Saturday, November 1, 2008

Taxes under Obama

I got this gem in an email from a friend.  Enjoy.

Bar Stool Economics - only for those who drink beer!

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.

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 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. But once
outside the restaurant, the men began to compare their

'I only got a dollar out of the $20', declared the
sixth man. He pointed to the tenth man,' but he got

'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

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.

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


  1. The Obama plan would not divide the savings equally. It would make the savings "progressive" The 20 would not be divided up equally, giving the richest the biggest windfall, and the beating in the end by the poor people. It would structure the refund so that the poorer customers would get more of the refund no matter how much they paid before. The rich man would be the one to continue to pay high the 59 buck and all the savings would go to the poorer people. And since there are now 5 people getting free beer from Obama, these people will now give him their votes. The rich man will not leave because the bar happens to be convenient, because even though he pays the most, it's been a long day and all the other places with good beer do the same thing.

  2. Actually, I don't think it'll matter much who wins. Because the president doesn't have as much power as people think he does. At every election you have candidates making promises they never keep. Because of the way US government is structured, nobody can do anything even if they wanted to.

  3. Moshe

    In the next a few years a few from the judicial branch are going to leave. Now do you want a republican in office at the time or Democrat.

  4. Don't forget that McCain is extreme left republican. Though I'm still voting for him anyway.
    Palin in 2009!

  5. I've never heard McCain described as "extreme left republican"... even by democrats. Palin, absolutely. But McCain... really?

  6. This morning, during another one of the insightful political discussions in the monrning, my coworkers discussed the unfairness of the tax breaks, the NERVE of the government to tax the rebates that they received earlier this year, about rich who don't work and pay the least amount of taxes, the stupidity of S. Palin for not screening her phone calls, etc, etc, etc...
    In short, I very much enjoyed the live reenactment of your post:)

  7. Robert Heilin had a great idea in Starship Troopers. You want to vote, serve your time in the army. Don't want to serve, don't want to protect your country, then you have no say in how it's run.

  8. Palin 09?? as in, something happening to McCain? I think she was a great choice, but not as Pres- just VP.

  9. The dude's pretty old, and all the stress and everything...

  10. that was great, really funny, I never looked at it that way.

    Perhaps I should print it and give it to my tax prof, he might enjoy it.

    I heard that Mcain wanted to tax the benefits workers receive, now that would be horrible.

  11. Moshe- Don't expect things NOT to change. the dems took house, senate and congress.

    He can do w/e the hell he wants, because itll pass.