Bar Stool Economics

By Nora Dunn on 21 February 2008 (Updated 20 November 2008) 109 comments
Photo: John Boston

Some of you may already have seen this anecdote as a circulating email. A Wise Bread reader recently posted it here, and I found it worthy of sharing.

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.
 

This is of course a light hearted way to poke fun at "the system", but still yet an interesting look at the North American tax system. It also observes how we can sometimes get caught up in our own worlds such that we lose sight of the forest through the trees.

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Xin Lu's picture
Xin Lu

love the story.  It's so true, and sorta sad.

Guest's picture
Vacancy

I didn't think such a close minded and innacurate portrait could be painted by such a revered man, so I did a little research.

David R. Kamerschen is indeed a professor at the University of Georgia. I found his page on that server:

http://davidk.myweb.uga.edu/

Read the first paragraph.

Guest's picture
Vacancy

I didn't think such a close minded and innacurate portrait could be painted by such a revered man, so I did a little research.

David R. Kamerschen is indeed a professor at the University of Georgia. I found his page on that server:

http://davidk.myweb.uga.edu/

Read the first paragraph.

Guest's picture
Adfecto

I have seen this story around the net a few times. All I can say to it is, "how much would you be willing to pay [in taxes] to have been born in the USA and given all of the opportunities which that has entailed." The wealthy man would have had a much lower chance to acquire his money in nearly any other country (and most of those others have even higher taxes). We, the wealthy, need to stop worried about how little other people pay, and instead be thankful for how much we have accumulated. The rich get that way from the consumption and labor of the poor and middle class. They also owe their safety, freedom, and precious capitalism to them as well. I'll get off my soap box now. Please think about what I've said and thanks for reading.

Guest's picture
Lily

Adfecto, I have a completely different perspective on what the story says. I don't think the wealthiest man in the story is necessarily ungrateful for his wealth or opportunities. The story doesn't say anything about his feelings one way or the other. He stopped supporting the system because the other men beat him up! He might have been perfectly willing to shoulder most of the taxes.

Your argument can apply to the poorer men in the story as well. Rather than complaining about how much they have to pay and how much more the wealthiest guy got from the "tax cut," they, too, should feel grateful that they live in a country with a surplus of opportunities.

After all, when the communal money is spent on safety, freedom, and capitalism, there is no distinction between a dollar from a rich man and a dollar from a poor man.

Guest's picture
Guest

Although I appreciate your opinion, it's not about paying taxes, we all need to pay taxes. It's about paying excess taxes, shakedown taxes to provide for others. I do realize that there are social constructs that prevent certain sects from achieving a certain level of wealth. However saying that we accumulate wealth at the expense of the less fortunate is a circular argument. We provide jobs for those 'poor and middle class'. Furthermore, if you don't mind paying more taxes, you can pick up my tab while your at it ;)

Guest's picture
Guest

Yes, my wealth doesn't have anything to do with all of the hard work I put into getting where I am, I just inherited it from the poor and middle class. Give me a break from the bs guilt trip. I came from a very poor beginning, decided I didn't want to live like that, worked my ass off, and now live a very comfortable life, while others in my family that decided to "coast" through life, live off of government programs paid by my taxes. Is that fair?

Guest's picture
Minimum Wage

There is an error here in assuming static prices.

In the 1980s, tax rates were cut, so my taxes were reduced.

However, since there was a general increase in after-tax incomes, people had more money to spend. Because people had more money to spend, the price of housing went up. Rents soared, and I faced five rent increases in five years, even though my gross income did not increase.

While my taxes went down, my rent went up by a lot more than my rent went down, so I ended up worse off.

Guest's picture
John

That prices went up on homes not because of tax decreases but rather because of government mandates to loosen the requirements for mortgage lending to fulfill the American dream for more. This drove demand and inflationary home pricing. This of course lead to the later crash that we all are stillnsuffering for.

Guest's picture
Guest

I come here for financial advice, not right wing propaganda.

Guest's picture
Guest

Very Wise Words

You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away men's initiative and independence.
You cannot help men permanently by doing for them, what they could and should do for themselves.
--Abraham Lincoln

Guest's picture
Guest

Thank you for sharing those words . . . .how very true

Guest's picture
Guest

Thanks for the posting of "Very Wise Words". How true. Just as a point of clarification, Wikipedia attrubutes the quote to William J.H. Boetcker. Here's the link:

http://en.wikipedia.org/wiki/William_J._H._Boetcker

Guest's picture
Guest

What? This isn't propaganda. This is how our tax system works. Who said it was from the perspective of the right wing. It is an objective perspective that accurately lays out in a broad generality of the income the tax structure in the US.

Guest's picture
Guest

If these basic economic principles don't line up with your political preference, I have an idea...don't come back to this sight.

Guest's picture
Guest

typical lib. unable to accept the truth.

Guest's picture
Guest

cause u are an id10t

Guest's picture
Guest

If you think that article is right wing propaganda, I'm sure you probably do need financial advice.

rstlne's picture
rstlne

Ah, but I wouldn't go to a bar like that. That's because I don't drink. But even if I did drink, I wouldn't go to a bar like that because I would prefer to be charged for a beer the same amount as anyone else, not according to how much I can pay.

Think about the flip side though: What if we paid for government the same way we pay for beer? In other words, what if we pay a user fee for government services that we consume? Wouldn't government become more efficient because they can't waste money on projects that no one needs? Wouldn't government become just another service provider in competition with private service providers, instead of crowding out the private sector the way it does now?

Guest's picture
Guest

But how would we measure how much each individual should be charged for how often they use the roads? Would you pay more taxes if you called the police and they showed up at your door (or even if someone ELSE called the police while your house was being robbed)? If the coast guard fought off a huge school of jellyfish from invading the Easter Seaboard, would people in Arizona have to pay for that?

Guest's picture
Matt

I realize that is not an original work by the poster, but I am a bit disappointed to see it here as I find it completely dishonest.

To begin, the "author" listed at the bottom was not the actual author. This name appears to be included simply to add some validity to an absurd essay. http://www.snopes.com/business/taxes/howtaxes.asp

As for the actual content, as Adfecto points out, "The rich get that way from the consumption and labor of the poor and middle class." They receive great benefits from a stable society that takes care of its poor. These benefits are both monetary and spiritual as they do the ethical thing in sharing wealth. The benefits they receive justify the high level of taxes they pay.

Tax breaks which disproportionately benefit the rich, as those given in the earlier days of the Bush Administration, are problematic as stimulus as well. While the poor have historically used funds to actually buy goods and services that they will use, the rich are more likely to put the money into paper investments which doesn't actually stimulate production.

As far as rlstne's suggestions about paying usage fees and efficiency, there are certain services that we expect to have provided whether or not it is efficient. Recently, some have suggested that we privatize the postal service. If that were to happen, do you really think that a private company would want to deliver a letter to the most remote locations in this country a couple times a year, for just a few dimes each? People constantly claim that private charity would be more efficient for providing social services, but this simply isn't true. Government is accessible to every single person in this country while private charity is not.

