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Barstool Economics and Taxes

Barstool Economics and Taxes

By David R. Kamerschen, Ph.D.

Professor of Economics, University of Georgia

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 paid 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. He said, "Since you are all such good customers, 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.

However, 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 $2? 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 any more. In fact, they might start

drinking overseas where the atmosphere is somewhat friendlier.

The Extraction

A man walks into the market followed by his ten-year-old son. The child amuses himself by repeatedly spinning a 10 pence coin in the air and catching it between his teeth. As they walk through the market, someone bumps into the boy at just the wrong moment and the coin goes straight into his mouth and lodges in his throat.

He chokes at once and begins to go blue in the face. His father, panicking at the sight of the gasping boy, shouts and screams for help. A middle-aged, fairly unremarkable man in a grey suit is sitting at a coffee bar in the market reading his newspaper and sipping a cup of coffee. At the sound of the commotion he looks up, puts his coffee cup down on the saucer, neatly folds his newspaper and places it on the counter. He rises from his seat and makes his unhurried way across the market.

Reaching the choking child (who is still standing, but just barely), the man carefully takes hold of the boy's testicles with his right hand and squeezes gently but firmly. A few seconds later the boy convulses violently and coughs up the coin, which the man catches in his free hand. Releasing the boy, the man hands the coin to the father and walks back to his seat in the coffee bar without saying a word.

As soon as he is sure that his son has suffered no lasting ill effects, the father rushes over to the man and begins thanking him effusively. The man looks embarrassed and brushes off the father's thanks. As he's about to leave, the father asks one last question: "I've never seen anybody do anything like that before - it was fantastic - what are you, a surgeon or something like that?"

"Oh, good heavens, no", the man replies, "I work for the Income Tax Department."

The River-god and the Seamstress

One day, as a seamstress was sitting sewing close to a river, her thimble fell into the water. When she cried out, the River-god appeared and asked, "My dear child, why are you crying?"

The seamstress replied that her thimble had fallen into the water and that she needed it to help her husband to make a living for their family. The River-god dipped his hand into the water and pulled up a golden thimble set with sapphires.

"Is this your thimble?" the River-god asked. The seamstress replied, "No."

The River-god dipped into the river again. He held out a golden thimble studded with rubies.

"Is this your thimble?" the River-god asked. Again, the seamstress replied, "No."

The River-god reached down again and came up with a leather thimble.

"Is this your thimble?" he asked. The seamstress replied, "Yes."

The River-god was pleased with the woman's honesty and gave her all three thimbles to keep, and the seamstress went home happy.

A few years later, the seamstress was walking with her husband along the riverbank, when he slipped and fell headlong into the river, disappearing under the water at once.

When the seamstress cried out, the River-god again appeared and asked her, "'Why are you crying?"

"Oh River-god, my husband has fallen into the river!"

The River-god went down into the water and came up with George Clooney. "Is this your husband?" the River-god asked.

'Yes!' cried the seamstress.

The River-god was furious. "You lied! That is an untruth!"

The seamstress replied, "Oh, forgive me, River-god, but you misunderstand me. You see, if I had said 'no' to George Clooney, you would have come up with Brad Pitt.

Then if I said 'no' to him, you would have come up with my husband. Had I then said 'yes', you would have given me all three. I'm not in my prime any more and taking care of three husbands would have been just too much for me. That's why I said 'yes' to George Clooney."

The River-god was impressed and let her keep George Clooney. The woman went home happy.

Moral

Whenever a woman lies, it's for a good and honourable reason, and in the best interest of others.

That's our story, and we're sticking to it.

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