How raising taxes will probably not solve anything
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I used to think that sharing is caring and how the world is divided unequally, money-wise. Actually, I still think that. But I’ve come across and interesting thought experiment that made me realise the problem is more difficult to solve than it seems.
Ten friends in their local bar called “Holland”, translated from Dutch
Every day, ten close friends meet each other at bar “Holland” to drink a few beers after a hard day of work. And each of these nights, they have to pay a € 100 - how convenient. Now, normally, they’d all have to pay € 10 euros each (as they’ve all had the same amount of beers), BUT because some of the friends earn more money than the others, they decide to divide the payment of the bill similar to how the Dutch tax system works. It looks something like this:
The first two (and poorest) pay nothing.
The 3rd friend pays € 1
The 4th friend pays € 2
The 5th friend pays € 3
The 6th friend pays € 5
The 7th friend pays € 7
The 8th friend pays € 10
The 9th friend pays € 16
The 10th friend pays € 56
And even though the richest friend pays more than all the other friends combined, they all seem to be happy with the solution and they keep on meeting each other in that same bar every day, chatting their nights away.
At some point, the bar owner approaches their table and says they have been visiting him so frequently, that he’s decided to give the group a discount. That’s great! He tells the friends he’ll take a whopping € 20 off their bill every day. So now they have to pay € 80 euros instead of
€ 100 for all their beers.
The bar owner advises the group of friends to apply this discount to the amounts they pay individually and the new bills look something like this:
The first two (and poorest) still pay nada.
The 3rd friend pays € 0,80 instead of € 1
The 4th friend pays € 1,60 instead of € 2
The 5th friend pays € 2,40 instead of € 3
The 6th friend pays € 4 instead of € 5
The 7th friend pays € 5,60 instead of € 7
The 8th friend pays € 8 instead of € 10
The 9th friend pays € 12,80 instead of € 16
The 10th friend pays € 44,80 instead of € 56
This still sounds like a perfectly fine solution to divide the bill, doesn’t it? After all, the first two poorest friends still drink for free and everyone goes home saving a bit of money. Who’s to complain about that?
Well actually, once they all stand up and are ready to go outside, everyone starts to count. “Hey,” says the 3rd friend, “I’ve only had 20 cents discount!” The 4th says “And I’ve got 40 cents discount of the total of 20 euros discount! Mr. 10 got € 11,20 of it!” Even the fifth and the seventh start complaining about what they’ve gotten back. Then the first two open their mouth: “Wait a minute. We didn’t even get anything. This system isn’t fair for us!” The 9 men stand around the tenth, intimidate him and call him names for being rude, greedy even.
The next day, the friends gather at “Holland” again. However, the tenth friend is missing. The other nine friends start drinking as usual and everything seems ok, until they receive the bill: they discover that they don’t have enough money to pay for it, not even for half of it.
