Tuesday 3 August 2010

Taxing graduates

Student fees and loans have been unpopular since Labour first introduced them, and with four of the five Labour leadership candidates supporting a graduate tax instead, it seems that some in that party are, albeit belatedly, realising what a mistake they made. But is a graduate tax any better?

It's hard to make a definitive judgement without a lot more detail, but what seems to be being proposed is a sort of supplement to income tax. So graduates on low incomes may end up paying little or nothing for their tuition, whilst those on high incomes may end up paying several times the cost of their tuition. Whilst the total amount collected may roughly equate to the total cost of fees paid, the amount paid by any individual may bear little relation to the cost of his or her tuition.

In short, it looks very much like a selective form of income tax, where people in one group within the population, graduates, pay more income tax than people earning the same salary who happen not to be in the selected group. Once we start doing that, where do we stop? How about an A-level tax?

The argument, presumably, is that those who gain a degree have benefited from their education by getting a higher-paid job than would otherwise have been the case, and should therefore pay towards the cost. But what if a graduate and non-graduate end up doing the same job at the same salary? They would be paying different rates of tax, with the graduate having a lower take-home pay than the non-graduate.

And we all benefit differentially from a whole range services provided out of public funds; what is it that makes a higher education a service which is chargeable, whilst other services are not? I don't understand what the key principle is which underlies that distinction, other than the base one of 'what do we think we can we get away with?'.

It isn't just graduates who benefit from higher education; society as a whole benefits from an improved level of education. Why do we treat education up to A-level as an investment but education beyond that as something different?


Unknown said...

Perhaps the graduate tax should be graded according to how useful the degree is to society. For instance, people working in public service - Doctors, Nurses Teachers, should be exempt while they are working within the sate sector. People in the private sector should pay it. Also,I suggest that a degree in,say, business studies, or anything that has studies in the title, should be taxed at a higher rate than a pure or applied science, or an engineering degree.

But if the aim is to get more people into university, would it not make sense to put extra tax on people who don't go to university? After all, they get an extra 5 years at least of earning opportunity!

utilly said...

Yeah, my master's degree in ceramics has proved to be a real moneyspinner...

Call me old fashioned but I still quite like the idea that the wealthier people pay more.

John Dixon said...


Me too. That's what income tax should be for.