According to Megan McArdle at Bloomberg Views she heard the idea of a tenure tax at an economic conference she attended. The idea is treated as a subset of the idea of a wealth tax.
Not to me.
To me a tax on tenure is not an idle concept related to a wealth tax. To me it is a tax on a labor market monopoly. People who can not be fired impose a cost on the entire society for two reasons.
The most important reason is that they become a barrier to meritocracy. They permanently occupy a potentially productive position as a meritocratic failure. They block the potential output of a more competent or more productive person. Think of your average bored and tenured teacher who can’t be fired for blandness. They occupy a job that could be held by a productive inspiring teacher.
Second, they create a labor market rigidity. In a market where people can’t be fired social adaptation is thwarted. A worker who is productive at night is blocked from working the night shift by the tenured person who hates working nights but has that time slot.
To me, a tax on tenure would apply to any job where the restraint on firing the worker presents significant obstacles. Say more than 100 hours of work by management to fire the person for mediocre output. The tax on tenure would apply to nearly every union job.
How much would the tax on tenure be?
I take the issue seriously. I use a present value calculator. Assuming a low level unionized city worker who’s average 40 year income is $100k in current dollars. Discount that at 3%, the longterm U.S. inflation deflator. The present value of that tenured job is $2.3 million. Tax it on the annual amounts of $58,000 that would be paid over the 40 years. In addition to the tax on the actual year’s income.
That makes sense to me. We would be taxing the value of tenure, which is the present value of having a lifetime job the person can’t be fired from.