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What Happens on Commencement Day Can Make a Big Difference on Tax Day

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April 16, 2012 04:45 pm

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As Tax Day approaches, I’d like to take you away from frantically trying to fill out your IRS Form 1040 and its accompanying tax forms for just a minute to talk about how dropouts are making our country’s return smaller than it could be.

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. Unfortunately, there is not enough discussion about a third direction to take that most everyone can agree on. In these economically tough times, there is a way through which America could increase tax revenues at all levels of government without changing the tax code: cut the high school dropout rate and trade dropouts for diplomas.

A recent analysis by well-known economists Henry Levin and Cecilia Rouse calculates that cutting the dropout rate for one high school class by half would raise $90 billion in additional federal tax revenue over the course of that class’s life. This figure is a combination of new taxes being paid by dropouts-turned-graduates and subsequent savings from social programs like healthcare, welfare, and the criminal justice system.

Here at the Alliance for Excellent Education, with the assistance of State Farm, we show that achieving the Grad Nation goal l of raising the high school graduation rate to 90 percent for just one high school class will yield almost $2 billion more in additional taxes being paid annually.

Of that nearly $2 billion, almost $700 million would be additional revenues at the state and local levels. I think there are a lot of state and local officials across the country who are facing deficits and who would be quite happy to have a portion of that $700 million flow into their coffers. How much of that tax revenue would go to your state? Download the analysis to find out.

Here in Washington, Congress is constantly concerned about long-term deficit reduction. If Congress focused more on the benefits of improving long-term graduation rates over a number of high school classes, it would mean adding billions of dollars back into the federal budget. Raising high school graduation rates creates new taxpayers and saves taxpayer dollars through decreased social costs.

The increased tax revenues don’t stop with high school graduates. Even more revenue would be raised by increasing the number of these new high school graduates who actually go on to postsecondary achievement. Consider that, according to the U.S. Bureau of Labor Statistics and U.S. Census Bureau, in 2010, the average high school graduate earned $28,000 while the average individual with a bachelor’s degree or higher earned $52,000. Those increased earnings represent more taxable income and more revenue coming in at the local, state, and federal levels.

There’s even more good news that goes beyond new revenues on Tax Day. If America can trade dropouts for diplomas, it will add increased earnings, productivity, and consumption of houses, cars, and other goods to the economy. All of that increased economic activity would add tens of thousands of new jobs and almost $8 billion in annual earnings to our economy.

Remember, these figures are for just one high school class. If we sustain a graduation ate of 90 percent over successive classes, these gains will multiply.

It’s important to remember that each and every high school dropout represents tax revenue that the local, state, and federal levels are missing the opportunity to raise. As you go to file your Form 1040 (and please, remember to do it by Tuesday!), think about all of the tax revenue our country is missing out on by not graduating more students. We know that what happens on Commencement Day can make a big difference on Tax Day, now let’s start working on a better return for next year by turning dropouts into high school graduates with diplomas.

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Every Child a Graduate. Every Child Prepared for Life.