Government provides services that we as a society feel must be provided whether or not it is profitable for the provider, and we as citizens have control over government, whereas we do not have this control over private entities.

And as far as companies moving overseas, laws which allow these companies to avoid paying taxes by doing so are more at fault than our internal tax system.

The problem with this "light-hearted take" like so many others, is that it dramatically oversimplifies the truth to serve a specific agenda.

I do want to say however, that I do enjoy Nora Dunn's work, despite my criticism of this post.

Guest's picture
Larry

It's a simple point but apparently completely missed. When taxes are cut, those who pay the most get the benefit of a larger amount of money, but a lesser % amount returned. If you don't pay it's hard to reduce the amount. The services rendered are the same for the person who pays or isn't required to pay. And when the money leaves, everyone loses.

There is an underlying perception that the rich guy was evil in some way just because he had money. But there is no indication of anyone being good or bad, just envious. And that is the point. The responses just indicate how effective the politics of envy have been. Being rich or poor never before was associated with being good, bad, happy or sad. Today it is. Being poor is associated with being lazy and unhappy, being rich is associated with being greedy and selfish. Life and people are not that simple.

The lesson is that ingratitude leads to actions and attitudes that become self destructive. Unfortunately this is the motivation for much of today's politics.

Guest's picture
Guest

Matt,

With all respect, your post reveals a lack of basic understanding of economics and the ways that corporations raise money and production. Corporations raise productivity/production through investments. They get the money to make the investments through sales (sale of goods and services), sale of stock, or sale of debt (bonds). Thus the money put into "Paper investments" does in fact spur production.

I find your argument about privatization of the postal system very interesting and an angle I had not thought of before. It would be interesting to do a population distribution study to determine if this is a net outflow from the lower income. It is certainly a net outflow from the urban to the rural, as those in urban areas are clearly subsidizing the "cost" of postal services in rural area. I suspect that those in rural areas are more middle class and thus this is a net transfer of cost from the poorer classes to those better off.

My final comment is on efficiency of private charities versus the government. Any private organization is more efficient than the government. However, I agree with what I think your point is - private charities are not more EFFECTIVE - because they may not be as accessible.

I would much support a graduated rate that was a flat tax type, but graduated. Say the bottom x% pay 10%; next 15%; next 20%; next 28%; etc with no deductions. The way the tax code is now, the richest hire the best tax attorneys and find ways to "hide" their money, effectively paying less. Its the upper middle class who can't afford the best tax attorneys who end up paying the highest net tax rates.

Guest's picture
Guest

"Tax breaks which disproportionately benefit the rich"?!?!? The "rich" still pay a disproportionate percentage in taxes!...disproportionately HIGH! Just because someone has found success they should have to pay a larger percentage? Last time I checked there was no evidence that the rich use a larger amount of government resources, why should they keep less of their money? Is it less deserved? Did they work less for it? No. If everyone was taxed the same percent THAT would be fair.

Guest's picture

And in response to the above commenter, I'd love to see you expand on how "paper investments which doesn't actually stimulate production" works.

Are you stating that investing in stocks, i.e. companies, doesn't drive productivity and BNP growth?

Guest's picture
Julie

To Jack from eyeflare,

I can see where Matt's coming from in terms of paper investments. If you buy a stock that's already in circulation (as opposed to at the IPO), the company doesn't actually get any of that money. The only way the company can benefit from higher share prices is by issuing new shares at the new price. They don't get any money off of the trading of their stock in the public market.

To further Matt's point (horribly oversimplified, mind you):
- A poor person gets a tax cut and hires a roofing company to fix his leaky roof. The company gets revenue.
- A rich person gets a tax cut and invests funds in the roofing company's stock, which is already listed on a public exchange. The company gets no revenue.

Whether buying paper assets indirectly stimulates production, I can't say, but it doesn't stimulate production the same way buying the company's product or service does.

Oh, and a definition check: what's BNP? Did you mean GNP (gross national product)?

Guest's picture
Blue

The roofing company example is a good one. However, the conclusions are not correct. I own a small company and just sold stock (paper?) in my company to several rich guys. Here is how it works. First 100% of their investment goes to growing the company - if I sell something only the profit portion goes to fund growth.

In the roofing example, that investment allows the roofing company to expand into siding and hire more people. In addition to the siding workers, he hires another office person to answer the phone, send out bills and generally keep track of things.

Even for a publically traded company, when you buy stock, some of that stock is being sold by the company to raise money for operations and growth. If it was just people trading money, companies would not care so much about stock price.

Guest's picture
Scott

What the author didn't tell you...

The nine poorest men worked for the tenth man. They all worked hard, paid their taxes, raised their families, and obeyed the law.

The company they all worked for(owned by the tenth man) was making huge profits because of their labor. Over the past ten years the tenth man's income went up 150% while he (making a good business decision) continually cut the health benefits and retirement benefits of his workers(to keep up with the increasing costs).

During this time the tenth man outsourced two of the men's jobs overseas and layed them off and gave his remaining employees just enough of a raise to help them keep up with inflation. At the same time increasing his own income.

Thus making it so that in the past ten years those left working for the company had no real increase in income eventhough the company they worked for was making huge profits; all of which was going to the tenth man.

The moral of the story is: We don't need a government that can give us tax breaks. We need employers ethical enough to let everyone share in the profits of the company they help build. Barring that we need a government big enough to make employers do the right thing.

Guest's picture
Blue

Scott forgot to tell you that the 10th man risked everything to start the company. He worked for 2 years at no pay. He borrowed against his credit cards to buy supplies. He also paid his employees fairly. If he didnt they would have quit.

Now he is successful and his risk taking, brains and business knowledge is being rewarded.

No one got screwed or taken advantage of.

Guest's picture
Guest

Question for Scott. Lets say the nine guys worked for the tenth. The tenth guy owns the business assumes all the risks, pays all the bills and pays a much higher percentage of taxes than his employees. Why then should he not be allowed to keep a majority of the profits. There are many companies that share the profits, it's called "profit sharing" and "stock options". Let's say the tenth guys company shares the profits. So shouldn't you as a profit sharing employee help him pay the bills or take a pay cut when the company is in the red and not making a profit? Would never do that, of course not. It's not your company why should you help pay the bills. If the other nine guys are so unhappy with their income or that their company doesn't "share the wealth" they have the option to work somewhere else or take the risk and start your own business. It's not your employers job to make you as wealthy as he is, it's yours. If you start your own business, you will make money off your employees just like the tenth guy and you will do what ever it takes to turn a profit.

