Our Tax System Explained: Bar Stool Economics

[quote=“Huang Guang Chen”]I think you’d be hard pressed to find a man with more integrity than our Tigger. Just a thought.

And another thought I had. I suddenly realised all over agin that of course, Tigerman is American, and so he’s paying double taxes (both in Taiwan and the US). The fact US citizens have to do this never ceases to astonish me. I was always under the illusion us quasi-Socialist/social demoratic nations were the ones being fleeced out the back section.


Americans can earn up to US75,000 overseas before they pay taxes, unlike us Canadians who pay on every cent unless we declare non-residency. I think their system is quite reasonable. No representation without taxation. :slight_smile:

Wow! Another aspect on taxes I’d forgotten. At least the Americans get to see their tax paid Tomahawks fly over head from time to time. :laughing:


I think it does matter who the author is. If it really is a professor of economics who has put his name to this piece, then he wagers his professional and academic reputation on it, no matter how cutely it’s written. The failure to address the issue of bartender tips is a major omission. If it is written by another person who has added the professor’s name to lend false credibility, then that’s sneaky. With all the dumb emails shooting about under false names during this election, I think it does matter.

Ideas matter.

Discuss the idea, please.

Really? Professor Kamerschen seems to think it is. So much so that he feels compelled to include a disclaimer on his website.

Ideas matter.

Discuss the idea, please.[/quote]

Infidel, Ph.D. Distinguished Professor of Lagerology, University of Pissburg

[quote] In the US and throughout most of the rest of the world, the tenth man would have paid off a politician for $10 to get a beer subsidy of $30 per night(to create jobs for the bartender). Of this $30, $10 of course would have covered the lobbying expense, $10 would go in his own pocket, $1 would go to the bartender to keep his mouth shut, and $9 would go to the bar.

The Bar would give him a kickback of $10 each night for bringing in his 9 buddies to make them into alcoholics, repeat customers for life.

The Bar would then raise their prices to $130 citing inflation and higher taxes.

The tenth richest man would then secure his finances in a Dutch Holding Company managed by a trust in Ireland which invests in Chase and Bank of America. He would then explain to his buddies that he is as poor as the rest of them and can’t afford to pay himself as he cries into his beer that night citing his latest financial report which shows him to be broke on paper so that he doesn’t have to pay taxes in the United States ever again.

Citing his former generosity, the other nine men would agree that the tenth man can now pay nothing like the 4 poorest.

The others would then be faced with an adjusted amount of

    * The fifth would pay $3.
    * The sixth would pay $10.
    * The seventh would pay $22.
    * The eighth would pay $38.
    * The ninth would pay $57.

Now the group would recognize that this is not fair and so would lobby the Government for an Earned Drinking Credit for the Poorest men. The government would oblige and give the four poorest men $2 each, but they would tax the 5th - 9th men $2 each as well.

    * 4 men receive a total of $8 and 5 men pay $10.

The adjusted amounts would then look like this for all 10

    * First Receives $2 pays $2 | Net 0
    * Second Receives $2 pays $2 | Net 0
    * Third Receives $2 pays $2 | Net 0
    * Fourth Receives $2 pays $2 | Net 0
    * Fifth Pay $1 to bar pays $2 to tax | net paid $3
    * Sixth Pay $8 to bar; pays $2 to tax | net paid $10
    * Seventh Pay $20 to bar; pays $2 to tax | net paid $22
    * Eighth Pay $36 to bar pays $2 to tax | net paid $38
    * Ninth Pay $55 to bar; pays $2 to tax | net paid $57
    * Tenth Man:  Tax Credit Received: $30 ;
      Pays $10 to politician;
      $1 to bartender;
      Receives $10 from Bar
      Net RECEIVED $29 per night and free beer

Of course this can not go on forever as the sixth, seventh, eighth and ninth men can’t afford to pay those rates forever. So they start paying with their credit cards held by Bank of America and Chase.

The tenth man would start demanding a higher Return on Investment from his investment managers, who would be hearing similar requests from all of their other investors. They would then expand their holdings into mortgaged back securities where a good deal more profit could be made.

Meanwhile the Fifth through ninth men are racking up debt on their credit cards from drinking every night, their health care costs are increasing as their liver fails, and they are also spending more on gasoline as they drink and drive as they can no longer afford to cab it.

