Very cool, if true

Again, don't think this is a simple binary choice. As a liberal, I don't think it's government's business to discourage or encourage any behaviour that doesn't harm others, just to enable people to do what they want.
I think in so far as we need taxation, it should be as much as possible taken from those who can most afford it - capital gains tax should be highest, because it's unearned income, followed by taxes on earned income, and only then any other taxes like VAT which are by their nature regressive.
That said, I have no problems with taxes that attempt to factor in costs of externalities - so if tobacco costs the NHS money, it's only right that there should be a tobacco tax. If flights mean the government will have to pay £Xmillion for flood protection due to global warming, tax flying. If raising the cost of those things to the consumer so it accurately reflects the actual social cost has the side-effect of discouraging them, I don't see that as a necessarily bad thing, so long as that's not the primary purpose, and so long as the taxes *only* cover the actual costs (or a reasonable approximation) and aren't used to raise revenue for other things.

As for the graduate tax, I think it a stupid idea. But a slightly less stupid one than making students pay tuition fees *before* they've benefited (if they do benefit, as many don't) as we do now... What I think we *do* need to do is invest more in training and apprenticeships and try to get away from the idea that (as is increasingly the case) you need a degree to get even an average job, while returning as far as possible to the old free education system that almost everyone currently in Parliament benefitted from for those who *do* actually want/need to go to university...

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You'll get no argument from me on any of that :->

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pete stevens (from livejournal.com)

I'd go for a land tax. Taxing land won't discourage it, you can't make the land go away. It will discourage people from holding onto land unnecessarily which would result in more land being returned for people to use productively.

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I've seen a lot of Lib Dems argue for a Land Value Tax as the best way forward, including lots of people I tend to agree with. I don't know enough about it to hold an opinion, though, and the website for ALTER (the group within the party to promote that) is *horribly* unusable...

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I agree with the Gaiman-accented albino.

If anything, you don't tax things that you want to encourage (or at least, not at a level that will act as a disincentive).

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lizw.livejournal.com

I agree with all of this.

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meaningrequired.livejournal.com

In Sim City I tax the things I'm trying to reduce if I have enough income coming in from elsewhere.

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I think adding a 'graduate tax' to graduates income is a preposterous idea and I've lost any respect I had for Vince Cable.

I suspect we'll eventually go the American way and end up paying full fees.

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It's interesting to note the NUS's support for the idea; they're proposing a 5% tax on gross income above a certain threshold (GBP15,000 is the figure quoted in today's Guardian) for a twenty-five year period after graduation.

Their justification for this is that repayments under the current system come to about 9% of income for graduates; by spreading this over a longer period at a lower rate, it hurts new graduates less and raises more from graduates later in their working lives when they're earning more.

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innerbrat

As I've always viewed my student loan as a kind of graudate tax anyway, I support this idea.

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Exactly. If you're paying back loans anyway then it's much easier for most people to pay them back through the tax system, rather than the current, blunter, instrument.

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innerbrat

I don't know how recent graduates are paying their loan back, but mine is taken out of my paycheck like a tax.

Uh,

If I had a paycheck. Which I don't.

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Aaaah. I was in the first wave of student loans, and I had to set up a direct debit to pay mine off, and get postponements when I was unemployed. It was a right pain.

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innerbrat

Great, now I'm panicking about how I'll pay my loan off when I'm abroad.

I'll burn that bridge when I come to it, I guess. I'm not going to have a job for ages.

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matgb

Nah, you're fine, you're on the tax based loan, it was changed for academic year starting 1998 or 1999 (as in, I can't remember if I was 1st or 2nd year to benefit from the sensible change for my currently extant loan, my earlier loan for year starting 1993 was paid off on the way Andrew describes).

And yes, the current system is not described as a graduate tax because Labour promised no new taxes. So they created a system that works exactly like a graduate tax, and called it a loan.

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At least you *managed* to get postponements. I'm in a weird situation with mine - they flat-out refused to believe that I was unemployed and kept 'losing' the paperwork, so I currently have two different sets of debt collectors chasing me, as they have been for seven years now, for 'defaulted' student loans I should never have had to pay, while I'm paying some of it out of my paycheque every month *as well*... at one point I had *FOUR* sets of debt collectors after me...

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I think the idea of paying back _more than_ the value of your fees via graduate tax because you end up in a job that earns more strikes me as unfair.

In any case, once the value of the fees is paid off (as per the current student loans system), income is still going to get hit with large amounts of income tax anyway.

If the tax stopped at the value of the fees, that would be fairer IMO.

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But *does* the current system only pay off the value of the fees, or does it add on a whacking great chunk of interest too?

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Interest is charged at RPI.

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Really - not CPI?

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Nop, definitely RPI.

