Bar Stool Economics?

    Bar Stool Economics Suppose that every day, ten men go out for beer and the bill for all ten comes to $100 and 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." So 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!" "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

    +8  Views: 1052 Answers: 11 Posted: 11 years ago
    Headless Man

    Comment please:

    America will just have to start manufacturing new business once again. Start giving drilling rights to new American companies. We Americans should not be held hostage when we're the ones who enrichened these fat cats. We'll survive it all. We've thrived at one time .. we can do it again.

    Very complicated. Sounds like Obamanomics

    11 Answers

    Interesting and entertaining story. While I am a fiscal conservative and agree with the obvious message that the professor author is professing, I DO have issues with the myriad of loopholes that infest our tax system.

    Suppose the bartender offered to exempt the 10th man from making any contribution on the grounds that, being the wealthiest, number 10 was the only one rich enough to own a motorized vehicle and thereby assumed the role of designated driver, albeit a drinking D.D.

    Since the bar gathering would likely not take place in the first place were it not for #10, why not reward him accordingly? Naturally, the bar tab would have to be distributed somewhat differently. I'll leave it up to you to split it 9 ways in the manner that you think is fairest.

    Would you resent number 10 for not contributing to the $100 (or $80) tab ?

    Headless Man

    I would be on the free list but I have enough pride if I wanted a drink and couldn't afford it I would just talk and tell them the downfall of over drinking and be the
    Headless Man

    Would you resent number 10 for not contributing to the $100 (or $80) tab ?---- NO, I would expect him to only pay for what he drank.

    The history of taxes is interesting. Government collects the funds to support itself by taxing us through  a variety of schemes. Taxes for wars that don’t interest us is resented generally. Real-estate tax is something we would rather avoid. And, oh yea we paid for roads and schools with some of those taxes. I’m still feeling burned in this deal. There are a lot of things that are public abuse…the $10,000.00 toilet seat, the fact that our government has to pay more for everything than any citizen. A little switch that can be bought at Ace Hardware for $0.79 cost our county and your county $9.85 for the exact same switch. The ways our Government does its job is not accountable or reasonable. No wonder there are so many secretes in government. I trust God, not government or tax structures.


    Headless Man

    Taxes for wars? What tax is that? The first job of the national government is to protect us and it needs money for that and I'm willing to pay a tax for protection, not for war.
    Your right most tax is not necessary for the government to collect and could be better handled by state and county governments.

    If taxes do not pay for our wars where did the money come from to pay the way? I don’t think it came from pillaging our way along. The UN and NATO didn’t cough up a wad of cash and industry was holding it’s hands out to collect on the cost of war…so it must have come from somewhere. We didn’t need protection from North Vietnam, it would have been cheaper to relocate the South Viet-Nameese to Texas than fight a war there. They would be tax payers by now.
    Headless Man

    I didn't say taxes didn't pay for wars but it is the governments job to protect us, how it is done is the job of the commander and chef, and we decided who that is. We should be more informed when we vote.

    At least Obama recognized the myth "that we need continual small wars to avert large scale wars” and choose to bring that to an end. Its practice became US policy in the late 1950 and has kept us in continual citizen sacrifice ever since. The price for this has been horrific for all of us and the world also.

    Tax the wealthy, and they just may not produce anymore. In fact, they might start moving overseas where the atmosphere is somewhat easier.

    Can you see the point?

    I like the idea of a simple percentage tax, maybe something like the Herman Cain 999 plan... Hope that's not just an upside down 666, lol.

    The tax codes are extremely outdated, complex and ridiculous. Good question and yes the way our government is currently overtaxing the public is approaching criminal.

    Headless Man

    Almost any change would be good. Glad your back with your comments, pray the best for you.

    Thanks for that headless Randy.

    There are a lot of hidden taxes in everything,too.

    Not sure if this is applicable here but I like it:-

    We see it happen day by day- Hunger, war death and decay - And yet no lesson will we learn, - It seems to cause us no concern. - The miser with his growing hoard, It is his master and his Lord. All he lives for is his wealth - All he thinks of is himself. Worldly goods his main desire, He heeds not death its mighty power, A soul you have and only one if that be lost all is gone. Oh foolish men when life is done - And when the judgement day has come. All earthly things shall pass away, And heavenly things remain to stay.  

    Headless Man

    You don't seem dopey to

    Thankyou Randy Palmer reassuring yeah! lol.

    I've got a headache now, must be time to turn in at this point....

    Headless Man

    This stuff will make your head hurt.......

    Yes.......very complicated

    Thanks for the comments.

    The United States is supposedly the richest Nation in the world. I don't think that big business is really going to up-root and leave us. They would definately be losing money if they did. When they make the statements that "maybe will just go overseas to expand", it is just that. The other countries of the world are also in a market crisis. I would say that expanding overseas will not be as profitable for big busisness unless the foreign governments were to buy them and control them. That isn't going to happen.

    As usual.. higher taxes on the rich will just trickle down to the " Little People " , and inflation will choke us along with no jobs. It's time for a fix and a " fair tax " reform. We may as well elect Larry the Cable Guy for president. "Get 'R' Done!!!!

    Headless Man

    Appreciate your comment.

    the U.S. is broke, and has been borrowing money from China for years.

    The "Trickle down theory” reduced taxes on the rich as earners so that they, in theory, will use the money they don’t pay in taxes to support their own profit making further…thus expanding the economy. There is nothing to indicate the result of this tax law theoretical experiment. 

    Business goes shopping for a competent workforce aka “outsourcing” wherever they can get the job done with the least expense and market their products where they can get the highest price…here. So we have fewer jobs and the economies of other countries is going up while the businesses so involved become richer and richer. Business is loyal only to investors to whom all gains are owed. We are in a race to a flat economy globally.  

    so what your saying is put heavier taxes on beer drinkers...

    Headless Man

    That would be

    Headless Man

    Yea, tax stools

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