"We already have a graduate tax - just a better version" blog discussion

foreversomeday

I remember going to a university information day when I was 16 or 17 - so would have been the mid 2000s, and I clearly remember them saying to us "Don't think of it like a loan. Think of it like a graduate tax." - and I always have done.

I think the last sentence about a loan ending once it's paid off is a good one though. Food for thought anyway.

tylerdurden

If graduates earn more over their lifetimes dont they/we end up paying a lot more tax (in the form of income tax and national insurance) anyway?

artumi_richard

tylerdurden points out that those who earn more pay more tax anyway. This gets to a rant of mine regarding fairness.

What is fairest

Example 1: You are in a cafe with friends and the bill arrives at the end of the meal
A) You each pay for what you ordered
You split it equally
C) You split the bill according to income, if one person had income of £100,000 another £50,000 a third earned £10,000. They pay £10,£5 and £1.
D) You split the bill according to income, but those who earn more pay even more than their proprotion in (C), so the contributions may be £13,£2.50 and 50p.

Example 2: You are the government and you wish to tax people's income.
A) You charge everyone for exactly what they use
You charge a flat rate of say £10,000
C) You charge everyone 20% of their income
D) You charge those who earn more a higher percentage.


I think in Example 1 everyone would think A is fair, and in 2 everyone would think D is fair.

Generally when people argue about taxes being fairer they are on shakey ground. There are different ways in deciding what is or is not fair, and we generally use different principles in different circumstances.

In example 1 we know the people we are coming to agreement with. In example 2 we do not. Perhaps that explains the difference, perhaps it's something else.

Anyway, that in mind, would it be fair to charge new graduates a graduate tax and not also those who made no specific contribution to their education?

Would it be fair to charge a Drama graduate the same as a Maths graduate when their chances of earning more, due to their degree, is so far different. (I heard this is true on Radio4 on PM)

Also, how much of the fees paid cover their education, and how much is to pay for the research that Universities do? Would a graduate tax actually be to fund higher education, or to fund a national research program which the whole country should be benefiting from?

One last thought. I started Uni in 1999, and so I'm paying off my student loan at the moment. As we know, this means I have more tax to pay now, but is it such a good time to be paying. [Gross generalisation coming up:] In an ideal world early to mid twenties is when you want to be buying a house, getting married, having children and buying a car. Is this not the worst time to stick an extra 9% tax on income over £15k to these people?

Does it come as a surprise that the average age of the first time home buyer, the average age of a first time parent and the length of time couples live together before marriage are all rising?

MSE_Martin

Oldernotwiser wrote: »

I've always encouraged my clients to look on loan repayments as a graduate tax so I have a lot of sympathy for Martin's viewpoint. However, the fact he misses is the way in which debts of thousands of ponds put off many students from lower income families from going to university. For that reason, I think that a move to a graduate tax might well be a good thing,

I udnerstand your view - i just think the whole systems been disgracefully poorly communicated - all the focus was on tuition fees.

If we had financial education in schools that explained it properly your point would dissappear. To intro a new tax because people dont understand the current system seems overkill - just explain the current system better.

Ferdy147

It's about time someone did some straight talking about university education.

- There are way too many mickey mouse courses. We need to increase the standard of degrees as they really are cornflake packet stuff in a lot of cases.

- There aren't jobs for the number of graduates that come out of university each year so increasing access to university places isn't going to achieve anything worthwhile. Yes it'll reduce the unemployed headline rate for a while but it'll also burden these students with a considerable debt that many cannot repay. Once they've graduated many will not be willing to accept lower ranking jobs because 'they have a degree' and so be more dependant on the state.

- All students should have to pay tuition fees not just those from slightly well off families. Perhaps those that aren't in a financial position to pay can have them deferred and pay them at a later date. Payments taken from salary at the same time as Income/NI Tax so that they can't default.

- Having been a student I know the 'hardship' students go through. That's not hardship, it's reckless and irresponsible spending of money. There may be exceptions to this of course but everyone I saw in hardship at uni were big on party's, alcohol, gadgets, mobile phones, laptops, fashion etc......living beyond their means essentially.

dave4545454

DarkConvict wrote: »

What gets me though, is that instead of going to university one could instead for say software engineering/computer programming, just do self learning and get the individual qualifications, then move into a low/similar job to get experience before moving to a graduate position without the graduate tax. A student loan is the way to go as those that take them out pay for it.

I understand the government does subsidise the costs, but then maybe this is where it can change, the government subsides less and the students pay a little more. As it stands there are more people coming out of university than jobs available. You already need to aim for the 2:1 or above, and soon enough need a master qualification to go with it due to fierce competition. Whilst this competition does mean the clever students make it into industry to many continue there part time jobs in supermarkets and retail chains (my friends have). The government would be wiser to reduce university funding and re-invest in apprenticeships, getting them out of education and into work. If they wish to seek a change in there job then they can save money and invest in university education after.

I may have some bias in this argument as I graduated only yesterday, top of year for computing students. So upping prices now would have less after on me.
There is some value to the american system, however there prices are simply to high.

congrats on the first honours:T i got one too in manufacturing engineering and management in 1992 during the last recession. unfortunately it never got me a paid job due to manufacturing being killed off in this country but i'm still proud of my achievement.

i agree with what you say about apprenticeships. personally i think an apprenticeship is worth a lot more than a degree and is far more likely to result in a paid job unlike all the many thousands of unemployed graduates.

DCodd

I may have misread this but it seems that there is no point where the tax will be removed, in other words no point where the debt is repaid is that correct?

Oldernotwiser

jd87 wrote: »

There's no way they could apply it retrospectively. Who is paying until 65? At the moment you only pay for 25 years then the rest gets written off.

The question of when the debt is written off depends on when it was taken out.

Oldernotwiser

DCodd wrote: »

I may have misread this but it seems that there is no point where the tax will be removed, in other words no point where the debt is repaid is that correct?

It won't be a debt anymore so the question of repayment won't apply.

DCodd

Oldernotwiser wrote: »

It won't be a debt anymore so the question of repayment won't apply.

Ok that is what I feared. At the moment a student on a degree course can opt to only take a proportion of the loan available to them if they so wish, this helps students who's career choice is a traditionally lower paid one as they can control the amount they will ultimately owe, the new tax system negates the benefit of such prudency and will encourage students to take the full loan amount regardless of whether they need it or not, they will pay the same amount back either way.