Re: AltInst: Taxing Ability

"Karl R. Peters" <u1006057@warwick.net> writes:

> Another amusing idea; with my IQ of 140 and my 5+ years
> of college schooling, I'd be liable for about 10 times my current
> income in taxes. Let's stick with the current system until we
> have a better way of accurately measuring someone's true
> economic potential.
>
> Karl
> <marX>

I have to agree with Karl. ISTM any attempt to measure potential
income is mere tea-leaf reading at this point, and probably will
remain so for a long time.

I am curious as to why taxing people on earnings capacity is
"attractive in terms of economic efficiency." Am I correct in
thinking it's along the lines of eliminating moral hazard? Ie, people
not trying hard to earn more because it would mostly be taxed away?

If so, it suggests 2 other objections: Is the earnings-to-effort curve
really so flat that eliminating that moral hazard will make a lot of
difference? And wouldn't attending college be a similar moral hazard?

Which is not to shoot down your idea. Please feel free to tell me
where I am wrong.

> ----- Original Message -----
> From: Robin Hanson <rhanson@gmu.edu>
> To: <altinst@cco.caltech.edu>
> Sent: Wednesday, November 22, 2000 6:13 PM
> Subject: AltInst: Taxing Ability
>
>
> > The suggestion to tax people on earnings capacity instead of earnings has
> > been around for a long time and is attractive in terms of economic
> > efficiency. In this paper we reflect on the feasibility of such a system
> > and give an exploratory empirical implementation. We apply the Leyden
> > Welfare Function of Income, a survey based measure of an individual's
> > welfare associated with income, to derive implications for ability
> > taxation. Under the assumption that IQ and schooling reflect earnings
> > capacity, we derive the tax functions using different criteria to
> > distribute the utility loss due to taxation.
> >
> > http://www.elsevier.nl/cas/tree/store/pubec/sub/1999/72/2/1804.pdf

Robin, how accessible is this for the intelligent layman? Unfamiliar
terms like "Leyden Welfare Function of Income" make me wonder if I'd
be wasting my time.

-- 
Visit this site to make your views known: www.AlGoreLost.org
Tom Breton, http://world.std.com/~tob
Not using "gh" 1997-2000. http://world.std.com/~tob/ugh-free.html
[To drop AltInst, tell:  majordomo@cco.caltech.edu  to: unsubscribe altinst]