Middle Class Bailout
Posted by dpolitico on April 25, 2010 · View Comments
Want to help reduce credit card debt for the middle class? Want to stimulate the economy? Want to help the government make some money instead of just spending it all the time? Then come on down! We’re getting the price right with a middle class bailout. Here’s how it works:
Create a debt tax credit. No, this isn’t rewarding people for irresponsible living. They have to pay it back. They file their income taxes and if they meet a certain debt to income ratio (yes, verification would be needed) they could qualify for up to a $10,000 tax credit (similar to the home buyers credit). The amount of the credit would be 10% of their debt or $10,000, whichever is less. And we’re only talking credit card debt. Not mortgages, student loans, etc.
So I owe $1522 in taxes this year. I have $50,000 in credit card debt (don’t tell my parents!). I would qualify for a $5,000 debt credit (reduced by 1522) which equals $3478. So I would have a refund. But the government isn’t cutting a check to me. They’re paying it directly to the credit card companies I specify on my return. Just like when you apply for a credit card and can indicate that you want to transfer a balance, you would do that on the tax return. You would provide the bank and the account number and the federal government would issue a check directly to the credit card company.
Then, whatever you received in a tax credit, you would have to begin repaying to the federal government by automatic withdrawal within six months. The government could charge 13% interest, a rate much lower than a credit card company, and set a minimum monthly payment so that the debt was paid off in three years.
The middle class would receive a six month grace period to save money, spend money or pay off more cards and then the government would begin collecting repayments in six months, with no interest charged until the start of repayment.
We’re handing out money right and left to big banks, why can’t we give a bailout to the middle class? You can’t tell me they’re any more irresponsible than the executives at Goldman Sachs.
