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When one considers imperfect competition, the case for reducing the tax burden on capital is substantially strengthened since the estimated gains are larger. Some imperfect competition is due to various forms of increasing returns to scale and product differentiation.

The taxation of human capital is straightforward and simple but its application is complicated because of few empirical evidences to support it. Human capital is a combination of capital investment, labor supply and final good. Significant features of human capital are its final-good properties and productivity. If human capital consumes a mean return equal to or greater than financial assets, it should be taxed. However, if human capital has a lower mean return than financial assets, it should not be taxed.