SHOULD CAPITAL INCOME BE SUBJECT TO CONSUMPTION-BASED TAXATION?

George R. Zodrow
OXFORD UNIVERSITY CENTRE FOR BUSINESS TAXATION

자료: SHOULD CAPITAL INCOME BE SUBJECT TO CONSUMPTION-BASED TAXATION?

※ 메모:
... Jones, Manuelli and Rossi (1993) and Milesi-Ferrettiand Roubini (1998) argue that the logic underlying the desirability of tax exemption of the income from physical capital in the long run in such models also applies to the accumulation of human capital; that is, returns to human capital investments should also be exempt from tax. To the extent that the costs of obtaining human capital are foregone earnings and the tax system is proportional, this is not an issue, as the implicit deductibility of foregone earnings, coupled with taxation of the returns to the investment in the form of future wages, implies that returns to investment in human capital are in fact untaxed (as such treatment corresponds to that of saving under a cash flow consumption tax). However, to the extent that the direct costs of making an investment in human capital (e.g., tuition, books and fees) are not deductible, the resulting wage income should not be taxed. Thus, tax exemption of the income to physical capital under a consumption tax should be accompanied by the deductibility of the direct costs of investing in human capital, to the extent such investments do not reflect consumption expenditures (Judd,2001). [26]

[26] ... However, in addition to its political appeal, a bias favoring human capital accumulation may be desirable to offset (1) the effects of a progressive tax system, under which the implicit deductions for foregone earnings are taken at a low rate while the subsequent returns to investment (future wages) are taxed at a relatively high rate (Dupor, Lochner, Taber and Wittekind, 1996), (2) the absence of deductions for most direct costs of investment human capital, including tuition, books and fees (Nerlove, 1992), and(3) the differentially high risk associated with undiversifiable investments in human capital (Eaton and Rosen, 1980;Judd, 1998). Moreover, ...