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Monday, June 24, 2019

Some Thoughts on Teaching Law: Part VII: Smaller Classes 

Aside from questions of transactional courses, team teaching, and the balance between theory and practical reality, one of the factors having a significant impact on the law teaching and law learning experience is class size. I’ve taught classes with as many as 165 students and classes with as few as 7 students. There is a difference.

When asked about class size, many law faculty would think first in terms of the impact of class size on the unenviable task of grading examinations and other assignments. Unquestionably, given the choice between grading 165 examinations and 7 examinations, almost all faculty would select the latter. But the impact of class size on examination grading challenges is just one aspect of the class size concern.

There are certain types of law courses universally considered to require limited enrollment. It is impossible for one professor to take 165 or even 65 or 25 students through a Trial Practice course, a seminar course with a paper requirement, or a clinic experience, to give three examples. It’s not so much that the amount of work expected of each student is that much different from what is expected in other courses. It’s the difference in the type of work, work that requires a significant amount of one-on-one, or one-on-two, interaction. Yet the benefits of one-on-one attention also exist in other courses. When a class size is small, the interaction between student and professor but also among students can be more extensive, focus more closely on what needs he most attention, and more productive.

As formative assessment becomes more prevalent in all law courses, a topic I address later in this series, the experience of small classes will need to migrate into the larger classes. The prospect of offering 90 students (now that 165-student classes are no longer offered where I teach because of 90-seat classroom limitations) the same sort of one-on-one attention provided in small courses is daunting, and discourages many faculty from adopting much, if anything, in the way of formative assessment.

The solution, it seems to me, is to reduce class size across the board. The learning experience in a class of 50, 70, or 90 students suffers when compared to the experience in a class of 15, 30, or 40 students. Most faculty would agree, but would also point out the financial and logistical impediments to such an across-the-board reduction. Yet it is possible, with changes in how law faculty task balance is arrayed, an issue I discuss later in this series. As a preview, lest anyone think that I advocate smaller classes in order to reduce the number of examinations and other assessments to be graded, the smaller class sizes would be accompanied by an increase in the number of classes taught. The simple reality is that reducing class sizes does not reduce the total number of students who present examinations and other assessments needing to be graded.

Friday, June 21, 2019

Some Thoughts on Teaching Law: Part VI: Balancing Theory with Practical Reality 

As much as I consider practical reality to be more determinative of most things in life and law, there still is a place for, and a need for, theoretical perspectives on law. There needs to be a balance between, on the one hand, examinations of what is wrong with law and what law ought to be and, on the other hand, an understanding of theories that give rise to the laws that exist.
When the examination of law begins with theory, it best suits instances where those contemplating and considering the theory and the resulting law are already proficient in that area of law. When theory comes into play in the company of those unfamiliar with the law, it often is better to learn the law and then examine its theoretical underpinnings. That approach makes it easier, I think, to understand the origins for, and justifications of, the law in question.

For example, when in the wills and trusts course I cover intestacy, I first have the students examine the statutes based on per stripes, per capita with representation, and per capita at each generation. After learning and understanding what those statutes require and how they apply in different fact situations, we then embark on an exploration of the theories and rationales underlying each approach. To take the opposite approach would have students playing with concepts without appreciating the significance of each rationale.

There are those who think that deviating from a theoretical approach transforms law schools into “trade schools” and gets students caught up in worries about “how to find the courthouse.” I disagree. There are others, especially students, who think that wandering into the world of theory is a waste of time that distracts from learning what to do. I disagree. And there are still others who claim that theory and practical reality are so inherently intertwined that both must be addressed. I agree.

When law schools first began to offer clinics, opposition was strong from many sectors of the law school professoriate. Those teaching clinics were usually kept off the tenure track, and were considered in some ways different and unfortunately in some cases, “lesser” than those teaching doctrinal courses. Similar treatment was, and often still is, experienced by those teaching Legal Writing. Slowly, the realization that these aspects of learning law are essential has permeated law schools, in part because of observation and re-evaluation of these programs, in part because of pressure from the ABA, and in part because of demands by students for additional opportunities to engage in clinic work. Because at most schools, financial and other limitations prevent clinics from accommodating all students, the development of externships as an alternative pathway to experiencing law in a practical setting has accelerated. Much progress has been made. More awaits. Sometimes I wonder, if someone who taught in American law schools during the 1950s and 1960s were to reappear and visit the twenty-first century American law schools, how they would react to the strong presence of clinics, putting aside their jaw-dropping reaction to the physical and technological evolution that has taken place. I suspect they would be somewhat bewildered but ready to ask question, listen to answers, and perhaps argue.

Wednesday, June 19, 2019

Some Thoughts on Teaching Law: Part V: Team Teaching 

When the idea of a transactional course is suggested, a common reaction is the concern that very few law faculty can, or want to, teach a course that is cross-disciplinary within the law. I remember being told, “I’m a [fill in subject] person. How can I put [fill in different subject] into the course?” The same concerns have been raised when the idea of teaching professional ethics within a doctrinal course is presented.

