A while ago, I came across a story that I found amusing. It tells of ten guys that go out each week for dinner together. Trying to be fair, they pay according to how much each person makes. The poorest guy eats for free, the next guy pays a small amount, the next guy pays a little more, etc. Then the restaurant decides to lower its prices, and messes up the guys’ payment system. Everybody wants a piece of the discount and they argue and fight over it. My memory gets hazy at this point; I don’t know what happens next, but at the end the richest guy is out of the picture and the nine remaining guys don’t have enough money to pay for next week’s meal.
I had it sent to me a couple years ago. Quite clever. The point is that by giving the poor people a free ride, and taxing the rich person heavily, it’s unfair to the rich, and if the rich person takes off because of this, everyone’s up the creek. Supposed to justify non-progressive taxation I suppose.
If you’re Ayn Rand you believe this. If you’re Karl Marx you believe that the workers can send everyone up the creek by laying down their shovels. As with most things, the truth is somewhere in between.
It is flawed because it is based only on income tax, which is progressive in nature. As you may or may not have noticed, income taxes are hardly the only taxes we pay. Many of our other taxes are regressive in nature, like the sales tax, or are taxes that the rich pay a much smaller share of, like payroll taxes. The tax system is far too complex to be represented by such a simple analogy.
The main flaw I see is also, admittedly, simplistic: How does the 10th guy just not show up (pay taxes) in the end? Mr. Gotrocks and I aren’t paying taxes because we like to. We can’t just decide to stop one day. We pay taxes because we’re both too pretty to go to prison.
See the large number of corporations that are essentially US Corporations that are now incorporating overseas. A fair amount of private US citizens are also becoming citizens of other countries for the same reason.