Re: Taxing Intelligence/Talent (was: 'Waterhole' and land rents)

On Sun, 21 Jan 2007 13:34:55 GMT, "Dan in Philly" <djr8@xxxxxxx>
wrote:

"S. Doo" wrote in message ...

The original idea was to compare intelligence with land, and taxing them.
Well, brains by themselves don't buy a high income for anyone

True, I should have specified *marketable* intelligence (also talent). IOW,
something that allows you to earn more money than other people (for a given
amount of work time).

If you want to tax "intelligence" you must be very careful to tax
intelligence and not the work done with it, or anything else.

So just tax a selected measure of intelligence: E.g., slap a tax on
people based on their IQ, the higher the IQ the higher the tax.
PERIOD. They pay the tax whether they work or not.

This a variation on the "lump sum" tax (or the "head tax") -- the
most efficient of taxes since it changes economic behavior not at all.

Since you are going to pay $X of tax in a lump sum, no more no less,
whatever else you do, there is zero incentive to change whatever else
you do. You are still going to go out and get an education and the
highest-earning job you can, work the same hours, etc., to the same
extent you would have otherwise.

OTOH if you tax earnings from *using* intelligence, you create
incentives to change all kinds of behavior.

And attaining a valuable scarce skill usually means first making a
costly investment in education.

Also true. And (as with the LVT) people should be allowed to deduct this
expense from their taxes. But note: two people can get the same education,
yet one will be 'smarter' and earn more money.

Or the dumber one can earn more money. All kinds of things besides
intelligence affect level of earnings: work effort, aptitude for a
particular kind of work, personality, friendships you make, nepotism,
luck, the kind of work you choose to do, how the industry you are in
happens to do 20 years after you join it, etc., etc. etc.

The question is: can we tax
away the extra income of that smart person without affecting anything.

Not unless you can identify the wage effect of intelligence alone
among all those other factors, on a person-by-person basis, which you
can't.

Besides, why tax away rent only to intelligence?

Why not tax away rent that to having a winning personality, rather
than one everyone hates and which just can't get along with
co-workers?

Why not tax away rent to having a workaholic personality rather than a
lazy one?

Those things certainly affect earnings as much if not more.

But then you have the ones working 70 hours a week to reach the huge
bucks at the top of their fields -- once those bucks are taxed away,
they may well say to hell with it all ...

That's why a tax on intelligence/talent may be unworkable. I don't see any
way to separate earnings due to intelligence from earnings due to effort.

Exactly -- or due to many other things either.

Of course, at the high end (multi-million $ salaries of CEOs, basketball
stars, etc) you could tax all of their income above a certain amount (say
one million $) and I doubt that any of them would quit.

No, but you could sure see two things very quickly: Hollywood
turinging right-wing on a dime; and a huge resurgence of the tax
shelter industry that was largely put out of business by the 1986 tax
reform that greatly reduced top tax bracket rates (and which was
largely enacted for just that purpose).

Dan in Philly

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