Richard Helppie's Common Bridge
The problems we have in the country are solvable, but not solvable the way we’re approaching them today, because of partisan politics. Richard Helppie, a successful entrepreneur and philanthropist seeks to find a place in the middle where common sense discussions can bridge the current great divide.
Richard Helppie's Common Bridge
Episode 6- Of Income Tax and Student Debt Solutions
In Episode 6, Rich proposes a few more possible solutions to the Student Debt Crisis and jumps into a simplified Income Tax structure.
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Speaker 2:Welcome to the podcast, the common bridge with Richard helpy. Rich is a successful entrepreneur in the technology, health and finance space. He and his wife, Leslie, are also philanthropists with interest in civic and artistic endeavors, but with a primary focus on medically and educationally underserved children. My name is Brian Kruger, and from time to time I'll be the moderator and host of this podcast. Rich, good to have you back again. Um, on this, uh, on this veteran's day in 19, uh, 2019. How are you,
Speaker 3:uh, doing great, uh, on this first snow day in the great state of Michigan. And I do think it's important to thank our veterans, uh, people that set aside their lives to serve, um, who did it selflessly, uh, who endured, uh, danger and we're always ready to go. So veterans, thank you very much. Um, I hope that you'll pause and accept the gratitude of a community and a nation.
Speaker 2:Well said. Um, you know, last week we had finished up on, uh, on student debt and, and on your social media posts you had gone on last week. Um, really interesting topic, uh, reaches out to a lot of different audience members, but you had mentioned last week, Hey, look, I'm not done with us. You wanna you want to talk a little bit more about it here in episode six, so it's all yours. If you want to finish up that topic or keep going or,
Speaker 3:well, great. Brian and this student debt subprime crisis is indeed a crisis because it is putting weight on our economy. It's putting particularly weight on a generation, a generation that really should be enthused, going out and creating households, growing families, uh, buying refrigerators, uh, creating a better world, uh, yet they have to retreat into a supported setting in order to pay off these monstrous debts. Um, I think it's a scandal. Um, I think it's a huge moral issue that a college, a university, a trade school can be promoting, that they're going to help a young person's future while at the same time knowing full well they're putting a debt burden on them.
Speaker 2:Well, you had mentioned last week too, that there seemed to be some winners in this and none of them were the student. They're there, the banks and the colleges seem to come out okay. But the student is the one that's burdened the most.
Speaker 3:That's, that's exactly right. And you know, we know it's a problem. And the other thing that we know is that, um, our political machinery at the federal level is horribly broken. Uh, we have two political parties that are very adept at attacking each other. Um, they're both living on the extreme and in the meantime, uh, the problems of the United States of America are not getting addressed and our problems are solvable. We've talked about healthcare, we've talked about, uh, gun violence and hope that we get to talk about other things. Sure. Now, and I'm not claiming to say, gosh, I've got all the answers, but at least we need to look at the problem. Admit that we do have a problem and say, how can we go about fixing it? Um, last week I spent some time with a, a couple in their mid thirties. Um, they had been privileged enough to go to a liberal arts college on the East coast and they said they were getting requests to donate to back to the college and they said, you know, they're not going to do that. Uh, I asked why? They said, well, the college has a big endowment. Uh, the college keeps building buildings and the college keeps raising tuition and they did not want to see students going into the same kind of debt profile that they have. Um, so they wanted, they weren't adverse to lending to the situation, but not necessarily this time directly to the foundation. That's right. And so when you think about what some of the solutions to this could be, so first of all, the tax codes, very powerful people, institutions, enterprises, all tend to do what they're incented to do. And if you have a college or university that can get revenue by directing people to go get a loan that they probably never can pay back, guess what? They're going to do that. So one answer might be this, any money that comes in that's from student debt, either there's a surcharge on it that it's taxable or it goes in a detriment. Your tax-free status, uh, give those colleges, universities, trade