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Student loan debt forgiveness likely has a multiplier close to zero. Forgiveness is taxable. If this negative cash flow effect outweighs interest savings would even be net negative. And wealth effect small in short run. Arbitrary/regressive $1T for ~$0 GDP, not a great idea.
Note, many considerations in this policy. I was not implying that short-run GDP was the only or even the main one. Many others were listing that as a/the major reason so wanted to help clarify thinking on it. And in a deeply depressed economy that is an important consideration.
You're so out of touch
Don’t tax it then...
Right? Your first thought might be “oh, hey, this may be a problem” and then “oh, but there’s a solution”.
Sure, but this wouldn't do that. (Unless the forgiveness was exempted from income taxes, something a POTUS can't do via executive order.)
This is not what I want to hear
I suspect they could decide not to tax it and there would be a long legal fight whose outcome is unclear. Who has standing to sue?
Loan forgiveness, including student loans, is taxable with certain specific exceptions. And I don’t see that as one of them. I’m not a lawyer but assuming this is correct the IRS is not going to blatantly illegally ignore it. And if we wanted to be lawless why not double SNAP?
That's why forgiveness shouldn't be taxed.
If that were the case, employers and contractors could just give loans instead of taxable w2s or 1099. Then forgive the loan 1 minute later and no taxes! That’s bad. So, there would have to be a ton of exceptions. Hello bureaucracy and paperwork!
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