State of the Union

[Jenksismyhero]

Funny you mention that. I know two people in that exact situation, with oh, 200+K in law school debt. Now they don't want to practice law cause they don't like it, etc, and want to do very blah work which won't pay much anything. They'll pay pretty much the minimum while getting the rest forgiven. And by forgiven, I mean, let other people who were responsible pay for it. It is a complete case of people taking advantage of things. The real purpose was to relieve people who really did get in way too over their heads. All this said, the answer shouldn't be, well, we'll just punish everyone who did it right and make them pay more.

 

And really it was implemented to be a SHORT-TERM solution, kinda like most welfare. Here's a crutch WHEN YOU NEED IT. But, as with every social safety net, it becomes an entitlement that gets abused. You can't fault people for doing it, but it sucks when you're the one scrounging to pay that stuff off in full while others don't.

 

 

[NorthSideSox72]

Funny you mention that. I know two people in that exact situation, with oh, 200+K in law school debt. Now they don't want to practice law cause they don't like it, etc, and want to do very blah work which won't pay much anything. They'll pay pretty much the minimum while getting the rest forgiven. And by forgiven, I mean, let other people who were responsible pay for it. It is a complete case of people taking advantage of things. The real purpose was to relieve people who really did get in way too over their heads. All this said, the answer shouldn't be, well, we'll just punish everyone who did it right and make them pay more.

 

So here's what you could do. Or maybe what I'd do.

 

Student loan payments are regulated. They are all subject to a once-a-year payment amount adjustment. The adjustment is made on the amount of net income from your annual tax filing, and a percentage cap is set so people aren't overwhelmed. No forgiveness - ever. If it take you 50 years to repay it but at only $50 a month, so be it. Payments always go interest amount first, then principal. If your payment is less than the interest amount, you make no ground on the principal, but won't see your balance go up either. Rates are set at loan generation as with any fixed-rate loan, but with a cap of a certain percentage to prevent people getting stiffed.

 

Finally, in order to make sure there is enough loan money available, the government can set up their own competitor, where the rate is set at a profitable amount above inflation (current and projections), such that they can not only cover losses and program costs but bank a little money to go to some sort of college grant program. This means they will be on par with what a bank might do, and keep the banks from running rates TOO high because they'd get yanked down by their competitor.

 

Protections for the loaning institutions and the loan recipients in there. No cost to taxpayers either. Doesn't need to be overly complicated, IMO.

 

[illinilaw08]

So here's what you could do. Or maybe what I'd do.

 

Student loan payments are regulated. They are all subject to a once-a-year payment amount adjustment. The adjustment is made on the amount of net income from your annual tax filing, and a percentage cap is set so people aren't overwhelmed. No forgiveness - ever. If it take you 50 years to repay it but at only $50 a month, so be it. Payments always go interest amount first, then principal. If your payment is less than the interest amount, you make no ground on the principal, but won't see your balance go up either. Rates are set at loan generation as with any fixed-rate loan, but with a cap of a certain percentage to prevent people getting stiffed.

 

Finally, in order to make sure there is enough loan money available, the government can set up their own competitor, where the rate is set at a profitable amount above inflation (current and projections), such that they can not only cover losses and program costs but bank a little money to go to some sort of college grant program. This means they will be on par with what a bank might do, and keep the banks from running rates TOO high because they'd get yanked down by their competitor.

 

Protections for the loaning institutions and the loan recipients in there. No cost to taxpayers either. Doesn't need to be overly complicated, IMO.

 

Student loans get protections that basically no other private debt get under any relevant law - they basically cannot be discharged in a bankruptcy filing.*

 

As a result, people who are struggling with student loan debt can't get out from under it - as opposed to someone who has a business go belly up. If the tradeoff to that is that there are programs like the income repayment plan or the "work for the government for 10 years and have your loans forgiven," I fail to see the concern. Those debts are already given absurdly preferred status under the law.

