There are good arguments for an individual income tax on potential income, but a drawback to such a tax is the significant administrative concern regardingits implementation. This paper argues that human-capital theory provides a widely accepted and straightforward method to estimate potential income using observed characteristics of individuals, and operationalizes this approach using data for the U.S. The paper also suggests that a potential-income tax is verysimilar to a presumptive income tax. The paper concludes by reviewing some significant problems with the implementation of a potential or presumptive income tax.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 63 (2007) Issue (Month): 3 (September) Pages: 415-435 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: H2 - Public Economics - - Taxation, Subsidies, and Revenue J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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