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Title: Bar Stool Economics and How Taxes Work
Added: Dec 5, 2010
Author: HowTheWorldWorks
Duration: 5:4
Description:
Lee Doren from HowTheWorldWorks created this video. HowTheWorldWorks has been around for about two years.Mother Jones Chart: http://goo.gl/7D6teOriginal Story: http://goo.gl/1GwqVSuppose that every day, 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: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". 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, boys and girls, 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.My new intro was made here: http://taliesen.net/ .
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Channel: News
Tags: bar stool economics how taxes work progressive tax system class warfare breaks fairtax senator bernie sanders trickle down for the rich lee doren howtheworldworks world works bush cuts
bar stool economics how taxes work progressive tax system class warfare breaks fairtax senator bernie sanders trickle down for the rich lee doren howtheworldworks world works bush cuts
Youtube Comments: 2649
domvasta Says:
May 15, 2012 - oops I meant. "but don't* make everyone else pay for their losses"but in general, "do unto others as you would have them do unto you." The flaw of socialism is that it seeks to force altruism on people. make it voluntary and people will reciprocate, mandate it and saps all incentive to produce. you'll find that because people don't control or see who their money is going to, they don't care if they are better off or not. In the end a welfare state seperates classes more than capitalism ever did
mortalisk Says:
May 15, 2012 - Isn't it true though. If money is something that cannot be created by people, then if some have more, then others will have less. But it is really unimportant, since what we care about is wealth and production, not money.A lot of people are really confused about this I think, meaning they haven't really thought it trough. To them it is you who are arguing the earth is flat, when you say that some people having more money does not mean others have less(if we leave out money printing)
naitsabes314 Says:
May 15, 2012 - I could pursue this case further, but it seems our personal views on this matter are way to different.As I see it you're a capitalist and have a typical capitalist outlook on society. I'm different.
coolsoeb Says:
May 15, 2012 - So by your logic, you feel that a mentally challenged person who is not working should recieve the same amount of money as a doctor who not only is contributing very valuable skills to society but also spent years and years of his life training to be a doctor.The reason that our system works is because the people who have desired skills are paid more than people who have undesired skills. Anyone can become a janitor. Few can become lawyers.Try living in a communist country for a year.
27288 Says:
May 15, 2012 - You don't know if i or my family has lived in a communist society or not. What you are describing is communism and i have said nothing about it. Even though were all equal to some degree our goals, aims, and accomplishments isn't, so no i don't think a janitor has the same presents as a lawyer. But our quality of life is different because our start and ability in life is different therefor inequality will arise. I'm not against capitalism totally just the walls & problems it creates for people.
coolsoeb Says:
May 15, 2012 - So what? I said try living in a communist country as in try doing so in the future. You have definitely inspired communism by stating "Money is the problem along with the mentality were born into, this desperation for money is bullshit." I explained that money is used as a tool to value people's skills.Capitalism allows people who were born into poverty to use the loans that America provides, go to college and have a higher standard of living. By having a surplus we can help the poorer too.
domvasta Says:
May 15, 2012 - I'm fine with you having a different outlook on society, the problem I have is when you support people that want to take my stuff and tell me what I can and can't do with and on my own property.
chiefdreambig1 Says:
May 16, 2012 - Capitalism is the greatest economic system in the world,how do you think the United States has become the greatest, the wealthiest nation in ALL of history?The poorest in the US is by far richer than over 50% of the world's population.Even the people in the projects have cell phones, microwaves,TV, game systems, gold teeth, an endless supply of cigarettes and such.The "walls and problems" that you spoke of are mostly self imposed. Wish I had more room to explain it, but Capitalism can't be beat!
naitsabes314 Says:
May 16, 2012 - Well I don't. I'm Swedish.
