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

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“The Progressive Income Tax” is one of those economic terms that gets bandied about, but few actually know what it means or how it works. This tale of three similar brothers with three different incomes (but one shared expense) helps explain the tax system under which we live. Adapted from an article by noted investor and economist, Kip Hagopian, and narrated by actress Carolyn Hennesy of “General Hospital” and “True Blood” fame, this animated story will change the way you think about how you pay your taxes. 

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Script:

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 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, 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. 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. “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?

“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, 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.”

For the complete script, visit https://www.prageru.com/videos/progressive-income-tax-tale-three-brothers

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35 Comments

  6. Harry really should’ve done himself and his wife a favor and sold the house/property and moved away.
    The problem with entitled leeches is … they always try to come back for more … they always try to make out that it’s the “Host’s” fault that THEY are not better off.

  10. Harry and his wife did work hard for their extra money and did save…but no one is talking about the 2 kids. During the week did they get enough daddy time? Were they in school or did they have to be in pre-school?

    It just depends on which resource loses and which resource wins. Harry and his wife lost time with their kids. In addition a large portion of Harry's wife's income went to Pre-school until the kids were in first grade. If they sent them to private school, then once again Harry's wife's income had to pay for that.
    Tom and his wife had plenty of time on their hands.But they also had little money. Did Tom's wife stay home with the kids? What did Tom do the other 20 hours of the week?
    Dick and his wife seem to be the one most balanced in terms of having time with their kids, getting enough money. If Dick didn't have enough money to pay his share of the $30k, then he needs to take out a loan and that will cost him more than $10K.

    It's all give and take.

    But yes, each of them should be required to pay their share of the improvements.

  14. Yeah just make a quick adjustment to where higher earner earns 100,000% more than the middle earner. Honestly as a liberal I support paying the same tax rate up to a certain amount. The problem are the billionaires.

  24. But just because you earned more money doesnt mean you worked hard for it. I'd argue a nurse works just as hard as a CEO, even though the ceo likely makes 100x more than the nurse. I think the CEO should be taxed a bit more than the nurse, but not too much that the CEO has no incentive to be a CEO.

  26. The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations,I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??

  29. I understand the story and have seen it happen. It is sad. But it doesn’t have to go that way. Are there folks out there who will never do well? Absolutely. Especially in the system we have today where you either conform to society’s ideas of success and therefore become wealthy, or you don’t. Not all of us have the same strengths. Only some strengths are rewarded monetarily in our society. It’s easy enough to say that each of these brothers was equal in all things…. But we know better than that. The premise of this story is set on an imaginary and implausible foundation. Let’s work on some other ways we can prove our worth. There are more of us that want to prove our worth than there are never do wells. How about a merit based economy? Wages based on toil? Taxes based on how much you value living in a place where the lights are lit and the neighbors aren’t stealing from you out of desperation. Where we hold people accountable with mercy, and encourage them instead of treading on them. If Tom was really as shrewd as this tale makes him out to be, he’d probably be the richest brother under capitalism. That final deal he laid out there 😅
    It’s not about not wanting to work. It’s about opportunities for fair compensation for merit.

  31. So basically let the people who got much larger opportunities because of their rich parents (for example Donald Trump or Elon Musk) be taxed less meaning that the people who were born into poorer families with a lot smaller opportunities have even fewer opportunities because they have to worry more about feeding their kids and healthcare. Basically keep the rich rich and keep the poor poor.

  35. They should have negotiated the costs before they started the repair's.The street repairs would require a payment for road repairs using a combination of income taxes, property levies, and federal grants. The flowers and lights could be skipped as well as the gates

    Local taxes would create fairness if all three houses have the same value.