Since tax and spending policies might interact with each other, collaboration across government levels and departments is essential. Tax progressivity implies that the higher salaries resulting from skills investments are taxed at higher rates than earnings in the absence of up-skilling. Thus, some disincentive to invest in skills is inevitable. But even in the absence of tax piogressivity, a proportional tax system can create a disincentive for marginal human capital investment when tire costs of investment are not deductible in the personal income lax calculation. Although lax disincentives for skills formation may be partly or fully offset by public-spending subsidies for higher education, the impact of taxes on the return on investment in human capital is important.