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# Law for Bills and Paid Taxes

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Suppose that every day, ten men go out for beer and the bill for all ten comes to \$100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay \$1.
The sixth would pay \$3.
The seventh would pay \$7.
The eighth would pay \$12.
The ninth would pay \$18.
The tenth man (the richest) would pay \$59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by \$20. Drinks for the ten now cost just \$80."

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men; the paying customers? How could they divide the \$20 windfall so that everyone would get his "fair share?" They realized that \$20 divided by six is \$3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each mans bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid \$2 instead of \$3 (33%savings).
The seventh now pay \$5 instead of \$7 (28%savings).
The eighth now paid \$9 instead of \$12 (25% savings).
The ninth now paid \$14 instead of \$18 (22% savings).
The tenth now paid \$49 instead of \$59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the \$20," declared the sixth man. He pointed to the tenth man, "but he got \$10!"

"Yeah, that's right" exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I"
"That's true!!" shouted the seventh man. "Why should he get \$10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Answer the question:
What is the wrong in the scenario?
What is the more probable scenario?

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#### Solution Preview

Title: TAX LAW

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Tax Law
There is normally a flat rate available to any taxable income within a country for example, under the US corporate tax rate; a flat tax rate of about 35 percent which amounts to about 18,333,333 US dollars annually for a taxable income is recorded. For any available income less than the 35 percent flat tax rate are recorded using graduating rates with the lowest rate being 15 percent. The graduating rates apply to single corporations progressing amounts of the income phase out as the taxable income of a corporation rises from 100,000 USD to 18,333,333 USD. The end result of this action results to the members of a controlled group of individuals or corporations be treated in a similar manner to that of a single corporation (U.S tax rates n.d).

In the United States, all corporate entities are viable to paying the United States company tax except in cases whereby exemptions are made whereby an organization has to pass through some special rules first. Organizations which are incorporated within the tax subject in the United States depending on their foreign corporations and income are only tax subjects because they have an effective income which is connected to a US trade or even business.

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#### Solution Summary

The laws for bills and paid taxes are examined. The first of four men who would pay nothing is determined.

\$2.19