schools, public, private for profit, not-for-profit, a disincentive to quit piling on debt. Um, we need to arrest the problem. And that to me is one part of the solution. Um, a second part of this is other forms of funding. Um, we could insent the same educational organizations with matching for incenting them to provide matching grants to scholarships. Um, and without making an endorsement, I actually went out and did some research. Um, there's a couple of websites, uh, one particularly called scholarships.com and they're looking, it looks to me like they're trying to match, uh, people that want to provide a scholarship with people seeking scholarship. And there's been an effort on that for a while, but it seems to only now becoming into really good effective focus. Yeah. Yeah. And so, um, there's been other proposals floated like, uh, make universities, uh, required that they need to have four to eight degrees that can be accomplished in four years or less and meet the median income of their service area. Now frankly, I think that would be very, very hard to administer. Um, but not a bad idea, uh, because it is all about price point ultimately. Um, so arresting the growth of student debt by using the tax code for, for uh, disincentives, I think it would be a step in the right direction. Also an incentive to give scholarships to give grants versus send students off to take on subprime debt. You would do that from the, from the, uh, tax form level? Uh, yes, I'd use the tax code really to get their yes, uh, taxing endowments, which was part of the tax reform, most recently passed by the Trump administration. Um, also, what's the pushback on that? It seems to me that'd be a clear solution. Tax endowments are huge. We talked about that in a previous episode. What, who's pushing back on that? Aside from the obviously universities, I mean it seems to me that that would be a taxable solution. That is who's pushing back and it really gets into what was the theory behind a not-for-profit status. So you want to have not for profit status for community. Good, great. I think we can all agree to that, but there comes a point when the endowments go into the billions and you're impoverishing young people and you want to call the moral question is that the public good, and I challenge anybody to defend that model. So in terms of correcting it, use the tax code to penalize using student debt for tuition. Use the tax code to insent matching grants. Perhaps use the tax code, amp it up a little bit to attacks the endowments themselves. I think that will a rush. The growth and then we have to get back to the other side of this equation is the horses that are already out of the barn in that we have young people today who have completed a degree, but they owe a substantial amount of money that they're going to be paying back for decades. Maybe it's a Hill that never gets declined. Precisely. We have people that took out student loans that never finished. We have people that would have gone to college but didn't because of the debt. And we had people that took on the debt and somehow managed to pay it off. Um, so I don't, I don't know how we sort all that out. Um, but it is achievable. And what I would put out is a couple of, uh, mileposts would be this one thing. We perhaps think about a check box on our 10 40 that if you want to direct part of your tax bill,$10 a hundred dollars, whatever you want it to be toward relieving student debt, you check the box. It's an excellent idea. You and I talked about that earlier and I'd never heard that. And that just seems so easy. And I think there's a lot of people because, you know, regardless of how polarized our society, there's
Speaker 2:this middle ground that we tend to look for in our, in our podcast and our social media. Um, that would check that box and go, all right, let's, let's get this moving in the right direction. At least to try to have some relief for these kids. I, I think that's a fantastic idea.
Speaker 3:Yeah, no, that, that brings in funding. Now you have to deal with how do you get that funding out. Um, and, and that is a much trickier calculation. Uh, perhaps it is also something on the 10 40 of the person that has the student debt, uh, that applies for some relief through the tax code and, and we use some of those tax dollars coming in from the check box in order to pay down those individual loans. Um, but again, just to put a cap on this, we need to arrest the growth of this subprime debt and we need to find a way to rectify, uh, as much of the damage that's been caused. And finally, guess who's working on it? Not Nemo. Kratz, not Republicans, and they're fighting each other in Washington DC.
Speaker 2:And meanwhile, a problem rolls on and rolls on and rolls on. That's correct. Gets right to the thrust of why you're even here. And why you've decided to do the common bridge. Right.
