Taxing Rich Dead People to Tackle Student Loan Debt

7 Pages Posted: 24 Jan 2019 Last revised: 14 Apr 2019

Date Written: January 19, 2019

Abstract

Once upon a time, there was a generation of indentured servants called Millennials. They were ambitious and mysterious and clever and feckless, in the way that all young people can sometimes be. Droves of Millennials applied to universities, believing that a diploma was a barrier for entry to advance the careers of which they dreamt. Most were confronted with a conundrum: borrow to subsidize the dream career, with decades of (potentially unaffordable) payments when they were finally employed. The Generation Who Stole the World, commonly referred to as the Baby Boomers, had decided that unlimited access to debt in the United States was the most economically sound approach by which to offer equal opportunity in higher education, and the delectable irony of this tale is that the availability of debt accompanied the skyrocketing of costs. A vicious cycle resulted in an entire generation of educated American Millennials having mortgaged their futures — visibly sagging under the weight of the chains of their debt. The average student loan debt for the Class of 2017 graduate in the United States was $39,400.

In the U.S., Millennials are the first generation in modern history to enter adulthood far poorer than the immediately preceding generation. It is a generation that has taken on 300% more student loan debt than their parents, with Millennials between the ages of 25 and 34 each having an average of $42,000 in student loan debt. They are about half as likely to own a home as comparably-aged adults in 1976. Fifteen percent of people aged 25 to 34 live with their parents, as compared to 10% roughly thirty years ago. More than 75% of Millennials have less than $5,000 in savings, and more than 62% have more debt than savings. While wages for Millennials are stagnating, the Baby Boomers are living longer, retiring later, and hoarding jobs that should have long since been passed onto the younger generation. Baby Boomers reaped the benefits of a soaring market and robust safety net programs, whereas Millennials are bearing the brunt of the cost of three fundamental rights skyrocketing in cost — education, housing, and health care. It has been asserted that Baby Boomers have “. . . turned the economy into a miserable hellscape and [Millennials are] just going to have to deal with it.”

Contemporaneous with soaring student loan debt balances, the estate and gift transfer tax system in the United States continues to be curtailed — the Tax Cuts and Jobs Act nearly doubled the estate tax exemption from $5.49 million in 2017 to $11.18 million in 2018. Effectively, a married couple may gift during life or transfer at death nearly $22.5 million without incurring transfer tax liability. This paring of the transfer tax system is notable: Boomers are staring down the inevitability of death in relatively short order. The largest intergenerational wealth transfer in the history of the world will occur over the next three decades, with an estimated $30 trillion passing from Boomers in the United States to their heirs. With this transfer of wealth, we stand on the precipice of a “lawmaking moment,” in which the Boomers may accept responsibility (if we are optimistic) or be held accountable (if we are pragmatic) for the remains of their governance: facilitating intergenerational justice through the broadening of the estate and gift transfer tax system, with funds earmarked and dedicated to fixing the broken system of higher education. The purpose of this article is to generate a discourse among academics and policy makers about an idea that has largely escaped the focus of the media and scholars: the use of tax systems to further notions of intergenerational justice.

Keywords: intergenerational justice, tax, baby boomer, millennial, student loan debt, transfer tax, estate and gift tax

Suggested Citation

Haneman, Victoria J., Taxing Rich Dead People to Tackle Student Loan Debt (January 19, 2019). Available at SSRN: https://ssrn.com/abstract=3318738 or http://dx.doi.org/10.2139/ssrn.3318738

Victoria J. Haneman (Contact Author)

Creighton University - School of Law ( email )

2500 California Plaza
Omaha, NE 68178
United States
8586827656 (Phone)

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