OT: Bar Stool Economics

[evolusd]

Many of you have probably seen this, but I always find it amusing!

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. 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 a graded procedure, 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.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

David R. Kamerschen, PhD
Professor of Economics
University of Georgia

[stockstradr]

Sure. Except for one problem: the facts.

Effective tax rates (meaning actual taxes paid) for the richest Americans AND effective tax rates for the companies they manage are some of the LOWEST tax rates ever paid by those groups in the entire history of our nation. Even the Wall Street Journal has written articles acknowledging in particular how low corporate tax rates are.

Those are the facts.

Buffet (an honest and honorable man) was interviewed by Charlie Rose this week. Buffet stated the above fact, and even though it was to his DISadvantage to acknowlege it on national TV, he had the courage to say (paraphrasing),

“I pay and my company pays a much lower tax rate than my secretary, or the average lower middle class American. Something is deeply wrong with THAT.”

This is one of many reasons Buffet is so well respected. He has the guts and integrity to admit on national TV that rich Americans and our corporations are paying taxes at rates that are TOO LOW.

[stockstradr]

Sure. Except for one problem: the facts.

Effective tax rates (meaning actual taxes paid) for the richest Americans AND effective tax rates for the companies they manage are some of the LOWEST tax rates ever paid by those groups in the entire history of our nation. Even the Wall Street Journal has written articles acknowledging in particular how low corporate tax rates are.

Those are the facts.

Buffet (an honest and honorable man) was interviewed by Charlie Rose this week. Buffet stated the above fact, and even though it was to his DISadvantage to acknowlege it on national TV, he had the courage to say (paraphrasing),

“I pay and my company pays a much lower tax rate than my secretary, or the average lower middle class American. Something is deeply wrong with THAT.”

This is one of many reasons Buffet is so well respected. He has the guts and integrity to admit on national TV that rich Americans and our corporations are paying taxes at rates that are TOO LOW.

[stockstradr]

Sure. Except for one problem: the facts.

Effective tax rates (meaning actual taxes paid) for the richest Americans AND effective tax rates for the companies they manage are some of the LOWEST tax rates ever paid by those groups in the entire history of our nation. Even the Wall Street Journal has written articles acknowledging in particular how low corporate tax rates are.

Those are the facts.

Buffet (an honest and honorable man) was interviewed by Charlie Rose this week. Buffet stated the above fact, and even though it was to his DISadvantage to acknowlege it on national TV, he had the courage to say (paraphrasing),

“I pay and my company pays a much lower tax rate than my secretary, or the average lower middle class American. Something is deeply wrong with THAT.”

This is one of many reasons Buffet is so well respected. He has the guts and integrity to admit on national TV that rich Americans and our corporations are paying taxes at rates that are TOO LOW.

[stockstradr]

Sure. Except for one problem: the facts.

Effective tax rates (meaning actual taxes paid) for the richest Americans AND effective tax rates for the companies they manage are some of the LOWEST tax rates ever paid by those groups in the entire history of our nation. Even the Wall Street Journal has written articles acknowledging in particular how low corporate tax rates are.

Those are the facts.

Buffet (an honest and honorable man) was interviewed by Charlie Rose this week. Buffet stated the above fact, and even though it was to his DISadvantage to acknowlege it on national TV, he had the courage to say (paraphrasing),

“I pay and my company pays a much lower tax rate than my secretary, or the average lower middle class American. Something is deeply wrong with THAT.”

This is one of many reasons Buffet is so well respected. He has the guts and integrity to admit on national TV that rich Americans and our corporations are paying taxes at rates that are TOO LOW.

[stockstradr]

Sure. Except for one problem: the facts.

Effective tax rates (meaning actual taxes paid) for the richest Americans AND effective tax rates for the companies they manage are some of the LOWEST tax rates ever paid by those groups in the entire history of our nation. Even the Wall Street Journal has written articles acknowledging in particular how low corporate tax rates are.

Those are the facts.

