What about a “Graduate AND Non-Graduate Tax”?

2016-10-26 08:51

I’m on record as being a big fan of our Statistician-General, Pali Lehohla – here’s the link to an earlier opinion-piece of mine on the man: http://voices.news24.com/robin-mun-gavin/2016/07/new-sa-hero-pali-lehohla/

Pali’s latest “pearls of wisdom” relate to the Nation’s current challenge - the affordability of free tertiary education!

Yesterday, Pali addressed the media, stating that it was clear to him that free tertiary education, in SA, simply wasn’t a viable option!

He also said that, given the higher priorities that have been enunciated by politicians and by society (eg electricity, water, social grants etc) there weren’t sufficient funds available for additional education costs.

He added that he believed that the current tertiary education system was inefficient – exacerbated by the high failure rate at our tertiary institutions which was clogging the system - leading to a commensurate increase in the costs of running such institutions.

As usual, I believe that Pali’s got it right!

However, Pali went on to suggest the imposition of a “graduate tax” to fund the shortfall in revenue required to deliver “free tertiary education” to all.

I have already expressed my views on such a tax – here’s the link to that opinion-piece: http://voices.news24.com/robin-mun-gavin/2016/07/a-graduate-tax-how-bizarre/

If you read this, you will see that I clearly wasn’t in favour of such a tax!

However, since writing this “graduate tax” opinion-piece, I’ve given the matter some further thought and I believe that a viable solution may rest in some sort of “hybrid Graduate/Non-Graduate Loan Tax”.

Let me explain:

The fairest way of funding a student’s education must surely be to lend him/her the funds.

It’s fair because it provides all who want to study, at a tertiary institution, with the means to study.

And, very importantly, it also needs the student to “back” himself/herself to succeed/graduate BECAUSE the funds lent will need to be recovered, from the student, over his/her working life.

And why shouldn’t this recovery be done through the (efficient) income tax system? – repayments (as a "tax") would be commensurate with the means to repay and this would, in turn, determine how quickly the loan would be repaid.

Importantly, and this is where I differ from a simple “graduate tax”, those who have accepted loans from the State but have dropped out/failed to graduate should STILL be liable to repay their loans through this “Graduate/Non-Graduate Loan Tax”.

I feel very strongly about this because it doesn’t necessarily follow that graduates are the big-earners in our economy – in fact, most of my very wealthy friends aren’t university graduates – they’re self-made entrepreneurs!! I also know of some graduates who earn very low salaries!

The principle must be that if a person has benefitted from state funding (for tertiary education) he/she must repay such funds to the State – and the tax system will ensure repayment – the advantage of doing this through the tax system being that these loans will only be repaid as and when the recipient earns income.

It would follow that if such person remains unemployed for his/her whole life, he/she will never be subject to this “tax”.

Importantly, this tax should be levied on the recipient only until the loan has been fully repaid (perhaps, together with a nominal amount of interest?) – that would seem fair.

Of course, the above proposal doesn’t deal with the person who receives state funding for tertiary education and then emigrates (regardless of whether they graduated or not) – something would need to be done to prevent this obvious loop-hole in collection.

What I’m suggesting is surely not going appeal to the students but, in my mind, it provides:

- Equity/fairness

- The settlement of the loan based on the person’s SUBSEQUENT ability to pay

- Certainty; and

- A definite motivation to pass exams/graduate.

What do you think?

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