Robin Hanson wants someone to come out in favor of Mankiw's proposed "tall tax", which aims to redistribute the unearned windfall that tall people receive just because nature has decreed that they will tower over their peers. Peter Diamond has dismissed this argument because it relies on the premise that models which produce ridiculous conclusions should be thrown out. Mankiw's reasonable response is that if we don't throw out models which produce ridiculous conclusions, then we're just cherry picking in order to validate our priors. This would tend to vitiate any claims economics might make to being a science.
However, I am tall. Therefore, I know this is a stupid tax. Let's think about why:
1) It confuses income with utility. Yes, I get to be tall. On the other hand, I can't find any clothes that fit. I spend ridiculous amounts of time trying to contort my body to fit standard automobiles, airplanes, busses, and so forth. I also suffer from many physical ailments associated with being tall: poor circulation in my hands and feet, foot cramps (my feet are too small for my height), back trouble, and a nasty case of bursitis which I acquired because no one told me that very tall women with long legs for their height should never, ever take up cross country running.Also, my height completely crushed my childhood dreams of becoming a jockey.
2) The income is not distributed evenly among the tall: it goes almost entirely to men who got their full height very early. Why should I pay more in taxes just because my cousin can afford a Lexus?
3) Height can be associated with deadly conditions. You've got Marfans or a pituitary tumor. You're going to die young. Hello, here's a special tax on your condition, just in case your life was not already difficult enough.
4) We already have a very good proxy for earning extra income, which is . . . the extra income. Presumably, the progressive income tax is already taxing the tall for being tall, while possibly also giving them discounts for other conditions that have lowered their earnings potential.
5) I already pay quite enough in taxes, thank you very much.
6) I have noticed that the kind of economists who spend a lot of time proving that tall people are smarter, earn more, and are also probably better conversationalists and fantastic in the sack, tend to also be the kind of economists who spend a lot of time shopping at Rochester Big and Tall. This qualifies my faith in their results, and therefore, my willingnes to alter tax policy accordingly.
7) I really pay a lot in taxes.
It confuses income with utility.
Ah, but for men, this is actually even worse if you're short. Being tall also confers a demonstrable advantage in dating and marriage, outside of income.
Perhaps a tax on tall men alone, since it seems that tall women have more offsetting issues?
I think part of the theory for the tall tax is that height-related income is essentially "unearned" or "windfall" income. Taxing the top of the height curve won't encourage people to be shorter, whereas taxing income will encourage people to work less.
You may be right that at the top of the height curve, women are not in as good a position as men, which might argue for exempting women.
Mankiw's reasonable response is that if we don't throw out models which produce ridiculous conclusions, then we're just cherry picking in order to validate our priors.
As an economics grad student, I can tell you for certain that this is what actually happens in the field. Mankiw would not like to admit it but it's true. Virtually all models in papers with significant empirical sections are written and tweaked to fit the results.
I just love the notion of "unearned or windfall" income. The process of establishing wages is otherwise so precise and logical. It's just height, or good looks, or whatever you don't happen to have, that is irrationally distributed.
Yours sincerely,
Harrison Bergeron.
Well, yes, HTD, that's why a lot of us real scientists tend to look down our noses at economics.
But let's not worry about the tallness issue: I propose a tax on intelligence instead. You get screened in school multiple times and are tracked accordingly. Later on, if you make x percent above the mean, and you are y percent above the mean in intelligence, you must pay an additional tax.
This goes to something that has bugged me for a long time, to wit, people who like to casually slip in references to how intelligent they are, how much more acute they are than common mortals, etc. But, even if this is the case, they have no reason to crow. Because intelligence, you see, has everything to do with the parents you have, and nothing to do with any particular efforts on your part. No one can make themselves more intelligent simply by an effort of will, or (past a certain age) by clever and intensive instruction. If one is intelligent, one is lucky, nothing more, just as one is tall, or born to wealth, or is beautiful by birth, not design.
So who's with me on this one?
