Friday, August 10, 2012

BAR STOOL ECONOMICS

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> Maybe Obama and he rest of his buds need to consider this example.
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> BAR STOOL ECONOMICS
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> Suppose that every day, ten men go out for a 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 $1.00
> The sixth would pay $3.00
> The seventh would pay $7.00
> The eighth would pay $12.00
> The ninth would pay $18.00
> The tenth man (the richest) would pay $59.00
>
> So that’s what they decided to do. The men drank in the bar
> every
> day and seemed quite happy with 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 $20.00.
> “Drinks for the ten men now cost just $80.00
>
> 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
> their “fair share?” They realized that $ 20.00 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, 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 union. “ 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, PH. D
> Professor of Economics, University of Georgia
 

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