Re: AltInst: Taxing Ability

From: Tom Breton <>
Date: Sun Nov 26 2000 - 19:33:20 PST

"Karl R. Peters" <> 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 <>
> To: <>
> 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.
> >
> >

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:
Tom Breton,
Not using "gh" 1997-2000.
[To drop AltInst, tell:  to: unsubscribe altinst]
Received on Sun Nov 26 20:03:23 2000

This archive was generated by hypermail 2.1.8 : Tue Mar 07 2006 - 14:49:12 PST