Why isn't the 1979 Act on the table where people can declare bankruptcy for college loan forgiveness?

I mean the govt is ultimately the cause of all of this and outrageous tuition prices. 

2 minutes ago, JohnSnowsHair said:

It's funny when any suggestion of a tax increase anywhere, in the least taxed advanced economy on the planet (revenue to GDP), is lazily dismissed as "socialism" or "communism".

The irony is, that @ToastJenkins as well to do guy who actually works for a living and draws a salary is carrying the bulk of the tax burden. My entire point is that anyone who works for a living and doing reasonably well shouldn't be propping up the government by ourselves. I have never, and will never argue that income taxes should be increased for anyone. They're too high as it is. The idea that TJ, you or I should pay more in taxes than Amazon is ludicrous. 

38 minutes ago, Gannan said:

The irony is, that @ToastJenkins as well to do guy who actually works for a living and draws a salary is carrying the bulk of the tax burden. My entire point is that anyone who works for a living and doing reasonably well shouldn't be propping up the government by ourselves. I have never, and will never argue that income taxes should be increased for anyone. They're too high as it is. The idea that TJ, you or I should pay more in taxes than Amazon is ludicrous. 

there's broader behavioral effects of different types of taxes though. this causes tension between what appears "fair" (which IMHO is never a great metric anyway) and what results in the ideal outcome overall.

corporate taxes have the effect of chasing companies to friendly environments. we're seeing that internally with many IT companies relocating to places like Texas and Idaho of all places.

consumption taxes have the effect of reducing consumption (and increasing savings/investments).

earned income taxes mainly just piss off people who live by their salaries. there's some measure of migration for workers to lower income tax states, but the truth is that most people go to where the jobs are. 

unearned income taxes mainly pisses off investors, and can cause flight of investment capital to markets with lower income tax rates. 

property taxes can chase people out as well, though it mainly does so for those in retirement years with less of an effect for those working. NJ may be a high property tax state, but there seems to be no shortage of people willing to pay them for the privilege of not living in NYC. 

 

so the question becomes not only how much to tax, but what to tax at what rates that gets us the best outcomes. if we want "fair", we just have some kind of flat tax on all the things (property taxes are kind of an outlier here so I'll leave them aside). so earned and unearned income might be taxes at some flat percentage, and corporations likewise would. but this may have a major effect on where business is done.

if we want to attract businesses and believe that where the jobs are people will come and - begrudgingly or not - pay the taxes so they can have a good paying job, we'd have a 0% corporate tax and some combination of earned income + consumption taxes. 

etc. etc.

 

ultimately workers tend to have the least ability to vote with their feet. sure, maybe they could live in some low-population low-tax state like Wyoming or Montana, but they're not going to find a lot of really high paying jobs like they will in SF or Austin. so most don't have the leverage to force a company to move to them, so they need to move to where the jobs are.

corporations, certainly larger IT firms among others, have more means and resources to relocate at least some of their workforce for tax reasons, though there is some tension with where talent pools are for high end knowledge workers (see: PA and NJ have relatively high corporate tax rates, but lots of pharma talent has settled in the NYC / Philly area it seems and it's hard to relocate without bigger tax incentives). 

 

the most business friendly configuration presumably would be high earned income taxes, and virtually no taxes anywhere else except maybe property taxes. it would minimize the tax disincentive to run or invest in a business and offload all tax burden onto individual workers. that's not really politically feasible, but economically in theory it's the best for business.

some believe the best overall balance is no corporate taxes, low income taxes, and higher consumption and land value taxes (as opposed to straight property taxes). this would incentivize business while also incentivizing individual savings, with the only negative business effect being reduced demand due to the consumption taxes.

 

whatever, I'm just rolling at this point. but one thing I'd note is that I rarely consider the "fairness" of taxation. obviously it can't be super out of whack, but a tax system that might be considered "fair" is going to be sub-optimal in other places, costing the overall economy more and reducing individual gains. so while it may be grating to have companies like Amazon/etc. having so little tax liability, there's advantage in having companies like Amazon be able to operate using all of their capital. 

