rich taxpayers

Every “tax time” brings the same old questions and arguments about how much tax we all pay and how the tax system favours the “rich” who should be made to pay more – because the perception is “the rich people don’t pay as much tax”. This brings me to my favourite story that may explain why the rich or richer taxpayers should be left alone:

“Once a month 10 men go out to dinner together and the bill for all 10 comes to $300.00. If they paid the bill the way we pay our taxes - it would be paid as follows:

• the first 4 men (the poorest) would pay nothing
• the 5^th would pay $3 
• the 6^th would pay $9
• the 7^th would pay $21
• the 8^th would pay $36 
• the 9^th would pay $54 and
• the 10^th (being the richest) would pay $177

The 10 men ate dinner in the restaurant every month and seemed quite happy with the payment arrangement until one day the restaurant owner gave them an unexpected benefit. He said to them "Since you are all such good customers I am going to reduce the combined cost of your meal by $60.

So now the dinner for the 10 men only cost $240.00 and the group still wanted to pay the bill the way we pay our taxes. So the first 4 men continued to eat free - but what about the other six?

The six remaining men realised that the $60.00 discount divided by six was $10 but if they subtracted that from everyone's share then the 5^th and 6^th men 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 amount and the result was:

• the 5^th man now paid nothing
• the 6^th man now paid $6
• the 7^th man now paid $15
• the 8^th man now paid $27
• the 9^th man now paid $36 and
• the 10^th man now pays $156 instead of $177.

Each of the six men that contributed to the bill were better off BUT once outside the restaurant however they began to compare the savings:

 "I only got $3 out of the $60" declared the 6^th man pointing to the 10^th man who he got $21.”

“That's right," said the 5^th man” I only got $3 too. It’s unfair that he got seven times more than us."

“That's true said the 7^th man "Why should he get back $21 when I only got back $6?" The wealthy get all the benefits" - he declared.

"Wait a minute," yelled the first four men "we didn't get anything at all. The system exploits the poor".

So the nine men surrounded the 10^th man and beat him up. 

No surprise to find that he did show up at the next month's dinner. So the nine men sat down for dinner and ate without him. When it came time to pay the bill, they discovered too late what was very important - they were $156 short of paying the bill.

So here is the moral of the story: We all hate those rich people BUT the fact is they do contribute the most to the Tax System. And this is what worries me about the new “carbon tax” – it is designed to make the richer pay more but the end result will be higher prices leaving the poorer to pay more. Funny how the tax system works, eh!!!

If you have specific tax questions, feel free to contact me.