Bar Stool Economics
Electric_Delta
Posts: 977
Bar Stool Economics
Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100 and 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." so 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 man's
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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100 and 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." so 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 man's
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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
Bristow, VA (5/13/10)
Post edited by Unknown User on
0
Comments
-
now there's a eye opener.
Godfather.0 -
I agree, Atlas Shrugged was way too long. Thanks for boiling it down.
0 -
Electric_Delta wrote:Bar Stool Economics
Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100 and 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." so 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 man's
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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
that would be grand if the system worked like that but it doesn't0 -
Godfather. wrote:now there's a eye opener.
Godfather.
remember my comment on your "sky is falling" thread ... just cuz you read it somewhere and it sort of fits your belief system doesn't make it fact ...
http://www.snopes.com/business/taxes/howtaxes.asp0 -
Electric_Delta wrote:Bar Stool Economics
Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100 and 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." so 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 man's
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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
Wow! The only problem i see with this equasion is there's 10 guys not 3 or 6,
1)Poor
2)Middle Class
3) Rich
or
1)Poor
2)Lower Middle Class
3)Middle Class
4)Upper Middle Class
5)Rich
6)Fuckin Rich!0 -
satansbed wrote:Electric_Delta wrote:Bar Stool Economics
Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100 and 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." so 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 man's
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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
that would be grand if the system worked like that but it doesn't
How does it not?Bristow, VA (5/13/10)0 -
Electric_Delta wrote:How does it not?
you aren't seriously asking are you?
i mean ... c'mon ... in your example - everyone gets the same benefit from the "tax" being paid ... that is clearly not the case ... there are issues of subsidies and where the money for those tax dollars go ... etc ... this is nothing more than some propaganda piece aimed at satisfying the belief that the rich are the saviours of society ...0 -
Your right, the no income/non taxpayers get more than I do. On top of that they get luxuries that I pay for on a daily basis. Are you of the thought process of working for something = bad / getting the same things as the working for free = good?polaris_x wrote:Electric_Delta wrote:How does it not?
you aren't seriously asking are you?
i mean ... c'mon ... in your example - everyone gets the same benefit from the "tax" being paid ... that is clearly not the case ... there are issues of subsidies and where the money for those tax dollars go ... etc ... this is nothing more than some propaganda piece aimed at satisfying the belief that the rich are the saviours of society ...0 -
HeidiJam wrote:Your right, the no income/non taxpayers get more than I do. On top of that they get luxuries that I pay for on a daily basis. Are you of the thought process of working for something = bad / getting the same things as the working for free = good?
i am of the thought process that is what is good for the whole is good for the individual ... outside of that i'm not sure what you are asking or implying ...0 -
So you are basically saying that you agree with slavery? You are advocating for taking away peoples freedoms.polaris_x wrote:HeidiJam wrote:Your right, the no income/non taxpayers get more than I do. On top of that they get luxuries that I pay for on a daily basis. Are you of the thought process of working for something = bad / getting the same things as the working for free = good?
i am of the thought process that is what is good for the whole is good for the individual ... outside of that i'm not sure what you are asking or implying ...0 -
No one is painting anyone as a savior. The story is an analogy that is indeed a very simplified yet accurate take on "how the [taxation] system works". The point of the story is not how the money is spent, but where it comes from. Whether everyone drinks the same amount of beer is irrelevant to the fact that the rich generate the vast majority of tax revenue for that beer (gov't). Thus when a tax cut occurs, of course those that are already putting more in will get more back. It's simple math.polaris_x wrote:Electric_Delta wrote:How does it not?
you aren't seriously asking are you?
i mean ... c'mon ... in your example - everyone gets the same benefit from the "tax" being paid ... that is clearly not the case ... there are issues of subsidies and where the money for those tax dollars go ... etc ... this is nothing more than some propaganda piece aimed at satisfying the belief that the rich are the saviours of society ...
