----- Forwarded Message ----
From: Ted Booth <tbooth@pacinfo.com>
To: Kelly O'Ryan <kochise55@gmail.com>
Sent: Monday, November 10, 2008 11:11:53 AM
Subject: Fwd: Bar Stool Economics

This would seem to be common sense.

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Date: Mon, 10 Nov 2008 12:57:07 -0600
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From: "Booth, Andrew W" <Andrew.W.Booth@maf.nasa.gov>
To: "Ted Booth" <tbooth@pacinfo.com>
X-OriginalArrivalTime: 10 Nov 2008 18:57:07.0126 (UTC) FILETIME=[20B57D60:01C94366]

 
 
Subj: Bar Stool Economics
 
Makes sense to me.  How about you?
Our Tax System Explained: 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 got' '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, ladies and gentlemen, 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.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.