Big brother is too big.

I found this little story a telling example of how the tax system really works and what will happen if we "beat up" the rich too much.

Here’s a little story that I thought I would tell everyone that basically outlines a few things. It deals with taxes, and it also deals with the mentality of a lot of people. Most people only ever see one side of the coin, and very often fail to even think that there actually is another side to the coin.

So, without further ado:

Once upon a time, there were 10 men who grew up together and passionately supported their football team. They wouldn’t miss a game, come rain, hail or shine; and every week they’d meet outside the ground at Ron’s Food Van.

It was traditional before the match started to have a pie and beer, with the weekly bill for the group’s snack totalling $100. As they were great mates, the men decided they would pay the bill in proportion to the amount of tax they paid each year. There was quite a bit of difference in their income and tax levels due to the fact they had each chosen different paths in life. The division of the $100 food and drink bill went something like this:
➤ The first four men (the poorest) paid nothing.
➤ The fifth man paid $1.
➤ The sixth man paid $3.
➤ The seventh man paid $7.
➤ The eighth man paid $12
➤ The ninth man paid $18.
➤ The tenth man (the richest) then paid $59.

Week after week through the footy season, the 10 mates ate their pies and drank their beer before the match, then happily went into the ground to watch their team play (badly). Then in May this year, something happened that overturned the orderliness of this arrangement. Because their team kept losing, the food van owner started to feel sorry for the men.

“Since you are all good customers,” he said, “and your team is at the bottom of the ladder, I’m going to reduce the cost of your weekly lunch by $20.”

That meant the discounted bill for the 10 men would now total $80. The great mates still wanted to pay their bill in proportion to the amount of taxes they all paid, so the first four men were unaffected. They would still eat for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get their ‘fair share’?

They realised that $20 divided by six was $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to eat their pie and drink their beer. A ludicrous result, and they didn’t want to be labelled ‘politicians’.

Now the food van owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

So this is what he suggested:
➤ The poorest four men still pay nothing.
➤ The fifth man, like the first four, now pays nothing (100% savings).
➤ The sixth man now pays $2 instead of $3 (33% savings).
➤ The seventh man now pays $5 instead of $7 (29% savings).
➤ The eighth man now pays $9 instead of $12 (25% savings).
➤ The ninth man now pays $15 instead of $18 (17% savings).
➤ And the tenth man now pays $49 instead of $59 (17% savings).

Each of the six men would be better off than before. And the first four would continue to eat for free.

The men seemed happy with the van owner’s suggestion, ate their snack and went in to the match. After their team had received yet another flogging, the men were feeling grumpy and decided to talk about something else other than their team’s performance. The talk turned to money and they began to compare their savings on the now discounted pre-match food and drink.

“I only got a dollar out of the $20 we saved,” declared the sixth man, “But he got $10.” He pointed at the tenth man,
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than me!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? 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!”

And with that, the nine men turned on the tenth man and beat him up.

AND IT CAME TO PASS…

The next week the tenth man didn’t show up for the game, so the nine – still feeling hard done by – got their pie and beer and ate without him. But when it came time to pay the bill, they discovered something amazing. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, finance gurus, propeller heads and rocket scientists, is how our tax system works. The people who pay the highest taxes sometimes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start supporting soccer and eating pies and beer overseas.

Yes, the rich are getting richer. But if we generalise for a minute, now or at some stage in their life, many of them have been amongst the best leaders, the hardest workers, the motivators, the investors, the best people managers, the cleverest inventors of new ideas, or one of the great contributors to society.
Yes, the rich are getting richer … but in real hard dollars, they are also the ones who contribute tens upon tens of thousands of dollars every year in tax.

This in turn helps to fund our schools, hospitals, roads, emergency services and so on. And often those same contributors are then “means tested” out from receiving any of the benefits their taxes are helping to fund.

HERE ENDETH THE LESSON

So next time you see a high flyer or rich person at the footy, don’t envy them for what they earn, because you don’t know about the sacrifices they have made to get there. Ignore the rubbish some journalists write – walk up and offer to buy them a pie and beer to say ‘thanks’. Thanks for paying the extra hundreds of thousands in tax to help make your life and standard of living that little bit better.