MSE News: Government proposes graduate tax

Pont

sh1305 wrote: »

The maximum grant you can get is £2906.

Not in Wales.

Fang_3

dave2 wrote: »

OK this is a long rant but there's a lot of points here and I tried to keep each brief. Note I'm responding more to this BBC article which has more detail. Also, I've already graduated so will not be subject to this tax, I'm ranting out of personal principle not personal gain (also, I'm not a lawyer or remotely likely to earn £100k).

People earning lots of money pay higher rate income tax, so they do pay more than teachers.

Teacher on £30k pa: £7,400 tax + NI (24.7% effective)
Lawyer on £100k pa: £34,700 tax + NI (34.7% effective)
That's 10p in every £1 more.
Lawyer on £200k pa: £83,300 tax + NI (41.7% effective)
That's 17p in every £1 more.

Not forgetting that the £30k earner might qualify for tax credits and whatnot, that the £100k earner will not.

Anyway, what about high earners who don't have degrees? The vast majority of people making good money have a lot of staff. Even if they do not have their own degrees, they are making that money off the degrees their staff have.

This is the main reason why tax is based off your earnings and not on the gov't services you personally use: you benefit from other people using the other services. People earning more money are benefiting, directly or indirectly, more than everyone else regardless of how much they are personally using. This is the reason why it is fair for any £100k earner to be paying 10p in the £1 more tax than anybody earning £30k.

Consider the NHS. In the UK employers benefit from the NHS because they do not have to pay medical insurance for their employees. If an employer is making a lot of money, part of that is because his employees do not demand more money in order to cover medical insurance.

University does not have some special benefit to lawyers and surgeons. Uni is nothing more than a stepping stone. After graduation they earn little too. But, these guys undertake a massive amount of education and training after university, significantly more even than the 1-2 years teachers have to do, and it is only after they qualify from these that they start to earn the big money.

Oh yeah and lawyers and nearly all high-earning professionals pay 100% for their own post-grad training. Teachers don't pay anything or are subsidised and those going to teach maths in secondary (for example) get tax-free grants of £9k plus £5k for "golden hello".

And another thing. People like lawyers on big money are nearly always self-employed (usually in a partnership). A self-employed person making £30k is not the same as an employee making £30k. Part of the reason they make more is they have to put in their own capital and take financial and business risks. There is no sick pay if they break a leg and no maternity pay if they get pregnant. You should get a premium for taking those risks. There is relatively few people who make a lot of money and are employees.

While we're at it, all the MP's voting on this graduated in the past and won't be subject to this tax, even though they already benefited from a degree. Why is it people born one year have to pay a tax and people born the year before do not? What is fair about that? Especially when the new graduates are being taxed more heavily because we good and proper ruined the economy for them.

So, having established that this proposal being more "fair" is a blatant lie, lets consider the inevitable implications of a graduate tax - that is, why the practicalities making this a bad idea:

1) People with a lot of family money are going to pay their uni fees in full to avoid the graduate tax. Even if the inheritance is £1m then say a 5% return on that is £50k a year. Add their earnings once they get working and the additional tax rate does not have to be very high to make paying full uni fees a very obvious good tax-avoidance investment. Lo and behold rich folk paying less tax than everyone else. Rich get richer and the poor get poorer.

2) Foreigners with foreign degrees working in the UK will not be paying the graduate tax. Therefore, they will have a higher after-tax pay than a UK graduate doing the same job with the same gross pay.

3) The same will apply to immigrants with UK degrees, since they have to pay the full fees anyway so no graduate tax.

4) When it comes to EU nationals, the situation is unclear. EU nationals get their uni fees paid for in exactly the same way as UK nationals do. Will they be subject to the graduate tax if they work in the UK? They will not be if they move back home because they are not resident for tax. In other words UK nationals pay more for UK university than EU nationals.

5) UK graduates who get a job e.g. in the USA do not pay UK tax, so no graduate tax.

6) There are lots of degrees for things like hairdressing which really, really do not need a degree. That takes skill, not academia. But under this proposal they will stop paying tuition fees yet they are unlikely to earn enough to pay a graduate tax.

Those with 'family money' are unlikely to be taking on student loans now.

Fang_3

The_One_Who wrote: »

I received full loans/grants, but I still couldn't afford to move out (not a major problem really). Yes in Scotland we don't pay tuition fees, but the maximum I would receive for living out would be £4,500. No one can live on that.

Means-tested is probably the best way to do it, but it's definitely not perfect.

For my first year at university my total 'support' was a student loan for £3400. Out of that I had to pay for accommodation and fees at £1200, of which there was no loan available to cover it.

I got a job. Why don't you?

The_One_Who

Fang wrote: »

For my first year at university my total 'support' was a student loan for £3400. Out of that I had to pay for accommodation and fees at £1200, of which there was no loan available to cover it.

I got a job. Why don't you?

Because I stayed at home, which isn't that uncommon in Scotland. I also have a job, but thanks for assuming I don't. Either way, I was just using that as an example that even 'full support' isn't that great.

Pont

Fang wrote: »

For my first year at university my total 'support' was a student loan for £3400. Out of that I had to pay for accommodation and fees at £1200, of which there was no loan available to cover it.

I got a job. Why don't you?

Me too Fang - I got £3400 each for years 2 and 3 (I completed year 1 part time). Out of my £3400 I had to raise two children, pay full rent, pay all household bills and travel 100 miles round trip daily. It can be done if you want it badly enough.

dave2

Fang wrote: »

Those with 'family money' are unlikely to be taking on student loans now.

What's that got to do with it?

The proposal is to replace the fixed-figure tax (masquerading as a tuition fee) with a % tax on earnings.

This has nothing to do with the student loans which will very likely continue (albeit with lower maximums).

Fang_3

dave2 wrote: »

What's that got to do with it?

The proposal is to replace the fixed-figure tax (masquerading as a tuition fee) with a % tax on earnings.

This has nothing to do with the student loans which will very likely continue (albeit with lower maximums).

Which could still be paid and thus avoid the 'tax'.

PassedAtFailing

Oldernotwiser wrote: »

I doubt that many lower income families could save 30,000 in 18 years, regardless of whether they wanted to or not. In fact, I'd go so far as to say that any family who could save this much couldn't be described as lower income.

I agree. And, we have to remember true "lower income" families will be getting some benefits. Most benefits are affected by savings so if these families saved they may well lose their entitlement to some benefits and thus have less money - so no money to save. I'm sure having large sums of money in a child's account whilst claiming benefits will raise plenty of suspicion!