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Canceling debt creates a taxable event for the person with the debt under the tax code. Transferring money to a person and then voiding the liability is indisti

Canceling debt creates a taxable event for the person with the debt under the tax code. Transferring money to a person and then voiding the liability is indistinguishable from unearned income, and is taxed as such. People aren't going to be very happy when they get hit with an unexpected $10k tax bill due immediately. Similarly, the people with the largest student loan debt tend to be affluent. Gifting the affluent more money than a poor person who could not afford school may be able to save in their lifetime is a bad look politically, and would be deeply unfair.

cwkoss 5y ago
> Similarly, the people with the largest student loan debt tend to be affluent. I question this. I'd assume the largest student loan debts are held by the middle class, because the affluent didn't take out loans because they paid for their education with cash.
- jkhdigital 5y ago
  > the affluent didn't take out loans because they paid for their education with cash Not if they didn't become affluent until after going to college and getting a high powered career... case in point, I took out almost $70k in student loans to get an MBA and paid it back within three years of graduation. I actually screwed up by paying it off so quickly, because the interest rate after refinancing was less than 3% and I would have been better off using that money to load up my IRA (which presumably would earn better than 3% on average, as well as provide a tax break).
throwawaycities 5y ago
> Canceling debt creates a taxable event for the person with the debt under the tax code. Under the current tax code, a forgiven debt isn’t always taxable. I have represented student loan holders and had their student loans forgiven (6 figure debts), and they had no tax liability. And if student loans were forgiven it would be through the passing of a law, and it would be pretty trivial to include a provision that would remove any tax liability from student loan forgiveness. And if people had a $10k tax bill due immediately (which you completely made up), they would not be mad if they had $100k or $200k in loan forgiven. It’s funny how the $10k tax bill is your concern on one hand then you shift to saying it would be deeply unfair because the people with the biggest loans tend to be affluent. Affluent people don’t have student loans because their parents pay for their school. Otherwise the people with the most amount of debt are the biggest victims of the poorly designed system intended to indebt them for their entire lives.

cwkoss 5y ago

> Similarly, the people with the largest student loan debt tend to be affluent. I question this. I'd assume the largest student loan debts are held by the middle class, because the affluent didn't take out loans because they paid for their education with cash.

jkhdigital 5y ago
> the affluent didn't take out loans because they paid for their education with cash Not if they didn't become affluent until after going to college and getting a high powered career... case in point, I took out almost $70k in student loans to get an MBA and paid it back within three years of graduation. I actually screwed up by paying it off so quickly, because the interest rate after refinancing was less than 3% and I would have been better off using that money to load up my IRA (which presumably would earn better than 3% on average, as well as provide a tax break).

throwawaycities 5y ago

> Canceling debt creates a taxable event for the person with the debt under the tax code. Under the current tax code, a forgiven debt isn’t always taxable. I have represented student loan holders and had their student loans forgiven (6 figure debts), and they had no tax liability. And if student loans were forgiven it would be through the passing of a law, and it would be pretty trivial to include a provision that would remove any tax liability from student loan forgiveness. And if people had a $10k tax bill due immediately (which you completely made up), they would not be mad if they had $100k or $200k in loan forgiven. It’s funny how the $10k tax bill is your concern on one hand then you shift to saying it would be deeply unfair because the people with the biggest loans tend to be affluent. Affluent people don’t have student loans because their parents pay for their school. Otherwise the people with the most amount of debt are the biggest victims of the poorly designed system intended to indebt them for their entire lives.