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bar stool economics

January 21st, 2008 · No Comments

secret confession: i’ve been keeping up with the election and politics lately. it drives one insane, really… there are so many dumb things going on. and it’s right under our noses.

one thing that irks me like nothing else are all the people who whine about the rich getting tax breaks. it’s something i’ve never minded. we need people who can manage money well to stay in decision-making positions. it’s guys like that who make sure i get a great paycheck every month. do i want them to stay happy? i sure do. how many people do you hear of that win the lottery and squander it away? just because you give people money or resources doesn’t mean they will use them wisely. when you read many political figures and what they consider “rich”… it’s shocking. if you have a pretty decent job, there are some political figures who want to scrape close to 50% of what you make off and give it to the “needy.” i’ll spare the full rant about people who receive government care never mind that many of them are able to work and contribute on their own. if you project the whole “take from the rich and give to the poor” mindset down the road, you end up with other lofty issues. take doctors for instance… they make a lot of money, right? sure they do. they go to med school. they work hard. they have a ton of liability every time they wake up and go to work. so… that being said… i don’t mind at all if money is a great motivation for them to take on that hard job. i want the most qualified person possible cutting me open (if i needed an operation). so… let’s say that doctors all of a sudden make close to what average joes are making… what would be the point of years and years of school and work and liability when they can get an office job and make just as much? and that’s just one example… but you get the point. it’s dumb… absolutely dumb.

i totally believe in charity for those in true need. (i lied about not starting a rant) but when i worked at a grocery store and saw all the people who had food stamps, i couldn’t believe it. there would be women coming in with four kids and one on the way. my first thought was, “did you REALLY need another child?” and i’d see able-bodied men that were twenty-something come in… and i had to wonder why they couldn’t go out and work like i did. i worked there for months… and saw the same people come in with aid. it wasn’t a temporary assistance for them… it was a lifestyle. if you have an ailment, or are elderly and sick, or are even having a rough time for a short while… i totally get it. things happen in life that are unpredictable and we should take care of those that we can. but if you’re just lazy, i have no sympathy. am i judgmental? probably a smidge. but i’m probably just as much right, too.

don’t know how accurate this is, but it’s probably close enough to the truth to be worth posting (from an email I received from my mom today)… it really is worth reading all the way through….

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.

Tags: random thoughts

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