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.
>>
>> T he 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