Bill,
No Question.
Personally, I think we could whack out a goodly chunk of the National Debt if we merely auctioned off one-year terms of Handicapper General.
http://instruct.westvalley.edu/lafave/hb.html
"Ah, but for men, this is actually even worse if you're short. Being tall also confers a demonstrable advantage in dating and marriage, outside of income."
I find this a confusing reason to increase the rate of taxes on the tall.
Is the role of government tax policy to penalize people for enjoying non-monetary advantages? Is there a way to even consider quantifying such a thing? What about a tall man who has trouble getting dates -- does he get a rebate on his taxes? Or are we taxing the potential to have a natural advantage in a non-monetary field just in case the individual should choose to exercise it?
Should we tax people because "others like them" make more money or enjoy advantages?
For the record, I know this makes me strange in this audience, but this is why I like the principle of flat taxes without exemptions. I see practical problems of implementation (especially at the lowest income brackets) but I like the principle of not distorting economic behavior with what governments think people should be doing. I really like not having implicit moral judgments as part of tax policy decisions.
But I understand this puts me way outside the economics mainstream!
SoV suggests a tax on the smart in addition to a tax on the tall, because both are products of luck.
Indeed. Ultimately, in my mind, as a government, you want to reward effort, and filter out (i.e. tax) everything that contributes to effort that can be described as luck.
Intelligence, Height, Beauty, your parents the contacts that your parents have, etc - are all a matter of luck.
Nominally, then, the janitor (Person X) who works 14 hour days should be paid as much as the doctor (Person Y) who works 14 hour days. I mean, the only reason that Y is an doctor is because she's more intelligent, and/or had more intelligent parents. That additional intelligence creates a cascade of positive benefits - avoiding crack, not getting pregnant as a teen, staying in school, staying in college, living beneath her means, continuing to educate herself past college.
All of these things come from the avalanche of luck that began the day you were born smarter than average.
In fact, your whole life is nothing but the weaving threads of the past, coming together in certain ways such that you meet certain people, make certain connections, decide to work harder than others. All of those things - irrevocably decided before you took your first breath.
So why should you, as an doctor, be rewarded more handsomely than the janitor? Everything that made you who you are happened before you were born - your willpower, your determination, your desire to improve yourself. I mean, at the end of the day, how can we possibly say that Person Y deserves higher pay than Person X, just because of the good fortune of additional gray matter?
Now of course, this assumes that we correlate this to educational fees - the additional years of work involved in learning to be a doctor, the debts acquired in medical school, etc - those all need to be factored in. But in the end, it seems like these two people (X & Y) should net out the exact same income.
Well, on the other hand, there's no denying that being an doctor is valuable to the country, more so than being a janitor (not that being a janitor is valueless, just not as valuable) Perhaps there ought to be a tax break for being a doctor. We can set up some sort of management board, that decides which jobs are important, and structure taxes so that people who take the jobs that are good for the country get paid more.
Hrmm. That could cause problems - what if we end up with too many Doctors? Maybe we should have a quota, and only give a certain number of Doctors the "Social Benefit" tax break.
Wow, we could do that for every single position - we could use "Social Benefit" tax breaks to determine how many of every job we want in society. How do we apportion the tax break? Well, we could give it to the oldest Doctors.. but that would be give special benefit to people with the genetic advantage of long lives. Can't have that.
I know - a lottery - we'll randomly choose some number X of all Doctors, and give them the "Social Benefit" tax break.
Well, and of course there are lots of different types of Doctors - we'll need to properly structure the "Social Benefit" and the "Social Benefit Lottery" so that they properly ensure we have the right number of people in each job. And every year, the Management Board can come together and decide if we have too many or too few of each of the thousands of jobs in the US, and decide how to shift the size of the "Social Benefit" and the quota in the "Social Benefit Lottery".
