Policy

The group calls the scheme an illegal abuse that would increase the state’s tax burden on some of the debt-canceled Americans.

President Joe Biden waits for members of the press to leave after speaking at the White House Competition Council meeting at the White House State Dining Room in Washington, DC, Monday, September 26, 2022 (AP Photo / Susan Walsh)
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A libertarian group in California put forward a legal challenge on Tuesday against President Joe Biden’s student debt relief plan, calling it an illegal abuse that would increase the state’s tax burden on some of the debt relief Americans.

The lawsuit, believed to be the first against Biden’s plan, was filed by the Pacific Legal Foundation, a group of Sacramento lawyers. It was filed in federal court in Indiana, one of the few states that plan to tax any student debt canceled by Biden’s plan.

“Congress did not empower the executive to unilaterally cancel student debts,” said Caleb Kruckenberg, a lawyer at the Pacific Legal Foundation. He said policymaking by the executive was illegal “through a press release and without statutory powers.”

The plaintiff is Frank Garrison, described as a public interest lawyer, who lives in Indiana and is employed by a libertarian group.

Garrison is on track to have his student debt waived under a separate federal program for government officials. Although most borrowers will need to apply for the Biden plan, Garrison and many other participants in the scheme will automatically receive relief because the Department of Education has information about their income on file.

According to the lawsuit, Biden’s plan would automatically write off up to $ 20,000 of Garrison’s debt, which in turn would create an “immediate tax liability” from the state of Indiana. Under the debt relief program to which it is now enrolled, the canceled debt cannot be taxed.

“Mr. Garrison and millions of others similarly located in the six appropriate states will not receive any additional benefit from the appeal – just a one-time additional penalty,” argued the lawsuit.

Any student debt canceled under Biden’s plan would also be subject to state taxes in Arkansas, California, Minnesota, Mississippi, North Carolina, and Wisconsin, unless lawmakers in those states change their current laws.

When asked about the lawsuit, White House Press Secretary Karine Jean-Pierre said anyone would be able to opt out of the cancellation. It has not explained how it will work – the White House previously said approximately 8 million Americans would automatically receive debt relief without applying.

“The bottom line is that anyone who does not want debt relief will not have to get this debt relief,” Jean-Pierre said in a press briefing.

A separate White House statement called the lawsuit “unfounded,” saying opponents “are trying everything they can to stop this program that will provide needed relief to working families.”

The Pacific Legal Foundation is a legal group that promotes individual freedoms and the separation of powers. It was created in the 1970s by workers led by Ronald Reagan when he was California Governor. The group said they had 16 quarrels before the US Supreme Court, 14 victories.

The Biden plan promises to cancel $ 10,000 of federal student debt for borrowers with income below $ 125,000 per year or households earning less than $ 250,000. Those who received the federal Pell grants to attend college will receive an additional $ 10,000.

The claim for the benefit is expected in early October.

Conservative groups have threatened to challenge debt cancellation since Biden first came up with the idea, saying it was legally questionable and would unfairly cancel student debt at the expense of Americans who did not attend college. One of the main challenges was finding someone to suffer personal harm as a result of Biden’s plan by giving him a standing card.

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The Biden administration has repeatedly argued that the plan has a solid legal basis.

In the legal justification for debt relief, Biden’s administration referred to the HEROES Act of 2003, which was aimed at providing aid to the military. According to August’s opinion from the Justice Department, the law gives the administration a “sweeping authority” to reduce or eliminate student debt during a state of emergency.

Education secretary Miguel Cardona said he had the power to cancel the debts of people who had been troubled during the pandemic. Cardona says Biden’s plan will ensure that borrowers do not get worse after the pandemic than before.

The lawsuit challenges this rationale, saying Garrison and others will see their debt increase as a result of Biden’s plan. He also claims that the plan fails to meet the requirements of the 2003 Act, arguing that the problem of high student debt is not the “direct consequence” of the pandemic.

“Nothing is legal or appropriate about canceling a loan,” the lawsuit said. “In the end, the administration threatens to introduce deep and transformative policies around Congress with untold economic effects.”

The legality of the mass cancellation of student debts has sparked debate as it has become a popular idea among Democrats in recent years. Following the election, Biden himself questioned his right to cancel the debt without Congress, asking the Justice Department to investigate the issue.

The Trump administration took steps to block widespread debt relief in its final weeks in office by issuing a memo from the Department of Education stating that the secretary did not have the power to grant such relief.

The lawsuit asks the court to overturn Biden’s plan and temporarily stop it while the legal issues are resolved.

The Associated Press education team receives support from the Carnegie Corporation of New York. The AP is solely responsible for all content.

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