Those unfamiliar with law schools might ask, “Why can’t someone teach multiple courses, Teachers in the K-12 system often teach multiple subjects.” My response would be, “Most law faculty can teach multiple subjects, even within one course, especially if those subjects are close to each other on the law subject matrix. But doing so requires the reshaping of a course, and cannot be done unless other law faculty also re-arrange courses so that topics aren’t abandoned or duplicated.” But I also point out that the easier solution is team teaching.

Team teaching, of course, is not new to law schools. There have been team-taught courses for decades, though not very common. Team teaching takes two forms. One is a time split, with one teacher taking responsibility for particular classes, and another taking responsibility for other classes. The split could be as simple as one person teaching the first 10 classes, and another teaching the remaining 16. Or those teaching the course could alternate, or come up with some other sort of split. The other form is what I call shared presence. That is, both (or all) of those teaching the course are in the class at the same time. I have team taught in that manner, and it worked out very well. In some respects it was an improvement over what otherwise would have happened, because each of the two of us brought a different perspective and a different bundle of topics in which we had expertise to the course. The course, I should point out, was a newly constructed offering that was put together on relatively short notice, a task easier for the two of us than it would have been for either one of us alone. I have also team taught other courses, and they have worked out well. I am fully aware of the potential risks, having been a student in a graduate law course that was team taught by two professors who ended up arguing with each other, and after a few weeks one of them disappeared. That, however, is the exception and not the rule when it comes to team teaching. Team teaching is very common in other academic fields and there’s no reason for it to be a rarity in law schools.

Monday, June 17, 2019

Some Thoughts on Teaching Law: Part IV: Teaching Ethics 

Many years ago, the ABA mandated that law schools require students to take a course in legal ethics, a requirement that evolved into a requirement that students enroll in a Professional Responsibility course. That requirement, in turn, has been expanded to require attention to what is called professional development. The ABA made this requirement part of the standards that law schools must meet in order to be accredited, a status that is necessary for its graduates to sit for the bar examination in most states.

Not long after the ABA added the ethics requirement, it went further and highly recommended incorporating ethical issues into doctrinal courses. The theory made sense, because ethics questions are easier to understand and resolve in the context of a substantive legal issue. In reality, though, very few law faculty brought those questions into doctrinal courses. In contrast, there are those, including myself, who have done so. For example, the question of how to represent a married couple fits well when discussing a married couple who seek will and trust drafting assistance. But would that not be a duplication when the same questions are considered in the family law context? Is that not a duplication inconsistent with one of my motivations for advocating transactional courses? The answer is the difference between how the conflict of interest analysis applies in a will drafting situation and how it applies in a divorce situation. The answer also rests in the notion that a transactional course that could be called So They Want to Get Married or Live Together would include not only representation with respect to ante-nuptial agreements but also with respect to their will drafting decisions. Those two problem prevention opportunities are better addressed as they are in practice, as part of one transactional situation, than when they are split, as they are in most law school curricula, between two courses. And, yes, there would be the companion So Their Marriage or Relationship Didn’t Work Out course.

It seems to me that the topics addressed in Professional Responsibility courses can be divided and placed into substantive transactional courses and in the evolving Professional Development course. Putting rules and application of rules in context makes them easier to learn, easier to appreciate, and easier to apply.

Friday, June 14, 2019

Some Thoughts on Teaching Law: Part III: The Problem Method 

Law school pedagogy has evolved since the days of Paper Chase. The practice of zeroing in on one student and grilling that student about an appellate case has diminished, though some law professors still use that approach. Students were, or are, asked to identify the appellant and appellee, to explain the procedural posture of the case, to describe the issue, to state the holding, and to explain the rationale of the court. Preparation for this experience required, or requires, students to “brief the case,” which is a short-hand reference to reading the case, usually multiple times, and writing out the responses to each of the tasks, in expectation of being the student questioned when the case comes up for consideration in the classroom. By the time students finish the first year of study, they ought to be able to dissect a case in this manner. For that reason, this approach faded somewhat in some upper-year courses even earlier than it began to fade in some first-year courses. Compounding the shift is the existence in the upper-year curriculum of courses that are based entirely or mostly on statutory law and not case law.

Though I usually enjoyed being the target of professorial questioning when I was in law school, I also considered it not as helpful to becoming a lawyer as it professed to be. That conclusion was reinforced by my practice experiences when I graduated and went “out into the practice world.” It became very clear to me, quickly, that lawyers were not briefing cases but were almost always confronting another aspect of law.

That is why I tell my students, lawyers try to help clients prevent problems and to help clients solve problems. Whether the client is someone coming into a law office, or a judge for whom the attorney is serving as clerk, or a corporation for whom the attorney is working in-house, or a public official on whose staff the attorney serves, attorneys are constantly trying to prevent or solve problems. When approached through the lens of a transaction, the skills that are valuable in dealing with problems in this manner are much easier to describe, explore, critique, and develop.

Teaching from the problem method approach, that is, examining fact situations to ascertain how a problem could have been avoided, and how the problem, if not avoided, can be solved, dovetails nicely with a transactional approach to teaching law. It makes no sense to restrict the legal analysis to a narrowly defined area of law when trying to resolve a landlord-tenant dispute or a computer hacking.

