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

Chapter Seven
Educational Attainment and Public Revenues and Costs
The preceding chapters provide estimates of the benefits that taxpayers would receive
from increases in educational attainment and the costs that would be incurred in providing
the additional education. In this chapter, we review the estimates and then
combine them to assess the total and net benefits to taxpayers of raising educational
attainment.
Effects of Increases in Education on the Public Budget
Tax Payments
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 tax payments and higher payments to social support and
insurance programs, such as Social Security and Medicare.
Increases in the education level of individuals in every population subgroup
result in substantial increases in payments into tax and social service programs by
more-educated persons. For example, compared with the average high school dropout,
the average college graduate contributes to the public budget additional taxes whose
present value (2002 dollars) varies between $120,000 and $192,000, depending on
demographics.
Graduating from college rather than ending education with only some college
provides the largest impact on tax payments, followed by earning a high school
diploma rather than dropping out of high school. The difference between the tax payments
made by a person with a high school diploma and an otherwise similar person
with some college is smaller, but still substantial.
Whites and Asians contribute the most to the tax system as a result of increased
education. Also, the variability of the taxation increment by race/ethnicity is more
pronounced for earning a bachelor’s degree compared with a high school diploma or
some college education. Finally, our results indicate lower increases in tax payments as
a result of increases in educational attainment for women compared with men. However,
this finding should be interpreted with caution, since we divide tax payments
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