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

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28 The Benefits to Taxpayers from Increases in Students’ Educational Attainment cational attainment on government revenues and costs are more likely than are changes that reduce such effects. If such changes occur, the estimates presented here will understate the effects of educational attainment on government revenues and costs. Our analysis assumes that the relationships observed in the data are causal. That is, we assume that the differences in contributions to government revenues and costs between more highly educated and less highly educated people are the result of the differences in their levels of education. There is abundant evidence that increased educational attainment leads to increases in earnings and that earnings are related to contributions to government revenues and costs. It is possible that some other factor is related to both the level of an individual’s education and his or her contributions to government revenues and costs. But it is clear that education is a dominant factor, even if there are others. Moreover, the magnitude of the effect of education on earnings has grown consistently over time. Because we assume that the relationships between education and contributions to government revenues and costs that existed in 2002 will continue over time, our estimates do not reflect the effects of increases in the effect of education on earnings and, consequently, on government revenues and costs. The bottom line is that the analyses that follow, notwithstanding the inherent uncertainties in estimating future trends and patterns, show that increases in educational attainment yield significant benefits to taxpayers. We recognize that the greatest gains accrue to those whose education levels are improved and that increases in educational attainment also provide numerous types of noneconomic benefits in addition to economic benefits. However, this analysis indicates that raising an individual’s level of education creates high benefits for the public budget, benefits that should be considered in assessing the importance of finding, funding, and implementing programs for increasing education levels.
Chapter Three Payments for Taxes and Social Programs Greater educational attainment increases both the likelihood of employment and an individual’s earnings when employed. The higher income realized by more highly educated people results in higher federal and state income taxes. “Consumption” taxes, such as sales, real estate, and excise taxes, also increase as a direct result of higher income. Taxes on consumption and property depend on the amounts spent on consumption and property, which, in turn, depend on individual and household disposable income. Therefore, as a by-product of earning higher incomes, people with more schooling generally pay more in taxes. In addition, the higher earnings realized by more highly educated people results in higher payments to social support and insurance programs, such as Social Security and Medicare. Payments to social support and insurance programs by individuals and their employers are determined by earnings. So, as a by-product of higher earnings, people with more schooling and their employers generally pay more to social support and insurance programs. In this chapter, we review the relevant taxation mechanisms that determine tax payments and payments to social support and insurance programs and present the results of our analysis of the effects of educational attainment on payments into the public budget. Appendix B presents the empirical analyses used to estimate the effects of increased educational attainment on tax payments and payments to social support and insurance programs. 1 Taxation Mechanisms Individuals and households contribute to the public budget by paying taxes. In this study we concentrate on three types of tax payments: 1 The education variables are jointly significant at the 0.001 level in all the regression models used to estimate the effects of education level on tax payments and payments to social support and insurance programs. See Appendix B for details. 29
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THE ARTS CHILD POLICY CIVIL JUSTICE
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Page 5: Preface Meeting the educational dem
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Page 11: Figures 3.1. Present Value of Lifet
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Page 25: Abbreviations ADA CPS EITC FTE GED
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Page 39 and 40: Chapter Two Analytic Approach There
Page 41 and 42: Analytic Approach 15 effects of edu
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Page 57 and 58: Payments for Taxes and Social Progr
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Page 69 and 70: Spending on Social Support Programs
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Educational Attainment and Public R
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Appendix A Data and Sources Data Th
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Data and Sources 89 Program Benefit
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Appendix B Estimating Tax Payments
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Estimating Tax Payments 93 Federal
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Appendix C Social Program Participa
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Social Program Participation and Co
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Appendix D Incarceration Cost Estim
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References Aos, Steve, Roxanne Lieb
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References 115 Krop, Richard, Steph
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References 117 U.S. Department of J
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