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Bar stool economics
If you've seen this story before, oh well. You're ahead of my curve. If you haven't, get a laugh at it. XD Accurate or not, it amused the hell out of me. Sorry. No cut for you all.
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.
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. 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.
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.
no subject
How do states do their budgeting, too? When they don't know how much money they'll get because customer spending is fickle?
no subject
furthermore, there's a minimum quantity of buying people will always do. they will always need transport from A to B, cars, gas, car tuneups. people will always need food. people don't always need movies and xboxes and game tickets, but there is a certain base level of spending that must be done. as long as business people are traveling, they consume nights at hotel rooms, dinners impressing prospective clients. a state will always have a certain level of funding incoming. furthermore, running a business under either a federal or statewide Fairtax is about 18 bazillion times easier, so more people will open more businesses... generating more jobs, generating more sales, generating more Fairtax.
people do not give to charities /only/ to reduce their tax burden. No person is going to give $100 away with the sole purpose of reducing their tax burden by $33. People give to charities because they want to (or for some other reason, like to have their corporate logo prominently displayed in the box labeled "companies that sponsor us/this event"); the tax thing is like a side effect. Charities will still be there. People -- who now have more disposable income to their name -- will still give. Companies will still "purchase logo display space."
life doesn't have to be as complex as our accustomed-ness to our bloated, convoluted tax system has bred us to believe. : pp
edit: i can has shigure icon too X D yaaaay shigure.
no subject
Well, the tax relief thing was more for huge cooperations than for the average Joe. If I give 100 bucks to someone, I won't think about it again until tax times come. XD It'll be like, YES. I get my school interest back! Oh... wait... I donated too! Hurray \o/ *tacks that on*
I only have the one XD Not much furuba in my icon space.