Does the Tax System Encourage too much Education?

Arbeitspapier

This paper provides an efficiency argument in favour of progressive labour income taxation. When the consumer faces a trade-off between investments in financial and human capital, a proportional comprehensive income tax tends to discriminate in favour of human capital investments. This effect is strengthened when education no longer is a pure investment, but also holds a direct consumption value. A comprehensive proportional income tax works as a tax subsidy on human capital investments, and it reduces the price of education as a consumption good. By introducing a progressive labour income tax, the efficiency distortion in the capital market may be partly neutralised.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 612

Classification and Topics

• Classification: Wirtschaft
• Subject: dual income taxation ; optimal income taxation ; human capital investment ; consumption value of education

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alstadsæter, Annette
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/76001
• Last update: 10.03.2025, 11:44 AM CET