Ultimately, they end up refinancing their credit cards into their house where they have equity. The mortgage broker promises them a 4.9% interest rate on the refinance which sounds good as their credit card interest rate is up to 21%. The broker promises them that they will not have to verify their income, provide W2’s nor copies of their tax paper work.

Their mortgage broker doesn’t tell them, but lies about the value of their house in order to refinance their credit and help them avoid paying private mortgage insurance. At their current income levels, and without verifying their income, their mortgage would be classified as Sub Prime and the interest rate would be 10.9%

The mortgage officer lies about their income levels as well to boost the internal credit scoring mechanism and get them financed, not at 4.9% but 5.9%, which is better than 10.9% and happens to pay the mortgage broker a higher commission than a loan at 4.9% that is not sub prime.

The mortgage broker also promises them a payment of $900 per month, but fails to mention the balloon payment of $50,000 in the 5th year and doesn’t mention the adjustable rates in year 3.

The men separately show up with a hangover and sun glasses on the date of their close for their new mortgages. They trust their broker and do not read the paperwork in detail flipping and signing almost as fast as they could raise a beer bottle to their lips.

The loan closes, the mortgage broker gets a fat commission, the bank securitizes the mortgages by selling them to an Irish Hedge Fund and pockets collectively a billion dollars in profits that year.

The hedge fund holds the investment for a year, shows a 35% gain on paper and starts selling shares to retirement funds and 401ks in the US that the Sixth through 9th men just happen to have the rest of their life savings sitting in.

The tenth man sees the writing on the wall, literally magic marker on a stall in the restroom of the bar.

“The end is Nigh”

He pulls his money out of the Irish Hedge fund invested in real estate and invests in Gold at $600 a troy ounce.

Meanwhile, he lobbies congress to tighten bankruptcy laws for credit cards which he still has a sizable investment in. Congress tightens bankruptcy laws and makes it impossible to absolve credit card debt, forcing people into chapter 13 where they must pay off the debt within 3 years or go to debtors prison where they can work it off in 7 years.

Gas prices are still going up so the President ignores a minor terrorist threat, allows the terrorists to blow up a major building and then goes to war with the terrorists home country where there is no oil, and simultaneously with a country that sits on 10% of the worlds oil reserves that has a decimated military infrastructure.

Oil prices shoot through the roof with Gold following close behind. The President whose family comes from oil barons make a fortune and become famous at their skull and bones country club outside of Yale.

Meanwhile our famous 10 guys, start paying even more money at the pump. The first 4 guys end up taking second jobs working at Wal-Mart and have to give up drinking at the bar so that they can try and beat their teenage kids out of a promotion.

The fifth and sixth guys get foreclosed upon. They were forced to stop paying their mortgage payments so that they could pay their mandatory credit card payments as required by the new bankruptcy law.

The seventh, eighth and ninth men all previously traded up their homes for McMansions that they can not afford with interest only payments of $2300 a month. When foreclosures start happening their plans on flipping their McMansions and cashing in on the equity slips through their fingers.

To make matters worse seven and eight get laid off from the companies they work for when their jobs get outsourced to China. The ninth man keeps his job at a law firm, but fails to notice that his 401k fund is slipping and has lost 10% in the last year. Things are looking up as his law firm seems on the edge of landing a big contract with Merrill Lynch.

Then the real estate crash and sub prime mortgage scandal erupt. Banks start dropping like flies to be saved not by the cash strapped government that can barely afford the war for oil any longer, but by China. Oil and Gold soar, Gold hits $900 a troy ounce and Oil hits $130 a barrel (about the same amount for 10 rounds of beer prior to the crash). Beer prices hold steady for the first few months, but then start to edge up as gas prices for delivery creep into the bar owners expenses.

Then the first four men one night remember their favorite bar. They sneak around back around 4:30 am and steal 50 empty kegs that just happen to be made of pure aluminum. Those kegs are now worth about half the value of a keg that is full in scrap metal prices or about $80.

They are not stupid and don’t want to get caught turning the kegs in at the dump where the police are already looking for keg thieves. So they head out to the closed down manufacturing plant where they used to work. They start a big fire, and melt down the aluminum into big messy aluminum splashes on the cement.

