Social Security System Acts As A Tax On Education

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NCPA Study Finds Tuition Isn’t The Only Cost Of Higher Degrees

WASHINGTON (January 17, 2001) — Tuition isn’t the only cost of a college education. College graduates are also treated much less favorably by Social Security, according to new study by the National Center for Policy Analysis (NCPA).

“Virtually all young people will pay more in Social Security taxes than they will get back in benefits,” said Dr. Tom Saving, a professor at Texas A&M University and director of the University’s Private Enterprise Research Center. “But individuals with more education are likely to do worse under Social Security than those with less education.” According to the study, for today’s 25-year olds on the average:

  • A male high school graduate can expect to pay $32,667 more in Social Security taxes than he will receive in Social Security benefits over his lifetime, (the estimate is measured in current dollars).
  • However, a male college graduate can expect to pay $63,363 more in Social Security taxes than he receives in Social Security benefits over his lifetime- and if he has a graduate degree, the loss grows to $93,170.
  • Thus, compared to a high school education, Social Security imposes about a $60,000 tax on graduate degrees.
  • Compared to a college degree, Social Security imposes about a $30,000 tax on graduate degrees.

Social Security does not literally base its benefits on education; it bases them on lifetime earnings. But the research finds that a person’s education level is the best predictor of lifetime earnings.

“If we know a young person’s educational level, we can predict Social Security taxes and benefits much better than knowing his current income,” said Dr. Saving, who is also a recently appointed trustee of the Social Security and Medicare trust funds.

“Social Security offers good news and bad news for workers who only have high school educations,” he said. “The good news is they fare better than workers with college degrees. The bad news is they still lose money.”

For complete study: http://www.ncpathinktank.org/pub/st240/