Guest's picture
Guest

I can always spot an employee that thinks that the deserve all the benifits the owner does because the go to work 40 hrs a week. I would like to know if you would be willing to put every penny that you own stock,house and all the cash you can get and risk it all for years living off of nothing for the first 5 to 10 years because you have a dream. Then, you finally start to make a profit a small one but then in another 5 to 10 years you are finally making a great profit. Then a college grad works for you for about 2 to 3 years and says "I have been here for 3 years and I think I should be making as much money as you". Remember if we stop spending our money we will be in recession like we are now so get a clue.

Guest's picture
Mycroft

Many of you missed the closing bit on who paid for the beer. Through it all, the tenth man paid more than half of the total bill. He got a proportionate share of the price break and was still proportionately paying the majority of the bill.

If you think that a poor person will use a windfall to do something responsible, then you have not spent much time living in a poor neighborhood. I have. Let me enlighten you as to the primary behavior pattern of poor people. The majority of poor people are selfish and short sighted as well as ignorant and stupid. The poor resent anything that comes in the way of the immediate, personal gratification of any thing they want. Those that are not these things, don't stay poor. How else do you think the payday advance and rent to own leeches stay in business?

As for buying a "paper" investment that has no benefit for any of the downtrodden masses, you haven't stopped to consider where the payment for that paper went. What did the seller do with that money, and if he invested in yet another piece of paper, what did that seller do with their money? That money goes round and round through the economy in many ways, it does not cease to exist with the first purchase!

Do I have paper investments? Yes I do. I was paid for some of my labor in the form of stock. This stock is now part of a retirement fund that I will use to buy goods and services when I am retired.

Learn some economics. Preferably not from a college professor who demonstrates radical leanings to the left or the right. Those kind of people have always spelled trouble at any time for any group of people that listens to them.

Guest's picture
Jim

"right wing propaganda?" really? Please point out the flaw in the argument instead of spouting nonsensical trolls.

Guest's picture
Eric B

The wealthy man (or class) is also receiving more services with the money he pays. They're getting government assurances on their investments - cue what the American government did for investors in Argentina, or the Middle East...

...or the subprime scandal. The poor person loses his or her home, but the government talks about bailing out the banking industry. (Which reminds me of the savings and loan bailout in many ways.)

I think the more appropriate analogy is the software package. A software developer charges wealthier people more for the same software package, but they get personalized technical support that makes sure the software works for them, even modifying the source code to make it easier for their usage. Sometimes this makes the software more usable for those who are charged less, sometimes it makes things harder.

When a price break is announced, combined with additional change requests requested by the wealthy (including bankruptcy "reform"), those paying less get a little upset.

Guest's picture
Guest

The subprime borrower that loses a home should never have been offered that credit line in the first place. They didn't qualify for credit and they have a mortgage kept at a teaser rate (that is usually lower than what they would have to pay for rent) for the first year or so that only pays into the interest of their mortgage loan and not into the equity of the home. Meanwhile, all these subprime-boosted sales are artificially raising the cost of homes and as people are kicked out of homes they shouldn't have bought in the first place, the housing market collapses sending the wealthy into a tailspin as well because they actually invested in the equity of their homes that are now worth less than what they paid a year ago.

Guest's picture
Guest

For Adfecto, I find that comment about "The wealthy man would have had a much lower chance to acquire his money in nearly any other country" extremely niave and short-sited. There are plenty of wealthy people in lots of other countries and plenty of opportunities in those countries as well. I have lived (and worked) in other countries and visited far more, as well as hosted many people from other countries who have visited here. I certainly did not get the impression that the people of these countries lacked more opportunities than those of us in the USA. As for taxes... in the other countries that I lived in, I did pay a lot higher taxes, however I saw my tax dollars at work and felt I benefited, as a resident, FAR more than I ever have living/working in the USA. Therefore, I did not resent it. I didn't even miss it. There were so many more free amenities available to me within the cities that I lived, provided by tax dollars, that it made them great cities to live in.

Guest's picture
Guest

I was sorry to see such a simplistic, outmoded story on Wisebread. Can everyone say "Atlas Shrugged?"

Guest's picture
coloneloftruth

*shudder*

Guest's picture
Guest

The funny thing is is that if you took the time to read Title 26 USCA Sub A "IncomeTax" , you would learn that your work and labor is not taxable (with very few execptions).

Sadly, it's long, hard to read or understand, and the IRS threatens us to "pay up or else."

Guest's picture
Guest

The funny thing is is that if you took the time to read Title 26 USCA Sub A "IncomeTax" , you would learn that your work and labor is not taxable (with very few execptions).

Sadly, it's long, hard to read or understand, and the IRS threatens us to "pay up or else."

Guest's picture
Guest

Some career advice:
Do what you do well, articles on frugality and personal finance and save the politics for the WSJ editorial page, cause this propaganda is alienating your readers and there are plenty of other personal finance blogs.

Guest's picture
Guest

As someone who falls into the lowest tax bracket I am insulted to read this right wing propoganda at a financial site.

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Guest

Is this really "right wing propaganda" or something worth pondering? And if this is a financial site, I would hope the topic to taxes would come up at some point. We all need to think about how the current system works, and weather it can be improved upon to have maximum benefit for everyone in this country.

Guest's picture
Guest

Is this really "right wing propaganda" or something worth pondering? And if this is a financial site, I would hope the topic to taxes would come up at some point. We all need to think about how the current system works, and weather it can be improved upon to have maximum benefit for everyone in this country.

Guest's picture
Minimum Wage

"right wing propaganda?" really? Please point out the flaw in the argument instead of spouting nonsensical trolls.

I did point out a flaw in the argument, it wrongly assumes static prices and an improvement in standard of living.

Guest's picture
Minimum Wage

The poor resent anything that comes in the way of the immediate, personal gratification of any thing they want. Those that are not these things, don't stay poor.

Guest's picture
Vesperto

Unfortunately, the entire story is built on a false premise - that the rich pay higher tax rates than the poor. That is true if you only consider income taxes, but income taxes are not the only taxes we pay. Poor and middle class workers pay Social Security tax on all of their earnings, while the rich pay Social Security tax on only a fraction of their salaries, and none of their investment income. The poor pay more of their income in sales taxes, because they must spend more of their incomes on tangible personal property. Middle class homeowners pay real estate taxes on their homes, their largest asset, while the wealty pay no such taxes on their jewelry or investment assets. All in all, Warren Buffett calculated that he pays a smaller portion of his income in taxes than does his receptionist. He challenged any CEO of a major corporation to show that that was not true of their companies. So far, no takers.

Guest's picture
Mark

Most employees don't realize that for every dollar you have to give up for social security, fica and medicare your employer has to match that dollar for dollar. Plus, the employers has to pay both the employer and employee share of taxes on what they bring home. People at the bottom should quietly drink their free beer and keep the tenth man coming to the bar or its going to get really ugly in this country.

