Biden isn’t “canceling” student debt. He’s making everyone else pay for it. The National Taxpayers Union Foundation reported:
Public reporting indicates President Biden may soon announce executive action canceling federal student loan debt for a large set of borrowers. Though parameters of the student debt cancellation have yet to be announced, the Biden administration may cancel $10,000 of debt per borrower for borrowers making $125,000 in income per year or less.Based on projections from the Penn Wharton Budget Model for the total cost of such cancellation, we estimate President Biden’s plan would cost the average taxpayer over $2,000.The Penn Wharton Budget Model (PWBM) released a policy report on Tuesday that estimated the total cost of $10,000 in debt cancellation for borrowers making less than $125,000 per year would be $329.1 billion over 10 years. There were just under 158 million taxpayers in 2019 according to the IRS, meaning that the average cost of debt cancellation is $2,085.59 per taxpayer.This is not a perfect proxy for cost, however, given the U.S. tax code is progressive and tax burdens are not evenly distributed across households. Accounting for the share of taxes paid by low- and middle-income households, we estimate that:
- 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.
Some may dispute that taxpayers bear the cost of canceling student debt. But the $329 billion cost of student debt cancellation would be $329 billion previously borrowed from the federal government and not returning to the Treasury. Policymakers will need to make up for that gap in the future with government spending cuts, tax increases, more borrowing, or some combination thereof.
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