NOTE: This is a column that I wrote several years ago and which was originally published in the Mississippi Business Journal. Permission to reprint with attribution to Mississippi Business Journal and Phil Hardwick.
THIS LITTLE DOLLAR STAYED HOME
This is a tale of two dollars. One stayed at home. One went to another town.
Once upon a time there were two dollars. They each lived with their owners in the small town of Make Believe in rural Mississippi. Make Believe was a nice little town. There was a Main Street that had lots of little shops that sold special items and arts and crafts and catered to people who drove through town. There was also a grocery store. There was even a doctor in Make Believe. It was a nice little town that was enjoyed by all its residents, none of whom wanted it to change.
This story of the first dollar is easy to tell. Its owner placed it snugly in her purse and drove 45 minutes to a nearby, larger town with a shopping mall. The owner stayed all day at the mall and spent the entire dollar on things bought in stores owned by big corporations in faraway states.
Part of the first little dollar stayed in that town and part of it went to the state government, but most of it went by electronic magic to another state. At the end of the day, the owner went back to Make Believe with all her treasures. Not one penny of the first dollar ever saw Make Believe, Miss., again.
The story of the second dollar is much different. The owner of the second dollar went to a little shop in downtown Make Believe. There the owner talked a long time to the shop owner about the beautiful merchandise in the store.
The shopkeeper told all about the things that were made right there in Make Believe. There were birdhouses built by Bob, beveled glass made by Beverly, blouses of silk designed by Betty, mocha chocolates by Missy, and even silverware crafted by Sam.
This owner of the dollar spent the entire dollar right there in the shop. The journey of the second dollar was much different from that of the first dollar. Yes, the first 7 cents arrived at the government in Jackson. One penny was sent back to the local town. So one penny of the sales tax came back to the Make Believe City Hall.
The owner of the shop took the next 50 cents and sent it to the manufacturers of the items that were bought. Because all of them lived right there in Make Believe, the 50 cents stayed there.
The next 16 cents went to the employee of the shop owner. Yes, you guessed it; the employee lived in Make Believe.
There was rent to pay on the shopkeeper’s retail space. It was paid to the owner of the building, who had lived in Make Believe all his life. The rent was 10 cents of the dollar.
There were operating expenses that the shopkeeper had to pay. Things such as utilities and maintenance and insurance. Sixteen cents of the dollar went to pay those expenses and some of the people that got paid lived in another town far away. Still, eight of those 16 cents was paid to people in Make Believe.
That left 8 cents. What would happen to it?
That’s right. Eight cents was the shopkeeper’s profit she got to keep. Of course, the shopkeeper lived in an apartment upstairs above the shop.
If we total where the second dollar went, we learn about 86 cents stayed in Make Believe.
I wonder what will happen to the 86 cents. Will the manufacturer, the employee, the real estate owner, the shopkeeper and the others spend the 86 cents in Make Believe? Or will they go somewhere else?
I wonder how much of the 86 cents will be spent in Make Believe. Because every time another penny is spent in Make Believe, the little town is better off because someone in Make Believe received it instead of another town.
Each person has a right to spend his or her money wherever and whenever he or she wishes. But when people spend their dollars in other towns, it does not help the economy of their hometowns.
The Tale of Two Dollars is told at this time every year because many people don’t know when they spend their money in their own hometown it helps their hometown.