News from Cass Business School

Graduate taxes are fairer for all

New research model supports a tax system which would be of greater benefit to individuals, academic institutions, and society

Wednesday, 20 October, 2010

Graduate taxes are a better mechanism than tuition fees for funding higher education because they reduce risk for students, and offer an incentive for universities to improve teaching and facilities, suggests new research from Cass Business School and the University of Cologne.
The research paper, 'Universities as stakeholders in their students careers', discussed by Cass academic Tom McKenzie in this week's Cass Talks, suggests that if a graduate tax scheme was adopted, revenues should flow directly to the institution of the alumnus as this would increase the incentive for universities to improve the quality of education. This is because universities would stand to profit from boosting their students' earnings potential and to lose out if they did not add value. They would effectively become stakeholders in their graduates' careers.
McKenzie and Sliwka found that risk-averse students preferred the graduate tax as future income is volatile and the state assumes part of this risk through the tax. However, since students differ in their abilities, those of high calibre are likely to prefer an upfront fee as they expect to pay more tax than their less able counterparts later on.  But due to the insurance effect of their education, a student with an average ability still prefers the graduate tax.
The Cass Talks interviews are an opportunity to hear Cass faculty and prominent alumni give their perspective on current business and finance news stories, global issues affecting the business world and new research coming out of the School. Listen, watch and download Cass Talks and see other Cass academics share their opinions

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