Guest's picture
Guest

The rich DO pay on their investments, its called a Capital Gains Tax, and that income in treated as part of the individuals overall income.  They also pay real estate taxes on their homes, not just the middle class.  The rish pay taxes on their jewelry in the form of Sales Tax.  It may not be the same proportion of income as if a poor person bought the jewelry, but the poor person wouldn't be able to buy the jewelry in the first place.  You should be thankful that the person who bought the jewelry created a market that now employs thousands of people, many of them lower and middle class.

And sure the rich only pay Social Security Tax on the first portion of their income, but the rich are also much less likely to draw from Social Security in the future because of two things.  First, that to obtain the full benefit of Social Security you have to be retired.  Second, because if you earn more than $25,000/yr single or $32,000/yr married, your Social Security income is taxed, as well.  For the rich who've invested wisely, that means a benefit that was supposed to be guaranteed to them by the government for paying into the system is being taxed again.  A double tax, really.  Take my money from me once, say you are going to give it back later and then when you do, you take another cut.

That the poor pay more of their total incomes (as a percentage of income) in Sales Tax doesn't bother me at all.  Effectively, the Sales Tax is the only tax that poor people pay.  At least now they are contributing to the system they will likely draw from in the future.

Guest's picture
Guest

--" while the rich pay Social Security tax on only a fraction of their salaries, and none of their investment income."

Capital Gains Tax?

--"The poor pay more of their income in sales taxes, because they must spend more of their incomes on tangible personal property"

Immediate Gratification? The poor spend money they don't have, and that's the difference between being "poor" and being "broke". Broke is a state of affairs, poor is a state of mind. You have to work at being poor.

Guest's picture
Guest

First, because as others have said, this doesnt account for the many regressive taxes that we fund our government with. Gas tax, social security, etc. It also does not take into account the lower rate paid on investment income that makes up a majority of the super rich's income in this country. Also, using 10 people and saying one would pay $59 for $100 worth of beer is complete bullshit and way too simplistic, as no one in any income group pays anywhere NEAR 59% in income taxes- effective income tax rate, even for the wealthiest is closer to 25%. Effective, not marginal tax rates are what matters. Also, this example assumes government services are evenly divisible, that is just as all ten each get one beer, each benefit the same amount, then we all benefit the same amount from government. As we know, this is completely untrue, as the wealthy have more assets and propery to be protected and insured by the government. Our indivisible system of infrastructure and defense has benefited them more than others, etc. They have more of the very money that the government employs people to print and runs a central bank to supply. We do not all get the same results from the system like we do from drinking one beer. Also, the idea that the rich will move out of the country if we raise taxes on them is complete and utter bullshit.We have JOBS not BUSINESSES leaving the country through outsourcing- GM is still based here, so is HP and other outsourcers- they outsource to gain competitive advantage on LABOR costs, not taxes! No one moved out due to taxes when they were much higher in the 1950s, or recently when they were slightly higher in the 1990s. In fact, under Clinton, the economy boomed and the rich did better than they ever have before or since! If guy 10 wants to move out of the country, where the hell is he going to go in the industrialized world?? To western Europe? Forgot, much higher tax rates there, up to 50%, try again- flat tax havens of Costa Rica, Estonia, Albania, Chad, and all those other backward 3rd world countries?? Ok, guy 10, try and make as much money in those countries w/ a completely uneducated, unproductive workforce, no sound infrastructure, no technological development and pathetic levels of capital investment. Less productivity, less profit. If he wants to leave, more power to him, someone else will come in and replace him to satisfy the demand- that is the beauty of our free enteprise system. There is money to be made, so guys 8 and 9 will step up and gladly take it!! As for 10, good luck making less money and living in constant fear of a currency collapse, hyperinflation or a military coup! Ridiculous example.

Guest's picture
Pat

Paying 59% of the bill is not paying 59% income tax. Your math and reasoning skills are way to simplistic. The story says each man paid what they could afford. No where does it say the richest guy had $100. If he could afford $59 dollars for a beer he must have a lot more than $100

Guest's picture
Pat

Paying 59% of the bill is not paying 59% income tax. Your math and reasoning skills are way to simplistic. The story says each man paid what they could afford. No where does it say the richest guy had $100. If he could afford $59 dollars for a beer he must have a lot more than $100

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Guest

He will go to Singapore and pay a 7% corporate tax, no capital gains tax, and at the very most 20% income tax. He will also be welcomed with open arms.

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Alison

I Loved this post. I'm glad someone out there can see the other side rather than just complain about the tax breaks that the wealthy get.

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holotone

To see what was quickly becoming my favorite financial advice blog become yet another platform for right-wing, elitist propoganda

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Guest

right-wing elitist? You must be a left wing LOON.

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zoom

I'm very disappointed to see this post here. If you're going to start getting political on us, you should back it up with some serious analysis rather than cutesy superficial right-wing crap.

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Guest

Hmmm, there must be some fuzzy math going on in this fanciful scenario. There currently is a maximum Federal tax rate of 35% for the top tax bracket. Last I checked, 35% of $100 is $35, not $59.

Sssshh, nobody say anything about the hedge fund managers earning multi-Million or Billion dollar ANNUAL compensation who receive their income in the form of dividends taxed at the glorious rate of 15% Ahhh, the congress sure knows how to look out for the middle class. Yes, ignore that hedge fund lobbyist entering your congressperson's office with one briefcase full of cash and another full of lobbyist-written-legislation ready for the old rubber-stamp treatment. He's just exercising his right to petition his government.

How convenient that campaign finance reform places the burden of reporting all 'gifts' from lobbyists on the politician not the lobbyist. We all know what great memories, and how scrupulously honest and what good record keepers our elected representatives are when it comes to such things. I wonder, will Tom Delay be pardoned like Scooter Libby? Awww shucks, nevermind, he's a good ol' boy too.

But then accurate math is probably not the point here, looks to me like the point is that all us middle class folk should be afraid. Afraid that all the rich folk are going to wake up and move to Shangri La leaving us cretins to our own devices; afraid that Bin Laden's going to blow up Main Street of Puny-town USA; afraid that if we speak out against a government run-amok that we'll be tarred as unpatriotic and then be spied on by our own government abetted by the telecom industry; afraid that Liberals are planning to unleash wave upon wave of wasteful Social programs; afraid that a Nationalized Medical program (like what congress gets) will mean poor care or inaccessible care for all, when in fact Canadian, British, and French programs conclusively show they are very effective for citizens and Doctors alike; afraid that the Iranians and North Koreans will get the Bomb; afraid that terrorists are using our domestic communications systems to plot against us; afraid that the smoking gun will be in the form of a mushroom cloud; afraid that same-sex marriages will lead to polygamy (huh!?) Fear, fear, fear. Remember folks: lock your front door, turn on your central station alarm, clench your butt-cheeks, and sleep with a pistol under your pillow. Be afraid. Because we're easier to control if we are all afraid.

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Guest

"...afraid that a Nationalized Medical program (like what congress gets) will mean poor care or inaccessible care for all, when in fact Canadian, British, and French programs conclusively show they are very effective for citizens and Doctors alike....."

