Bar Stool Economics

[swamp snorkler]

For all those in favor of taxing the rich more, here is how it works!!!!!?????

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 arraignment, 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 there "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 & girls, journalist 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

[GIBob]

Good stuff there - Thanks

[Feesherman]

And there lies the problem with Dems. They think they can raise taxes on the rich as high as they please and just assume that they will pay. They never consider that they might just take their skin outta the game leaving hundreds of unemployed in their wake!

[Matt G]

Great read! Thanks for the post.

[nguidry]

Love the post. Wish more folks understood. Problem is once the 5th guy gets a free beer he wants free food as well.

[Wag]

that's why I favor a flat tax.....everyone in that scenario would pay the same price for their beer....pretty simple really.

[Spunt Drag]

Originally Posted by Wag

that's why I favor a flat tax.....everyone in that scenario would pay the same price for their beer....pretty simple really.

True but economic experts say to get the same amount of current revenue you would have to have a flat tax around 35%. The top 2% of the population pays 40% of total revenue, so a flat tax of around 20% would come up short. These aren't my figures though, just what I've heard.

[Gerald]

Flat Tax..........Lets take this one step farther.

Lets eliminate all Federal income tax and replace it with a Federal sale tax. I don't know what the percentage would be, maybe 5%. Everybody pays the same percentage on what they spend. If the RICH spend a lot of money, they pay more "taxes" on the money they spend.

Maybe something like food items bought at grocery stores would not be taxed.

If you save your money [kind of the same thing as a Roth IRA] you don't pay any tax on that money.

Think of what this would save the Governent..... no more IRS and everything involved in collecting income taxes. Yes it would add to the "sale tax" collections system cost.....but the net savings would be HUGE.

[Spunt Drag]

Originally Posted by Gerald

Flat Tax..........Lets take this one step farther.

Lets eliminate all Federal income tax and replace it with a Federal sale tax. I don't know what the percentage would be, maybe 5%. Everybody pays the same percentage on what they spend. If the RICH spend a lot of money, they pay more "taxes" on the money they spend.

Maybe something like food items bought at grocery stores would not be taxed.

If you save your money [kind of the same thing as a Roth IRA] you don't pay any tax on that money.

Think of what this would save the Governent..... no more IRS and everything involved in collecting income taxes. Yes it would add to the "sale tax" collections system cost.....but the net savings would be HUGE.

While I would love for this to happen, you wouldn't have much of a military with that little of revenue. And your savings aren't taxed, unless you're talkin about a death tax. What is taxed is the interest your savings or investments (capital gains) make.

[Gerald]

Originally Posted by Spunt Drag

While I would love for this to happen, you wouldn't have much of a military with that little of revenue. And your savings aren't taxed, unless you're talkin about a death tax. What is taxed is the interest your savings or investments (capital gains) make.

The "Federal Tax" would have to be what it would take in enough money to run the country. Maybe this would be a little higher....say 8 or 10%.

Maybe some Luxury [non-essential] items would be taxed higher.

[scott craft]

Does anyone know what the tax rate is on those in the top 2%? I understand these guys pay more taxes, but is that because they are taxed at a higher rate or simply because of the amount they are taxed on? I suspect it is because they make more and not because of their tax rate, but I haven't researched it.

[Spunt Drag]

Originally Posted by scott craft

Does anyone know what the tax rate is on those in the top 2%? I understand these guys pay more taxes, but is that because they are taxed at a higher rate or simply because of the amount they are taxed on? I suspect it is because they make more and not because of their tax rate, but I haven't researched it.

They are taxed at a much higher rate. But it's only their income that is taxed that high. Capital gains is taxed at a much lower rate.

[getonfish]

Originally Posted by scott craft

Does anyone know what the tax rate is on those in the top 2%? I understand these guys pay more taxes, but is that because they are taxed at a higher rate or simply because of the amount they are taxed on? I suspect it is because they make more and not because of their tax rate, but I haven't researched it.