9 minutes ago, JohnSnowsHair said:

there's broader behavioral effects of different types of taxes though. this causes tension between what appears "fair" (which IMHO is never a great metric anyway) and what results in the ideal outcome overall.

corporate taxes have the effect of chasing companies to friendly environments. we're seeing that internally with many IT companies relocating to places like Texas and Idaho of all places.

consumption taxes have the effect of reducing consumption (and increasing savings/investments).

earned income taxes mainly just piss off people who live by their salaries. there's some measure of migration for workers to lower income tax states, but the truth is that most people go to where the jobs are. 

unearned income taxes mainly pisses off investors, and can cause flight of investment capital to markets with lower income tax rates. 

property taxes can chase people out as well, though it mainly does so for those in retirement years with less of an effect for those working. NJ may be a high property tax state, but there seems to be no shortage of people willing to pay them for the privilege of not living in NYC. 

 

so the question becomes not only how much to tax, but what to tax at what rates that gets us the best outcomes. if we want "fair", we just have some kind of flat tax on all the things (property taxes are kind of an outlier here so I'll leave them aside). so earned and unearned income might be taxes at some flat percentage, and corporations likewise would. but this may have a major effect on where business is done.

if we want to attract businesses and believe that where the jobs are people will come and - begrudgingly or not - pay the taxes so they can have a good paying job, we'd have a 0% corporate tax and some combination of earned income + consumption taxes. 

etc. etc.

 

ultimately workers tend to have the least ability to vote with their feet. sure, maybe they could live in some low-population low-tax state like Wyoming or Montana, but they're not going to find a lot of really high paying jobs like they will in SF or Austin. so most don't have the leverage to force a company to move to them, so they need to move to where the jobs are.

corporations, certainly larger IT firms among others, have more means and resources to relocate at least some of their workforce for tax reasons, though there is some tension with where talent pools are for high end knowledge workers (see: PA and NJ have relatively high corporate tax rates, but lots of pharma talent has settled in the NYC / Philly area it seems and it's hard to relocate without bigger tax incentives). 

 

the most business friendly configuration presumably would be high earned income taxes, and virtually no taxes anywhere else except maybe property taxes. it would minimize the tax disincentive to run or invest in a business and offload all tax burden onto individual workers. that's not really politically feasible, but economically in theory it's the best for business.

some believe the best overall balance is no corporate taxes, low income taxes, and higher consumption and land value taxes (as opposed to straight property taxes). this would incentivize business while also incentivizing individual savings, with the only negative business effect being reduced demand due to the consumption taxes.

 

whatever, I'm just rolling at this point. but one thing I'd note is that I rarely consider the "fairness" of taxation. obviously it can't be super out of whack, but a tax system that might be considered "fair" is going to be sub-optimal in other places, costing the overall economy more and reducing individual gains. so while it may be grating to have companies like Amazon/etc. having so little tax liability, there's advantage in having companies like Amazon be able to operate using all of their capital. 

I don't believe I used the word "fair".  I said that the burden is disproportionally placed on working people who do well. The larger point is that we aren't seeing an overall benefit from a 0% corporate tax rate for the largest corporations.  Quite the opposite. 

Fairness is entirely subjective, and what we would likely consider to be a mostly "fair" tax system is one that's less likely to be pragmatic. In this context, pragmatism stems from the fact that those who earn more income are more likely to be tolerant to disproportional tax increases. It's not "fair" to have someone who earns $200k/yr to pay a higher percentage of income tax than someone who earns $30k/yr, but it's more pragmatic than having a flat income tax percentage needed to generate the same amount of revenue.  The bigger issue, as always, is spending though. We have a spending problem more than we have a revenue problem. Again, "fairness" in how our tax revenue is allocated becomes a sticking point since it's indirectly correlated to the amount of revenue needed to be generated. Maybe we're too far down the laffer curve already, maybe not. But I do know one thing, this pandemic has soured me even further on how much undue leeway we give to the most selfish, uneducated, and uninformed segments of our population. 

