Fight Back: give swing voters the facts about Sarah Palin

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  Anonymous started this discussion on Sep 25, 2008

  If economics were explained like this maybe even people like Matt Damon, Keith Oberman, and Obama could understand it. Next time you hear someone talking about tax breaks that go to the rich think about this and decide if we really want America to have this kind of attitude in policy.Bar Stool Economics Simplified Tax System
  Best definition and least boring way to explain why the producers are getting the shaft. One of the things that ended the Roman Empire was the ability of citizens to legally pick pockets of the wealthy at the ballot box.

  Best explanation to share with your congressman or congresswoman, who clearly does not seem to understand, this complex principle.

  The United States Tax System Explained: Bar Stool Economics

  Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.00. 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 $1.00.
  The sixth would pay $3.00.
  The seventh would pay $7.00.
  The eight would pay $12.00.
  The ninth would pay $18.00.
  The tenth man (the richest) would pay $59.00.

  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 $20.00.” Drinks for the ten, now cost just $80.00.

  The group still wanted to pay their bill the way we pay our taxes, so the First Four Men were un affected. They would still drink for free. But what about The Other Six Men – the paying customers? How could they divide the $20.00 windfall, so that everyone would get his “fair share?” They realized that $20.00 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 Man now paid $2.00 instead of $3.00 (33% savings). The Seventh Man now paid $5.00 instead of $7.00 (28% savings). The Eighth Man now paid $9.00 instead of $12.00 (25% savings). The Ninth Man now paid $14.00 instead of $18.00 (22% savings). The Tenth Man now paid $49.00 instead of $59.00 (16% savings).

  Each of The Six Men was better off than before. The First Four Men 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 $20.00," declared The Sixth Man. He pointed to The Tenth Man, “but he got $10.00” 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 got!” “That’s true!!” shouted The Seventh Man. "Why should he get $10.00 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 Man and beat him up.

  The next night The Tenth Man didn’t show up for drinks, so The Nine Men 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 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 deduction. Tax them to much, attack them for being wealthy and they may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

  
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  Lizzy Gore replied on Sep 26, 2008

  Hi-

  How do you figure the rich man just “won’t show up?” If he’s still making enough to own a few homes and a yacht despite his high tax rates— is he going to quit his job as an orthopedic surgeon just because it just isn’t fair? And work as a mid-level manager in some insurance company? That makes no sense to me. As long as a person can still get more stuff, a better life, and more security with a higher paying job, why wouldn’t they? Are you saying that if a person who is currently taking home (post-taxes) 800K will decide to move out of the country if he starts taking home “only” 700K? Or are you talking about investments and capital gains tax here?

  Economics shouldn’t be explained by simplified stories. I could make up the same story and say that the ten men didn’t get into a fight. It doesn’t prove anything. Show me the facts, the history, the case study that shows higher taxes on the top 1% will cause their money to “leave.” In real life. Not in theory.

  Economic theory is full of parables like this that don’t always hold up in real life. Most of this, in my opinion, is because we conflate dollar value with use value, and neglect the real power dynamics that exist between groups and countries. The global market is currently (very efficiently) reallocating food crops to bio-fuel and meat production to feed China’s growing demand for meat. This is very efficient, dollar-wise. But when you have countries like Nigeria exporting food crops (with the revenues falling in only a few pockets) and the general population paying higher prices for their food staples, this is actually very INEFFICIENT.

  
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  Anonymous replied on Oct 3, 2008

  Obviouly you are not an economist and that is o.k. We need people to teach literature and english as well and I am sure you are going to be one heck of a Teacher. I probably would want you to be my child’s teacher because you are passionate and are not one to sit on the sidelines.

  Back to Economics which I do know something about. Bush’s Tax cuts actually helped push this current crisis off until now. What we are going through is due to the Clinton Administration and their lack of common sense.

  Barack Obama’s plan is actually not going to help the Middle Class at all.

  Take for instance a person making $60,000 right now. Currently they are responsible for $6,000 in taxes under Bush. Barack wants to remove these tax cut’s all together and take every one back to the Clinton administration’s era of tax cuts where that same person making $60,000 is now responsible for $10,000 in taxes. Now Barack Obama’s plan does call for targeted tax cuts for the middle class , but these targeted tax cuts would take the $10000 you owe down to $8,000. Please tell me where this is helping the middle class? You just raised my taxes…..