Perfect... Except for the Management Board. They're only human, after all, and corruptible. Two choices here - one is that the people on the Management Board are cut off from all other people - they are placed in special towers, without outside contact, so they can't be tempted by corruption. They can only speak with each other - the rest of their world is managed by the Keepers, who, while never having direct contact with the Management Board, are responsible for taking care of them, protecting them, etc.
Of course, the Keepers are also human, and potentially corruptible. We'd have to have some sort of Overwatch, who would be responsible for tracking the Keepers, and making sure they were not corrupted.
I know what you're thinking - we'd need an "Uber Watch" to watch over the Overwatch. I'm way ahead of you. No. Instead, we'll let the people vote on who should be in the Overwatch. Democracy in action....
Except that it would reward people for being good at politics. That doesn't seem right - it was their genetic destiny to be good at politics...
Maybe we should choose the Overwatch at random from the population at large - give them a certain number of years as members of the Overwatch, and then put them back into the general population.
There you have it! A self-contained system - the randomly selected Overwatch watches over the Keepers, who take care of the Management Board, who decide how each job in the country is compensated, based on the best interests of the country at large.
We'll finally be freed of the tyranny of smart, tall people earning more than everyone else.
This is the dumbest thing I've heard since the proposed "Baby Tax" (Or the proposed "Baby Gift" for that matter)
Whooops, I hit Post instead of Preview. The other option for the Management Board, of course, is that we choose a very large number of them, each with a small amount of control over the final tally, so that any particular corruption would be minimal.
In any case, however, we'd still need Keepers and an Overwatch.
Gee, jb, are you always this good at putting words into other people's mouths, words they patently did not say? Perhaps there should be a tax on lying. I think most of us agree that it's a behavior to be discouraged, and not good for the economy at all.
I already pay quite enough in taxes, thank you very much.
Do you? I mean, from a libertarian perspective, sure you do. But you probably pay less than most people who've had similar opportunities. You've made no secret of the fact that as a journalist you don't make all that much money, and in the US, if you don't make much money, you don't pay much in taxes.
In terms of economic opportunity, I gather that you've had it at least as good as I have. You're very intelligent, you went to good schools, and at one point you were in a line of work that pays better than mine, but you decided to give that up and go into a line of work that pays much less but provides greater nonmonetary benefits.
There's nothing wrong with that, of course--money isn't everything--but I can't for the life of me see why I should pay more in taxes than you do. That's the idea behind opportunity-based taxation--if I have a duty to pay more than those who have been less fortunate than I, then why should you be allowed to shirk your duty just because you've chosen to trade the income potential of a career in business for the nonmonetary benefits of a career in journalism?
jb: When you mentioned "towers" I was sure you were going with an academic metaphor. When you mentioned "keepers" I was sure you were going with a zoo metaphor.
Anyway, as my father used to say, "When I am Emperor, THIS is how it will be done...". No need to vote, just put me in charge.
(In the real world it's already too late. The Glaroon runs everything. I though everybody knew that.)
JB, you're close. However, remember that the doctor also might have made better investments of time and effort in early life, which is something we want to encourage, or at least to allow to be priced appropriately.
Whoops - now that I think about it, we also have a stronger societal interest, at least economically, in the doctor working an extra hour than in the janitor working an extra hour.
We can correct for this by taxing the doctor for her looks and brains, then allowing both her and the janitor to reap the full fruits of their labor. That way, we can redistribute some of the doctor's unfair bounty to the janitor without discouraging either of their incentives to work. The "tall tax" gets us part of the way their.
"Indeed. Ultimately, in my mind, as a government, you want to reward effort, and filter out (i.e. tax) everything that contributes to effort that can be described as luck."
Why do you assume effort is not as related to luck as height or intelligence? Do you think the capacity and willingness to work hard are not inherited? Even if they are not genetic, they are likely to be passed on as wealth is.
Taxes are about politics and pragmantism, not fairness or social engineering. Even when they look like they are about social engineering, it is only because some exercise in social engineering is politically popular.
