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The Almighty Buck Education

Financing College With a Tax On All Graduates 597

Hugh Pickens DOT Com writes "As the number of students attending colleges and universities has steadily increased and the cost for most students has climbed even faster, student debt figures (both total and per person) have continued to get bigger. Now Josh Freedman at Forbes Magazine proposes a graduate tax-funded system of higher education, under which students would pay nothing to attend college upfront. Instead, once they graduate and move out of their parents' basements, they would begin to pay an additional income tax (say, for example, three percent) on their earnings that would fund higher education. 'In other words, the current crop of college graduates funds the current crop of college students, and so on down the line. There is no debt taken on by students, which minimizes risk (good); repayment is tied to income, because only people who make income pay the tax (also good); and it is simpler and more easily administrable than plans to make loans easier to pay off (still good).' The main argument for a graduate tax comes from its progressivity. Supporters of a graduate tax point out that most college graduates, particularly those from elite universities that use a greater share of resources, are richer than people who have not graduated from college. The state of Oregon made headlines last year for an innovative proposal called 'Pay It Forward' to fund higher education without having students take on any debt. Pay It Forward amounts to a graduate tax: All of the graduates of public colleges in Oregon would pay nothing up front in tuition but would pay back a percentage of their income for a set number of years. These payments would build a fund that would cover the cost for future students to receive the same opportunity to attend college with no upfront costs. 'As pressure mounts for more students from all backgrounds to attend college, it will become increasingly difficult to try to stem the rapid tuition inflation under a loan system,' concludes Freedman. 'Our current student loan system has made college more expensive, turned higher education into an individual, rather than a communal, good, and generated serious negative economic and social risks.'"
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Financing College With a Tax On All Graduates

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  • by Mr. Freeman ( 933986 ) on Friday February 14, 2014 @09:09AM (#46244485)
    This is actually a really good idea. However, it does need some limits, particularly with regard to tuition prices. This proposal will give universities to raise tuition prices like mad. We need to place some serious restrictions on those.
  • by Albanach ( 527650 ) on Friday February 14, 2014 @09:13AM (#46244519) Homepage

    No, it is not good idea. Everyone benefits from an educated workforce. The self-made entrepreneur benefits from employing graduates. The store worker benefits from the graduates that built the business employing them.

    If we accept that taxation is they way to fund education, the smart move is to do it through general taxation. Since everyone benefits from education, everyone pays a share. And you drop the administrative costs associated with managing loans or adding a section to the tax code.

  • by portforward ( 313061 ) on Friday February 14, 2014 @09:14AM (#46244527)

    implement this will be very popular with college students and then everyone will move to the "traditionally funded college" state schools to avoid the tax. Also the STEM, medical and business students will end up subsidizing the fine art, journalism and french medieval poetry students and their professors. This already happens to a degree (no pun intended), but at least the penalty is more born by the student through loans that need to be repaid, rather than the people who studied a more rigorous and practical career. Also, we will probably end up with too many people who go through law school because there is really no penalty to attend (besides lost wages) and then they won't be able to find jobs and then become something else.

  • by jbmartin6 ( 1232050 ) on Friday February 14, 2014 @09:20AM (#46244587)
    I agree, this is a horrible idea. The rate of students actually graduating in 4 years is already low, it will just go down as soon as students are attending for "free". There might be some minor improvement if there were a competitive process and only the students who gave a crap about their education would qualify. But this notion that every slacker has a "right" to attend and fart around for six years is a disaster. When I went to graduate school, anyone could tell, with a high degree of accuracy, which students were paying their own way and which were not. The ones paying for it were the ones who worked hard and tried to get something out of even the easy classes. The other just wasted everyone's time. A couple times I had to get one of the latter removed from my team projects since they weren't worth anything.
  • by Opportunist ( 166417 ) on Friday February 14, 2014 @09:26AM (#46244627)

    Please explain why the most successful countries when it comes to education and international comparison tests have "socialized" education systems.

    Education and your chance to it must depend on what's in your brain, not what's in your wallet!

  • by Anonymous Coward on Friday February 14, 2014 @09:28AM (#46244643)


    So does a death penalty for being unemployed.

  • Richer (Score:4, Insightful)

    by Luthair ( 847766 ) on Friday February 14, 2014 @09:34AM (#46244691)
    The summary describes why this isn't necessary - college graduates make more money. This means they already pay more taxes.
  • by PseudoCoder ( 1642383 ) on Friday February 14, 2014 @09:36AM (#46244703)

    Eventually they'll find something soft and squeeze and then they'll own me. That's terrific! Let's also further minimize risk, so I have no idea what is wise and what isn't. This way I get to make others pay for my prospect-less liberal arts degree. That's so nice of them! Now everybody will get into college, even the less scholarly types who would be better off in trade schools, and graduation rates will plummet, and this new super efficient government program will be paying for those who flunk out and will exempt them from paying anything since they didn't graduate because the over achievers oppressed them somehow and they are the ones who should pay for drop-outs anyways. That's so sustainable!

