Tuesday, August 10, 2010

We Already Have a Graduate Tax

Just a thought on the graduate tax. We already have a graduate tax. It's called income tax at 40 per cent.

That is all.

49 comments:

The Purpleline said...

Not really as a graduate might take a low paid job out of vocation rather than monetary ideals.

What needs to change is employers attitudes and practices, if the Big companies and I really point fingers at the American Banks for this one,and other corporates wish to employ only graduates then they should contribute to the cost of the nation and our universities.

Otherwise they should be forced to open up employment opportunities to all.

It seems simple, but as they believe they benefit from taking a graduate then they should pay and contribute towards that cost.

Dilettante said...

Is it back at 40% now? I thought it was still 50%...

Braveheart said...

50% surely....

Thorpe said...

The bills have to be paid somehow - the problem could be made much smaller by cutting courses of little value.

Alternatively, publish a list each 3-5 years of courses that are of significant benefit to the country, and make those free to study. The list of valued courses should be revised frequently to ensure that we are getting enough mathematicians, scientists, computer programmers etc. Many countries operate their immigration policies along such needs-based lines - I don't see why we should n't scale our academic offerings accordingly.

At the other end of the scale courses such as "Football Culture" (Staffordshire University), Parapsychology (Liverpool - you can even extend your studies and get a real life Doctorate in ghostbusting there!), "Surfing Studies" (Plymouth) could reasonably be tagged "utter waste of taxpayers' money - if you want to study this course, pay the market rate of £35,000 for your degreee"

Turnbull2000 said...

Ah yes, but increasing tuition fees only ensures the money is directed towards the Universties. Whereas a graduate tax allows it to be siphoned off towards Baby Boomer appeasing public spending.

Thomas said...

So just to clarify, does that mean that successful people who didn't go to university but earn enough to be taxed at 40% should subsidise the graduates who take a low paid job out of principle?

You're being a little bit simplistic...

longrun2 said...

The proposal is not a Graduate tax which would hit you and me and Vince in the pocket. It is a tax only on *future* graduates and therefore would be illegal under the Age section of Anti-discrimination legislation.

viewfromthedadside said...

Meaning that everyone with a great salary is paying your 'graduate tax', whether they went to uni or not. Fair?

James said...

The 50% wouldn't be paid by the vast majority of graduates (or indeed non-graduates) as it only applies over £150K.

I am not sure Iain's point holds water though. The appropriate comparison is between a graduate earning £70K (say) and a non-graduate on the same income. The former achieved that with the help of a costly university education and should contribute to that cost. Charging the same rate is arguably unfair on the non-graduate.

Peter said...

Yes. A Graduate Tax is certainly unjustified. Most Graduates will give far more back to the economy than it costs to educate them.
The main objective must be to cut the benefits bill by all possible means, including credit checks. Talking about new taxes is only a distraction.

Adam said...

What's wrong with fees is that they hit young people from families of average means - like me.

Young people from the poorest families get the fees paid. I have no problem with that.

Young people from wealthy families have them paid for by their affluent parents.

Young people in the middle get hit.

What's good about the graduate tax is that it will make the richest young people pay their fair share too - not their parents, them - because I doubt many parents will offer to pay their child's graduate tax in the way they pay their fees.

Sean Haffey said...

Absolutely right.

If graduates earn more, they pay more.

If they don't then why tax them? (But also why fund non-courses - we all know the usual suspects)

Alex said...

It is a short step from taxing graduates for the benefits derived therefrom to taxing NHS patients for the benefits of their cure.

Sean Haffey said...

For those who think we should have a graduate tax, can we also have one on people who did A Levels rather than just GCSE, those who did GCSE rather than leaving school without qualifications, and so on?

John Holmes said...

You really do live in a bubble don't you? How many graduates do you think actually fall into the top income bracket?

Will said...

I wouldn't mind having critical rebuttals of this argument:
1) For straight up goods, we have a flat fee. If I buy a car, it costs the same whether or not I am rich or poor.

2) However, for services, a percentage is much fairer. These are the necessary items for society to function. It is more progressive, and allows all to partake, rather than putting people at the lower end off. For example: imagine if the NHS required a flat fee for each operation. Those at the bottom of society (often through no fault of their own) would choose to have fewer operations, and become worse off. This scenario is combated by taxing a percentage of income.