JakeLaBelle9 Says:
May 18, 2012 - I love this explanation!!!
pradyu109 Says:
May 21, 2012 - By having access to cheap labour(apartheid,colonialism,imperialism),achieving economic power by destroying economies(mexico,hell half of the americas,except Canada,guess that's why you guys hate them),through wars claiming to fight communism and terrorism(this also comes under destroying economies and trying to maintain economic superpower status).
pradyu109 Says:
May 21, 2012 - Then why did the banks and insurance companies receive bailouts for the shit they dragged themselves into.Why should the government bailout wall street and not the poor guy who is losing his home due to mortgage default.Capitalism claims Corporations have same rights of a person,then why is that they are given preferential treatment in the form of bailout packages and tax cuts when the poor guy is held out to dry.
pradyu109 Says:
May 21, 2012 - Your claim that Capitalism brought more people out of poverty is false.Advancements in Science and Technology have made it possible for more people to live in a dignified manner aka out of poverty.Even till the late 70's,most of the funding and monetary incentives for scientific and technological advances were provided by the government. Even your internet was a US defence project(ARPANET).
chiefdreambig1 Says:
May 21, 2012 - What are you smoking? What system do you prefer? Socialism? Communism? Totalitarianism? Who hate Canadians? Who hates any LEGAL immigrant? There are abusers in every system, but American Capitalism is by far the greatest system in the world! It has produced the greatest wealth of any nation ever. We have helped more people than any nation ever. Whenever we engage in war we NEVER take their land- we free people and rebuild their country. Go live in Iran or India for awhile!
pradyu109 Says:
May 21, 2012 - If you really claim Capitalism stands for removing people out of poverty,why not remove all restrictions on copyrights.Removing technology copyrights would help millions in asian and african countries to use their resources judiciously.
pradyu109 Says:
May 21, 2012 - you free people??like the native indians who actually are the inhabitants of your land or the Africans who were traded in your country.whom did you actually free??the vietnameese??the afghans??every war you started was with economic gain in mind..even world war 2.freedom means nothing to you people.
chiefdreambig1 Says:
May 21, 2012 - Yes, there have been problems with slavery, but that was ended OVER 150 YEARS AGO!!! The Democrats wanted to keep the slaves, but the Republicans set them free. If you are so worried about slavery, why don't you go tell the Muslims to set their slaves free- they have them right now- WE DON'T! What economic gain have we ever gotten from the countries we were at war with?????? We could have set the Vietnamese free if the Democrats would have let our guys do their jobs! You need to grow up!
domvasta Says:
May 21, 2012 - well Capitalism is basically a system where there is zero government interference in the market, what you're referring to is crony capitalism. I don't think anyone here is supporting bailouts for anyone. Capitalism is simply an economic system and doesn't require that corporations be considered people, Corporations are just a method of organizing people to increase their productivity. So I agree there shouldn't be preferential treatment given to people who lose their houses or the banks.
domvasta Says:
May 21, 2012 - If you want to know why the banks and insurance companies recieved money, it's because they are organized enough to lobby congress for a bailout, while the person that took out a mortgage and then defaulted has very little power in that regard. If you want to level the playing field, stop federal handouts full stop, because any system with that much power and money is bound to abuse it and waste it. If you want to help people get back on their feet, do it locally, leave the feds out of it.
Oracle96 Says:
May 22, 2012 - simple analogy made complex by the people below..
sullustanmel Says:
May 23, 2012 - I don't get this...haha
MetalSights Says:
May 25, 2012 - People who contribute little can see people who contribute significantly. The better off people receive more benefit from their contributions since they give more, and the less off people receive little/no benefit.Less off people complain, demand the better off people pay more. Better off people leave. Lesser off people are then supposed to somehow pay for their share and the share of the better off people. That's a rough breakdown of what happens here. (CORRECT ME IF I'M WRONG!)
nottinmatterz2day Says:
May 28, 2012 - i think some leftists it is not simple enough
CesarManiaX Says:
May 28, 2012 - If I bought a new car, a new house, new clothes, and then quit my job, you would say I'm stupid. George bush started a war in Iraq and cut taxes.
domvasta Says:
May 15, 2012 - economies can't go against people. If you mean when people lose money as a result of an investment gone sour, or a mismanagement of their assets, then it's their fault, help them if you want to, but make everyone else pay for their losses. If you're referring to people who never had assets in the first place, then I believe they deserve help, and would gladly help support them. but you're free to disagree and not help them out. This is an issue for local communitites, not the federal government.