Elizabeth Warren and Student Loan Refinancing

Sen. Elizabeth Warren sponsored a bill that would allow students to refinance their student loans at today’s low interest rates – just like we all refinance our mortgages, if we can, to save money on interest and shorten the repayment cycle.

The initiative was funded, however, by having 22,000 millionaires pay “their fair share of taxes.” I understand that “fair share” is a subjective term. Our society largely agrees that the very rich get better treatment in taxes, proportionally, than the very poor. The very rich do not agree. They argue that they already pay the majority of all taxes, and the very poor pay none.


I lifted the chart above (Source: IRS) from the site www.taxfoundation.org. This chart tries to show several things: First, that the share of income taxes paid by the top 1 percent of earners has increased since 1980. You can also see the Bush 41 tax cuts, a sharp drop in 1988 on the blue line, and the Bush 43 tax cuts, the sharp drop in 2000.  You can see  that taxes for the rich went up steadily during Clinton. Contrary to what conservative opinion would have us believe by labeling Obama the redistributor, taxes for the rich actually went down during the Obama years.

The chart also indicates that the taxes for the bottom 90 percent went down steadily, then they jumped sharply during the Bush 43 “tax cut” time. Finally they started rising during the Obama years.

Or does it?

There is something wrong with this chart, in my opinion. This chart looks like if you are in the bottom 90%, where I am, for example, you used to pay over 50% in taxes in 1980, and now you pay “only” 32%, doesn’t it? It also looks like if you are in the top 1%, you used to pay under 20% in 1980, and now you pay 35%. Isn’t that what this chart looks like, if it is just presented like this?

But that is not really what it means. Talk about misleading statistics. The www.taxfoundation.org site’s first paragraph reads like this:

The top 1 percent of taxpayers pay more in federal income taxes than the bottom 90 percent. As you can see in the chart below, this is a stark change from the 1980s and early 1990s. But since the early 1980s, the share of taxes paid by the bottom 90 percent has steadily declined.

Aha, the top 1% pay more in the aggregate in federal income tax than the bottom 90%. That’s what this really means. This has nothing to do with individual tax payers, but the accumulation of all taxes paid.

Regardless of what the graphs look like, to me this indicates that the income gap has grown since 1980. The fact that the top 1% pay more taxes cumulatively simply means that the top 1% also make huge amounts of more money than they did in 1980, as compared to the bottom 90%. This chart actually shows that the rich are now much richer, because they cumulatively pay so much more taxes.

This is a statement about the drift of our society away from the middle class to a two class system, comprised of very few and very rich people in the 1%, and everyone else on the poor and very poor side.

That tells me that as a group, the 1% are doing just fine, just very fine.

Elizabeth Warren knows that. She also knows that the student loan refinancing act would have made lives easier for 40 million students by allowing them to refinance their loans. We’re not talking about forgiveness, or default, we’re talking about refinancing, just like we all get to refinance our mortgages when the interest rates support it.

37 Republican senators blocked and filibustered that act, and therefore stood in favor of 22,000 millionaires at the cost of 40 million student loan holders. That’s one millionaire protected from a rise in taxes for every 1818 student loan holders.

Here are the names of the Republican senators that blocked the bill:

Lamar Alexander (Tenn.)
Saxby Chambliss (Ga.)
John Cornyn (Texas)
Michael Crapo (Idaho)
Michael Enzi (Wyo.)
Charles Grassley (Iowa)
Orrin Hatch (Utah)
James Inhofe (Okla.)
John McCain (Ariz.)
Mitch McConnell (Ky.)
Pat Roberts (Kan.)
Jefferson Sessions (Ala.)
Richard Shelby (Ala.)
Roy Blunt (Mo.)
John Boozman (Ark.)
Richard Burr (N.C.)
Jeff Flake (Ariz.)
John Isakson (Ga.)
Mark Kirk (Ill.)
Robert Portman (Ohio)
Patrick Toomey (Pa.)
David Vitter (La.)
Roger Wicker (Miss.)
John Thune (S.D.)
Thomas Coburn (Okla.)
Daniel Coats (Ind.)
Dean Heller (Nev.)
John Barrasso (Wyo.)
Mike Johanns (Neb.)
James Risch (Ind.)
Marco Rubio (Fla.)
Rand Paul (Ky.)
John Hoeven (N.D.)
Mike Lee (Utah)
Ron Johnson (Wis.)
Deb Fischer (Neb.)
Ted Cruz (Texas)

It makes me wonder how these people expect to get reelected when they adversely affect 40 million voters to protect 22,000 rich people? They must expect to receive lots of money from the rich people, to make sure the poor remain as poor as possible.

One thought on “Elizabeth Warren and Student Loan Refinancing

  1. This shift in taxation policy was really stated and became part of the national discussion from a President you didn’t mention, Ronald Reagan. Reagan’s taxation vision which became known as Reaganomics or Supply Side economics is based on a concept of the Laffer curve http://en.wikipedia.org/wiki/Laffer_curve. Supposedly, the concept was sold by Reagan and his Republican colleagues that lower taxes on the rich (the investor class if you will) would actually produce more revenue for the government. A concept that they popularized by the saying ‘A rising tide floats all boats’. I can’t think of an economic principle that has been more thoroughly discredited in actual practice than this one has. I would argue that this policy has led to the most significant impact on income distribution becoming the opposite of what Reagan had in mind. Yet we continue on in this trend as if it is working for us. While the people trying to warn us about the impending economic disaster like Elizabeth Warren and Robert Reich are roundly criticized as lunatics by the right wing. It’s hard to watch sometimes…

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