The conclusion that a combination of the problem method in the context of a transactional approach isn’t to propose that all doctrinal courses that examine one area of law are of little or no value or should be eliminated wholesale. Nor is it to suggest that case analysis needs to be abandoned. But it is to suggest that when the pieces of traditional doctrinal courses that fit well into a transactional course are removed, the traditional doctrinal courses will be smaller in terms of time and credits, and perhaps more likely to be moved from the first year to an upper year or vice versa. And it is to suggest that the case method is a useful tool that should be part of a collection of similar tools used in a transactional course rather than as the sole approach to a course focused entirely on doctrine. Case analysis, standing alone, is much less powerful than when coupled with a problem method approach focused on the transactions planned or encountered by clients.

Wednesday, June 12, 2019

Some Thoughts on Teaching Law: Part II: Transactional Curriculum for Doctrinal Courses 

For several decades, I have been an advocate for shifting the core law curriculum from a bundle of doctrinal courses to a larger group of smaller transactional experiences. For more than a century, law students are exposed to the law in packages that focus on a specific area of law. For example, the typical first-year law curriculum includes courses in torts, property, contracts, criminal law, civil procedure, and perhaps one or two other courses. Upper-year law students, though given the opportunity to enroll in clinics, trial practice, seminars, and similar courses, also select from courses in taxation, wills and trusts, business organizations, evidence, family law, constitutional law, and a long list of other courses. All sorts of combinations can be found in American law schools. Even more permutations can be identified when looking at the package of courses in which each individual law student enrolls.

The difficulty with approaching law in this manner is two-fold. First, in every instance in which an issue in one course dovetails with an issue in another course, full examination of that issue usually is curtailed. A transaction that involves an issue is examined only from the perspective of the doctrine being examined in that course. Second, where there are transactions that require analysis of issues spanning the coverage of multiple courses, duplication might occur or, more frequently, students are left to put the pieces together on their own, which few, if any, do unless they encounter the transaction in an advanced course such as a clinic, or until and unless they encounter the transaction in practice.

Several examples illustrate the problem. Some years ago, when teaching the wills and trusts course, I started to focus on a case that the authors of the textbook had included because it was relevant to the issue in question. A student raised her hand and said, and I paraphrase, “We have already discussed this case in Constitutional Law and in Family Law so can we please not go through it yet again? Can we look instead at something that’s only in this course?” I acceded, and became a bit more aware of the duplication issue. Recently, again while teaching the wills and trusts course, I realized that when considering the identification of spouses and children for purposes of inheritance and will language, we were going over the same ground as is covered in the family law course. The issue of whether someone is someone else’s spouse is not confined to one course.

One of the complaints from law faculty is that the law continues to grow and yet the time frame available to deal with the law not only has held constant, but also has shrunk. The shrinking is a result of shorter semesters, and student enrollments shifting from some of the core doctrinal courses into externships and specialty courses. Certainly, under those circumstances, dealing with particular issues in multiple courses when other issues are cut out of courses and not treated anywhere in the curriculum, is not the best approach when dealing with curtailed course time.

What would transactional courses look like? They would be constructed around a transaction or a bundle of related transactions. They could be designed to be semester-long courses, or as partial-semester courses. Yes, there would need to be some coordination so that students could maintain a fairly even credit load throughout a semester. Some of the courses that come to mind include, Renting an Apartment and Buying a House (as one or two courses), The Legal Implications of Intimate Relationships, Selling Property at Garage Sales and Online, The Legal Consequences of Buying and Selling a Vehicle, and The Client Who Is Writing a Song or a Book, to name a few.

Consider a course in Renting an Apartment. The issues arising when a person rents an apartment currently can arise in traditional doctrinal courses such as Property, Torts, Criminal Law, Taxation, Debtor-Creditor Law, Bankruptcy, and Family Law. Whether a rental situation is discussed in any particular one or more of these courses at a particular school depends on what the person teaching the course decides to include. There’s no right or wrong in that, per se. It’s simply a matter of what a practicing lawyer considers when counseling or otherwise helping a client deal with a landlord-tenant situation. Clients don’t walk in and say, “I have a torts problem.” Nor do lawyers usually react by thinking, or saying, “I learned about this in the Contracts course,” because the issues that the attorney brings into the analysis were considered in multiple courses.

There are several other advantages to approaching law teaching in this manner. These are benefits from the perspective of the students.

First-year students almost always feel intimidated or overwhelmed when their courses begin. Even upper-year students can feel that way though perhaps not as frequently or as intensely. The volume of material is substantial, the approach of the professor can be confusing, the language is complex, and the material can seem abstract. Approaching law from a transactional perspective chops things into what I call “digestible pieces” that are easier to assimilate. The material is less abstract and more practical.

Law students also tend to consider the package of materials encountered in a course to be somewhat detached from their own experiences. Starting one’s substantive law education with a course covering transactions in which the students have engaged, or which they can easily envision themselves experiencing, are more likely to grab their attention, fuel their interest, and engage their intellect. The excitement of entering law school that so often is unfortunately dampened within a few weeks is more likely to persist when the relevance of the course comes close to home.

Another advantage of the transactional course approach is that it meshes well with the problem method of teaching and learning, which I will discuss in the next installment in this series.

