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No, individual taxes are not increasing to pay for student loan forgiveness

Student loan borrowers who make less than $125,000 per year will be eligible to have between $10,000 and $20,000 of federal student loan debt forgiven, President Joe Biden announced on Aug. 24 . Even though the forgiveness plan may be a sigh of relief for many student loan borrowers, some GOP leaders, including Sen.

Ted Cruz (R-Texas) claimed this would have a negative impact on the average U. S. taxpayer.

“Let’s be clear – there is no way to ‘cancel’ student debt. This will cost every taxpayer an average of $2100 … This administration is exceeding its legal authority and illegally burdening hard-working Americans with debts they didn’t take on themselves,” a release from Cruz’s office said . A VERIFY viewer also asked us on Instagram to find out if his taxes would go up because of the federal student loan forgiveness program.

Will the average taxpayer have to pay $2,100 to cover the cost of student loan forgiveness? No, the average taxpayer will not have to pay $2,100 to cover the cost of student loan forgiveness. Individual taxes are not increasing at all due to the loan forgiveness plan. The $2,100 cost estimate was based on a hypothetical scenario that divides the cost of the program by the number of taxpayers, which is not how income taxes are determined.

Sign up for the VERIFY Fast Facts daily Newsletter For taxes to be raised to pay for the debt forgiveness package, Congress would have to pass a bill amending the Internal Revenue Code (IRC) , the governing law of federal tax collection. That hasn’t happened nor has it been proposed. Dave Vasquez, Cruz’s press secretary, told VERIFY the taxpayer estimate Cruz used in his statement condemning the student loan forgiveness plan came from a National Taxpayers Union Foundation (NTU) blog penned by Andrew Lautz, NTU’s director of federal policy.

The NTU is a nonpartisan research and educational organization that shows Americans how taxes, government spending, and regulations affect them. Lautz’s blog post was published on Aug. 23, prior to Biden announcing the student loan plan, with an estimate on the cost per taxpayer if the taxpayer were the only means of paying for this plan.

But this is not how the funding for government programs work, and Lautz acknowledged this. “Some on social media have misinterpreted our analysis to mean that their taxes are literally going up to pay for this,” Lautz told VERIFY. But that’s not the case.

The NTU came up with that number by taking the total cost of the plan divided by the number of taxpayers in America, though that calculation doesn’t take into account differences in tax brackets, which would decrease the average for taxpayers with lower incomes. “It’s hard for anyone to conceptualize $400 billion, let alone $1 trillion, but plenty of people can conceptualize that the cost comes out to $2,500 for each one of the 158 million taxpayers in America,” Lautz told VERIFY. The Aug.

23 blog post said the average taxpayer would pay $2,085. 59 to pay for the plan. The figures used originally didn’t account for debt cancellation promised for up to 27 million Pell Grant recipients .

The NTU published a later blog post on Aug. 25 with updated figures that brought the average cost to y $2,503. 22 per taxpayer.

More from VERIFY : Yes, there is a way to check if you received a Pell Grant It’s not unusual for different agencies to use models to describe the average cost of something federally funded based on the cost per taxpayer, Lautz said. For example, Congress requires the Department of Defense to report on the cost of the wars in Afghanistan and Iraq each year based on the cost per taxpayer – in 2021, the wars cost the average taxpayer $184. There are several organizations that keep track of the nation’s debt and divide that by the average taxpayer to show how much each person would have to pay.

But these models don’t actually change the amount of income taxes people pay. Policymakers still haven’t determined how they will pay for the cost of student debt cancellation, which could be done in the future with government spending cuts, tax increases, or more borrowing, or some combination thereof, Lautz told VERIFY. The VERIFY team works to separate fact from fiction so that you can understand what is true and false.

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From: wfaa
URL: https://www.wfaa.com/article/news/verify/taxes-verify/fact-check-individual-taxes-are-not-increasing-to-pay-for-student-loan-forgiveness/536-01987cee-7b61-4c0d-b1d9-e69e7cc6b4d3

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