Er, no, taxes are actually about paying for government services and government investments. If you go to where the money is increasingly these days, that is, the upper ten or five or one percent, they're the ones who are screeching about class warfare, about taxing 'success' or 'hard work', etc.
Okay, fine. So let's take them at their word, that they shouldn't be taxed for their hard work or risk-taking. We won't. We'll tax them on the advantages they accrued through luck of birth. Sounds reasonable to me.
I don't think there's any reasonable response to #4. Surely we can agree, whether you inherited significant or just average intelligence, that taxing income as opposed to height is a better way to, you know, tax income.
As for the non-monetary benefits, you can go back and forth on this one. Yes, women tend to like tall guys, but manufacturers of seating do not.
I'm with Megan on this one. Tax money, not characteristics.
According to one study they cite, the typical 6-foot American earned $5,525 more than a 5-foot-5-inch worker, after correcting for sex, age and weight.
You have got to be kidding me. Social science is this bad, even when performed by Harvard econ professors?
JB, you're close....
Presumably no one cares, but just for the record "jb" and "JB" are two different posters.
I'm still over in the Harvard thread trying to figure out how to save money without then having to spend it on my future children's over-priced college educations.
Does this relate to the discussion over at EconLog about experts, just go along with the experts when you are not one?
Mankiw has probably spent years on this idea gathering data and thinking about implications. Hanson has certainly known about it for a while.
What kind of position are any of us in to cast judgment on this topic.
Brandon Berg - I liked your comment.
JB - I care, and apologize, but come on, you guys are killing me!
In case it's not absolutely clear, I agree that one should tax the money, not the trait.
I'm just pointing out that those people who are whining about "class warfare" and "taxing merit" when it comes getting them to pony up to pay for governments expenditures and investments, need to consider the possibility that they're being taxed more than other people because of inherited privileges, not because their more meritorious conduct in the private sphere.
JB - I care, and apologize, but come on, you guys are killing me!
No apology necessary. I'm kicking myself for not picking an outlandish and rare nickname.
Megan, you forgot one:
8) Greg Mankiw is a boob. A boob with a Ph.D., but a boob nonetheless.
His boobosity is amply demonstrated by his actual submission of a paper asserting such a patently absurd premise. Regardless whether "a case can be made" and statistics cited showing tall people should pay more in taxes or not, and despite his claiming the fig leaf of it only being to demonstrate the inherent absurdity of "the modern approach to optimal income taxation," in reality it's just a silly argument for argument's sake. It's the kind of argument you'd get from the Discovery Institute in favor of intelligent design creationism: "see, your so-called science can be so absurd, so it has to be invalid." Boob.
This reminds me of the old joke (Friedman is said to have particularly loved it):
All great economists are tall, except Milton Friedman (5'3") and John Kenneth Galbraith (6'8").
I like the joke, too (Stigler, I think?).
Except that joke doesn't really work, unless you include the converse: All tall economists are great.
But then it loses the punch of pithiness.
How about penalizing the smart who under-earn? Lazy smart people, squandering all their good luck.
How about penalizing the smart who under-earn? Lazy smart people, squandering all their good luck.
This is meaningfully similar to one of the central ideas of G.A. Cohen's last decade of work-- that Rawls' Difference Principle as a justification for inequality is wrong because it presumes that the talented have the right to withhold their services from society, and so to blackmail society into paying them more than they need. If only we understood that those John Galt wanna-bes aren't acting legitimately in the first place by witholding their contributions, then we'd understand that inequality can't be morally legitimated by the need to provide incentives to them for their contributions,
I really pay a lot in taxes
You do? I must have seriously underestimated how much professional bloggers earn.
Tax blog posts. By both volume and length. Retire the national debt and clear the intertubes in no time. Plus likely enormous increase in national productivity, assuming of course that posters wouldn't spend their free time masturbating in some other manner and that they actually have something productive to do instead.
jb - great post
Honestly, using taxes as an incentive is stupid. If we're going to discuss how things SHOULD be, we should cut out all the unnecessary government services (I get to decide) and then figure out how much money is needed to operate the government with what's left. That should be collected from the people in a fairly simple and somewhat progressive fashion.
