Student Debt Forgiveness can be a Boon to the IRS

I read this article a few weeks ago, but I was too busy finishing my last semester of a masters program to comment on it.

"Warren unveils $640 billion college debt forgiveness plan"

https://www.ksl.com/article/46536747/warren-unveils-640-billion-college-debt-forgiveness-plan

On the surface it sounds great. 42 million Americans would have college debt up to $50,000 cancelled for those whose annual household income is less than $100,000.

But, there is no mention (either because of ignorance or intent) of how that debt forgiveness will come back to bite those individuals when tax filing is due. To the IRS, debt forgiveness is seen as income. That means it's taxable.

There are some ways to minimize or possibly eliminate having to pay taxes on the debt forgiveness, but a tax advisor would need to guide the person as to what should be done. And, it would likely need to happen BEFORE the debt was forgiven.

Most of those who would have their debts forgiven would not be in a position to get the tax help they need to avoid the tax penalty of the additional income.

So, is it a sneaky way to boost income tax revenue? 

I think it is. I think Warren may well be aware of the potential tax liability this will impose on millions, but she doesn't care and won't mention it because it will dampen the enthusiasm for this idea. This is just political gamesmanship to win votes, and it will increase tax revenue. Of course, it's a one-time tax boost. But it'll be enough to fund other vote-winning projects. If this debt forgiveness happens early in her presidency, most Americans won't even remember it by the time the next presidential election comes around. By then she will have increased taxes elsewhere.

I actually wrote about this a few years ago on another blog of mine

 https://politizize.blogspot.com/2015/09/a-possible-sneaky-tactic-to-raise-tax.html