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Sarah Sanders’s questionable argument that paying taxes is like buying beers

White House press secretary Sarah Huckabee Sanders used a story about paying a bar tab to illustrate the Trump administration's proposed tax cuts. (Video: Reuters)

During Monday’s news briefing, White House press secretary Sarah Huckabee Sanders told a story in defense of the Trump administration’s proposed tax cuts.

“Suppose that every day, 10 people — for our purposes, we’ll say reporters — go out for beer, and the bill for all 10 comes to $100,” it began, winding its way through a gripping minutes-long tale of beers drunk and discounts distributed.

The upshot was this: If you have 10 people who are paying a $100 bar tab at the same distribution as our taxes are paid, the costs of the beers would be broken down like this, from poorest reporter (1) to richest (10).

Bar tab

Four would pay nothing; the person at the top would pay $59.

If the owner of the bar then decided to cut the tab by $20, an even distribution of that cut, per Sanders, would look like this.

Bar tab, after cuts

Now a fifth person drinks free; everyone else pays less.

However, she says, those reporters would be mad. After all, the savings aren’t evenly distributed! The richest guy saves $10, as below, but the people in the middle save only a buck!

Savings per reporter

As befits the Halloween season, the end of Sanders’s tale is haunting.

“The nine reporters yelled at the 10th and made him feel bad,” she said. “So the next night, the 10th man didn’t show up for drinks, and the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important: They no longer had enough money between them all to even cover half of the bill.”

Spooooky. Also: Questionable rhetoric.

Sanders’s tale was offered in defense of her boss’s tax cuts proposal. Criticisms that the wealthiest Americans see most of the benefit are unwarranted, she argues, for precisely the reason that the beer-drinking journos should not look askance at the guy who’s covering their tab. But what Sanders leaves out is what makes a richer or poorer reporter. Because Sanders is distributing the tax load among 10 people, we should similarly distribute incomes.

Let’s say that, combined, those 10 journalists make $1 million in salary. (Lucky journalists.) If those incomes are distributed among the 10 drinking reporters, the incomes would look like this, according to 2016 numbers from the Census Bureau. (That data is only broken down into quintiles, so we’ll pair up the journalists.)

Distribution of $1 million in income

These categories are themselves misleading, as the income distribution slopes up sharply as you enter the richest percentiles. If we had 20 reporters, the richest one alone would earn nearly a quarter of all of that income.

As it stands, though, more than half of the million dollars is earned by just two of the reporters. In Sanders’s telling, those two would see $14 of the $20 reduction in the tab, 70 percent of the benefit.

Speaking at an event last week, budget director Mick Mulvaney raised the point that a reduction of tax brackets for lower-income Americans would also reduce taxes for the wealthiest, as everyone pays the same rate for the first $20,000 and the next $20,000, etc.

That argument in defense of tax cuts for the wealthiest Americans operates from a similar rhetorical base as does Sanders’: that the value is in tax cuts broadly, not in reducing taxes for those who earn less money.

While it’s true that cutting the tax rate for incomes under, say, $50,000, would mean that millionaires would pay less on that $50,000, there’s not necessarily any reason to extend that argument to incomes above, say, $1 million — unless you also want to reduce taxes on the rich.

The journalists in the bar-tab scenario could certainly agree that, instead of distributing the savings equally, only the two people who make more than $500,000 a year combined would pay anything and that the other eight people would drink for free. Or you could even hold their costs steady and drop the eighth-richest reporter to chipping in $3, as below. No one else pays anything.

Bar tab, with savings distributed to less-wealthy first

I’m not arguing that this should happen, but it would be one way to dramatically reduce debt load for those poorer journalists.

By excluding incomes from her story, Sanders is arguing that the tax system is basically unfair, that the richest Americans are sacrificing for the general good without getting anything in return. In fact, they get half of all income generated in the U.S.

Whether it’s fair that they then contribute the same amount to the bar tab is left to the reader to determine.