Take a look at this article from this week's Globe and Mail....

http://www.theglobeandmail.com/servlet/story/RTGAM.20081103.wemergency03...

With conditions in Canada's hospitals comparable to a Third World country, according to one specialist, doctors on the front lines suggest ways to keep ER departments from turning into dumping grounds....

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Guest

whiners - get a job, work hard, save some money and stop complaining about people who do better than you

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FlyByNight

This is just propaganda, that's why it was claimed to be written by some fake professor.

As someone pointed out, federal income tax is just one part of the tax system. Most poor and middle class people pay payroll taxes on 100% of their income, while the richer you are the tinier that percentage becomes.

I work as an investment banker for a large Wall Street bank in their Hong Kong office. I make a ridiculously high salary by any measure, in the low 7-figures and I am in my 30s. Yes, I cringe a bit when I see what I've paid in taxes throughout the year considering it is more than most people pay for their houses. I pay these taxes and get virtually no break by living outside of the US. Basically, I pay hundreds of thousand of dollars to the federal government each year just to retain my US citizenship. However I can't complain. I still make way more money than 99.9% of the population. In one year I save more money than most people will save in their lifetimes. I grew up in a middle-class family, we were not poor and not rich. I remember how hard it was. Now if the government wants to give me a tax cut of say 5% and save me something like $50,000 in taxes that would be nice but I have absolutely no need for the money. But if you gave the tax cut to the poor and middle class the extra $1000 or whatever they would receive could go a long way. I'm not talking about redistribution either, but instead effective tax rates should take expenses into account as well as all the taxes you pay as a percentage of your income. I pay payroll taxes on less than 10% of my income while the vast majority of the country pays it on 100% of their income. Someone making less than 1/10th of what I do pays exactly the same amount of money in payroll taxes each year. For him it represents around 10% of his total income, for me it represents less than 1%. That is a big difference. Also, as someone else noted when you're rich you make a considerable amount of money in capital gains and dividends which are only taxed at 15% - roughly the same tax bracket as poor people are in but it is a tax bracket that benefits the rich more than anyone. Besides my ridiculous salary I average over one hundred thousand dollars of additional income in capital gains each year that are barely taxed. Make no mistake about it, the tax system benefits the rich over the poor by leaps and bounds.

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Guest

First, the story does not ever claim that the richest man pays 59% of his income in taxes. In fact, it never mentions his income. What the story says is that the richest man pays 59% of the bill (i.e. taxes).

Second, to those who argue that the poor and middle class actually pay more in taxes, you need to be a bit more specific. As a percentage, that is probably true. But in dollars, no way. A rich man paying only 25% in taxes on an income of 1 million dollars pays as much as 5 people paying 100% tax on an income of $50,000. And even that is misleading because people who make less money pay at a lower tax rate (which means they pay a lot less in dollars).

And to the person who mentioned social security taxes, noting that the rich only pay on a fraction of their income, you should take some time to see what they get out of it. The benefits for social security are capped based on the taxable cutoff, so someone who makes twice the cutoff amount receives the same amount as someone who makes exactly the cutoff amount (and the two pay the same amount). And if you think raising the cap would help the poor (more money in the system, right?), you'd be wrong. Because benefits are based on the fraction you pay of the cap, raising the cap effectively lowers the fraction you pay, and so your benefits drop (this is counteracted somewhat by there being more money in the system, but even then you can't do better than breaking even).

Finally, to whoever said that the rich get more from the government, I'd like to see justification for that. You mention that the government protects their business interests, but the government is the one who jeopardizes their business in the first place (all sorts of regulations, taxes, etc.). With the exception of corporate bail-outs (which are wrong), the rich get little from the government that they wouldn't get without it. For example, the rich are excluded (at least partially) from welfare, medicare, financial aid for college, and many other programs, while the poor receive most of the benefits of these programs (even though they payed only a small dollar amount into the programs). Someone explain to me how that's fair (and I mean fair, not ethical).

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Guest

the guy paying $59.00 for his one beer likely charges the poor guy $1,000 per hour for his services (lawyer? doctor?)
the question is, in hours of work, I suspect the rich guy gets his beer a whole lot cheaper than the poor guy

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Guest

"the guy paying $59.00 for his one beer likely charges the poor guy $1,000 per hour for his services (lawyer? doctor?)
the question is, in hours of work, I suspect the rich guy gets his beer a whole lot cheaper than the poor guy"

Yea, because the rich guy was born a lawyer or a doctor right.

Most likely the rich guy worked his ass off in high school so that he could get into a good college and then worked even harder in college so he could get into law or medical school and then put in 80 hours a week at his firm or residency program to establish himself in his profession. Not to mention the tremendous amount of debt he incurred for 7-8 years worth of school.

As a law student with a fiance in dental school I can assure you that neither of us will feel even the slightest pang of guilt about the amount of money we will be charging the "poor" man.

I remember back in high school when that "poor" guy was out behind the gym smoking pot while I was in class working hard to get into college. While he was having babies at 18, I was studying at a good university. While he drifted from one mindless low skill job to another, I was getting into professional school. And later, when he's still waiting tables at P.F. Changs, I'll tell him to hurry with the check, since I need to get back to the office so I can fleece more "poor" people... yea right.

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Guest

1000 an hour? Lawyer, yes (not controlled by the government) Doctor, no, try like $40 for a follow visit and $200 for a consult. There are going to be a lot of doctors in the future and here is why: Lets get straight A's in high school, go to a good college, get straight A's (no life), go to Medical School (7yrs and no life), finally graduate, have the government tell you that you cannot charge more then X amount for a visit, pay your staff, have someone claim you made them worse, lawyer takes your money

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Trevallicious

I have always loved this analogy and whilst overly simplistic, it runs true.

In Australia, I've just been re-classified as "wealthy". What makes me newly wealthy? Well, the new government lowered the threshold of "wealth" so now I am loaded.... apparently. Over here, you get a thing called "Baby Bonus" - in simple terms, you have a baby and the government gives you $5000.00. This was an initiative of the previous government and is obviously an incentive to breed faster. This bonus was not means tested, you have a baby, you get the bonus regardless of who you are or how much you earn.

Our new government have elected to means test the bonus and set the limit at the new, lower, "wealthy" bracket.

What does this mean for me and my wife? It means that for the past 10 years where we delayed having kids until we had a home and stable financial base, payed all our taxes and did not claim a single cent in welfare or other benefits, we now are ready to have kids and for her to stop work but as, with the stroke of a pen, the bonus is means tested - we get nothing.

Now, I pay a lot of tax and have done so for years. I am not much different to anyone else here - we have a house (we don't get tax free mortgages here, I understand that the US does??) a couple of cars, and an investment property that runs quite negatively much to our distaste. Admittedly, not everyone has investment properties but hey, with the rental crisis here, if I didn't build it one more family would be living on the street.

