Progessive Income Tax = Tax on Going to College

"In 1980, an American with a college degree earned about 30 percent more than an American who stopped education at high school.  But, in recent years, a person with a college education earned roughly 70 percent more (see chart above).  Meanwhile, the premium for having a graduate degree increased from roughly 50 percent in 1980 to well over 100 percent today.  The labor market is placing a greater emphasis on education, dispensing rapidly rising rewards to those who stay in school the longest. 

For many, the solution to an increase in inequality is to make the tax structure more progressive - raise taxes on high-income households and reduce taxes on low-income households.  While this may sound sensible, it is not.  Would these same individuals advocate a tax on going to college and a subsidy for dropping out of high school in response to the increased importance of education?  We think not.  Yet shifting the tax structure has exactly this effect."

~Gary Becker and Keven Murphy, "The Upside of Income Inequality," from The American, May/June 2007.