3) Education is closer to a service than a good. Everyone contributes a percentage of their income to cover state schools; universities should be treated similarly.

4) Having a highly educated workforce is good for all of society; the economy becomes stronger, and the country grows. Having people go to university benefits all; not just those who go. Therefore the whole of society should contribute to the running costs of our universities.

5) Therefore, our university education system should be free at the point of delivery for the students, and should be funded by the taxpayer. Presumably the fairest way to do this is a rise in income tax.

Disclaimer: I am a Liberal Democrat - I do not hide this. I am however, pleasantly surprised by the coalition, and would happily cast second preference votes for Conservative candidates.

Dan Sullivan said...

When do non-graduates paying the 40% rate start to get their rebates?

Demetrius said...

Graduate Tax is one of those things from The Department of Bright Ideas that is destined to go hopelessly wrong. As you imply and others state if any goup do financially better than others during their working life then they pay more tax. It would not affect me. This one should be ditched faster than the cuts in milk for toddlers.

Andrew said...

I agree. As Cable said, "If you're a graduate, on average you earn £100,000 net of tax over your lifetime more than if you're a comparable non-graduate."

So, if that's net of tax, how much more tax does a graduate pay than a comparable non-graduate? If that's higher than the cost of a university education then yes, it's already paid for. No need for additional taxes.

If that figure is accurate, we already benefit from encouraging people to go to university. What we therefore do not want to do is take away their incentives - "Go to university, don't earn much for 3-7 years, and then get taxed more afterwards as well!" Not a winning approach I'd suggest.

Osama the Nazarene said...

Non graduates also pay this 40% whereas my daughter, and a lot of other recent graduates, is paying an additional 9% (Blair / Clarke tax) on all earnings above £15,000. This is called repaying her student loan and is the current graduate tax.

A stepped graduate tax which hits the future doctors and graduate bankers would not be unwelcome.

Unfortunately it is being introduced because the Uni lecturers want to pay themselves a loads more by raising student fees.

tris said...

Most of the graduates I know are working tills in Tesco or manning phones in BT call centres.

My brother who is not a graduate, and who left school at 16 without any qualifications earns much more than £70 grand. He is paying graduate tax without having graduated, whilst they are not paying it despite having graduated.

Mind you it was inevitable that if half the population in a low wage economy (by western standards) were to graduate, there would be a large number who would not get graduate jobs.

Tom said...

Then how come I'm not earning enough to pay it!!!

trevorsden said...

No you do not have to be a graduate to pay 40% tax.

The point about a graduate tax is that it is a specific tax or payment to cover the cost of a university education. As opposed to making people borrow money as they do now. The govt only contribute part of the costs so graduates are being forced to pay one way or the other.

A lot of people with no education like barrow boy city traders pay the 50%.

If we cannot afford the education we should not run the courses. The popularly lampooned 'mickey mouse' courses are really the sort of courses run previously on day release and night school - paid by employers who considered they got some benefits.

But of course the other point is that 'the money has run out' so as we have to raise money somehow I understand its coming from 80% cuts and 20% taxes.

Ian said...

I don't think it makes much sense either. This tax year a graduate needs to earn over £43875 before paying higher rate tax. How many graduates earn over that? I bet it won't be many.

Mark M said...

We don't need a graduate tax anyway. We only need that because of Labour's daft idea that 50% of people should go to uni.

That, plus the mass immigration that means our low paid jobs are all taken by hard working foreigners, is a recipe for disaster - lots of young people with no jobs to go into deciding "well, education it is then" coupled with not enough money to educate them.

Another fantastic success from the Labour years.

Ed the Shred said...

Someone earning £100,000 who pays tax at, say, 20%, pays £20,000 tax (forgetting about personal allowances etc).

Someone earning £25,000 who pays tax at the same rate pays £5,000 (again disregarding allowances etc).

So the higher earner pays four times as much tax as the lower earner.

Graduates, on the whole, earn more money and thus pay more tax.

What's the issue then? As Iain says, we already have a graduate tax. I suggest it in a different way, a flat rate.

Norfolk Blogger said...

If so Iain, why not stop charing students top up fees ?

Matthew said...

