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Category: Tax Policy

Tax Policy

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Free College for all, well most

mike.editor@midpush.com, originally published 190427, updated 190427

In the 2016 presidential race Bernie Sanders announced that he thought a college education should be free. This is in keeping with his leadership via compassion and emotion viewpoint.

In the 2020 presidential campaign, Elizabeth Warren, in her race to best Bernie regarding compassion and emotion, has one upped Bernie and come up with a platform that emphasizes throwing out a students prior loan commitments and going forward to make college as free as possible.

Sticking my neck out, if I was a candidate here is what I would do:

  • Make High School Graduation contingent on understanding how Interest accrues and why you need to make more then the interest payment to pay the loan off in a timely manner. Too many students are clueless here….
  • Demand that colleges, public, private, & for profit, publish statistics on graduate employment statistics and income received by graduates of each of their degree programs. Students need this data to make informed decisions. Doing this would also help colleges offer more pertinent degree programs based on the economy.
  • Change the interest rate charged for these loans to be indexed slightly, say 2.5 points, above the 10 year treasury yield. Today, April 26, 2019, that would be 5%. The key point is given these loans are so hard to get rid of, a higher interest rate should be un-necessary.
  • Push community colleges more by lowering their costs. In a number of states they are virtually free, (except for books). Two years at a community college with a transfer to a 4 year degree lowers the overall cost.
  • Schools that accept federal student loan monies should publish statistics on teacher, maintenance, and administrator cost ratios. Too many state public schools started with good intentions, but now pay very high salaries for administrative work. The students and the taxpayer foot the bill.

Students need to understand that if they want to get an Art History major, and a number of the recent year graduates from their prospective college are working Docent jobs paying $28K a year. They most likely should not borrow $100K to fund their education. Conversely if the recent graduates from an engineering degree are making 120K after two years, borrowing $100K might be a sound investment.

Students over the age of 18 are adults, they need to be provided information to make informed decisions.

Not an ad, but presents the case well that most students are graduating high school without a basic understanding of interests and loans. One reason we need more H1B visa holders. (prudential)
Not an ad, but presents the case well that most students are graduating high school without a basic understanding of interests and loans. One reason we need more H1B visa holders. (prudential)

Elizabeth Warren’s Plan Highlights

  • Estimated cost of her plan over 10 years, $1.25T, T=trillion
  • Wipe out, ie pay off, existing loans for up to $50K. Up to 42 million citizens could benefit from this proposal. The pay offs would phase out for higher earners.
  • Expand Pell-Grants for non-tuition expenses.
  • Assist historically black colleges.
  • Questions that are unanswered are:
    • Effectively debt relief is income, would these payoffs be taxable by the IRS and states?
    • How are students debts handled going forward?
    • What about students who didn’t finish college?
    • This plan would likely increase the number of students attending college, either more colleges are needed, or higher prices will result from increased competition.

Down the road, with an increased student loans and or grants, colleges would be freeer to raise prices higher allowing them to pay more and hire additional staff. This behavior is explained by the fundamental economic demand curve.

What prompted me to write this was listening to a KQED radio program, Forum. ANatalia Abrams from an organization studentdebtcrisis.org was on. Her key points are:

  • Student Loan Debt is not the students fault.
  • Education used to be free, and still should be. She believes free education will “collectively” help everyone.
  • She is excited about Elizabeth Warren changing the world.
  • She describes a number of stories, documented here. A number of these cases appear to be people who have not made interest payments, and yet seem puzzled their loan balance has gone up. Education loans and yet they don’t seem to understand credit, loans, and such. They need more education….
  • Students and their parents are not responsible for choosing colleges with tuition way beyond their means or ability to afford. Buying college is like buying a car or a house — you do the research and purchase what you can afford.
  • She believes people should go to the school of their choice. Regardless of cost. And the public should pay for it.
  • She does not believe there should be a ROI (Return On Investment) regarding their choice of study.
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Pelosi wants Trump’s Taxes – But a firestorm if he goes nuclear

Nancy Pelosi, Speaker of the House

mike.editor@midpush.com, updated 190409

For the past 30 years or so it has been a “custom”, not a requirement, for presidential candidates to release their tax returns. Presidential candidates are however required to file a “Personal Financial Disclosure” with the Federal Election Commission. Donald Trump has filed a Personal Financial Disclosure , but so far he has refused to reveal his tax returns that contain more detailed information.

