Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76001
Authors: 
Alstadsæter, Annette
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 612
Abstract: 
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.
Subjects: 
dual income taxation
optimal income taxation
human capital investment
consumption value of education
Document Type: 
Working Paper

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