Bar Stool Economics - Granite Grok

Bar Stool Economics

Left wing tax policy and the class warfare rhetoric they use to advance it crumbles in the face of even the most simplistic analysis.  Take the left wing war on the wealthy.  They argue that the rich do not pay their fair share even though the rich pay most of the taxes.  Here in New Hampshire the Mark Fernald wing of the democrat party apes this ridiculous technique on the matter of New Hampshire property taxes, a notion upon which the social justice mavens and the Granite State "Fair Tax" Coalition are meant to agitate.  But neither claim holds water and this cross post from CNHT explains why.
 
Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100 and 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.” so 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, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
 
Professor Kamerschen shows us what Ayn Rand described in Atlas Shrugged, what has happened in California, and what is happening across America under Democrat leadership.  If you make doing business to difficult or too expensive, the people doing it will do it someplace else.
 
Democrats can deny it all they like, but facts and history prove them wrong.
 
Applied to the State of New Hampshire and the lefts class-warfare rhetoric on property taxes, we get nothing different.   As I explained here, using their own numbers, we find that "the Rich’ pay significantly more now, always have, and always will.
 
Using Fernald’s figures on percentages a person making $20,000.00 would be paying 8.3% of their income in taxes.  So the annual cost for their NH state salad bar plate is $1,660.00 per year.  Without even considering tax credits, rebates and so on for any income group, here’s the breakdown based on Fernald’s misleading percentages from the top of each of his income brackets, in terms of actual dollars.

$20K/year           $1660.00

$34K/year           $2244.00

$55K/Year           $3190.00

$159K/Year         $5565.00

$474K/year         $9480.00

And just for fun…

1.6million/year  $32,000.00

… same set of available government services, and the rich bastard has to pay $30,340.00 more every single year for the pleasure.  So in one respect, Fernald is right.  It is unfair.  Lower income folks get more for their dollar. 

Read the whole thing here.  There is more to the argument than I can paste here and there was plenty of left handed Cherry Picking going on at GSFTC that I explored.  But just imagine the result of "beating up" the rich guy?  Who gets stuck paying for government the left will have already bought and paid for because they convinced you that you would be better served if we added more incentives to live, work or do business someplace else?
 
You’d get screwed and the left doesn’t care.  Once you build more government there’s no going back.

 

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