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 their fair share?
They realized that $20.00 divided by six is $3.33. But if they
subtracted that from every body'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, 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, 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. Vote for Obama again.
David R. Kamerschen, PH. D
Professor of Economics, University of Georgia
</SPAN>
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 their fair share?
They realized that $20.00 divided by six is $3.33. But if they
subtracted that from every body'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, 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, 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. Vote for Obama again.
David R. Kamerschen, PH. D
Professor of Economics, University of Georgia
</SPAN>
