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 r 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 o f $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.

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.

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October 28th, 2008 Posted by Mark | Announcements, Gossip, Joke of the Day, politics | no comments

Obama’s 95% Illusion

I just knew it was a shell game. It depends on what the meaning of ‘tax cut’ is. He’s a greasy con artist that has the welfare crowd eating out of his hand. If he gets elected, I can just see all of the crying and whining when he doesn’t fulfill on his promises. This article was posted in the Wall Street Journal and is the best breakdown of the proposed Obama tax cuts I’ve seen…

One of Barack Obama’s most potent campaign claims is that he’ll cut taxes for no less than 95% of “working families.” He’s even promising to cut taxes enough that the government’s tax share of GDP will be no more than 18.2% — which is lower than it is today.

AP

It’s a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he’s also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of “tax cut.”

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.” Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

- A $500 tax credit ($1,000 a couple) to “make work pay” that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A “savings” tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A “clean car” tax credit of up to $7,000 on the purchase of certain vehicles.

Here’s the political catch. All but the clean car credit would be “refundable,” which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer — a federal check — from taxpayers to nontaxpayers. Once upon a time we called this “welfare,” or in George McGovern’s 1972 campaign a “Demogrant.” Mr. Obama’s genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation’s Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable “tax credits” would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as “tax credits,” the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends “refundability” on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

It is also true that John McCain proposes a refundable tax credit — his $5,000 to help individuals buy health insurance. We’ve written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain’s proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don’t now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn’t create a new one.

There’s another catch: Because Mr. Obama’s tax credits are phased out as incomes rise, they impose a huge “marginal” tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of “making work pay,” but in practice they can be a disincentive to working harder, especially if you’re a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery — among many — of the McCain campaign is why it has allowed Mr. Obama’s 95% illusion to go unanswered.

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October 13th, 2008 Posted by Mark | News, politics | no comments

Burning Down The House: What Caused Our Economic Crisis?

Great Video that sheds light on the subprime lending crisis. Obama and the Democrats sure want to distance themselves from this but even Bill Clinton admits that he had a hand in it. If only Pelosi, Dodd, Frank, etal. would admit their part. Oh, they would never again get reeelected.

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October 10th, 2008 Posted by Mark | politics | no comments

Obama & ACORN Voter Fraud Exposed

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October 9th, 2008 Posted by Mark | politics | no comments

AB2270 Bill Passes Legislature, Only a Veto Can Stop It Now

Sign the petition!

Dear Friend,

UPDATE on AB 2270, the bill that could allow unelected bureaucrats to ban water softeners in your home and your neighborhood. The bill has moved from the legislature and now sits on the Governor’s desk and we need your help in letting the Governor know the risks involved in this bill.

AB 2270 is bad policy that must be stopped. This bill violates property rights and would allow government to come into one’s home and remove an appliance. Banning and removing home water softeners will not solve California’s water salinity problems.

Call Governor Schwarzenegger TODAY at 916-445-2841 OR click here to email his office. Tell the Governor to “VETO AB 2270 and Save My Softener” or you may use the suggested text below.

Thank you.

Email your legislator now! (use this sample text)

As my Governor, I urge you to vote NO on AB 2270.

If passed, this bill would cause environmental harm (hard water requires more soap and detergent for all cleaning applications, directly putting more chemicals back into the environment).

Also, this bill would allow the government to intrude into a private residence and remove an appliance.

California has more important problems to solve at the moment…please VETO AB 2270!

Email your legislator now!

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August 20th, 2008 Posted by admin | Announcements, SOS, politics | no comments

Cooking Class – Mustard Glazed Beef Short Ribs

Mustard-Glazed Beef Short Ribs

June 9, 2008 – 12:07 ET

RECIPE COURTESY OF MICHAEL LOMONACO
Porter House New York
10 Columbus Circle
4th Floor
New York, NY 10019
212-823-9500

6 pounds beef short ribs, on the bone, cut into 4 portions
Fine sea salt and freshly ground black pepper
1 tablespoon olive oil
1 tablespoon unsalted butter
1 large onion, peeled and chopped
2 carrots, peeled and chopped
1 celery stalk, chopped
1 jalapeÃ±o pepper, seeded and chopped (optional)
2 cloves garlic, peeled and crushed
Â¼ cup tomato paste
1 cup red wine
3 cups low-sodium, store-bought beef broth
Bouquet garni: 3 sprigs rosemary, 3 sprigs thyme, and three sprigs oregano tied in a cheesecloth
Â½ cup Pommery mustard
Â½ cup honey

Preheat the oven to 350Â°F.
Pour the oil into a wide, deep-sided sautÃ© pan and heat it over medium-high heat. Season the short ribs with salt and pepper, add them to the pan, and brown them all over, approximately 4 minutes per side. Transfer the ribs to a large casserole or roasting pan.
Add the onion, carrot, and celery to the sautÃ© pan and cook for 5 minutes to lightly caramelize them. Add the jalapeÃ±o, garlic, tomato paste, wine, and broth to the pan. Bring the mixture to a rapid boil, then pour it over the ribs in the casserole. The liquid should not rise more than two-thirds up the side of the ribs and the ribs should not be entirely submerged. If you have extra liquid, maybe your casserole is too small and the ribs are too tightly packed; try dividing the ribs and liquid among 2 casseroles.
Put the casserole in the oven, add the bouquet garni, and braise the ribs approximately 2 Â½ – 3 hours. Pierce the ribs with the tines of a fork; if cooked enough, the fork will meet no resistance.
Remove the casserole from the oven and let rest for 5 to 10 minutes before transferring the ribs to plate or platter. Degrease the braising liquid, strain it, discard the solids, and reduce and reserve the juices for serving. The short ribs can be cooled, covered, and refrigerated for 1 to 3 days. Let come to room temperature before proceeding.
Prepare an outdoor grill with a drip pan to prevent-flare ups or preheat the oven to 350Â°F.
Combine the mustard and honey in a bowl and liberally brush over the ribs. Grill or cooks the ribs in the oven for 10 minutes, turning once, until the glaze is caramelized, dark, and delicious. If grilling, brush on more glaze as the ribs cook.
Serve the ribs family-style, passing the reduced braising liquid alongside in a sauce boat.

Serves 4 to 6

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June 11th, 2008 Posted by Mark | Activities, Announcements, For Sale or Free, Good Eats, Gossip, Referrals, politics | no comments

Windfall Tax on Retirement Just Another Hoax

Retracted…

Last week my father sent me an email regarding a Windfall Tax on Retirement accounts being proposed by Nancy Pelosi. It made me pretty mad so I wrote about it here on my blog. Unfortunately, and uncommon for me, I published my blog without checking on the validity of the email. Since it already said that it was checked against snopes.com I made the mistake of trusting it. Well, after the fact, I decided to Google it to see what was up since I hadn’t seen anything about it elsewhere in the news. My suspicion was confirmed when I found that even snopes.com listed it as false and an urban legend as well as many other sites. I apologize for jumping on that bandwagon and I’ll make sure to check the source in the future.

You can read what snopes.com has to say about the hoax here.

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