1 minute ago, we_gotta_believe said:

Fairness is entirely subjective, and what we would likely consider to be a mostly "fair" tax system is one that's less likely to be pragmatic. In this context, pragmatism stems from the fact that those who earn more income are more likely to be tolerant to tax increases. It's not "fair" to have someone who earns $200k/yr to pay a higher percentage of income tax than someone who earns $30k/yr, but it's more pragmatic than having a flat income tax percentage needed to generate the same amount of revenue.  The bigger issue, as always, is spending though. We have a spending problem more than we have a revenue problem. Again, "fairness" in how our tax revenue is allocated since it's indirectly correlated to the amount of revenue needed to be generated. Maybe we're too far down the laffer curve already, maybe not. But I do know one thing, this pandemic has soured me even further on how much undue leeway we give to the most uneducated and uninformed segments of our population. 

Neither party has any appetite for spending cuts which is why I was posting more about what is within the realm of possibility. For years I dismissed income inequality as "not my problem" because I'm happy with where I am. However, we are seeing the effects of it on a global scale and its starting to permeate just about every aspect of society. This is why I couldn't disagree with Snow's point more about how companies like Amazon paying a 0 percent rate is actually a good thing. 

1 minute ago, we_gotta_believe said:

Fairness is entirely subjective, and what we would likely consider to be a mostly "fair" tax system is one that's less likely to be pragmatic. In this context, pragmatism stems from the fact that those who earn more income are more likely to be tolerant to tax increases. It's not "fair" to have someone who earns $200k/yr to pay a higher percentage of income tax than someone who earns $30k/yr, but it's more pragmatic than having a flat income tax percentage needed to generate the same amount of revenue.  The bigger issue, as always, is spending though. We have a spending problem more than we have a revenue problem. Again, "fairness" in how our tax revenue is allocated since it's indirectly correlated to the amount of revenue needed to be generated. Maybe we're too far down the laffer curve already, maybe not. But I do know one thing, this pandemic has soured me even further on how much undue leeway we give to the most uneducated and uninformed segments of our population. 

we have both a taxation and a spending problem. 

we have a generation conditioned to reflexively reject any suggestion of a tax increase as socialism, while at the same time demanding more and more from government. 

as a percentage of GDP, tax revenues are lower than any other advanced economy. our spending also lags behind other advanced economies, though to a much lesser degree; the gap between tax revenue and spending by our gov't is pretty damn high.

I don't necessarily care whether we close this gap through reduced spending (HAH!) or increased tax levels. but one way or the other we need to close the gap to a reasonable level. we can deficit and make it up with treasury bills, but it can be at levels we've been going the last decade. 

7 minutes ago, Gannan said:

Neither party has any appetite for spending cuts which is why I was posting more about what is within the realm of possibility. For years I dismissed income inequality as "not my problem" because I'm happy with where I am. However, we are seeing the effects of it on a global scale and its starting to permeate just about every aspect of society. This is why I couldn't disagree with Snow's point more about how companies like Amazon paying a 0 percent rate is actually a good thing. 

I guess I'm not sure if you're proposing to hike the corporate tax rate back into the 30's or remove some of the common deductions/credits being utilized by companies like Amazon, or something else entirely. I don't know enough about the specifics of the amazon situation itself to know why their effective rate is so low.

4 minutes ago, Gannan said:

Neither party has any appetite for spending cuts which is why I was posting more about what is within the realm of possibility. For years I dismissed income inequality as "not my problem" because I'm happy with where I am. However, we are seeing the effects of it on a global scale and its starting to permeate just about every aspect of society. This is why I couldn't disagree with Snow's point more about how companies like Amazon paying a 0 percent rate is actually a good thing. 

I didn't really come down on it being a "good thing". it's just what it is - there is some advantage to corporations being able to operate with low/no taxes. if the goal is to have as many companies competing to do business here in the US as possible, we probably don't need a 0% corporate tax rate but we do want to mind what our tax rate is relative to our competitors (other nations with advanced economies). I think there's advantage in making sure we keep our rates low and highly competitive to ensure companies have strong incentive to operate here, even if labor costs are higher.

the other issue with that though is the regulatory capture built into our tax code. but that's a separate question. 