Speaker 3:Precise and, and, uh, you know, potentially, uh, if people start asking their representatives, their senators, their presidential candidates, what are you doing about student debt? Give me a concrete answer. Not something polarized on the extreme. Where are you working with members of Congress despite whether they're in your party or outside of your party or independent or a third party or whatever to get the problem solved? Yeah. Let's make that the benchmark now. Well, I think one of the first people I'd call on that would be you to talk to him. I'll take him, I'll take him to camp David. Nobody leaves until we have an answer. Bring the actuary's, lock the door, right. Bring it, bring the finance people. We've got, we've got some number crunching to do. But again, it's a solvable problem if we get after it.
Speaker 2:Okay. Yeah. That's great. That's great. And, and maybe, maybe this dovetails a little bit into a personal income taxes too. Um, we were talking last week that we wanted to get to this topic. It's something you want to go into today. Um, it's uh, I dunno, it can, uh, it can have a lot of different tentacles out there, but is it something you want to talk about today and, um, define the problem and talk about solutions or something you want to go on with? Uh, later on.
Speaker 3:Let's talk a little bit about the tax code. I'm going to stay onto a personal income taxes. Oh, that is the largest single source of revenue for the federal government. Tax receipts are at an all time high. And uh, you know, you wonder, well, gee, how could that be while spending's at an even greater, uh, all time high? So, you know, we're not bringing in enough money to fund the services that we need. Um, not very many people understand the tax code. Uh, there are nuances and rules that are piled upon rules and regulation, um, and, uh, special handling and nobody really understands how it works. And what I would propose would be something very, very simple. All right. First of all, everybody pays a little something. So let's say that on your first$2,000 of income, you pay 10%. So that's$200, right? Everybody's got a little stake in the game, and then every individual gets a$25,000 annual deductible, right? So that means your, you know, your first 25001st$26,000, you're not subject to federal income tax above that, you, everybody pays the same flat rate, and I'll pick a random number, 25%. So if you take the family of four, what you would have there after that first small contribution would be the first hundred thousand dollars of income would not be taxed at all. So median family income making 52 to$70,000 would pay no federal income tax, all right? They could live on that money. Um, if you were a person making a million dollars a year, then you would subtract your$25,000 and you would pay 25% on that amount. Uh, it's absolutely understandable. It's absolutely fair. Um, the only deduction that I would suggest would be up to 10% of your income can go to charitable causes, just like we have today. And that's it.
Speaker 2:Okay. Now, um, you're going to get some pushback on folks that think that's not progressive enough. Um, and what would you say to that? Would you, would you, would you, yeah, would you say to that? Because that's usually the big pushback, especially today when you're looking at, uh, the dichotomy of the haves and the have nots or the perceived have and have nots. They feel that there should be some punitive, uh, taxing done with folks who have succeeded. Uh, I have trouble that, but, um, what do you, what do you think about that?
Speaker 3:Well, I showed them the numbers. It is progressive because if you, it's well, it is progressive in that if you're a person that I can't do the math in my head, so I'll take out that first piece. Um, I was told there'd be no math. You're right. Exactly. Um, let's say that you're, that that family of four, that making, um,$150,000 a year. All right? And you have two professionals working and you're making that, um, uh, that$150,000 a year, you'd get a hundred thousand dollars in tax deductions. And then you would pay 25% of that remaining 50,000 or your tax bill would be 12,500. Okay? Let's say you were that same couple making 80,000. You'd have the a hundred thousand dollars deductible, you'd pay nothing. So somebody making 80, somebody making 150, it goes up progressively. Um, let's take that up to somebody making one point$1 million, right? And by the way, I'm counting all forms of income, whether it's wages, capital gains of inheritance, inheritance, whatever it might be, whatever falls into that, whatever, whatever falls into outside of the inheritance, we're going to come back to that, um, uh, about money that escapes in a state, right? This is a little nuance on that, but we can come back there. Um, but you're gonna pay 25% on that. So take that person that makes 1.1 million. Now a family of four, okay? So they're going to get their a hundred thousand dollars deduction and that's going to take them down to a million. They're going to pay 250,000. Now. So here you have a family making 80,000 pays zero family making 150,000 pays 12,500 family making 1.1 million pays 250,000.