    We should make everything "communal"! Just like they did in that union that isn't there anymore. Or that other country that's still there imprisoning its dissenters and running them over with tanks. I love my Brave New World!

  • by Qbertino ( 265505 ) <> on Friday February 14, 2014 @09:37AM (#46244715)

    How about no tution at all? It works great for Germany. ... Just sayin' ...

    (Cue "Nanny State!", "OMG SOCIALIZM!!", "Obviously won't work because of reasons a,b,c and d", etc. remarks below, thank you.)

    Allthough we do have Semestergeühren. Something like 150€ per Semster (GASP!) of enrollment fees. ... This is outrage! I'm going to protest tomorrow. ... Oh, wait, you get the public transport flatrate for that ... and student benefits (cheaper access to public events, etc.) ... Scratch that, I guess I won't protest after all.

    Seriously, you guys should move out of the middle ages allready. Healthcare, tution-free college and metric system. It works. Get with the programm. :-)

    My 2 cents.

  • by Joe_Dragon ( 2206452 ) on Friday February 14, 2014 @09:50AM (#46244823)

    can also lead to more schools to teach real skills and not years of fluff and filler

  • by Anonymous Coward on Friday February 14, 2014 @09:50AM (#46244829)
    1. Don't go to college
    2. Start a business
    3. Employ graduates
    4. Don't pay any extra tax yourself
    5. Profit
  • Re:Lifers? (Score:5, Insightful)

    by Sponge Bath ( 413667 ) on Friday February 14, 2014 @09:57AM (#46244883)

    Many universities with full enrollment already give you the boot if you burn too many hours without graduating.

    That said, this scheme sounds no different than a student loan tied to the ability to repay. If anything, it obscures actual costs which usually causes problems.

  • Re:Lifers? (Score:4, Insightful)

    by ganjadude ( 952775 ) on Friday February 14, 2014 @10:08AM (#46244971) Homepage
    obvious to you and I, lets see what the actual bill says
  • Re:Lifers? (Score:2, Insightful)

    by ILongForDarkness ( 1134931 ) on Friday February 14, 2014 @10:10AM (#46244985)

    A more key part of the problem IMO is the "progressive" statement. Progressive = "we the government know how to spend your money better than you do"

    Engineers paying for the next generation of engineers is one thing, engineers paying for 3 basket weaving degrees is something else entirely. If they tie the payers to the degrees that the current students are pursuing it is likely okay. But if they tax all and then decide afterwards which programs get the money collected based on political pressure we'll end up with a bunch of "coal science" programs and black history graduates. Society can use some of both of course but separating market supply from market demand (by pushing the cost of inputs to everyone rather than the person making the choice to enter that field) isn't good. Nor would it be good for the relative costs of programs. A literature degree might end up costing the same as an engineering degree even though one has a large unmet demand and the other does not, one requires much more expensive teaching resources than the other etc.

    A better solution along these lines though hard to enforce people actually trying hard to get good paying jobs early on: a fixed percentage for a fixed number of years after graduating. Given that people are getting out of school right around when they start having families and have the lowest earnings (and higher unemployment) I'd say some delay. Say from year 5 to year 10 after graduating you pay 20% of your salary. People are less likely to take a couple years "to see the world" when they are 30 with kids or just have bills than right after graduating so that would help mitigate the risk of people just saying "screw it now is a good time to be a missionary for no pay". Tying it to graduate pay would also allow the market to naturally choose how much money goes into each program based on its value to society.

  • by ganjadude ( 952775 ) on Friday February 14, 2014 @10:11AM (#46244995) Homepage
    The reason the cost is so high is that the government guarantees student loans. As such the schools know they are going to get paid either way and they are doing a disservice to our people telling everything that they should go to college. Frankly not everyone should go to collge but the schools have a financial stake in getting everyone in. Drop out or not, the schools get paid, as such, the cost of education has sky rocketed since the guarantee of loans
  • by felrom ( 2923513 ) on Friday February 14, 2014 @10:25AM (#46245131)

    It's why the government taxes cigarettes, alcohol, and machine guns: because they want less of those things.

    If you start taxing college, you'll get fewer people going to college, and fewer people who went will work as hard as they would have otherwise. If you want to fix college tuition problems, then stop underwriting loans with tax dollars. Let private investors determine the proper risk of each student based on GPA, SAT, and the field they want to study.

    It's such a daftly basic concept of economics, that it's depressing to see so many smart people trip over their own feet trying to explain why it shouldn't apply. You can rationalize to yourself why this is different all you want, but as Feynman said, "Nature cannot be fooled."

  • Re:Lifers? (Score:4, Insightful)

    by BobMcD ( 601576 ) on Friday February 14, 2014 @10:31AM (#46245187)

    That said, this scheme sounds no different than a student loan tied to the ability to repay. If anything, it obscures actual costs which usually causes problems.


    How is 'go to school now, pay it back later' any different than 'go to school now, pay it back later'?

