taxes and the wealthy

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      This came across my desk the other day. I’m obviously not rolling in

      it, or I might not be here, but I do recognize the relevance of the

      snippet. I think a flat tax would be great, because then nobody can

      whine about it, and everyone knows just what to expect. Whining, in

      any area of life, generates NOTHING positive… Have a great day!


      Bar Room Economics

      Suppose that every day, ten men go out for beer and the bill for all


      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


      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


      first four men were unaffected. They would still drink for free. But


      about the other six men – the paying customers? How could they divide


      $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


      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


      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


      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


      man. ‘I only saved a dollar, too. It’s unfair that he got ten times


      than I!’ ‘That’s true!!’ shouted the seventh man.

      ‘Why should he get


      back when I got only two? The wealthy get all the breaks!’ ‘Wait a


      yelled the first four men in unison. ‘We didn’t get anything at all.


      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, ladies and gentlemen, journalists and college professors,

      is how

      our tax system works. The people who pay the highest taxes get the


      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


      drinking overseas where the atmosphere is somewhat friendlier.

      David R. Kamerschen, Ph.D.

      Professor of Economics

      University of Georgia

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