NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Human Capital and the Income Tax

Louis Kaplow

NBER Working Paper No. 4299 (Also Reprint No. r1922)
Issued in December 1994

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.

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Published: Virginia Law Review, Vol. 80, pp. 1477-1514 (1994).

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