Restructuring the University System: What Level of Public Support?

It seems inevitable that universities in Canada will be increasing their reliance on tuition as a source of income. This paper works out an optimal tuition subsidy formula for a full tuition university system where investments in higher-education are treated by the tax system in the same way as investments in physical capital. The optimal subsidy is quite substantial in some cases. In general, with enlightened tax policy, there is no reason to fear that a full tuition regime will reduce the quality, equity, or accessibility of the university system.