In Indiana, Republicans always, always talk about reducing the “tax burden” on Hoosier citizens. They incessantly brag about their solicitude for taxpayers, and Indiana’s status as a “low tax” state.
Well…it turns out that their solicitude is pretty selective; it’s focused on the folks who are most likely to support them, either financially or with their votes. Businesses, corporations, rich folks…Struggling students, not so much.
In fact, not at all.
President Biden’s continuing effort to relieve millions of Americans from a real burden–student loan debt–has already benefitted 35,000 young Hoosiers. A provision of Biden’s American Rescue Plan also amended the Internal Revenue Code so that the discharge of that debt would not be taxable. (As you may or may not know–but your accountant will confirm–if you owe someone money, and that someone “forgives” the debt, the IRS considers the amount forgiven to be income, and you will be taxed on it.) Taxing student loan forgiveness would rather obviously go a long way toward reducing the relief being provided.
Indiana’s legislators–those solicitous “anti-tax” Republicans–looked at the situation and said “not so fast!”
The Indiana Department of Revenue explains.
The IRS excludes federal direct student loan forgiveness from federal income tax due to an exemption in the Internal Revenue Code. Although the computation of Indiana’s adjusted gross income (AGI) begins with federal AGI, Indiana is a static conformity state, meaning that Indiana’s tax code is linked to the Internal Revenue Code (IRC) as of a specific date. For a provision that impacts federal AGI, the effect on Indiana AGI depends on whether the Indiana General Assembly wholly or partially decouples from the federal provision during the legislative session.
When the American Rescue Plan Act (ARPA) expanded IRC section 108(f)(5), excluding student loan discharge under certain circumstances from federal gross income, the Indiana General Assembly passed a law decoupling Indiana from that provision in the IRC, and enacted a state provision requiring Hoosier taxpayers to add back the excluded amount to their Indiana AGI.
In 2022, this provision was clarified retroactively to provide that discharges resulting from total and permanent disability, death, or bankruptcy were not required to be added back. That law, IC 6-3-1-3.5(a)(30), still stands; therefore, federal discharge of some student loans between 2021 and 2025 must be added back to Indiana’s adjusted gross income. This includes the one-time student loan forgiveness under the Biden-Harris Administration’s Student Debt Relief Plan, even though the plan was not part of the ARPA.
Nice of them to say that if the loan was discharged because you died, were permanently disabled or bankrupt, they’d let you off the hook.
Indiana thus joins Mississippi, North Carolina and Wisconsin (last I looked, Arkansas was still considering the matter). Students elsewhere in the country are not being penalized.
Things are different for corporations. Indiana is one of only twelve states with corporate tax rates under 5%. That’s in contrast to states like Minnesota (9.8 percent), Illinois (9.5 percent) and Alaska (9.4 percent). The higher corporate rates in those states evidently made it unnecessary for them to tax students’ debt relief. (I’m sure it has nothing to do with the fact that corporations can afford lobbyists and students can’t.)
A statement issued by Representative Greg Porter at the time student loan repayments resumed (they’d been paused during the pandemic) elaborated on that point. Porter wrote:
More than 900,000 Hoosiers currently have some form of student loan debt, with the average Hoosier owing about $32,000. With repayments beginning soon, many Hoosiers will face financial stress, a stress the Republican supermajority has done nothing to ease for constituents.
“Indiana is one of the few states that taxes an individual’s student loan forgiveness or an employer paying off the student loan for an employee. Last session, my bill to make loan forgiveness dollars exempt from taxation never received a hearing. This is a shame, because Indiana Republicans never shy away from dispensing tens of millions of dollars in tax credits to large companies seeking move to Indiana but refuse to take action to make conditions better for Hoosiers living and working in our state.
The next time you hear Indiana politicians talk about their concern for us poor, struggling taxpayers, you might ask them just which taxpayers they want to relieve–and which ones are unworthy of their solicitude.
The Reverse Robbin Hood Republicans: Take from the poor to aid the rich. This never changes.
If several thousand Hoosiers burdened by student debt showed up to the IN state house en masse to beg our republican legislature not to tax their student debt relief as ordinary income I believe it would fall on completely deaf ears. However, if a business executive asked for some type of handout behind closed doors (maybe over an expensive dinner) a legislator would most likely assure the exec it will be taken care of.
