# Our Tax System Explained: Bar Stool Economics

[color=#0040FF]Our Tax System Explained: Bar Stool Economics[/color]

[quote=“David R. Kamerschen, Ph.D., Professor of Economics, University of Georgia”]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 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 got’ ‘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.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.[/quote]

What a very good thing Obama is going to reform your tax system!

HG

Who in their right mind would drink American beer every day?

No, businesses must employ people to make money (many high earners employ others, others rely on the fact that their business can employ others). These employees need to be educated and healthy. This is paid for through tax revenues (unless you are in America where the health care burden often falls directly on the employer). The workers also need some form of social insurance, this can be paid for by taxpayers, companies, or by individuals (through high savings rates-reducing consumer demand) (or a combination of all three).
Businesses also need basic infrastructure to make profit, for example roads, railways, seaports, refuse collection etc. This infrastructure requires heavy capital investment and high maintenance costs, which must (in the main) come from tax revenues or borrowing against future tax revenues.

The business cannot just flee elsewhere, unless the place they move to can also provide the necessary labour force and infrastructure-it is not simply a matter of “drinking in the cheapest bar”. Taxes are necessary to do business.
You could tax low earners more, and high earners and businesses less- but this has several disadvantages. One of them of course is that a high tax burden on low earners dampens consumer demand, exactly what is not required in recession. I think corporate American recognises this, I certainly haven’t seen too many complaints from big business about Obama’s tax plans.

With that post you have forever, in my opinion, demonstrated your profound ignorance.

With that post you have forever, in my opinion, demonstrated your profound ignorance.[/quote]

That cuts so deep I may never recover.

You really don’t know how utterly clueless you are, in this regard.

[quote=“Tigerman”]
You really don’t know how utterly clueless you are, in this regard.

You mean we’re no longer the bestest of friends?

Oh, well…I’ll just have to drown my sorrows with this delicious Monteith’s Golden Lager.

Cheers!

[quote=“Tigerman”]
[color=#0040FF]Our Tax System Explained: Bar Stool Economics[/color]

This guy has a PhD, but it sure ain’t in mixology. Wouldn’t a true reflection of our barstool economy include the fact that the tenth man actually doesn’t go to the bar anyways, relying instead upon his butler to bring him fresh beers at his private beach while he watches his 4th trophy wife bounce among the waves?

Oh, and that \$49 is worth every penny he pays because he gets “access” to the beermakers, who cater to his every taste.

[quote=“Infidel”]You mean we’re no longer the bestest of friends?

Oh, well…I’ll just have to drown my sorrows with this delicious Monteith’s Golden Lager.

Cheers![/quote]

Yeah, I pegged you early on as a lager drinker.

Professor Kamerschen is not the author of that article and does not know who is:
davidk.myweb.uga.edu/

The article mentioned in the first line of the website “Tax Cuts - A Simple Lesson In Economics” is the same as the brain dead bar stool article as any Google search will tell you.

Gotta love the Repubs love of the facts.

Now, now, MM. this is Tigger talkin’ beer.

HG

[quote=“Huang Guang Chen”]Now, now, MM. this is Tigger talkin’ beer.

HG[/quote]

And apparently drinking a lot of it, too.

[quote=“Huang Guang Chen”]Now, now, MM. this is Tigger talkin’ beer.

HG[/quote]

Actually, no. I drink far more wine and whiskey these days (just finished off a nice Sauternes)… Love my ales, but, they’re just too filling in my advanced age.

Anyway, the author of the piece is not important. I’m not, as I’ve indicated previously, submitting a brief to the court here… and I’m not about to Shepardize my posts. The content is all that really matters.

And that guy criticizing American beer doesn’t have a clue as to what he’s talking about.

Yes, because it makes no difference as to whether the post was written by a distinguished Professor of economics or the drunken idiot on the tenth barstool.

Still, living up to the usual conservative standard of honesty, I can see that you’ve gone back to edit the title and show that it really is just an anonymous e-mail.

:no-no: :liar:

More vigorous exercise, lad. I suggest fartleking.

Its the idea that matters. It doesn’t matter where the idea is from.