Using Human-Capital Theory to Establish a Potential-Income Tax
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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Volume (Year): 63 (2007)
Issue (Month): 3 (September)
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References listed on IDEAS
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- Allingham, M. G., 1975. "Towards an ability tax," Journal of Public Economics, Elsevier, vol. 4(4), pages 361-376, November.
- Milka Casanegra de Jantscher & Vito Tanzi, 1987. "Presumptive Income Taxation: Administrative, Efficiency, and Equity Aspects," IMF Working Papers 87/54, International Monetary Fund.
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