 

* I say basically because the Bankruptcy Code has provisions that allow student loans to be discharged with a requisite show of "hardship," but the cases that allow for hardship discharges involve the saddest .0000001% of people struggling with student loan debt.

 

 

[Reddy]

You're looking out for yourself. For better or worse that's what you're doing, and no one can tell someone who is doing that that they are wrong. However, this is not what the rule was meant for. If a person is able to put away a significant amount of money then they should not able to take advantage of that program IMO. The program is not meant to pay back what you feel like you want to in order to maximize how much you can have forgiven 25 years later. Because what is forgiven is paid back by everyone else who follows the rules. So like you said, maybe you should act more like those who vote Republican instead of those who tend to vote Liberal.

 

guys. my IRA has a whole $4,800.

 

let's not blow this out of proportion.

 

[Reddy]

I also feel like all of you are missing the fact that as I make more money, I'm paying more in student loans... I'm just ALSO putting money into an IRA. The fact that you all are acting like I'm "choosing" not to pay my loans back is hilarious. Like... you guys don't think I'm trying to make more and more money? If that means I have to pay more in loans, so be it, but that's my goal. I'm not TRYING to game the system.

 

Lol.

[Jenksismyhero]

Student loans get protections that basically no other private debt get under any relevant law - they basically cannot be discharged in a bankruptcy filing.*

 

As a result, people who are struggling with student loan debt can't get out from under it - as opposed to someone who has a business go belly up. If the tradeoff to that is that there are programs like the income repayment plan or the "work for the government for 10 years and have your loans forgiven," I fail to see the concern. Those debts are already given absurdly preferred status under the law.

 

* I say basically because the Bankruptcy Code has provisions that allow student loans to be discharged with a requisite show of "hardship," but the cases that allow for hardship discharges involve the saddest .0000001% of people struggling with student loan debt.

 

Students don't have any collateral, so it makes sense that it would be difficult to discharge. The problem is going forward the amount of debt is going to keep rising and more and more people are going to take the "well i'll just pay whatever I can for 25 years and then it'll be gone" option, leaving the rest of the country with the increasing bills.

 

 

[Jenksismyhero]

I also feel like all of you are missing the fact that as I make more money, I'm paying more in student loans... I'm just ALSO putting money into an IRA. The fact that you all are acting like I'm "choosing" not to pay my loans back is hilarious. Like... you guys don't think I'm trying to make more and more money? If that means I have to pay more in loans, so be it, but that's my goal. I'm not TRYING to game the system.

 

Lol.

 

I think it's the classic example of a buddy or family member asking you to lend them some money because they can't afford to do X and then you find out they went out the night before and dropped 100 bucks for dinner and drinks or just bought an expensive toy. When you borrow money from someone you shouldnt be spending any extra dollars on anything else but that loan. Otherwise it just looks like you're taking advantage of the generosity.

Edited January 27, 2015 by Jenksismybitch

[Reddy]

I think it's the classic example of a buddy or family member asking you to lend them some money because they can't afford to do X and then you find out they went out the night before and dropped 100 bucks for dinner and drinks or just bought an expensive toy. When you borrow money from someone you shouldnt be spending any extra dollars on anything else but that loan. Otherwise it just looks like you're taking advantage of the generosity.

 

someone's bitter.

 

I'm paying back the loan AND saving for retirement.

 

I'm doing what someone my age SHOULD be doing.

 

I honestly don't understand how I can be faulted for doing that. haha

[Jenksismyhero]

someone's bitter.

 

I'm paying back the loan AND saving for retirement.

 

I'm doing what someone my age SHOULD be doing.

 

I honestly don't understand how I can be faulted for doing that. haha

 

Bitter that in this country I and others like me (middle to upper middle class) have to shoulder the burden of both the rich and poor? Yep, I sure as hell am.