We can't afford for my wife to be off work for months at a time with no pay so the "Baby Bonus" was a great thing to assist us in starting our family. Also, it would be the first thing we have ever claimed from the Government!!

But alas, new government comes in, means tests the bonus and caps it at a level where we can't get it and we get screwed.

We have a system of welfare payments here called "the Dole" in which those who cannot get work (about 5%) get paid ~$250/wk. Those recipients are entitled to full Baby Bonus. Guess what, we pay ~$50k in tax this year, work our bums off, pour money into our investment black hole, battle the bills every month and can't get a red cent from the government to help us after we have so diligently helped the *poor* for so long.

Why not? We saved our pennies, worked hard, payed our taxes, didn't ever claim anything.

We all enjoy the benefit of what our tax dollars do as far as infrastructure & security. I'm comfortable with the fact that I pay more (in $) than someone poorer than I but FFS, why am I hobbled when it comes to hand-out time when I need it?

I payed more tax than 90% of people in this country but I am not allowed the same reward as those who contribute nothing??

If I dropped my pay to the national average (my wife is already there), downsized our cars, sold our primary house and moved into our investment house, I would have more money in my pocket, be able to milk the government for every "bonus" under the sun and then retire on the government pension and my (then) meager superannuation fund.

If I stay doing what I'm doing, I live the same lifestyle as somenone earing a % of what I do, I don't claim anything from the government, I pay the government a mountain of taxes and I fund my own retirement.

On the subject of "super" - Australia's super debt is staggering, what would happen if everyone just decided to use the government pension? We'd go broke overnight.

Hrmm, I think that everyone crying foul at the "well healed" needs to pull their heads in and look at the longer term view. Grab a few bucks today but remember, they will cost you dearly in the future.

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Guest

Obviously, Kamerschen falls into the tenth man category, with that "feel sorry for the rich" attitude!

In reality, it goes more like this:

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).

Rather than being content with the relative savings, the 10th man hired an accountant, an attorney, and a lobbyist for $19 total. They managed to get the system amended so that they now paid $8; which is less than both the 8th and 9th pay and an 86% savings.

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Guest

Here is the reality of this situation.

Man # 10 is the richest and owns the building the bar is located in. When they beat him up, he is no longer able to manage his building and the bar has to close.

Man # 9 is the second richest and owns the distributorship that provides the beer. With no bar to buy the beer, he goes out of business.

Now there is no bar and no beer.

Men # 5-8 consider driving to another bar, but since gas is too expensive they cannot afford to drink at all.

Men # 1-4 don’t have a license to drive in the first place and now turn to a life of crime since they can no longer drink free.

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Markyson

Just like the document says, those that don't get it never will. Post 36 is spot on, and most the posts prove post 15 correct as well, especially with the ignorant and stupid comment.

Why do the people crying 'I'm poor and it ain't fair' do something to change their lives instead of trying to steal it by linching the folk with more money than them. Entitlement Mentality piece of s%#Ts, people aren't entitled to other peoples "stuff" including thier money. Whos the crook? America provides oppurtunity to correct your thinking, take chances and change your life if your not happy with it. or just move to canada so you can get your ass wiped for you.

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Guest2

Post 14 is so typical of employee attitudes that have no clue. The employer "owes" it to the so-called "hard working" employees?
A good employer that is going to stay in business does in fact realize the value of their employees and sometimes has to cut the increasingly high health benefits to just keep jobs for employees. I guarantee, it's not for increased profits.
You forgot to mention who has all the responsibility and risk in the business. The employer. Who normally works more than 40 hours per week? The employer. Who pays the Workers Comp and Unemployment bill for the employee? The employer. Who matches the SS tax for the employee? The employer. Who is the first to quit over something petty or get hurt "accidentally" on the job to collect Workers Comp? The EMPLOYEE.
If employees understood a little bit more about what it takes to own a business and the risks involved, they would probably appreciate their job just a bit more.
Our Congress is made up of a bunch of dumb a*%es that have never run a business. How can they balance a budget when they don't understand that they can't spend more than they receive? We need less government interference. www.fairtax.org

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Guest

OK show me a rich man that would repeatedly pay 59 dollars for the same beer that is sold for as little as 1 dollar to someone else. The rich man would just buy the beer factory and ship it overseas to save $$$ on wages and materials. He would then sell the beer to his friends while getting government subsidies for helping the poor and tax breaks for selling in the US. He would make sure everything went the way he wanted by sending lobbyists to congress. The people, buying the beer, would have to make up the difference.

Sound like what has happened to the USA in the past eight years? Oh and how did deregulation of the mortgage industry work out? Do the Republicans now have to act like Liberals to bail out the stock market? Funny I was told by Bush that we had a strong economy all the way up to this point, and in his speech the dumbass said this problem started before he was elected. Well what the hell was he going to do about it for the pas eight years?

David R. Kamerschen, Ph.D. is a dumbass or just overpaid or both.

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Guest

I wish I would have stumbled across this post months ago when the conversation was still hot... but I see many incorrect conclusions in the preceeding comments. For those that call the article fanciful b/c there is no 59% tax bracket... the article doesn't claim this to be the case. It doesn't say the tenth man makes 100 and spends 59 on beer... he pays 59% of the taxes... of the total governement pie. 25% of his income paid in taxes may well equate to 59% of government spending... I haven't looked to confirm this as it doesn't change the moral of the story. I understand that we need to protect and develop the lower and middle classes... but we also need to reward the rich... these are the people striking out on their own and innovating. These are the people mortgaging their homes to start small businesses... if they fail they lose everything... so if they win they should have everything to gain. For those receiving a monthly, bi-weekly, or weekly paycheck... don't take for granted the security in that. And to those who say these people won't move overseas... you're right, they won't. But that doesn't mean the innovation won't. Stop rewarding risk taking and people stop taking risk. The beauty of this country is that it rewards tinkering.

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Guest

The rich are alredy rewarded... by being rich. The poor, at this point, don't have healthcare, a quality education, quality housing, or quality law enforcement.

Therefore, they didn't get a free beer to begin with. They went to the bar, engaged in coversation, paid for a round of pool, and still got nothing in return.

Capitalism by nature creates more losers than winners. But why we beleive that the winners have to win as big as they do, and the losers have to lose as badly as they do, is beyond me.

And #43, I agree. It does suck owning a small business. But it sure doesn't suck running a huge corporation. Which administrations laws made it that way?

I don't need a handout from the government. I need fair wages, decent healthcare, quality law enforecement, sewer services, good roads, livable housing, and my fellow countrymen happy.

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Guest

What if we take the story and still get the $20 dollar rebate. But this time, everyone wants a piece, but no one can agree on where it should go. Someone interjects that since the top have the benefit of being able to buy beer, they shouldn't get the rebate (they can afford the beer without it). So the $20 should go towards those that need it, and hence the 4 people at the bottom who paid nothing, get $5 each.

