Old Jokes Home

Generali

There's a pretty old joke that's been doing the rounds which I last saw here

Suppose that once a month, ten men go out for beer and the bill for all of them comes to £100. If they paid their bill the way we pay our taxes and claim State benefits, 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.
And the tenth man (the richest) would pay £59.


So, that’s what they decided to do. The ten men drank in the bar every month and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly beer by £20.” Drinks for the ten men would 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 realised that £20 divided by six is £3.33 but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.


So the bar owner suggested a different system. The fifth man, like the first four, now paid nothing.
The sixth man paid £2 instead of £3 .
The seventh paid £5 instead of £7.
The eighth paid £9 instead of £12.
The ninth paid £14 instead of £18.
And the tenth man now paid £49 instead of £59. 
Each of the last six was better off than before with the first four continuing to drink for free.


But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10!”


“Yes, that’s right,” exclaimed the fifth man. “I only saved a £1 too. It’s unfair that he got ten times more benefit than me!”


“That’s true!” shouted the seventh man. “Why should he get £10 back, when I only got £2? The rich get all the breaks!”


“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”


So, the nine men surrounded the tenth and beat him up. Funnily enough, the next month the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came to pay for their drinks, they discovered something important – they didn’t have enough money between all of them to pay for even half the bill.

Many of you will have heard it and I suspect the original protagonists were paying in Groats or Pieces of Eight or even denarii!

Here is a spreadsheet, admittedly from 2004, which tries to take UK taxes and benefits, including things like education, NHS and even free milk and show who pays what on average. It is split into 'deciles' so decile 1 is the lowest paid 10%, decile 2 the 2nd lowest paid and decile 10 the richest 10% of households.

If we use the same logic as the joke, ie that people that net take out of the system aren't being paid to drink too then we end up with the below payments being made for beer:

Man 1 - pays nothing
Man 2 - pays nothing
Man 3 - pays nothing
Man 4 - pays nothing
Man 5 - pays nothing
Man 6 - pays £2
Man 7 - pays £8
Man 8 - pays £16
Man 9 - pays £25
Man 10 - pays £49

michaels

Gen - are the proportions for all individuals, all households or only those households /individuals where someone is earning?

Generali

michaels wrote: »

Gen - are the proportions for all individuals, all households or only those households /individuals where someone is earning?

They are average for each decile of earnings per household for all households. For example, decile 1, the bottom 10% earn on average £2,586pa and collect an average of £5,067 in direct benefits. They then pay £815 in direct taxes and £2,572 in indirect taxes. Then finally they receive £5,890 in indirect benefits such as healthcare, education and so on.

So net and on average, a household in the bottom decile of earnings will take out of the system £7,570.

Generali

BTW I find it amazing that on average, half the households in the UK are net recipients of welfare.

nicko33

So the bar owner suggested a different system. The fifth man, like the first four, now paid nothing.
The sixth man paid £2 instead of £3 .
The seventh paid £5 instead of £7.
The eighth paid £9 instead of £12.
The ninth paid £14 instead of £18.
And the tenth man now paid £49 instead of £59.

that only comes to £79
a good illustration of how difficult it is to administer the tax system

michaels

Hmm - not sure if this is remarkable or not - all govt spending is in effect redistribution and the govt makes up getting on for 50% of the economy so it is really that surprising? Especially when looking at income and wealth distribution you might expect it to be even higher. I suspect globalisation / 'hollowing out' will only make things 'worse'

Generali wrote: »

BTW I find it amazing that on average, half the households in the UK are net recipients of welfare.

Generali

nicko33 wrote: »

that only comes to £79
a good illustration of how difficult it is to administer the tax system

Hey I didn't write the joke and I don't claim it's a good one!

I hope you'll find that my figures add up

BTW, if you include welfare so people are paid to drink you end up with the below:

Man 1 - Paid £39.71
Man 2 - Paid £44.24
Man 3 - Paid £37.70
Man 4 - Paid £25.01
Man 5 - Paid £12.16
Man 6 - Pays £6.36
Man 7 - Pays £20.78
Man 8 - Pays £41.09
Man 9 - Pays £63.19
Man 10 - Pays £127.40

PasturesNew

I don't understand how to read the Excel spreadsheet. How should it be read?

Generali

PasturesNew wrote: »

I don't understand how to read the Excel spreadsheet. How should it be read?

Imagine you took every household in the country and wrote a list of them in order of household income excluding benefits and then split it into 10 equal length sections. Each one of these is called a 'decile' with decile 1 being the lowest paid 10% of households and decile 10 being the highest paid 10% of households.

Each row then shows the average for that item for each decile. For example row 67 shows the average amount of duty on wine and spirits paid on average by each decile on average.

Cell B67 shows that the lowest paid 10% of people spend an average of £76/year per household on tax on wines and spirits. C67 shows that the next 10% of earners pay an average of £79/year per household on tax on wines and spirits and so on.

PasturesNew

Generali wrote: »

Each row then shows the average for that item for each decile. For example row 67 shows the average amount of duty on wine and spirits paid on average by each decile on average.

Cell B67 shows that the lowest paid 10% of people spend an average of £76/year per household on tax on wines and spirits. C67 shows that the next 10% of earners pay an average of £79/year per household on tax on wines and spirits and so on.

Ah, so it assumes people receive/pay for everything equally.

So there's no way to find out how much one contributes individually...

So, looking at original income it assumes people have a wage, benefits in kind (no idea what that is), are self-employed, get a pension, have investments and other income.

To be honest - it's all confusing, can't actually work out what means what on that list.

It'd help if the formulae were in there... or some instructions.

e.g rows 22-28, it seems to imply I'd receive those, but I don't. So then it raises the salary to a lot more, which isn't true/right.

Are they saying that the average person earning what I do actually gets £6k more than me?
No wonder I'm poor.

michaels

Comparing rows 20 and 99 reveals the usual shocking marginal effective tax rates.

I note it includes imputed pension contributions but no doubt the figures also include pensioner households so I am not sure if that implies some sort of double counting?