Tax Cuts For The Rich

This parable, in various forms, has been in circulation for decades. According to Snopes, the authorship is unknown. Given the recent debate on extending the Bush tax cuts it seems appropriate to reprint it here to remind the taxpaying public how this really works.

Ten men go out for dinner where the bill comes to $100. They elected to pay their bill the way we pay our taxes. The first four men - the poorest - would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man - the richest - would pay $59. The ten men ate dinner in the restaurant every day and were content with this arrangement until one day, the owner threw them a curve - in tax language, a tax cut.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So from now on dinner for the ten would cost only $80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected; they would still eat for free. But what about the other six - the paying customers? How could they divide their $20 windfall so that everyone would get his "fair share?"

The six men 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 end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same percentage and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth paid $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, and the tenth man paid $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat 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 who pointed to the tenth. "But he got $7!"

"Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too . . . It's unfair that he got seven times more than me!".

"That's true!" shouted the seventh man, "why should he get $7 back when I got only $2? 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 he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay they discovered that they were $52 short.

And that is how our progressive 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 at the table anymore.

The only error Southern Man can identify in this story is that due to the Earned Income Credit the poorest person would, in the original arrangement, be paid a modest sum by the others to eat dinner with the group.

[added later] As Noel Sheppard writes here:

For over nine years, the Democrat Party and their media minions have regularly echoed the mantra of how horrible the Bush tax cuts were. Yet, just days from them expiring, two Democrat Presidents got together to tell the nation just how essential they were.

There was a time when Southern Man was convinced that politics couldn't get any stranger. He was wrong.