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TAX RETURNS: On Tax Day 2012, a 90 Percent High School Graduation Rate Would Yield $1.8 Billion Annually in Additional Tax Revenues, New Alliance Analysis Finds

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“When students earn high school diplomas, they become more marketable in today’s highly competitive job market, while the higher earnings they pocket translate into increased tax revenues—all without any increase in the tax rate. It’s a win-win.”
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On Tax Day 2012, a new analysis from the Alliance for Excellent Education finds that graduating 90 percent of high school students would generate an additional $1.8 billion annually in tax revenues. Of that total, $1.1 billion would be federal tax revenue while the remainder—nearly $700 million—would be state and local revenues.

“In these tight fiscal times, governments at all levels are leaving money on the table by not graduating students from high school,” said Bob Wise, president of the Alliance for Excellent Education and former governor of West Virginia. “When students earn high school diplomas, they become more marketable in today’s highly competitive job market, while the higher earnings they pocket translate into increased tax revenues—all without any increase in the tax rate. It’s a win-win.” (Watch more from Gov. Wise by clicking on the image above or visiting http://youtu.be/Bs_9cEdTBPc).

Based on March 2012 data from the U.S. Bureau of Labor Statistics, the unemployment rate for high school dropouts is 12.6 percent, compared to 8 percent for high school graduates and 4.2 percent for college graduates. When employed, high school dropouts earn about $8,000 less annually, compared to high school graduates.

According to the Averaged Freshman Graduation Rate (AFGR) calculated by the U.S. Department of Education, the United States has a national graduation rate of 75.5 percent, nearly 15 percentage points below the 90 percent goal envisioned in the Alliance’s analysis.1  To reach the 90 percent goal, the nation would need to ensure another 584,000 students earned their diplomas.

At the state level, only Wisconsin has reached the 90 percent graduation rate goal as determined by AFGR. Vermont (89.6 percent), Minnesota (87.4 percent), and North Dakota (87.4 percent) are next in line. At the other end of the spectrum, Nevada (56.3 percent), Mississippi (62.0 percent), the District of Columbia (62.4 percent), New Mexico (64.8 percent), and South Carolina (66.0 percent) have the most work to do to reach the goal.

“Tax policy usually finds two groups, those in favor of tax hikes and those in favor of tax cuts, debating about which direction taxes should take,” Wise said. “Unfortunately, there is not enough discussion about this third direction—graduating more students from high school. The U.S. Congress is constantly concerned about long-term deficit reduction, but as this analysis shows, decisions on how to close budget gaps and build a strong economy must begin with ensuring better educational outcomes for the nation’s students.”

The complete analysis is available here

AFGR provides an estimate of the percentage of high school students who graduate on time. It uses aggregate student enrollment data to estimate the size of an incoming freshman class and counts of the number of diplomas awarded four years later. Although not as accurate as an on-time graduation rate computed from a cohort of students using student record data, this estimate of an on-time graduation rate can be computed for every state with currently available cross-sectional data.

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Every Child a Graduate. Every Child Prepared for Life.