 

Your situation might not be so bad, but there are others out there that definitely game the system. Hell I have friends who are doing it. Friends who have basically decided not to marry so that their income levels to the IRS and Dept. of Ed look substantially lower than they really are.

Edited January 27, 2015 by Jenksismybitch

[illinilaw08]

Students don't have any collateral, so it makes sense that it would be difficult to discharge. The problem is going forward the amount of debt is going to keep rising and more and more people are going to take the "well i'll just pay whatever I can for 25 years and then it'll be gone" option, leaving the rest of the country with the increasing bills.

 

Students can discharge literally any other debt that they get when they don't have collateral. Credit card debts for one. Medical debts for another. Personal loans to friends. The deficiency on a car loan (after the collateral is sold for pennies on the dollar). Literally almost no other private debt gets that favorable treatment (domestic support obligations - but that's about it). In fact, it's actually easier to discharge tax debt than student loan debt.

 

The question, to me, is how is a consumer's money put to the best use. College is almost a pre-requisite to finding a good job. The costs associated with that degree are growing at an unsustainable rate. I don't see why putting together programs that assist with repaying that burden - again a burden that's a pre-requisite to almost any decent job - is so very problematic.

 

Now, in the case of the income based repayment plan or whatever (a program I admit to not being particularly familiar with), it shouldn't be a windfall - so if someone's income goes up in that 25 years or whatever, their payments should increase accordingly. Ideally, a program like that assists people when their means are most likely to be at their lowest - immediately when they graduate - and should be caught up when income rises within that 25 year period or whatever.

 

 

[caulfield12]

Funny you mention that. I know two people in that exact situation, with oh, 200+K in law school debt. Now they don't want to practice law cause they don't like it, etc, and want to do very blah work which won't pay much anything. They'll pay pretty much the minimum while getting the rest forgiven. And by forgiven, I mean, let other people who were responsible pay for it. It is a complete case of people taking advantage of things. The real purpose was to relieve people who really did get in way too over their heads. All this said, the answer shouldn't be, well, we'll just punish everyone who did it right and make them pay more.

 

 

That's not the only example. I know someone who graduated from Harvard Law, and she realized that corporate law simply wasn't for her, there were a couple of suicides at her downtown law firm (at least one jumped through the window) and she chose at that time to work teaching law (writing) at a major university.

 

There's a built-in incentive for those who attend law school to work in the public sector/non-profit, places like the Southern Poverty Law Center, for example...resulting in a "greater good," presumably, for society.

 

 

Also, and this isn't directly about your comments but preceding ones....if we have our family money in a trust (father passed away previously) and the whole trust is transferred to my family and I instead of my mother having to pay an extreme amount of her personal funds for long-term care to the point where all the trust is drained away and then she can finally qualify for Medicare/Medicaid to pay for a higher share, isn't that also wrong?

 

Yet how many rich parents transfer $10,000 per year to their children (tax free)...or go out of their way to avoid paying any estate taxes?

 

Isn't that even worse than paying a lower percentage of your student loans, because transferring wealth to the next generation through a trust costs the government a lot more money in lost revenue, does it not?

 

Not to mention the government under Bush moved the benchmark number from the high hundred thousands to around $5 million before taxes would kick in on estates/trusts for wealthy individuals.

Edited January 27, 2015 by caulfield12

[Reddy]

Students can discharge literally any other debt that they get when they don't have collateral. Credit card debts for one. Medical debts for another. Personal loans to friends. The deficiency on a car loan (after the collateral is sold for pennies on the dollar). Literally almost no other private debt gets that favorable treatment (domestic support obligations - but that's about it). In fact, it's actually easier to discharge tax debt than student loan debt.

 

The question, to me, is how is a consumer's money put to the best use. College is almost a pre-requisite to finding a good job. The costs associated with that degree are growing at an unsustainable rate. I don't see why putting together programs that assist with repaying that burden - again a burden that's a pre-requisite to almost any decent job - is so very problematic.

