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A case for taxing education

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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.

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Tomer Blumkin, Efraim Sadka

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Adapt according to the presented license agreement and reference the original author.