Bar Room Economics

This is not mine, I am not sure whose it is originally. Anyway, read it.

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Suppose that every day, ten men go out for a beer and the bill for all ten comes to $100.00. If they paid their bill in the same unfair 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 wealthiest) 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 the following curve “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by 20 % (or $20.00).” The drinks for all ten men would now cost just $80.00. The men decided to pay the bill in the same usury way they always did, so:

The first four men were unaffected. They would still drink for free because they were poor.

The remaining six men who always paid realized that the $20.00 savings divided by six equaled $3.33 each, but if they subtracted that from each share:

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, the poorest, like the first four, now would pay nothing and thus would receive a 100% savings.
The sixth man now paid only $2.00, no longer $3.00, a 33% savings
The seventh man now paid only $5.00, down from $7.00, a 28% savings.
The eighth man now paid only 9.00, down from $12.00, a 25% savings.
The ninth man now paid only $14.00, down from $18.00, a 22% savings.
And finally, the tenth man now paid $49.00 instead of $59.00, a 16% savings.

Each of the men was better off than before. Now the first five would drink for free!!

But inside 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 $10.00.” The fifth man agreed, “I only got a dollar, too, It’s unfair that the tenth man got ten times what I got.”

“That’s true!!” shouted the seventh man. “Why should he get $10.00 back when I only got 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!”

As they got angrier, the nine men surrounded the tenth (the wealthiest) and beat him up.

For obvious reasons, the next night the tenth man didn’t show up for drinks, so the nine remaining sat down and had beers without him. But when it came time to pay the bill, they discovered something very important. They didn’t have enough money between all of them to pay 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.

For those who understand, no explanation is needed. For those who do not understand, or who choose to not understand, no explanation is possible.