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It's Just Not Right!

By: Senator Carl Levin
May 9, 2012

Senate Republicans are preventing the Senate from even debating legislation to fix the looming increase in student loan interest rates. It's just not right.

On July 1, the interest rate on student loans is going to increase from 3.4 percent to 6.8 percent. It's going to double unless we act. That will cost 7.4 million college students and their families money that many families do not have to spare. So the need to act is urgent.

Instead, in what has come to be a damaging ritual here in the Senate, Republicans have filibustered the motion to proceed to legislation to prevent the increase in student loan interest rates. Republicans have voted against even allowing the United States Senate to begin to debate a bill.

Republicans say they, too, want to prevent this increase in student loan interest rates. They differ with us, they say, on how to pay for this. Republicans say the only way they will support legislation to prevent this rate increase is with cuts from a fund that helps to prevent infectious and chronic diseases.

Democrats are offering a different alternative. We recognize that the tax code is riddled with loopholes and special breaks that allow some individuals and some corporations to avoid paying taxes. In this case, what's identified is a tax break that allows some professional service providers, such as lawyers, to avoid paying their payroll taxes by organizing their businesses as so-called "S corporations," and then paying themselves in the form of dividends instead of salaries. The Government Accountability Office recently examined this issue and found widespread problems, costing taxpayers and the Treasury billions of dollars each year in uncollected revenues.

What our bill would do is require that professional services providers with incomes above $250,000 a year pay payroll taxes on the income that they derive from these S corporations. We would use the revenues from closing that loophole for those with incomes above $250,000 to prevent the interest rate hike that is going to hit middle-class families and, at the same time, and we would be able to do so while also we avoid increasing the deficit or slashing important programs.

Our Republican colleagues have accused us, to quote one of them, of raising taxes on "the people that are doing some of the very serious job creation in this country." Well, not long ago, Republicans were saying something different about this loophole. For starters, they actually called it a loophole. That's what former Vice President Cheney called it, during his 2004 vice presidential debate - a "special loophole." He accused his debate opponent of dodging $600,000 in payroll taxes using this loophole. Likewise, a Republican candidate for Senate not long ago called this "a deceptive tax scheme to get around the IRS." There were no Republican cries then about raising taxes on job creators.

The fact of the matter is this loophole ought to be closed, no matter who is taking advantage of it. And closing it, at least for those with incomes above $250,000, in order to avoid another blow in a long series of blows to middle-income Americans just makes sense. It is fundamentally fair.

Hundreds of thousands of students in Michigan depend on federal student loans to help afford college. They and their families know that college is not getting any cheaper. They don't need a doubled interest rate on top of tuition increases. For many, an affordable loan is the difference between staying in school or giving up the dream of a college education. We should not let this loophole stand in the way of those dreams.

Today, I urged our Republican colleagues to end their filibuster of this vital bill. If Republicans think they have a better way, they should let us debate their alternatives and let us vote. They should end their filibuster of this critically needed legislation today.