What really bothers you is not that the story isn't a fairly accurate portrayal (which it is), but that you believe that there are almost never any circumstances that the "rich" should get a tax break, regardless of the math. I use "rich" loosely here b/c a family making a combined income of 250k in any major US city, particularly on the coasts, is anything but "rich". I mention that only because these tax conversations tend to go from talking about the top ~3% (the 250k mark) to billionaires in their yachts, which frankly gives us a pretty interesting view into the mindset on that side of the debate.0 -
MotoDC wrote:No one is painting anyone as a savior. The story is an analogy that is indeed a very simplified yet accurate take on "how the [taxation] system works". The point of the story is not how the money is spent, but where it comes from. Whether everyone drinks the same amount of beer is irrelevant to the fact that the rich generate the vast majority of tax revenue for that beer (gov't). Thus when a tax cut occurs, of course those that are already putting more in will get more back. It's simple math.
What really bothers you is not that the story isn't a fairly accurate portrayal (which it is), but that you believe that there are almost never any circumstances that the "rich" should get a tax break, regardless of the math. I use "rich" loosely here b/c a family making a combined income of 250k in any major US city, particularly on the coasts, is anything but "rich". I mention that only because these tax conversations tend to go from talking about the top ~3% (the 250k mark) to billionaires in their yachts, which frankly gives us a pretty interesting view into the mindset on that side of the debate.
thanks for trying to tell me what bothers me ... unfortunately, you are incorrect ...
what bothers is me is that a simple example like this will be the foundation of many people's arguments when the reality of the taxation system and the services related to taxation is much more complex ... do you think the billionaires like gates and buffet view the tax system like this email chain?0 -
this would be a lot more accurate if the bartender hadn't have given them $20 off the same amount of beer, but instead the bartender should have bought $400 worth of beer with their $100 and told them they needed to pay the differencethat’s right! Can’t we all just get together and focus on our real enemies: monogamous gays and stem cells… - Ned Flanders
It is terrifying when you are too stupid to know who is dumb
- Joe Rogan0 -
mikepegg44 wrote:this would be a lot more accurate if the bartender hadn't have given them $20 off the same amount of beer, but instead the bartender should have bought $400 worth of beer with their $100 and told them they needed to pay the difference
That is what is so comical about the tax debate. People are in favor of raising taxes on the rich and then they complain about how the government doesn't fairly distribute it to the poor and favors the rich ... so why is anyone in favor of giving more money to an organization that can't manage money properly??? Be Excellent To Each OtherParty On, Dudes!0 -
Jason P wrote:mikepegg44 wrote:this would be a lot more accurate if the bartender hadn't have given them $20 off the same amount of beer, but instead the bartender should have bought $400 worth of beer with their $100 and told them they needed to pay the difference That is what is so comical about the tax debate. People are in favor of raising taxes on the rich and then they complain about how the government doesn't fairly distribute it to the poor and favors the rich ... so why is anyone in favor of giving more money to an organization that can't manage money properly???
Good call.Bristow, VA (5/13/10)0 -
polaris_x wrote:HeidiJam wrote:Your right, the no income/non taxpayers get more than I do. On top of that they get luxuries that I pay for on a daily basis. Are you of the thought process of working for something = bad / getting the same things as the working for free = good?
i am of the thought process that is what is good for the whole is good for the individual ... outside of that i'm not sure what you are asking or implying ...
Who exactly determines what is good for the "whole?" Sounds a lot like socialism to me.Bristow, VA (5/13/10)0 -
Electric_Delta wrote:Who exactly determines what is good for the "whole?" Sounds a lot like socialism to me.
it is socialism!! ... and the decision is made through consensus ... it has its pitfalls but in general - it works ...0 -
I always find it amusing when something as complicated as revenue income and spending by a government in order to maintain and run a nation of 400 million in a global environment of 6.5 billion can be simplified to a '10 men walk into a bar' joke from an E-Mail Spam... and people actually buy into it.
Somehow... I think it a bit more complex that that. But, that's just me.Allen Fieldhouse, home of the 2008 NCAA men's Basketball Champions! Go Jayhawks!
Hail, Hail!!!0 -
Cosmo wrote:I always find it amusing when something as complicated as revenue income and spending by a government in order to maintain and run a nation of 400 million in a global environment of 6.5 billion can be simplified to a '10 men walk into a bar' joke from an E-Mail Spam... and people actually buy into it.
Somehow... I think it a bit more complex that that. But, that's just me.
Glenn Beck and Hannity will use the same scenarios. They really know their audience.0
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