Speaker 2:That makes sense to me. I also think rich that there's, there's a thought that, uh, among a lot of people that think that the rich, they don't pay taxes, somehow that gets zeroed out. And in your plan at least, it's like, look, we're all doing this. Here it is. Here's the number. There's, you're taking the tax code and you're making it from a 700 pages into about three. Right? I mean, it's going to be very specific. Here's your number, here's your tax.
Speaker 3:Exactly. Right. And it's, uh, I think there's also a perception and a lot of truth that people with means have mechanisms to avoid taxes, right. And shelters and things that they do.
Speaker 2:And that's where the resentment grows a lot with the folks who,
Speaker 3:yeah. And, and, and so let's take for example, uh, uh, to touch a inflammatory topic, the, uh, president's income tax. Okay. If it was printed, my guess would be that it would, if it was printed double side might be four or five feet tall. All right. In that, particularly with real estate, it might be taller than that. Yeah. All right. Is that a little ridiculous or what? And this notion that someone's going to go in there, fare it out two or three pages and say, aha, I have found an issue. Um, wouldn't it be better if the American people were sitting here saying, doesn't matter how the president made his money or how the family made the money? We're all paying the same rate on according to the same rules period. End of discussion. I would rather see our country lose jealousy and so, you know, good for them. Um, I see little dispute when you say should, uh, bill Gates is, or Steve jobs, uh, families be rewarded for the tremendous changes they've made in society. I don't think people really pushed back against that. Um, though, on the same token, when you look at the number of billionaires in America, there is a disturbing number of Walton heirs that are, that are there. You brought that up and you know, part of me says, well, okay, good for them. Um, as Joe Biden said on the campaign trail at one time, I don't think 500 billionaires is the problem in the country.
Speaker 2:Yeah. I think Joe Biden was right on that.
Speaker 3:Yeah, absolutely. Um, he, he was right about that. And so trying to craft a, a tax code to penalize a small group, uh, it's just an exercise in futility. It's a exercise in a divisiveness. Um, but some of the breaks could be modified like the step up in basis. And, and I can explain that that is, uh, if your grandfather bought a stock at a hundred dollars and bequeath it to you when your grandfather passed and it was then worth a thousand, um, there's no tax on that$900, though had your grandfather sold it would have been taxed on 900. Right. So that step up in basis really needs to be addressed. Um, it's a, it's a, uh, an anomaly of the tax code. Um, the other thing in terms of inheritance taxes, uh, I think it's a good thing that people want to provide for future generations and that they're in a position to do that. Whether it's a business, a farm, a building, um, a savings. If they've been frugal and they want to pass that onto their children and grandchildren, they should be able to do that without that, uh, being punished.
Speaker 2:I agree. Um, in and as far as the, if we go back to the founding fathers, would it have been their intention then to, to take, uh, the inheritance and T taking your argument the other way? And it's like, you know, we're gonna, we're gonna take a lot of that from it and we're going to give it to the federal government. If you look at it from that standpoint, it, that seems unfair. Uh, certainly if you talk to a libertarian, he's going to say no. Okay. So if we're going to, uh, redistribute that wealth, why does it have to go to the federal government? Uh, some folks that will have a big problem with that.
Speaker 3:And that's where the charitable part of this comes in. I mean, we have done great things in this country with hospitals, with schools, uh, theaters and all those parts of life that, those aspects that make life so rich. Um, but that may not be great business enterprises. And that's where we have to get into this better spirit of giving. We have to get off the polar extremes. We have to quit worrying about whether somebody is going to be advantaged or disadvantaged. Um, and so what's the right fair thing to do? And let's come together in the middle. Um, my guess would be if people are listening to this podcast, I have annoyed people on both, uh, polar extremes. Um, and that's okay because the essence of a compromise is that, you know, people do come together.
Speaker 2:You have been listening to Richard healthy's common bridge podcast recording and post-production provided by stunt three multimedia. All rights are reserved by Richard helpy. For more information, visit Richard helpy.com.