02 June 2006

Tax Math Reframed

Liberalizing a Conservative Parable of Uncertain Origin

Suppose that every day, ten men go out to their exclusive buffet dinner club and the membership dues for all ten came to $100 each day. If they paid their membership dues the way we pay our taxes in America, 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 would pay $7.

The eighth would pay $12.

The ninth would pay $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 were happy with the arrangement, until one day, the club manager threw them a curve. "Since the club is doing so very well," he said, "I'm going to reduce the cost of your daily dues by $20." Membership dues for the ten now cost just $80 each day.

The group still wanted to pay their dues 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 men - the paying members? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They 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 club manager 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 $50 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 $9!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got almost ten times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $9 back when I got only two? 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 then he said, “Now hold on boys, let’s consider what’s really going on here. Isn’t the manager of our club sending our sons and daughters over to another club across town to kill or die?”

One of the five who receive meals without paying dues replied, “Yeah and mostly ours not yours, so, what’s your point?”

So he continued, “Doesn’t his attacking the other clubs cause our club to run a deficit and accumulate debt?”

The eighth man replied, “So?”

He continued, “Don’t you think it’s a little odd to suddenly offer us a dues reduction when the club is operating on deficit spending and accumulating debt? Do you really believe that is a good way to manage our club?

“I know that we don’t always agree on how to pay the dues, but let’s not forget that we are all equal owners of this club. The reason we created the club in the first place was to make sure we all had a good meal every day, we started this club in order to take care of each other. We distributed the dues so that everyone can reasonably afford to be members. Our club system is not about who gets how much, it is about how well we are taking care of each other. If there are problems in our club it is because we aren’t taking good care of each other and club resources are getting diverted from the real purposes we created the club to serve.

“We were all upset to find out how mistreated members of the other club were and when the manager made his case for the threat against us we believed him and trusted that he was using good judgment, so we supported his proposal to take aggressive action, but that’s not what our club was created to do.

“Now consider the fact that you were about to lynch me. Anger and fear are not good states of mind for making caring decisions. When we act out of the fear and anger then we sometimes take actions that we later regret. If our club is going to take care of us then we have to figure out how to care for each other, not attack one another. We need to think about how to design a club system that supports us to be creative and bold, not afraid and defensive. We all agree that we need to be strong as a club, and while the strength of fearful defense is strong, the strength of creative and bold loving is even stronger!

“We need to reconsider the purpose and mission of this club and then alter how we manage our manager to serve the club not the manager. In any case, lynching is not a solution to the problem.”

So they all drifted home and went to bed feeling guilty for almost lynching their friend. But after seeking personal support amongst each other, receiving a little counseling, and investigating how to be empowered club members they hired a new manager, revised the charter, stopped attacking other clubs and lived happily until the next time they got complacent, hired a fear mongering manager, and felt like lynching somebody again.

[To get the original story and find out about it’s reputed but indefinite origins: http://www.snopes.com/business/taxes/howtaxes.asp ]

In the original story as it came to me by e-mail the ten men were eating at a regular restaurant and the "club manager" was actually the "restaurant owner." But that raises the question of whether the relationships in the parable accurately reflect an appropriate parallel to the relationships that they are being used to represent.

When I googled the original parable to find out if the math was incorrect there was not a single refutation of the math, although there were some comments on the violent finale in which the rich guy gets lynched. It was overly dramatic, but it exemplifies the real fear embedded in the original “conservative” version.

In my revision I have tried to incorporate a different set of embedded assumptions that would better reflect on my understanding of the way things are supposed to work. Although I did not succeed in countering all of the original misguided assumptions I covered most of them. Here are the embedded assumptions of the original that seem to me to be problematic or not matched to reality as I understand it along with criticisms questions or an alternative to each:

1. the government is a restaurant that can be owned by someone
Criticism: The very idea that the government can be owned is sickening enough, but to imply that it is owned by the president or the ruling party is even worse.
Alternative Frame: The government is a club in which we receive benefits by virtue of membership.

2. the owner of the restaurant is separated from or different than those whom he serves
Alternative Frame: The manager of the club is also a member of the club

3. the owner of the restaurant is free to change prices without any consideration of costs
Alternative Frame: The manager is obligated to justify changes in dues based on real costs and a reasonable plan for managing the club resources to accomplish the mission of the club (without conflicts of interest)

4. the bill is presumed to be paid entirely by personal income taxes
Questions: The costs of the government club are covered by more than just personal income taxes so an accurate picture of the tax system should reflect those other obligations and how they are collected. How much do corporate taxes contribute to the maintenance of the club? How could we portray their role and contribution?

5. when the rich customer is killed his resources are assumed to disappear
Problem: The rich customer’s assets would probably get caught up in probate and the lawyers in the group would probably end up with most of them. In any case the fifty bucks would not simply disappear, they would go to someone else who would simply assume the position and the bill would still get paid, but by a different person.

6. The benefits of the restaurant meals are assumed to be received uniformly amongst the customers
The club is founded for the purpose of our common welfare such that the club is on a mission to provide nurturing support to the members. The buffet dinner was meant to represent this uneven distribution of the available benefits, but this still misrepresents the situation because many of the people who might stand to benefit are discouraged or otherwise prevented from receiving the benefits they may be entitled to have. The story would have to include some way of insulting the poorest for being poor before they could get their meal.

Another problem with the parable is that the idea that a reduction in the amount that each person pays should be calculated as if it were cash to be received as a refund instead of a discount off the original price. A manager that discounts more than a 100% would be fired for giving away the store.

