Yahoo news reported a story that only about 50% of the people in this country pay taxes. The other 50% have “no skin in the game” as our benevolent potentate like to say. Here’s two of my favorite sections of the article:
The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government.
The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.
Reading these sad statistics made me think of my favorite modern parable regarding taxes and perceived fairness.
Suppose that every day ten men go out for lunch and the tab 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 five men (the poorest) would pay nothing.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $13.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
All for the same meal.
One day, the owner threw them a curve. He said, “Since you are all such good customers, I’m going to reduce the cost of your daily lunches by $20. Food for the ten will now cost just $80.”
The group still wanted to pay their bill the same way we pay our taxes, so the first five men were unaffected. They would still eat for free. But what about the other five men — the actual ‘paying’ customers? How could they divide the $20 windfall so that everyone would get his “fair share”? They realized that $20 divided by five is $4.00. But if they subtracted that from everybody’s share, then the sixth man would each end up being “paid” to eat his lunch. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same formula based on what was paid, and he proceeded to work out the amounts each should pay!
And so: The first five continued to eat lunch for free (no change).
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 $13 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $50 instead of $59 (15% savings).
Each of the five who had been paying was now better off than before, and they all still ate the same meal. But once outside the restaurant, the men began to compare their savings. “I only got a dollar back out of the $20 savings,” declared the sixth man. “It’s unfair that he got back nine times more than I!” “That’s true!!”shouted the seventh man. “Why should he get $9 back when I got only $2? The wealthy get all the breaks!” “Wait a minute,” yelled the first five men in unison. “We didn’t get anything at all. This payment system exploits the poor!” So the nine men surrounded the tenth guy and beat him up. The next day the tenth man didn’t show up for lunch, but the other men sat down and ate without him. When it came time to pay the bill, they discovered something interesting. Between them all they didn’t even have enough money to pay half the bill!