Buffet (an honest and honorable man) was interviewed by Charlie Rose this week. Buffet stated the above fact, and even though it was to his DISadvantage to acknowlege it on national TV, he had the courage to say (paraphrasing),

“I pay and my company pays a much lower tax rate than my secretary, or the average lower middle class American. Something is deeply wrong with THAT.”

This is one of many reasons Buffet is so well respected. He has the guts and integrity to admit on national TV that rich Americans and our corporations are paying taxes at rates that are TOO LOW.

[kewp]

In order for this to be accurate; there needs to be an 11th man (representing the wealthiest that don’t pay taxes) that the other ten pay to drink the best beer.

[kewp]

In order for this to be accurate; there needs to be an 11th man (representing the wealthiest that don’t pay taxes) that the other ten pay to drink the best beer.

[kewp]

In order for this to be accurate; there needs to be an 11th man (representing the wealthiest that don’t pay taxes) that the other ten pay to drink the best beer.

[kewp]

In order for this to be accurate; there needs to be an 11th man (representing the wealthiest that don’t pay taxes) that the other ten pay to drink the best beer.

[kewp]

In order for this to be accurate; there needs to be an 11th man (representing the wealthiest that don’t pay taxes) that the other ten pay to drink the best beer.

[Anonymous]

Gosh oh gee. How do I debate such a straight forward and simple explanation of our tax system?
Let me try.

A “real” economist would have two problems with this “example”:
1. It uses luxury as its model. A simple understanding of game theory shows that at the end of
the story, if the 10th man decides not to buy, then he has no leverage. No one “needs” beer. Our
government doesn’t apportion luxuries.

2. There is no baseline. The assumption is that if you can’t afford it, don’t drink. When in reality,
what most of us are doing is working to pay for food, clothing, shelter, education, and healthcare.
THAT is the baseline. Anything made above the price of these necessities could be subject
to the “beer” argument, but the result would end up with pretty much everyone paying as shown.

So it’s ridiculous to use beer as the example. Why not use 60″ plasma TVs or diamonds?
None of these represent the economic situation that most of us find ourselves in. Since the example
uses a luxury (beer) as its foundation, let’s rewrite the story using a necessity: Oxygen.

HERE IS THE UPDATE TO THE STORY
Suppose that every day, ten men go out for oxygen and the bill for all ten
comes to $100. 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 breathe each day and seem quite happy with the
arrangement, until one day, the richest man throws them a curve.

“I’m tired of paying the most when you all use the same amount of oxygen.
I’m not going to pay for you to get oxygen anymore. Go buy your own air.”

the 1st and 2nd men (poorest) can’t afford oxygen and die within minutes.

The 3rd poor man gets his wages reduced by his boss (the seventh man who needs to pay more now)
and can no longer afford oxygen either. He dies within days.

The 4th poor man, pays for oxygen and continues to breathe. How? He loves his wife and kids
and so to continue to allow them to breathe, he was driven to steal the rich man’s car to pay for oxygen
for his family. Crime increases, not because men want “beer” and bling, but because they will do
anything to provide for their families. He gets caught and sent to prison where he earns no money.
His disabled wife and small children all die now that they have no provider of oxygen.

The 5th & 6th men make their living selling products (like food) and services to the first 4 men.
Having more than half of their customers die, they can no longer afford to stay in business.
They both close shop and die within weeks.

The 7th & 8th men own or work for companies that sell products and services to the 9th & 10th man.
Unfortunately, the workers they rely on to plant and harvest the crops, manufacture goods, and deliver
the services have all died. Within months, the 7th and 8th men die.

The 9th man has enough money to buy oxygen for a year. Unfortunately, the guy that refills oxygen bottles was man
number 1. The guy that maintains the regulators and oxygen safety equipment was man number 2. The owner of the trucking
company that delivers the oxygen was man number 7. Man number 9 dies in 4 months when the supply of safe, available oxygen disappears.

