This I Understand!!! I Hope We All Do!!

By
Real Estate Broker/Owner with Sellstate Advantage Realty

Finally, an explanation that makes sense! Think about it before you go to the polls!

"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

be split 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

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 f

But what about the other six men who were 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 one should pay.  Even though the rich guy had paid much more all

along and now got much less back, he went along with the plan anyway.

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,

also. It's unfair that he got ten times more than I got' 'That's true!!'

exclaimed 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, is how our tax system works. The people

who pay the highest taxes get the biggest benefit from a tax reduction.

Tax them too much and attck them for being wealthy, and they just may

not show up any more. In fact they make start drinking overseas were the

atomosphere is a somewhat friendlier!

Something to think about! Have agreat day!

Mike Kelly, Sellstate Advantage Realty, Cape Coral, Florida 239-549-9200

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Rainmaker
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Lewis Beynon
CENTURY 21 Triangle Group - Raleigh, NC
Triangle Real Estate 411

Great blog Mike, this is going to all 9 of my friends......Guess what number I am?

Oct 30, 2008 08:57 AM #1
Rainer
26,172
Joshua & Kathy Schmidt
ERA Henley Real Estate - Cabot, AR

Mike,

That is definitely a different approach to explaining the system.  A pretty good analogy to say the least.

Oct 30, 2008 09:02 AM #2
Rainmaker
710,643
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Thanks for sharing. Will send to some folks as well. The first seemed to illustrate the concept and simple mathematics of a flat tax where everyone has some responsibility to contribute. Seems fair to me!

Oct 30, 2008 09:04 AM #3
Anonymous
Danny Briggs

I've read this analogy before.  It makes sense.  Thanks for posting it.

Oct 30, 2008 10:08 AM #4
296,445
Tim and Pam Cash
Crye-Leike (Sango) - Clarksville, TN
Real Estate Professionals - Clarksville TN

Mike, I saw this with a restruant theme a while back.  Makes you think, or at least it should.

Oct 30, 2008 10:45 AM #5
Rainmaker
160,675
Jay LaGace
RE/MAX Realty Team - Cape Coral, FL
Cape Coral / Lee County Real Estate - 239-443-8795

Vote Republican, its the only way to go...

Oct 31, 2008 12:50 PM #6
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Rainer
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