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Robert Reich: Who to Tax, Polluters or Students?

July 8, 2013

Why Republican congressmen want to tax college students to pay down the deficit.

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Image from Flickr via jeco

By Robert B. Reich
By arrangement with Robertreich.org

A basic economic principle is government ought to tax what we want to discourage, and not tax what we want to encourage.

For example, if we want less carbon dioxide in the atmosphere, we should tax carbon polluters. On the other hand, if we want more students from lower-income families to be able to afford college, we shouldn’t put a tax on student loans.

Sounds pretty simple, doesn’t it? Unfortunately, congressional Republicans are intent on doing exactly the opposite.

Earlier this year the Republican-led House passed a bill pegging student-loan interest rates to the yield on the 10-year Treasury note, plus 2.5 percentage points. “I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Rep. Virginia Foxx (R-NC), the co-sponsor of the GOP bill, said.

Republicans estimate this will bring in around $3.7 billion of extra revenue, which will help pay down the federal debt.

In other words, it’s a tax — and one that hits lower-income students and their families. Which is why several leading Democrats, including Senate Majority Whip Dick Durbin, oppose it. “Let’s make sure we don’t charge so much in interest that the students are actually paying a tax to reduce the deficit,” he argues.

(Republicans claim the President’s plan is almost the same as their own. Not true. Obama’s plan would lead to lower rates, limit repayments to 10 percent of a borrower’s discretionary income, and fix the rate for the life of the loan.)

Meanwhile, a growing number of Republicans have signed a pledge – sponsored by the multi-billionaire Koch brothers — to oppose any climate-change legislation that might raise government revenues by taxing polluters.

Officially known as the “No Climate Tax Pledge,” its signers promise to “oppose any legislation relating to climate change that includes a net increase in government revenue.”

Big private banks stand to make a bundle on student loans if rates on government loans are raised.

By now 411 current office holders nationwide have signed on, including the entire GOP House leadership, a third of the members of the House as a whole, and a quarter of U.S. senators.

The New Yorker’s Jane Mayer reports that two successive efforts to control greenhouse-gas emissions by implementing cap-and-trade energy bills have died in the Senate, the latter specifically targeted by A.F.P.’s pledge

Why are Republicans willing to impose a tax on students and not on polluters? Don’t look for high principle.

Big private banks stand to make a bundle on student loans if rates on government loans are raised. They have thrown their money at both parties but been particularly generous to the GOP. A 2012 report by the nonpartisan Public Campaign shows that since 2000, the student loan industry has spent more than $50 million on lobbying.

Meanwhile, the Koch brothers – whose companies are among America’s 20 worst air-polluters –have long been intent on blocking a carbon tax or a cap-and-trade system. And they, too, have been donating generously to Republicans to do their bidding.

We should be taxing polluters and not taxing students. The GOP has it backwards because its patrons want it that way.

Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers Aftershock: The Next Economy and America’s Future and The Work of Nations: Preparing Ourselves for 21st Century Capitalism. His latest, Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it, is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His new film, “Inequality for All,” will be out September 27.

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