I have also neglected to redistribute the gender, educational level, sexual orientations and racial attributes of the characters in the story, which would be required for a full liberalization of the tale.

My rewriting is at least partly inspired by ideas in George Lakoff's books, Don't Think of An Elephant and Moral Politics.

[FYI- I have revised this post since Karl Low made his comments and some of his critique has been helpful in revising the post since then.]

9 comments:

Anonymous said...

Excellent parable !!

I would like somebody to explain to me why our school system no longer teaches the principles and responsibilities of citizenship, a.k.a. "civics." These classes had already been discontinued when I was in school.

Karl Low said...

Unfortunately, your solution requires that the majority of the population ignore their own short-term interests for a longer-term view. While it would certainly be nice if it happens, you have about as much chance of seeing success as you do when wishing for manna from heaven.

The analogy misses a couple things. First, that $100 only buys them one meal. The first five get to share the salad, the sixth and seventh split the soup, the eighth gets the wine, the ninth gets the dessert, and only the tenth man really gets a full meal out of everything that's been put in.

The second thing is that everybody works at the restaurant. The tenth man is the owner, as you state, but everybody else also works there at various lower positions, and their wages are set by the owner.

They work. He eats. And then he claims moral superiority over them by supposedly having paid for their share, and promising that one day they too might get promoted to where they can have the meal.

If they weren't kept so tired and hungry, they might see through this, and realize that any change in management isn't really going to change a thing so long as they let the owner continue to set the policies of the restaurant.

Your solution is just for a continued smoke-screen of blaming the management. The management may be incompetent, but even competent management won't let anybody eat any better so long as the system remains in place.

Don Berg said...

Thank you, Karl! When I first got the original parable in my e-mail I sent it on with requests for analysis. Then in the absence of such analysis I re-wrote the tale to try to address my nagging sense that there was something fundamentally wrong with it. Unfortunately, your reply seems to be an analysis of the original parable, not my reframing of it.

You talked about the owner, but my reframing referred to a manager, not an owner (though I did mention the owner as the tenth man in passing reference to the original.) My reframing specifically tries to avoid the problems of the ownership issue by reframing the eating establishment as a membership owned club rather than a privately owned restaurant.

I don’t think that your analysis is equally applicable when applied to the membership club with a manager instead of the private owner of a restaurant. For instance, I changed it to a buffet club and thereby implied that members are helping themselves to what is available (and they are certainly doing that in unequal ways.) Also, it does not quite hold true that the government sets wages, except for minimum wage. And, finally, I am not using “a continued smoke-screen of blaming the management,” I am suggesting the membership fulfill their duty to the club by exercising their membership rights.

I really appreciate that you took the time to point out flaws from the original tale. Please consider re-reading my post with attention on the shift to a membership club rather than a privately owned restaurant. I would be very interested to know if you feel that my reframing was adequate to address your concerns, and if not, what do you think would work better. I think that our views converge in that my reframing was meant to provide a perspective by which the problems you point out might be avoided.

Don Berg said...

Let's think about the absence of civics in similar terms as our parable.

So in our parable the public schools would be a part of the buffet meal that is served each night at the meal club. Consider that we have had management in place for decades that are of Italian descent and therefore they believe that the only legitimate cuisine that should be served should be Italian.

If school is one of the sections of the buffet that government serves up, then serving up civics today would be like serving up a taco. Sure, it’s a food lots of people like and may want, but since it’s not Italian it doesn’t fit with the current way that they plan the menu.

Anonymous said...

You should re-write this again and place it in the ideals of a truly free peoples.

Remove the Democrat and Republican fear mongering (what you wrote is sure to rile plenty of right wingers - you have in essence written an attack on their ideals).

But seriously, remove all the impetuous reasoning. Take 10 real people. Re-write the parable with 10 regular people from each of the income brackets.

Seriously - this story and the Republican version would be crap. But there would be a lot to learn.

The Democrats and Republicans are absolutely horrible at applying any real solutions to the implied problems in this parable. The real answer lie somewhere else.

But I digress, I found this story as dishonest and morally reprehensible as the Republican one.

Don Berg said...

adronbhall,

If you would be kind enough to elaborate on exactly what your moral objections are and also "the ideals of a truly free peoples" then I would gladly attempt to reframe the tale again.

Enjoy,

Don

Anonymous said...

I like your response to the parable. Are you on Facebook?

Don Berg said...

I am on Facebook, but I don't friend people I don't know so you are better off contacting me through my sites: this one or Teach-Kids-Attitude-1st.com

Enjoy,
Don

Don Berg said...

Here's how I responded to a re-posting of the original awhile back:

This story is offensive representation of a democratic society. First of all the idea that the reigning adminstration owns the country and is empowered to treat it as their own business is both horrid and too close to the apparent truth of the Bush administration. (I don’t know if other governments with radically conservative leadership are equally prone to a disproportionate sense of their own entitlement to power and privilege.)

Another offense against the truth is the idea that the citizens would not take into account the disproportionate level of non-financial burdens that the poor bear. Consider that while the rich pay for our wars abroad, it is the poor who bear most of the burden of sacrificing their sons, daughters, husbands, wives, and friends. In a democratic society everyone bears some cost to maintain the infrastructure that makes the peace and prosperity possible.

The financial burden is only one of the costs and the rich are rightly taxed more heavily because the benefits they gain from infrastructures like the SEC, the banking system, and others is heavily in their favor. Taxes, along with certain kinds of government service, are the membership dues we all pay to enjoy peace and prosperity.

LINK to the reposting