It is too late to raise taxes on Wadlow, but what about other tall people?
That, at least, is one possible takeaway from a new paper by Gregory Mankiw and Matthew Weinzierl that National Bureau of Economic Research spit into my inbox a couple of days ago. (Link here, though it’s subscription only.) The paper has two steps. First, they argue that the consensus among utilitarian optimal tax theorists is that we should be taxing productivity. (Since income is a function of productivity and effort, and we do not want to discourage effort.) Second, they argue that a person’s height is strongly correlated with their productivity. So why not tax tall people?
Emmanuel Saez responds by e-mail.
Well, no, to my knowledge no one is eager to tax height, intelligence, and race. But there is a prominent guy who lives at a nice home at 1600 Pennsylvania Avenue who wants to “spread the wealth around.” The moral and political philosophy used to justify such income redistribution is most often a form of Utilitarianism. For example, the work on optimal tax theory by Emmanuel Saez, the most recent winner of the John Bates Clark award, is essentially Utilitarian in its approach.
The point of our paper is this: If you are going to take that philosophy seriously, you have to take all of the implications seriously. And one of those implications is the optimality of taxing height and other exogenous personal characteristics correlated with income-producing abilities.
There are plenty of small things to say about this. Height is not perfectly exogenous — we can imagine people trying to reduce their height to reduce their tax burden, can’t we? — and the fact that the correlation is not perfect suggests there will be some individuals unfairly affected by a height tax. (On the other hand, as the government’s information gets better we could imagine that unfairness disappearing.) But mostly, I want to say this: Isn’t moral and political philosophy exactly like a smorgasbord?
Consider everyone’s favorite hypothetical from ethics 101: A runaway train is barreling down the tracks toward five workers, unaware that they’re in for a grisly demise. You are standing on a bluff overlooking the scene, in front of a magic lever that can divert the train to a separate track on which there is a lone worker. Do you pull the switch?
Yglesias on Mankiw.
More on taxing tall people and/or utilitarianism when I find it.
UPDATE: Alex Tabarrok
This goes back to a point I was making a while ago about how dangerous it is that the public discourse is so dominated by low-quality freelance philosophy done by people with PhDs in economics. I’m fairly certain that if Mankiw were to walk over to Emerson Hall he could find some folks (possibly T.M. Scanlon who I know sometimes reads this blog) who could explain to him that there’s little grounds for the belief that a commitment to utilitarianism is the main justification for redistributive taxation.
…the point here is that the marginal utility of money income declines as it grows. This is also a strong argument for believing that redistributing money from wealthy or high-income individuals to the poor or to public services will be welfare-enhancing.
Contra Alex Tabarrok’s cute post here there’s nothing contradictory between pointing out that Greg Mankiw is wrong to imply that utilitarianism-based arguments are the only (or even the primary) arguments available for redistributive taxation and also to point out that considerations related to the declining marginal utility of money do, in fact, militate in favor of redistributive taxation.
For example “Allah forbids it” is not the only reason one might decline an offer of whiskey at breakfast. Indeed, “Allah forbids it” is, for most people, not going to be an important consideration. But of course many people are observant Muslims. And insofar as you are going to be an observant Muslim, Islam will count as a good reason to avoid whiskey at breakfast.
Matt links to Neil Sinhababu on the height tax.