Though I’ve never taught, or even proposed, a transactional course of this nature, because the opportunity did not exist nor the concept acceptable to enough people, I do bring some elements of this approach into the courses that I teach. Putting the focus on the client not only helps in this effort but pretty much requires it. Focusing on an issue in the context of the client’s concern makes it difficult to shove aside any aspect not within the tight confines of the course syllabus. Admittedly, there are times when, because of credit hour restraints, I tell the students, “We must leave the details to the [whichever] course.” I’d rather not do that. Whether I ever get the chance to teach a transactional course in this manner is questionable, but as the years have raced by, the odds have decreased quickly. It will be for those in the next generation of law teachers, and the generation succeeding that one, to shepherd these changes, which I hope will become commonplace.

Monday, June 10, 2019

Some Thoughts on Teaching Law: Part I: Introduction 

I have been teaching law for 39 years. During that time, I have had many opportunities to think about teaching law, to discuss teaching law with deans, other faculty, and students, to change how I teach law, and to adopt various approaches in an effort to improve the teaching of law by myself and by others. Though from time to time I have shared on this blog some of my pedagogical ideas, I decided it is a good time to collect my thoughts in one place

Of course, these are not all of my thoughts. My thoughts about teaching law continuously change, as I re-evaluate what I have done and am doing as I teach law.

Nor are these thoughts collectively a complete blueprint for structuring the teaching approach at a law school. It is more a matter of putting these experiences, ideas, experiments, and goals on the table, so that others can consider them as they think about their own teaching, the teaching they encountered as students, and the teaching that they might experience as they contemplate entering or continuing a law school education.

Though it might be tempting to view this series as a criticism of current law teaching generally, that is not what is nor what it is intended to be. In fact, some of the ideas that I share are not unique to me, but have been adopted by others over the years. Granted, there is some implied criticism to the extent that some of the thoughts I share reflect an attempt to adapt law teaching to the changes that have overtaken the practice of law.

Friday, June 07, 2019

An Example of Congressional Tax Legislative Dysfunction 

When people wonder why the federal tax law is such a mess, I advise them to take a close look at how tax legislation moves through the Congress. Few people bother to do so, and most of those who do give up several paragraphs into any description of federal legislative processes. It certainly does not line up with what people have learned in civics courses in high school.

About a month ago, in More Bad Tax Law: The Price For Not Listening to The Citizenry, I wrote about the 2017 tax law change that ended up causing a provision intended to apply to trusts to adversely affect the taxation of benefits received by surviving spouses and children on account of the death of the other spouse and parent while on active military service. I noted that “Congress is now ‘scrambling’ to fix the mess.

The use of the word “scrambling” probably was read as meaning “rushing” but, as described in this story, it apparently means “messing up” in the ways eggs are stirred together. What happened?

Instead of proposing a bill to fix the problem and having it move through both houses of Congress, which it surely would have passed unanimously or near unanimously, the legislators managing the fix attached it to a bill that would revise some of the Internal Revenue Code provisions dealing with the tax treatment of retirement plans. When the retirement plan legislation was proceeding through the House, it also had legislation attached to it that would have changed the rules for section 529 education plans. After objections, that portion was removed, and the retirement plan legislation, with the fix for the military benefits taxation problem, sailed through the House by a 417-3 vote.

And then the combined bill went to the Senate, where, since the 2018 mid-terms, almost all House legislation goes to die because the Senate Majority Leader, acting single-handedly, refuses to bring the legislation to the Senate floor. This time, though, the holdup is attributed to as many as six Republican Senators. This now requires the chair of the Senate Finance Committee to try to find out why these Senators are holding up the legislation. The retirement portion of the legislation is very similar to one that the Committee’s chair and ranking member have been working on, in a bipartisan manner, for the past six years.

The holdup might be connected to what happened in the House. When the section 529 education plan changes were removed because of objections by Democrats, the military benefits fix was added to the bill to “sweeten” it for House Republicans. But there might also be other reasons for the holdup. This mess leaves me with three questions.

First, why aren’t Senators required to state publicly why they are holding up legislation? Aside from national security details, the Congress should operate transparently. Members of the Congress are representatives, and not rulers.

Second, why does the Congress insist on stitching provisions together when doing so causes members of Congress to vote for provisions they don’t support or to fail to vote for provisions that they do vote? I understand that the reason for combining provisions is a political tool, but representation of this nation’s citizens requires something of a higher quality than the detritus of politics.

Third, what would happen if each of the three proposals – one for the retirement plans, one for the section 529 plans, and one for the military benefits fix – were moved through the Congress separately? I suppose this question consists of three questions, namely, would each of these provisions pass? I don’t know what would happen to the first two, but I am confident that the military benefits fix would sail through both the House and the Senate. That provision deserves to be enacted, quickly and unencumbered by the politics or other issues afflicting the other two provisions.

Until politicians put the nation and its citizens above party loyalty and payback for lobbyists and campaign fund contributors, the legislative process will suffer, and so, too, will Americans. The only people who can change this mess are Americans. Will they?

