For any number crunchers, does this seem right to you?  I checked on snopes and couldn't find anything...


Quote:

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 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.

That is the Reagan tax cut and the Bush tax cut in a parable.  check it out for yourself.  It isn't hard to find the percentages of the cuts to the different tax brackets, and it is exactly the way the Democrats are portraying the "Tax Cuts for the Wealthy".  

Reagan cut the taxes to "the wealthy" from 70% to 29%, and ushered in the longest peace time economic expansion in history.  Along with that, receipts to the US Treasury more than doubled, and over 20 Million new jobs were generated.  

If you don't like a Republican example, go back and see what happened when John F Kennedy cut taxes.  I don't have the numbers handy, but they were of the same type.

Jerry

And........if we raise their taxes even more, the high income earners will simply put more money into things like Tax Free Municipal Bonds instead of stimulating the economy with investments. Wouldn't you?

Think about it.

Great analogy.  
I need to borrow this to explain to some people that just don't get it.

Who is John Galt?

I found it on snopes when I got a copy attributed to a specific economist.  The origin is to this day unknown.  Since it is really just an illustration, there is nothing for snopes to research outside of the original author and to that end they do not know.

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Marc wrote on Oct 22^nd, 2008 at 11:34pm:

And........if we raise their taxes even more, the high income earners will simply put more money into things like Tax Free Municipal Bonds instead of stimulating the economy with investments. Wouldn't you? Think about it.

Ok - thought about it.  It's good. Tax-free muni bonds are tax-free for a reason ... they encourage investment in roads, schools, stadiums, libraries, prisons, and other things that state and local governments decide to invest in. They are relatively safe, but boring. The tax breaks encourage some people to diversify and hold a bit more of that type of investment.

McCain has said before that when people make lots of money, it is reasonable to tax them at a somewhat higher rate, and that the progressive income tax is not socialism:

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Adam Smith, who wrote "Wealth of Nations" (as a textbook and promo of capitalism) also said that a progressive income tax makes sense - the people on the bottom of the ladder spend most of their money on necessities, and a flat amount or flat rate tax would be unfair:


Quote:

The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

notseinfeld wrote on Oct 23^rd, 2008 at 11:26am:

Who is John Galt?

He's alive and well in Colorado.

    A $100.oo for 10 lousy beers????????


That many beers shouldn't cost more than 40     ;D ;D

Mellisa,

That is a great example of how it works, but it involves a little thinking to understand it... you know how much that is discouraged in these times.

-Shawn

Bar stool's probably a pretty sharp one, it's just what's sittin' on it that people move their chairs away from.

Melissa wrote on Oct 22^nd, 2008 at 10:53pm:

For any number crunchers, does this seem right to you?  I checked on snopes and couldn't find anything... Quote: 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 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.

Yeah!, thats why I stopped going to conventions.....LOL  ;D ;)

But we STILL Charge the Beers to you darling.... :)

Hugs BD

From each according to their ability, to each according to their need.

Linda_Howell wrote on Oct 23^rd, 2008 at 12:23pm:

A $100.oo for 10 lousy beers???????? That many beers shouldn't cost more than 40     ;D ;D

Have you ever been to Washington, DC??? Now you'll understand the parable even more.
TomM

Noone said they each only got 1 beer.  It didnt say they went out for "a beer".

So, the guess is they had more than 1 beer each.

Adam Smith has been called "the father of capitolism" and "the inventor of capitolism". He was in favor of heacy luxury taxes and a progressive tax system was was VERY heavey on the top end. It has been a while since I have read his stuff but I think he went as far as 90% tax rate on the richest in the country.

Modern day people love to label stuff after they change what the meaning is behind what they just changed.

The tax rate on the upper end in the 1950s reached as high as 90% for a time....generally thought of as one of the golden ages of capitalism.

Charlie