President Donald Trump is championing tax reform that would stimulate the economy and provide families of all income levels much-needed relief. However, the Left has taken issue with the desperately needed tax reform proposed by President Trump and congressional Republicans, saying it “benefits the rich.”
White House Press Secretary Sarah Huckabee Sanders addressed the accusation in a press briefing Monday. Sanders used an analogy comparing American taxpayers to a group of people sharing the cost of drinks in a bar in order to illustrate the principle that the wealthy only appear to benefit more from tax cuts because they already pay a larger share.
The original source of the analogy is unknown. As Business Insider notes, an alternative version that takes place in a restaurant instead of a bar was published in a March 2001 edition of The Chicago Tribune.
Conservative intellect William F. Buckley, Jr. also shared the analogy in his column for National Review in April 2001, attributing it to “a friend, via the Internet.” The version of the story most similar to the one read by Ms. Sanders is one published by Independent Journal Review in 2014.
The IJR version cites “David R. Kamerschen, PhD, Professor of Economics.” However, an update to the article says that Dr. Kamerschen has denied being the author of the analogy. Thus, its origin remains a mystery to this day.
Nevertheless, it remains a fitting explanation for how tax reduction works, and why Democrats who oppose tax reform display a lack of familiarity with the basic principles of economics. The analogy begins:
“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…
As with our tax system, there are some people who pay much more than the other and some who pay nothing at all: “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.”
Eventually, the bar owner lowered the men’s bill from $100 to $80, and recommended they reduce each person’s share by income. The poorer members of the group receive a bigger reduction. Thus, “the fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33 percent savings). The seventh now paid $5 instead of $7 (28 percent savings). The eighth now paid $9 instead of $12 (25 percent savings). The ninth now paid $14 instead of $18 (22 percent savings). The tenth now paid $49 instead of $59 (16 percent savings).”
But when they see that the tenth man technically is getting a bigger break in dollars (though not percentage-wise) than the rest of the group, his “friends” beat him up. Not surprisingly, the tenth man doesn’t show up at the next meeting. When it comes time for the nine remaining men to pay for drinks, they’re shocked to learn their money won’t even cover half the bill.
Sarah Huckabee-Sanders explained taxes to reporters in the White House press room. Do the reporters understand what she was trying to convey?
This leads to the analogy’s insightful lesson: “And that, boys and girls, journalists and government ministers, 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 somewhat friendlier.”