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# Thread: Bar Stool Taxation

1. ## Bar Stool Taxation

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 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 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.

2. The rich guy is down in the Caymans laughing at people who pay tax on their ****y watered down domestic beer. And he owns the bar too.

3. ...most reg guys would understand and wouldn't care that the 10th guy got the biggest break...

4. Jesus christ man, WTF are you talking about?

5. Originally Posted by ASH_1962
Jesus christ man, WTF are you talking about?
Dint you hear? Beet tax is going up. Or down. Not sure. It's gonna be different though. I think.

6. Is the bartender a woman? Is she hot?

What if I spill my beer, do I get another?

7. Please stop posting your ****ty chain emails.

http://www.snopes.com/business/taxes/howtaxes.asp

8. why do all terrible arguments employ stupid anecdotes like this? I don't know what's worse this or the story about the Professor who gets "busted" by the snot-nosed student when trying to explain to his silly ass that god isn't real.

9. There's a tax on bar stools now?

10. wrong forum, chooch.

11. My bad, mods please move to politics forum

12. dump lock ban

please

13. And your some self proclaimed Champion of Common Sense? Seriously?

14. Originally Posted by chiefst2000
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 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 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.
This sh*t again?

15. Originally Posted by LIDeadHead
And your some self proclaimed Champion of Common Sense? Seriously?
There is no more common sense then what was posted re tax law. All spot on and 100% correct. That said politics are for the poli forum. I had two JI tabs open at the same time. Posted in the wrong one.

16. Originally Posted by chiefst2000
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 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 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.
It's actually even worse If it was like our tax system the first 4 would be getting paid to drink. Those 4 would would always vote to keep things the same way. I remember the first time my wife got more money back on her tax "refund" than she paid taxes. I couldn't believe it. How is it a refund if you get more back than you paid? The problem is that politicians don't care about money, only votes. So if you keep people poor, and give them just enough to live on, then they have no choice but to vote for you.

17. Originally Posted by PlumberKhan
This sh*t again?
It's appropriate at the moment as the current vote in the Senate involves extension of the Bush tax cuts for all or the Democratic version which raises taxes on the investor class.

18. Originally Posted by chiefst2000
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.

Oh puleeeze. This is so simplistic a view of things - albeit on a football forum so okay.

Jobs and earnings are created by the velocity of money - in other words how often it changes hands. There is much more harm done to economic activity by how the wealthy sequester money they have or earn than by poor or middle-income getting more than their 'fair' share.

If you look at the world's most dynamic economies, a hallmark is always the rise and emergence of a middle-class. With disposable income and a real shot at mobility, they become the huge drivers of money velocity. This 'boom' is often extended by credit that lets them magnify the velocity of their own money by begin able to spend more in current and future dollars than they actually have.

So sorry - I don't know where you are going with this - but if you think more rich people are the thing lacking from the American economy you are wholly mistaken. Lowering rich people's tax rates doesn't cause them to spend any more than they would otherwise - that's the truth. It's not that deserve a tax raise, it's that a tax cut on the rich for fiscal purposes is utterly ineffectual. All that tends to happen is that they sequester the funds in bank accounts or investments, often soaking up credit that would otherwise be more available elsewhere or they look to buy hard assets - driving up the price of those assets.

Think of all the poor suckers paying thousands more for gas these past few years because American 'investors' are allowed to speculate on oil prices. That's a massive wealth transfer from the lower-classes to the investment classes. So - no crying when it comes to taxation unless you want to take a look at the whole big picture. Oh - and one more thing - those investment classes pay 15% on their long-term gains [12 months] - that puts most of them well below the actual tax rate paid by even 'middle-class' families.

Investment losses are of course counted against gains when calculating liabilities - and can be carried forward too - for AS LONG AS YOU LIVE [at a rate of some \$3,000 per year]. When a working man loses his job, and draws down his savings, can he 'carry forward' his loss of income? Can he say 'hey I didn't make any money last year, so give me a break this year on my taxes.'? Nope.

19. Originally Posted by adpz
Oh puleeeze. This is so simplistic a view of things - albeit on a football forum so okay.

Jobs and earnings are created by the velocity of money - in other words how often it changes hands. There is much more harm done to economic activity by how the wealthy sequester money they have or earn than by poor or middle-income getting more than their 'fair' share.

If you look at the world's most dynamic economies, a hallmark is always the rise and emergence of a middle-class. With disposable income and a real shot at mobility, they become the huge drivers of money velocity. This 'boom' is often extended by credit that lets them magnify the velocity of their own money by begin able to spend more in current and future dollars than they actually have.

So sorry - I don't know where you are going with this - but if you think more rich people are the thing lacking from the American economy you are wholly mistaken. Lowering rich people's tax rates doesn't cause them to spend any more than they would otherwise - that's the truth. It's not that deserve a tax raise, it's that a tax cut on the rich for fiscal purposes is utterly ineffectual. All that tends to happen is that they sequester the funds in bank accounts or investments, often soaking up credit that would otherwise be more available elsewhere or they look to buy hard assets - driving up the price of those assets.

Think of all the poor suckers paying thousands more for gas these past few years because American 'investors' are allowed to speculate on oil prices. That's a massive wealth transfer from the lower-classes to the investment classes. So - no crying when it comes to taxation unless you want to take a look at the whole big picture.
You actually make some decent points and some poor ones. There is a sweet spot with regards to taxation. that is the point in which reducing taxes does not increase investment or GDP. The interesting thing is that the way money is taxed in the US there is actually a negative effect over time to revenues when taxes are raised. As an example in 2007, a full 5 years in to the Bush tax cuts we had revenues as a % of GDP at the historic level of around 18.5%. That year the deficit was under 200 billion.

My point? Raising taxes actually reduces revenues to the government through reduced economic activity. The private sector is much more efficient then the public sector at investment and revenue generation. Your concept of the wealthy sequestering money does not hold true. The wealthy invest their money. Even investment in Municipal Bonds is a positive for the public sector as Munis exchange tax free income for a reduced return relative to similar risk taxable products. The State or locality gets a discount on their cost of capital.

Furthermore your point on Oil prices is misguided. The reason we pay so much for gas and oil is because Government blocks our ability to exploit our domestic resources. Blaming it on speculators is misguided and simplistic.

20. Originally Posted by chiefst2000
Blaming it on speculators is misguided and simplistic.
Fair enough - all of these topics are complicated and interwoven - and the results of actions largely speculative.

I have a few friends at the US Treasury - one who works for Tim Geithner - and my interests aren't in taxation really. I'd be much happier if the US had some cogent plan about how to move into being a post-industrializing world-intergrated economy.

The current way sure isn't working and that is most certainly not a problem to be solved by taxes one way or the other. And to me it's the biggest problem by far.

I'd like to see the US adopt some sort of government-business industrial policy that creates real incentives for high-value-added manufacturing [and the inevitable service jobs it begets] along with a much lower corporate tax rate tied to local and national investment - investment not just in corporate assets but extending to investment in educational partnership, training, etc.

Anyway - its a complex and unfortunately long-term issue.

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