If you're worried about economic rents why not reduce economic rents?

The latest attempt to justify eyewatering tax rates is to insist that high incomes are largely gained from economic rents. Thus we should tax high incomes because economic rents.

For most of the last four decades, the gains from economic growth have flowed overwhelmingly to the rich. Much of those gains to the rich weren’t “earned” in any traditional sense, but rather extracted, excess profits squeezed out of a system designed to favor those who already have power, position and wealth.

The justificatory paper is here and looks at, as it should, the manner in which American doctors, lawyers, financiers and the like make high incomes.

Well, call us Mr. Picky if you must but we do tend to think that if you’re worried about the unfairness of economic rents then the solution is to reduce the ability to claim income from economic rents. That does seem to, rather neatly, deal with the problem.

We thus find ourselves agreeing with Milton Friedman in arguing that the American Medical Association should be abolished, or stripped of licensure powers, because its existence, or perhaps licensure powers, protects those economic rents earned by doctors.

We might even go on to agree with the Cato Institute and observe the manner in which the American labour market is infested with such requirements for licensure. Some one third of all jobs require a highly restrictive licence - membership of a guild in effect - for it to be legal to perform that labour. Strip those requirements away and we reduce that ability to collect economic rents on labour income.

We’d also add our own solution. Such licences are near always state based - moving across the state line requires the acquisition of a new one with the new restrictions placed upon who may have one. Thus there is an obvious solution, use the Commerce Clause to impose Federal recognition of each state licence in every state. Given that there are 50 states then at least one of them can be relied upon to issue a licence to do whatever for $25 or the like. Licensure then becomes a boring collection of cheap documents, not an actual barrier leading to the creation and appropriation of those economic rents.

Perhaps that solution doesn’t appeal. But back to us being Mr. Picky. If you wish to complain about economic rents then you should be proffering solutions to economic rents. Not using their existence as an excuse to tax the bejabbers out of everyone. For without your offering a solution to the thing you’re actually complaining about we might think it is just an excuse to doing that taxing of the bejabbers.

And that would never do, would it?