All taxes are graduate taxes: How the tax system delivers automatic recovery of government spending on higher education

T. Curtin*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract

    For 20 years many governments of developed countries have agreed that more of the costs of university education should be funded directly by its beneficiaries, through one or other-or a combination-of up-front fees and deferred fees repayable as loans or through the tax system. The basis for this view is the belief that university education generates substantial personal benefits for its recipients, and that they should therefore be required to fund their studies, either as students, or subsequently through repayment of student loans or special taxes on graduates' income. The World Bank has acted on the same set of beliefs by requiring its client countries in the developing world to adopt the 'user pays' policy, although this has also been the part of its broader aims both to reduce total public spending and to have its clients switch public funding of education from the tertiary level to primary schools. This paper examines first the merits of the underlying arguments for 'user pays' in higher education. It then demonstrates how all tax systems automatically recover the costs of public investment in education through the direct correlations between levels of education, incomes and spending, and taxes. Finally it examines the impact of tuition fees and graduate tax systems on access, equity, and economic growth in developing countries. The paper's conclusion is that the negative effects of fees in higher education are an unnecessary burden on society, because of the automatic recovery of the costs of higher education through the extra taxes paid by graduates on their higher earnings vis-a-vis non-graduates.

    Original languageEnglish
    Pages (from-to)479-491
    Number of pages13
    JournalRound Table
    Issue number356
    DOIs
    Publication statusPublished - 2000

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