The Parable of the “Bush Tax Cuts”
Once upon a time there was a tiny village. In the village there lived 10 families, one of which was very rich.
Now each year every family contributed some of their money to the village fund so that their town could be safe, well-run, and to provide some cushion in hard times. The richest family, being so rich, paid a bit more of their income into the village coffers than did the other families. For many years, by putting the contribution from the one rich family together with those from everyone else, the total was quite sufficient to meet the village’s needs.
One day, as the elders were counting out the village’s expenses for the coming year, they discovered that they would need far less than they had expected. Excitedly, they called a meeting to share the good news.
“Great news, everyone!” said one of the village elders. “It turns out that we will have more money than we need to run the village this year.”
There was much rejoicing.
After the rejoicing, the talk turned to what to do with the extra money. One of the members of the richest family spoke up.
“It seems to me,” he said, “that we should just reduce my family’s annual contribution. No sense in having us pay more than we need, right?”
The other villagers weren’t very warm to that idea. Instead, they wanted to use the extra money to install a new chalkboard in the school, or fix up the village’s guard tower, or to save it, just in case. But just as the elders were about to decide to use the money to rebuild an old well that had fallen into disrepair, the head of the rich family sweetened the pot.
“You know,” he said, “Why don’t we reduce everyone’s contribution, ours and yours? In fact, I don’t think you other families should have to contribute at all. We’ll cover the total cost of running the town, and that’ll be that.”
Now, even though that suggestion meant that most families saved a little money, while the very rich family saved a lot of money, everyone still agreed. And so the village council set new contribution amounts: nothing from the nine ordinary families, and just enough from the rich family to cover that year’s much-reduced expenses.
Everyone went home that night with big smiles on their faces.
All was well. Until the following year.
The previous year’s unusually low expenses turned out to be a bit of a fluke, and the coffers were running dry. Another meeting was hastily called.
“Bad news, everyone,” said the elder. “We’re going to be short of funds next year if we don’t change the contributions. What shall we do?”
There was much grumbling.
“I suppose we should just go back to the old system,” said one villager. This suggestion was met by a chorus of boos.
Another suggested, “Perhaps they,” he indicated the rich family, “would be willing to cover the shortfall?” This proposal was met by a much smaller but much louder chorus of boos, coming mainly from the rich family.
From there, the discussion descended into argument.
Finally, a member of the rich family stamped his feet and called for everyone’s attention. “My family already pays for the entire village’s expenses. None of you pay anything. We should get to decide how to fix this problem. But not to worry, I have a solution.”
“All we have to do is reduce our expenses back to what they were last year. Then no one will have to pay more. See? No problem.”
“And how do you propose we reduce our expenses?” asked a skeptical villager.
“Well, I’ve never really understood why my family has to help pay for the village’s main road. We don’t use it. We have our own private road. If we stop maintaining the main road, the village will save some money. And while we’re at it, I think our village ‘rainy day fund’ has made some of you complacent. Perhaps you’d work harder without it. And since we’re on this topic, couldn’t we save a bundle by shutting down the school? My kids don’t use it — we have tutors — and I don’t see why I should pay for your kids.”
Needless to say, his suggestions did not go over well with the rest of the families. More arguing and shouting ensued.
“All right, all right,” sighed the head of the rich family. “If your school and your road and everything else mean so much to you, then you can pay for them. If each of you pitch in, there will be more than enough to fund everything you want.”
“But to cover the gap, we’d have to pay more than what we used to pay!” objected one villager. “How is that fair?”
“Fair? You want to talk about fair? You don’t pay anything at all now!”
“That’s because you told us we didn’t have to!”
The debate lasted for days and days. The rich family simply refused to pay any more, arguing that they obviously knew what was best for the town, since they were the successful ones.
Eventually, with the village short on funds, the school began to crumble, potholes went unfilled, and the village’s wall fell down. One by one, the families left the village for better-tended pastures. And before too long, there was no more village left at all.