Wednesday, June 05, 2019

Tax Rates, Tax Bases, Revenue Neutrality, and a Wee Bit About Tariffs 

Usually, when I write about the Philadelphia real property tax, it’s a matter of dealing with assessment complaints, procedural snags, and collection issues. I have described these concerns in posts such as An Unconstitutional Tax Assessment System, Property Tax Assessments: Really That Difficult?, Real Property Tax Assessment System: Broken and Begging for Repair, Philadelphia Real Property Taxes: Pay Up or Lose It, How to Fix a Broken Tax System: Speed It Up? , Revising the Board of Revision of Taxes, How Can Asking Questions Improve Tax and Spending Policies?, This Just Taxes My Brain, Tax Bureaucrats Lose Work, Keep Pay, Testing Tax Bureaucrats Just Part of the Solution, A Citizen Vote on Taxes, Freezing Real Property Tax Reassessments: A Nice Idea, The Tax Price of a Flawed Tax System, Can Bad Tax Administration Doom the Tax?, Taxes and Priorities, R.I.P., BRT, A Tax Agency Rises from the Dead, and Tax Law as Subterfuge: Best Use Valuation v. Current Market Valuation, How to Kill a Bad Tax System That Will Not Die?, The Bad Tax System That Will Not Die Might Get Another Lease on Life , Robbing Peter to Pay Paul, Tax Style, Don’t Rob Peter to Pay Paul: Collect Unpaid Taxes, The Philadelphia Real Property Tax: Eternal Circles , A Tax Problem, A Solution, So Why No Repair?, Can the Philadelphia Real Property Tax System Be Saved?, and Pay Tax Now? Pay Tax Later?.

This time, however, I am writing about an issue that involves not only the Philadelphia real estate tax but taxes generally. A recent Philadelphia Inquirer article describes the unhappiness of Philadelphia property owners who are facing increases in their real estate taxes, not because of a rate increase but because the assessed values of their properties have increased. Unlike some Pennsylvania jurisdictions, Philadelphia is not required to lower the tax rate when the tax base, that is, the combined assessed values of properties subject to the real estate tax, increases. Some city officials have proposed that the rate be lowered. Others point out that because the city itself, as well as the school district that also relies on the tax, face higher expenses, lowering the rate would require raising other taxes, cutting services, or some combination of both. At least one politician wants “revenue-neutral assessments” but that approach, though arithmetically possible, would require assessing properties at less than fair market value, which would violate state law.

The revenue neutrality debate caused me to think about another tax that increases as values increase. Consider the sales tax. With a fixed rate, the amount of the tax increases if the price of the item increases. Trying to implement a reduced sales tax rate to keep sales tax revenues level when overall prices increase would be somewhat of a nightmare for merchants and state revenue departments, even with the assistance of digital technology. It would not surprise me if, when someone advocated making the sales tax revenue neutral, opponents of the idea would point out that the overall price increases causing sales tax revenues to increase would also cause the costs faced by state and local governments to increase.

Then the word “tariff” popped into my mind. Prices of many items in this country are beginning to increase substantially thanks to tariffs imposed in a futile effort to inflict financial pain on other countries. Tariffs, of course, are not paid by other countries but are paid by domestic merchants and residents of this country. Take, for example, automobiles. Almost all jurisdictions, perhaps all jurisdictions, that impose a sales tax subject automobile purchases to that tax. If tariffs cause the price of automobiles to increase, as surely they will, a $3,000 increase in the price would generate, in Pennsylvania with its 6 percent tax, an additional $180 of sales tax revenue. Multiply that by the number of automobiles sold in the state, add in boats, trailers, airplanes, and everything else subject to the tax, and the tariff is generating not only an inflationary increase in the price of goods, but an increase in state and local taxes. True, the higher prices might compel those who are not wealthy or sitting on piles of corporate cash to cut back on their purchases, but at least a majority of Americans are already limiting their purchases to bare necessities because of the nation’s income and wealth imbalance, and don’t have the luxury of bargaining in the marketplace and they certainly don’t control the marketplace. They’re stuck. I wonder if the tariff advocates let their thinking process go this far in analyzing the consequences, assuming that a thinking process and not a limbic system reaction inspired the tariff decisions.

Monday, June 03, 2019

The 2017 Tax Legislation: A Failure From Every Direction 

Readers of MauledAgain know that I have been a critic of the 2017 tax legislation, because it is terrible for most Americans, is mostly a giveaway to the oligarchs, is sloppily drafted, and has caused all sorts of unintended but adverse consequences for taxpayers least able to handle those consequences. I have criticized this tax “reform” mess since the legislation first started making its way through a Congress insensitive to the plight of most Americans. I have written about the flaws of that legislation in posts such as Taxmas?, Those Tax-Cut Inspired Bonus Payments? Just Another Ruse, That Bonus Payment Ruse Gets Bigger, Getting Tax Cut Benefits to Those Who Need Economic Relief: A Drop in the Bucket But Never a Flood, Oh, Those Bonus Payments! Much Ado About Almost Nothing,
You’re Doing What With Those Tax Cuts?, Much More Ado About Almost Nothing, More Proof Supply-Side Economic Theory is Bad Tax Policy, Arguing About Tax Crumbs, Another Reason the 2017 Tax Cut Legislation Isn’t Good for Most Americans, Yet Another Reason the 2017 Tax Cut Legislation Isn’t Good for Most Americans , Is Holding On To Tax Cut Failures Admirable Perseverance or Foolish Stubbornness?, What’s Not Good Tax-Wise for Most Americans Is Just as Not Good for Small Businesses, Don’t Want a Crumb? Here’s Dessert But Give Back Your Appetizer and Beverage, How Tax Cuts for Large Corporations and Wealthy Individuals Impact Jobs, and Broken Tax Promises: When Tax Cut Crumbs Are Brushed Away.

