Dick and Jane are married and have three children. Dick has a job that pays him $50,000 per year. Jane takes care of their home and children. She has no income. They both agree that their lifestyle is somewhat depressed and would like to somehow give it a boost.
They mull over their options. Jane could get a job, but with child care expenses and the additional income tax they find that the additional net income would be very small, and not worth giving up her time at home with the kids. Dick could work longer hours or get another job, but he would then have very little time to spend with his family.
Then they have an epiphany. Why not just create a job within their household? Why not hire Jane to keep house and care for the kids and pay her $25,000 per year? This will raise their total income to $75,000 per year. But where will they get the money to pay her? Well, the options are to borrow the money or tax Dick’s income or some combination of both. They decide on the latter.
When their friends and relatives hear about the plan a few think it’s a wonderful idea but most have serious reservations. Some of the skeptics ask how taxing Dick to pay Jane is going to increase their combined real income. Others complain that borrowing the money will probably lead to bankruptcy or leave their kids with the debt down the road.
But Dick and Jane are undaunted. They’re too excited now about the hope and change coming to their lives.