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Also every time this sort of discussion comes up I am reminded about the joke of the 10 men in the restaurant.
The cost of dinner
Each and every day, 10 men go to a restaurant for dinner together. The bill
for all 10 comes to $100 each day. If the bill were paid the way we pay
our taxes, the first four would pay nothing; the fifth would pay $1; the
sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The
10th man – the richest – would pay $59. Although the 10 men didn’t share
the bill equally, they all seemed content enough with the arrangement –
until the restaurant owner threw them a curve.
“You’re all very good customers,” the owner said, “so I’m going to reduce the
cost of your daily meal by $20. I’m going to charge you just $80 in
total.” The 10 men looked at each other and seemed genuinely surprised,
but quite happy about the news.
The first four men, of course, are unaffected because they weren’t paying
anything for their meals anyway. They’ll still eat for free. The big
question is how to divvy up the $20 in savings among the remaining six
in a way that’s fair for each of them. They realized that $20 divided by
six is $3.33, but if they subtract that amount from each person’s
share, then the fifth and sixth men would end up being paid to eat their
meals. The restaurant owner suggested that it would be fair to reduce
each person’s bill by roughly the same percentage, and he proceeded to
work out the amounts that each should pay.
The results? The fifth man paid nothing, the sixth pitched in $2, the
seventh paid $5, the eighth paid $9, the ninth paid $14, leaving the
10th man with a bill of $50 instead of $59. Outside the restaurant, the
men began to compare their savings. “I only got one dollar out of the
$20,” said the sixth man, pointing to the 10th man, “and he got $9!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar,
too! It’s not fair that he got nine times more than me!” “That’s true,”
shouted the seventh man. “Why should he get back $9 when I only got $2?
The rich 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 outraged men surrounded the 10th and brutally assaulted him.
The next day, 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 faced a problem that they hadn’t faced
before. They were $50 short.
The moral
There are a couple of lessons to be learned here. The first is an observation
from my wife: If the 10 individuals had been women, they probably would
have figured things out. But in all seriousness, I’m going to suggest
that the approach taken by the restaurant owner in the story is exactly
the right approach to divvying up tax cuts. It’s how our system should
work. The people who pay the highest taxes should get the greatest
relief from a tax cut, in absolute dollars.
The fact is, if you overtax the rich, they just might not show up for
dinner next time. After all, there are plenty of good restaurants around
the world.
The cost of dinner
Each and every day, 10 men go to a restaurant for dinner together. The bill
for all 10 comes to $100 each day. If the bill were paid the way we pay
our taxes, the first four would pay nothing; the fifth would pay $1; the
sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The
10th man – the richest – would pay $59. Although the 10 men didn’t share
the bill equally, they all seemed content enough with the arrangement –
until the restaurant owner threw them a curve.
“You’re all very good customers,” the owner said, “so I’m going to reduce the
cost of your daily meal by $20. I’m going to charge you just $80 in
total.” The 10 men looked at each other and seemed genuinely surprised,
but quite happy about the news.
The first four men, of course, are unaffected because they weren’t paying
anything for their meals anyway. They’ll still eat for free. The big
question is how to divvy up the $20 in savings among the remaining six
in a way that’s fair for each of them. They realized that $20 divided by
six is $3.33, but if they subtract that amount from each person’s
share, then the fifth and sixth men would end up being paid to eat their
meals. The restaurant owner suggested that it would be fair to reduce
each person’s bill by roughly the same percentage, and he proceeded to
work out the amounts that each should pay.
The results? The fifth man paid nothing, the sixth pitched in $2, the
seventh paid $5, the eighth paid $9, the ninth paid $14, leaving the
10th man with a bill of $50 instead of $59. Outside the restaurant, the
men began to compare their savings. “I only got one dollar out of the
$20,” said the sixth man, pointing to the 10th man, “and he got $9!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar,
too! It’s not fair that he got nine times more than me!” “That’s true,”
shouted the seventh man. “Why should he get back $9 when I only got $2?
The rich 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 outraged men surrounded the 10th and brutally assaulted him.
The next day, 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 faced a problem that they hadn’t faced
before. They were $50 short.
The moral
There are a couple of lessons to be learned here. The first is an observation
from my wife: If the 10 individuals had been women, they probably would
have figured things out. But in all seriousness, I’m going to suggest
that the approach taken by the restaurant owner in the story is exactly
the right approach to divvying up tax cuts. It’s how our system should
work. The people who pay the highest taxes should get the greatest
relief from a tax cut, in absolute dollars.
The fact is, if you overtax the rich, they just might not show up for
dinner next time. After all, there are plenty of good restaurants around
the world.
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