    Aside from the individual's control over the cost of their education, that is. Under the debt system a person could elect to go to a cheaper school to minimize their repayment cost, and/or select a career rather than a hobby.

    Under the new system, there's no incentive to control costs at all.

  • Re:Lifers? (Score:4, Insightful)

    by swb ( 14022 ) on Friday February 14, 2014 @12:11PM (#46246607)

    At one time, a college education was, or was almost, free. How did we do it?

    We also had a college system that was principally focused on education, not on a broad range of social welfare goals and without the bureaucratic empire builders.

  • Re:Lifers? (Score:4, Insightful)

    by cornjones ( 33009 ) on Friday February 14, 2014 @12:32PM (#46246819) Homepage

    I really don't get this argument. the UK system is much like is being proposed here but w/ less burden on the student. You are asking the student to go into 9k/yr debt but it is only payable once you get a good job. That is a good deal for the student, if you spend a bunch of money on school and still can't get a job, you don't pay it back. the risk is all on the gov't (which i am ok with).

    this 'tax on future earnings' really sounds like a loan w/ slightly different terms. Rather, terms that never end.

  • Re:Lifers? (Score:5, Insightful)

    by schnell ( 163007 ) <me@sch n e l l . net> on Friday February 14, 2014 @12:53PM (#46247093) Homepage

    There is a much more dangerous issue here that makes it a terrible idea: decoupling the provider and user from the costs involved is exactly why the US healthcare system is so screwed up. Today, colleges have a cost that is known to the student, and students factor that in to their education "purchase." I might like to go to a college that charges $50K a year, but if there's another one that charges $30K a year and provides a similar education, I may choose the cheaper one. Colleges know this and they model their cost structure to fall within a tuition rate that students will be willing to pay.

    But now, with students and colleges not having to consider price, no college has any incentive not to inflate its costs - hey, if cost is no object to the student, why not? New Ferraris for all the administrators and a shiny new $50M Center For the Study of Basket-Weaving! The college is getting paid either way, and the student doesn't care because they don't see a bill. Maybe that provides a better quality education for some people, but it's dubious as to whether the benefit outweighs the costs to all the people who have graduated and are now paying for $100K/year per student tuition rates.

    This is the same thing that happens in the US medical system today - doctors don't have to think about what procedures cost, so, hey, why not run a bunch of tests that cost $15,000 a pop just to be safe? They're getting paid either way. And the patient typically doesn't see much of that cost directly because (post-deductible, blah blah) most of it is absorbed by their insurance company. Nobody (for the most part) chooses which hospital to go to based on what it costs, and there is no incentive to reduce costs for anyone except the insurance companies. (If you want to hear the gory details, NPR did an awesome story on this several years ago [].)

    At any rate, while improving access to college education is a great goal, the healthcare example should scare anyone sane that taking "what college costs you to deliver or receive" out of the equation is a recipe for costing everyone way more money than it should.

  • Re:Think about it (Score:5, Insightful)

    by ShanghaiBill ( 739463 ) on Friday February 14, 2014 @01:02PM (#46247233)

    Plus would you hire someone who did that?

    Yes, I would. I would consider it an IQ test. Nobody has a legal or ethical responsibility to adjust their behavior in order to maximize their taxes.

    Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. -- Learned Hand []

  • Stereotypes (Score:5, Insightful)

    by sjbe ( 173966 ) on Friday February 14, 2014 @01:08PM (#46247299)

    Depends on the position. If we are talking engineers probably not but that may be "just the right kind of out of the box thinking" needed for the standard MBA types.

    Oh yes, engineers are just paragons of virtue. I'm reading a whole bunch of engineers posting in this thread about how they would scam the system and you think someone with a business degree is somehow worse? Seriously, I have both engineering and business degrees. Are you claiming that I am a criminal because I went to school to learn how to run a business? Or are you just interested in scapegoating a bunch of people you don't actually know much about because it is convenient and you don't actually understand what they do?

    Let me give you a tip. No matter what your job is, people think you are an incompetent idiot in some way and few people will ever really understand what you do. People (wrongly) think engineers are arrogant nerds with limited social skills and bad hygiene who don't understand anything that isn't a machine and who don't understand money at all. People (wrongly) think all finance people are criminals who are only interested in making a quick buck. People (wrongly) think all marketing people are a bunch of impractical imbeciles who don't understand anything technical. People (wrongly) think that people who manage others are incompetent greedy asshole who can't actually do anything useful and who never make correct decisions. In ANY profession you will find some people who are good, a lot of people who are mediocre and some people who are genuinely incompetent. Just because you've run into some of the later doesn't mean everyone is just like them.

  • Re:Lifers? (Score:2, Insightful)

    by Anonymous Coward on Friday February 14, 2014 @01:54PM (#46247849)

    I would never hire such a person. Getting only "most" of a degree is one thing, but deliberately milking the system is an automatic DO_NOT_HIRE.

"my terminal is a lethal teaspoon." -- Patricia O Tuama