Tax The Tall
The New York Times Magazine "Year In Ideas" issue is great again. One of the 70 ideas covered is Mankiw & Weinzierl’s proposal, floated in April, to tax the tall:
Should we tax tall workers at a higher rate than their shorter peers? The answer – yes – "follows inexorably" from reigning academic theories of taxation, argues Greg Mankiw. … Using optimal-taxation formulas, Mankiw and Weinzierl crunch the numbers and come up with a "tall tax" amounting to 7 percent of a tall person’s income. Short people would receive a 13 percent rebate.
Do Mankiw and Weinzierl actually endorse such a system? Far from it. Rather, they argue, the proposed tax clarifies our thinking about taxation in general. They say that height is a "justly acquired endowment" … By the same logic, they imply … the government has no right to force someone with the "justly acquired endowment" of entrepreneurial genius to pay a higher tax rate. Peter Diamond, an economist at M.I.T., says the paper’s basic mistake is the notion "that if you can draw a silly inference from an approach, then that discredits a model."
To which Mankiw replies:
If economic theorists are allowed to embrace inferences from a model that they like and cavalierly reject those that they consider "silly," what is the point of theory? That discretion gives the theorist the freedom to always confirm his priors.
Browsing blog commentary on the tall tax for an hour, I was stunned that I could not find a single supporting post (just two comments), even among economists! We economists work out all this elaborate theory, rejecting submitted papers without elaborate enough calculations, and refusing to hire those who cannot do them. But then we throw it all out the window the moment theory suggests a slightly eyebrow-raising policy?
I could sympathize if the proposal seemed to violate a fundamental moral principle, defended by ethicists for generations. But we are not talking about endorsing rape, slavery, murder, or baby eating here. We are talking about adding height as one more factor considered by a complex system of taxation and subsidizes that already considers hundreds of details, including age, marriage, children, job, hours worked, ethnicity, nation, city, housing type, kinds of products purchased, types of investment made, and roads used. How the #@$! is it a sacred moral principle that a tax system weighing all these details shall not also consider height – so sacred that even relatively-amoral economists dare not question it?
Elite academics, including economists, seem to me to display a huge status-quo bias. All policies outside a certain range of familiar possibilities seem "silly" to ordinary people. So no matter how strong the supporting arguments, elite academics feel they must reject such proposals, so as not to seem silly themselves. Thus basically only eccentric academics, resigned to never becoming more elite, endorse such proposals.
Since that describes me, let me state loudly and clearly: the economic theory is solid, so I support a revenue-neutral height tax as improving the status quo. (For complexity-neutrality also, in addition cut some other minor factor now considered.) I would also follow theory if it similarly supported taxing weight, beauty, IQ, leisure hours, or multi-year income variance. (I’m 6’0", 200lb, high IQ, and not pretty.)
Added: Mankiw says I "must be an unabashed Utilitarian", but I’ll bet he wouldn’t make the same comment about a supporter of a typical policy supported by standard economic theory. Why is this policy so different? Talking about "justly acquired" just begs the question of what is justly acquired.
Chris Dillow, Karl Smith, and Not Sneaky support it, while Megan McArdle takes a towering stand against.