They turn in the aluminum for cash and get caught up on their back alimony and child support before heading back to work at Wal-mart where they now work for their teen age kids that beat them out for that promotion earlier in the month because their job skills weren’t as good as recent high school graduates.  They then begin dreaming of new ways to find aluminum alimony allowances.

Meanwhile, the banks and mortgage companies lobby congress spending about $10,000 a head in an election year to bail out the economy. Congress provides the major banks with government backed loans to refinance the bad sub prime loans so that the government can personally guarantee those bad loans. They also put $100 billion of actual cash into the hands of Americans hoping to stimulate the economy.

Americans however, are all in debt up to their eye balls and use the extra $1200 they receive to make 2-3 credit card payments. They take the $300 for each kid and buy groceries for the month and then they start worrying about next month.

The banks get away free as they have Chinese financing now and no bad loans as they have refinanced them over to the US Government. The US government had to print more money to pay for all of these actions and so Gold goes up to $1500 a troy ounce.

The tenth man is now worth Billions and moves to Costa Rica to retire taking the new trophy wife that used to be the bartenders girl friend with him.

The first four men end up going to county prison for 3 months for stealing aluminum dog crap receptacles after running out of kegs to steal.

The fifth and sixth men end up living in an apartment and then homeless after they lose their jobs at Wal-Mart.

Click HereThe seventh and eighth men whom we previously left hanging in our story after they lost their jobs and ability to pay for their homes, end up losing their homes, and their kids. They and their spouses are each convicted of mortgage fraud by the FBI in a major sting operation after it is revealed that they lied on their mortgage applications. Their mortgage brokers who actually did the paper work cop a plea agreement in exchange for immunity with the Feds and rat out each of their unsuspecting customers.

The ninth man ends up losing his entire retirement fund which took a big hit as the dollar rapidly plummeted into free fall. He ends up refinancing his own house under a government backed loan for $650,000. Unfortunately, a tornado comes through that winter in a freak coincidence and levels the home. FEMA promises to provide assistance but never shows up and the ninth man freezes to death attempting to salvage the shreds of his belongings. His home insurance policy refuses to pay as they claim that his house was over valued and then they prove it with comparables studies from his own mortgage brokers database.

The tenth man ends up dumping his new bride a year later, moving back to the states a year after that when the US appears to have hit rock bottom and he leads up a Chinese real estate investment initiative in the states. He makes another $10 billion in ten years, but is then executed in Beijing for espionage.

Meanwhile, the bar tender goes on to win American Idol and sleep with Paula Abdul. They are now blissfully happy, doped up on anti-psychotics, and the biggest two idiots the world has ever seen.

EDIT - Note this article is not written to refute the article titled ‘How Tax Cuts Work’ by David R Kamerschen. That is because David R Kamerschen refutes having ever written the original! This is just an article to expand on the concept of the original article written by an unknown viral writer.[/quote]



Infidel, I think you pretty much nailed it with the one caveat that in your final note I would change “an unknown viral writer” to “an unknown viral writer who tried to lend false credibility by co-opting another’s name”.

Over the years there have been many cutesy expressions of the Steve Forbesian concept that “it’s really a tragedy that the wealthiest have to pay more taxes than everybody else”. The wealthy are adept at their tax planning, and they disproportionately benefit from their wealth in the form of government access, government spending and government protections. I could drive an RV back and forth across America a thousand times and still never benefit from the interstate highway system as much as the average Walton family member does sitting at their homes in Arkansas.

Yes, they pay more, but they also have a lot more to lose and, thus, government protections count for a lot. Going back into the bar, the bar’s bouncers (or the bartender’s hogleg/baseball bat/blackjack or other useful behavior modification device) have a role in maintaining order in the trade of beer. While they cannot ensure fairness, they can at least deter drinkers 1 through 9 from beating drinker 10 to death to take his cash or deter outsiders from entering the premises to make trouble.