 

Now, in the case of the income based repayment plan or whatever (a program I admit to not being particularly familiar with), it shouldn't be a windfall - so if someone's income goes up in that 25 years or whatever, their payments should increase accordingly. Ideally, a program like that assists people when their means are most likely to be at their lowest - immediately when they graduate - and should be caught up when income rises within that 25 year period or whatever.

 

that's exactly how it works, and there's nothing wrong with that.

[Reddy]

That's not the only example. I know someone who graduated from Harvard Law, and she realized that corporate law simply wasn't for her, there were a couple of suicides at her downtown law firm (at least one jumped through the window) and she chose at that time to work teaching law (writing) at a major university.

 

There's an incentive for those who attend law school to work in the public sector/non-profit, places like the Southern Poverty Law Center, for example.

 

Also, and this isn't directly about your comments but preceding ones....if we have our family money in a trust (father passed away) and the whole trust is transferred to my family and I instead of my mother having to pay an extreme amount of her personal funds for long-term care to the point where all the trust is drained away and then she can finally qualify for Medicare/Medicaid to pay for a higher share, isn't that also wrong?

 

Yet how many rich parents transfer $10,000 per year to their children (tax free)...or go out of their way to avoid paying any estate taxes?

 

Isn't that even worse than paying a lower percentage of your student loans, because transferring wealth to the next generation through a trust costs the government a lot more money in lost revenue, does it not?

 

Not to mention the government under Bush moved the number from the high hundred thousands to around $5 million before taxes would kick in on estates/trusts for wealthy individuals.

 

 

I was just about to make this argument. For Jenks to be targeting the poor is horribly misplaced, when the impact on America's taxpayers is much, much higher from the rich and powerful taking advantage of tax loopholes, etc. The government wouldn't need to raise taxes or create these incentive programs if they were getting the money they should be in the first place from corporations and billionaires.

Edited January 27, 2015 by Reddy

[Chisoxfn]

That's not the only example. I know someone who graduated from Harvard Law, and she realized that corporate law simply wasn't for her, there were a couple of suicides at her downtown law firm (at least one jumped through the window) and she chose at that time to work teaching law (writing) at a major university.

 

There's a built-in incentive for those who attend law school to work in the public sector/non-profit, places like the Southern Poverty Law Center, for example...resulting in a "greater good," presumably, for society.

 

 

Also, and this isn't directly about your comments but preceding ones....if we have our family money in a trust (father passed away previously) and the whole trust is transferred to my family and I instead of my mother having to pay an extreme amount of her personal funds for long-term care to the point where all the trust is drained away and then she can finally qualify for Medicare/Medicaid to pay for a higher share, isn't that also wrong?

 

Yet how many rich parents transfer $10,000 per year to their children (tax free)...or go out of their way to avoid paying any estate taxes?

 

Isn't that even worse than paying a lower percentage of your student loans, because transferring wealth to the next generation through a trust costs the government a lot more money in lost revenue, does it not?

 

Not to mention the government under Bush moved the benchmark number from the high hundred thousands to around $5 million before taxes would kick in on estates/trusts for wealthy individuals.

To be frank, the estate tax might be one of the most unfair taxes in the world. You made it, lets just retax it and make it a burden on your families.

[caulfield12]

I was just about to make this argument. For Jenks to be targeting the poor is horribly misplaced, when the impact on America's taxpayers is much, much higher from the rich and powerful taking advantage of tax loopholes, etc. The government wouldn't need to raise taxes or create these incentive programs if they were getting the money they should be in the first place from corporations and billionaires.

 

And we don't even have to talk about billionaires.

 

There are also a ton of "middle class" families or family-based businesses that have net worth/s between $700,000-$3.5 million.

 

I'll just put it this way. In 2000, if that money were transferred to me above that $700,000 or 750 K figure (I can't remember exactly, it has been too long), the tax rate was incredibly high, something like 37-55%.

