Discussion: Progressive Taxes

Your discussion brings me back to an oft posted description of "how taxes work", which you can find here at snopes:

How Taxes Work

Once you've read that, here is a response I wrote to it a few months ago:

I think you left off the part of the story that describes why they pay the amounts they do at the restaurant.

It just so happens that these 10 men also work at the same business and live on the same street. And that (for the sake of simplicity) the $100/day for dinner is equal to 1/10 their total pay (ie as a group they get $14g in their bi-weekly paychecks). Now it so happens (according to 1998 US Census data) that the 4 guys who work menial jobs (janitorial, maintenance, delivery, etc) for the company have to split $70 between them for their paycheck. Meanwhile the 5th, who holds an administrative/secretarial position gets $238 every two weeks. The 6th who is a junior engineer has a paycheck of $392. The senior engineer, man #7 gets about $560. The 8th man is a middle-manager who has a pay check of $980. The 9th man, VP of the company is paid $1820. And the 10th, the CEO? He takes $9940 home every two weeks.

Now when they show up at the restaurant, they know that the four menial laborers have already spent their paycheck just to try to cover their rent. So now even if they want to make those 4 pay, they simply can't do it and the lot of them would get tossed out of the restaurant. So they can either make them starve, or everybody else can chip in. Being that they're neighbors and co-workers and the others would prefer they not starve (not to mention worrying about them starting labor unions or rioting or resorting to criminal activities or anything like that) so they decide that they will after all pitch in.

Now, the secretary is having some difficulty making ends meet too, while he is better off than the laborers it is very difficult for him to provide for his family, and the group figures that it wouldn't be fair to charge him the same amount as those who are better off, and that if they did it might cause him to go bankrupt which would then cause harm to their bank and community (did I mention they all bank together too?). So they come up with a scheme where each pays in according to their income.

But the CEO, sly fellow he is, slips a few bucks to the waitress and gets her to fudge the individualized bills in his favor. So in the end we have the 4 laborers who are paid only 00.5% of the company's income get a free ride by not having to pay anything for dinner. Meanwhile the secretary who earns 1.7% of the money gets a bit of a boost by only having to pay 1% of the bill. And the wily CEO who earns 71% of the money only has to pay 59%. While all of these folks are getting a good deal, who is it that gets screwed? Our 4 middle class workers. The junior engineer who earns 2.8% of the money but pays 3%, the sr engineer who makes 4% but pays 7%, the mid-manager who earns 7% but foots 13% of the bill, and even the VP who makes 13% yet has to pay 18%.

When the restaurant offers a discount and calls attention to the pay structure everyone notices the discrepancy, that the CEO isn't paying his fair share. "Hey!" they say, we can use this opportunity to get that back in line by giving this discount to our middle class workers. But unfortunately for them, the CEO has the restaurant owner in his back pocket and so the restaurant owner sees to it that most of that discount goes to the CEO.

And that boys, and girls is WHY the systems works the way it does.

Oh, there was a bit of an inaccuracy regarding the end of the scenario as well. Generally when the 4 guys who combine for 1/2 of 1% of the wealth decide they've had it with the 1 who controls 70% of the wealth, they don't beat him up and keep him from dinner, they guillotine the fucker and divide up his money. Which would make it all that much easier to pay the next day's bill (and all the more incentive for the CEO character to not cheat out of the system).