You've just been introduced to the Obama Tax Credit. Wealth redistribution at it's finest.

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Brice

The price of the beer is raised to $200. $90 for the beer (national security, mail, criminal justice system (police, courts, prison), highways, healthcare, $10 to pay for the operators (government employees), $50 to pay for the guys who only paid $80 last week for $130 worth of beer, and $50 to pay for all the free beer for the guys who stold some (illegals and tax cheats)

The man paying $59 now pays $150.
The man paying $18 now pays $45.
The man paying $12 now pays $25.
The man paying $7 now pays $10.
The man paying $3 pays nothing.
The man paying $1 gets $4 back.
The four men who paid nothing get the free beer, highering preferance for the government jobs, and $6.50 back.

If I was the rich guy I'd move too. Not because I don't want to pay taxes, but because I'd rather give my money to the four men who paid nothing, and cut out the government who will spend 10% of my tax dollars to manage the program. If the jobless rate out there is on the rise, how come illegals are still trying to get over the boarder? Because there are still jobs American's aren't willing to do, not because there aren't any jobs.

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Guest

The whole story is a parable. Read no more into the facts of the story than what are given. The tax brackets described may not be exactly accurate, or they might be, but they set a framework for us to think about deeper meaning. Look at the relative math. Look at how people react. Maybe the rich guy could move away; maybe he couldn't. What matters is the reaction on the last day when he is not there to support the rest of the crowd.

Make no inferences about greed or forthrightness, etc., among the characters. In the story nine guys beat up a tenth man because he had more money than the rest of them. Now, suppose he was a mean boss: does that justify a crime like assault and battery?

What we are seeing is an internet Rorschach test. People get to expound on a simple story with their own interpretations of the world. #14 is obviously stuck in a socialist Labor agenda of the early 20th century. The law student in #50 is hoping that he one day gets a chance to bill that much. We Americans get as much from psychoanalyzing random strangers as we do from any tax break or government benefit.

Me, technically I'm a "rich doctor" who for some reason probably won't make enough to see a tax increase under Obama's proposed tax plan. I make less in a year than the least paid major league baseball rookie. And yes, I have worked 60 to 80 hour weeks for the last 25 years to maintain a tenuous toe hold on my social standing. Somehow I think my charitable work (i.e. don't charge those who really can't afford to have seen me) is doing more for society than buying $59 beers. Psychoanalyze that.

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Guest

I love how whenever anything criticizes the tiered tax system, it by default has to be "right wing propoganda." The point of the story (and that's what it is-a story, not something meant to be taken word-for-word literally) was to say that if we keep making the wealthy pay so much more (percentage-wise) in taxes, they WILL take that money elsewhere. They will deposit it in off-shore accounts or outsource. And fair or unfair, we need the rich to keep all the social programs we have for the poor going. Without the wealthy, this country can't function and all the post was saying is we should keep that in mind.

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Dave

To whomever posted #51.... Those are not the words of Abraham Lincoln. Those are the words of William J. H. Boetcker, a Presbyterian minister.

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DCX2

You all should look into the history of US income tax rates for the highest bracket. Particularly focus on World War I, World War II, and post-WWII/Cold War tax rates. Obama's "socialist" tax plan is almost half the rate that the rich paid while we were fighting communists. It's no higher than during Bill Clinton's years, and capital gains will be lower than it was during Reagan. Meanwhile our national debt is in excess of $33,000 per man, woman, and child in the US.

If you think poor people are lazy, I have many working class friends that would be offended. They are the most dedicated folks I've ever seen; working hard despite no upward financial mobility. Some turn in an application a day trying to find a good job with benefits, but there aren't very many anymore. Others are single parents with multiple jobs (poor kids never get to see their parent). Parents who screw their credit rating in order to put their children through college, since they make a little bit too much to qualify for aid. It turns out the best way to get a good job is to know the right people, just like the best way to become rich is to be born into a rich family. That's not working hard; that's aristocracy.

Consider this. The poorest 4 men can't afford to drive to the bar anymore. The middle class men decide that their children's future is more important than beer and only go to the bar every now and then. The rich man begins refusing to subsidize the drinks of other patrons. Now the bartender doesn't get enough customers because too few people have disposable income. The beer now costs the rich man much more because the bartender has lost the economy of scale.

Do you think Samsung could afford to make big screen TVs if there weren't millions of middle class Americans with disposable income? When the economies of scale begin to disappear, the rich will understand exactly what debt they owe to the middle class.

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Max

Your are forgetting one important factor. As many have pointed out, the rich got rich by hard hard work, taking risks and being innovative. Rest assured, that if the economies collapse YOU will starve way before the rich do. And since they know how to become rich, how to create, how to innovate; they can do it again. One important thing most people don't realize is that most rich business owners started in their garage, basement, etc. YOU need them more than they need you. Cheap, remedial, unoriginal labor force is much easier to find than the select few that can create. So rest assured, when you tummy is grumbling you WILL beg them for a job, you WILL beg them to feed you and you will accept any bone they can throw at you.

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Roland

I'm not a millionaire, but I do have quite a bit of money. I'd like to leave the US, but I've been told US law has changed and leaving would involve taxing my-already taxed assets all over again-effectively confiscation. So I'm stuck. And so is the tenth man in your scenario. This does not apply to those with money AND connections, who can and will break the law with impunity.

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Guest

What is missing from this discussion (if one can still in good faith call it a discussion) is that many Americans fail to be satisfied with what they have -- which is another subtle point to this fictional example. Yes, there is a significant gap between the upper class and the middle class incomes (though to establish/market household income of $250K/year as a cut-off for the middle class seems high to me), yet compared to other comparable industrialized economies, the US middle class has more income on average -- evidenced by 1800 sq ft homes versus a 1000 sq ft apartments ---- larger, more expensive (and often multiple) cars versus mopeds and Smart cars.

To be in the middle class is not a bad thing, yet much of this campaign has focused individuals on "how bad they have it" or what they don't have. I grew up squarely in the middle class, and I was only unhappy when I spent too much time and energy worrying about what others had that I did not - friends that were gifted new Hondas when they turned 16, while I was stuck with a beat-up Pontiac that I had to pay for with money earned from afterschool and summer jobs. I had two working parents (a teacher and a nurse -- who are still very much in the middle-class) and shared one of two bedrooms in a 1600 sq ft house with my younger sister. I financed my way through graduate school, put in many 80 hour work weeks, and now have moved into the top 5% . . . but if I look around, I am really closer to the bottom of the top 5% and there are plenty of other people with bigger houses, bigger cars, better vacations, and more stuff than I. I work very hard (and make sacrifices) to maintain my standard of living and so that I may be self-suffient when I retire (which now will come at a later date given recent market turmoil). What I notice on this board is that posters are quick to make sweeping generalizations about the "poor" (such as lazy and stupid) and the "rich" (that they are self-absorbed and they all have million$) -- neither are fair or accurate. Personally, I wish that politicians and their constituents would spend a little more time focusing on the gap between the US poor and the US middle class (it's about the same as the gap between the middle class and the upper class) but the consequences to standards of living and quality of life are more significant. No one seems to be talking about that --- maybe because most of the voting power by population in the US is in the middle class -- not the upper and lower classes.

