PM Lee should tell this story about splitting beer bill to justify importing more billionaires into S'pore

This is a narrative people will understand.

Belmont Lay| January 04, 12:35 PM

In July 2013, Prime Minister Lee Hsien Loong made the following statement about how he can make Singaporeans better off if he had his way and even though it might be an unpopular thing to do:

“In fact, if I can get another 10 billionaires to move to Singapore and set up their base here, my Gini coefficient will get worse but I think Singaporeans will be better off, because they will bring in business, bring in opportunities, open new doors and create new jobs, and I think that is the attitude with which we must approach this problem.”

But this made many, many people angry on the Internet, as they felt that wealth disparity is already severe as it is.

For the record, Singapore's Gini coefficient for 2013 was 0.412 after adjusting for Government transfers and taxes.

In 2012 it was 0.478. (In short, a Gini coefficient of zero expresses perfect equality, while a value of one, or 100%, expresses maximal inequality. So, Singapore is considered quite severe.)

However, there appears to be a much more compelling way to convince Singaporeans that having more wealthy people makes sense.

Here's how. From Quora, a crowdsourced question-and-answer site, this is the best story to tell to convince people that the rich are, have been and will be shouldering their fair share in society.

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The Parable Of Splitting Beer Bill Between The Rich And The Poor

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7..

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that's what they decided to do...

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner offered: "Since you are all such good customers, I'm will reduce the charge of your daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share?

They realised that $20 divided by 6 is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid $2 instead of $3 (33% saving).

The seventh now paid $5 instead of $7 (28% saving).

The eighth now paid $9 instead of $12 (25% saving).

The ninth now paid $14 instead of $18 (22% saving).

The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 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. This new tax system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas, where the atmosphere is friendlier.

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There are some flaws in this narrative, but we will not be revealing it.

You can google it online or think it through or follow us on Facebook and hope that we will reveal the rebuttal in the future.

If you can spot the flaw(s), feel free to post your response in the comments below.

 

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