We really have a problem here.
In the days of the Soviet Union, they had their State run news organs, Izvestia and Tass. These were pretty much propaganda organs, but they only had limited effect because the people knew it was propaganda. Today we here in the USA have a real problem on our hands because most people are inclined to think they aren’t being lied to.
I can’t tell you how often I see these memes popping up – someone spouting propaganda as truth because they heard it on Glenn Beck, or FOX News, or whatever. We have completely lost the ability to think for ourselves in this country. I pride myself in always being ready, or at least open, to changing my opinion in the light of new evidence because there is so much bad information out there. But some people really only listen to certain voices coming from certain places and the real irony here, which is pretty much par for the course around the country, is that this guy (mentioned below) is defending the 1% that he is surely not a part of with a tired internet meme that dates as far back as 2004.
It is explained here that this silly analogy about how taxes are collected and why we shouldn’t ‘overtax the rich’ – as if that is even remotely the case right now – has been attributed to two different economic ‘scholars’ neither of whom are taking credit for it. When I tried to explain the problems with his analogy I got this response which is really the heart of it:
not my analogy, was written by T Davies professor of accounting and chair division of accounting and business law. University of south Dakota. Its not the Taxes that are unfair, its the wage disparity but thats the evil that comes with capitalism. Those who don’t like it should go check out a socialist society, no one lives well or has any freedoms. The poor of this country still live better than 90% of the world
There is this concept of ‘inevitability of evil’ – as if we have no control. And then I got this:
give me an example of a country with more than 200 mil people to make a fair comparison. size does matter. As well, europe seems to have its economic problems as well. A huge sovereign debt crisis is looming. As well I am not sure if the social model you are referring to really is Viable. I do recall some violent riots in france just this past october. I did not say I thought our system was fair, my point is that you can not solve the problems by simply taxing the rich.
Anyway, here’s the meme:
Let’s put tax cuts in terms everyone can understand.
Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
* The first four men (the poorest) would pay nothing.
* The fifth would pay $1.
* The sixth would pay $3.
* The seventh $7.
* The eighth $12.
* The ninth $18.
* The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.”
So, now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.
So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his ‘fair share’?
The six men realized that $20 divided by six is $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 meal.
So, the restaurant 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.
And so:
* The fifth man, like the first four, now paid nothing (100% savings).
* The sixth now paid $2 instead of $3 (33% savings).
* The seventh now paid $5 instead of $7 (28% savings).
* The eighth now paid $9 instead of $12 (25% savings).
* The ninth now paid $14 instead of $18 (22% savings).
* The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man “but he got $10!”
“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 $2? The wealthy 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!”
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for
even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they
just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.
It’s important to note that this attack response to a Facebook post of mine was totally unprovoked. He even added this at the beginning:
How Taxes Work . . . the story of ten men going out to dinner representing how our tax system in the U.S. works… and why its not smart to continually overtax the rich?
This is a VERY simple way to understand the tax laws. Read on — it does make you think!!
The really sad part is that he was trying to ‘help’ me – he honestly thought I’d read that and say – ‘wow, that is so astute. T Davies really helped me understand taxes!’.
Here are the problems with this analogy.
1 – the idea that the bottom 40% of wage-earners don’t even pay taxes is demonstrably false. Also, there are things like payroll taxes that don’t figure in, and there are things like sales tax that hit lower income people disproportionately – so believe me, poor people pay taxes.
2 – The richest 10% control about two thirds of the wealth in this country, so if the richest guy in that silly analogy is only paying 59%, he is already paying less than his fair share – it should be closer to 66%.
3 – It is a fact that the super-rich routinely pay comparatively less (percentage-wise) in taxes than their middle class counterparts.
4 – The numbers are just totally off. Shouldn’t he have wondered why a university professor didn’t link any sources to back up his claim? You know, like a government report or something? We’re just supposed to believe this guy, who doesn’t really exist, about his numbers that have no source.
So next time someone tries to pull out this tired analogy, bust them on it.

screen shot from the Facebook exchange
UPDATE:

He is no longer my friend.
EDIT: I just saw this guy at a wedding in NYC, and although we didn’t speak, I did get some more info on him. Apparently, he is the heir to a rather large estate/fortune, so he has a dog in the fight as it were. For someone in the finance industry, it’s a shame how clueless he is about taxes.