THE FOLLOWING PARABLE has floated around the Internet in various versions for a while. The author is in question but may be one Don Dodson, who submitted a letter to the editor of the Chicago Tribune printed on March 4, 2001. My slightly adjusted take stands apropos to the current debate on the expiring federal tax cuts.
Over lunch two friends discussed the proposal to extend the Bush-era federal government tax cuts. "I'm opposed to those tax cuts," the college professor declared, "because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that's not fair."
"But the rich pay more in the first place," his businessman friend argued, "so it stands to reason that they'd get more money back." He could tell that his professor friend was unimpressed by this argument, still contending that the "rich" get a free ride in America.
Then the businessman told this parable: Suppose that every evening ten men go to a restaurant for dinner. The bill for all ten comes to $100. They paid the bill the way we pay our federal taxes. The first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $17. The tenth man (the richest) would pay $60.
0 + 0 + 0 + 0 + 1 + 3 + 7 + 12 + 17 + 60 = $100 cost of dinner
The ten men ate dinner in the restaurant every day and seemed happy with the arrangement until the owner threw them a curve. "Since you're all such good customers," the owner said, "I'm going to reduce the cost of your daily meal by $20." Now dinner for the 10 would only cost $80.
The first four are unaffected; they still eat for free. So, how are we to divvy up the $20 savings among the remaining six so that everyone gets his fair share? Divided among the six equally, $20 is $3.33 each, but if we subtract that from each share, then the fifth man and the sixth man would end up being paid to eat their meal.
So, the restaurant owner worked out the amounts each should pay by using reductions proportional to what they were paying. Now the first four still paid nothing, the fifth man paid 80 cents, the sixth pitched in $2.40, the seventh paid $5.60, the eighth paid $9.60, and the ninth paid $13.40, leaving the tenth man with a bill of $48 instead of $60.
0 + 0 + 0 + 0 + .80 + 2.40 + 5.60 + 9.60 + 13.40 + 48.00 = $80 reduced cost of dinner
Outside the restaurant, the men began to compare their savings. "I just got a measly 20 cents out the $20," complained the fifth man, pointing to the tenth, "and he got $12!"
"Yeah, that's right," exclaimed the sixth man. "I only got sixty cents. It's unfair that he got twenty times as much as me!"
"That's true," shouted the seventh man. "Why should he get $12 back when I got less than $3? 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."
0 + 0 + 0 + 0 + (-.20) + (-.60) + (-1.40) + (-2.40) + (-3.40) + (-12.00) = (-$20) savings on dinner
Then 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 the bill, they discovered something: they were $48 short!
And that, boys, girls, and college professors, is how America's progressive tax system works. Those 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 any more.
After all, there are lots of good restaurants in Monaco and the Caribbean.
Gary D. Gaddy has figured out who the rich are -- everybody who has more money than he has.
A version of this story was published in the Chapel Hill Herald on Friday September 24, 2010.
Copyright 2010 Gary D. Gaddy