Notes on the Tax Treatment of Human Capital

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Section 1 presents a preliminary attempt at clarifying the ways in which taxes affect human capital accumulation. Section 2 outlines a simple general equilibrium model with two capital goods - physical and human – and the saving corresponding to each, to begin to deal with these issues. Once human capital is viewed as an alternative source of wealth and hence human capital investment as a source of current saving (re-sources withdrawn from current consumption to help increase future output),the old issue of the differential tax treatment of alternative types of capital arises. Sensible tax policy with respect to the taxation of either physical or human capital must take into account the tax treatment of the alternative asset. Section 3 outlines some points of departure for such an analysis.

Published: Proceedings of the Treasury Conference on Tax Policy, U.S. Department of Treasury, 1977.

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