Economics 101

This was sent to me but it makes sense.

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." The bill for the ten men now cost them just $80.

The men 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. What about the other six men, though, 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 their beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount. So, he proceeded to work out the amounts each should pay.

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 paid $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 man now paid $49 instead of $59 (16% savings).

Each of the six men was better off than before, and the first four continued to drink for free. Once outside the bar, though, 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 and said, "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 did!"

"That's true!" shouted the seventh man. "Why should he get $10 back when I only got 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 man and beat him up. The next night the tenth man didn't show up, so the nine sat down and had their beers without him. When it came time to pay the bill, though, they discovered something important. They didn't have enough money between them for even half the bill.

And that, boys and girls, 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, or attack them for being wealthy, and they may not show up anymore. In fact, they might start drinking their beer overseas, where the atmosphere is somewhat friendlier.

For those who understand, no explanation is necessary.
For those who don't understand, no explanation is possible.


- By David Kamerschen, Ph.D.
Professor of Economics
University of Georgia

What is wrong with America? Can we fix it? We have a chance, get out and VOTE!!

At least that is what I think