Governor Perry’s In State Tuition: Creating New Taxpayers

By Linda Vega

As for you, my galvanized friend, you want a heart. You don’t know how lucky you are not to have one. Hearts will never be practical until they can be made unbreakable. Wizard of Oz

But I still want one. (Tinman)

Why, anybody can have a brain. That’s a very mediocre commodity. Every pusillanimous creature that crawls on the Earth or slinks through slimy seas has a brain. Back where I come from, we have universities, seats of great learning, where men go to become great thinkers. And when they come out, they think deep thoughts and with no more brains than you have. But they have one thing you haven’t got: a diploma. Wizard of Oz

There is a misconception of what “In State Tuition” for undocumented youth is and how it is a strict benefit for these persons. The seven Republican presidential candidates intentionally attack Governor Rick Perry on this immigration issue as if to shift attention from the real issues like: the economy, entitlement, and the War On Terror. Many conservative voters have come to realize that these attacks are, in fact, a distraction from real issues. Yet, by talking about exaggerated and invented numbers over the cost of providing in-state tuition for undocumented students in Texas, Mitt Romney and Michele Bachmann are avoiding the real financial benefits that these immigrants in Texas will generate. In fact, those students enrolled in institutions of higher education in Texas, with the help of the in-state tuition fees bill signed by Perry. This law allows the payment of about $350,000 in taxes more than millions of Americans currently pay. (This is explained below)*. So while Romney, Bachmann and Santorum accuse Perry of being “soft” on immigration, the truth is that the Governor Perry is creating high income tax payers that will pay for unfunded entitlement programs such as Social Security, Medicare, and Medicaid.

According to those experts of the Social Security Trust fund “If we don’t do anything to fix the current system, we will have a nightmare scenario.” We need to reduce benefits to Social Security by 23% as Americans are now living longer, and the ratio of workers receiving benefits will soon be larger than those workers paying into the system. So the financial problems are not only created by demographics of boomers retiring, but also by the increase on longevity and “reduction in immigration”. Moreover, in the 1960s, the ratio of workers contributing to Social Security to actual beneficiaries was 16 to 1—for every Social Security beneficiary, there were 16 workers paying into the Social Security. Currently, the ratio has declined to 3 to 1 by 2009 and with a steady decline to 2 to1 by 2020. Thus, creating college educated high-income tax payers will benefit all Americans, especially seniors.

According to the U.S. Census Bureau, the earnings of an American worker increases with the educational level. The higher the formal education, the higher the income earned and the higher the level of money paid into the national coffers in the form of taxes. For example, “Adults ages 25 to 64… earned an average of $34,700 per year in 2005. Average earnings ranged from $18,900 for high school dropouts to $25,900 for high school graduates, $45,400 for college graduates and $99,300 for workers with professional degrees (Master’s).” As a result, each successively higher education level is associated with an increase in earnings. These in turn are additional taxpayers who are created by the level of education received.

 

People who attend some college (but do not earn a degree) might expect work-life earnings of about $1.5 million. This is slightly more for people with associate degrees, with earnings at $1.6 million over the duration of their life. Over a work-life, individuals who have a bachelor’s degree will earn on average $2.1 million — about one third more than workers who did not finish college, and nearly twice as much as workers with only a high school diploma. A master’s degree holder tops a bachelor’s degree holder at $2.5 million. Therefore, the net income difference between a tax payer who has only and high school degree ($1 million) and tax payer with Bachelor’s degree ($2. million) is about $1.2 million. Thus in Texas, Governor Perry is creating a labor pool that will end up paying for unfunded federal entitlement programs, including Social Security.

Additionally, in Texas, the state spends about $10,000 annually per student in the prestigious University of Texas system and even less in the Texas State University or community colleges. Therefore, the total investment per student for a 4-year degree is about $40,000. However, in return, the state of Texas is creating a pool of workers who will earn an average of $2.4 million in their lifetime. Furthermore, average American tax payers contribute an average of 25 percent in payroll taxes. *As result, any student who graduates from college in Texas will be taxed 25% on their $2.4 earned income ($600,000) as opposed to only $250,000 from those tax payers with only a high school who will earn only $1,000,000 in their life time. Consequently, the in-state tuition bill signed by Governor Perry is, in fact, a high-income tax payer generator.

We can all agree that primaries are all about agitating the conservative base by promoting stringent unrealistic goals that will change in the general election. However, attacking a good economic conservative policy, adopted by the state legislature in Texas and signed by Governor Perry, just to appease hard-liners is blatant disregard for conservative fiscal policies, States Rights, and common sense democratic Republican principles. According to Romney, “I think if you’re opposed to illegal immigration, it doesn’t mean you don’t have a heart, it means you have a heart and a brain.” First, his advisors should teach him the proper terms in speaking about immigration. Finally, if Mitt Romney does have “a heart and a brain,” he may want to consult with his economic advisors on the in-state tuition issue. Or better yet, he may want to look at Texas, a sound economic model for how to stimulate economic growth with education.

http://www.utexas.edu/business/accounting/pubs/tf_undergrad_fall11.pdf

http://www.census.gov/prod/2002pubs/p23-210.pdf

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