Bar Stool Economics (A commentary on the American tax system)

May 11th, 2009 No comments
Author - David R. Kamerschen, Ph.D.

Author - David R. Kamerschen, Ph.D.

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.

Author: 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 possible.

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Jack Kemp Memorial Service Details

A memorial service will be held for the honorable Jack Kemp on Friday, May 8, at 2 pm at Washington National Cathedral. The service is open to family, friends and former colleagues. Seating for the service begins at 1 pm, and attendees should plan on arriving as close to 1 pm as possible.

Wednesday, the House passed H. Res. 401, a resolution honoring the life and recognizing the far-reaching accomplishments of the honorable Jack Kemp. A bipartisan delegation headed by Representative Charles B. Rangel (D-NY) and U. S. House of Representatives Minority Leader John Boehner (R-OH) will be attending the memorial service on Friday.

A tribute by Charles Colson and a pastoral prayer offered by the Reverend Alistair Begg, senior pastor of Parkside Church located in Bainbridge, Ohio, are scheduled. The sermon will be delivered by Dr. Robert Norris, senior pastor of Fourth Presbyterian Church of Bethesda, Maryland. The Howard University Choir will sing at the service. Cathedral Dean Samuel T. Lloyd III will welcome the congregation, and Episcopal Bishop of Washington John Bryson Chane will offer the invocation and benediction.

Mr. Kemp represented western New York in Congress for 18 years and played professional football, quarterbacking for the Buffalo Bills. He headed the Department of Housing and Urban Development under President George H.W. Bush and was the Republican vice presidential nominee in 1996.

The service is closed to cameras; however, cameras are allowed outside, near the west end entrance to the Cathedral, for arrivals and departures. Since all Cathedral schools are in session, no surface parking will be available. Media are asked to drop off at Wisconsin Ave. and South Rd.

Author: Rory Cooper
Source: The Heritage Foundation

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With Swine Flu Waning, Theories Abound

The real origin of the Swine Flu

With an announcement today by the Mexican government lowering Swine Flu fears, it leaves a lot of unanswered questions. There are as many conspiracy theories about the H1N1 virus’ origin and cause as there are people wearing face masks in Mexico City.

I have heard several strange and thought provoking theories regarding this mysterious illness with the humorous name. Speculations on the origins of the pathogen vary wildly from a lab created mix of viruses intended as a Bio Weapon to Children kissing pigs.

According to some journalists with contacts within the UN and WHO, this pathogen variant was created in a lab. As proof, they state that the usual process of transmission is that the virus is transmitted from a pig to a human, which is not the case in this outbreak because no case of a pig being infected with the A-H1N1 virus has been registered. Furthermore, the A-H1N1 virus partly contains American pig genes, partly human and bird flu strains and the virus of the Euro-Asian swine flu.

Allegedly, American scientists exhumed the body of a woman who died of the Spanish flu in 1918 and used the genetic material of the flu virus as the basis for the creation of the H5N1 virus through genetic manipulation. All this happened in laboratories at the Fort Detrick military base from which the new strain of anthrax called ames originated.

Also given the proximity of the outbreak to President Barrack Obama’s envoy on his last trip to Mexico doesn’t help to slow the theorists. The virus first struck in Mexico City on April 13th, three days before Obama flew in to meet government officials. Throwing gasoline on the fire, Archaeologist Felipe Solis, a man who shook Barack Obama’s hand in Mexico died the next week from symptoms similar to those of swine flu.

Only to make matters worse a member of the US delegation that came to Mexico with President Obama, Energy Secretary Steven Chu, later found showing the symptoms of the flu virus and also appears to have spread the flu to his wife, son and nephew.

So was it an assassination attempt or merely an outbreak of some pretty wicked flu virus? Either way advances in medical sciences and communication surely slowed and helped to control the spread and severity of the H1N1 virus. Personally I’m glad we all wont have to spend the summer wearing respirators, as it impedes the flow of beer and barbecue.

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Cancer claims conservative Jack Kemp at age 73

Jack Kemp Dead at Age 74

Jack Kemp Dead at Age 73

Today we lost a true American Hero, 7 time All  Star AFL Quarterback  for 13 Seasons and private in the United States Army Reserve. Jack Kemp died today at age 73 after a long fight with an undisclosed form of cancer.

The nine term congressman from western New York was a model Conservative serving as Bob Dole’s vice president pick during their unsuccessful 1996 republican presidential bid.

Kemp supported a ban on abortion and immigration reform, more than we can ask of most of the so called conservatives currently in the house and senate, Arlen.

Unlike his liberal counterparts Jack believed in sticking to his principles and code of morality he could be judged by. He represented an era of unabashed conservatism that should serve as an example  for future “conservative” candidates.

Just as Sarah Palin breathed conservative CPR into a dying campaign late in the 2008 presidential race, Jack Kemp should provide the necessary motivation for a new generation of young conservative minds to aspire to great things, without compromising our beliefs.

Thanks Jack, for 73 great years of unapologetic partisan politics.

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100 Days Newser, and the media giggled…

Video: Sycophantic Media Laughing at Obama

Video: Sycophantic Media Laughing at Obama

Mr. Obama the New York Times wants to know what’s enchanted you the most over these last 100 days. Does anyone else care at this point?

After 12 newsers already this year is anyone listening, Bush 43 had the decency to only interrupt our lives 19 times (most of which not during primetime) his first year in office which as we all remember included 9/11.

It appears to me that Obama’s still running for office, especially given the slide to a new low 64% approval rating.

With the fear of a growing H1N1 pandemic, The Dow hovering at a miserable 8000, and a new bailout seemingly everyday it’s hard to stomach watching the economy melt down while the sycophantic press takes an hour of our lives to giggle at the president’s inability to remember four questions without the need to write them down.

It’s not funny and we’re not laughing. No matter what your political affiliation is we’re all on this “Ocean Liner” together, and like a bad Leonardo DiCaprio movie we’re taking on water and sinking slowly.

Since his inauguration on Jan. 20, 2009, Obama has proposed new spending programs that will add over the next 10 years $6.5-trillion to the national debt. That’s $65 Billion a day! How can we or generations to come ever pay back 6.5 Trillion dollars? Even if we decided to start now and pay off a million a day it would take us 17,808 years!

The sun will burn out and die before we could ever pay any of this money back and all the while the media and president laughs at it all. Do you think it’s funny?


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