Now comes a Congressional Research Service report, as described in various stories, including this one from Forbes, that concludes the 2017 legislation “had little measurable effect on the overall US economy in 2018.” The report concludes that “the tax cuts didn’t come remotely close to paying for themselves by turbocharging the economy as President Trump repeatedly promised.” The Forbes story notes that the report’s conclusions surprised almost no one, because “most independent analysts predicted more than a year ago that the law would have little economic impact.” It’s nice to know I was not alone.

In response to the report, acolytes of the failed supply-side, trickle-down nonsense now claim that the legislation’s supporters “never really promised a big short-term burst of economic growth/” Really? It’s so sad that so many people have such short memories.

So what did the 2017 legislation do, aside from making a mess of things for taxpayers of modest or little means? It “substantially lower[ed] effective corporate tax rates and generate[d] a flood of stock buybacks and dividends for shareholders.”

What did the 2017 legislation not do? It didn’t pay for itself, causing a dangerous surge in the national debt, which will end up being a burden for taxpayers of modest and little means, unless, of course, the unwise 2017 enactment and its consequences are reversed by a future Congress and Administration that represents all Americans and not just oligarchs, large corporations, and their apologists. Similarly, the 2017 legislation did not bring the typical worker the promised $5,000 annual salary increase. Adjusted for inflation, wages “grew more slowly than overall economic output, and at a pace relatively consistent with wage growth prior to passage of the TCJA.” If salary increases for the oligarch class are removed from the wage computation, the salary situation for the rest of working America is even worse. Attempts to obscure the failed promises attached to the legislation that focused on bonus payments must be evaluated in light of the fact that “reported bonuses were equivalent to about $28 per US worker.”

The 2017 tax legislation is a failure. It was sold to the public as something other than what it is. Unfortunately, it has become too easy in this day and age to con people. The con artists are alive and well, and they’re not just making robocalls.

Friday, May 31, 2019

Soccer It To the Taxpayers, Again 

In the past, I have written about major league soccer franchise owners demanding public financing of their private enterprises. For example, it has happened in St. Louis, as I described in If You Want a Professional Sports Team, Pay For It Yourselves; Don’t Grab Tax Dollars, and Nashville, as I described in Tax Breaks for the Wealthy Leave the Wealthy Begging for Handouts from Taxpayers. Of course, soccer franchises are not alone in seeking public financing for private sports businesses, as I have discussed in posts such as Tax Revenues and D.C. Baseball, Putting Tax Money Where the Tax Mouth Is, Taking Tax Money Without Giving Back: Another Reality, Public Financing of Private Sports Enterprises: Good for the Private, Bad for the Public, Taking and Giving Back, If You Want a Professional Sports Team, Pay For It Yourselves; Don’t Grab Tax Dollars, More Tax Breaks for Those Who Don’t Need Them, and A Tax Break That Pays For Itself?.

Now the situation has arisen in Cincinnati, and it has become a mess. A year and a half ago, as reported in this story, officials in Cincinnati and Hamilton County, Ohio, agreed to divert $51 million in tax revenues to finance a portion of the cost of bringing a major soccer league franchise to the city.

Now comes news that Cincinnati’s ability to fork over the funds it promised might have been impaired. The city had approved diverting a portion of its local hotel tax to the private enterprise project. But in order to do that, it needs the approval of the independent Convention Facilities Authority, which has oversight of the tax. The Authority is concerned that if its revenues are diverted to a soccer project, it will lack the funds needed to maintain the convention center and to make payments on the debt incurred to build the convention center. It wants the city to promise to replace the diverted funds. That, of course, means that the city either must raise taxes or divert spending from yet another public project. Either way, taxpayers, even those who are not soccer fans, will pay. The city, in turn, claims that it is Hamilton County preventing the city from channeling the hotel tax revenues into the soccer franchise. The dispute threatens to delay the construction of the franchise’s stadium.

There is a lesson to be learned from this mess. Though in theory it appears easy to shift public funds into private hands, the practical reality of the logistics can present a variety of obstacles. None of this would happen if the wealthy individuals and profitable corporations desiring to own professional sports franchises used their own money. They are willing to ask people who are not fans of their particular sport to bear the financial burden of that sport, even though they are among the strongest opponents of imposing taxes for any purpose they don’t support. Like other private enterprise owners, they should turn to their potential customers and patrons, and ask them to contribute to their dream. If they don’t want to do that, and don’t have enough money to finance their dream of owning a professional sports franchise, they are welcome to join the ranks of the 99.8 percent of Americans who also lack the money to acquire a professional sports franchise.

