Organizations and Markets

Attack of the Public Finance Utility Monsters

31 July 2009 at 10:19 am Dick Langlois 4 comments

| Dick Langlois |

I just saw this amusing abstract from Greg Mankiw. I think it will be far too subtle for most people.

The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution

Should the income tax include a credit for short taxpayers and a surcharge for tall ones? The standard Utilitarian framework for tax analysis answers this question in the affirmative. Moreover, a plausible parameterization using data on height and wages implies a substantial height tax: a tall person earning $50,000 should pay $4,500 more in tax than a short person. One interpretation is that personal attributes correlated with wages should be considered more widely for determining taxes. Alternatively, if policies such as a height tax are rejected, then the standard Utilitarian framework must fail to capture intuitive notions of distributive justice.

Extra credit: how would such a tax affect NBA salaries — like that of UConn’s seven-foot-three Hasheem Thabeet, who was taken number two in the recent draft?

Entry filed under: - Langlois -, Classical Liberalism, Law and Economics, Public Policy / Political Economy.