Last week an offshoot of Occupy Wall Street launched Rolling Jubilee, a new project billed as “a bailout for the 99%”. The project, which has been generating considerable interest in the financial press, aims to help out ordinary Americans by purchasing and abolishing their debt. It’s a novel idea:
Banks sell debt for pennies on the dollar on a shadowy speculative market of debt buyers who then turn around and try to collect the full amount from debtors. The Rolling Jubilee intervenes by buying debt, keeping it out of the hands of collectors, and then abolishing it. We’re going into this market not to make a profit but to help each other out and highlight how the predatory debt system affects our families and communities. Think of it as a bailout of the 99% by the 99%.
Rolling Jubilee will hold a formal launch event this Thursday at Le Poisson Rouge. The event is already sold out, but will be livestreamed at rollingjubilee.org.
So far, over $143,000 has been raised to wipe out $2,871,186 in debt. If Rolling Jubilee can get to $1 million, it will be able to wipe out more than $20 million in debt, which would be no small feat. If it could somehow manage to raise $10 million, it could theoretically cancel $200 million in debt.
What’s really striking about this (no pun intended) is that an individual contribution goes a long way. For every $1 donated, $20 of debt can be purchased.
Got $10 to spare? We’ll liberate someone from $200 of debt.
Throw us twenty bucks and we’ll obliterate $400 of a struggling American’s debt. $100? We’ll take the weight of two thousand dollars off someone’s back.
Many people have raised questions about Rolling Jubilee, especially in regards to the tax implications of forgiving debt (there’s an active comment thread about that over at Reuters’ site). Rolling Jubilee says it will earn no income from buying and abolishing debt, so it will not have to file 1099-C forms with the Internal Revenue Service. We understand that Rolling Jubilee has received some counsel on this matter from attorneys who specialize in tax preparation.
What about people who will benefit from the project?
Supposedly, they’re covered too. IRS Publication 4681 declares, “Generally, you do not have income from canceled debt if the cancellation or forgiveness of the debt is a gift.” And that is the business Rolling Jubilee is going into: Gift-giving. Unlike megabanks, Rolling Jubilee wants to abolish debt, not profit from it.
Rolling Jubilee may, however, want to obtain a ruling from the Internal Revenue Service affirming that people whose debt is forgiven have received a gift and therefore don’t have to pay taxes on cancellation of debt (COD) income.
What we find appealing about Rolling Jubilee is that it turns finance on its head, much in the same way that the GNU General Public License (GPL) turns copyright on its head. The GPL uses copyright law to keep free software free, a concept known as copyleft. Users of free software are required to abide by the license: if they distribute the software, they have to distribute the source code. And if they distribute modifications, they have to distribute the modified source code.
Rolling Jubilee is essentially doing something similar. The project is taking advantage of the fact that banks sell debt. RJ will legally buy the debt, but instead of trying to collect the debt, it will cancel it.
It’s a very progressive, very unconventional idea.
Rolling Jubilee aims to be transparent. The people behind the project want prospective donors to know there will be almost no overhead at all:
All contributions go to The Rolling Jubilee Fund, a non-profit 501(c) (4) organization with the exclusive mission of buying and abolishing debt. 100% of the money raised will go to the process of buying and abolishing debt (a process that includes some associated costs such as paperwork, accounting, and legal fees). The volunteers managing the fund receive no compensation. In the interest of transparency, a full accounting of funds received and spent will be reported on our website.
If you’re interested in participating in Rolling Jubilee, follow this link to learn more.