(Sorry for the late response, I managed to miss this in my inbox).

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No, you're not 'paying back more than the value of your fees' under a graduate tax. You're contributing in a manner that reflects the financial benefit that you personally have gained by virtue of your (presumably state-funded) higher education.

If anything, it's an attempt to create a) a progressive tax that b) recognises the contribution that the state has made (through the education system) to the earning ability of graduates.

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My initial response below:

http://andrewducker.livejournal.com/2111045.html?thread=14590021#t14590021

I recognise that the tax system just taxes income whether or not a person has a degree or not and the idea of the graduate tax is to add a tax specific to graduates and, heck, the money has to come from _somewhere_ but my problem with the graduate tax is that it taxes on _income_ post graduation, not the cost of the degree fees and the two may be completely unrelated.

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drdoug.livejournal.com

It's worth pointing out that, in the UK at least, the current value of tuition fees is considerably less than the cost of tuition. Finding the number instantly is hard, but off the top of my head it's something of the order of 10%-33%.

(One of the (many) things that really pisses me off about the student finance debate - since at least 1988 - is how rarely these numbers are produced, which is why they're hard to find. Surely the actual cost of tuition is a pretty relevant figure to include in any discussion of how much prospective students should pay for their tuition? But apparently not.)

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matgb

I think adding a 'graduate tax' to graduates income is a preposterous idea

What do you think of the current loand repayment system, which is administered as a tax on earnings on graduates?

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I used student loans. I struggled but I paid back what I borrowed plus the interest.

Without my degree, I suspect that I wouldn't be enjoying a salary that reaches the 40% tax band so, in my mind, having paid off my loans, the government is already taxing the 'extra benefit' of my degree by taking a larger proportion of my income than they would have been able to had I _not_ graduated.

I'd be interested to know if it is planned for students who start a degree but who _don't_ graduate (i.e. drop out) still have to pay graduate tax? I've looked but I can't find a clear answer on this. If not, there would be less incentive to complete a degree if it 'got a bit hard'.

Will the government consider charging a tax on 'college fees' for non-compulsory A Levels and Highers to pay back the 'extra benefit' students see from these qualifications?

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matgb

"University of Stirling - Stirling, Scotland - Stirling, United Kingdom (1993 - 1996)"

The Loans system changed in 1998, you were on the old mortgage repayment loans. Loans are now paid back by paying 9% of any earnings above £15K. It is indistinguishable from a graduate tax, except that a) those that drop out or fail still pay and b) you pay until you've paid off the lump sum.

I have no idea what any plans would be; essentially, the Govt does not have a policy on this yet, it's allowing Labour's Browne review to complete, but ensuring that something that had been ruled out is now not ruled out.

Personally, I'd rather all degrees were free and anyone that got good enough results could go. But the money isn't there.

Fees were introduced at the same time the loan scheme was changed (1998, again), and have been changed & substantially increased, in England, since. They're not charged in Scotland because the LDs had that as a term of forming coalition in the first Scottish Parliament.

So, I restate my question. What's the difference between a graduate tax and the current loans sytem, that's paid back as an extra income tax? Why is one acceptable,t he other not?

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Some ignorance on my part then. Certainly a 2.5% graduate tax will probably look more attractive than a 9% swipe on anything above 15k, in most cases, especially on a new graduates paycheck.

I think the biggest differences between the loans that are 'taxed' directly from paypackets and the new graduate tax is that, with loans, an individual pays back exactly what _they_ owe, it _can_ be paid early and once it is paid off, it is paid off.

With graduate tax, if by some chance an individual managed to turn their degree into a successful career, they'd end up contributing enough tax to pay their own debt... and then continue to be taxed.

That's unfair in my mind.

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matgb

Exactly.

I am pretty much in agreement. Given the massive level loans now are (my unpaid loan is £12K, that's on the low end of post '98 graduates), the repayment system you had would've been unworkable.

To be honest, I suspect Vince is angling to get through a "graduate tax" as a rebrand of the current loans scheme, including a tapering off once you've paid your fees &c. Although how the amount assessed would be calculated is anyone's guess.

Sorting out student finance is not something I'd want to do. Sorting it out then trying to persuade the Tories of the scheme to get it through is going to be an absolute bugger.

Start from scratch, easy, but unfortunately it's a right mess and there's no money to spare.

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innerbrat

Clarify! Do you mean "if you were in charge you would..." or "this is how it runs now..."?

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The way you think things ought to be run.

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innerbrat

In which case: c) you tax the things that create the greatest cost for you. Discouragement and fund raising work together in beautiful harmony.

e.g. smoking, driving in London.

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innerbrat

actually, scrap that, driving in London doesn't create cost; running the Congestion Chrage system creates cost.

Never mind!

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