It appears some of our allies have taken a liking to the Swiss cheese tax code that Trump and Republicans made worse with their 2025 tax law. As for us, we like to think we have a sharper palate.
Last week, our Senior Vice President for Tax Policy, Bob Lord, used our Closer Look to share one of his recent Substack pieces. In the piece, Bob defends the Working Americans’ Tax Cut Act (WATCA)—the second part of Patriotic Millionaires’ legislative platform, The MONEY Agenda—as a smarter and fairer legislative path for lawmakers to pursue in offering relief to workers as opposed to the growing heap of “no tax on” proposals we’re seeing out of Congress.
For this week’s Closer Look, we thought it was only fitting to share a new, related Substack piece that Bob co-wrote with our Senior Legislative Advisor, Sarah Christopherson. Bob and Sarah use their piece to offer a critical, thoughtful response to a separate Substack post that one of our allies, Families Over Billionaires, recently published. Families Over Billionaires argue in support of reinstating a tax exemption on student loan debt cancellation income, which Republicans let expire through their One Big Beautiful Bill Act in July 2025.
As Bob and Sarah explain, Families Over Billionaires’ advocacy for reinstating this tax exemption contradicts their advocacy against WATCA, which they vociferously opposed at the time it was introduced. That contradiction not only tarnishes Families Over Billionaires’ credibility, it exemplifies the trap that the larger progressive tax movement appears ready to fall into.
By cheerleading the tax exemption for student loan debt cancellation, Families Over Billionaires is essentially just hopping on the “no tax on” bandwagon. It would be easier and fairer to have a tax code that doesn’t have Swiss cheese-style carveouts for special groups, and instead enact broad-based legislation like WATCA, giving relief to all workers in all industries who don’t earn the median cost of living. And if Families Over Billionaires were to see the light and change their mind on WATCA, it might just help them have a more consistent and principled approach to tax policy too.
Without further ado, we present Bob and Sarah’s full piece below. We’re sure you’ll enjoy it, especially if you have a sharp palate for good tax policy like we do.
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The Critical Role of Consistency in Tax Policy Advocacy
Progressive tax policy advocates are stumbling headfirst toward a trap that threatens to further undermine Americans’ trust in federal taxes right when we should be building a popular, far-reaching political movement for reform.
Some of the fiercest opponents on the Left of a broad-based tax cut for low- and middle-income Americans—a tax cut that is fully paid-for by requiring households making over $1 million to pay a modest tax increase—have now come out in favor of giving an even bigger tax cut to some of those same workers, but with a catch! Lucky winners of this particular income tax cut roulette would only get tax relief on income derived from debt cancellation, not income from working.
If that sounds crazy, imagine trying to explain to workers and voters why two households barely scraping by with the same low income will be treated to thousands of dollars in tax relief or not based on whether or not they took out student loans.
We’ll get into specific examples below, but first, do progressive tax policy advocates have a duty of consistency? We think so.
When the same organization advocates for and against helping the same group of taxpayers, it’s not just their own credibility that suffers. It also harms the public’s faith in the fairness of the tax code. It looks like some favored subgroups of taxpayers are going to get special treatment, while less favored ones pick up the tab.
Tax changes are always going to create some winners and some losers. It’s inevitable. But in order to build a system that is broadly accepted as legitimate and fair, those policy choices must be based on fair and intellectually defensible principles.
A proposal to help some members of a taxpayer group may leave other members of that group out in the cold. And if you’re advocating for some members of a particular group of taxpayers and against other members of the same group? Eeks! “Houston, we have a problem.”
So, we were taken aback when a particular Substack post from Families Over Billionaires came across our feeds. Families Over Billionaires was formed a few years ago to fight against the excesses of Trump’s tax policy and in favor of policies benefiting the vast majority of Americans. By all appearances, they’re a well-intended group. Their voice is an important one in the cause of tax fairness in America and they are a key ally in the fight against oligarchy, organizing Americans at both the federal and state levels. Our organization, Patriotic Millionaires, has worked with them on joint advocacy projects.
We don’t always see eye to eye, though. Earlier this year, they stridently opposed the Working Americans’ Tax Cut Act (WATCA), a bill Patriotic Millionaires worked with Sen. Chris Van Hollen and Rep. Don Beyer to introduce. WATCA would eliminate income tax on income up to the median cost of living, currently $46,000 for a single adult with no children.
In that post, which also appeared in Rolling Stone, Families Over Billionaires executive director Kristen Crowell declared that when asked in 55 town hall meetings what they wanted in exchange for their hard-earned tax dollars, not one person asked for a tax cut. “The idea that middle-class families most need a smaller tax bill,” Crowell argued, “misreads what people are actually experiencing.” Sen. Van Hollen, a champion of progressive tax policy, “hadn’t gotten the memo yet” and was “fighting the last war with a stale playbook.”
