I remember coming across Harvard Economics department chair, former W. Bush economic advisor, and author of our 101 econ textbook Greg Mankiw's (sarcastic) proposal for a height tax a few years back. What Mankiw basically says is that height is strongly correlated with income but something that is almost entirely outside of our control. Thus, as we discussed in glass, a tax on height will have almost no distortionary effects on productivity, it'll be the equivalent of a lump sum tax. But because it's strongly correlated with income, it'll still overall (but obviously not perfectly) be quite progressive. Mankiw argues that such a tax fits the utilitarian framework of what makes a "good tax" quite well.
I doubt anyone here will want to advocate for the height tax, and obviously Mankiw doesn't want to either. His point is that the utilitarian framework is clearly insufficient for deciding if a tax is fair. So, what do you make of Mankiw's height tax idea? To what extent do you think utilitarianism is useful for deciding what's fair? What makes a tax "fair"?
Gayer and Rosen (authors of Public Finance) wrote something interesting in the chapters for this week. I believe it was chapter 17 that they wrote about equity vs. efficiency of taxes. If taxes were solely based on inelasticity of a good or service, the government would maximize efficiency, but then most of the tax revenue would come from insulin and other healthcare goods that don't have substitutes. This is obviously an example of sales tax instead of income tax, but I think this can still be applied. A tax is fair when it doesn't prevent a large group of people from getting necessary goods and services to survive. Yes this is still quite ambiguous, but so are taxes. The entire tax system is ambiguous. Fair taxes often can be manipulated by smart purchases such as an electric vehicle or a car. I suppose one could purchase to have half an inch off of their heels to save on their taxes, but let's be real. The first rule of statistics is, "correlation does not mean causation". Just because a tax can be considered in the same field utilitarianism does not mean it is fair. Fair and being good for the majority are not the same thing. This is not something we should forget as potential economists.
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