Human Capital and the Income Tax

Louis Kaplow

No 4299, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article examines how to treat human capital -- perhaps the vast majority of the capital stock -- under an ideal, Haig-Simons income tax. Innate ability, investments in human capital, and uncertainty in future earnings are considered. It is demonstrated that conventional income tax treatment and proposed modifications are closer to implementing a consumption tax than an income tax. Approximating ideal income tax treatment may be feasible, but assessing its desirability would require further inquiry.

Date: 1993-03
Note: PE
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Published as Virginia Law Review, Vol. 80, pp. 1477-1514 (1994).

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