|Jul 24, 2012, 03:21 PM|
San Marcos, CA
Joined Aug 2009
Bar Stool Economics
Suppose that every day, ten men go out for a 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 $1.00
The sixth would pay $3.00
The seventh would pay $7.00
The eighth would pay $12.00
The ninth would pay $18.00
The tenth man (the richest) would pay $59.00
So that’s what they decided to do. The men drank in the bar every day and seemed quite happy with arraignment, 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 $20.00.
“Drinks for the ten men now cost just $80.00
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 there “fair share?” They realized that $ 20.00 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 man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
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, 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 union. “ We didn’t I 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, journalist 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.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
David R. Kamerschen, PH. D
Professor of Economics, University of Georgia
|Jul 27, 2012, 06:34 PM|
I love the way economists oversimplify things to "prove" their point.
First, he ignores the fact that the bill is 10% lower now that Moneybags left. Second, he assumes that the rich guy would get into such an arrangement in the first place; after all, the rich get that way by NOT paying for anything they don't have to. Third, if the rich guy bales to drink overseas, now he has to find 9 more friends, and maybe learn a new language!
As far as the 4 poorest are concerned, the rich guy would be better funding night school for them, instead of buying them beer.
As long as the education system in the US remains as haphazard as it is, the poor guys will have no chance. Also, if it easier to make a living with a handgun than a pencil, things will stay the same. Now that the rich guys have shipped all the jobs offshore, and made all the rest of employment into McJobs, of course they are happy with the existing system, and now invest the beer money in lawmakers that will keep it that way...
|Aug 06, 2012, 01:00 PM|
Brawley, CA. USA
Joined May 2000
|Sep 05, 2012, 09:59 AM|
|Sep 06, 2012, 09:53 PM|
Well, I would make one small change in order to better represent our current tax system. Instead of the first man paying nothing, he would in fact get $2 back with his beer. Don't forget our "redristribution of wealth" tax system. We have people receiving larger refunds than taxes paid in. Sad isn't it?
|Sep 11, 2012, 05:51 PM|
Besides, corporations can afford tax lawyers and accountants to find all kinds of dodges, the rest of us can't.
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