24 minutes ago, we_gotta_believe said:

I guess I'm not sure if you're proposing to hike the corporate tax rate back into the 30's or remove some of the common deductions/credits being utilized by companies like Amazon, or something else entirely. I don't know enough about the specifics of the amazon situation itself to know why their effective rate is so low.

I guess if I were to propose something it would be to create progressive corporate tax rate while eliminating the loop holes. I'm not sure what the Biden administration is proposing in the way of specifics. 

2 hours ago, Gannan said:

Forgiving the interest seems to be the best compromise to me. It avoids the moral hazard while allowing folks to get out of debt in a reasonable amount of time. The way student loans are run now is nothing short of a scam. 60 minutes had a great piece about how student loan scams are defrauding our military.

https://www.cbsnews.com/news/student-loan-debt-forgiveness-public-service-60-minutes-2021-10-03/

There are provisions in the bankruptcy code that already account for people who try to get out of debt too soon by never intending to pay it back.  If the code is modified to allow for discharge of student loan debt, there could be a provision added which, for example, excludes discharge of debt payment for which has become due within five years or less.

2 hours ago, Gannan said:

Even @vikas83 agrees with me that corporations paying an effective rate of 0% is problematic. Don't be obtuse. 

The revenue isnt the problem

and accelerated debt rules etc can always fudge the numbers. Of course companies will avoid taxes. To do otherwise  would be stupid on their part. Companies are not social constructs.

2 hours ago, Gannan said:

Betsy Devoss who made her billions in part from the student loan business made the debt forgiveness program unattainable for virtually everyone and fundamentally broken. Sadly the Biden administration has done nothing to fix it. 

Which shows how bad an idea it is for the govt to subsidize demand… only to be trumped by them taking the system over

2 hours ago, JohnSnowsHair said:

It's funny when any suggestion of a tax increase anywhere, in the least taxed advanced economy on the planet (revenue to GDP), is lazily dismissed as "socialism" or "communism".

Know who starts with " i just think it’s funny…”  whiney biotches

10 minutes ago, Gannan said:

I guess if I were to propose something it would be to create progressive corporate tax rate while eliminating the loop holes. I'm not sure what the Biden administration is proposing in the way of specifics. 

Consumption tax instead of income. Fixed

34 minutes ago, JohnSnowsHair said:

I didn't really come down on it being a "good thing". it's just what it is - there is some advantage to corporations being able to operate with low/no taxes. if the goal is to have as many companies competing to do business here in the US as possible, we probably don't need a 0% corporate tax rate but we do want to mind what our tax rate is relative to our competitors (other nations with advanced economies). I think there's advantage in making sure we keep our rates low and highly competitive to ensure companies have strong incentive to operate here, even if labor costs are higher.

the other issue with that though is the regulatory capture built into our tax code. but that's a separate question. 

In the western world Ireland is the only other country that shifts the tax burden away from corporations and to working people. Its not a coincidence they are also the only western country with a huge income inequality gap like ours.  

2 hours ago, DaEagles4Life said:

Why isn't the 1979 Act on the table where people can declare bankruptcy for college loan forgiveness?

I mean the govt is ultimately the cause of all of this and outrageous tuition prices. 

The student loan provisions in the original 1979 Act were modified, as were the credit card provisions.  Now, student loans are almost always non-dischargeable in bankruptcy, and credit card indebtedness cannot be discharged in a Chapter 7 if the debtor has enough disposal income as calculated by a "means" test.  I have no problem with being able to wipe out credit card debt in a Chapter 7 liquidation.  Credit card indebtedness often amounts to predatory lending as the banks are excluded from state usury laws.  See prior posts re returning to original bankruptcy provisions in the 79 Act regarding discharge of student loan indebedness.

2 hours ago, Gannan said:

The irony is, that @ToastJenkins as well to do guy who actually works for a living and draws a salary is carrying the bulk of the tax burden. My entire point is that anyone who works for a living and doing reasonably well shouldn't be propping up the government by ourselves. I have never, and will never argue that income taxes should be increased for anyone. They're too high as it is. The idea that TJ, you or I should pay more in taxes than Amazon is ludicrous. 

We are not corporations. Its quite simple. 

