As the Obama Administration considers ways to pay for their proposed universal health care system, and everything else for the matter, old habits like cigarettes, and growing ones like soda consumption, are being considered for new and/or higher taxes. While it seems like everything is currently on the table, the administration may only need to look up for inspiration, and another source of revenue. Greg Mankiw and Matthew Weinzieri, both from Harvard, have proposed taxing people based on their height (see the Fox Business News article). Crazy and arbitrary? Maybe not.

To backup their proposal, Mankiw and Weinzieri cite studies that show a correlation between height and income. As it turns out, previous research found that each inch of height added about 2 percent to a man's income on average (sorry ladies, only men were considered in the study). Statistical data snooping? Once again, maybe not. According to the theory, it is believed that exhibiting height early in life allows adolescences to develop characteristics such as self-esteem that are later rewarded in the labor market. Others, conducting similar studies, hypothesize that proper pre-natal and childhood nutrition also helps to explain the correlation between growth (height) and cognitive ability (also helpful in the labor market).

Carrying things forward, since tall people are more desired by the labor market, they of course will earn more money, and subsequently pay higher taxes. So who cares you might say. Even if tall people do make more money, they are already paying more taxes. How do you generate more revenue? Simple. Tax those who are tall, regardless of their current income level. After all, as the researchers mention, if the goal is to “maximize the level of happiness through a redistribution of income,” then why not tax those people who are not only already happy (i.e., rich), but also those that are most likely to eventually be happy down the road.

While some may be thinking that this is just another academic study, and therefore a waste of time, it does offer some important points, even if we never tax people based simply on height (at least I hope not, given that I am over 6 feet tall myself). Weinzieri asked the question: "Does government have the right to ask those who have the ability to earn more to pay more?” When taxes on cigarettes and soda are consider to pay for health care, are we not in many cases penalizing healthy individuals because we think that they have a higher chance of getting sick down the road? Could we do the same for tall people, in the name of spreading the wealth and happiness? Carried further, why should someone buying a new car pay more personal property tax than someone with an older car, when the new one is probably more fuel efficient and better on the environment (and the health of everyone)? Are we taxing the correct source, or promoting the behavior we desire?

In conducting and publishing their latest research, Mankiw and Weinzieri have not simply pointed out a statistical correlation, or helped to justify a new tax system. Instead, they have done something far greater and more useful. They have introduced new questions for everyone impacted by the existing tax code, or those looking for new ways to justify taxing one group over another. In short, they have created a dialog. Socrates would be proud ......... as would a few flat tax proponents.

In another example of "unintended consequences," some bond holders are beginning to avoid companies such as General Motors, after the recent moves by the Obama administration to short-change its creditors (see Bloomberg article). Companies with strong unions or extensive medical and pension legacy cost, similar to those at GM, may find it difficult in the future to obtain the funding they need from those labeled by the administration as "speculators". Even those that are still willing to lend will now do so only on their financing terms, which will most likely involve higher rates to compensate for the added credit risk each investor is now taking for the possibility of being "leapfrogged in a bankruptcy," according to those at Schultze Asset Management. In addition to the other automakers, including Chrysler and Ford Motor, companies such as AMR are also being shunned. The irony is that each of the car companies will probably be looking for financing in the future to help fund new energy efficient technology, such as hybrids and more efficient engines, yet they may find the terms offered in the markets unacceptable for making a profit. This of course will no doubt result in Joe tax payer once again making up the difference.