Are Machines More Important than People?
Here at IPI we have long argued that the key to economic growth is investment, and that the means of incentivizing investment is through the tax code.
This is why the right kind of tax reform lowers or eliminates taxes on savings, interest, dividends, capital gains and upon estates. It's also why we argue that businesses should be able to deduct new investment when it is made, rather than having to deal with depreciation schedules artificially stretched out for the government's benefit.
All of this is intended to stimulate investment in physical plant and equipment to make the economy grow.
But are machines more important than people?
If we're in the information age, or a knowledge economy, or whatever you want to call it-if we're in an era in which human creativity and ingenuity are the keys to the future-then shouldn't the tax code treat investment in human capital at least on an equal par with investment in physical capital?
We think it should, and it's clear that not only the current tax code, but also all the major tax reform proposals fail to adequately recognize the importance of investment in human capital.
And there's a simple way to remedy this-make all educational costs tax-deductible.
This would include primary and secondary tuition, graduate school, tutoring, technical training, test and GED preparation.
The status quo simply isn't working. Test scores and especially pursuit of the critical science, technology, engineering and math (STEM) fields are inadequate for a 21st century economy. Meanwhile, student loan debt is ballooning, and a significant part of this debt is being held by "third parties" like parents and grandparents of students. These are threats not only to our economy, but also to our democracy.
At least part of the solution is to begin to recognize in our tax code that human capital is at least as important as physical capital, and to treat it as such. The likely result would be more overall pursuit of educational opportunities, more third party financial participation in educational expenses, and less debt.