A Graduate Tax is a Bad Idea

But not because of the argument Iain Dale makes here:

Just a thought on the graduate tax. We already have a graduate tax. It’s called income tax at 40 per cent.

This is an off-hand comment, sure, but it would also be a better argument if it were true. There are about 31.7 million taxpayers in Britain; only 3.8 million of them pay any tax at 40%. I’m all for widening tax bands to take some people out of higher tax rates but there are millions of graduates who don’t earn enough to pay higher rates of tax.

Nevertheless, the belief that everyone pays tax at 40% is a constant feature of press and metropolitan opinion. Hence too the sound and fury generated by Inheritance tax or Vince Cable’s so-called “Mansion Tax” which receive extraordinary amounts of attention even though they only pertain to a (relatively) small number of people. 

That’s not an argument for increasing taxes on the rich, merely for remembering that most people aren’t rich and that the government would be well-advised to concentrate on winning the trust of strivers on £22-35K a year – people who, in many respects, make up the “real middle-class” – who are some way poorer* than the 40%-paying middle-classes that, whatever the sacrifices they make (often real ones) are still pretty well-off. 

Anyway, a graduate tax is a bad idea for a host of reasons, not the least of which is that it would be better for money to go directly to universities and better too to have a system that doesn’t encourage emigration. In other words, a more fairly priced education market which would, eventually, provide better information for prospective students than is currently the case. (And which could be paid for by a mixture of bursaries and larger loans).

*Granted, the picture is muddied when one thinks of two-earner families who struggle to educate their children privately or afford the house in the catchment area they desire. Nevertheless, it remains a fact that most of the people who commentate on politics in the press are rather wealthier than much of the middle-class for whom they love to speak.