The core problem with WATCA, according to Families Over Billionaires, seemed to be that the proposal was “trading away” the revenue raised from the increased taxes on the rich included in the proposal to offset the tax relief WATCA provides to struggling workers, revenue that Families Over Billionaires maintained was needed for child care, higher education, and other priorities.
That’s why we were surprised to see Families Over Billionaires’ recent post, advocating for relief from the “tax bomb” facing working families who earn student debt relief. You have to read carefully to understand what the “tax bomb” is, but it flows from a bedrock principle of tax law: the cancellation of a borrower’s indebtedness is income.
Step back for a moment and it makes sense: there’s no substantive difference between receiving money directly through a paycheck or grant and using it to make purchases versus receiving money from a loan to make those same purchases IF the obligation to repay the loan is canceled. If income could be reclassified as canceled debt to avoid income taxes, then income taxes would be extremely easy for nearly anyone to avoid. Which is more or less what Donald Trump did when he used a “legally dubious” maneuver to avoid tax on hundreds of millions of dollars of income from the cancellation of indebtedness (as reported by the New York Times in 2016). We doubt our friends at Families Over Billionaires believe it was okay for Trump to avoid tax on his cancellation of indebtedness income.
Families Over Billionaires, however, does believe working families that “earn” relief from student debt by making required payments based on their income level for 20 years should not be required to pay tax on their debt cancellation income. Specifically, they advocate for the reinstatement of a code provision exempting that income from tax, which the OBBBA allowed to expire.
We’re not unsympathetic to families in question. They face income tax on non-cash income. That’s always challenging. But let’s be clear about three things:
First, paying income tax on cancelled debt is a whole lot better than paying the debt itself.
Second, the revenue cost of exempting middle-class families from tax on their cancellation of indebtedness income is revenue that is being “traded away” from other uses, such as child care, higher education, and other priorities. In that regard, it’s no different from the revenue that is used to offset the cost of exempting the income up to the basic cost of living from income tax, so working Americans aren’t driven into poverty by the federal income tax.
Third, when a working American is required to apply cash income to the payment of student loan debt, or any unavoidable expense for that matter, the effect of taxing that income is the same as the effect of taxing non-cash income from the cancellation of debt. That working American is no less deserving of sympathy than the worker whose debt is cancelled.
Which of course brings us to the contradiction. Consider the situations of the following two taxpayers:
Sam earns $46,000 from his job. He scrimps on living expenses, sharing an apartment with two others and eating lots of pasta, to free up $5,000 to pay down his student loan.
Shawn earns $41,000 from his job. He qualifies for the cancellation of $5,000 of student loan debt, giving him $46,000 of total income.
Sam and Shawn are in identical positions tax-wise. They each have $46,000 of income and they each have $41,000 of income outside of income related to the reduction of student loan debt. But Families Over Billionaires advocates for requiring Sam to pay income tax on the $5,000 of income he used to pay his student loan debt, while Shawn is excused from paying income tax on the forgiveness of his student loan debt. And remember, Sam already feels slighted that he had to scrimp and save to pay his debt, while Shawn was given a get-out-of-jail free card on his.
[And, by the way, there’s Tony, who recently borrowed to start his own plumbing business, and applies $5,000 of his $46,000 income to pay down the principal of that borrowing.]
You can see how quickly these carveouts can snowball. In fact, one of Families Over Billionaires’ complaints is that Congress permanently expanded the tax exemption for debt cancellation under certain circumstances, just not the one that they’re advocating for.
When our tax code rests on an intellectually consistent notion of income—a definition of income expansive enough that it prevents the ultra-wealthy from avoiding taxes—it’s easy to explain and defend. The problems begin when advocates and policymakers start picking and choosing whom to tax not based on income levels but on popularity of the beneficiaries.
Our view is that income is income is income, whether that income is derived from an appreciating asset or an hourly wage or a tip or a canceled debt, and if you don’t have enough of it to meet your basic needs, you shouldn’t pay federal income taxes on it.
But if you do have enough income to contribute, you should. Once Donald Trump opened Pandora’s box with his bevy of (temporary) carveouts for tips, overtime pay, and seniors’ Social Security distributions, too many Democrats jumped on board with their own iterations. In our meetings with members of Congress, we’ve heard proposals to eliminate taxes on teachers (but not janitors and paraprofessionals), cops (but not paramedics), and nurses (but not hospice workers) and so on. It’s easy enough to foresee how every sympathetic (or just politically connected) profession and every possible method of receiving income will wind up with its own army of lobbyists seeking special tax treatment.
It would be hard to top the inconsistency of Trump’s “no tax on” provisions and the copycat proposals percolating in Congress. But taxing Sam on the income he used to pay a student loan while not taxing Shawn on the forgiveness of his student loan? That would take the inconsistency—and the resulting loss of fairness in the eyes of taxpayers—to a new level.
