Just received this in an email and thought it could result in some nice name calling here: 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 me! ‘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, ladies and gentlemen, 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 (higgmond note - someplace like Richland).
higgmond Wrote: ------------------------------------------------------- love it! thanks for this - i’ll put it to good use immediately
Is Europe really friendlier on a tax basis? I don’t know much about taxes, but it doesn’t seem right?
Black Swan Wrote: ------------------------------------------------------- > Is Europe really friendlier on a tax basis? I > don’t know much about taxes, but it doesn’t seem > right? europe isn’t, but hong kong sure is!
Angry rant from marcus coming in 3… 2… 1…
This is going to generate a lot of chatter. I have seen the same email with “10 people go to dinner” and then the bill comes. It’s the exact same concept. One of the main things that Steve Forbes always focused on when he was running for President was the flat tax. I have heard it brought up since then but it seems like there needs to be a bigger push towards simplifying the tax code.
This is true but the 10th guy is the only one eating. The rest are cleaning up! I don’t know why people want to protect established wealth. If the 10th guy leaves the 9th would be more than happy to replace him. For your reading pleasure. Please stop worrying about the wealthy… April 8 (Bloomberg) – For the well-off, this could be the best tax day since the early 1930s: Top tax rates on ordinary income, dividends, estates and gifts will remain at or near historically low levels for at least the next two years, thanks in part to federal legislation passed in December. “This is clearly far and away the most generous tax situation that’s existed,” says Gregory D. Singer, a national managing director of the wealth management group at Alliance- Bernstein LP in New York. “It’s a once-in-a-lifetime opportunity.” The 400 U.S. taxpayers with the highest adjusted gross income paid income taxes at an actual, or “effective,” rate of just under 17 percent in 2007, down from almost 30 percent in 1995, according to the Internal Revenue Service. The effective rate for the 1.4 million people in the top 1 percent of taxpayers dropped to 23 percent in 2008 from 29 percent the year before. That means the top 400 pay a lower rate than the next 1,399,600 or so, Bloomberg Businessweek reports in its April 11 issue. Much of the top 400’s income is from dividends and capital gains, generated by everything from appreciated real estate to stocks and the sale of family businesses. As Warren Buffett has said, since most of his income is from dividends, his tax rate is less than that of the people who clean his office. The true effective rate for multi-millionaires is actually lower than indicated by official government statistics. Those figures don’t account for additional income generated by many tax-avoidance strategies designed for the wealthy. Common techniques involve complicated borrowings that never get repaid, netting the beneficiaries hundreds of millions in tax-free cash. No Income Taxes From 2003 to 2008, for example, Los Angeles Dodgers owner and real estate developer Frank H. McCourt Jr. paid no federal or state regular income taxes, according to court records previously reported by the Los Angeles Times. A spokesman for McCourt said he used a tax code provision at the time that permitted purchasers of sports franchises to defer income taxes. An accountant working for his ex-wife, Jamie McCourt, said in a declaration in the court proceeding that developers such as McCourt “typically fund their lifestyle through lines of credit and loan proceeds secured by their assets while paying little or no personal income taxes.” Here’s a guide, based on public records and interviews with experts, to some of the ways it’s done. Click the links for explanations: The “No-Sale” Sale An executive has $200 million of company shares. He wants cash without triggering $30 million or so in capital-gains taxes. The Skyscraper Shuffle Two people are 50-50 owners, through a partnership, of an office tower worth $100 million. One of them wants to cash out, while avoiding $7.5 million in capital gains taxes. The Estate Tax Eliminator A parent with millions invested in the stock market wants to leave future earnings to his kids without paying the estate tax on them. The Trust Freeze A wealthy couple wants to “freeze” the value of several income-producing assets at about $150 million – pushing any future appreciation out of the estate and avoiding a possible $50 million federal estate tax bill. The Option Option An executive’s company might offer him millions in shares as part of a compensation package. But who wants to pay taxes on that? The Bountiful Loss An investor wants to offset a capital gain by selling some stock at a loss – without really reducing his position in the stock. The Friendly Partner A property owner wants to sell a piece of income-producing real estate worth $100 million while avoiding a potential $15 million capital-gains tax. The Big Payback A billionaire who doesn’t need returns on his investments any time soon wants to avoid taxes on the profits. IRA Monte Carlo An investor wants to convert a traditional Individual Retirement Account, which allow contributions to be deducted from taxes but incur taxes on distributions, to a Roth IRA, in which contributions are taxed but distributions aren’t. The Venti Executives want to avoid immediate tax bills from salaries or cash bonuses while still increasing their pay by means of deferred compensation plans. The Exit Strategy Those who died in 2010 left tax-advantaged estates.
