From: Travis
Subject: Barstool Economics
Date: Thursday, October 16, 2008,
*BAR STOOL ECONOMICS *
*
*
*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 w**ould
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, boys and girls, 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)
--
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