Barstool Tax Policy

An oldie, but goodie for those who have a hard time understanding how raising taxes on the "wealthy" impact the "less wealthy"

-- Barstool Tax Policy --

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

 

Obviously no one told this to California politicians. I'm planning on moving outta here as soon as I finish my degree.

 

I like that metaphor it makes me smile...

 

They were too busy getting to the choppa

 

difference being income isn't really shown... and that the "wealthy" are often not making the proportionate increase of even 18 to 59. the math doesn't add up. if those were taken at percentile's of the income brackets, then yes, the wealthiest is paying a larger percent of the bill than he receives as income (6.37% earning roughly one third of all income in 2007). im sure that the economic downturn may have changed this for 2008 and the first part of 2009, but as this isn't a new arguement and i doubt the numbers will be radically different, i'll continue to use 2007 as a decent estimate... and my rounding below uses simplifications that are more modest toward a higher percent of the overall population holding that 1/3 of the income anyway

if we based even that 10% wealthiest (ie just the top guy here) as taking in only 1/3 of the income of the 10 person system, then for the other 9 to not be able to handle the bill of $80 (or even $72 if you take that it's less beer for 9), than the system earns about $120 and thus the wealthiest only earns $40 - losing $19 per day.

the principle of the arguement that the wealthiest get larger cuts because of the percentage basis of most legislation is sound, but i personally feel that when we have to start adding digits to the national debt counter after we actually had surpluses back in the 90s, perhaps it matters not who gets any cut at all. further more, if im going to spend my income on beer, im definitely going to move to europe anyway. more selection of quality brew

 

The big problem is, politicians will not deal with debt in the appropriate way.

There is a point where increasing taxes no longer increases government revenue. In fact, after this point is passed people start spending less money meaning private companies make less money. Those companies then have to either increase prices, cut costs, or both. This usually causes people to lose jobs and spend even less still. With less money moving, the government takes in less of it.

A good example of this happening would be California.

I'm sure people who pay any sort of attention to the news will know that we have a huge budget mess. Bear in mind, California was one of the most taxed states in the United States before we recently increased taxes (in terms of sales tax, gas tax, income tax, corporate taxes).

To "solve" the problem the state legislature agreed to a mixture of spending cuts and tax increases (about 50/50 if I remember right). All well and good right? Nope, this increase in taxes has now caused our states budget gap to increase by another 8 billion...

I just woke up so I'll update this with some sources and stuff later.

 

A bit off topic but in regards the Faux News/Republican "Tea Bagging" for no reason.

http://www.officiallyrad.com/post/97407042/ive-stayed-out-of-this-argument-until-now-but

I lol'd. I also personally like the second comment below the pictures. I'm also wondering if the republican(though not true republican) protesters even realize that this whole situation is because of a useless 6 year war started by their party leaders.


Back on topic I'd rather support a Fair Tax system than the current.