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 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 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 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.

This is an outrage and must be immediately deleted.

Second the motion...

Ya'll must think I'm arrogant and foolish for wanting to drink my beer elsewhere. I'm not sayin', I'm just sayin'

Since the earlier thread is gone, I'll post the real numbers for total federal tax burden again. This is per the Congressional Budget Office as of 2004, and covers all federal taxes, not just selected ones:

The bottom two guys would pay 1.1%, not zero;
The next two would pay 5.2%, not zero;
The middle two would pay 10.5, not 4%;
The next two would pay 19.5%, not 19%; and
The top two would pay 63.5%, not 77%.

Story on CBO report

Shame on you Darkhorse, and on the original poster of these "economics" for trying to illustrate a point (which is perfectly clear) without verifying all numbers and calculations to one tenth of one percent. And I know what your sayin'!

You're right GD. I didn't redo the math. I apologize for my transgression.

Gee Yoss, that seems so much more fair [/sarcasm font]

Stupid double posts . . .

And I'll point out again that your figures are including social security contributions, which (in theory, at least, until the Democrats' refusal to reform the program bankrupt it), are tied to the amount of the benefit you receive when you retire. They are, therefore, irrelevant to the funding of the federal government's general operations.

And I'll follow that point by again noting that excluding social security/medicare, those who earn the most pay a very disproportionate share of taxes.

- the top 25% of income earners earn 66% of the nation's income, and pay 85% of the total income taxes;
- the second 25% of income earners earn 21% of the nation's income and pay 12% of the total income taxes;
- the bottom 50% earn 13% of the nation's income and pay 3% of the total income taxes.

source

I'm not arguing that the system shouldn't be progressive. I'm just saying that any idea that we're not already "soaking the rich" is ill-founded.

And, further, the argument that you shouldn't cut income taxes if a lot of the benefit of cutting taxes goes to "the rich" is either ignorant or dishonest.

The Republicans didn't reform it when they had control, did they? I do think that there will be reform once the obstacle-in-chief leaves office.



That statement is questionable but beside the point. Payroll taxes are VERY relevant to the total tax amount that people pay, which is the issue here.

Amazing - Bush pushes for reform, Democrats make outrageous statements about how there is no crisis, and yet he's the problem. The award for Best Revisionist History goes to...Yossarian! Bravo.


If it's just another source of revenue, and social security is just another welfare program, that would be right. Most people, though, don't consider SS welfare. Are you going to change their mind?

Bush pushed for private accounts that would divert money from the current program. If he had been willing to reform SS financing without private accounts that could have been done. After he is gone they can do that.



Reality doesn't get put up for a vote. FICA taxes are taxes, period. They pay for SS and Medicare and represent a significant portion of the taxes paid in the US. The statutes regarding their collection is found in the Internal Revenue Code. Here is the SS table on the tax rates over the years:

FICA Tax rates

so the tax reduction will be coupled with a benefit reduction? Or will SS and medicare be transformed from a pay as you go program to a welfare/wealth redistribuion system?

I am surprised more liberals haven't spoken out against this idea, as I think this would virtually guarantee these programs eventual destruction.

Oh, so my version is deleted, but two more can be posted? Crazy BOL politics!

You make your first comment with a straight face as if Bush were a fiscal conservative.

As opposed to the Lesser of Two Weevils .

Ron, you can support someone without agreeing with every single point/policy/plank. But I am sure I am just a sheep, unlike you who agrees with every single Obama policy position.

Sorry - but the irony of your statement just gave me a giggle. For your own safety however, I do not recommend that you try telling that to the nice folks at Fox News.

that is not true at all, fox gives each candidate equal time and are even showing in their polls that BO is ahead.

I don't watch the news networks, but from what I have heard, one could say the same thing about MSNBC, or at least Keith Olbermann.

Obama made a good comment about this the other day. He said:

"If voters are similarly polarized and if they're seeing two different realities, a Sean Hannity reality and a Keith Olbermann reality, then we're not going to be able to get done the work we need to get done,"

That brings to mind the quote by the late Senator Daniel Patrick Moynihan "You are entitled to your own opinion, but not your own facts".

Seriously. Seek help.