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Amendments to the Internal Revenue Code:

Taxing the College Graduates

The Congress shall have power to lay and collect taxes
on incomes, from whatever source derived, without
apportionment among the several States,
and without regard to any census or enumeration.

- The Sixteenth Amendment to the United
States Constitution, enacted in 1913:

As you know, people with college degrees, elite school admissions, and occupational licenses have a much easier time "earning" a living than the poor, the homeless, the abused, and the rejected. Therefore, a graded tax levied upon income-generating academic credentials may be very desirable in the progressive socio-economic sense, though long overdue. The United States Constitution allows the taxation of income from any source, and the statistics clearly demonstrate income advantage for people in proportion to their level of academic completion.

This article is primarily to describe what such a taxing scheme should look like in the Internal Revenue Code along with some explanations. Individual states and foreign countries could use the same model for their own income tax schemes. In a previous commentary, Economist Warns Against Tuition Increases, several pros and cons of this type of tax were discussed.

The credential tax rate should depend in part upon the individual's level of academic completion, and the ratings of the academic institution attended. A person with a doctorate would be taxed more than a person with only a baccalaureate. A person with a degree from Harvard would be taxed more than a person with a degree from the University of Illinois.

People who have occupational licenses and drivers' licenses should also have to pay an additional tax.

Because of a general fiscal preference for college students and graduates in terms of employability, entry level and rate of pay, the imposition of the tax should be independent of a person's occupation. In other words, a college graduate working in a gas station, a pub, or in some other setting that traditionally does not require a college degree, would still have to pay the credential tax.

Several safeguards should be employed to achieve the necessary and proper goals of the new tax scheme, with due regard for the rights of the taxpayers.

Safeguard 1:

A special board should determine the top schools every year in order to maintain fair tax assessments. At this writing, reasonably valid rankings of colleges and universities over the past several years can be found in the U.S. News and World Report.

Safeguard 2:

A special code of conduct would be needed for government employees administering the tax code, because employment practices in the government, including the judiciary, are predominantly predicated upon academic and professional ideology insofar as having degree requirements and licensing requirements. Without a special code of conduct in this area, government employees generally perform the role of "lesser credentialed servants" of their more influentially credentialed "masters". One result of this conflict of interest, between public duty and private credentials of persons occupying government job positions, usually amounts to abuse of power. The "safety net" for the poor turned out to be a safety net for the relatively rich by creating fraudulent, stigmatizing dossiers against the credential-poor through the welfare departments, unemployment departments, and the court system. The result has been unlawful favoritism for the credential-rich.

Safeguard 3:

Elective, equitable exemptions or deductions should be made available. For example, people who might best qualify are those who have been substantially and chronically injured into poverty over a period of many years, for not having appropriate post secondary credentials because of academic or professional corruption. Even if they are given a college degree later in life, their cost-benefit ratio from the degree would still be much lower than if they had been able to get their degree at a younger age. Of course, people who freely choose marriage or gainful employment above the poverty level during their younger years instead of completing college should not be qualified for this type of exemption or deduction.

Other exemptions or deductions would be feasible because of the new tax. Tuition tax credits could be equitably retained, and possible deductions for public service by younger taxpayers who earn under a certain amount is also conceivable.

Safeguard 4:

Penalties for discriminatory wages and benefits to evade the tax should be pursued. Suppose a college graduate complains to his employer that the tax is unfair and discriminatory. The employer would then be pressured to raise his or her salary or benefit package. This means that if the tax originally amounted to $50 against the graduate, the employer might be pressured to give a raise of, suppose $500. If the added tax over $50 is $25, then the graduate makes a profit of $425 dollars merely because of complaining about the tax. This is likely to be paid off the salaries of lesser credentialed employees. Therefore, this type of discriminatory salary, wage, and benefit increases should be vigorously prosecuted and penalized. If this safeguard turns out to be unenforceable, then the whole tax scheme would fail.

For the first several years of this new tax scheme, the total amount of revenue generated should not be increased from the current income tax scheme. This might otherwise result in increased fiscal mismanagement and special interest self-dealing with the increased revenues. Colleges and universities which created the problems which the tax scheme is trying to remedy would undoubtedly be the first in line to claim its proceeds. Graduates would claim a "greater stake" in the income derived from their degrees and licenses for paying more because of them, and would also indirectly lay claim to the proceeds. These special interests must be made to understand that it is they who must pay for the social and economic damages they cause. For this reason, a similar credential tax scheme may be necessary for separate inheritance and gift taxes, and for other potentially abusive tax shelter mechanisms. But eventually, if the credential tax does its job, everyone's tax rate might become lowered, including the upper tax brackets.