Personally, I'm in favor of a modified consumption tax and in eliminating income tax and the IRS and all of the complications that go along with it. By modified, I'd vary the tax rate so that basic goods (food, clothes, etc...) were taxed at a very low rate or not all.
But I know that the reality is that we'll keep our income tax and the government (at the behest of various busybody groups) will keep trying to use taxes to make people do the "right thing," whatever that is.
EI
EI, the one part of the Mankiw idea that's valid is that it points out the potentially absurd aspect of the contemporary focus on shaping taxes so they don't interfere with incentives to produce -- namely, when you really pursue this argument, you wind up with results that feel instinctively ridiculous. When Megan says (and most would agree) that it's ridiculous to tax tall people who aren't rich more just because they're tall, she's rejecting a strong argument that people who are tall but are not earning more than short people must on average be lazier than those shorter people. In other words, they are not incentivized to work as hard as shorter people are, because they can gain the same amount of money while doing less productive work. But it just feels instinctively wrong to tax a poor tall person more, just because she's taller. Why? For the same reason that it feels right to tax someone who makes $60,000 a year more than someone who makes $50,000: because people who earn more should pay more to support government, because they can afford to, because they're benefiting more from the social system, and so on. We instinctively feel that it is wrong to structure taxes purely on what produces the greatest incentive to work; an idea of fairness based on the ability to pay also has to play a role.
Which is why the national sales tax concept has a lot of hurdles to overcome.
The real problem with this is that it institutionalizes inequality. Let's say I'm 6'5", and I have a wife and two kids, ya de ya de. I get taxed higher because of the assumed advantage of height. Now, I can make a claim that would be valid, that my employer should pay me more because I am taller-I am, after all, being taxed for my supposed advantage, so I need the extra income to make up for it. I have a family after all, so it's not just about me. My employer has to decide whether the claim I make is valid. If he accepts the claim, then he de facto accepts the absurd notion, advanced by the new tax system, that height actually contributes something meaningful to productivity (which may be true in the NBA, but not in accounting or the vast majority of other human endeavors insofar as I can tell). A tax on height would perversely enshrine height as an economic feature according to the very terms the ostensible purpose of the tax would be to mitigate.
According to one study they cite, the typical 6-foot American earned $5,525 more than a 5-foot-5-inch worker, after correcting for sex, age and weight.
Did the study correct for race? Hispanics tend to have lower incomes than whites and also tend to be shorter.
Tax blog posts
Better yet, tax blog comments.
Or, tax spam. Hormel pays taxes on profits from Spam (tm) and spammers should be paying eye-bleeding high taxes on spam. If they don't pay up on time, we'll submit them to the flaying industry.
We instinctively feel that it is wrong to structure taxes purely on what produces the greatest incentive to work; an idea of fairness based on the ability to pay also has to play a role.
What does fairness have to do with "ability to pay" (by which I assume you mean actual, and not potential, income and/or wealth)?
That is, why is it fair that I pay more in taxes than someone who has had the same opportunities as I have, and who has chosen to use them to pursue a career which doesn't pay as well as mine but offers greater nonmonetary benefits, or even someone who has simply wasted those opportunities?
On the flip side, why is it fair that I be taxed less than someone who's had the same opportunities as I, but who's put in 100-hour weeks building a successful business or training to become a doctor? If my extra leisure time isn't taxed, why should their extra income be?
If it's really about fairness, it makes more sense to tax opportunities than to tax results. There's more to life than money.
Wow! Mankiw's proposal is simply brilliant. This entire thread is proof of it.
Not any more brilliant than if he had simply written a paper that said "the current model for determining optimum income taxation levels is flawed." But no, he felt he had to make a silly hypothetical to illustrate his thesis. Maybe this qualifies as humor in economist circles. To me it just looks like being a boob. But then I don't get the point of Johnny Knoxville and Steve-O's stupid human tricks, either.
