An interesting read.

Bar Stool Economics by David R. Kamerschen, Ph.D.

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. 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

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"Sometimes I think that the surest sign that intelligent life exsists in outer space is that none of it has tried to contact us yet."

Calvin, speaking to Hobbes

good read -

It's definitely a good lesson. If you're going to beat up your rich drinking buddies, it's best to also take all their money so you can continue to pick up the tab.

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My foot hurts

Interesting read.

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The only guarantee in life is a life worth dying for. -Atmosphere

I like it...it pretty well encapsulates my displeasure with our tax code. However, it's just a tad simplistic. The tenth guy can get lots and lots of breaks in our system, from write offs to things like TIFs and other incentives that just help make him more wealthy. But I definitely think the first four guys should STFU and enjoy this thing they got going.

i keep meaning to type out an idea for a tax that would be great. itll take to long to do right now... ill try and get it thursday.

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Kuzi's cigar catalog blending 101 developing your palate

Luko:

But I definitely think the first four guys should STFU and enjoy this thing they got going.

LMAO

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"Sometimes I think that the surest sign that intelligent life exsists in outer space is that none of it has tried to contact us yet."

Calvin, speaking to Hobbes

Generally its a good post. And it's more or less accurate if true, but it's also true that it doesn't cover the write offs and things, or the various tricks some of the wealthy use to avoid paying taxes. I like the idea of lowering income taxes and having national sales taxes instead, but I wouldn't know how to go about implimenting such a thing or even how effective it would actually be in practice.

Wafflebob:

Generally its a good post. And it's more or less accurate if true, but it's also true that it doesn't cover the write offs and things, or the various tricks some of the wealthy use to avoid paying taxes. I like the idea of lowering income taxes and having national sales taxes instead, but I wouldn't know how to go about implimenting such a thing or even how effective it would actually be in practice.

even after the "tricks" and what not the top 1% are still paying over 50% of all income tax

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Kuzi's cigar catalog blending 101 developing your palate

The "trick' was they were smart enough to get there in the first place!

gmill880:

The "trick' was they were smart enough to get there in the first place!

OTOH, a LOT of people got rich doing stupid things on Wall Street. (Link x-posted.)

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