A Case for Taxing Education
28 Pages Posted: 7 Apr 2005
Date Written: April 2005
We illustrate a novel informational feature of education, which the government may utilize. Discretionary decisions of individuals to acquire education may serve as an additional signal (to earned labor income) on the underlying unobserved innate earning ability, thereby mitigating the informational constraint faced by the government. We establish a case for taxing education, as a supplement to the labor income tax.
Keywords: optimal taxation, re-distribution, education, inequality
JEL Classification: H2, D6
Suggested Citation: Suggested Citation