Measuring Effective Tax Rates on Human Capital: Methodology and an Application to Canada
This paper examines the impacts of a wide range of tax provisions on the incentive to invest in human capital, and shows how these effects can be quantified using effective tax rates, or ETRs. For individuals with median earnings, ETRs on the human capital formed in first-degree university study are sizeable, although not as large as those estimated by previous authors for physical capital in Canada. When the expenditure side and its direct subsidies are also taken into account, the net effective tax rate on human capital becomes negative. The taxation of human capital is far from uniform. ETRs vary by income level, gender, part-time vs. full-time study, whether students have loans, number of dependants, and use of RESPs. The most significant differences are those related to income level. Workers at higher percentile levels of the earnings distribution throughout life may face ETRs three times as high as those for low-income workers – a result of our progressive income tax system.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993.
"On the Optimal Taxation of Capital Income,"
NBER Working Papers
4525, National Bureau of Economic Research, Inc.
- James Davies & John Whalley, 1991.
"Taxes and Capital Formation: How Important is Human Capital?,"
in: National Saving and Economic Performance, pages 163-200
National Bureau of Economic Research, Inc.
- James Davies & John Whalley, 1989. "Taxes and Capital Formation: How Important is Human Capital?," NBER Working Papers 2899, National Bureau of Economic Research, Inc.
- Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
- Lans Bovenberg, A. & Jacobs, Bas, 2005.
"Redistribution and education subsidies are Siamese twins,"
Journal of Public Economics,
Elsevier, vol. 89(11-12), pages 2005-2035, December.
- Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
- Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers 3099, C.E.P.R. Discussion Papers.
- Carneiro, Pedro & Heckman, James J., 2003.
"Human Capital Policy,"
IZA Discussion Papers
821, Institute for the Study of Labor (IZA).
- Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
- John Shea, 1997.
"Does Parents' Money Matter?,"
NBER Working Papers
6026, National Bureau of Economic Research, Inc.
- Graham Glenday & James B. Davies, 1990. "Accrual Equivalent Marginal Tax Rates for Personal Financial Assets," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 189-209, February.
- Robin Boadway & Neil Bruce & Jack Mintz, 1984. "Taxation, Inflation, and the Effective Marginal Tax Rate on Capital in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 17(1), pages 62-79, February.
- James B. Davies & Jie Zhang & Jinli Zeng, 2000.
"Optimal Tax Mix in a Two-Sector Growth Model with Transitional Dynamics,"
UWO Department of Economics Working Papers
200017, University of Western Ontario, Department of Economics.
- James B. Davies & Jie Zhang & Jinli Zeng, 2000. "Optimal tax mix in a two-sector growth model with transitional dynamics," Departmental Working Papers wp0105, National University of Singapore, Department of Economics.
- Dupor, Bill, et al, 1996. "Some Effects of Taxes on Schooling and Training," American Economic Review, American Economic Association, vol. 86(2), pages 340-46, May.
- Daron Acemoglu & Joshua Angrist, 1999.
"How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws,"
99-30, Massachusetts Institute of Technology (MIT), Department of Economics.
- Daron Acemoglu & Joshua Angrist, 1999. "How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws," NBER Working Papers 7444, National Bureau of Economic Research, Inc.
- James J. Heckman & Lance Lochner & Christopher Taber, 1999. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies," NBER Working Papers 6881, National Bureau of Economic Research, Inc.
- Perroni, Carlo, 1995. "Assessing the Dynamic Efficiency Gains of Tax Reform When Human Capital Is Endogenous," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 907-25, November.
- Michael J. Boskin, 1975. "Notes on the Tax Treatment of Human Capital," NBER Working Papers 0116, National Bureau of Economic Research, Inc.
- Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September.
- Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden, and West Germany--The Theoretical Framework--," NBER Working Papers 1058, National Bureau of Economic Research, Inc.
- Stephen Cameron & Christopher Taber, 2000. "Borrowing Constraints and the Returns to Schooling," NBER Working Papers 7761, National Bureau of Economic Research, Inc.
- Kenneth L. Judd, 1982.
"Redistributive Taxation in a Simple Perfect Foresight Model,"
572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
- Kaplow, Louis, 1996. "On the Divergence between "Ideal" and Conventional Income-Tax Treatment of Human Capital," American Economic Review, American Economic Association, vol. 86(2), pages 347-52, May.
- repec:dgr:kubcen:200182 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_965. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.