A Simple Objection To Greg's Height Tax

Greg is getting some press for his and Matthew Weinzierl's working paper on height taxation and its affront to standard notions of equity. Yet, I think the paper falls short when it fails to recognize the importance of the height-income effect mechanism.

Here is a simple example that shows why the mechanism is relevant. This is written in a tone familiar to economists. If there is enough interest among non-economists I can do a more thorough explanation.

Suppose that base income is drawn from a normal distribution. Then nature distributes a bonus to 50% of all tall people. This introduces a strong height-income effect.

Wanting to correct for this economists suggest that the social planner institute a tax on the tall and redistributes the income to the short.

However, she rejects the proposal because it fails her Rawlsian analysis.

The distribution of income for tall people conditional on not have received the bonus is the same as the distribution of income among the short. Therefore, the poorest tall person has roughly the same income as the poorest short person. Therefore, if she takes income from all tall persons the poorest tall person will likely become poorer than the currently poorest person.

Since her objective function is max min(all agents) the tax decreases social welfare.