Why is anyone surprised? Republicans have been trying to fiddle taxes every time they’ve gotten their hands on government – at any level. Begin with the overturning of the Glass-Steagall Act, a New Deal law that prevented banks from “investing” depositor money into get-rich-quick schemes that ignored the depositors. Then there is the adjunct horror of Supply-side economics. Add to that the Republican initiatives that allowed the rich and corporations unlimited access to foreign banks to avoid paying taxes on profits. Do we need anymore evidence that the entire history of Republican politics is a grift?
And yet… And yet rural folks on fixed incomes still vote for these crooks. It’s not just Indiana, it’s everywhere. Republicans sold the con job to the most vulnerable to retain and hold on to power. Why? To feed the same rich and greedy bastards who line their pockets. That’s called corruption, and it is the reason we have such a divided society today.
The beginning answer is to vote out as many Republicans as possible, but that means people have to get off their asses and VOTE!
Excellent point. But hypocrisy has never stopped the GOP — at least not in this century.
Another teapot tempest. If the federal government forgives a $10,000 student loan the Indiana tax that is being bemoaned here is about $300. Our income tax rate is so low that it doesn’t mean very much in most cases. The former student comes out way ahead. $300 is a small amount to pay for relief of $9,700 plus interest.
Wealth redistribution up funds the Republican Party. They are smart enough to hide that fact behind words so that it costs them minimally at the ballot box.
Political campaigns are word wars mainly spread on entertainment media. That makes the Murdochs the most critical asset of the Republican party.
Fortunately for them, that support is mutual. Republicans profit from Murdoch, and Murdoch profits from them.
That reveals the danger of inadequately regulated Capitalism. Profit can be made at the expense of society.
Morton, except the average student debt is close to $30k, making the tax close to $1,000. Not many people in Indiana have that in their savings account, so it will be another hardship.
This is another example of socialism for the wealthy but rugged capitalism for everyone else. And yes, the oligarchs have lobbying groups that grease the palms of the Republicans and Democrats. For instance, AIPAC, the Israeli lobbying arm, gave Biden $5.2 million, which has brought his loyalty in the billions of dollars and vetoes the UNSC.
Take it a step further, and the military-industrial complex looks to cash out in Ukraine, Israel, and Taiwan. The MIC then gives cash back to the politicians in both parties. This military aid is a money laundering scheme. Cutting taxes for corporations/oligarchs is also a money laundering scheme since some tax savings flow back to the politicians. It’s a racket in the US.
Who is in power doesn’t matter; the oligarchs/lobbyists will shift to that political party. It’s a pay-to-play operation.
The most notable part of this is that, despite the low tax rates, Indiana still struggles to lure corporations to the state. I wonder why? Could it possibly be state policies regarding education, infrastructure, and health are still stuck somewhere in the dark ages?
Could be, Peggy, and Marcus, if as you suggest the state is getting such a miniscule return on its taxation of student loans relief, why bother? The federal purpose behind student debt relief was not to provide states with an opportunity to raid such jackpots but rather to provide a means for indebted students to move out of mom and dad’s basement and perchance marry, build a house of their own, and pursue a positive future.
The State of Indiana was not a party to the loans of students but has inserted itself as a party via its taxing policy – another explanation for the brain drain from this state. Brilliant!
The Magna Carta should be revisited. It’s still a very valid document, and much of what tax laws and such dictate today, comes from the Magna Carta. So does habeas corpus.
Magna Carta or Great Character requests the rights of the body, IE habeas corpus. Taxation without habeas corpus, without representation of the person, should not be enacted in any way shape or form.
Parliamentary authorized taxation of course is legal by this entity’s constitutional law, but they usually follow the guidelines of the Magna Carta. American laws are absolutely based on the Magna Carta.
The Boston tea party was organized through those who had brought the Magna Carta with them along with much of the other constitutional paradigms. The Federalist papers are great, but the Magna Carta actually contains much more toothy mastication of law. Protections and representations of habeas corpus even in tax law would diametrically oppose what’s going on today.
JPS, human knowledge is more than adequate to direct homo sapien culture to the world we all dream of consisting of the most functional balance of personal freedom and the morality of do unto others as you would have them do unto you.
The problem is that like many other resources, knowledge is growingly inequitably distributed and simply growing so fast it’s impossible for anyone to keep up, much less everyone.
Can AI in massively networked distributed computers become the tool to spread new knowledge more space-time effectively?
Maybe, but not yet.
What else is new?
Any Republican effort to “lower taxes” rings pretty hollow with me. The much heralded Trumpty-Dumpty tax reform from several years ago raised my federal income taxes by 25%.