Vonnegut on taxation
Posted March 10, 2008on:
In the comments for my post on taxing observable characteristics that are correlated with income, CPW asks what I think about Kurt Vonnegut’s tale of Harrison Bergeron. I don’t plan to venture into literary criticism which I have no expertise in, but I liked the story enough that I can’t resist posting on it!
The first thing to note is that Vonnegut presents a very dystopic view of society. Everyone is handicapped to have equal capabilities and reduced to the lowest common denominator. Nobody is allowed to excel at anything in any way. However, the counterfactual scenario implicitly presented is a society dominated, if not ruled, by eight foot tall supermen like the eponymous Bergeron. I doubt that either situation is particularly appealing to many people. What, then, distinguishes taxation of ability from Vonnegut’s rather disturbing tale?
First, taxation of ability doesn’t reduce everyone to the lowest common denominator. Those who are above the median are taxed, but those below the median are subsidised.
Secondly, and most importantly, it is the monetary return to effort that is equalised, not ability. What is so distasteful about Vonnegut’s story is that the best and brightest are prevented from shining. Taxation in no way removes their ability to demonstrate their talents, it only prevents them from earning monetary returns over and above those that the median person would earn from putting in the same effort. Note also that, in practice, only observable characteristics are taxable and ability is not generally measurable.
If it seems unfair to those with talent to monetarily penalise them, consider the current tax scheme. The current scheme of progressive taxation means that those who are paid the most are taxed a far higher marginal rate than everyone else. Since income is a relatively good proxy for ability, the current scheme also indirectly penalises those with talent and transfers income to those endowed with less. Not only that, but it reduces the marginal return to effort as one earns more. If one supports the current scheme then surely a scheme which also penalises the same talent, but at less of an allocative cost, is preferable.