Tenth Man Formation

Those of you still stinging from your annual appointment with the Tax Man might commiserate with this little story.  You may or may not be the "10th Man" but I'll bet you're feeling like it right now...

Sometimes politicians, journalists and others exclaim, "it's just a tax cut for the rich!" and that's accepted to be an unassailable fact.

But what does that really mean?

Here's a way to look at the issue you may not have considered before. 

We Southwest Louisianians love to eat out at restaurants.  So let's pretend that you and nine of your closest friends are enjoying a meal at your favorite beanery.  The ten of you eat there every week, and each time the total bill comes up to $100.

If your group pays the bill the way Americans pay our taxes, it would go something like this:

The first four diners (the poorest) pay nothing.

The fifth pays $1.

The sixth pays $3.

The seventh pays $7.

The eighth pays $12.

The ninth pays $18.

The tenth diner (the richest) pays $59.

The ten diners seem quite happy with the arrangement until one day the owner of the restaurant throws them a curve.

"Since you are all such good customers, " he says, "I'm going to reduce the cost of your weekly meal together by $20.  Dinner for the ten of you will now just cost $80."

The group still wants to pay their bill the way we pay our taxes, so the first four diners are unaffected.  They still eat for free.

But what about the other six diners...the paying customers?  How could they divide the $20 windfall so that everyone gets his/her "fair share?"

They realize that $20 divided by six is $3.33.  But if they subtract that from everybody's share, then the fifth and sixth diners each end up being paid to eat their meal.

So, the restaurant owner suggests that it would be fair to reduce each diner's bill by roughly the same amount (rounding it off by dollars) and he proceeds to work out the amounts each should pay.

And so...

The fifth diner, like the first four, now pays nothing (100% savings).

The sixth diner now pays $2 instead of $3 (33% savings).

The seventh diner now pays $5 instead of $7 (28% savings).

The eighth diner now pays $9 instead of $12 (25% savings).

The ninth diner now pays $14 instead of $18 (22% savings).

The tenth diner now pays $49 instead of $59 (16% savings).

Each of the six is now better off than before.  And the first four continue to eat for free (now joined by the fifth diner).  But once outside the restaurant, the diners begin to compare their savings.

"I only got a dollar out of the $20," declares the sixth diner, pointing to the tenth diner.  "But Diner Ten got $10!"

"Yeah, that's right," exclaims the fifth diner.  "I only saved a dollar too.  It's unfair that Diner Ten got 1o times more than me!"

"That's true!" shouts the seventh diner.  "Why should Diner Ten get $10 when I got back only $2?  The wealthy get all the breaks!"

"Wait a minute," yell the first four men in unison.  "We didn't get anything at all.  This system exploits the poor!"

At this point Diners One through Nine beat Diner Ten to a pulp.

Fast-forward to next week.   Diner Ten doesn't show up for dinner, so the other nine sit down and eat with the 10th chair empty.  But when the bill comes, they discover something important.  They don't have enough money between all of them to pay even half the bill.

So that's how our tax system works.  The people who pay the highest taxes get the most benefit from a tax reduction.  That's the conundrum of anyone in public office who is faced with this issue, particularly in the context of a global economy.

Tax those who have more income too much, in proportion to others, and you run the risk that they just might not show up for dinner anymore.  In fact, they might start eating at a new favorite restaurant oversees, where the food is tasty enough and the atmosphere at the table a lot friendlier.

Comments

[Bonnie Lass]

Tenth Man Formation - what a great saga of a tale! It does seem that taxation in the US is similar to ours in the UK!
On the subject of taxation, it would appear that every time we have an increase in tax in the UK it only goes into the coffers to cover up previous blunders by politicians who are elected, and who are so out of touch with reality, and also lacking in intelligence, to see the broad picture.

[Mike Giles]

Hi Jim

This comment really isn't in regards to your blog but it's the only way I know to reach you. I've been a fan of KPLC for more years than I can remember and I'm still a regular viewer. My problem has to do with the way hazardous weather warnings are posted. At present, the warning takes up two-thirds of the viewing screen and remains there for long periods of time. While I appreciate the warnings and am very much interested in them, this means of displaying them has become aggravating to the point that I'll switch channels so that I can enjoy my programming on a full screen. The "old" way of doing it was, in my opinion, much better. Broadcast a warning tone for about 3 seconds at 5 second intervals followed by a crawl across the bottom of the screen which would run twice. If necessary, repeat the warning about every 10 minutes. The warning tone would draw me from anywhere in the house and I could read the warning. I think it's much more effective and infinitely more "viewer friendly" than the method currently in use. If a Doppler radar picture is more effective, limit it to no more than twenty percent of the screen and eliminate all the other simultaneous "advertising" on the screen. Display the warnings for no more than 60 seconds and repeat if necessary. I guess the bottom line here is that we watch television for program content and anything which significantly detracts from that is cause to switch channels, if only to find the same program on another unfettered channel.

Jim, I hope you take this comment as constructive criticism. I enjoy KPLC and look forward to continued viewing.

[Tim]

Actually, the IRS says that the top 400 richest tax filers - people who took in an average of $343 million each - actually paid a rate of just 16 percent in 2007. Those 400 people who do so well on tax day have a combined net worth of nearly $1.37 trillion.

If we had progressive taxes that reduced their wealth to a trifling $100 million each, we’d have enough money to set up a trust fund whose interest could provide tuition-free higher education for students at every public college and university in perpetuity.

Could they get by on only $100 million dollars a year? I think they probably could.