The Progressive Income Tax: A Tale of Three Brothers | 5 Minute Video

Summary

In this engaging video by PragerU, we delve into the story of three brothers, all with the same background but different financial priorities and lifestyles. Despite starting on equal footing, their economic paths diverge significantly. As they face a shared expense for community improvements, their differing incomes and philosophies on spending and investing create a surprising debate on fairness. Through a whimsical narrative, the video critiques the principles of the progressive income tax system in the U.S., suggesting that it unfairly burdens those who earn and save more.

Highlights

• Tom, Dick, and Harry start off with the same opportunities but choose different work-life balances. ⏰
• Their financial outcomes, ranging from $25K to $150K, are greatly influenced by their choices and spouses' contributions. 💼
• A dispute arises over how to fairly split a $30,000 bill for community improvements—mirroring real-world tax debates. 🏡
• Harry, who earns the most, is surprised when expected to cover the majority of costs, reflecting on his savings and investments. 💡
• The story humorously reflects on progressive taxation, sparking thoughts on economic equality and fairness. 🤔

Key Takeaways

• The tale of three brothers showcases how identical financial opportunities can lead to very different outcomes based on personal choices. 📈
• The story emphasizes the debate on income distribution and fairness in contributing to shared expenses. 🤔
• It provides a critique of the progressive income tax system, suggesting it penalizes those who work and save more. 💰
• The narrative presents a humorous yet thought-provoking perspective on economic principles and taxation. 😂
• The brothers' debate raises questions about what constitutes fairness when contributions to communal benefits are considered. 🤝

Overview

Once upon a time, there were three brothers, all carpenters with identical backgrounds, yet each chose different paths. Tom worked the least, prioritizing leisure, while Dick balanced his work and lifestyle. Harry, however, worked the hardest, with his wife also contributing significantly to their household income. As a result, their earnings varied greatly and set the stage for a debate on fairness.

When a neighborhood improvement required a $30,000 investment, the brothers were caught in a debate reminiscent of tax policy discussions. Harry naturally assumed they'd split the cost equally, but Tom and Dick had other plans. Drawing parallels with the U.S. progressive tax system, Tom argued for a divided contribution based on income, leaving Harry to bear the brunt of the cost.

Despite Harry's protests, the brothers voted for a distribution that echoed the complexities and controversies of real-world taxation. The narrative humorously illustrates how differing views on work, savings, and fairness impact financial decisions. The story of Tom, Dick, and Harry serves as a playful yet critical examination of income disparity and tax policy, leaving viewers pondering what true fairness means.

Chapters

• 00:00 - 00:30: Introduction to the Three Brothers The chapter 'Introduction to the Three Brothers' introduces three triplet brothers: Tom, Dick, and Harry Class. They share many similarities including being raised in the same family, having the same IQ, skills, and opportunities, as well as having similar family situations. Each brother is a carpenter earning $25 per hour. Despite these similarities, the brothers have different priorities, particularly in their work habits. Tom chooses to work 20 hours a week, while Dick works 40 hours.
• 00:30 - 01:00: Family Incomes and Financial Choices This chapter discusses the financial choices and family income situations of three individuals: Harry, Dick, and Tom, and their respective wives. Harry is 60 years old and married to a woman who works full-time as an office manager with a salary of $50,000. Dick's wife works part-time in real estate, earning $25,000 annually. Tom's wife does not work. The chapter highlights that both Tom and Dick spend all of their family income, relying on Social Security instead of saving for retirement. In contrast, Harry and his wife are implied to have a different approach, though their choice is not explicitly detailed in the transcript.
• 01:00 - 01:30: Financial Outcomes and Home Improvement Plans Three brothers with different annual incomes invested their money over many years in stocks and bonds. They each purchased equally-priced homes in a new housing development on the same private street. Eventually, they decided to pool their funds together to improve their street.
• 01:30 - 02:00: Debating Contribution for Street Improvements Three families united by their concerns about crime and aesthetics decide to enhance their street with a security gate, improved pavement, and better lighting and landscaping, all costing $30,000. Harry proposes an equal split of the bill, but Tom and Dick dispute the fairness of equal payment.
• 02:00 - 02:30: Progressive Income Tax: A New Contribution Proposal The chapter discusses a conversation between Harry and Tom about progressive income tax. Harry, who works long hours and invests wisely, questions why he should be penalized with higher taxes. Tom, on the other hand, prefers to enjoy life in the present and relies on the social system that taxes the wealthy more to provide for those like him. The dialogue explores the differing philosophies on income, work ethics, and taxation.
• 02:30 - 03:00: The Fairness Debate and Vote In the chapter titled 'The Fairness Debate and Vote,' a family discussion arises over financial fairness. Tom argues about the lack of generosity he perceives from his brother. Dick intervenes with a suggestion to resolve the disagreement: he proposes a method of sharing financial responsibilities based on income percentages. He calculates that their combined income is $250,000 and proposes each pays 12% of their individual incomes, which would mean Tom contributes $3,000.
• 03:00 - 03:30: Outcome and Family Dynamics The chapter titled 'Outcome and Family Dynamics' discusses a financial negotiation between three individuals: Dick, Harry, and Tom. Originally, Dick was to pay $9,000 and Harry $18,000. However, Tom proposed an alternative distribution where Harry would pay $23,450, Dick $6,550, and Tom would not pay anything. Although this seemed arbitrary to Dick, he found it advantageous as his share would be $2,450 less than what he initially suggested.

