Sarah Huckabee Sanders’ Bar Metaphor Is Really Stupid
by Benjamin Studebaker
A friend of mine recently sent me this clip of White House Press Secretary Sarah Huckabee Sanders attempting to defend President Trump’s “Cut Cut Cut” tax plan with an elaborate bar metaphor. Let’s call it the “Allegory of the Tab”:
A couple days later, my dad told me he heard someone bring this up, as if it were some kind of serious argument for Trump’s plan. I can’t let this stand. The Allegory of the Tab is too reductive, too simplistic, too brain-dead to pass without a post exclusively and entirely about how dumb it is.
If you can’t play video, the Allegory of the Tab goes something like this. 10 reporters go to a bar, and they pay their $100 tab the way that we pay our taxes. The poorest 4 pay nothing, the fifth pays $1, the sixth pays $3, the seventh pays $7, the eighth pays $12, the ninth pays $18, and the richest pays $59. But then the bar owner decides to reduce the tab by $20. They don’t want to divide up the savings by splitting the money evenly, because the poorest reporters would end up getting paid to drink beer. So instead they cut each reporter’s bill by a percentage. So the poorest 4 get nothing additional, the fifth gets $1, the sixth gets $1, the seventh gets $2, the eighth gets $3, the ninth gets $4, and the 10th gets $10. But the poorest 6 reporters end up feeling that this is unfair, and they give the richest reporter a hard time. So the next time the group goes out to drink, the richest reporter decides not to come, and when the group gets the bill they can’t afford to pay it.
Simple, right? The problem is it’s way too simple. There are two core problems with it:
- This is not an accurate representation of what the Trump tax plan does.
- This is not an accurate representation of the way our society works.
Let’s talk about each of these things.
The Trump Tax Plan Doesn’t Work Like This
The Trump tax plan is not a straightforward percentage cut to income tax. It has a lot of other components, many of which hurt poor and working people or benefit the wealthy exclusively. Here are just a few of the other things Republicans want it to do:
- They want to eliminate state and local tax deductions. Under current law, if you live in a high-tax blue state like Illinois, you can deduct your state and local taxes from your federal bill to avoid being taxed twice. Without those deductions, you end up paying higher taxes twice over–first to your state and locality, and then again to the federal government. This provision essentially punishes you for living and working in a blue state.
- They want to eliminate the estate tax, which only affects people with estates larger than $5.5 million.
- They want to cut the nominal corporate tax rate by 15 points, at a time when we’re now finding out that billions of dollars are already successfully hidden from our government by wealthy firms and individuals.
- They want to eliminate the deduction on medical expenses, which currently only applies to medical costs in excess of 10% of your income. So if you have very high medical expenditures, you would then be taxed more on top of that.
- They want to create a new tax loophole that enables rich people in the 39.6% top tax bracket to lower their rate to 25% by investing in their own pretend firm.
- They want to get rid of the Work Opportunity Tax Credit, which incentivizes firms to hire veterans.
- They want to get rid of tax credits which incentivize investment in fighting rare diseases, offset the cost of adoption, and encourage businesses to improve access for the disabled.
Indeed, early analyses indicate that the Trump tax plan will raise taxes on about a fifth of American households by 2027, and that this fifth will consist mostly of middle class people in the $50,000-$75,000 range. There are about 125 million households in America, so we’re talking something like 25 million households here, or 40-50 million people. That’s much larger than the group that Republicans planned to take healthcare away from.
So Sarah Huckabee Sanders is lying. The administration’s plan looks nothing like what happens in the Allegory of the Tab. But this is just the tip of the iceberg.
The Allegory of the Tab Looks Nothing Like A Real Society
In the allegory, the reporters are just a group of friends. None of them work for each other, and none of them work for the bar. But of course in a real society, money doesn’t fall out of the sky. The entire economy cannot consist of reporters. Somebody pays people. About 7% of Americans, or 14% of the workforce, works in the public sector. This means that 1 of the 10 guys in the bar is an employee of the bar and does get paid to drink beer.
What about the other 9? In the United States, the civilian employment-population ratio is about 60. This means that 6 of the 10 have jobs. So if one of them works for the bar, that means that 4 of them don’t work and the other 5 work in the private sector. Who are the employers in the private sector? Rich people and their companies. This means that 4 of the 5 work for the richest one.
Now, when you work for someone, you give them your labor and in exchange they give you a wage. But the wage is never equal to the full value of the work you do–if that were true, there would be no profit, no money for your employer to invest in the business. Businesses need to generate a surplus beyond what they pay their employees. Of course, employers don’t spend the entirety of this surplus on growing their own businesses. Some of it they use to pay themselves. Some of what they pay themselves they use to consume luxury goods and services, and the rest gets invested in other people’s businesses. So crucially, all of the money which the richest guy has comes from the work of his 4 employees.
The state then comes in and taxes all this money, taking more from the richest guy than they do from his 4 employees or from the 1 guy they’re paying anyway. But when they take money from the rich guy, they’re really taking wealth and income which the 4 employees created. That wealth and income is then used to pay the guy who works for the bar and to take care of the 4 people with no jobs.
The Allegory of the Tab completely glosses over this internal power structure. It treats the 10 as if they were just a group of friends plucked off the street. But in reality all of the wealth the 10 have comes largely from the work of the 4 private sector employees. So when the Trump tax plan gives the rich guy $10 back, those are $10 he only has in the first place because of the hard work of other people in the group.
So what happens if the rich guy “decides not to show up”? We just promote the 9th guy to his job and that guy hires one of the 4 unemployed guys. If the rich guy thinks being the rich guy is such a bad deal, he can always try his hand at being one of the 4 we don’t tax. The rest of us just stand to get promoted if he goes. He’s not as indispensable as he thinks he is.
See how misleading the Allegory of the Tab is? Of course, we could go much further. After all, if we really want to fix the allegory, we need to acknowledge that in this story, the bar prints the money–taking that seriously leads to all sorts of cool scenarios in which the bar can hire more than just one guy. Indeed, the bar can hire as many guys as it wants, and pay them as much as it wants, provided that it doesn’t run out of booze to sell them. If it runs out of booze, the booze price spirals out of control. One way the bar might handle this is by having one especially burly employee threaten the others with violence if they don’t give back a percentage of their wages. This leaves the employees with less money to buy beer and reduces the chance of a price spiral, but it also sometimes makes them feel mistreated by their employer. But that just makes it confusing, doesn’t it? Modern monetary theory is complicated, even when applied to the Allegory of the Tab.