The Effects of a Tax Deduction for Lifelong Learning Expenditures

Abstract

We study whether a tax deduction for lifelong learning stimulates post-initial training. Exploiting jumps in marginal tax rates at bracket thresholds in a regression kink design, applied to tax-return data on the universe of Dutch taxpayers, we estimate how the effective (after-deduction) cost of training affects take-up. Low-income individuals do not respond, while high-income individuals become more likely to claim lifelong-learning expenditures when the net cost falls, though they do not spend more conditional on claiming.

Main findings

• Low-income taxpayers show no response to changes in the effective cost of training.
• High-income taxpayers are more likely to claim lifelong-learning expenditures when the deduction lowers the net cost, with the effect peaking at ages 40–45.

Links

• Journal
• SSRN

Nederlandstalig