aerius wrote:Surlethe wrote:There's something a little bit subtler than simply measuring proven ability to pay here: this is, in some sense, a measure of how hard has someone worked to gain what he earns. It seems to me that if a six-foot man and a five-foot man, otherwise identical, both make $180000 per year, the six-foot man has not had to work as hard to attain his job because there are social advantages attached to being of above-average height. So if we wish to move the situation closer to a meritocracy, it makes sense to tax the six-foot man and subsidize the five-foot man so that their incomes reflect the effort they have to put into earning money. (Note that this would augment an already-progressive system; the tax code would already target those who have ability to pay.)
Mankiw is being stupid again if this is what he's trying to prove.
No, Mankiw thinks he's channeling Jonathan Swift ala
A Modest Proposal. His approach is to show progressive taxation as being unjust and unfair
as a concept: taxing people by height is simply the absurd "example" spun forth to illustrate his moral. The game is given away in the last paragraph as he summarises his thesis:
THE OPTIMAL TAXATION OF HEIGHT: A CASE STUDY OF UTILITARIAN INCOME REDISTRIBUTION pp 15-16 wrote:III Conclusion
The problem addressed in this paper is a classic one: the optimal redistribution of income. A Utilitarian social planner would like to transfer resources from high-ability individuals to low-ability individuals, but he is constrained by the fact that he cannot directly observe ability. In conventional analysis, the planner observes only income, which depends on ability and effort, and is deterred from the fully egalitarian outcome because taxing income discourages effort. If the planner's problem is made more realistic by allowing him to observe other variables correlated with ability, such as height, he should use those other variables in addition to income for setting optimal policy. Our calculations show that a Utilitarian social planner should levy a sizeable tax on height. A tall person making $50,000 should pay about $4,500 more in taxes than a short person making the same income.
Height is, of course, only one of many possible personal characteristics that are correlated with a person's opportunities to produce income. In this paper, we have avoided these other variables, such as race and gender, because they are intertwined with a long history of discrimination. In light of this history, any discussion of using these variables in tax policy would raise various political and philosophical issues that go beyond the scope of this paper. But if a height tax is deemed acceptable, tax analysts should entertain the possibility of using other such tags as well. As scientific knowledge advances, having the right genes could potentially become the ideal tag.
Many readers, however, will not so quickly embrace the idea of levying higher taxes on tall taxpayers. Indeed, when first hearing the proposal, most people either recoil from it or are amused by it. And that reaction is precisely what makes the policy so intriguing. A tax on height follows inexorably from a well-established empirical regularity and the standard approach to the optimal design of tax policy. If the conclusion is rejected, the assumptions must be reconsidered. One possibility is that the canonical Utilitarian model omits some constraints from political economy that are crucial for guiding tax policy. For example, some might fear that a height tax would potentially become a gateway tax for the government, making taxes based on demographic characteristics more natural and
dangerously expanding the scope for government information collection and policy personalization. Yet modern tax systems already condition on much personal information, such as number of children, marital status, and personal disabilities. A height tax is qualitatively similar, so it is hard to see why it would trigger a sudden descent down a slippery slope.
A second possibility is that the Utilitarian model fails to incorporate any role for horizontal equity. As Alan J. Auerbach and Kevin A. Hassett (1999) note, "...there is virtual unanimity that horizontal equity -the extent to which equals are treated equally- is a worthy goal of any tax system." It may, for instance, be hard to explain to a tall person that he has to pay more in taxes than a short person with the same earnings capacity because, as a tall person, he had a better chance of earning more. Yet horizontal equity has no independent role in Utilitarian theory. When ability is unobservable, as in the Vickrey-Mirrlees model, respecting horizontal equity means neglecting information about exogenous personal characteristics related to ability. This information can make redistribution more efficient, as we have seen. In other words, as Kaplow (2001) emphasizes, horizontal equity gives priority to a dimension of heterogeneity across individuals' ability and focuses on equal treatment within the groups defined by that characteristic. He argues that it is difficult to think of a reason why that approach, rather than one which aims to maximize the well-being of individuals across all groups, is an appealing one. Why would society sacrifice potentially large gains for its average member to preserve equal treatment of individuals within an arbitrarily-defined group?
A third possibility is that the Utilitarian model needs to be supplanted with another normative framework. Libertarians, for example, emphasize individual liberty and rights as the sole determinants of whether a policy is justifed (see, e.g., David M. Hasen, 2007). From their perspective, any transfer of resources by policies that infringe upon individualsí rights is deemed unjust. Daniel M. Hausman and Michael S. McPherson (1996) discuss the views of Robert Nozick, a prominent Libertarian philosopher, by writing: "According to Nozick's entitlement theory of justice, an outcome is just if it arises from just acquisition of what was unowned or by voluntary transfer of what was justly owned... Only remedying or preventing injustices justifies redistribution..." Similarly, the prominent Libertarian economist Milton Friedman (1962) writes: "I find it hard, as a liberal, to see any justification for graduated taxation solely to redistribute income. This seems a clear case of using coercion to take from some in order to give to others..." How to reconstitute the theory of optimal taxation from a strictly Libertarian perspective is, however, far from clear.
Our results, therefore, leave readers with a menu of conclusions. You must either advocate a tax on height, or you must reject, or at least signifcantly amend, the conventional Utilitarian approach to optimal taxation. The choice is yours, but the choice cannot be avoided.
© 2009 by N. Gregory Mankiw and Matthew Weinzierl. All rights reserved.
The various footnotes are also a dead giveaway as to what this argument is really all about. As [11] illustrates:
In principle, individuals would have an incentive to grow less in the presence of a height tax. For example, to the extent that parents would intentionally provide a less healthy environment for their children in response to a height tax, that could influence the optimal design of a height tax. We ignore this possibility below.
A little word-substitution and we get something worthy of the Chicago School:
In principle, individuals in the top earning brackets would have an incentive to grow their incomes less in the presence of a high top-level income tax. For example, to the extent that government would intentionally provide a less healthy environment for their citizens in response to a high top-bracket income tax, that could influence the optimal design of a high top-bracket income tax. We ignore this possibility below.
I spotted the thrust of this paper in about two seconds.
You've been taken for a ride.
More like the shotguns would come out and he'd get strung from a tree.
