NC Senate leader pans exempting student loan forgiveness tax
Efforts to exempt North Carolina residents from state income tax on the value of student loan forgiveness announced last month by President Joe Biden likely will be unsuccessful given that the state Senate's most influential member opposes them.
Democratic Gov. Roy Cooper asked legislators last week to change state law to correct what he called an “fundamental unfairness for many hardworking people who will get hit hard” through an income tax payment.
But Senate leader Phil Berger told reporters on Tuesday that he didn't see a need to take any action. He said such an exemption would be unfair when compared to people who must pay income tax on the monetary value of credit card debt and mortgage loan reductions. And Berger also questioned whether Biden had a basis in federal law to declare the forgiveness.
The White House has said the value of that forgiveness — up to $10,000 for some and to $20,000 for others — is exempt from federal income tax. North Carolina appears to be one of half-dozen states where amounts would be subject to state tax without a change.
Cooper compared the legislature’s decision last year to exempt loans from the Paycheck Protection Program during the pandemic for businesses from state income tax to the student loan forgiveness. But Berger, a Rockingham County Republican, called PPP a “completely different situation.”
“The PPP loans were taken out as a result of the federal government and state government shutting down the economy. And those loans were provided for by federal law ... passed by Congress,” Berger said. The student loans, he added, "were not taken out in any kind of emergency situation.”
The White House said on Tuesday that an estimated 1.19 million people in North Carolina would be eligible for student debt relief under the Biden administration plan. It's unclear exactly how much state income tax revenue would be collected. North Carolina’s individual income tax rate of 4.99% falls to 4.75% in 2023.