Sunday, 18 November 2012

Just an Economic Parable

This is a parable of sorts.  For those who don't remember the full meaning of a parable....it's a story or verse, about something, which is mostly false or made-up....but it leads you to grasp lessons in life.

Karl was a millionaire of such, and well-to-do.  Every year, his company could deliver ten million dollars to Karl, as the income from his investment and risk-taking.  To be honest, Karl is a pretty hefty risk-taker.

Karl pays a fancy-pants tax accountant to ensure that he pays the least amount of taxes possible.  At the end of his tabulations, Karl typically pays $1.6 million.  That's roughly sixteen percent of what he made.  Now, you'd be upset that a wealthy guy got away with such a deal....but there's some things you should know.

Karl has a charity foundation, and he donates around $700k a year to this foundation.  That counts off money from his taxes.  Karl also has this great deal with the university down the road....where he donates $175k a year between the baseball department and the library fund.  Three times a year, Karl attends a local charity event and donates a $25k check to each charity or foundation.  Almost ten percent of Karl's income goes to charity events.

Well....one day....because of financial incompetence  recession or whatever....the government comes to say that Karl isn't giving his fair share.  No matter how the accountant does the math....Karl has to give twenty-five percent of his income, period.  No matter what the credits are, or the donations that Karl gives.  It makes things fair....as the government guy explains it.

So Karl evaluates his new twist of life.

If it doesn't matter what he does....they have to take that $2.5 million of his....then he really doesn't need to think or worry much about the charity business.

A year or two into this new tax scheme....the charities and educational funds of America (including those stupid university folks) are now talking about this massive loss in income.  Libraries are short on funds....pet shelters are short....little league organizations are low on cash....and various environmental causes are now worried that they can't sustain their magnificent organizations.

Wonder why?  Maybe we need a government committee to meet and discuss why the economic state of charities are suffering as such?

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