 

Since then, the bar has been moved upwards and upwards to the point where it's not really a concern that $10,000 should be transferred on a yearly basis (to avoid potential taxes) because the trust could never catch up, even with a 10% annual rate or return (which has been unrealistic now under the new economic paradigm since the dot com crash and 9/11) so even $2 or $2.5 million would be inherited tax free.

 

(Of course, a new administration might change this, yet I have zero belief that the Clintons would revisit the estate tax issue since they are precisely the type of family to benefit from this policy/protection directly.)

 

I'm going to posit a guess there are a LOT more Americans in this situation than law school graduates taking advantage of student loan deferrals or high school and university teachers "ripping off the government" with their exorbitantly-high salaries.

[Chisoxfn]

I was just about to make this argument. For Jenks to be targeting the poor is horribly misplaced, when the impact on America's taxpayers is much, much higher from the rich and powerful taking advantage of tax loopholes, etc. The government wouldn't need to raise taxes or create these incentive programs if they were getting the money they should be in the first place from corporations and billionaires.

So what amount should they get from corp's and billionaires? Just curious? Should we just let Billionaires and Corporations pay for everything and the rest of us all pay no taxes?

[Reddy]

So what amount should they get from corp's and billionaires? Just curious? Should we just let Billionaires and Corporations pay for everything and the rest of us all pay no taxes?

 

Where did I suggest that? We should all pay an equal proportion. Kinda simple.

[caulfield12]

To be frank, the estate tax might be one of the most unfair taxes in the world. You made it, lets just retax it and make it a burden on your families.

 

 

And that's where we get into the utilitarian "greatest good for the greatest number" argument.

 

Why should I benefit unduly because my parents were successful in saving/investing money? What did I do to earn it? Isn't giving me even more money (tax free) an incentive NOT to be a "job or wealth" creator but to instead sit on my money and enjoy my life? Aren't the 2nd and 3rd generations of inherited wealth more likely to "hoard" money than to grow it or create enterprises with jobs that bring in many others under the "wealth umbrella"? Hasn't it been shown to the contrary that once people accumulate money, they want to protect their money/status and PREVENT others from joining them in prosperity?

 

 

As we all know, there will come a tipping point (the same as with climate change) where the Top 1-3% has accumulated so much of the wealth that it creates an unhealthy balance for the entire economy (in terms of where consumption will actually come from)...not just the US, but the world economy.

 

This point has been argued over a lot recently, but more specifically with the Picketty "Capital in the 21st Century" book.

 

In the end, GREED wins. (See Gordon Gekko in Wall Street...the union laborers lose their jobs and Scott Walker becomes president, haha).

 

In all seriousness, look at a company like Apple. 42% of their Iphone 6 profits are coming from here in China, which is now the largest smartphone market in the world. How much greed is acceptable before it corrupts? I don't know how much an Iphone costs in the US (maybe around $700-750 and a lot are given away for free with service plans), but here in my "average" second tier city of 10 million, the list price is over $1000 and even higher for Iphone 6+ and 64K memory compared to 16 or 32 (all the way up to $1,200).

 

Now the assembly-line workers in Shenzhen for Foxconn (when they're not committing suicide at a rate which caused the company to erect netting to prevent suicides) are making something like $250-300 USD per month. The average family in China is right around the $1200-1500 USD per month salary range, and yet the price is 25-35% higher in China (without all the same service and protection/repair/replacement guarantees like US consumers receive). Essentially, the REAL cost is 3X what it costs in the US. How is that kind of system, in the end, sustainable for workers or for Apple? Eventually, they will run out of consumers (and workers) in emerging markets like China, India or Brazil to buy their high-end phones.

Edited January 27, 2015 by caulfield12

[Chisoxfn]

Where did I suggest that? We should all pay an equal proportion. Kinda simple.

