Bar Stool Economy

Rob Loach rob at IVMAN.COM
Tue Dec 23 15:40:08 MST 2008


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 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!" 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 to pay even half of the tab!

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.

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