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Education

Is Warren’s Student-Debt Proposal ‘Broadly Progressive’?

Sen. Elizabeth Warren (Joshua Roberts/Reuters)

I had to chuckle at this from Jared Bernstein:

The Warren plan expends resources on student debtors from upper-income families, but it is still broadly progressive. Analysis from experts at Brandeis University, the University of Tennessee, and Arizona State University shows that among low and moderate-income families — those in the bottom 40 percent of the income distribution — close to 90 percent of borrowing households would have their student debt wiped out compared to just under 30 percent of those in the top 10 percent. Similarly, the proposal provides total cancellation for about 90 percent of those with an associate degree or less but provides total cancellation for about only 25 percent of those with a professional degree or doctorate. (Because student debt rises with household income, the plan could be made more progressive and less expensive by lowering the $50K cancellation amount).

It’s funny because this calculates the progressivity of student-loan relief the way conservatives calculate the progressivity of tax cuts.

As I spelled out in this post, there are a lot of different ways to do the math on “progressivity,” and they led to very different conclusions about the 2017 GOP tax law. If you just look at raw dollar amounts, the rich got a lot more (simply because they pay the most in taxes to begin with) — making the policy look ridiculously regressive. If you look at percentage changes to after-tax income, things look quite a bit better. If you look at percentage changes to federal taxes paid, things look better still. And if you ignore payroll taxes and just look at changes to income taxes paid, the policy is actually ridiculously progressive, with some people at the bottom getting a 100 percent tax cut (though they paid very little in income taxes to begin with and saw no change to their much higher payroll-tax burden).

By the same token, wealthy people have far more student debt than poor people do. Calculating the percentage reduction in debt simply removes this from the equation.

To be fair, two features of Warren’s plan make it less regressive than it might otherwise be: She phases out relief starting at $100,000 in household income — with those making above $250,000 getting no relief at all — and caps total relief at $50,000. She also claims she’s going to fund this by soaking the super-rich. But I find it somewhat curious that the economic analysis she released didn’t even mention the average dollar amount that households in various income brackets would receive.

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