Statistical Myths

Have you ever wondered who comes up with all the silly statistics governments come up with to justify a tax? Like the one in New York where the governor needs more money so he wants to tax soft drinks. "Who else should pay the $58 million it takes to care for the obese?" he asks.

How does anyone know exactly how much it takes to "care" for anyone? Beyond that, however, think of it this way. Let's assume that mythical $58 million is correct. Where does that $58 million go? Does it evaporate into thin air? It probably goes to doctors, nurses, hospitals, clinics, drug companies, drug stores, and caregivers.

What would happen to all those people if this money were to go away? But this is only half the story - actually 1/7 of the story. The "velocity of money" is estimated to be 7. That means for every dollar someone earns it is spent 7 times.

One dollar is paid to a doctor. He buys $1 of food. That 1$ is paid to the store that pays $1 to an employee who then pays his rent. The rent money goes to the landlord who buys $1 of plumbing supplies, etc., etc.,etc. - you get the point.

So when a politician says "we need to pay for __________ with this increase in taxes" - don't believe them.