  
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  Anonymous replied on Oct 5, 2008

  Gosh oh gee. How do I debate such a straight forward and simple explanation of our tax system?
  Let me try.
  
  A “real” economist would have two problems with this “example”:
  1. It uses luxury as its model. A simple understanding of game theory shows that at the end of
  the story, if the 10th man decides not to buy, then he has no leverage. No one “needs” beer. Our
  government doesn’t apportion luxuries.
  
  2. There is no baseline. The assumption is that if you can’t afford it, don’t drink. When in reality,
  what most of us are doing is working to pay for food, clothing, shelter, education, and healthcare.
  THAT is the baseline. Anything made above the price of these necessities could be subject
  to the “beer” argument, but the result would end up with pretty much everyone paying as shown.
  
  So it’s ridiculous to use beer as the example. Why not use 60" plasma TVs or diamonds?
  None of these represent the economic situation that most of us find ourselves in. Since the example
  uses a luxury (beer) as its foundation, let’s rewrite the story using a necessity: Oxygen.
  
  HERE IS THE UPDATE TO THE STORY
  Suppose that every day, ten men go out for oxygen and the bill for all ten
  comes to $100. 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 breathe each day and seem quite happy with the
  arrangement, until one day, the richest man throws them a curve.
  
  “I’m tired of paying the most when you all use the same amount of oxygen.
  I’m not going to pay for you to get oxygen anymore. Go buy your own air.”
  
  the 1st and 2nd men (poorest) can’t afford oxygen and die within minutes.
  
  The 3rd poor man gets his wages reduced by his boss (the seventh man who needs to pay more now)
  and can no longer afford oxygen either. He dies within days.
  
  The 4th poor man, pays for oxygen and continues to breathe. How? He loves his wife and kids
  and so to continue to allow them to breathe, he was driven to steal the rich man’s car to pay for oxygen
  for his family. Crime increases, not because men want “beer” and bling, but because they will do
  anything to provide for their families. He gets caught and sent to prison where he earns no money.
  His disabled wife and small children all die now that they have no provider of oxygen.
  
  The 5th & 6th men make their living selling products (like food) and services to the first 4 men.
  Having more than half of their customers die, they can no longer afford to stay in business.
  They both close shop and die within weeks.
  
  The 7th & 8th men own or work for companies that sell products and services to the 9th & 10th man.
  Unfortunately, the workers they rely on to plant and harvest the crops, manufacture goods, and deliver
  the services have all died. Within months, the 7th and 8th men die.
  
  The 9th man has enough money to buy oxygen for a year. Unfortunately, the guy that refills oxygen bottles was man
  number 1. The guy that maintains the regulators and oxygen safety equipment was man number 2. The owner of the trucking
  company that delivers the oxygen was man number 7. Man number 9 dies in 4 months when the supply of safe, available oxygen disappears.
  
  Now we come to good, ol’ man number 10. The guy that wants to stop paying because he is blind to the value others bring to him and his lifestyle.
  Man number 10 has stocked away 5 years worth of oxygen. He’ll survive…at least for awhile. As long as
  he can build his own roads, make his own electricity, maintain his own equipment, grow his own food, provide his own healthcare,
  clean his own air & water, and protect himself from fire, flood, hurricane, and the occasional attack from
  anyone else who might have survived and wants to take HIS oxygen.

  And that, ladies and gentlemen, journalists and college professors, is how our tax system would
  work if we let the short-sighted run our economy. The people who pay the highest taxes need to understand
  that they truly get the most benefit when the people who supply, buy, and work for them can afford the necessities of life.
  Bitch too much, attack the middle class and poor for not paying enough, and they just may
  stop producing, showing up, or DIE.

  David Stuck
  Student of Life and Economics
  For those who were naive enough to except the “beer” analogy, think about
  where YOUR money goes and what would happen to you. (hint: You aren’t the 10th man)

  
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  Boris replied on Oct 7, 2008

  Wow. Incredible. All these anonymous comments, and all so opinionated, and so damn stupid.

  Beer a luxury? First of, if you knew anything, you would consider the fact that beer consumption/sales is historically pretty isolated from economic conditions. In fact sales tend to increase during economic downturns. So much for the “luxury” comment… And to make your argument better, you advocate the use of buying air??? I realize you are trying to appeal to certain human weaknesses in judgment, but for the sake of not sounding like an idiot, please refrain from insulting our intelligence.

