The Benefits to Taxpayers from Increases in Students - RAND ...

Educational Attainment and Public Revenues and Costs 83
Reducing the estimate of the effect of an increase in education on net benefits
to taxpayers by 25 percent has largely the same result for every demographic group,
although the effects are slightly smaller for the estimates of net benefits for black males
and somewhat greater for those of white women. The range of percentage reductions
in net benefits across the groups is generally narrow. Reducing the estimated effect of
increased education level generally has roughly the same effect on the net benefits estimates
for each increase in education considered here.
Even if we assume that the estimates of the effects of increased educational attainment
are overly optimistic, the results still imply that such increases yield significant
net benefits to taxpayers. Table 7.8 shows the smallest estimated increase in net benefits
resulting from an increase in education across the demographic groups if the estimate
of the effects of the increase in education on tax payments, social program costs, and
incarceration costs is reduced 25 percent.
For example, suppose we assume that our estimate of the effect of increasing education
from less than high school graduate to high school graduate on net benefits to
taxpayers is 25 percent too high. If we recalculate the effect on tax payments, social
program costs, and incarceration costs assuming that the education effects are 75 percent
of our estimates and assume no change in the costs of providing the additional
education, the lowest estimate of the increase in total benefits that would result from
that increase in education is about $51,000 (Asian man and white man). The estimated
increase in net benefits for each of the other demographic groups, assuming that the
effect of increasing education from less than high school graduate to high school graduate
is only 75 percent as large as our estimate, is larger.
The results presented in Table 7.8 show that even if our estimates of the effects of
increases in education on net benefits to taxpayers are substantially too high, increases
in educational attainment will still result in substantial benefits to taxpayers in the
form of increased public revenues and decreased public costs by those whose education
is increased.
Table 7.8
Smallest Estimated Effect of Increased Education on Net Benefits If
Effect of Increased Education Is Reduced
Increase in Education
Less than high school graduate
to high school graduate
High school graduate to some
college
Some college to bachelor’s
degree or more
Less than high school graduate
to bachelor’s degree or more
Smallest Estimated Effect on Net Benefits to
Taxpayers (2002 $, thousands)
51 (Asian man and white man)
24 (Hispanic woman and white woman)
53 (Hispanic woman and white woman)
123 (white woman)