Now we come to good, ol’ man number 10. The guy that wants to stop paying because he is blind to the value others bring to him and his lifestyle.
Man number 10 has stocked away 5 years worth of oxygen. He’ll survive…at least for awhile. As long as
he can build his own roads, make his own electricity, maintain his own equipment, grow his own food, provide his own healthcare,
clean his own air & water, and protect himself from fire, flood, hurricane, and the occasional attack from
anyone else who might have survived and wants to take HIS oxygen.

And that, ladies and gentlemen, journalists and college professors, is how our tax system would
work if we let the short-sighted run our economy. The people who pay the highest taxes need to understand
that they truly get the most benefit when the people who supply, buy, and work for them can afford the necessities of life.
Bitch too much, attack the middle class and poor for not paying enough, and they just may
stop producing, showing up, or DIE.

David Stuck
Student of Life and Economics
For those who were naive enough to except the “beer” analogy, think about
where YOUR money goes and what would happen to you. (hint: You aren’t the 10th man)

[Anonymous]

Gosh oh gee. How do I debate such a straight forward and simple explanation of our tax system?
Let me try.

A “real” economist would have two problems with this “example”:
1. It uses luxury as its model. A simple understanding of game theory shows that at the end of
the story, if the 10th man decides not to buy, then he has no leverage. No one “needs” beer. Our
government doesn’t apportion luxuries.

2. There is no baseline. The assumption is that if you can’t afford it, don’t drink. When in reality,
what most of us are doing is working to pay for food, clothing, shelter, education, and healthcare.
THAT is the baseline. Anything made above the price of these necessities could be subject
to the “beer” argument, but the result would end up with pretty much everyone paying as shown.

So it’s ridiculous to use beer as the example. Why not use 60″ plasma TVs or diamonds?
None of these represent the economic situation that most of us find ourselves in. Since the example
uses a luxury (beer) as its foundation, let’s rewrite the story using a necessity: Oxygen.

HERE IS THE UPDATE TO THE STORY
Suppose that every day, ten men go out for oxygen and the bill for all ten
comes to $100. 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 breathe each day and seem quite happy with the
arrangement, until one day, the richest man throws them a curve.

“I’m tired of paying the most when you all use the same amount of oxygen.
I’m not going to pay for you to get oxygen anymore. Go buy your own air.”

the 1st and 2nd men (poorest) can’t afford oxygen and die within minutes.

The 3rd poor man gets his wages reduced by his boss (the seventh man who needs to pay more now)
and can no longer afford oxygen either. He dies within days.

The 4th poor man, pays for oxygen and continues to breathe. How? He loves his wife and kids
and so to continue to allow them to breathe, he was driven to steal the rich man’s car to pay for oxygen
for his family. Crime increases, not because men want “beer” and bling, but because they will do
anything to provide for their families. He gets caught and sent to prison where he earns no money.
His disabled wife and small children all die now that they have no provider of oxygen.

The 5th & 6th men make their living selling products (like food) and services to the first 4 men.
Having more than half of their customers die, they can no longer afford to stay in business.
They both close shop and die within weeks.

The 7th & 8th men own or work for companies that sell products and services to the 9th & 10th man.
Unfortunately, the workers they rely on to plant and harvest the crops, manufacture goods, and deliver
the services have all died. Within months, the 7th and 8th men die.

The 9th man has enough money to buy oxygen for a year. Unfortunately, the guy that refills oxygen bottles was man
number 1. The guy that maintains the regulators and oxygen safety equipment was man number 2. The owner of the trucking
company that delivers the oxygen was man number 7. Man number 9 dies in 4 months when the supply of safe, available oxygen disappears.

Now we come to good, ol’ man number 10. The guy that wants to stop paying because he is blind to the value others bring to him and his lifestyle.
Man number 10 has stocked away 5 years worth of oxygen. He’ll survive…at least for awhile. As long as
he can build his own roads, make his own electricity, maintain his own equipment, grow his own food, provide his own healthcare,
clean his own air & water, and protect himself from fire, flood, hurricane, and the occasional attack from
anyone else who might have survived and wants to take HIS oxygen.

