My View on Taxes - A Lesson in Barstool Economics

The truth is nobody likes paying taxes and almost everyone feels that they’re paying too much and the rich aren’t paying enough.  And in every election year, both political parties roll out the typical class warfare crap in the hopes to win votes.  Past the headlines and soundbites is the reality that this country has promised too much to too many and is financing it’s current obligations onto the backs of our children.  The truth is - we’re all going to have to make some hard choices.

Now, being one of those who is the target of the political rhetoric, I thought I’d share an illustration that was sent to me on how our taxes really do work.  I’ve been at both ends of the spectrum during my life - from not having a pot to pee in to being blessed with a certain degree of financial good fortune.  I really would agree that I could pay more - as I do believe that those whom much has been given, much is expected.  But give me a break.  I just wished some of those bitching about the wealthy not paying enough would wake up and realize what is being funded on their behalf and say thank you and for our politicians to not simply use the extra money collected to fund new programs but to pay off what we owe so our kids can have a brighter future.

You see - we all have some hard choices that we need to make.  I’m willing to give more but ONLY if I have the faith that our political leadership can spend within the budget and those whom benefit quit looking at other people’s money as their entitlement.

>
>    Subject: Bar Stool Economics
>
>        Best explanation to share with your congressman, who
>clearly does not understand this complex principle.
>
>        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!”
>
>        “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