Greg Mankiw often says this:
A tax on height follows inexorably from the standard utilitarian approach to the optimal design of tax policy coupled with a well-established empirical regularity.
Becuase this is part of his argument against income redistribution. As I have said before (and see a nice comment there by Ilya) this is based on a misunderstanding of the theory of taxation. It does not matter what the government’s underlying objective is, whether it is utilitarian or anything else. If the government wants to raise money, for whatever purpose, say to provide education or pay the President’s economic advisors or fight wars, it wants to do so in the least distortionary way.
Minimizing the distortions means making use of instruments that are correlated with ability to pay but are exogenous, i.e. unaffected by tax policy. As Mankiw points out (the “well-established empirical regularity”), height is correlated with ability to pay and clearly the tax code does not affect how tall you are. So by conditioning your tax payments (at least partially) on your height, the government can raise the same amount of revenue as a given pure income tax with less distortionary effects on your labor supply.
It has nothing to do with utilitarianism. (And your natural objection to taxing height therefore says nothing about your attitudes toward income redistribution.)
Cheap Talk 
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February 28, 2010 at 6:50 am
Todd
Isn’t it possible to object to income redistribution without reference to utilitarianism? If so, couldn’t my objection against the injustice of a height tax still confirm my attitude that income redistribution is wrong if it violates certain other, non-utilitarian principles?
February 28, 2010 at 8:04 am
gappy
I have read a version of this critique in The Baseline Scenario (the author of that post was J.Kwak). It seems to me that *it has* to do with utilitarianism, since this normative principle requires income redistribution, which, according to Mankiw, requires a tax on height, at least if you like to impose least-distortionary taxation schemes. Hence, those rejecting a tax on height would have to reject income redistribution policies and a fortiori utilitarianism. The fact that this is a special case of the general case against income redistribution does not invalidate it.
Incidentally, I think that Makiw and Winzierl are ambivalent about their conclusions. Maybe taxing height is the right thing to do; Robin Hanson openly endorsed it. Isn’t this defensible as a flip case of the “veil of ignorance” argument by Rawls? If we agree that we should subsidize innate disadvantages, shouldn’t we tax innate advantages?
February 28, 2010 at 8:28 am
jeff
Those rejecting a tax on height would have to reject any effort by the government to raise money in a Pareto efficient way.
Or they could reject some other aspects of the theory of optimal taxation. Like the premise that progressive taxation is a way to economize on a hidden information problem.
And those embracing a tax on height need not embrace utilitarianism or redistribution of any sort. A tax on height is the Pareto efficient way to raise money for any purpose at all, even to build a basketball court for the tall people.
February 28, 2010 at 9:08 am
Dan
A tax on height is not pareto efficient if height is not exogenous. One of the determinants of height is genetic, but another is childhood nutrition, which a height tax may discourage. Such a tax might also encourage mean reversion in mating: tall people would be less likely to marry since their offspring would be taxed heavily.
February 28, 2010 at 9:37 am
jeff
True. Although these effects may be desirable if you are an advocate of height redistribution. Thanks.
February 28, 2010 at 9:18 am
Joshua Gans
I don’t think Mankiw is against income redistribution but instead wonders if economists might have something to say about it. Utilitarianism doesn’t provide that basis and also seems not to be what people are really basing redistributive arguments on.
By the way, these things can be used in other ways. For instance, after the Stern report, many who were against climate change action argued that if we cost the future generations something in terms of a bad environment we are making up for it with better technology. This was a utilitarian argument against that policy. However, if you held that view, you would equally want to redistribute current income to poorer countries. It seems that most of those who are against climate change policy similarly hold the inconsistent view that they should not do much to help the poor. Of course, the alternative is that utilitarianism isn’t working for anyone.
February 28, 2010 at 10:52 am
Tom Hickey
Jeff, in a fiat system the government does not raise money through taxation or borrowing. That is left over from the gold standard days.
The government is the monopoly issuer of its currency and there is no financial constraint on issuance. There is a real constraint, of course. If the government issues too much, that is, stimulates nominal aggregate demand in excess of real output capacity, inflation results. Then taxation is required to drain the excess. If the government issues too little, then nominal aggregate demand is insufficient to sustain real output capacity and an output gap is created the results in unemployment rising. The government expenditure should increase and taxation be reduced to stimulate spending power. See L. Randall Wray, Understanding Modern Money: The Key to Full Employment and Price Stability (1998).
February 28, 2010 at 6:26 pm
gappy
I am now reading the original paper by Mankiw and and Weinzierl. The welfare function being maximized *is* a utilitarian one, and the results of the paper, namely the superiority of height taxation compared to a benchmark model that is not using this tag, are all relative to this utilitarian welfare function. I have yet to read the details of the paper, but I assume that they are correct. But it seems that the results apply narrowly to the utilitarian case. It *does* what the government’s underlying objective is, whether it is utilitarian or anything else.
Am I missing something?
