There have been a number of threads here in the recent past decrying the evils of debt, and I think we would all agree that the bible certainly presents debt as an undesirable thing.

However, if my understanding is correct, under our modern western tax regimes the interest payments on debt are tax deductible, so that sometimes it is actually beneficial for a person to have some debt as opposed to none.

Now this sort of financing is normally associated with large corporations, but from what I understand, individuals can use it as well, particularly when purchasing property.

Firstly, do these arrangements really provide the overall benefit they are supposed to?

Secondly, how should we look at them in light of the bible's teaching about debt?



p.s just for completeness, I do not believe the bible condemns all debt as sinful.

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Mark Li
International University Church
New South Wales, Australia

Tax advantages never outweigh the cost of debt. Tax advantages do make debt more manageable. The cost of home ownership can sometimes be more affordable by deducting mortgage interest. Consumer debt (in the U.S.) is no longer tax deductible. The last bastion of tax havens reside in the area of mortgage interest.

Debt is never good, although in the area of home ownership it may be necessary. One rule of thumb is to compare the cost of ownership with the cost of renting. In many markets it costs as much to rent as it does to own. With the proper down payment home ownership may be a debt that makes sense.

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Bill Brown
Elder
Grace Baptist Church
Anne Arundel County, Maryland

Deo volente

I'm avoiding the question of whether debt is biblical. There is a diversity of opinion on that. Calvin thought it was fine in some cases, especially business, other reformers thought it was never fine.

But I think it is important to realize what is behind the idea of tax deductions. It is an overt form of social engineering. Tax law (court decisions and commentary) considers deductions to come from "the grace of Congress." That phrase is literally used. This, of course, very obviously raises Congress to the level of a king or even of a god. Only a sovereign entity can distribute grace.

So quite clearly, the so-called sovereign has decided to encourage the use of debt. Economists who have their eyes open acknowledge that debt is the primary means of "creating" money.

So the social engineers not only dispense grace, they "create" (more or less ex nihilo) something they ought not--that is, the measure of wealth. It is rebellion at a basic level.

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R.Vic Bottomly
Providence Reformed Baptist Church, Tacoma, WA

Yup... Obviously if you concluded that debt was simply condemned by God, that would settle the issue straight up.

By creating weath I assume you mean reserve banking? That could be another topic all on its own. Although that said, it does interest me, does the government have the right to create the currency it wants?

However, given the fact that we live in a society that is structured so, should christians take advantage of these things? Do they ever provide a true advantage?

Yes reserve banking is part of it. But debt itself increases the de facto money supply. For example, I lend you money, you give me a promissory note. I use the promissory note to buy something else. Doing this I essentially double the money in circulation. You still have the money I lent you, I didn't have any more but I still could buy something.

This is the basis for all the derivative financing we read about. There is more "value" (so to speak) in all the derivatives floating around than can be accounted for by the actual money supply (in terms of dollars or whatever).

The Bible says, "Owe no man but to love him."

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David Silvey
Bethany Church (Evangelical Free)
Pasadena, CA

Creating money ex nihilo is today's equivalent of debasing currency. In bible times it was putting other alloys into the gold/silver, making it cheaper (and buy less).

What Vic alluded to is a form of inflation--debasing the currency. So yes, indirectly, it is sinful.

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J. B. Atken
John Knox PCA
Layman, M.A. student at Louisiana College

Exactly. Diluting money is the same as debasing currency which is the same as using unjust measures. That is an abomination according to God:

Deu 25:13-15: Thou shalt not have in thy bag divers weights, a great and a small. Thou shalt not have in thine house divers measures, a great and a small. But thou shalt have a perfect and just weight, a perfect and just measure shalt thou have: that thy days may be lengthened in the land which the LORD thy God giveth thee.

Pro 20:10: Divers weights, and divers measures, both of them are alike abomination to the LORD.

Mic 6:11-12: Shall I count them pure with the wicked balances, and with the bag of deceitful weights? For the rich men thereof are full of violence, and the inhabitants thereof have spoken lies, and their tongue is deceitful in their mouth.

nah-uh-uh, those are *old* testament references. Christ got rid of that (Mt 5.17) and we are under grace now.

Right, I keep forgetting. Render unto Ceasar his own money. It's not yours anyway.

Hey, wait a minute. What about Mt. 5:18 and 19?

I think it is proper to take advantage of deductions, in general. It is the system we are under. In other words, I have no problem for a businessman taking business deductions, or for people with high medical bills taking deductions, etc. It is legal and authorized, even if I think the tax system itself is fundamentally unjust.

On the other hand, entering into a money losing transaction just to claim deductions is certainly not a good idea for most people. People get into trouble especially in the area of second mortgages. They have substantial equity in their house so they borrow against it to pay for other things. It has been fueling our economy. The results of such foolishness is starting to become apparent in the mortgage crisis. The outcome will be interesting, and quite likely painful, because, among other things, many pension plans are heavily invested in these loans that are beginning to default.

So even if you want to follow the moderate view of Calvin on debt, it still should not be entered into just because of tax benefits.

Hiya,

I use a margin loan to buy shares. That is, the bank pays for the stocks (shares) I aquire as long as I buy the same value of stock using my OWN cash. Thus, I can own twice the value of shares I would ordinarily be able to own. When the company I own stocks in pays dividends, I get to keep them all (and reinvesdt in more shares). When the stock value goes up, I get to keep the difference if I sell them. In the meantime, the interest I pay on the margin loan is deducted from the tax I pay out of my income tax so it essentially costs me nothing (or very little). I don't use the margin loan to acquire more shares than I can actully buy using my own cash reserves, I just choose to use the banks money instead as it yields legitimate tax deductions.

This kind of debt is not for everyone, but I dont feel any discomfort in using it myself.

Matt

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Matthew Glover
Reformed Presbyterian Church of Australia

Irrespective of the tax jurisdiction, I think people generally exaggerate the economic benefits of tax deductions, and it compels them to irrational economic behavior rationalized from the perception that it saves them money. Tax deductions only drop the adjusted gross income for tax purposes, so it basically means interest on debt where tax-deductible is 25-35% less than it actually is, when the deduction is claimed. That's it. It doesn't mean one should go borrow oneself into oblivion or buy expensive vehicles, because of a perceived tax benefit.

I think the pravailing tax structures and debt-based monetary systems are horribly inefficient, detrimental to economic growth which could be greater, and would otherwise allow for a broader, more affluent middle class and greater economic prosperity for the masses if we had a sound monetary system. Hopefully, by the 22nd or 23rd century, we will eventually work out the kinks and inefficiencies of the status quo. The political fetish for centralized unitary states and central banks will eventually wither.

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Ryan
1689 London Baptist Confession

I have the same optimism about this, Ryan, except I hope it will be quicker than that.

By the way, I couldn't help but think that you were sounding like a postmil.