Normally in this blog we nitpick movies and TV shows, but today I'd like to nitpick a story you may have heard or read in a few different places. Yesterday was the deadline to file taxes in America, which is what reminded me of this parable that supposedly demonstrates how unfair our tax code is to the rich. Yes, you read that right, unfair to the rich. Bear with me, please.
So there is this rich man who on a regular basis treats four poorer men to dinner. The men are of different income levels, but they each put a little something towards the dinner: the poorest man puts in $1, while the second richest man puts in $5. Nevertheless, only the richest man truly pays for his own meal.
Then one night, the restaurant owner reveals that, due to a clerical error or a software glitch (depending on which version of the story you've heard), he has been overcharging the men, and, being a man of conscience, issues a refund.
This is where the trouble begins. The men can't agree on how to split the refund. The poorest man says the refund should be split evenly among each of them five ways. The second richest man says the refund should be split proportionately to how much each of them put towards the dinner. Another one of the men points out that each of them is proposing the apportionment that will give him the biggest refund.
But the richest man is disgusted by all this bickering and declares he doesn't want his share of the refund: the others can fight over it but he's never treating them to dinner again. (There is also a racist version in which the poor men are black and beat up the rich white man—but rich people don't want to put it in poor people's minds that maybe they can beat up the rich and take their stuff, so violent versions of this story are rarely heard).
The first time I heard this story I thought to myself, "Well, it does sound kind of unfair when you put it that way." But there are several problems with this parable that don't quite square up with real life.
First of all, there is a big difference between money that gets taken out of your paycheck automatically and money you have to physically remove from your wallet to hand to a waiter, and even more so when the other people getting the refund are people you've come to know over the past few months. Suppose you're the poorest man in the parable. Sure you would want a fifth of the refund, but at the same time you would not want to vex the generous rich man by being too eager to grab up more than your fair share and perhaps lose your meal ticket in the process. In real life, you do know some of the other taxpayers, but you most likely don't personally know taxpayers in significantly different tax brackets. If you're a middle class single parent struggling to make ends meet in the big bad city, would it bother you if you get a tax refund of a few hundred dollars but the millionaire in the Hamptons has to pay a couple grand in taxes?
And that's another thing: do rich people really socialize with middle- and lower-class people? Maybe rich brats are closer to their illegal immigrant nannies than they're to their own parents, but beyond that, not much, really. Maybe a rich guy will occasionally take a homeless man to dinner now and then, but a regular arrangement like the one in the story sounds rather unlikely.
This should also bring our attention to the fact that the federal income tax is not the only tax there is. Consider for example the sales tax. I live in Michigan, here the sales tax is 6%. Most food items are exempt from sales tax. But many basic necessities (toothpaste, soap, clothes, shoes) are subject to sales tax. I seriously doubt that even the most extravagant rich man spends as much on these items as, say, the entire East side of Detroit.
Besides, do the rich really pay their fair share of the federal income tax? The richest 1% control 90% of the wealth, yet they only pay 40% of federal income taxes! Maybe my figures are off a little bit, but not much. Through a variety of loopholes, the rich get all kinds of tax breaks to the point that they only have to pay a few dollars in taxes.
Meanwhile, tax breaks for the poor wind up being usurped by corporations through scams like refund anticipation loans. The confusing instructions for the newer credits don't help matters at all. Subtract line 3a on form J from line 76d on form 20 but if line 4 on the 1040 is less than $500, then you... geez! I'm sure the rich find this just as complicated as the poor. But I won't be shedding any tears for a rich man who paid an accountant a thousand bucks to find him those tax loopholes. That's like a dollar to you or me.
Well, that's enough ranting from me. In the interest of full disclosure, I am getting a tax refund, from a combination of excess withholding, the EIC and the Making Work Pay credit. But with the various expenses on my to do list, my refund is almost all spent before I even get it.
No comments:
Post a Comment