In 1888, in ᴄhicago, a bridge was built to connect two parts of the city. A toll was charged but officials wanted it to be a “progressive” tax. Rich people will pay more to cross.
So, how could they identify rich and poor quickly?
They had an idea, rich people wear shoes (it’s 1888 remember), So, they decided to charge a tax based on that.
They had an idea, rich people wear shoes (it’s 1888 remember), so they decided to charge a tax based on that. If you cross the bridge wearing shoes you pay a tax, but if you are barefoot, you cross for free.
Simple
Easy
Difficult to avoid
Brilliant
But it failed
Why?
The rich simply took off their shoes and crossed the bridge (tax avoidance).
The poor?
They did not want to be seen as poor, so they would were shoes or borrow shoes to cross the bridge.
This is a true story.
So, what are the lessons?
- Poverty is loud, literally.
- Poverty is in the mind, but a verb.
- The rich stay rich by not spending (frivolously).
- Humans are irrational.
- The rich always gets better financial advice.
- Taxing the rich is cute but complicated.
Are you borrowing a shoe to cross any bridge?
