Another Thing About Taxation

What Place a Morality Tax?

Tax Day, New York City, by Amit GuptaWhen you start thinking about tax it’s hard to stop. Having written my weekend post on tax and governance in Hong Kong I began to think about the extent to which taxes are warranted beyond the fair maintenance of society and its institutions. In a place like Hong Kong taxation isn’t the main form of government revenue, so it’s hard to argue for more progressive tax rates. But what about as a general principle? How do we determine the scope of taxation that best suits a given society?

Daniel Hamermesh and Joel Slemrod have been working on one answer for a while: a tax on workaholism.

The pair recently published a paper entitled “The Economics of Workaholism: We Should Not Have Worked on this Paper” in the B.E. Journal of Economic Policy & Analysis. But the effort, provocative as it might seem, didn’t cause much of a stir. The paper had already been issued in 2005 as a NBER working paper, and even then made only a passing fuss (amongst others, the Ayn Rand fan club, the Atlas Society, was predictably unimpressed).

Still, it’s worth a thought. Hamermesh and Slemrod liken workaholism to a physiological illness, given that it’s an addiction and has consequences for co-workers and families. They note that other addictions attract taxes on the goods associated with them. ‘Sin taxes’ they’re usually called, and they’re supposed to halt the effects spreading into society. So high taxes on cigarettes help to reduce smoking, which both reduces passive smoking and relieves the financial pressure on the public health care system.

The answer for workaholism, it seems, is to hit workaholics with higher personal tax rates. Remember, it’s all about social service.

BJ, 終電おとこ (Last Train Man), by moogs, with Creative Commons licenceBut the problem is that the pair base their argument on the presumption that only one particular type of person is a workaholic. Citing the Canadian General Social Surveys from 1998 and 2005 (curious for a US-based study, and certainly “informal” as they mention), they claim that workaholism is more prevalent in the higher income brackets, and then focus on office-based professionals.

From amongst many possible rebuttals, I have a two-word reply: ‘building industry’. Despite the myth of the high paid plumber, I grew up around obsessively hardworking tradesmen in the Australian building industry who earn far less than the bankers snorting cocaine in Central late on a Hong Kong Friday night.

Construction Worker Portrait, by Saad.Akhtar, with Creative Commons licenceSo if you want to impose a tax on workaholics – regardless of the sort, duration and clinical validity of the psychoanalysis that establishes their condition – you had better be sure that you’re targeting the right people, and that the tax wouldn’t have any unfortunate effects.

But if higher-income professionals really are the main workaholics in your society, then there’s also a problem. These people are far more likely than lower-income tradesmen to seek medical help from the private sector for overwork and its attendant physical and psychological illnesses. The more they work the more they spend (or private insurers spend for them), and the more the private sector benefits. A ‘sin tax’ in this scenario would do nothing to ease the burden on public health care, and could do a little damage to the private system.

Even if personal income tax is redirected en masse towards hours worked rather than earnings, as Hamermesh and Slemrod mention in passing, then the tax burden is still likely to fall on others than those intended – day labourers, for instance, or freelance editors. Are these people necessarily sick? I doubt it.

Curiously enough, talk of tax drops away as the pair draw their conclusions, with space devoted only to workplace participation and the behavioural implications of workaholism. So the tax issue is slippery, easily evoked but difficult to keep in the picture.

Hamermesh and Slemrod voice the conventional hope for further research into the issue. Perhaps there isn’t enough interest in academic economics to grant them fellow travellers. But I hope there is, and I also hope for more, and wider, debate. If simply taxed out of the labour market, what would workaholics do? Perhaps other methods could better help them and us.

Confused, by djloche, with Creative Commons licenceShould taxation be about morality and value judgments, or about the more dispassionate accumulation of government revenue with which to regulate society? It seems to me that Hamermesh and Slemrod skip easily from the private to the public sphere without accounting for the movement. Or maybe they just failed to recognise the difference. It can be a puzzling world.

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