Now Harvard Business School economist Matthew C. Weinzierl, whose research focuses on the optimal design of tax policy, advances the case for a tax based not on how much you earn, but on your age. In general, older people up to the age of 55 would be taxed more than younger ones, giving those just starting out in their careers more cash to spend.
Under one scenario explored in Weinzierl's paper The Surprising Power of Age-Dependent Taxes, a worker earning $44,000 would face an average tax rate early in his career that is approximately 20 percent
less than when he is in his peak earning years.
The idea behind this plan is that people spend, save, and redistribute money through the economy differently at various times of their lives. A 25-year-old with an income of $100,000 and no family uses money differently than a 45-year-old parent starting to think about sending kids to college and eventual retirement. Age-dependent taxation would provide a number of benefits for the economy in terms of efficiency and equity, Weinsierl and other scholars on this topic believe.
- Lower taxes on average.
- Fewer young people saddled by debt just as they are starting out.
- Motivates against "oversaving," which undermines the tax system.
- Less taxes paid by lower-income earners.
- More efficient wealth redistribution through the economy.
Are you ready to replace the current US income tax? What's your alternative?
- Does the US Need Wealth Redistrbution?
- The (Tongue-in-Cheek) Case for Taxing Tall People More
- Policymakers Need to Mind the (Income) Gap