Smarter cuts on education

The cuts in higher education could be made differently, says Lex Borghans, economist and member of the Board of Education. He proposes that the government changes the tax discount that young people receive. Young employees now don’t pay taxes over the first €6400,- of their income. By cancelling the tax discount completely, the government can save two billion euro.

Borghans says a part time job is more important for students than their education. According to the Maastricht professor, the current fiscal system and study financing does not encourage students to study diligently. This is because a part time job during college is tax free. Borghans writes: “The result of this is that practically all students have a part time job which generates a high income because they don’t have to pay taxes.”

‘Studying is investing’ is the motto. But Borghans says something is wrong with this reasoning. “The problem is that the income generated by the education –the higher income they will receive later in life- will be taxed with 42 or 52%. So there is a bonus for not studying.”

Borghans proposes the tax discount for young people will be cancelled. The government will receive money from the taxes, which can be used for study financing. The proposed measure will have some other benefits, says Borghans: “An additional effect might be that this measure helps prevent dropouts from MBO-schools. Dropping out prematurely will become less attractive for these students.” It will be less appealing to start working life, because high tax-rates will have to be paid.”  

The measure can, if the tax discount is cancelled completely, yield two billion euro for the government. If this money is re-invested in education, the study-grants can be doubled. A students who focuses solely on his studies, will be given more financial aid to do so. Students who want to work for additional cash will be treated like any other employee.