In a response to my piece entitled, "Taxeaters", a reader who favored progressive income taxation posed this question back to me: why shouldn’t the top 50% of income earners pay 96% of the taxes?
My answer: for the same reason that they shouldn’t have to pick up 96% of the state’s collective bar tab. All knowledge builds upon what you know.
That evening, I pondered his question some more and was inspired while enjoying a pub meal that Michelle Obama would ban if she could. And here is the problem with progressive income tax theory played out a fictional place called Madison Wild Wings.
Let’s say there are 200 tables at MWW and the bill for each is $100 for a total of $20,000. The manager announces a better, fairer way to pay the bill - progressive, he calls it. Sounds like progress, so the customers go along, and besides they are watching the Badgers on the big screens and not paying much attention.
He sorts the tables by income into the 100 lower-half tables and the 100 upper-half tables. We’ll call the upper-half "taxpayers" and the lower-half "taxeaters", just because it drives liberals nuts when I do that.
He then informs the upper 50% - the taxpayers – that their share of the total MWW bill for the night is 96%, or $19,200. There are 100 tables, so they each must pay $192 for their $100 of food. The taxeaters share is $800 or $8 per table. The servers get 20% tips from each table, so some make $38.40 and some making $1.60, which creates MWW’s first-ever income gap.
Is this fair? According to liberals, the United States government, and all but handful of states that have no income tax, the answer is a resounding "yes!" Is it smart? We will find out on Day 2 of the progressive payment plan at Madison Wild Wings.
Day 2: The crowd is a little different tonight; can you guess how? Right, there are more taxeaters and fewer taxpayers. And the taxeaters order the best of everything now that they know someone else is paying. The total bill surges to $30,000.
Taxpayers’ share is $28,880 – $280 per table - while the taxeaters pay just $12 per table for $150 of appetizers, entrées, dessert, and blender drinks. The servers on the taxpayer side got $56 tips per table, while the taxeaters got $2.40, so all the best servers go work the taxpayer side.
Are the taxeaters grateful to the taxpayers? No – in fact, they are furious that their bill went up 50% from $8 to $12! Plus their service was horrible, because their servers suck at it. They accuse the manager of ripping off poor people, and then call him racist and homophobe for good measure, even though he is gay and Hispanic. The bad servers form a union - the I Hate Rich People Union.
A University professor with a Ph.D. gets a grant to study the problem. He asks the taxeaters if they have been screwed by rich people; they say yes, they have been screwed by rich people; he concludes they have been screwed by rich people. That wins him a Nobel Prize, and President Obama makes him a Czar of some new agency that will tell MWW how to make wings from now on. Dr. Duh funnels federal grants to his old University and they name a building after him. The sandal people are pleased.
The MWW manager doesn’t want to lose most of his customers, so he agrees to tax the rich even more, increasing their share to 98%. This is quite popular with the taxeaters. He also donates to President Obama’s campaign and gets a waiver from ObamaCare.
Day 3: Even more taxeaters show up, some bussed up from Illinois, just like their parents did in the 70’s, the last time there were free wings in Wisconsin. Some taxpayers quit working and join the taxeaters side, some go elsewhere; there are only 50 tables filled in the upper half. And the bill comes to $40,000 this time. Ben Bernanke reports this increase a 33% rise in GDP. Ron Paul laughs at him.
98% means the taxpayers have to pay $39,200 and since there are only 50 tables, each table’s share shoots up to $784. The taxeaters total share is $800, back to just $8 per table. Except now the servers on the taxeater side go on strike because their tips dropped back down from $2.40 to $1.60 per table. Ben Bernanke adjusts GDP downward and Paul Krugman blames the strike on greedy rich people.
Then Bernanke remembers that you can’t spend the same dollar twice, so $39,200 of something else won’t get bought somewhere else, and he has to adjust GDP all the way back to zero. This confuses Joe Biden, so he just calls it 12,000 new stimulus jobs and asks directions to that custard place.
By now everybody at MWW is angry. Taxeaters are complaining, taxpayers are leaving, the servers are on strike, the kitchen help is going back to Mexico, managers are quarrelling, profits are down, Ben Bernanke is testy, the cost for taxpayers to eat at MWW are more than double any other wing joint in town, and Joe Biden is still there and won’t shut up.
Note to students: this is what we mean by the term "hostile business climate". At Madison Wild Wings it is bad – one of the 10 worst in the nation. New taxpaying customers peek inside and run away to spend their evening somewhere more hospitable.
Meanwhile over at the Texas, Tennessee, and Florida Dutch Treat Wing Emporium, the place is packed with taxpayers who fled from MWW, along with the best servers who can earn more without the union. The TTFDTWE is profitable, the patrons are happy, the servers are making good money, and taxpayers and taxeaters are back comingled at their tables, laughing and getting along just fine. Prices are low and dropping, quality is high and improving, and the menu is expanding with more choices every day. Capitalists and libertarians are not surprised, because everyone is acting in their own self interest and of their own free will.
Note to students: this is what will happen when Wisconsin passes Right To Work legislation. That is how you fix a hostile business climate.
Back to our story…the progressives are shocked and appalled by TTFDTWE. Someone on WPR sniffs back tears and calls it the Walmart of NASCAR Waffle Houses, and the next caller claims she is David Koch and says the whole state of Arizona is a bleepin’ MubarakDictatorBushHitler. The sandal people whisper-talk their glee at her clever gotcha, saying, "right on" and "solid" and "word". They don’t understand the meaning of "word", but it sounds really, really black.
Day 4: Now the taxeaters demand free high speed rail to take them to MWW and back and health insurance. The taxpayer side at MWW starts drinking tea and fighting back. The old manager abruptly retires to Spain after taking a lavish Cancun vacation and buying some train cars. The till is empty when the new manager shows up for work, and his bookkeeper tells him the budget is in the red by $3.3 billion.
He meets the taxpayers, who politely remind him who pays his salary and then give him a folded note with a message for the taxeaters. The new manager walks over to the taxeaters, and opens the note and calmly says, "The people who pay my salary have asked me to tell you to buy your own damn wings."
The taxeaters go berserk, walk off their jobs, take over the state Capitol, hide in Illinois… Well, you know the rest of the story; we have been living it for real in Wisconsin for three ugly weeks now. It is fitting that the cradle of the progressive movement is also the cemetery in which it will be buried, and someone needs to pull the plug on this ridiculous life-support stalemate of a protest the unionists have inflicted.
The progressive income tax is not simply bad economic policy, it is inherently immoral. If you only earn 10 times more than me, why should you pay 30 times more in taxes? Why? Because you have it and I want it? That is the morality of the brute, the rapist, the looter, and yes, the taxeater. The 10% tithe in religion is a voluntary flat-rate revenue source, and personally, I would choose God over socialists when it comes to moral imperatives and questions of infallibility.
For the past century, socialist progressives have wrapped their turd of an ethos with the plight of the poor, the infirmed, the children, the disenfranchised, and even the planet; hoping their faux-compassionate veneer would distract us from the stench.
Like most other things, they are wrong. And so is their progressive income tax.
"Moment Of Clarity" is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim’s website www.timnerenz.com to find your moment and order his new book, "Tooth Fairy Government."