Tax effects on education

Abstract

Taxes affect the individual’s educational choice through many channels, and they have both direct and indirect effects on human capital accumulation. The structure of the tax system creates different incentive effects that distorts the individual’s educational choice. Some of these tax effects discourage higher education, while others encourage it. I give an overview over the existing literature on taxes and education and also provide the intuition for many of these partial effects in a simple model. The total effect of taxes on education is ambiguous.