You specifically mentioned that the Corporations and Billionaire's should pay their fair share. I would argue that they would all say they are in compliance with current tax laws, so the question is, what do you think that fair share is. I obviously took an extreme stance but I'm curious. I'd argue that in this country it is the higher end of the middle class and the upper middle class that probably are impacted the most severely by taxes. The poor today are probably better off than any other decade (from the perspective of benefits received) and the wealthy, well, they are wealthier than ever.

 

However, I never find the solution to be, well tax everyone else more, because at different points, you create pockets where you are better off being dependent on the government or where the law of diminishing returns due to taxes / tax incentives, etc lost, that you might not benefit from taking another step forward (or said another way, the benefit might not be worth the cost (e.g., more hours of work, additional stress, etc), etc.

[caulfield12]

Where did I suggest that? We should all pay an equal proportion. Kinda simple.

 

 

So you're for a flat tax, then?

 

(I wouldn't mind it, IF IF IF there were protections in place from the accumulation of individual and corporate wealth offshore, capital gains, etc.)

 

We all know the example of someone like Warren Buffett (because most of his wealth growth is in the form of capital gains from Berkshire-Hathaway) being taxed at a much lower rate than his upper middle class administrative assistant.

Edited January 27, 2015 by caulfield12

[caulfield12]

You specifically mentioned that the Corporations and Billionaire's should pay their fair share. I would argue that they would all say they are in compliance with current tax laws, so the question is, what do you think that fair share is. I obviously took an extreme stance but I'm curious. I'd argue that in this country it is the higher end of the middle class and the upper middle class that probably are impacted the most severely by taxes. The poor today are probably better off than any other decade (from the perspective of benefits received) and the wealthy, well, they are wealthier than ever.

 

However, I never find the solution to be, well tax everyone else more, because at different points, you create pockets where you are better off being dependent on the government or where the law of diminishing returns due to taxes / tax incentives, etc lost, that you might not benefit from taking another step forward (or said another way, the benefit might not be worth the cost (e.g., more hours of work, additional stress, etc), etc.

 

 

What's the average net worth of Congress and the leaders of the PAC's that donate to them?

 

They are essentially the ones (like the Kochs and Grover Norquist) determining what's a fair share for us, except it is under the guise of coming from the government/people and not an elite group or faction within that government.

 

The Republicans, for most of the last 20-30 years, have been much more successful at getting the middle class/upper middle class to break their way on wedge/social issues and drawing attention away from what is in their economic best interest. The only problem is that they're growing older and whiter and the rest of the country is breaking younger and non-white, and not voting in lock-step with their religious beliefs (and, of course, fewer and fewer are attending church as well each generation).

Edited January 27, 2015 by caulfield12

[Chisoxfn]

Obama saw my post and has dropped proposal to get rid of 529 plans.

 

http://www.cnbc.com/id/102355633

[Reddy]

So you're for a flat tax, then?

 

(I wouldn't mind it, IF IF IF there were protections in place from the accumulation of individual and corporate wealth offshore, capital gains, etc.)

 

We all know the example of someone like Warren Buffett (because most of his wealth growth is in the form of capital gains from Berkshire-Hathaway) being taxed at a much lower rate than his upper middle class administrative assistant.

 

I see no reason why anyone should pay a different percentage of their income than anyone else. Doesn't make sense to me.

[Chisoxfn]

I see no reason why anyone should pay a different percentage of their income than anyone else. Doesn't make sense to me.

So rich, poor, etc, everyone should pay the same x%?

[Reddy]

So rich, poor, etc, everyone should pay the same x%?

 

Where are you trying to lead me with this? I'm not an expert when it comes to tax codes, etc, but I absolutely believe that CEOs shouldn't be paying LESS in tax than their middle management, which is often the case.

 

A consistent rate, and closing the loop holes, seems like a pretty sensible idea - potentially with caveats for ultra-low income folks.