Greg Mankiw: the Steve-O of economics.
liberalrob,
If he had written such a paper, neither I, you, nor any of these commenters would have been thinking about it.
Here is Mankiw's and his coauthor's (Weinzierl) conclusion :
I see lots and lots of attempted avoidance.
Megan -
Your #4 misses the point. The point is that taxing income directly is distortionary, so we need to find a proxy that correlates strongly with income but for which individuals can do nothing about.
Because it's a stupid, silly argument; why bother? Nobody's ever going to advocate a tax on height; that's Mankiw's whole point, I get it. But rather than take it on head-on, he decided to make this reductio ad absurdum example and thereby implicity demean and denigrate anyone who argued in favor of the status quo: "either agree with me or be someone who advocates a tax on height." It's a chickensh!t way to argue. Pardon my French. That kind of stuff you expect to see in a bar or on a blog, but not in serious policy discussions and not by someone who expects to be taken seriously in an academic setting.
He's being a boob. No two ways about it.
EI,
Taxation creates incentives and disincentives, so we should use our tax policy to incentivize what we want, and punish that which we don't want. We don't want poverty, we want wealth. Therefore we should tax the poor and not tax the rich. This seems to align out tax code with our socially desired outcome.
So liberalrob, under what circumstances is a reductio ad absurdum argument acceptable to you? Is this one worse than other similar arguments, or is the very idea of pointing out that good principles can have bad consequences if carried to extremes offensive to you?
Because, taken to its extreme, that principle would ban discussions of principles altogether.
Yes, it is extremely uncomfortable to have to admit that one's priors really don't have as firm a basis in logic that one once thought.
This thread demonstrates this aptly.
Really, the Parallel postulate has a basis in logic? That's news to me. No, it's an idiotic argument because when people usually argue on the basis of utiltiarian outcomes, the preference stems from "it's usually a pretty good idea", not "we can take this as a given" or "we adopt this as an axiom." Heuristics instead of an axiomatized system.
Which also is a pointer as to when reductio absurdum arguments are valid: when one is dealing with a heavily formalized system, libertarianism, for example, or objectivism (and which incidentally also show the inherent silliness in both of those philosophies - I think that this is where Mankiw is really coming from.) And of course, being a math guy, I use this type of argument all the time.
One final point, I agree with liberalrob about Mankiw's motivations and essential dishonesty: he's trying to cast a weak sort of utilitarianism (and really, this sort of dishonesty has been used for, I don't know, over a millenium, and is well known to most philosophers) as just as axiomatic as some other types values. It's not of course.
why is it fair that I pay more in taxes than someone who has had the same opportunities as I have - Brandon Berg
So, you're for the height tax, right? Tall people have more opportunities, so they should be taxed more heavily?
Alright, so i'm seeing this too much nowadays, and it bothers me. What is up with the idea that taxing someone more encourages them to work less? This doesn't make any sense to me at all.
Ooooo, some economist read Harrison Bergeron and turned it into a post on taxation. Here's Kurt Vonnegut from beyond the grave: Thanks, and **** you.
So liberalrob, under what circumstances is a reductio ad absurdum argument acceptable to you? Is this one worse than other similar arguments, or is the very idea of pointing out that good principles can have bad consequences if carried to extremes offensive to you?
Reductio ad absurdum arguments are useful for the sole purpose of showing that every principle is stupid if taken to extremes. It's a nice little logical trap for catching people who are dumb enough to think reason and logic are the alpha and omega of value judgments.
The way to escape reductio ad absurdum is absurdly easy: (1) Ignore it, and don't let some twit call your entire principled edifice into question by insisting that you follow it over the cliff; or (2) Don't have any principles.
[And if anyone says that not having any principles *is* a principle, you're missing the point.]