1 minute ago, ToastJenkins said:

Consumption tax instead of income. Fixed

You are proposing a VAT essentially.  The income tax when initially enacted was only supposed to tax incomes of the uber wealthy.  My how times have changed.

17 minutes ago, ToastJenkins said:

Know who starts with " i just think it’s funny…”  whiney biotches

Lazy.

12 minutes ago, Procus said:

You are proposing a VAT essentially.  The income tax when initially enacted was only supposed to tax incomes of the uber wealthy.  My how times have changed.

Everyone should pay taxes. Even the poor. Everyone needs skin in the game. 

2 minutes ago, Gannan said:

Everyone should pay taxes. Even the poor. Everyone needs skin in the game. 

Everyone already does pay taxes.  Those with very low incomes don't pay income taxes.  But they do pay sales tax on items they purchase unless they live in a state that doesn't have sales taxes.

 

4 minutes ago, Procus said:

Everyone already does pay taxes.  Those with very low incomes don't pay income taxes.  But they do pay sales tax on items they purchase unless they live in a state that doesn't have sales taxes.

 

Sorry. I meant everyone should pay income taxes.

23 minutes ago, ToastJenkins said:

We are not corporations. Its quite simple. 

Once the supreme court rued that corporations are people, it kind of killed that argument. 

Since I was mentioned, here are some thoughts:

1. I agree with @Procus that bankruptcy (Chapter 7 or 13) is the correct venue for discharging student debt (which would require changing current bankruptcy laws). A simple blanket forgiveness from the Federal Government for all student debt is ridiculous and creates even more moral hazard (if that's even possible at this point). But -- this needs to be combined with a massive change...GET THE GOVERNMENT OUT OF THE STUDENT LOAN BUSINESS. We have crippling levels of student debt because the same people demanding loan forgiveness now were calling for unlimited student loans for anyone to study anything, regardless of ROIC. Unlimited cheap financing leads to...skyrocketing prices due to the new influx of demand. So now people spend the same amount to study Art History at Villanova as they do to go to Wharton, despite the SLIGHT difference in lifetime earnings potential. Make banks and colleges underwrite these loans and own the risk and watch underwriting standards return. Now, liberal politicians will never accept this, but that's the only real solution. Spending 6 figures on a college education needs to be treated as a massive investment with a return, not a right for all.

2. To be clear @Gannan, I think the proper income tax rate for corporations and individuals is 0%. I support a national consumption tax. But back in reality, that won't happen. What we need is to stop lying to people about who actually pays income taxes -- they are overwhelming paid by the wealthy, and we have the most progressive income tax system in the developed world because so many pay nothing or next to nothing. Furthermore, @Gannan is correct that the people truly screwed are high wage earners as opposed to people making passive income. So, let's go to a flat tax that applies uniformly. 20% on everything, 1 standard deduction. 

3. The reason many businesses pay zero tax is because dope politicians try to use the tax code to incentivize things -- R&D tax credits, accelerated depreciation, green energy, marriage, kids, etc. We need to accept a simple truth -- the people writing tax policy are much dumber than the people paying taxes. Put all these credit and deductions in the system, and large companies and smart individuals will use them to minimize or eliminate their taxes. Stop blaming the companies/people and start blaming the idiots who write the laws.

57 minutes ago, Procus said:

You are proposing a VAT essentially.  The income tax when initially enacted was only supposed to tax incomes of the uber wealthy.  My how times have changed.

that is the inevitable creep of govt. which is the genius of the founders trying to limit it at every turn.

it would have to be a big bang implementation, otherwise you would just end up with both. still probably would knowing the slime on the hill and human nature...

46 minutes ago, Gannan said:

Everyone should pay taxes. Even the poor. Everyone needs skin in the game. 

i agree

37 minutes ago, Gannan said:

Sorry. I meant everyone should pay income taxes.

Once the supreme court rued that corporations are people, it kind of killed that argument. 

nah b/c corps still dont get to vote.

the reason to do it is simple - employment. ireland's exploded when they did all this and tons of capital was invested. so you collect income tax out the other side. its just a question of where it comes out. you going to take less pay b/c the corp had to pay more in taxes? or be fine with losing your job as a cost saving measure?