I’ve seen this email before many times…its not a good analogy since the very poor who do not pay income tax do pay taxes in other forms (sales tax, gasoline tax, taxes passed on by companies included in the prices of products. Also the problem is that a lot of your taxes go towards defense spending, in addition to agriculture and oil subsidies and unless you are willing to make significant cuts to those (which so happen to benefit red states/counties), all these spending cuts discussions are moot. Anyways read this critique of Ryan’s proposal below, its interesting and makes some good points as to by the GOP proposal seems half baked and makes too many unsubstantiated assumptions. How do they expect the the unemployment rate will drop to 4 percent? Why should I keep paying for a better Medicare plan for the 55 plus crowd when I wont receive any of the same benefits? Is this fair? http://www.cnn.com/2011/OPINION/04/08/carroll.ryan.plan/index.html?hpt=T2
Dang! look at Hong Kong taxes!!! http://www.guidemehongkong.com/taxation/personal-tax/hong-kong-salaries-personal-tax-guide
Well, there are problems with this analogy. So what is “beer” supposed to represent. Well, it represents government services. Now the right actually can complain that part of the problem is that not only does man #9 and #10 pay for most of the beer, men #1-5 probably consume more beer each than man #9 and #10 do, yet they are paying for most of it. But this does ignore two things. 1) The beer that guy #9 and #10 get is fine specialty microbrewed beer with the best ingredients. Guys #1-5 and maybe even 6 and 7 are drinking Pabst Blue Ribbon (though apparently PBR is chiq these days, for reasons I can’t fathom). 2) You still need to eat to live. Guys #9 and #10 are served fillet mignon, braised veggies, and fruit salad with frozen yogurt and a touch of chocolate, whereas guys 1-5 have to make do with pretzels and popcorn. Guys #9 and #10 also make fun of guys #1-5 for being fat. Guy #6 gets revenge by having a threesome between him and guy #9’s and #10’s wife together after the physical trainer session.
bchadwick Wrote: ------------------------------------------------------- > Well, there are problems with this analogy. > though i agree with your first point (espicially regarding PBR), your second is a little backwards. guys 8 and 9 are responsible because while they have enough to live comfortably they only splurge occiasionally so they don’t get filet suffed with crab wrapped in gold leaf, only guy 10 does - and he never eats the same thing twice. guys 1-5 always get the buffet to “get more for their dollar” and horde resources which they believe compares to guys 8 - 10 eating well. guys 8 - 10 do make fun of guys 1-5 because they look like pigs at a trough; plates over-flowing, using sleeves as napkins, not using utensils, and having belching contests. guys 6 and 7 are conflicted because they switch back and forth between groups, mostly getting the buffet though eating reasonable amounts and using utensils and napkins. guys 1-5 fight a lot, also, because they have trouble staying married. their wives keep talking to guys 6-9, looking to upgrade and they can’t handle the jealousy. they eventually start going after each others’ wives and end up in jail for the gun shots and knife wounds they inflict each other with. guy 6 lets three of the wives live with him because he can’t imagine anything better while guys 7-9 date them on the side. guy 10 can’t believe he has friends like this, but has fun watching it so he keeps showing up.
marcus phoenix Wrote: ------------------------------------------------------- > I’ve seen this email before many times…its not a > good analogy since the very poor who do not pay > income tax do pay taxes in other forms (sales tax, > gasoline tax, taxes passed on by companies > included in the prices of products. Also the > problem is that a lot of your taxes go towards > defense spending, in addition to agriculture and > oil subsidies and unless you are willing to make > significant cuts to those (which so happen to > benefit red states/counties), all these spending > cuts discussions are moot. > > Anyways read this critique of Ryan’s proposal > below, its interesting and makes some good points > as to by the GOP proposal seems half baked and > makes too many unsubstantiated assumptions. How do > they expect the the unemployment rate will drop to > 4 percent? Why should I keep paying for a better > Medicare plan for the 55 plus crowd when I wont > receive any of the same benefits? Is this fair? > > http://www.cnn.com/2011/OPINION/04/08/carroll.ryan > .plan/index.html?hpt=T2 I fail to see the problem with taxes going to defense spending. If you want to say too much is spent on defense then maybe I’d agree. Also so what if they go to red states… plenty of pork goes to blue states so your point appears to just be another rant against Republicans. Whether you like it or not, entitlements are the issue. You could cut defense spending in half and it still wouldn’t come close to solving our long-term fiscal problems.