The Progressive Income Tax: A Tale of Three Brothers | 5 Minute Video Transcription

• 00:00 - 00:30 Once upon a time, there were three brothers, triplets, named Tom, Dick, and Harry Class. They were raised in the same home, with the same parents, had the same IQ, same skills and same opportunities. Each was married and had two children. They were all carpenters making $25 per hour. While they were very similar in all these respects, they had different priorities. For example, Tom, chose to work 20 hours per week, while his brother, Dick worked 40 hours
• 00:30 - 01:00 and Harry 60. It should also be noted that Harry's wife worked full time as an office manager for a salary of $50,000. Dick's wife sold real estate part time 10 hours a week and made $25,000 per year. Tom's wife did not work. Tom and Dick spent all of their family income. Since they paid into Social Security they figured, they didn't need to save for retirement. Harry and his wife, on the other hand, had,
• 01:00 - 01:30 over many years, put away money each month and invested it in stocks and bonds. Here's how it worked out: Tom made $25,000 a year, Dick and his wife made $75,000 and Harry and his wife, $150,000. When a new housing development opened up in their community, the brothers decided to buy equally-priced homes on the same private street. One day the brothers decided to pool their funds for the purpose of improving their street.
• 01:30 - 02:00 Concerned about crime and safety, and wanting a more attractive setting for their homes, the three families decided to install a security gate at the street's entrance; repave the street's surface; and enhance the lighting and landscaping. The work was done for a total cost of $30,000. Harry assumed they would divide the bill three ways, each brother paying $10,000. But Tom and Dick objected. "Why should we pay the same as you?" they said.
• 02:00 - 02:30 "You make much more money than we do." Harry was puzzled. "What does that have to do with anything?" he asked. "My family makes more money because my wife and I work long hours, and because we have saved some of the money we've earned to make additional money from investments. Why should we be penalized for that?" "Harry, you can work and save all you like" Tom countered. "But my wife and I want to enjoy ourselves now, not 25 years from now." "Fine, Tom. Do what you want. It's a free country. But why should I have to pay for that?
• 02:30 - 03:00 "I can't believe your being so... unbrotherly," Tom argued. "You have a lot of money and I don't. I thought you'd be more generous." At this point, Dick, the peacemaker in the family, entered the conversation. "I've got an idea," Dick said. "Our combined income is $250,000, and $30,000 is 12 percent of that amount. Why don't we each pay that percentage of our income? Under that formula, Tom would pay $3,000,
• 03:00 - 03:30 I would pay $9,000, and Harry would pay $18,000." "I have a much better idea," said Tom. "And one that's fairer than what you're proposing." Dick and Harry turned to Tom. "Harry should pay $23,450; Dick, you should pay $6,550; and I will pay nothing." To Dick this sounded completely arbitrary, and not really fair. But it did have one big plus. His share would be $2,450 less under Tom's formula than under his own.
• 03:30 - 04:00 So, he decided to be silent. Harry, however, was stunned. "You want me to pay almost 80% of the bill despite the fact that each of us is receiving the exact same benefits? Where did you get such a crazy idea?" "From no less an authority than the U.S. government," Tom responded, as he pulled out a gray booklet. "It's all right here in the IRS tax tables. This is the progressive income tax system
• 04:00 - 04:30 all U.S. taxpayers live under, and I don't see we should be any different. In fact, I believe all future improvements should be paid in this way." "Works for me," said Dick. So, by a vote of two to one, the cost of the street improvements was divided as Tom had proposed, even though they benefited equally, and even though the reason Harry had more money was that he and his wife had worked many more hours than his brothers and their wives, and saved some of what they had earned
• 04:30 - 05:00 instead of spending it all. Tom and Dick lived happily ever after with their new arrangement. Harry grumbled a lot, but whenever he complained his brothers called him greedy and selfish. The end.