Saturday, 12 February 2011

Funding universities by a graduate income tax

It was flash of inspiration or perhaps not. How should we fund universities in Scotland? By taxing graduates! Student fees are anathema to me as I was fortunate to be able to attend university by having my fees paid for the state. I also received a full grant (Anyone remember student grants?). I know I would never have attended university if I had to pay for it at the point of use. Since I have been in full time employment since I graduated, I feel that I have more than paid back this investment made in me by virtue of the massive amounts for money I have paid through income tax, VAT, vehicle excise duty and duty on beer, wine and spirits. Especially the duty on beer! However funding tertiary education through general taxation seems to be politically unpalatable

So here is the point; fund universities and colleges by setting a graduate income tax. Not just future graduates, by every single graduate working in Scotland. For Scottish residents, make tertiary education free at point of use, then pay an additional income tax. Not a flat fee, but a percentage of income to make the big earners pay more back into the pot. By widening the tax base it will be possible to reduce the actual tax take from any one person to a minimum.

Obviously, people who graduate and leave the country will escape this tax, but this is already the case in countries like Australia, where graduates are expected to pay back their fees when the start earning. The flip side is that I am proposing we tax all graduates who are living or working in Scotland, whereever they gained their qualifications.

I can foresee a sliding scale of the actual tax percentage, based on the number of years spent in further education, so the HND graduate pays a 3x multiplier of the tax rate and the medic, 5x.

The tax revenue is now easier to collect, after the coalition's insistence on implementing the Calman commission. As Scottish income tax will have to be identifiable, so collecting the graduate income tax will easily follow. Establishing who are graduates can fall to the employer without any additional burden. Every job I have had where I got the job based on academic qualifications, have demanded a copy of my degree certificate as a matter of course. It only takes a few minutes to verify with the institution the duration of the course and the graduate tax multiplier is established and factored into PAYE.

Obviously this revenue would have to be ring fenced. This is my worry about this proposal; Governments are always tempted to reallocate resources. A graduate tax may be seen as another cash cow, like road tax.

Setting the tax rate could be a function of the further education sector and not government. There are also some benefits in making people assess what course they choose.