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Tax Reform

Tax Reform_xs_87996360Legend has it that death and taxes are two certainties in life but there is a third – the guys and gals going for drinks after work on Friday. Consider the following before you determine your opinion on tax reform.

10 individuals achieving different levels of success in their jobs agree to share the bill for their drinks every Friday. But in a manner worthy of their egalitarian spirit they agree the split proportionate to the level of taxes they pay. Say the bill comes to €100 – the breakdown looks something like this:-

The first four (lowest taxpayers) pay nothing.

The fifth pays €1.

The sixth pays €3.

The seventh pays €7.

The eighth pays €12.

The ninth Nigel pays €18.

The tenth Amanda (the richest – she’s loaded!) pays €59.

The arrangement continues harmoniously for some time until the owner upsets things by agreeing to reduce the bill by €20.

Everybody is happy to continue with the tax benchmarks and to split the bill accordingly. It doesn’t bother the first four in the slightest because they were drinking for free anyway. But how should the others divide up the €20 savings to make sure the same splits apply?

They quickly realise that €20 divided by six is €3.33 – but deducting this amount from everybody’s share doesn’t work because then 5 and 6 (Aaron and Melissa) would end up being paid to drink!
So, they agree to divide-up the savings by roughly the same amount in order to continue to reflect the proportional split of taxes paid, as follows:-

Aaron now pays nothing (100% savings).

Melissa pays €2 instead of €3 (33%savings).

Arabella pays €5 instead of €7 (28%savings).

Sebastian pays €9 instead of €12 (25% savings).

Nigel pays €14 instead of €18 (22% savings).

Amanda pays €49 instead of €59 (16% savings).

The new splits represent very reasonable comparisons to the previous arrangement. But once outside the lounge, the group begin to compare their positions – not in a very sober way!

“I only got a euro out of the €20 savings”, declared Melissa. “But Amanda got €10!”

“OMG, that’s right,” exclaimed Aaron. “I only saved a euro, too. It’s unfair that Nigel got so much more than I did!”

“Absolutely bloody right!” shouted Arabella. “Why should Amanda get €10 when I only got two? Amanda always seems to get the lucky breaks! It’s soooooo unfair.”

“Hold on a minute,” screamed the first four (John, Paul, Ringo & George), “we didn’t get anything at all. We’ve been exploited!”

They expressed their grievances to Amanda – strongly!! She walked away shaking her head in total disbelief.

The following Friday night Amanda didn’t show up for drinks. But when the other 9 came to pay the bill they discovered something really important. They didn’t have enough money between them for even half of the drinks!

Tax Reform – for those who clearly understand the implicit metaphor, no explanation is needed. For those who don’t, no explanation is possible.

Thanks to Dr. David Kamerschen

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