Saturday, December 08, 2007

Taxing talent, taxing height, taxing beauty

I'm pretty talented and reasonably tall. However, I'm not beautiful. Now that the debate over taxing good fortune is being broadened out hopefully my biases should start to be smoothed over.

Chris Dillow posted recently on a beauty tax, asking whether it was any more ridiculous than a tax on the rich. He supports a tax on the rich, in part, because of moral luck. Because you are lucky to be born talented or hard-working. Exactly the same logic can be applied to a tax on beauty, height, or much anything else.

Greg Mankiw applied (PDF) the logic of optimal taxation to height and found that it would imply significantly higher taxes for the tall. I think that the conclusion he takes from being able to draw this inference also applies to the argument Dillow makes:

The Times also quotes a critic:

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.” He comments: “I think there is probably no model that passes that test."

I wonder what Peter's alternative approach is. If economic theorists are allowed to embrace inferences from a model that they like and reject those that they consider "silly," what is the point of theory? That discretion gives the theorist the freedom to always confirm his priors. The economist ends up using theory like a drunk uses a light post--for support rather than illumination.

5 comments:

Kit said...

As the old adage goes:
"Tax it and you get less of it.
Subsidize it and you will get more of it."

Do you want to live in a shorter, talentless, ugly world?

Bretwalda Edwin-Higham said...

Tax on beauty. Who decides?

Matthew Sinclair said...

Indeed James. One could say the same about a tax on the wealthy. I could have been wealthier but less happy had I chosen a different career. Why should the choice to sacrifice workplace fulfilment for extra earnings be penalised? Why am I effectively going to be subsidised for my particular trade of income for fun work?

A tax on the rich should be a tax on the 'better off'. Another failure of redistributive taxation is that it fails to distinguish the two.

Meg said...

You can only analogize a tax on beauty to a tax on the wealthy if part of the beauty tax revenue is going to beautification processes for the less attractive. The point of taxes is to provide things that everyone needs and that government has a reasonable responsibility to provide. (a) No one "needs" beauty, not in the way they need money for food or whatever. (b) You would probably disagree with me about whether or not government really does have a reasonable responsibility to provide the things on its budget list. But if that's your argument, it has nothing to do with the method of taxation. Either way, the idea is that wealth, unlike beauty, is directly correlated to food, clothing, and a roof over your head. Otherwise you're taxing lower-income gorgeous people to beautify ugly wealthy people, and a libertarian like you couldn't possibly make that argument.

I suppose there's an argument to be made that beauty, like height, is CORRELATED with earning more money and therefore those people should be taxed more. But they're already paying more taxes on the money they make off of their beauty, so how can you justify an additional tax on the same income (not to mention that you'd be lumping in the aforementioned lower-income pretty people)?

Bretwalda Edwin-Higham said...

:)