CHARLOTTE, N.C. (QUEEN CITY NEWS) – Some policy experts are warning taxpayers they will face the brunt of President Biden’s Loan Forgiveness Program.
A new National Tax Payer’s Union Foundation (NTU) analysis says the average taxpayer will be coughing up an extra $2,000 in taxes.
But since our tax system is all income based, the end cost would vary based on how much the individual makes a year.
NTU Foundation’s analysis says taxes aren’t going to go up because of this policy immediately. Still, someone will have to foot this bill eventually, and Andrew Lautz, NTU’s Director of Federal Policy, believes it will be the taxpayers.
“No one’s taxes are going up $2,000 next year to pay for this policy,” said Lautz. “You know the per taxpayer burden we think is an important figure taxpayers should know about. It’s an easy way to understand that this policy costs money, and any money that the federal government spends is ultimately borne by the tens of millions of people who pay taxes in America. But no, taxes are not directly going up.”
But Lautz believes the 400 billion dollar deficit will eventually trickle down to the taxpayer within the next 5-10 years, especially since the Biden Administration hasn’t explicitly expressed how this plan will be paid for.
President Biden’s plan, issued by executive order, will cancel up to ten thousand dollars of federal student loans for borrowers earning less than $125,000 a year and will cancel up to $20,000 of loans for Pell Grant recipients.
Some experts have speculated the funding of this program would eventually be paid for with the planned savings from the Inflation Reduction Act, but Lautz says the numbers don’t add up.
“The Inflation Reduction Act, according to the most recent estimates, is projected to reduce deficits by about $300 billion over the course of a decade; we are still crunching the numbers at NTU foundation,” he says. “But early indicators, both from our number crunching and from other estimates that we’ve seen out there, is that this student debt cancellation policy is going to cost upwards of $400 billion. “Those two policies combined are actually going to increase the debt on net.”
Dr. Michael Walden, an economist from North Carolina State University, is more concerned about the short-term impacts Biden’s plan will have on the economy.
“The fundamental reason why we have an inflation problem is that we have consumers trying to spend money at higher rates than the supply chain can supply things to buy,” Walden said. “This will exacerbate that to some extent; I don’t think it’s going to send the inflation rate into 20% ranges. But if it were me, I would have advised the president to hold off on this; let’s wait until we get inflation better under better control.”
Dick Beekman, a Wake Forrest Law student with student loans, is excited about the new program but still has concerns.
“I’m excited for my friends and potentially myself, who might not have necessarily as much of a financial burden to go to school,” Beekman said. “But some of my concerns kind of arise from is there’s a band-aid to an underlying solution, which is just how expensive college is these days. And I don’t really see anything being done to necessarily address that specifically.”
The NTU Foundation says no matter how you slice it; this loan forgiveness program is going to have mid to long-term effects on taxpayers; whether or not those effects are worth it is up to you to decide.
NTU Foundation’s analysis based on income levels is the following:
- The average cost of student debt cancelation per taxpayer making between $1 and $50,000 is $158.27;
- The average cost per taxpayer making between $50,000 and $75,000 is $866.87;
- The average cost per taxpayer making between $75,000 and $100,000 is $1,477.78;
- The average cost per taxpayer making between $100,000 and $200,000 is $3,158.35; and
- The average cost per taxpayer making between $200,000 and $500,000 is $9,947.92.