Capital idea? 2

November 28, 2003

Miguel Palacios argues that governments cannot fund higher education from tax alone. His solution is for the private sector to lend the money to graduates, who would pay back a percentage of their earnings over time. Those payments look just like a tax, and he even suggests that they should be collected through the tax system. So if the private sector would be willing to use this new revenue stream to pay for higher education, a government should be able to do exactly the same with a graduate tax. Investment in higher education matched by a graduate tax is unaffordable only if you ignore the long term.

Richard Green
Head of economics
University of Hull Business School

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