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1 Daniel Ballard  Sun, Oct 21, 2012 9:41:24am

As soon as a person could spend or invest forgiven debt it should be taxable. Until then, I'm not a fan. This is not how you help the middle class recover from the crash. Adding a big tax bill that is likely beyond a former homeowners ability to pay is just going to ruin their credit and keep them from recovering.

2 Obdicut  Sun, Oct 21, 2012 11:49:51am

re: #1 Daniel Ballard

So if I borrow $100,000-- which is not taxed, at all-- and then never have to pay that back, in what way did I not just make $100,000?

3 EiMitch  Sun, Oct 21, 2012 1:09:21pm

re: #2 Obdicut

Thats a rather simplistic view. Debts are usually at least partially paid before defaulting. And lets not forget interest.

4 Mostly sane, most of the time.  Sun, Oct 21, 2012 5:19:32pm

I use this as an example in math when I'm teaching my kids negatives.

If you subtract a negative, you have a positive. Or, if you take away a $5 debt, that person just got $5 richer.

My bigger question is what can we do to stop the bubble situation again.

5 Romantic Heretic  Sun, Oct 21, 2012 8:19:27pm

You can't stop bubbles. The driving emotions of the business world, which includes most of us, are greed and fear.

Greed inflates bubbles. Fear pops them. Until people learn to master these emotions bubbles and their popping will continue to happen.

6 Dark_Falcon  Sun, Oct 21, 2012 10:48:07pm

re: #2 Obdicut

So if I borrow $100,000-- which is not taxed, at all-- and then never have to pay that back, in what way did I not just make $100,000?

The problem, Obdi, is that if a bank agrees to loan modification with a borrower to save her house that eliminates $12K worth of debt on purchase price value that proved to be the product of the Real Estate Bubble, she still will be ruined if she gets hit with taxes for an extra $12K of 'income' that she can't pay. All that will do is make those tax debts a life-long ball and chain.


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