I think what you mean is "we have income contingent loans". Why exactly to the LibDems think that system is unfair?

Iain Dale said...

I was never in favour of tuition fees so I see no need to try to justify them.

Wrinkled Weasel said...

No more taxes! No more public spending! The entire concept of taxing things, just because you think you can get away with it is criminal. Better off graduates already pay a higher rate of tax. Enough is enough! The middle classes are not a cash cow. This country is built on clever people, some, but not all of them graduates. Why punish effort? Why disconnect excellence from reward? And why allow foreigners to effectively study here free?

It's a crap idea.

comradepowell said...

So a degree is a passport to a higher-rate tax band is it?
Maybe for your generation Iain.
I graduated ten years ago and I'm on £24k. But I'm content with that salary, perhaps because I'm not a greedy grasping Tory voter for whom no amount of money is ever enough (not that all Tories are greedy and grasping). Tip for everyone risking apoplexy over the 40 and 50 per cent bands - try living frugally on an income taxed at the basic rate, keeping your impact on the planet to sensible level, and you won't have to worry about it! Oh and before you moan about the cost of living in London, why not move to a cheaper part of the country, like the Government is advising housing benefit claimants to do?!

Adam said...

Tuition fees are a poll tax on the intelligent.

Sure, as Iain suggests, there are flaws, intellectually and otherwise, with a graduate tax.

The alternative I would like is the one put fwd by the Lib Dems, but sadly very unlikely to be adopted by the Browne review of the Coalition: tuition fees, all of them, paid for out of general taxation.

If unrepentant chain smokers can have multiple heart operations free on the NHS then a clever young person from a modest background should get a university education free.

comradepowell said...

PS. Facetiousness aside, and before any of you think I'm some sort of NuLab stooge, on the issue of tuition fees I rather agree with Mark M at 10.09pm last night.

thisisben said...

I'm not sure about this supposed course in "Football Culture" at Staffordshire uni. Can't find anything on their website and a google search suggests this was merely a 12 week module as part of a media studies degree.

As a 12 week course, it sounds like a perfectly valid thing to study in that context. The above comment makes it sound as if people are studying it as a degree for 3 years.

There are many courses which are arguably worthless but just quoting something which sounds stupid and implying that it's a full degree is not a proper representation of the facts.

Iain-your point makes no sense on a financial level since the income would not pay for good quality university education and would not be sufficiently targeted at the people who benefit from going to uni.

Dual Citizen said...

My advice to all budding students. Go to university. Get degree. Emigrate. Pay no graduate tax. Simples.

Dual Citizen said...

My brother's advice. Go to university. Party party party party. Consume as much rducational resource as other students. Drop out. Don't pay gradaute tax or anything towards his education. Simples.

TLC said...

How many graduates actually find a job (within the first few years of graduation) with a salary high enough to pay the higher rate of income tax? I'd wager it's not many at all.

Lady Finchley said...

Coming from the States where people have to pay for their university education (although there are many more scholarships and bursaries available there than here)I cannot help but think that you guys are a bunch of whingers. University education is a privilege and not an automatic right. Students in the States take out student loans as a matter of course and unlike many students here do not think it is an affront to also work their way through university. Nobody is my family is well off yet all who wanted to managed to go to university.

It would be a start to get rid of all the Mickey Mouse courses - there would be so much more money to fund proper courses.

Don said...

Alex has made a very important point, in that a graduate tax would open the door to governments taxing any specific sector of the community because it has the ability to pay, or because it is more costly than the average.
So tax "bankers",or "doctors" or "fat people" or "sportsmen", or any sector people see as overpaid or costly to maintain.This tax would be pure and simple discrimination, something I thought had become unthinkable.
Also will all degrees attract the same tax?
I suppose a double first at Oxford should be taxed more heavily than a lower second from Hull.
The whole proposal reeks of spiteful socialism , as would be expected from its main advocate.

Junior Lawyer said...

Quite right!

Roger Thornhill said...

1. Plenty of non-grads pay 40% tax. To take the logical conclusion, will you exempt non-grads from the 40% band? I am sure Alan Sugar and Richard Branson would welcome it...