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DJ

Ten men go out for a beer and pay $100? That's a pricey beer. Typical Republican overspending.

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Guest

Read the story. It does not say "A" beer. It says "ten men go out for beer". Typical Democrat readers, they always miss the point so they can jump to their own misinterpretations.

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Guest

A man goes into a restaurant for dinner and sees all the employees wearing Obama campaign buttons. After his meal the waiter brings the bill and says “Aren’t you so glad Obama won the election”. The man thinks for a minute and turns to his waiter and says “I’ll tell you what I’m going to do. I’m going to tip you $20 tip for all the hard work you did serving my family and I, but I’m going to give you only $9.00 and I’m going to give the rest to the homeless guy outside the restaurant and tell him it from you. The waiter was very upset with and asked why the homeless guy should get $11.00 when he didn’t do any of the work? The man replied “this is what our new president is going to do to me”. The waiter left very upset.

Moral of the story is. People like the theory of his plans, but they won’t like it in practice!

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Guest

Comment 40 above was probably the most intelligent one I read on this thread. My wife and I work our butts off putting our kids through college. According to Joe Biden et.al, we're in the AGI bracket +150k that should do their patriotic duty and pay more in taxes. I don't go out for beers, we don't go out to restaurants, I drive a beater 11-year old truck that overheats like crazy anymore to fund these college expenses and, AND, we tithe more than 10% to our church, charities and to sponsor an AIDS orphan in Uganda. Will Slow Joe be shoveling some of that "revenue" back our way to assist in the college bills, charities, and the AIDS orphan? Doubtful. Truth will probably be only FOBs (Friends of Barack) will be getting the candy he promised everyone. Bottom line is taxes are going to get raised. That's never been good for anyone in the long run. This is going to be a painful 4 years.

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Guest

You completely missed the point: of course no one pays 59% taxes, you really just made yourself look like an idiot. The point is that the rich pay 59% of all taxes payed in the country; therefore we can't do without them. Without the wealthy, the government would only receive 41% of what it currently does. It isn't saying the wealthy should get more tax breaks, just that you shouldn't complain that they get more money back than you: that's how percentages work. And that concludes your middle school math class.

By the way, whoever wrote comment 73 should be commended. It definitely puts middle-class life in a whole new light.

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Guest

This is a terrible analogy. The bill is $100. The fifth poorest guy pays 1% of the bill. The next guy pays 3% of the bill. These percentages are about the cost of the bill. Taxes are a percentage of earnings, not the federal budget. Plus, when he reduced the cost of the bill, they didn't keep the same percent distribution, they tried to take the rebate in equal percentages. They should have paid 0, 0, 0, 0, $0.80, $2.40, $5.60, $9.60, $14.40, and $47.20, and everyone would still be happy. They all got mad and couldn't pay the bill because they were all dumb and couldn't do math.

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Guest

FairTax

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Guest

I think most don't understand what the story was really about. It a much bigger picture then simple politics. We are a free country. People are welcome to live where ever they would like. You tax the rich to much, and they can take their money else where. Sorry that's the realty. A business can run tax free in a lot of countries. Those countries know how important it is to attract business and to keep them there. I think as Americans we forget that its just not all about us. How do we force a business we want to Tax 39% to stay here and not move operations.
Close our borders to the land of the free?

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Guest

Guess Amazon has finally proven how what the article is trying to say. Attack them too much, and they will move away.

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Guest

That's right.

All they did was work their ass off from high school on, often for no pay, and massive debt to acquire the american dream.

Sure, a majority (the VAST majority) of the rich that these people refer to are actually the children of vast inheritances, and rich stay rich by being greedy, but yes, they are the victims.

Why should the rich pay more? WHY INDEED?
Because 5,000 dollars or a 15 percent tax rate on 50k bears the same effect on the 50k maker as it would the guy making a million.

Life's not fair. And it should be fair for the rich when it comes to paying taxes. What's that? But you just got laid off because your factory owner realized he could ship the factory overseas and pay the employees sh-t? Hey. LIFE"S NOT FAIR. You should know that by now you typical lazy dumb poor person.

(all rich people are inherently smarter, of course, and never lazy)

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Outrageously simlpe-minded

Please excuse my ignorance (I am not an economist), but why did they not decide to pay 80% of what they used to? The absolute values of the deductions would still be unequal, but "everyone by the same percentage" would be an argument much more easily "digested", thus avoiding the beating.

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Torie

why does the 10th man get dropped?....
that's not FAIR!!

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Guest: Alex A.

Much ado about nothing. The story just bgioes to show you thwe consquences of the progressive tax rates. If those in the highest bracket diappear by e.g. not working, or moving to another country etc. etc. then everyione remaining has to pay more.And, if you raise the taxes in the "rich" too much, they'll find a way to "disppear". Politicians take notice!

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Guest

For those who complained about "unfair share" of tax on the rich, let me also provide this statistics from government study of wealth distribution:

- top 1% of the poupulation owns 34% of total assets in this nation
- top 20% of the poupulation owns 85% of total assets
- the bottom 80% claims only 15% of the assets

As you know assets generate capital gain, interest, and rent. These income are almost effortless. (say compare to coal miners.) Those who wrote articles like "bar stool economics" never cite these statistics side by side with tax burden. I think we need to consider the whole picture. Tax is an unpleasant fact of life. But US tax burden on the rich is less than most, if not all, OECD countries. It is a necessary evil. And I think the rich should be a bit more compassionate toward society.

Wall Street Banks are lobbying against centralized clearing house for derivatives trading because $20 billion of revenue is at risk, according to WSJ. But without centralized clearing house, it means future government bailout is inevitable because society can not afford the melt down of the entire financial system.

From this example you can see anyone's wealth has to do with how the law is written. That centralized wealth I quoted above has a lot to do with US law and lobbying.

I think when considering tax policy we need to factor in these facts. The bottom 80% who owns only 15% of all assets obviously don't have the resources to do much lobbying.

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Guest

Risk to get to the point to earn the right to capital gains, interest, rent, dividends, etc.

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Listening to Idiots

Typical spin from the whining losers who think our tax system is unfair. Whoever wrote this little story left out one HUGE detail. In the real world, the four poorest men in this example would share their beer from ONE SINGLE shot glass, while the 10th man enjoyed his glass of beer PLUS he gets 4 refills. So now, what % of the bill should the 10th man pay?

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Dave

Ha! Clearly propaganda written by people who think nothing of paying $10 for a beer, but who want to "communicate" with us little people.