mar350 Wrote: ------------------------------------------------------- > guys 1-5 fight a lot, also, because they have > trouble staying married. their wives keep talking > to guys 6-9, looking to upgrade and they can’t > handle the jealousy. they eventually start going > after each others’ wives and end up in jail for > the gun shots and knife wounds they inflict each > other with. By this time guys 1-5 have 7 kids each and after a few generations take over the world.
brain_wash_your_face Wrote: ------------------------------------------------------- > mar350 Wrote: > -------------------------------------------------- > By this time guys 1-5 have 7 kids each and after a > few generations take over the world. how so? each kid grows up swearing to never be like their father.
bchadwick Wrote: ------------------------------------------------------- > Well, there are problems with this analogy. > > So what is “beer” supposed to represent. Well, it > represents government services. Now the right > actually can complain that part of the problem is > that not only does man #9 and #10 pay for most of > the beer, men #1-5 probably consume more beer each > than man #9 and #10 do, yet they are paying for > most of it. But this does ignore two things. > > 1) The beer that guy #9 and #10 get is fine > specialty microbrewed beer with the best > ingredients. Guys #1-5 and maybe even 6 and 7 are > drinking Pabst Blue Ribbon (though apparently PBR > is chiq these days, for reasons I can’t fathom). > > 2) You still need to eat to live. Guys #9 and > #10 are served fillet mignon, braised veggies, and > fruit salad with frozen yogurt and a touch of > chocolate, whereas guys 1-5 have to make do with > pretzels and popcorn. Guys #9 and #10 also make > fun of guys #1-5 for being fat. Guy #6 gets > revenge by having a threesome between him and guy > #9’s and #10’s wife together after the physical > trainer session. +10000 Listen, I’m all for privatization, lowering taxes, etc. But there are certain fundamental rights as humans that we hold as one of the pillars of why western civilization is BETTER than other parts of the world. I don’t mind paying taxes to the extent that it goes towards universal healthcare. Simply put, a healthy worker is a productive worker. Off topic: The fact that the 9-11 First Responders Bill took so long to pass on some argument that it would be a tremendous tax burden is a national shame and a point of epic fail on the part of our great nation.
Marcus’s response was actually only half crazy. The fact that the poor have to shell out as much money on sales, gas, etc. taxes is definitely unfair because it’s a higher portion of their income. But all the defense spending blah blah had nothing to do with the original discussion. bchadwick, I don’t agree with your analogy regarding the PBR/High quality beer if you’re talking about govt services. Govt services would suck regardless of who is consuming them. In reality, all men have access to PBR, but the poorest ones would have access to more (e.g. Medicare and Medicaid). Now one could say Man #10 goes ahead and consumes PBR, chips in his share at the end, and also decides to buy himself some imported beer on his own dollar…
Somehow the police services, environmental protections, public schools, and social services in wealthy communities are much nicer than in the ghettos. Are you really trying to argue that everyone gets equivalent public services?? Are poor retirees really getting the same sized social security checks as the wealthy, and is Medicare really treating the poor with the same quality treatments in the same first-class hospitals as the Beverly Hills crowd???
Good point. I need sleep. In retrospect both your points were valid.
bchadwick Wrote: ------------------------------------------------------- > Somehow the police services, environmental > protections, public schools, and social services > in wealthy communities are much nicer than in the > ghettos. Are you really trying to argue that > everyone gets equivalent public services?? Are > poor retirees really getting the same sized social > security checks as the wealthy, and is Medicare > really treating the poor with the same quality > treatments in the same first-class hospitals as > the Beverly Hills crowd??? Agree with you on the police, but the wealthy don’t qualify for SS and the patients in Beverly Hills Memorial (or whatever it’s called) aren’t paying with Medicare, they’re on their own dime.
wealthy don’t qualify for SS…wha???