Wednesday, May 29, 2019

When a Tax Break Goes Bad 

Readers of this blog know that I am not a fan of tax breaks directed at a particular industry, or, worse, a particular individual or company. Nor am I a fan of tax breaks that are dished out based on promises, because I prefer tax breaks, if to be issued at all, to be given in response to performance rather than promise. I have written about this issue in posts such as How To Use Tax Breaks to Properly Stimulate an Economy, How To Use the Tax Law to Create Jobs and Raise Wages, Yet Another Reason For “First the Jobs, Then the Tax Break”, When Will “First the Jobs, Then the Tax Break” Supersede the Empty Promises?, No Tax Break Until Taxpayer Promises Are Fulfilled, When Job Creation Promises Justifying Tax Breaks Are Broken, and Why the Job Cuts By Tax Cut Recipients? Would it not be wonderful if, when a tax break recipient fails to live up to its promises, the tax break was repealed, and the beneficiary of the tax break required to pay back to the federal, state, or local government fooled into providing the tax break the amount of the tax break, plus interest? So many problems could be solved so very quickly. Yet legislatures rarely repeal tax breaks because of broken promises. At best, they let some tax breaks expire if the intended goal of the tax break has been achieved or has become irrelevant. It doesn’t happen very often.

Now comes a report that the Oregon legislature has indeed repealed a tax break. According to the report, in 2015 the Oregon legislature unanimously enacted a tax break intended to persuade Google Fiber to set up shop in Portland. Despite the tax break, Google Fiber did not make the move. Other companies, however, took advantage of the provision, costing Oregon many millions of dollars. In part, that was because the bill was badly drafted, reflecting the failure of the legislature or its staff to understand the terminology of the fiber communications industry. Now, four years late, an almost unanimous Oregon legislature has passed and sent to the governor a repeal of that tax break.

The author of the report notes that the entire episode is “a bipartisan failing that shows what can happen when legislators wade into the complexities of tax policies and technology without fully understanding the implications.” Is it really that difficult to understand what happens when something is given in exchange for a promise without securing that promise with some sort of escrow, mortgage, or other protective device?

One legislator lamented, “You can’t craft one of these things for one segment of the industry alone.” Yes, you can. You can draft very carefully. But, of course, though that worked years ago, nowadays the nature of modern communications technology makes it easy to identify the intended recipient. In many instances, passing a tax break for a specifically named individual or company violates law. Thus the game of trying to make a provision appear to be general though intended to be specific. Yet in some instances people and businesses that don’t fall within that narrow definition can change their activities or structure in order to do so. This, of course, highlights the foolishness in the first place of handing out narrow tax breaks.

At least the Oregon legislature saw the errors of its ways, and fixed the problem. Would it not be magnificent if the United States Congress saw the many errors of its ways repeated time and again, and took steps to clean up the tax mess it has created?

Monday, May 27, 2019

Tax Breaks for Wealthy People Who Pretend to Be Poor 

Readers of this blog know that I am not a fan of handing out tax breaks to wealthy individuals who claim that what they are doing is good for the public. Often, they threaten not to engage in activities or invest in projects unless they get tax breaks and other handouts. I have written about this tax break grab game in posts such as Tax Revenues and D.C. Baseball, four years ago in Putting Tax Money Where the Tax Mouth Is, Taking Tax Money Without Giving Back: Another Reality, and Public Financing of Private Sports Enterprises: Good for the Private, Bad for the Public, Taking and Giving Back, If You Want a Professional Sports Team, Pay For It Yourselves; Don’t Grab Tax Dollars, Is Tax and Spend Acceptable When It’s “Tax the Poor and Spend on the Wealthy”?, and Tax Breaks for Broken Promises: Not A Good Exchange.

Reader Morris alerted me to yet another instance of a wealthy professional sports franchise owner trying to get taxpayers, almost all of whom are poor or middle class, to pay for a private activity. According to this report, David Tepper, owner of the Carolina Panthers who play in North Carolina, wants to move the team’s facility to Rock Hill, South Carolina. Instead of simply making the move, designed to create a connection to the other state with Carolina in its name, Tepper wants South Carolina to pay for the move. Tepper wants the state to “help us out.” Those are words taken out of the mouths of people truly in need of help. Granted, if the help that Tepper needs involves zoning, or building permits, the request is understandable. But Tepper wants money. Specifically, he wants $120 million.

Tepper essentially threatened South Carolina by explaining that without the $120 million he would remain in North Carolina. It seems to me that the people of South Carolina would respond by saying, “Then stay there.” Why would people throughout South Carolina get excited because a team that plays in North Carolina will put a practice facility in South Carolina? How many South Carolinians will get the chance to watch practice in the team’s facility?

The proposed facility is just over the border from North Carolina and is only 30 miles south of the team’s stadium in Charlotte. It seems to me that the only point of proposing to put the facility just over the border is to find a way to get tax dollars out of a second state. It reminds me of the tax giveaway by New Jersey that “persuaded” the Philadelphia 76ers to move their practice facility across the Delaware River to Camden, New Jersey. That deal, incidentally, is among the many similar New Jersey tax giveaway deals under investigation, with one of the concerns being the failure of the businesses and wealthy individuals to deliver on the promises that they made in order to get the tax breaks.