House democrats, led by Nancy Pelosi, have stated they plan to request Trumps tax returns. One method is to use a little known section of the IRS, specifically IRS Section 6103(f)(1).

If you wanted to play tit-for-tat, on June 26, 2017, only 12 out of 530 senators and representatives had released their tax returns. But, you can’t fault the others, they are not required to. And neither is Trump.

For some, tax returns are a private matter.

Section 6103(f)(1) reads in part.

The section of the IRS code that congress would use if they go forward on their promise to review President Trump’s tax returns over the years. One, while he was a private citizen. Two, while he has been President. The IRS has audited his returns over the years but this is thought not to be sufficient.

Nominally this is an underutilized section of the IRS. It has never been used against a President and the Separation of Powers would certainly come into play. Meaning the Supreme Court might be asked to intervene. This could take a few years. And this provision provides some anonymity for the tax payer being reviewed.

What could Trump do? Well, reading past 6103 (f), try IRS Section 6103 (g)…. It gives the President much broader powers than congress to pull anybody’s tax return.

The main portion of IRS Section I.R.C § 6103(g), which follows I.R.C § 6103(f). This subsection gives the President of the United States very broad powers to request and receive any US taxpayers tax returns. This would include congress members and members of the press.

This section gives the president very broad powers. He does not need a reason for these requests. He does have to eventually disclose who he has made requests for. But this would be after the fact.

Could Trump pull Nancy Pelosi and her husband, Paul Pelosi’s tax returns? And leak them, accidentally of course? Did AOC, working as a waitress disclose all of her tips? How many waiters have you known that disclose all of their tips? Did Dianne Feinstein and her husband, Richard Blum pay all their taxes? Or, George Sorros, who gave $400K to Kim Fox, might be interesting.

Where would it stop?

Public confidence in the tax system depends and relies on the belief that the IRS will protect taxpayers’ privacy. Most people have accepted Trump as not as clean as a whistle. His tax returns, have been reviewed and audited by the IRS for many years now. He probably attempts to make optimal use of the Tax Code, in his favor, as any smart American could do, and should.

Ideally, there should be a law that all candidates for public office should release their tax returns. But today, there is no such law.

In a letter to the Treasury Department’s legal office, one of Trump Attorneys wrote:

  • If the IRS acquiesces to Chairman Neal’s request, it would set a dangerous precedent. As Secretary Mnuchin recently told Congress, he is “not aware that there has ever been a request for an elected official’s tax returns.” For good reason. It would be a gross abuse of power for the majority party to use tax returns as a weapon to attack, harass, and intimidate their political opponents. Once this Pandora’s box is opened, the ensuing tit-for-tat will do lasting damage to our nation.
  • Can the Chairman request the returns of his primary opponents? His general-election opponents? Judges who are hearing his case? The potential abuses would not be limited to Congress, as the President has even greater authority than Congress to obtain individuals’ tax returns. 26 U.S.C. §6103(g). Congressional Democrats would surely balk if the shoe was on the other foot and the President was requesting their tax returns. After all, nearly 90% of them have insisted on keeping their tax returns private, including Speaker Pelosi, Senator Schumer, Representative Nadler, Representative Schiff, and Representative Neal himself.

In November 2013, Senate Democrats led by Harry Reid used the nuclear option to eliminate the 60-vote rule on executive branch nominations and federal judicial appointments. This opened a new frontier in politics.

Will Nancy Pelosi begin a new era herself?

Trump on leaving office, may, just leak tax returns, by accident. I wouldn’t put it past him.

Democrats should concentrate on legislation. Of course they have to work with the president. What have they passed in the last 3 months, that is now law?

Or we can wait another 21 months to see if this scenario changes. Remember the house must pass a bill, then the senate must also pass it, and unless they have veto proof majority in both the house and senate, the presidents signature is required.

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