Warren Buffet publicly said he pays a lower tax rate than his assistant who makes around 50,000 a year. It is well documented that the super rich pay next to nothing in taxes compared to the middle class. Yes they pay much more in regards to monetary amounts but the breaks they receive are ridiculous. They should pay the same rates we pay. Our national debt would be much better off and they would still be ridiculously rich.

[scott craft]

Originally Posted by Spunt Drag

They are taxed at a much higher rate. But it's only their income that is taxed that high. Capital gains is taxed at a much lower rate.

Thanks.

[kcinnick]

There are Government employees who have a job to give out money. They have to give out more money than last year to ensure they still have a job next year. They don't care if you lie, they don't care if you cheat, they just care to add you to the rolls so there is enough work load to ensure their Government Job next year.

When we had my son, the first night we had an awesome nurse, we were considered a priority case since my wife had an emergency C section and there was a point where they felt the baby had to come out now or he may not make it. Anyway, the second night that great nurse was there, but we had the ****tiest nurse of the night. I went to chat with the good nurse, and I asked her why she wasn't still our nurse. Her answer had me hit the roof. "Well, ya'll are good parents and you don't need me, I have to take care of the babies with other types of parents." Turns out, one mom decided she wanted to go clubbing, so she wasn't admitted to the hospital, but the baby was, so she left her baby with the nurses and went out. Another room had one Momma, one Baby and like 3 potential baby daddy's, nurses didn't mind when I slipped up and let my Conceal Carry slip out from under my shirt as I politely told them to get in their room and shut the door or leave the wing.

The kicker is when we were leaving. The doctors come around and do all the discharges at the same time. I noticed the other people loading up new car seats, diaper bags loaded to the brim with diapers, bottles, wipes, etc., strollers, cases of formula, at minimum $750 worth of stuff. Only thing the farewell crew gave me was a bill. I asked what was going on, and they said that stuff was for the medicaid patients and they were getting food stamps and WIC also. So basically, I paid for the birth of my son, and the birth of the people whom my son is going to have to support when he starts working. The only problem I see is the poor are breeding faster than the middle class, they have an incentive to have a child, I have to budget for number 2. I would have loved to have two kids close together in age, but I would have never been able to afford it, well not unless I quit my job and got on the dole.

[LPfishnTIM]

interesting thread and interesting comments! One thing that people forget about the rich, they make jobs and they know how to make and retain money. Qualities that not everybody has. In the Bible, Jesus told many parables, one was about a young rich ruler who gave gold to three men, one multiplied his by 10x, another by 5x and the last buried his gold so he didn't loose it! which one was rewarded the most, the one who gained the most and the one who buried the gold, it was taken from him and given to the one who gained the most! that's Bible economics and I think If we tried it, it would work!

[scott craft]

Originally Posted by Spunt Drag

Our national debt would be much better off if the 50% of Americans who pay no taxes at all would pay their "fair"share. I get what you're saying. I'm middle class, and don't feel represented by either party. My company makes Billions, that's millions with a B, and still claims they're broke every quarter. The middle class is disappearing and the rich are gettin richer. But I don't want the government taxing the rich and "spreading the wealth".

From what I've read the "50% of Americans pay no taxes" statement isn't quite true, it's a political hype statement. I am in favor of a flat tax because I think everyone should be taxed at the same rate plus getting rid of loopholes will bring in more revenue in its own right.

[Spunt Drag]

Originally Posted by scott craft

From what I've read the "50% of Americans pay no taxes" statement isn't quite true, it's a political hype statement. I am in favor of a flat tax because I think everyone should be taxed at the same rate plus getting rid of loopholes will bring in more revenue in its own right.

Mark twain said "There's lies, damn lies, and statistics." so you're probably right. But it's not to say they don't pay income and sales taxes. They just get so much back at the end of the year on their returns they actually come out to the good.

[getonfish]

Matt I understand how the tax code works and I agree that Capitol gains is why the rich pay lower taxes. There needs to be some adjustments made to that law in my opinion.

On the other hand I also understand that it is the rich who supply the jobs to the rest of us. There are in fact HUGE additional tax breaks available to businesses that we don't even qualify for. Messing with those is a double edge sword though.

[scott craft]

Thanks Matt, that clears it up a lot.