Tax Time

I was referred by Plastic from Time To Pay The Piper to this amusing parable by William F. Buckley on the National Review called A Parable: The Tenth Man. In it, he poses the current tax situation and relative tax burdens of various members of society as a group of ten men eating dinner. Each man represents a tenth of society. It’s supposed to educate you about last year’s tax cut. I’ll reproduce it here for you:

“Every night, ten men met at a restaurant for dinner. At the end of the meal, the bill would arrive. They owed $100 for the food that they shared. Every night they lined up in the same order at the cash register. The first four men paid nothing at all. The fifth, though he grumbled about the unfairness of the situation, paid $1. The sixth man, feeling generous, paid $3. The next three men paid $7, $12, and $18, respectively. The last man was required to pay the remaining balance of $59.”

“The ten men were quite settled into their routine when the restaurant threw them into chaos. It announced that it was cutting its prices: Now it would charge only $80 for dinner for the ten men. This reduction wouldn’t affect the first four men — they would continue to eat for free. The fifth person decided to forgo his $1 contribution to the pool, and the sixth contributed $2. The seventh man deducted $2 from his usual payment and now paid $5. The eighth man paid $9, the ninth, $12, leaving the last man with a bill of $52. Outside of the restaurant, the men compared their savings, and angry outbursts began to erupt. The sixth man yelled, “I got only $1 out of the total reduction of $20, and he” — pointing to the last man — “got $7.” The fifth man joined in the protest. “Yeah! I got only $1 too. It is unfair that he got seven times more than me.” The seventh man cried, “Why should he get a $7 reduction when I got only $2?” The first four men followed the lead of the others: “We didn’t get any of the $20 reduction. Where is our share?””

“The nine men formed an outraged mob, surrounding the tenth man. The nine angry men carried the tenth man up to the top of a hill and lynched him. The next night, the nine remaining men met at the restaurant for dinner. But when the bill came, there was no one to pay it.”

Like I said, amusing. Somewhat disengenuous, but amusing. It doesn’t mention just which dish each man ordered or how much of the table each man takes up when eating and whether anyone hogs all the bread, butter and water. It doesn’t take into account the guy that ordered a steak, wine, appetizer, lobster tails, coffee and dessert who just wants to “split it 10 ways”. Or what about the guy that smoked a cigar the whole way through the meal?

I’m not being that facetious really. The extremely rich aren’t rich only because they work harder than everyone else. That’s a pat fallacy. Not all people (I’ll do the honor here of opening up the floor to women as well) use the same amount of resources, public or private. Not all people have the same environmental impact.

Reading it though, you might find yourself thinking along Ayn Rand’s lines, that perhaps a flat tax is better and each should pull their own weight. That’s perfect, but make sure the starting line and course is the same for everyone first. And since that’s not going to happen, perhaps a more modified Randian approach is necessary.

Isn’t it interesting that the argument is so rarely about the fairness of an income tax at all and usually about the degree of taxation on different levels of income? To be really fair, why punish people for earning, creating and contributing? There’s no doubt that society must be supported somehow, but why automatically through income taxation? Why not through consumption? We already have sales taxes at the state and local level. A national sales tax would work much better than an income tax because hard work is not punished and frugality is rewarded.

However, the real problem is that the values espoused in the U.S.: working hard, living within your means, are not those enforced. The U.S. has debt at an all-time high. Credit card companies are actively looking for people to pay their rent on credit now too. Consumption is at an all time high too; after all, it generates GDP and drives the economy. Today, society would rather tax you for earning that tax you for spending. It’s the spending that generates the economy.

With a national income tax, individuals could adjust their level of taxation by consuming less. Services that everyone benefits from could be lumped together and paid for like school taxes. Why not a ‘police’ tax, a ‘fire’ tax, a ‘military’ tax, etc. They would all be just as obligatory, but more descriptive. Then it’s more paying for a service than just tossing money into a pile for others to do with as they see fit.

The current system only encourages cheating, reward cheaters and criminalizes everyone. It discourages individuals from earning more. Got a little side job lined up? Well, be careful about taking it or your taxes are 5 times as complicated. If you don’t declare it, you’re a criminal. Is this how people should think about work? The sheer complexity of the system also sucks you in. If you put enough time into it, you can figure out how to pay fewer taxes. So the system encourages people to waste their time learning the system for its own sake. There’s no way out. You either pay a lot of taxes or you learn everything there is to know, pay fewer taxes, and devote a good portion of your life to thinking about taxes, income and loopholes instead of being a creative individual.

As for that vaunted tax cut, I got about ¼ of 1% of my taxes back. IBM got $1.4 Billion. They’re a corporation. I’m a citizen. Think about who rates in the U.S. these days.

What did you get?