There's an economic parable that has been floating around for several years that hits this nail on the head. It's titled: "The tax system explained in beer." There are a number of variations, but here's the quick version:
"Ten men go out for beer, and the bill comes to $100.
"They paid their bill the way Americans pay taxes.
"The first four men (the poorest) paid nothing. The fifth, $1. The sixth, $3. The seventh, $7. The eighth, $12. The ninth, $18. The 10th (the richest) paid $59.
"One day, the owner threw them a curve ball. 'Since you are good customers, I'm reducing the cost of your daily beer by $20.'
"The group still wanted to pay their bill the way Americans pay taxes. So the first four men were unaffected. They drank for free. But what about the other six men? 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 a higher percentage the poorer he was, to follow American tax principle.
"And so the fifth man, like the first four, now paid nothing (100 percent savings). The sixth now paid $2 instead of $3 (a savings of 33 percent). The seventh now paid $5 instead of $7 (28 percent savings). The eighth now paid $9 instead of $12 (25 percent savings). The ninth now paid $14 instead of $18 (22 percent savings). The 10th now paid $49 instead of $59 (16 percent savings).
"Each of the six was better off than before. And the first four continued to drink for free. But once outside the bar, the men began to compare their savings.
" 'I only got a dollar out of the $20 savings,' declared the sixth man. He pointed to the 10th man. 'But he got $10!'
" 'Yeah, that's right,' they all exclaimed, 'The wealthy get all the breaks. This new tax system exploits the poor!"
"The nine men surrounded the 10th and beat him up.
"The next night, the 10th man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered they didn't have enough money between all of them for even half of the bill."
I know supporters of the president discount this as stupid spam. But there's truth behind it. When you "spread the wealth around" in this way, you legitimize citizen freeloaders. And that is most definitely not "good for everybody."
Tuesday, December 14, 2010
Spreading wealth, trapping poor
This article in the Review Journal states,