Table-1, Possible Tax Rates

Table-2, Tax Percentages for Undergraduate Schools

Table 3 - Tax Percentages for Graduate Schools (not included here)

Table-4, Surtax Percentages for Professional Schools

Schedule ED - Tax on Post-Secondary Academic Degrees, Occupational and Drivers' Licenses

Table-1 Possible Tax Rates

Two year college degree, terminal or post-baccalaureate.......3%

Two years of college completed.....................................................3%

Baccalaureate degree: If from top 50................................................7% If from top schools ranked 51-100.............................6% If from all other schools ....................................5% Plus, for advanced degrees: Master's degree ..............................................1% Doctorate: If from top 50 ranked schools.................................4% If from all other schools.....................................3% Professional school degrees, such as J.D., M.D., M.B.A.: If from top 50 schools........................................5% If from all others............................................4% Post-professional school degrees (such as J.S.D.).............1% Non-matriculated enrollment to evade tax...................1% per year enrolled Occupational license, depending on type..................1% - 5% Current Driver's License......................................1%

Note: The following Schedule ED is not an official taxform of the Department of the Treasury - Internal Revenue Service. However, you might wantto send a copy with a protest to the House Ways and Means Committee, or to the Senate Finance Committee. If you feel generous, you can send the amount of the tax to the author of this commentary :)


For the Tax Year


Tax on Post-Secondary Academic Degrees,
Occupational Licenses, and Drivers' Licenses

See separate instructions

For the calendar year beginning January 1, 2011 and ending December 31, 2011

Your name:

Mailing Address:


State (or country, if outside the U.S.):

Zip Code:

Your Social Security Number

Date of Birth (month, day, year):

Academic Degrees

1 Is your highest level of academic completion an Associate's Degree from any college?
Enter Yes or No:

If yes, enter 3% in the following box, then go to line 5.

2 Do you have a baccalaureate degree?
Enter Yes or No:
If yes, state from which college or university

From Table-2 enter the percentage amount for that particular college or university:

3 Do you have a master's degree?
Enter Yes or No
If yes, state from which college or university

From Table-3, enter the percentage amount for that particular college or university.

4 Do you have a Ph.D or the equivalent?
Enter Yes or No
If yes, state from which college or university

From Table-3, enter the percentage amount for that particular college or university.

5 Do you have a law degree (J.D.), a medical or dental degree (M.D. or D.D.S.), or an M.B.A.?
Enter Yes or No
If yes, state from which college or university:
From Table-4 enter the percentage amount for that particular college or university.

6 Have you received any other degree after having received your first baccalaureate degree?
Enter Yes or No:
If yes, state from which college or university:
From Table-2, enter the percentage amount for that particular college or university:

Occupational Licenses

7 Do you have any occupational license?
Enter Yes or No:
If yes, state the nature of the license(s):

From Table-5 enter the percentage amount according to the instructions:

Driver's License

8 Do you have a state issued driver's license or identification card?
Enter Yes or No:

If yes, enter 1% in this box:


9 Add the percentages from lines 1 through 8 inclusive and enter the total percentage amount here:
The amount in this box is your credential tax rate.
10 Enter your gross income here, from one of the following amounts that you entered on either Form 1040, Form 1040A, or Form 1040EZ:
  • Line 22 on Form 1040
  • Line 15 on Form 1040A
  • Line 4 on Form 1040EZ
11 Multiply the amount on Line 10 by the percentage on Line 9. Donate this amount to the author of this form :)

Table-2 - Tax Rates for Graduates of Undergraduate Schools

On Line 2 of Schedule ED enter 5% if you possess an undergraduate degree from any school except the ones listed below:

Enter 7% on line 2 of Schedule ED if you possess an undergraduate degree from any of the following schools:

Amherst College (MA)
Bates College (ME)
Bowdoin College (ME)
Brown University (RI)
Bryn Mawr College (PA)
California Institute of Technology
Carleton College (MN)
Carnegie Mellon University
Claremont McKenna College (CA)
Colby College (ME)
Colgate University (NY)
Columbia University (NY)
Cornell University (NY)
Dartmouth College (NH)
Davidson College (NC)
Duke University (NC)
Emory University (GA)
Georgetown University (DC)
Grinnell College (IA)
Hamilton College (NY)
Harvard University (MA)
Harvey Mudd College (CA)
Haverford College (PA)
Johns Hopkins University (MD)
Massachusetts Inst. of Technology
Middlebury College (VT)
Mount Holyoke College (MA)
Northwestern University (IL)
Oberlin College (OH)
Pomona College (CA)
Princeton University (NJ)
Rice University (TX)
Smith College (MA)
Stanford University (CA)
Swarthmore College (PA)
Trinity College (CT)
University of California - Berkeley
University of Chicago
University of Michigan - Ann Arbor
University of Notre Dame (IN)
University of Pennsylvania
University of Virginia
Vanderbilt University (TN)
Vassar College
Washington and Lee University
Washington University in St. Louis
Wellesley College (MA)
Wesleyan University (CT)
Williams College (MA)
Yale University (CT)

Enter 6% on line 2 of Schedule ED if you possess an undergraduate degree from any of the following schools:

Barnard College (NY)
Bard College (NY)
Beloit College (WI)
Boston College
Brandeis University (MA)
Bucknell University (PA)
Case Western Reserve Univ. (OH)
Centre College (KY)
College of the Holy Cross (MA)
College of William and Mary (VA)
Colorado College
Connecticut College
DePauw University (IN)
Dickinson College (PA)
Franklin and Marshall College (PA)
Furman University (SC)
Georgia Institute of Technology
Gettysburg College (PA)
Kenyon College (OH)
Lafayette College (PA)
Lawrence University (WI)
Lehigh University (PA)
Macalester College (MN)
New York University
Occidental College (CA)
Pennsylvania State U. University Park
Pepperdine University (CA)
Rensselaer Polytechnic Inst. (NY Rhodes College (TN)
Sarah Lawrence College (NY)
Scripps College (CA)
Skidmore College (NY)
Texas A&M Univ. College Station
Tufts University (MA)
Tulane University (LA)
U. of Illinois Urbana-Champaign
U. of North Carolina Chapel Hill
Union College (NY)
Univ. of California Los Angeles
Univ. of California San Diego
Univ. of California Santa Barbara
Univ. of Southern California
Univ. of Wisconsin Madison
University of California Davis
University of California Irvine
University of Rochester (NY)
University of Texas - Austin
University of the South (TN)
University of Washington
Wabash College Wake Forest University (NC)
Whitman College
Yeshiva University (NY)

Table-4 Tax Rates for Graduates of Professional Schools

On Line 3 of Schedule ED, enter 3% if you possess a professional school degree from any institution except the ones listed below:

Enter 4% if you possess a professional school degree as follows:

Law (J.D. or equivalent):

Yale, Harvard, Stanford, University of Chicago, Columbia, U. Mich., NYU, U. Virginia, Duke, U. Penn., Georgetown, UC Berkeley, Cornell, Northwestern, UT Austin, USC, Vanderbilt, UCLA, U. Iowa, Hastings (U.Ca.), U. Wisconsin, Geo. Wash.U. (D.C.), Univ. Minn., Notre Dame, Univ N.C. (Chapel Hill).

Medicine (M.D.):

Harvard, John Hopkins, Duke, UCSF, Yale, Wash. U. (Mo.), U. Penn., Stanford, UCLA, Cornell, U. Mich., Columbia, U of Washington, Univ of Chicago, Vanderbilt.

Business (MBA):

Harvard, Stanford, Penn, Northwestern, MIT, Univ Chicago, Duke, Dartmouth, Virginia, Michigan, Colulmbia, Cornell Carnegie-Mellon, NC Chapel Hill, UC Berkeley, UCLA, UT Austin, Indiana Univ. at Bloomington, NYU, Purdue, USC, U. Pittsburgh, Georgetown, U. Maryland, U. Rochester.

Case-Study 1: A person received a two year degree from a community college, but also received a baccalaureate from the University of Wisconsin, became a Certified Public Accountant, and later graduated law school at Harvard. He currently works as a licensed attorney with a gross income of $350,000 per year. How would he be taxed under the credential tax scheme?

Case-Study 2: A person with an undergraduate degree from Yale receives $25,000 per year as a freelance writer for magazines, receives royalties for a book, and receives honoraria for speaking engagements. How would she be taxed under the credential tax scheme (Hint: If she didn't have the Yale degree, she would not have those sources of income)

Answer: Referring to the tables above...