March 1, 2010 at 9:23 am
jeff
The utilitarian solution is one of many Pareto efficent solutions. The argument “discomfort with taxing height implies discomfort with utilitarianism” loses force if not just the utilitarian solution but all Pareto efficient solutions imply taxing height. You would be then led to “discomfort with taxing height implies discomfort with Pareto efficiency.” But I assume that Mankiw is perfectly comfortable with Pareto efficiency. (The resolution is either that you are perfectly comfortable with taxing height or you do not accept the other premises of the model. The comments here by Ryan, Dan, and Sean are good places to start.)
To see why Pareto efficiency, and not just utilitarianism, implies taxing height, consider the following exercise. Take any tax policy that conditions only on income. From that policy, fix the allocation assigned to the tall, including whatever net transfer to or from the tall it entails. Now, allow yourself to change the tax policy only for the short.
You want to maximize the utility of the short subject to covering the budget imbalance for the tall. (i.e. you pay the short whatever surplus you have earned from the tall, or you must collect from the short whatever net payment you are making to the tall.)
Notice that you have just allowed yourself to remove a constraint on the design of tax policy. The old tax policy was subject to the constraint that the taxes for the tall are the same as for the short. Only in extreme special cases will you not be able to improve the allocation for the short when you remove this constraint. And when you can improve, you have found a Pareto improvement.
Thus, policies which do not condition on height are almost always Pareto dominated by those that do.
To see how you will typically improve you need to understand the logic of these models of optimal taxation. They are incentive schemes. You want to tax people but then they wont work hard enough. So if you want to tax the tall, you need also to tax them when their output is unexpectedly low in order to induce them not to shirk. But when you do that, and your tax is conditioning only on output and not the fact that they are tall you are messing up the incentives of less productive agents, like the short. Often a low output for the productive is a high output for the unproductive. You are therefore penalizing the unproductive for working hard and generating high output.
You would do better by isolating these incentive schemes from one another. That way you can penalize the tall without also penalizing the short.
March 1, 2010 at 10:39 am
gappy
Thanks Jeff. That was helpful.
February 28, 2010 at 10:19 pm
Ryan
Sigh… I thought economists who think about equilibrium outcomes would have a better understanding of biological evolution. This whole talk on taxing height really disappoints me.
Influence on genetic selection is at least as important as influence on behavior.
Notice that
(1) Taxing on genetics will invariable result in a distortion of the gene pool, at least through natural selection and possibly migration if the taxation is not a world policy.
(2) Since all else equal genetic selection is optimizing for sexual attractiveness, a distortion on genetics will lead to a less attractive gene pool.
(3) A less attractive gene pool is a reduction in wealth as a loss of a positional good if the taxation is not a world policy.
(4) A less attractive gene pool is a reduction in wealth as a loss of productivity.
Some may argue attractiveness has no causal effect on productivity—and I agree there is probably quite a bit of indirect correlation—but I feel it is ludicrous to say the genetic process which has driven the biological evolution of our species has had no causal effect on our productivity. Perhaps height is merely a signal like the size of a buck’s antlers which is thought to have a primary purpose of signaling the buck’s overall health (hence merely positional). But even signaling mechanisms can turn out to be very important. Biologists believe selection for intelligence began as a signaling mechanism (necessary for complicated mating rituals etc) and hence was primarily driven by sexual selection (as opposed to the much slower process of survival selection). There is no arguing against human intelligence having been the key driver of human productivity. What about height? Do we even know?
Now suppose we go ahead and start taxing height and realize down the road that it actually is disrupting productivity, health, or overall welfare. How do we undo it? Tax shortness? It’s not so easy to repair a distorted gene pool (e.g. Blacks who have been free of malaria for generations still have a high prevalence of sickle-cell anemia).
February 28, 2010 at 11:45 pm
Ryan
If you’re going to do it, I think it’d be better to take the DNA sequence of the whole population (if this isn’t too costly), then calculate a tax rate based on the combination of alleles according to their correlation with productivity. At least that doesn’t heap all the tax onto a single characteristic. Plus it would be easier for people to date since their specific genetics would be difficult to observe and could be kept confidential (but not that confidential since people with low numbers could voluntarily show their tax returns). You’ll still distort the gene pool, but it might not be any worse than the inherent distortion of wealth redistribution. Talk about an inheritance tax if you got the wrong set of alleles though.
March 1, 2010 at 12:16 pm
Sean
Dan and Ryan make a good point about inter-generational endogeneity. Further, a tax on height would also cause massive discrimination in the workplace, because a given tax-adjusted salary can be more cheaply financed for short people than tall people. There is also the possibility of a large behavioral distortion on the labor supply side, because individuals will strongly resent being taxed on exogenous characteristics, and many will prefer to be unemployed or under-employed than pay a higher tax than their short co-worker. In short order height will no longer be correlated with ability to pay, perhaps in the current generation but almost surely in the next. No way is taxing exogenous individual characteristics Pareto efficient.
March 1, 2010 at 12:56 pm
jeff
good points
March 1, 2010 at 12:19 pm
Sean
The bad pun in the penultimate sentence of my last post definitely unintended!