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This article appeared in the February 23, 2002 issue of the Lakeshore News -
Salmon Arm, B.C. It was written by Ron Adams, a local financial advisor who
writes a regular column in the paper. Ron is sometimes a little irreverent and
ruffles many conservative feathers in town but he is often entertaining and
usually gets straight to the heart of the issue.
As written by Ron:
I was having lunch at PJ's with one of my favourite clients last week
and the conversation turned to the Campbell government's recent round
of tax cuts. "I'm opposed to those tax cuts," the retired college
instructor declared, "because they benefit the rich. The rich get much
more money back than ordinary taxpayers like you and I and that's not fair."
"But the rich pay more in the first place," I argued, "so it stands to reason
that they'd get more money back." I could tell that my friend was
unimpressed by this meager argument. Even college instructors are a
prisoner of the myth that the "rich" somehow get a free ride in Canada.
Nothing could be further from the truth.
Let's put tax cuts in terms everyone can understand. Suppose that
everyday 10 men go to PJ's for dinner, The bill for all ten comes to $100.
If it was paid the way we pay our taxes, the first four men 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.
The 10 men ate dinner in the restaurant every day and seemed quite
happy with the arrangement until 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. Now dinner for the 10 only costs $80.
The first four are unaffected. They still eat for free. Can you figure out
how to divvy up the $20 savings among the remaining six so that
everyone gets his fair share? The men realize that $20 divided by 6 is
$3.33, but if they subtract that from everybody's share, then the fifth
man and the sixth man would end up being paid to eat their meal.
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 paid nothing, the sixth pitched in $2, the seventh
paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man
with a bill of $52 instead of $59. Outside the restaurant, the men began
to compare their savings.
"I only got a dollar out the $20," declared the sixth man pointing to the
tenth, "and he got $7!"
"Yeah, that's right," exclaimed the fifth man. I only saved a dollar, too.
It's unfair that he got seven times more than me!
"That's true," shouted the seventh man. "Why should he get $7 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 he
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 were $52 short!
And that, boys and girls and college instructors, is how Canada's 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 Switzerland and the Caribbean.
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