Atlas Walked Into A Bar And Shrugged

> 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, 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.
>
> For those who understand, no explanation is needed. For
> those who do not understand, no explanation is possible.
>
> David R. Kamerschen, Ph.D.
> Professor of Economics
> University of Georgia