Re: AltInst: Tax Inferred Ability to Pay

From: Robin Hanson <>
Date: Mon Aug 30 1999 - 13:35:27 PDT wrote:
>Taxing education, which has positive externalities, is really perverse.

It is not clear that education has positive externalities, and least
beyond that of any other investment. To the extent that education
is used to signal quality, rather than create it, education can
actually have substantial negative externalities.

The education market may have problems due to capital constraints,
but taxing it later doesn't change this either way. Also, education
is already taxed indirectly via the taxes on the earnings it makes
possible. Directly taxing education while reducing the indirect tax
needn't change the net total tax on education.

>The debates of the appropriatesness and value of IQ tests would be
>never ending. (I expect IQ has little correlation with income anyway,
>except for really low IQs.)

Actually the correlation is very strong, even for high incomes.

>1) Reduce the load for these taxes by taxing actions with negative
>externalities or where efficiency benefits from trading are now absent
>due to prohibition.
> a) Tax the hell out of sin: alcohol, cigarettes, marijuana, heroin,
>cocaine, prostitution, X-rated activities. ...

What are the negative externalities or prohibition problems with these?

Robin Hanson
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323

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Received on Mon Aug 30 14:03:47 1999

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