Ten men in a bar, rewritten to encompass todays economy
A friend sent me the 10 men in a bar story to show how progressive taxes as well as increases are damaging to the economy. Being I strongly disagree with such a model, I rewrote it and sent it back. 
Increasing taxes on the rich?? Here is a twist on that to think about.
- Suppose that every day, ten men go out for beer and the bill for
all ten comes to $100. The ten men were a most diverse crowd, ranging from fast food employees to a wealthy banker. - Each man paid $10 for his part of the beer tab.
- The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the govt threw them a curve.
- “Since we had to bail out Wall street, and 50 or so other big business’, plus tax revenues are dropping” they said, “we’re going to increase your taxes by 10%’”
- Since the wealthy banker had most of his income in offshore defferment and other tax avoidance products, the tax increase had only a miniscule effect on him. His discretionary income remained the same.
- The 3 factory managers were hit pretty hard, their taxes costs them an extra $1000, but they still had significant discretionary income, so they continued to come to the bar.
- The 4 factory assemblers were hit pretty hard too, their taxes cost them an extra $300, and thus, they had to cut back coming to the bar.
- The 2 folks working at a fast food joint cost them an extra $100, their employer had to cut back their hours, as fewer people were eating out, and the costs of everything else went up, thus they could no longer come to the bar at all.
- The bar owner had a significant loss, as 30% of his business evaporated, and his costs went through the ceiling and thus he had to close the bar.
All were very unhappy, even the banker, being his fav bar was closed, his investments were in the tank, and the GNP took a dive. The govt was not pleased, and had to reduce their expenses, resulting in less police protection, less road maintenance, and reduced educational oppurtunities.
Where as if the tax increases were progressive in nature:
- The investment banker got hit hard when some of his tax avoidance strategies evaporated. His discretionary income dropped some, but he could still go to the bar.
- The factory managers got hit hard too, their taxes costs them an extra $1000, but they still had significant discretionary income, so they continued to come to the bar.
- The 4 assemblers ended up having a $100 hit on their income, thus they ended up coming to the bar a bit less, but it was still doable.
- The fast food workers had no tax increase, although with prices going up, they had to watch their money a bit more, so they cut back a little.
- The bar owners costs went up a bit, but nearly 90% of his revenue remained. Thus he was able to stay open, although with the price increase folks had to cut back a bit on their bar tab for a bit.
Over time, efficiencies and productivity went up across the board, every one got a effective wage increase as more people had more money to spend due to progressive taxes. The wealthy banker did even better, as he had some of his money tied up in the bar and the fast food joint, and found he was making significantly more money overall, even though he paid more in taxes. just as the plant managers did. The factory workers and fast food joint guys had more money to spend, even though the prices went up a bit. All were happy, the GNP increased, as did gross tax revenue for the govt.
![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
Add New Comment
Viewing 3 Comments
Thanks. Your comment is awaiting approval by a moderator.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Add New Comment