Word
Gems
What is a
man but the sum of his thoughts?
Economics:
The
Parable of the Tax Cut
- Everyday, ten men go out to dinner. Each person gets the same
meal everyday, and the total comes out to about one-hundred dollars each time.
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- The men decide that, because some of them are wealthier than
others and can better afford it, they would pay for the meals using the same system
Americans use to pay their taxes.
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- The tab is worked out like so: The first four men, being the
poorest, pay nothing everyday. The fifth would pay one dollar. The sixth would pay three
dollars. The seventh would pay seven dollars, the eighth would pay twelve dollars, and the
ninth person eighteen dollars. The tenth man, the richest, would pay fifty-nine dollars of
the one-hundred dollar meal. So for weeks, the men use this arrangement and eat dinner
every night, and they seem quite happy with it.
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- One day, the owner approaches the men. He tells them that,
since they’ve been such loyal customers, he would give them a discount of twenty
dollars on their meal everyday, bringing the total cost down to eighty dollars.
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- The men thanked the owner, and then decided amongst
themselves that the best way to pay for it would still be to use the same system they had
been using all along.
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- The first four men were unaffected, since they still didn’t
have to pay anything for their meal. However, the other six men had to decide how to
divide the extra twenty dollars they saved so that each person would get their fair share
back.
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- At first, they thought they might divide it evenly between
the remaining six, giving each back three dollars and thirty-three cents. However, they
realized that after subtracting that from everyone’s share, the fifth and sixth man
would actually end up being paid instead of paying. So, the restaurant owner suggested
that the best way would be to reduce each person’s bill by roughly the same
percentage, and proceeded to work out the amount that each should pay.
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- The way it ended up working out was like so: The fifth man
ended up paying nothing, making five out of the ten that paid nothing for the meal. The
sixth paid two dollars, the seventh paid five, the eighth paid nine, and the ninth paid
twelve. This left the tenth man with a bill of fifty-two dollars instead of fifty-nine.
All six of the men were better off than before, and the first four continued to eat for
free.
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- However, once outside the restaurant, the men began to
compare their savings. The sixth man said “Hey, I only got a dollar out of the
twenty.” He then pointed to the tenth man and said, “But he got SEVEN dollars
back! He was paying fifty-nine and now only has to pay fifty-two. Where he got a seven
dollar savings, I only got a one dollar savings!”
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- “That’s right!” exclaimed the fifth man,
“I only got a dollar, too. It’s unfair that he got seven times more back than I
did.”
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- “Very true,” said the seventh man, “Why should
he get seven dollars back when I only got two dollars? The wealthy get all the breaks!”
The eighth and ninth men chimed in with similar opinions.
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- “Wait a minute!” yelled the first four men in
unison, “We didn’t get anything back at all. This is a system exploiting the
poor!” Then, all nine men surrounded the tenth man and beat him up, teaching him a
lesson for taking advantage of the rest of them.
-
- So, the next day the men showed up for dinner again. However,
the tenth man wasn’t there, so the rest of them sat down and enjoyed their dinner
without him. Then, when it came time to pay the bill, they discovered something important
– they were fifty-two dollars short.
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- The moral of the story?
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- The people who pay the highest taxes 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 anymore.
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