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bluering
Trad climber
Santa Clara, Ca.
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Topic Author's Original Post - Feb 8, 2008 - 12:54pm PT
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I just ran scross this...
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 on 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!"
"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.
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Ghost
climber
A long way from where I started
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That is an excellent analysis of one side of the issue. However, I'd like to read what Dr. Kamerschen has to say about how the ten men might behave when the bartender said "My costs have gone up and I'm going to have to raise your total bill by $20."
Since the US is now very much in the position of seeing its total bill go up, how should the payment distribution be changed?
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paganmonkeyboy
climber
mars...it's near nevada...
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I agree with you in theory bluering...
however - many times, the richest man is going to be paying less than 10 bucks - loopholes, write offs, assorted scams and creative accounting - we see many stories where the wealthy are not paying the same percentage as the rest of the populace, but are in fact paying significantly lower...
also - this analogy leaves out the part where the rich man gets his money by only paying the poor man 7 bucks an hour to dig ditches - there is an inherent cost/benefit model that isn't taken into account at all here in this simple case - ie the fact that capitalism requires most people to be poor in order to work.
that having been said - you know i will never vote for hillary ;-)
(how goes the smoking and quitting ?)
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Karl Baba
Trad climber
Yosemite, Ca
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Bullsh#t, historically the tax rate on the highest wealth in the US has been as high as 90%. The rich have never had it better, EVER, than right now. The wealth gap in this country is widening at an expanding rate, not by just a little
That scenario above is just stupid. Here's the real story.
The bartender tells the guys, I'm doubling the price of beer but you don't have to pay now, pay 100% of the old price now, I'll return %20 of that to the richest guy, and the rest you can pay in the future. You have to sign an agreement obligating your kids to pay if you don't. I'll keep track of the interest. I need to spend the extra money on the doubled beer price on a million dollar alarm system, Video surveillance, and a dozen sawed off shotguns in case bikers try to sack the place.
That's our tax, borrow and spend system
peace
Karl
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Shingle
climber
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If this were really an analogy with our society, the tenth man would drink nine of the beers, leaving the one remaining to be split by the other nine. Also, his buddy's company would have actually made the beer and taken home the profits.
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Moof
Big Wall climber
A cube at my soul sucking job in Oregon
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The analogy fails to account for the following:
1. In life, the first four guys got a shot glass of PBR to share with each other. The paint on the shot glass depicting the bar's name had lead in it because the tenth guy imported them from the third world to sell to the shop owner.
2. The tenth guy was getting BJ from bar owner, while drinking a second beer he smuggled in from the Caymen Islands.
3. The bar went out of business because the bar owner couldn't do math and found out the hard way he couldn't keep giving away beer below cost.
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bluering
Trad climber
Santa Clara, Ca.
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Topic Author's Reply - Feb 8, 2008 - 01:38pm PT
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PMB, I'm in my 'cutting down' phase trying to weaken my reliance on nictine. I should be off in another week, maybe two.
Thanks for asking.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Glad to hear the smoking thing is still working.
Only 17% of today's kids are smoking.
I saw somewhere recently that 60% of Chinese males (in China) smoke.
BTW. There was a story yesterday that Mike Bloomberg's Family Charity contributed $125 Million to help eliminate smoking.
Hey, Karl, how does that fit with your rich people fantasies? :-)
Don't forget that AMT. Nobody can escape that. Once you hit that magic upper middle class level all sort of loopholes start closing. Even charity gets punished.
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AllezAllez510
Trad climber
PDX, OR
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This is bullsh!t. I'm so sick of people bitching about taxes. Do you have ANY other concerns? Guess what? Surprise!!!! Governement 'services' (read: da armeee) do not come out of thin air.
Let's start by cutting the Defense Dep. budget by, oh say, 90% and then I listen to you bitch about taxes.
We have enough nukes to destroy the planet 10 times. We don't need the military we have. I'm tires of paying taxes to subsidize Europe's and Asia's security.
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k-man
Gym climber
SCruz
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I'm glad I didn't take economics from that Professor, he doesn't know much about how the "rich" pay taxes.
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Karl Baba
Trad climber
Yosemite, Ca
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"PMB, I'm in my 'cutting down' phase trying to weaken my reliance on nictine. I should be off in another week, maybe two. "
Way to go Bluey, never give up giving up.
Tiggy, I don't think the uber-wealthy are all intentionally evil at all. That's nice of Bloomberg, the equivalent of me giving out $200, but still. We're all trapped in our habitual rationalizations, actions and motivations and our peer group keeps us locked in that behaviour. It seems if we decided to change, the actions of those around us would negate it.
The impact of the Megacorporations and Billionares are so negative mostly because of their extreme power. Perhaps they know not what they do. I kill mice in my house and ants too, I don't feel that bad about it.
Peace
Karl
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