John's Recommended Articles

Our 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. 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 got" "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
exploit s 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

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

Last night in the Presidential debate, the candidates were asked whether health care is a "right" or a "responsibility." Obama said it is a right. McCain said it is a responsibility. Consider this:

The term "rights," note, is a moral (not just a political) term; it tells us that a certain course of behavior is right, sanctioned, proper, a prerogative to be respected by others, not interfered with—and that anyone who violates a man's rights is: wrong, morally wrong, unsanctioned, evil.

Now our only rights, the American viewpoint continues, are the rights to life, liberty, property, and the pursuit of happiness. That's all. According to the Founding Fathers, we are not born with a right to a trip to Disneyland, or a meal at McDonald's, or a kidney dialysis (nor with the 18th-century equivalent of these things). We have certain specific rights—and only these.

Why only these? Observe that all legitimate rights have one thing in common: they are rights to action, not to rewards from other people. The American rights impose no obligations on other people, merely the negative obligation to leave you alone. The system guarantees you the chance to work for what you want—not to be given it without effort by somebody else.

The right to life, e.g., does not mean that your neighbors have to feed and clothe you; it means you have the right to earn your food and clothes yourself, if necessary by a hard struggle, and that no one can forcibly stop your struggle for these things or steal them from you if and when you have achieved them. In other words: you have the right to act, and to keep the results of your actions, the products you make, to keep them or to trade them with others, if you wish. But you have no right to the actions or products of others, except on terms to which they voluntarily agree.

To take one more example: the right to the pursuit of happiness is precisely that: the right to the pursuit—to a certain type of action on your part and its result—not to any guarantee that other people will make you happy or even try to do so. Otherwise, there would be no liberty in the country: if your mere desire for something, anything, imposes a duty on other people to satisfy you, then they have no choice in their lives, no say in what they do, they have no liberty, they cannot pursue their happiness. Your "right" to happiness at their expense means that they become rightless serfs, i.e., your slaves. Your right to anything at others' expense means that they become rightless.

The above quotation comes from the article linked below and addresses the question of health care as a right. I encourage all to read it.

http://www.aynrand.org/site/News2?id=13873&page=NewsArticle

In case you won't follow the link to read the whole thing, here are a few more quotes:

We are seeing a total abandonment by the intellectuals and the politicians of the moral principles on which the U.S. was founded. We are seeing the complete destruction of the concept of rights.

...you don't need to think of health care as a special case; it is just as apparent if the government were to proclaim a universal right to food, or to a vacation, or to a haircut. I mean: a right in the new sense: not that you are free to earn these things by your own effort and trade, but that you have a moral claim to be given these things free of charge, with no action on your part, simply as handouts from a benevolent government.

Under the American system you have a right to health care if you can pay for it, i.e., if you can earn it by your own action and effort. But nobody has the right to the services of any professional individual or group simply because he wants them and desperately needs them.

You have a right to work, not to rob others of the fruits of their work, not to turn others into sacrificial, rightless animals laboring to fulfill your needs.

The only hope—for the doctors, for their patients, for all of us—is for the doctors to assert a moral principle. I mean: to assert their own personal individual rights—their real rights in this issue—their right to their lives, their liberty, their property, their pursuit of happiness. The Declaration of Independence applies to the medical profession too. We must reject the idea that doctors are slaves destined to serve others at the behest of the state.