  The tax example presented makes sense. No, a doctor taking home, after tax, 200K probably would not leave this country. And yes, if you are earning 800K, after tax, you have plenty of means of sheltering your money if pushed to do so.

  BUT!!!

  Instead of talking about individual tax structures, and being stupid and thinking there is individuals and companies not escaping taxation….one example. Google. Everyone seems to love the guys, and I’m not trying to single them out, but how in the world do they attribute the largest percentage of revenue, only to U.S., to Ireland? Might it be their favorable tax rates, and the procedural ease of transferring all that revenue to a country where there is little actual revenue generation take place? Guess what… If you push a giant corporation in a global economy through heavy taxation, they are not going to accept less profit, they will push, tug, and move until they do make same or more money. There is no other country in the world with double taxation of our standards, where AMT rules, rates, and loopholes are so rampant, odd, and the tax code and its enforcement is so weak. Yes, Germany’s tax laws dwarf ours, but it’s detailed enough that the loopholes we have here are pretty much nonexistent there. By the way, there is only one candidate who has a concrete plan of cleaning up the messy code, and making it work smoother.

  You want proof that the tenth man leaves? Look at Google, GE, Microsoft, Yahoo. Look at their transfer pricing strategies. If you can’t grasp those, just look at the revenue they contribute to countries like Ireland or other favorable tax countries, where no manufacturing or service centers exist. Don’t concentrate on the little guy, or the little guy who works his butt of for 800K a year, look at someone who saves $500 million by just talking to a good lawyer.

  If none of this makes sense… Think of what a “Global Economy” is; think of companies like InBev, and Nestle, where no actual “home” country exists. I don’t know about you, but I feel like lowering taxes and bringing more business in (as well as taking less from individuals) to generate revenue for the government, is better than having Obama use my money to fuel his plane so he can exchange pleasantries with Iran.

  
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  Boris replied on Oct 7, 2008

  Wow. Incredible. All these anonymous comments, and all so opinionated, and so damn stupid.

  Beer a luxury? First of, if you knew anything, you would consider the fact that beer consumption/sales is historically pretty isolated from economic conditions. In fact sales tend to increase during economic downturns. So much for the “luxury” comment… And to make your argument better, you advocate the use of buying air??? I realize you are trying to appeal to certain human weaknesses in judgment, but for the sake of not sounding like an idiot, please refrain from insulting our intelligence.

  The tax example presented makes sense. No, a doctor taking home, after tax, 200K probably would not leave this country. And yes, if you are earning 800K, after tax, you have plenty of means of sheltering your money if pushed to do so.

  BUT!!!

  Instead of talking about individual tax structures, and being stupid and thinking there is individuals and companies not escaping taxation….one example. Google. Everyone seems to love the guys, and I’m not trying to single them out, but how in the world do they attribute the largest percentage of revenue, only to U.S., to Ireland? Might it be their favorable tax rates, and the procedural ease of transferring all that revenue to a country where there is little actual revenue generation take place? Guess what… If you push a giant corporation in a global economy through heavy taxation, they are not going to accept less profit, they will push, tug, and move until they do make same or more money. There is no other country in the world with double taxation of our standards, where AMT rules, rates, and loopholes are so rampant, odd, and the tax code and its enforcement is so weak. Yes, Germany’s tax laws dwarf ours, but it’s detailed enough that the loopholes we have here are pretty much nonexistent there. By the way, there is only one candidate who has a concrete plan of cleaning up the messy code, and making it work smoother.

  You want proof that the tenth man leaves? Look at Google, GE, Microsoft, Yahoo. Look at their transfer pricing strategies. If you can’t grasp those, just look at the revenue they contribute to countries like Ireland or other favorable tax countries, where no manufacturing or service centers exist. Don’t concentrate on the little guy, or the little guy who works his butt of for 800K a year, look at someone who saves $500 million by just talking to a good lawyer.

  If none of this makes sense… Think of what a “Global Economy” is; think of companies like InBev, and Nestle, where no actual “home” country exists. I don’t know about you, but I feel like lowering taxes and bringing more business in (as well as taking less from individuals) to generate revenue for the government, is better than having Obama use my money to fuel his plane so he can exchange pleasantries with Iran.