Mankiw’s Tall Tax

Famous Economist Gregory Mankiw has a working paper with Matthew Weinzierl on the optimal tax being a tax on your height and not one on your income.

This from the paper:

"The theoretical leg is that, according to the theory of optimal taxation, any exogenous variable correlation with productivity should be a useful indicator for the government to use in determining the optimal tax liability. The empirical leg is that a person’s height is strongly correlated with is or her income. Judge and Cable (2004) report that "an individual who is 72 in. tall could be expected to earn $5,525 [in 2002 dollars] more per year than someone who is 65 in. tall, even after controlling for gender, weight, and age."

This pretty much is the basis of the idea that something that isn’t income, so that is doesn’t discourage people to work more, should be taxed. Since most of the time taller people are paid more than shorter this seems a very logical following. Obviously you can not talk about "fairness" here.

So the question is raised what causes a 2 percent increase in income for each inch a male is tall?

One theory is that when you grow tall as a adolescent, you earn a type of human capital and education that is different in society than someone who is short. This could lead us to believe that it isn’t height but the way people are treated by peers as a teenager that will increase or decrease there income.

This is definitely an interesting thought and seems well written thus far. The problem I have with it is the same that many people have, which is addressed in the paper. That is that if people get used to be taxed for a demographic then why not have a black/white + tall/short tax. This equation could continue forever.

The argument against it is that we already tax on martial status and so on.

Of course another problem with this is that it increases government power of having information about you and trying to keep it accurate. A tax audit would consist of you being measured constantly.

The paper can be found here.

Published in: on March 10, 2008 at 6:26 pm  Leave a Comment  

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