We often take for granted the value of simple things like police protections, the National Guard, the standing professional army. Had Bill Gates amassed his fortune a mere few centuries ago, he would have had to maintain a private army (or would have needed a private army to amass his fortune) just to protect what he had against robbers, murderers, kidnappers, Vikings and the like. Compared with the sort of appropriate protections that someone lower in the pecking order might need to take, I suppose a putative medieval-era “Lord Gates” sitting in Ye Olde Pub could cry into his beer about how “unfair” it is he has to spend so much on an army, a castle, stores for defending himself against sieges, big pots full of boiling oil and on updating his dungeon’s torture devices – all just to protect his incredible wealth. And perhaps it would be fortunate that the soldiers around him would deter any drunken serfs from getting up to kick his ass.

[color=#0000FF]Obamessiah Caught Playing Dirty Pool! Again![/color]

Heritage Foundation to Obama Campaign: Kindly stop lying about our support of your tax plan


:offtopic: Are you saying that the Heritage Foundation Bar & Grill’s swimming pool is dirty again? You wanted us to discuss ideas and then, apparently when it turns inconvenient, you post a non-sequitor that has nothing to do with drinking beer. I, for one, am disappointed.

Ah yes… obfuscate and evade.

MFGR, this thread isn’t really about beer. But, its cute that you thought so. :laughing:

Obama is a Stevie Ray Vaughan fan?

[quote=“Tigerman”]Ah yes… obfuscate and evade.

MFGR, this thread isn’t really about beer. But, its cute that you thought so. :laughing:[/quote]

Well, it sure wasn’t about dirty pools at the Heritage Foundation.

But I do have one question about the barstool economics bit – which of the 10 drinkers is pounding the Iron City cans? Is it Joe Sixpack or Joe the Plumber?

Bar Stool Economics: The economy looks better and better after each whiskey.

:laughing: :notworthy:

Guess this author doesn’t understand the concept of decreasing marginal utility.

Finally, someone mentions this. :bravo:

I’ve been thinking about the issue of taxation for a while and trying to formulate why I agree with progresssive taxation but haven’t had time to sit and really write it out. Fortunately this kind reader of Andrew Sullivan’s blog spells much of it out pretty clearly:

[quote]I think there is a prudential reason for maintaining a progressive tax system (and we certainly can argue about “how” progressive it should be): namely, that if you believe, as I do, that the U.S. is best served by maintaining a capitalist system and a free market, we have to accept that one of the natural consequences of such a system is the accumulation of wealth in the hands of fewer and fewer people.

Regardless of whether these fewer and fewer deserve the money they accumulate or are unfairly being punished by progressive taxation, the political consequence of such an accumulation of wealth is radicalism - a majority that uses its political power to destroy the system rather than simply to modify it.

In other words, progressive taxation is required to maintain the political viability of a free market.[/quote]

I would add that the ability to make money in any country is contingent upon a massive amount of government intervention and spending. I don’t mean direct aid in the form of grants and bailouts, but in maintaining a social structure that safeguards your wealth. We need to spend huge amounts on education, healthcare, policing and infrastructure so that the majority can live healthy lives of relative prosperity and are not tempted to overthrow the system.

Countries with great poverty are inherently unstable. So the very wealthy have a choice: live in a free safe prosperous society where you pay more in taxes, but have your wealth protected, and furthermore are able to grow wealthier and wealthier, or live in a Zimbabwe-like state where you could lose it all in a second, and where it probably isn’t that satisfying to be wealthy in the first place.

Also, I’m wondering how a progressive tax system can be compared to 9 guys beating up the 10th and taking his money. Sounds to me more like a revolution; which is one risk if you create too much inequity. The Morlocks will come to get you.

How did that story illustrate the creation of too much inequity?

Elegua apparently moved beyond the story’s inadequacies to comment on the how the economy actually works. The numerous flaws of the stories’ model are probably why the economics professor who was falsely named as the author has been so adamant about disassociating himself from it.

Apparently in the worldview of the anonomous fraud who wrote the thing, beer drinkers 1 through 4 have absolutely no hopes for a better life, live only to take free beers, and are probably unable to feel pain the way we humans do thanks to their primitive nervous systems.

It didn’t. The story is actually far too simplistic and exaggerated to do that. I actually posted the above as 2 separate ideas: 1) progressive taxes do not equal a revolution 2) revolutions can occur if too much inequality is created. There should be no revolution in this case, though one might argue how progressive the tax rate really is.