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Thread: Barstool Economics

  1. #1

    Default Barstool 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.

    David R. Kamerschen, Ph.D.
    Professor of Economics, University of Georgia

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


    Note: DR. DAVID R. KAMERSCHEN is a Distinguished Professor of Economics and holder of the Jasper N. Dorsey Chair at the University of Georgia, Department of Economics, Brooks Hall, Athens, GA

  2. #2

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    Funny! But I'm on the flat rate parade! Scrap the entire tax system and tax everyone at a flat rate.
    Steven Vaccaro

    Where Racing on a Budget is a Reality!

  3. #3

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    Quote Originally Posted by Steven Vaccaro View Post
    Funny! But I'm on the flat rate parade! Scrap the entire tax system and tax everyone at a flat rate.

    I'm kind of there too... though then I start wondering about the cost of raising kids and whether or not there should be deductions for children, etc... My initial reaction is just tax everyone... EVERYONE... 10% and be done with it... Then I start thinking maybe it should be a ramp from 0% to maybe 25%, starting at those making minimum wage, and ending at the top...

    Not sure which way works out the best... but I agree... it should and needs to be much simpler than it is right now...

  4. #4

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    I agree. Its just way to difficult at this point.
    Steven Vaccaro

    Where Racing on a Budget is a Reality!

  5. #5

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    Maybe we should just all work for The State and then they can decide who gets how much. Surely the most valuable people of the country (the politicians and their friends) would be worth the most, and those who actually staff factories (remember those?!?!) would be worth little.

    Right?

    Andy

  6. #6

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    Quote Originally Posted by Darin Jordan View Post
    I'm kind of there too... though then I start wondering about the cost of raising kids and whether or not there should be deductions for children, etc... My initial reaction is just tax everyone... EVERYONE... 10% and be done with it... Then I start thinking maybe it should be a ramp from 0% to maybe 25%, starting at those making minimum wage, and ending at the top...

    Not sure which way works out the best... but I agree... it should and needs to be much simpler than it is right now...
    Forbes plan was to use a 13% factor with deductions only for the very poor, poverty level.
    an RC rock crawler lost in a sea of boat parts.........

  7. #7

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    Quote Originally Posted by rockwerks View Post
    Forbes plan was to use a 13% factor with deductions only for the very poor, poverty level.
    At this point... I'd go for just about anything reasonable that satisfies two, or maybe three basic criteria:

    1) It's SIMPLE
    2) It's FAIR
    3) It gives the government the money needed to operate effectively

  8. #8

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    Nothings wrong with the tax system, it's just i don't believe we get back what we put in. Tax us 45 to 50 percent and include free schooling and free medical( from a scratch to brain surgery) like they do in those Scandinavian, Norwegian countries...I was watching 20/20 one on Denmark, this guy injured his back and they gave him a months vacation plus sent him to the Bahamas, my kinda tax system. also if you noticed they don't have a 4 tier government bureaucracy( City, County, State, Federal) which places the responsibility on each other when they money goes missing and the job is left undone ,ie Katrina levee's system, point the finger politics to stop a minor river, while Holland levee system stops the North Sea
    Samuel Johnson - “An injustice anywhere is an injustice everywhere.” William Cooper "listen to everything, read everything, and believe nothing unless you can prove it in your own research!"

  9. #9

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    Quote Originally Posted by RCprince View Post
    Nothings wrong with the tax system, it's just i don't believe we get back what we put in. Tax us 45 to 50 percent and include free schooling and free medical( from a scratch to brain surgery) like they do in those Scandinavian, Norwegian countries...I was watching 20/20 one on Denmark, this guy injured his back and they gave him a months vacation plus sent him to the Bahamas, my kinda tax system. also if you noticed they don't have a 4 tier government bureaucracy( City, County, State, Federal) which places the responsibility on each other when they money goes missing and the job is left undone ,ie Katrina levee's system, point the finger politics to stop a minor river, while Holland levee system stops the North Sea
    I heard bad and good things about how socialized health care works in Europe. Many people say it works, but then many people say you still end up paying a lot, since usually the state can't cover everything. A lot of people here say they dont want to pay for the poor the same as they have to pay. That we wont have enough money to do it. That it will reduce the quality of the health care you receive.

    However if our country gave up a few things it's more feasible. Like our giant military, stop taking so many prescription drugs, stop spending billions trying to stop illegal drugs from getting in. Stuff like that, now I dont take either side of this argument, since I've already got cheap insurance, dont know if disarming ourselves is a good idea and I have to take meds. Illegal drugs; well I'm out of college so I dont care either way.

    Then there's a third way to look at it, if we just spent 700 billion on the banks then I guess this country has enough money to socialize health care. We also just bailed out capitalism as we know it, so health care is just another communist like thing to do. Maybe this isnt a bad thing, I think the worst part is that we dont know.
    BOATS CAN FLY AND SHOULD!

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