Louis Kaplow, Response: The Income Tax Versus the Consumption Tax and the Tax Treatment of Human Capital, 51 Tax L. Rev. 35 (1997).
Abstract: In two recent articles, I explore the conceptual question of how human capital would be treated under a pure, comprehensive, accrual income tax, pursuing the analogy to accrual treatment of physical and financial capital, which has received much academic attention. My central conclusion is that conventional income tax treatment of human capital -- taxing wages when earned -- is close to the treatment required by a pure consumption tax, whereas accrual income tax treatment would be quite different from that in existing income tax systems. Professor Zelenak's article largely agrees with my central claims. Much of his article is concerned with criticizing me for advocating a consumption tax, which I do not in fact do. Indeed, I castigate the very type of argument he attempts to attribute to me and relies upon in defending his own views. It is also the case that Zelenak's affirmative arguments for the existing hybrid income/consumption tax and his various objections to particular elements of my analysis are largely without foundation.