# Tax “Cuts”: Kash’s Rebuttal to Mankiw

Kash suggests that Greg Mankiw was not careful in his beer drinking example:

The first and second men (the poorest) used to pay \$0.20. Now they pay only \$0.15 (a savings of \$0.05, or 23%). They must then pay an additional \$0.16 somewhere down the road.

The third and fourth men (the next poorest) used to pay \$1.25. Now they pay only \$0.90 each (an immediate savings of \$0.35, or 28%), but must pay an additional \$0.46 each later.

The fifth and sixth men used to pay \$4.05 each. Now they pay only \$3.25 each (an immediate savings of \$0.80, or 20%), but must pay an additional \$1.00 each later.

The seventh and eighth men used to pay \$8.70 each. Now they pay only \$7.10 each (an immediate savings of \$1.60, or 18%), but must pay an additional \$1.90 each later.

The ninth man (the second-richest) used to pay \$15.60. Now he pays only \$12.45 (an immediate savings of \$3.15, or 20%), but must pay an additional \$3.10 later.

Finally, the tenth man (the richest, who had an income about ten times that of the fifth man, and five times that of the seventh man) used to pay \$56.00. Now he pays only \$45.00 (an immediate savings of \$11.00, or 20%), but must pay an additional \$9.75 later.

Sounds about right for the tax deferral strategy that Bush used to make us all think we were better off. So let’s recap. The poorest see their tab rise by 80%. The third and fourth fellows see their tab go up by about 9%. The fifth and sixth men see their tab go up by about 5%. The seventh and eighth men see their taxes go up by about 3.5%. Number nine about breaks even with the richest fellow in the bar seeing his tab fall by more than 3%.

No wonder Kash’s bartender did not increase the price of munchies. Must better to send the deferred tabs in the mail so the patrons would not know until days later!

Greg? You were saying?