Thursday, May 01, 2008

Bar Stool Economics

This came in my in-box and I had to post it because most Americans just don't get it!! Please post it on your blog as well.

"Best explanation to share with some of your friends, who clearly do notunderstand this complex principle.

Our Tax System Explained: Bar Stool Economics

Suppose that every day, ten men go out for beers and the bill for all tencomes to $100. If they paid their bill the way we pay our taxes, it would gosomething 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 thearrangement, until one day, the owner threw them a curve."Since you are all such good customers," he said, "I'm going to reduce thecost 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 theydivide 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 thatfrom everybody's share, then the fifth man and the sixth man would each endup being paid to drink his beer. So, the bar owner suggested a plan to reduce each man's bill, and he worked 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).

Note that the tenth man got the smallest percentage reduction and now paid 61.25% of the total bill, where he previously paid 59% of the bill.

While I'm struggling to remain in the middle class with today's soaring energy prices, I realize that I am better off than a lot of folks. I also understand that without the economic opportunity that comes with the investment of the rich people far outweighs the supposed unfair tax breaks they get. Read on. This is where it gets good. 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 comparetheir savings.
"I only got a dollar out of the $20 declared the sixth man. He pointed tothe 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 Igot 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.For those who understand, no explanation is needed. For those who do not understand, no explanation is possible."

AND, this little email doesn't even get into the penalties rich singles or rich married couples without children face!! But we still hang onto our mentality of, "Who cares, they are rich and I'm not." Some people never even stop to consider the fact that rich people generally work hard to become rich. Sure there are examples of people who don't-all over Hollywood, but we would much rather boycott Walmart than the movies.

The fair tax system would help our contry so much and not effect most of us a penny. Study up on it folks!! The people interested in wealth redistribution(Give us your money and we will spread it around to help the poor and programs we want to help.) are killing this country!!


Jason said...

Whoa. I'm going to need to study this a few times to understand it!

Anonymous said...

This was totally cool. Thank you for sharing it.

I adamantly support the Fair tax too.