And that, ladies and gentlemen, journalists and college professors, is how our tax system would
work if we let the short-sighted run our economy. The people who pay the highest taxes need to understand
that they truly get the most benefit when the people who supply, buy, and work for them can afford the necessities of life.
Bitch too much, attack the middle class and poor for not paying enough, and they just may
stop producing, showing up, or DIE.

David Stuck
Student of Life and Economics
For those who were naive enough to except the “beer” analogy, think about
where YOUR money goes and what would happen to you. (hint: You aren’t the 10th man)

[Anonymous]

Gosh oh gee. How do I debate such a straight forward and simple explanation of our tax system?
Let me try.

A “real” economist would have two problems with this “example”:
1. It uses luxury as its model. A simple understanding of game theory shows that at the end of
the story, if the 10th man decides not to buy, then he has no leverage. No one “needs” beer. Our
government doesn’t apportion luxuries.

2. There is no baseline. The assumption is that if you can’t afford it, don’t drink. When in reality,
what most of us are doing is working to pay for food, clothing, shelter, education, and healthcare.
THAT is the baseline. Anything made above the price of these necessities could be subject
to the “beer” argument, but the result would end up with pretty much everyone paying as shown.

So it’s ridiculous to use beer as the example. Why not use 60″ plasma TVs or diamonds?
None of these represent the economic situation that most of us find ourselves in. Since the example
uses a luxury (beer) as its foundation, let’s rewrite the story using a necessity: Oxygen.

HERE IS THE UPDATE TO THE STORY
Suppose that every day, ten men go out for oxygen and the bill for all ten
comes to $100. 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 breathe each day and seem quite happy with the
arrangement, until one day, the richest man throws them a curve.

“I’m tired of paying the most when you all use the same amount of oxygen.
I’m not going to pay for you to get oxygen anymore. Go buy your own air.”

the 1st and 2nd men (poorest) can’t afford oxygen and die within minutes.

The 3rd poor man gets his wages reduced by his boss (the seventh man who needs to pay more now)
and can no longer afford oxygen either. He dies within days.

The 4th poor man, pays for oxygen and continues to breathe. How? He loves his wife and kids
and so to continue to allow them to breathe, he was driven to steal the rich man’s car to pay for oxygen
for his family. Crime increases, not because men want “beer” and bling, but because they will do
anything to provide for their families. He gets caught and sent to prison where he earns no money.
His disabled wife and small children all die now that they have no provider of oxygen.

The 5th & 6th men make their living selling products (like food) and services to the first 4 men.
Having more than half of their customers die, they can no longer afford to stay in business.
They both close shop and die within weeks.

The 7th & 8th men own or work for companies that sell products and services to the 9th & 10th man.
Unfortunately, the workers they rely on to plant and harvest the crops, manufacture goods, and deliver
the services have all died. Within months, the 7th and 8th men die.

The 9th man has enough money to buy oxygen for a year. Unfortunately, the guy that refills oxygen bottles was man
number 1. The guy that maintains the regulators and oxygen safety equipment was man number 2. The owner of the trucking
company that delivers the oxygen was man number 7. Man number 9 dies in 4 months when the supply of safe, available oxygen disappears.

Now we come to good, ol’ man number 10. The guy that wants to stop paying because he is blind to the value others bring to him and his lifestyle.
Man number 10 has stocked away 5 years worth of oxygen. He’ll survive…at least for awhile. As long as
he can build his own roads, make his own electricity, maintain his own equipment, grow his own food, provide his own healthcare,
clean his own air & water, and protect himself from fire, flood, hurricane, and the occasional attack from
anyone else who might have survived and wants to take HIS oxygen.

And that, ladies and gentlemen, journalists and college professors, is how our tax system would
work if we let the short-sighted run our economy. The people who pay the highest taxes need to understand
that they truly get the most benefit when the people who supply, buy, and work for them can afford the necessities of life.
Bitch too much, attack the middle class and poor for not paying enough, and they just may
stop producing, showing up, or DIE.