2. Once you tax grads more, then they will still be subject to prejudice from lenders, as their income has been reduced.

3. You remove any capacity for someone to pay off early.

4. You expose this wheeze - and frankly, I consider it one (it is from Vince Cable, after all) - to future parliaments either raising it or abolishing it.

5. Repayment is pushed out to 25 years, so exposing the State to more debt interest payments to cover the shortfall. More cost.

6. You bind people to the State and force a de facto mortgage upon them for 25 years. Vile.

7. You distort the market across the board, not tackling the issue of duff "degrees" one iota.



There is a term for The Graduate Tax: FAIL

Weygand said...

The present tax system based on the amount earned - is universally accepted as equitable in principle, even if there are disputes as to how it is applied.

Linking tax to your education would produce endless anomalies;
a) Footballers and film stars would be taxed at a lower rate than entrepreneurs and those who aspire to such roles (often the working class) would have an incentive not to go to university
b) It would be paid by our citizens but not those thousands of students who come here to study from the EU
c) People doing the same job in the same company would be taxed differently on the same income (and again the foreign citizen would pay less) etc etc.

Taxation should be based on the circumstances of an individual at the time the tax is levied and not on his/her history - which would simply be a disguised policy of wealth redistribution.

Tom said...

Said already - Why should someone who earns the same amount without a university degree pay for others?

Not said already - With higher tuition fees, you would pay more for your children's education by being in a higher income bracket.

................................. said...

Are all people in the 40% tax band graduates?

longrun2 said...

It is demonstrably false that an university degree automatically gives you a financial advantage over someone who does not gain one. May I instance a certain W. Gates who dropped out from some prestigious US university to which his father sent him?
On a more mundane level the boy next-door left school at 15 and became a steel erector; I left school at 17, spent four years at a better college than Cable's Fitzwilliam, several more years studying in the evenings to pick up a handful of professional qualifications and up to the time when Blair & Brown wrecked our manufacturing industry his net earnings (after deducting tax and costs directly associated with work like commuting and reinforced boots) accumulated at a zero real rate of interest exceeded mine. The house on the other side was the Vicarage and the differential was even worse - my earnings vastly exceeded his despite the longer training and longer working hours that he suffered: in my late 20s I was paid more than the Archbishop of Canterbury.
Sorry if I've gone on too long but I feel that this proposal that penalises the young to avoid our (Vince's and mine) generation paying over to the next-but-one a subsidy comparable to the one that we received from previous generations is just plain wrong

PabloSantos said...

Complete rubbish. An unhelpful and blanket approach to politics. Comments like this show an out of touch attitude from an overpaid pundit. Clearly some graduates will never be at the highest tax threshold - it all depends on their subject and their circumstances.

Lady Finchley said...

Maybe I am missing something here but I thought one of the main purposes of a university education was to teach you to think, research and open you up to new ideas. Equating it to a high paying job is exactly the kind of thinking that has led to stupid targets for university attendance and ridiculously high expectations of graduates and their families. A 'good' job should be a by product of a university education and not necessarily the goal.

Craig said...

I agree, there is already a graduate tax, however, it isn't the 40% rate or the 50% rate of income tax. It is actually the repayments on student loans and fees that are collected at the rate of 9% on earnings above £15,000 (gross). This is in addition to income tax liabilities.

Through this method people pay what they have been charged for their university education, no more no less (subject to having a generous rate of interest).

Surely, the answer is obvious, incrase the amount charged and paid back by this method? People that don't go to university would then contribute less through general taxation, graduates pay what they owe on an ability to pay basis, and universities are guaranteed to receive the money as the "tax" is hypothecated.

Then, as higher fees are charged there can then be measures in place to increase accessability to the best universities and make admissions based on intellectual ability rather than ability to pay.

Of course students will be faced with the prospect of these debts to repay, which should concentrate the mind on the value of some degree courses.

Especially, when you start work after university, you do feel that 9% after £15,000 on top of everything else disappearing from your pay packet. But, this system should allow people who genuinely want to go to university to go to the best university they are capable of going to. Those who genuinely want a university education would be more than willing to take this burden on.

Sometimes a policy does not need wholescale reform to make a dramatic improvement in conditions. Occasionally, some slight modification can have a significant impact. This is one such occasion.

denverthen said...

Lol.
Truth, sometimes thy name is Dale.