It is important to ask how governmental expenditures on education affect economic equality. Arrow (1971) has shown that public expenditure on different individuals with different ability should be input progressive in order to maximize the utilitarian objective function if ability and public expenditure are substitute as the arguments in the individual utility function. There the word ‘input progressive’ is used in the sense that expenditure should be higher for individuals with low ability. Green et al. (1971) have recently argued that the case for input regressivity can be made under alternaiive assumptions, in particular, when the output of educational process is public goods and when expenditures themselves are produced commodities. On the other hand, the analysis of the optimal income taxation in the presence of educational process has been made by Sheshinski (1973) and Atkinson (1973). This approach takes account of the rational choice between education and work under a given tax schedule, but it does not take into account explicitly the possibility of educational expenditure by the government. The purpose of this paper is to investigate the question of public expenditure on education in the framework of education-work choice in the presence of income tax. The possibility of proportional subsidy on the cost of education is introduced and the interrelationship between linear income tax and linear educational subsidy (tax) is studied. It will be shown below that if the objective function is the utilitarian, that is, the sum of individual utilities, then (1) some educational tax is desirable in the absence of income tax; (2) if we compare the optimal linear income taxation in the absence of educational tax (subsidy) with the optimal linear educational taxation in the absence of income taxation, the first is always more desirable than the latter; (3) if both policies are available and if the collection cost of tax