Of course, this entire post can be explained away by personal bias. I'm 6'4, and I'll kill anyone who tries to tax my height. ;-P
gerontion,
Your wages are basically the price for which you are willing to sell an hour of leisure. Every hour you work is an hour you can't sleep, play with your kids, snowboard, whatever.
Raise taxes, and you reduce the value of an hour of labor by taxing part of it away. Some people will find that it isn't worth their while to put in another hour at work; they enjoy time at home more than they enjoy the wages to be gained from more work.
We're assuming, of course, that your basic needs are met and you're basically balancing disposable income against leisure time.
gerontion, there are probably a small number of people who are trying to achieve a certain income goal for some reason who will work more if taxed more, but they are the exception. The vast majority of people will end up working less if they are effectively getting paid less for each hour or work.
And I'll second what Immoralist said about reductio ad absurdum arguments... after all, it's in the name: "absurdum" It works fine in mathematical systems where you are deriving a rigid set of rules that must be 100% consistent. In social policy, though, there is no set of rigid laws that always apply. People are irrational, inconsistent, and unreliable.
EI
Do you honestly think most people would rather work at a job making $40K/yr if they were only taxed 5% as opposed to a job making $200K/yr if they were taxed 50%? I beg to disagree.
Yes, it is easy to "escape" the reductio ad absurdum by avoiding discussing it, however, in this case, by doing so, you can no longer justify tax policy on purely utilitarian grounds.
And, I would also argue that taxing height really isn't all that absurd- it only violates the current status quo. We already tax certain endowments disproportionately, and we tax people differently based on where they live, or how many children they have. What is considered absurd is deeply affected by culture.
At least Megan, in her arguments, attempted to argue against the tax by showing the tax itself isn't justified on utilitarian grounds, and I think some of her arguments would mitigate against the magnitude, but would not completely eliminate height as source of tax differentiation.
SoV,
Two things: If the two jobs had the same hours, educational requirements, stress, etc, probably not. But they almost certainly don't, so the question is whether the extra downsides are justified by the upside. It may be that the $200k job is worth $150k/yr in educational debt service, lost leisure, and frustration. In that case, the high taxes make it unprofitable for most people, so few will want to do it.
Someone making $40k a year is almost certainly working MUCH harder than someone making $200k a year. MUCH harder.
That person making $40k a year probably has LESS leisure time, since those at the bottom of the corporate heirarchy don't get lots of vacation days and often have to work on holidays. Most likely the guy making $40k has much HIGHER frustration due to inability to afford the new iPod and SUV the guy making $200k takes for granted.
The blanket assumption that someone making $200k is working harder than the person making $40k and therefore we shouldn't discourage him by raising his taxes is simply incorrect. It may be true of SOME jobs, but not all, and in fact I doubt it's true of many.
And one more time, I'll say it again and again: most people don't consider the tax implications when deciding whether to work harder for a higher salary.
Sure I can justify it. It's easy. Watch, I'll do it right now:
"Mankiw's argument is ridiculous, therefore I ignore it, and continue to maintain that tax policy is justified on purely utilitarian grounds."
See how easy that was?
If Mankiw comes back with a serious argument and turns out to be right, so be it; but he's going to have to make a better argument than the one he's presented. Until he does, I'm happy to take my chances betting against him.
Mankiw's greatest hits:
"Outsourcing is good for America!"
"Flipping burgers should be counted as manufacturing!"
"Mitt Romney for President!"
0-for-3. And with this swing-and-a-miss, he gets the Gold Sombrero.
liberalrob, if you have any links to job postings for $200k/yr that are as easy as you say, I'd like to see them. It might be time for a career change.
most people don't consider the tax implications when deciding whether to work harder for a higher salary.
That may be true today, but jack up marginal rates enough and it will change.
Everyone, from bottom to top, benefits from our organized society. The degree doesn't matter a whit. Tax everyone a set percentage of his gross income, to be paid on April 15 in a lump sum, no deductions, not withholding, no cushioning of any sort. That will bring government spending under control.