Beaver County Reds – 4/3/12

This page was last updated on April 4, 2012.

I found what follows on the Facebook wall of Tina Shannon, chairman of Beaver County Reds.

Mrs. Shannon wrote, “Future generations being indentured to the banks. Bad for the economy because this generation will have trouble buying house & cars & setting up a family because the banks are sucking all that money out of our neighborhoods.. Corporations benefit from an educated work force yet they pay very little (sometimes no) taxes. We pay taxes & our kids are saddled with a lifetime of debt. Hell NO. I stand for my children & all my people who are trying to improve themselves.” (April 3, 2012) This comment accompanied a link to a call on this topic to be hosted by Mrs. Shannon’s husband and BCR Treasurer, Randolph.

Mrs. Shannon failed to note the student loan program is yet another leftist policy/program that landed us in greater debt. In this case the culprit is the Higher Education Act of 1965 (HEA). The HEA is another of President Lyndon Johnson’s “Great Society” programs and it throws taxpayer money at colleges directly via grants and indirectly via guaranteed student loans. Predictably, these subsidies drove up both tuition and the size of loans to pay the ever-increasing tuition. You’ll note Mrs. Shannon didn’t call out colleges for increasing tuition faster than the inflation rate. You can find more about this in my critique of “Corbett’s priorities make no sense” (Don Skinner, 3/13/11). Other than a lefty knee-jerk reaction to blame evil “banks” and “corporations” for everything, it’s hard to see how banks – let alone corporations – are to blame for this. Nobody forced students to take out loans they knew they would have difficulty repaying. (In the interest of full disclosure, I considered cost when I chose my college and went with the less-expensive choice. I later learned I also chose the better education.) If you want to dump on banks for making student loans they would not otherwise, encouraging banks to make such loans is the whole point of the program. That’s the reason for the government guarantee for student loans. When you take out a government-guaranteed loan, in effect the government becomes the creditor. Therefore, it is not “banks … sucking all that money out of our neighborhoods,” it is our federal government. If this sounds familiar, it should. Substitute Community Reinvestment Act of 1977 for HEA and Fannie Mae & Freddie Mac for Sallie Mae and, Surprise!, it sounds a lot like the subprime mortgage mess, doesn’t it? For background, Sallie Mae started out as a government-sponsored enterprise (GSE) like Fannie and Freddie, but it gradually privatized itself from 1997 to 2004.

Mrs. Shannon should have first-hand experience with the effect of subsidies on prices. Mrs. Shannon owns/operates Shannon’s Brown Bear Daycare & Preschool, partially subsidized by taxpayers via subsidies to her customers (County workers, others protest state budget impasse; J.D. Prose; Beaver County Times; September 1, 2009). It would be difficult to believe government subsidies to her customers have no effect on the prices Mrs. Shannon charges.

Let’s also look at this excerpt: “Corporations benefit from an educated work force yet they pay very little (sometimes no) taxes. We pay taxes & our kids are saddled with a lifetime of debt.” I don’t know why Mrs. Shannon focused on “corporations,” but if you substitute “businesses” for “corporations” her statement is still true, but still irrelevant. Mrs. Shannon owns a business but I don’t know if it’s organized as a corporation, partnership, proprietorship, et cetera. Remember, income taxation of corporations is double taxation. Therefore, even if a corporation pays no taxes, its owners do if the company pays dividends. You see, businesses - like government - don’t have any money; it all belongs to the owner(s). One way or another, business taxes are paid by individuals - customers, employees, and owners. According to the Tax Foundation, the average U.S. taxpayer worked eight days in 2002 to pay federal income taxes levied on corporations. In addition, we worked a fraction of a day to pay other business taxes. Business taxes are approximately seven percent of our total personal tax burden. That is, seven out of 100 tax dollars we pay are business taxes. Unfortunately, a lot of people like Mrs. Shannon don’t know this fact or choose to ignore it.

As for “We pay taxes,” that’s not true for a big chunk of our population. Based on 2009 federal income tax data, the top 1% (AGI greater than $344,000) of filers paid 37% of the total and the top 5% (AGI greater than $155,000) paid 59%. The bottom 50% (AGI less than $33,000) paid 2.3% of the total. For tax year 2009, 58,603,938 filers (41.7%) had zero or negative tax liability. If you think that’s bad, it gets worse. The Tax Foundation continues, “In 2008, 25 million tax filers received $51.6 billion in EITC [Earned Income Tax Credit] benefits. Of this amount, $50.5 billion was refundable in excess of their income tax liability. Also in 2008, some 25.3 million filers received $30.7 billion in child tax credit benefits, with more than 18 million of these filers getting $20.5 billion in refundable checks. Many families are eligible for both the EITC and the child credit. These are not refunds of overpaid tax; they are payments to people who have already gotten back everything that was withheld from their paychecks during the year.”

Finally, let’s remember the feds completely took over the government-guaranteed student loan business in 2010 as part of the Obamacare bill. That is, the feds will make student loans directly without using private financial institutions. Private financial institutions can still make student loans, but they won’t be federally guaranteed. Because the loans won’t be guaranteed, private loans will be more expensive and harder to qualify for, putting a huge dent in this industry. To be clear, I oppose government student loans regardless of how it’s done. First, it’s not a government responsibility as per the U.S. Constitution. Second, do we really want to politicize who gets a student loan and who doesn’t? It’s just another means for the government to control us. For example, is it too difficult to imagine the feds setting different rates and repayment schedules depending on the school you want to attend and/or the curriculum you want to pursue?

In Peace, Friendship, Community, Cooperation, and Solidarity. <g>