Week in Insights: Taxing Star Athletes More Is Unfair Policy

Recently, there’s been some chatter in the tax and economics world about taxing star athletes more to make their pay proportional to the value they provide.

One side argues that stars are rightly paid more because they’re rare—that is, their value is tied to scarcity. The other side counters that their prowess is tied mostly to luck and their relative additional value over a regular athlete, vis-à-vis spectator turnout, is marginal. They’re earning “scarcity rents” that should be curtailed.

The bit about luck has some truth to it. And tax policymakers generally oppose windfalls due to happenstance—see estate taxes and ...