David Stuck
Student of Life and Economics
For those who were naive enough to except the “beer” analogy, think about
where YOUR money goes and what would happen to you. (hint: You aren’t the 10th man)

[Anonymous]

Gosh oh gee. How do I debate such a straight forward and simple explanation of our tax system?
Let me try.

A “real” economist would have two problems with this “example”:
1. It uses luxury as its model. A simple understanding of game theory shows that at the end of
the story, if the 10th man decides not to buy, then he has no leverage. No one “needs” beer. Our
government doesn’t apportion luxuries.

2. There is no baseline. The assumption is that if you can’t afford it, don’t drink. When in reality,
what most of us are doing is working to pay for food, clothing, shelter, education, and healthcare.
THAT is the baseline. Anything made above the price of these necessities could be subject
to the “beer” argument, but the result would end up with pretty much everyone paying as shown.

So it’s ridiculous to use beer as the example. Why not use 60″ plasma TVs or diamonds?
None of these represent the economic situation that most of us find ourselves in. Since the example
uses a luxury (beer) as its foundation, let’s rewrite the story using a necessity: Oxygen.

HERE IS THE UPDATE TO THE STORY
Suppose that every day, ten men go out for oxygen and the bill for all ten
comes to $100. 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 breathe each day and seem quite happy with the
arrangement, until one day, the richest man throws them a curve.

“I’m tired of paying the most when you all use the same amount of oxygen.
I’m not going to pay for you to get oxygen anymore. Go buy your own air.”

the 1st and 2nd men (poorest) can’t afford oxygen and die within minutes.

The 3rd poor man gets his wages reduced by his boss (the seventh man who needs to pay more now)
and can no longer afford oxygen either. He dies within days.

The 4th poor man, pays for oxygen and continues to breathe. How? He loves his wife and kids
and so to continue to allow them to breathe, he was driven to steal the rich man’s car to pay for oxygen
for his family. Crime increases, not because men want “beer” and bling, but because they will do
anything to provide for their families. He gets caught and sent to prison where he earns no money.
His disabled wife and small children all die now that they have no provider of oxygen.

The 5th & 6th men make their living selling products (like food) and services to the first 4 men.
Having more than half of their customers die, they can no longer afford to stay in business.
They both close shop and die within weeks.

The 7th & 8th men own or work for companies that sell products and services to the 9th & 10th man.
Unfortunately, the workers they rely on to plant and harvest the crops, manufacture goods, and deliver
the services have all died. Within months, the 7th and 8th men die.

The 9th man has enough money to buy oxygen for a year. Unfortunately, the guy that refills oxygen bottles was man
number 1. The guy that maintains the regulators and oxygen safety equipment was man number 2. The owner of the trucking
company that delivers the oxygen was man number 7. Man number 9 dies in 4 months when the supply of safe, available oxygen disappears.

Now we come to good, ol’ man number 10. The guy that wants to stop paying because he is blind to the value others bring to him and his lifestyle.
Man number 10 has stocked away 5 years worth of oxygen. He’ll survive…at least for awhile. As long as
he can build his own roads, make his own electricity, maintain his own equipment, grow his own food, provide his own healthcare,
clean his own air & water, and protect himself from fire, flood, hurricane, and the occasional attack from
anyone else who might have survived and wants to take HIS oxygen.

And that, ladies and gentlemen, journalists and college professors, is how our tax system would
work if we let the short-sighted run our economy. The people who pay the highest taxes need to understand
that they truly get the most benefit when the people who supply, buy, and work for them can afford the necessities of life.
Bitch too much, attack the middle class and poor for not paying enough, and they just may
stop producing, showing up, or DIE.

David Stuck
Student of Life and Economics
For those who were naive enough to except the “beer” analogy, think about
where YOUR money goes and what would happen to you. (hint: You aren’t the 10th man)

[Author]

Posts