Beer Math, also knows as Bar Stool Economics, also known as the US Tax System
By
Suppose that every day, The first four men (the poorest) would The ten men drank in They realized that $20 divided by six is $3.33. But if they And so: Each David R. Kamerschen, Ph.D. Professor of
Bar Stool Economics
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:
pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The
seventh would pay $7.
The eighth would pay $12.
The ninth would pay
$18.
The tenth man (the richest) would pay $59.
the 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.
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?'
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.
(100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The
seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9
instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22%
savings).
The tenth now paid $49 instead of $59 (16% savings).
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.
sixth man. He pointed to the tenth man,' but he got $10!'
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!
college professors, is how our tax system works.
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.
Economics, University of Georgia
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