The Wall Street Journal has an interesting article today regarding a paper by Harvard economists N. Gregory Mankiw and Matthew Weinzierl. The two economists look at how imposing a flat income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. with the rate based on the taxpayer’s height, since height is highly insensitive to change, could lead to a more efficient economic outcome given a revenue constraint. From the Wall Street Journal:
With a Democratic Congress and the White House at odds over raising taxes and by how much, a former top Bush administration economist is offering one option: increase taxes on the tall.
In a new paper, Greg Mankiw, a professor at Harvard University, and Harvard colleague Matthew Weinzierl argue that taxing tall people more than short people neatly meets the two criteria of an ideal tax system: it is both equitable and efficient. (Read the paper.)
Where does Mr. Mankiw, a staunch opponent of taxes as both chairman of Mr. Bush’s Council of Economic Advisers from 2003 to 2005 and now a blogger, come up with this?
Taxing height strikes many as “absurd,” he and his colleague acknowledge, but it “follows ineluctably” from both “well-documented” empirical evidence and the “dominant” theory of the best way to tax income.
In an interview, Mr. Mankiw said he is trying to get economists to test their own beliefs about tax theory. “It’s a challenge to the conventional model, by saying if you take this model seriously you have to buy into these conclusions that seem pretty infallible.”
While this is a reductio-ad-absurdum argument, as crazy as this sounds, there are those who favor higher taxes on individuals with higher weights. But typically, supporters of such policies aren’t as explicit about their goal as they should be. Instead, they call such policies “fat taxes” and the argument goes something like this: obese people tend to be unhealthy and thereby drive up medical costs on government. Therefore, we should tax the consumption of fatty foods. Unfortunately, these plans typically have everyone (healthy or unhealthy) paying higher taxes on these foods, even though the negative costs to society from their marginal consumption differ by consumer-type.
But under a plan like Mankiw and Weinzierl suggest, we can target obesity directly rather than through proxies like taxes on fatty foods. When each taxpayer writes his/her height on the 1040 each year, we can also have a line for weight. Then based on that weight, we can impose a special surcharge for those who are overweight based on their BMI.Share