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Here's one simple tax reform idea that can create good jobs

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The recent election results surprised almost everyone, except for working-age men outside the workforce. This portion of the male population, below retirement age who are neither employed, in school, nor actively looking for work, according to Nicholas Eberstadt's new book, "Men without Work: America's in Visible Crisis," has more than doubled over the last 50 years. And if current trends continue, a quarter of men between 25 and 54 will be out of work by mid-century.

There is a reasonable argument out there, as we partially saw from Donald Trump's rhetoric and supporters, that men in the U.S. workforce are far behind those in other industrialized countries, including those known for their inflated welfare systems and overly rigid labor markets.

While causes are multitude and varied (social insurance benefits, tax imposed by child support on earning income which has been recently more efficiently collected, diminution in attractive work opportunities, technology and the rise of international competition, etc.), there is no single, magic remedy – not even for Trump. However, there is one route that could be taken, embracing ideas from the left and the right, to help ease our acute unemployment crisis – and create a standard for the capitalization of human capital.

Tax policy can be adjusted to offer incentives for the private sector to increase wages and employment. The idea is simple and implementable.

Presently, the Internal Revenue Service (IRS) allows corporations to deduct accelerated depreciation on capital assets (equipment and some intangibles) while booking straight-line depreciation in their accounts. As a result, companies can decrease their tax burden while still showing higher income in their financial statements.

Unfortunately, no similar concession is provided for human capital. Therefore, the rules favoring physical capital perversely distort the allocation between physical capital and labor.

"The tax saved by the corporations hiring workers can be used to increase wages and employment, and, as a result, improve the lot of those men - and women - whose income has stagnated over the last decades."

While it doesn't appear to be an obvious fix, this distortion can be remedied by offering similar treatment to human capital as is now provided for physical capital: allow corporations to capitalize their human capital (the present value of future compensation) and claim accelerated amortization of it just as they can now claim accelerated depreciation on physical capital.

The tax saved by the corporations hiring workers can be used to increase wages and employment, and, as a result, improve the lot of those men - and women - whose income has stagnated over the last decades. To make this fix even more potent, the offered tax saving could be made conditional on actual increase in employment and/or wages.

Adoption of such a policy would require accounting standard setters to mandate, in financial statements, the creation of an asset reflecting the benefits of labor and a corresponding liability reflecting the projected obligations to workers.

As a result, human capital would be reflected in the accounting reports to be amortized over time just as physical capital is depreciated over time. Amortization and the interest on the human capital liability will replace labor costs currently included in income statements.

There is a recent precedent for this; the accounting regulators have just issued a standard requiring lease agreements to be capitalized as asset and liability.

Implementation of this idea is feasible at a relatively low cost. Presently, corporations forecast their future wages because of their need to estimate pension liability. The same data they have developed for this accounting purpose can be used to capitalize human labor just as they would be required to capitalize future lease payments.

As President-Elect Trump prepares to take office and make good on his promise to the electorate, there is a viable path for him to also make good on actually getting them back into the workforce and feeling great again.

Commentary by Joshua Ronen, professor of accounting at New York University Stern School of Business and co-editor of the Journal of Law, Finance, and Accounting. Follow him on Twitter @JrRonen.

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