Here
it is. It’s been going around the
Internet for nearly two years, but judging from the increasing frequency of
late, it seems to have enjoyed new life.
[My comments are in brackets.]
I was having lunch with one of my favorite friends last
week and the conversation turned to the government's recent round of tax cuts.
“I'm opposed to those tax cuts,” the
retired West coast college instructor 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,” I argued, “so
it stands to reason that they'd get more money back.” I could tell that my
friend was unimpressed by this meager argument.
So I said to him, let's put tax cuts in terms everyone can
understand. Suppose that every day 10
men go to a restaurant for dinner. The bill for all ten comes to $100. If it
was paid the way we pay our 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 $18. The tenth man (the richest) would pay $59.
The 10 men ate dinner in the restaurant every day and
seemed quite happy with the arrangement until the owner threw them a curve.
Since you are all such good customers, he said, I'm going to reduce the cost of
your daily meal by $20. Now dinner for the 10 only costs $80.
The first four are unaffected. They still eat for
free. [Ah, what a sweet deal that man who
cleans the airport urinals for $6 an hour has.
He eats for free! Or how about that
woman who cleans your hotel room. She, too,
eats for free! Except for the payroll
tax taken out of their checks and the sales tax they pay. And the tax they pay on their gasoline and their
phones if they can afford gas or a phone.
Why should the rest of us pay taxes to help educate their kids and
provide them with health care? They
shouldn’t be allowed to have kids.
And if they have them anyway, those kids don’t deserve decent schools and
health care. Our first priority has got
to be cutting taxes for the top, not providing good schools and health care to
deadbeat six year olds.] Can you
figure out how to divvy up the $20 savings among the remaining six so that
everyone gets his fair share? The men realize that $20 divided by 6 is $3.33,
but if they subtract that from everybody's share, then the fifth man and the
sixth man would end up being paid to eat their meal.
The restaurant owner suggested that it would be fair to
reduce each man's bill by roughly the same percentage, being sure to give each
a break, and he proceeded to work out the amounts each should pay. And so now the fifth man paid nothing, the
sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid
$12, leaving the tenth man with a bill of $52 instead of $59.
Outside the restaurant, the men began to compare their
savings. “I only got a dollar out of the $20,” complained the sixth man,
pointing to the tenth, “and he got $7!” “Yeah, that's right,” exclaimed the
fifth man. “I only saved a dollar, too. It's unfair that he got seven times more
than me!”
“That's true,” shouted the seventh man. “Why should he get
$7 back when I got only $2? 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.”
The nine men surrounded the tenth man 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 important.
They were $52 short! And that, boys, girls and college instructors, is
how America's tax system works. The people who pay the highest taxes should 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. [This is why in the 1940s and 1950s, when the top federal tax
bracket had been hiked to 90%, in part to help finance World War II and the
Korean War, highly productive people all just retired and the American economy collapsed. Or, well, they didn’t and it didn’t – America
did pretty well in the 1940s and 1950s – but that’s a minor detail. And this is why in the 1960s, when the top
bracket was 70%, highly productive people all just retired and the American
economy collapsed. Or, well, they
didn’t and it didn’t either – the American economy did pretty well in the 1960s
– but that, too, is just a minor detail.]
I’m
not arguing for a 90% or 70% top bracket.
Or even for the 50% top bracket of the fist six Reagan years. What I’ve been saying ever since Texas
Governor Bush began promising huge tax cuts for the wealthy is that the
39.6% top bracket of the Clinton/Gore era was a pretty good balance and should
not be cut.
Yes,
90% and 70% and all the crazy tax shelter schemes that went with them were
nuts. But 28% – which was where the top
bracket ended up in 1986 in President Reagan’s second round of cuts – we now
know was too low. It may have been well
intended, but it overshot the mark. We
added $3 trillion to the national debt in the dozen Reagan/Bush years.
The Bush administration inherited a good balance that was working. Their first round of tax cuts turned surpluses that were projected as far
as the eye could see into deficits projected as far as the eye could see. And now, in the wake of two wars we need to finance, against terrorism and, whether we go to war or not, the buildup for Iraq, the President insists on more tax cuts (mainly, as usual, for the best off).
Normally,
taxes are raised to pay for wars. The
Bush administration proposes to pay for its wars by cutting taxes on the rich and borrowing the cost from future generations.
But
let’s leave the macro level and get back to that top tax bracket. It’s worth pointing out that few people if
any actually pay the top rate on all their income. In the first place, they pay less on the
first dollars they earn, just like anyone else. It is a graduated rate. More
important, they pay 0% on their municipal bond interest (while sacrificing much
less than 39.6% in yield compared with equivalent taxable bonds) and 0% on
their capital gains until they choose to “realize” them – at which point they
pay only about 20%.
This
is not to say that the best off don’t pay a heck of a lot in taxes – they do! They should be proud that they do. We should be grateful that they do.
But
it is a balance. And the balance under
Clinton/Gore worked out pretty well for everyone – including the top 1%, who
got richer faster than any other group, even after tax.
So
why, when you look at all the problems and challenges in the world, would you
say, “Well, we can’t do everything, so let’s direct most of our efforts and
resources toward improving the plight of the rich. Let’s shift the balance further in their favor.” Why would you say that?
The
most remarkable thing about this idiotic thing about the 10 men having the $100
dinner is that it seems to be passed around the Internet not, for the most
part, by people with adjusted gross incomes in excess of $383,000 a year (the
top 1%), but, rather, by people so eager for $1,000 and $2,000 tax cuts that
they don’t bother to take into account the extra $20,000 or $40,000 in national
debt they and their children will be taking on in return – money borrowed
largely to give much, much larger tax cuts to people like George Bush (whose annual
tax savings have been estimated
at $44,500) and Dick Cheney ($327,000).
Not to mention the really rich.
#
PROGRAM NOTE:
Don’t miss Brother/Outsider on PBS’s “P.O.V.” tonight. It’s the life of Bayard Rustin - and a part
of the Martin Luther King “I have a dream!” story that many do not know. Supporting cast includes a much younger
Strom Thurmond. Where I live, P.O.V.
comes on at 10pm.