Fortunately, there is opposition to the proposal. One concern is that the tax breaks would benefit a very small portion of the state though it would be a financial burden on taxpayers throughout the state. Another concern is whether the economic projections of the proposal match what is claimed or are based on false assumptions. Yet another concern is the bewilderment caused by a person worth $11 billion begging for $120 million.

Tepper’s response is almost laughable. He explains, “It’s going to cost us a lot of money to go down to South Carolina. We’re going to have to put out real money to go down there. So it’s not like we get that money from South Carolina, and that’s it. There’s a lot of money in a facility that we have to invest.” What nonsense. Here is how businesses should work, and did work until wealthy individuals and business owners started playing the pretend-you-are-poor game. Analyze the proposal. If it makes sense to spend business assets on the proposal, that is, if it generates profits for the benefits, then do it. If it doesn’t, then don’t do it. If it doesn’t generate profits without taxpayer assistance, then it’s not worth doing. All over America, small business owners develop proposals, and forge ahead without taxpayer financing because they do not have the requisite wealth and power to “persuade” legislators to dish out public funds. Another tactic available to Tepper is to solicit funds from Panthers fans, giving them access to the practice facility in exchange for some sort of subscription or stock in his business. In that way, the cost falls on those who are interested in his team. Tepper claims that “most of the people in South Carolina want this.” Then give those people in South Carolina who want this the opportunity to contribute funds directly to Tepper. I doubt the money will roll in, because I think, or at least hope, that most South Carolinians aren’t in the habit of giving freebies to wealthy people who claim to be in need of money. There’s a word for people drowning in money who beg for more. It’s called addiction. It’s time for Americans to stop the enabling of this woeful malady that is at the root of so many of the nation’s problems. To borrow a phrase, just say no.

Friday, May 24, 2019

So the Soda Tax Really Was About the Revenue and Not So Much About Health 

One of my several criticisms of the soda tax is that it singles out certain liquids that contain sugar, and ignores other sugary substances. I have been writing about the flaws of the soda tax for more than a decade, beginning with What Sort of Tax?, and continuing with The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, When Tax Is Bizarre: Milk Becomes Soda, Gambling With Tax Revenue, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, The Imperfections of the Philadelphia Soda Tax, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, and Time for a Salt Tax to Replace a Soda Tax?

Another, related, concern that I have about the soda tax is that it is premised on the claim that it is designed to improve people’s health, yet it is not applied to any food or beverage that is unhealthy other than sugar. So is sugar the prime cause of bad health? According to a recent study, reported in this article, the answer is no. I wrote about that flaw of the soda tax in Time for a Salt Tax to Replace a Soda Tax?

Another concern, to which I’ve not given much attention, is the inequity of taxing sweetened beverages based on the number of ounces in the beverage rather than the amount of sugar. If the primary goal of the soda tax is to reduce sugar consumption, then even aside from the failure to tax solid forms of sugar, the tax should reflect the amount of sugar in the drink. Some sugary beverages contain twice or three times the sugar in a given number of ounces than do other sugary beverages.

All of these concerns, along with the silliness of taxing some items that are healthy despite having some sugar content, have contributed to my conclusion that the soda tax is designed for revenue production rather than health benefits. Taxing beverages is much easier than taxing all sugar-containing substances based on the number of grams of sugar in a particular substance. In a number of my commentaries on the soda tax I have suggested that it was designed as a revenue raiser. And now we have the proof.

According to this Philadelphia Inquirer story, “Mike Dunn, a spokesperson for Mayor Jim Kenney, said the health benefits of Philadelphia’s tax ‘have always been secondary to the primary goal’ of funding important city programs.” Wow. For quite some time, Kenney and other advocates of the soda tax have claimed that they proposed the tax in order to improve the health of people living in Philadelphia. As I, and others, have repeatedly emphasized, if reducing sugar consumption was the primary motivation for the tax, it would have been, should have been, and could have been, applied to all foodstuffs and beverages containing sugar. That approach, of course, would permit reduction of the tax to a level that would not have the adverse financial impact on businesses and consumers that the existing soda tax has caused.

Wednesday, May 22, 2019

Call It a Tariff and the Unwise Won’t Realize They’re Being Taxed 

Almost a year ago, in Tariffs: Taxes By Another Name, I shared my agreement with what Tom Giovanetti, with whom I don’t always agree, had to say about tariffs in Who Pays Tariffs?. Here is what I wrote:
Tom Giovanetti offers an important analysis of how tariffs work and what the recently imposed tariffs will do to Americans and the American economy. Giovanetti points out that in the past, tariffs were a major source of federal tax revenue, that tariffs have been in place for decades, and that until recently, U.S. tariffs were significantly lower than those of the nations with which the U.S. trades. He points out that tariffs on goods imported from a particular country are not paid by citizens or residents of that country but by the Americans who purchase those goods, because the importer passes the tariff along as part of the price charged to consumers. On all of these points, he is correct.

Giovanetti argues that the tariffs imposed by the current Administration aren’t designed to raise revenue, but to increase the cost of imported products so that American consumers will shift their purchasing decisions from those items to their equivalents manufactured in the United States. He notes that this shift also has the effect of raising the prices charged by domestic manufacturers. Tariffs, he concludes, hurt American businesses and American consumers. On all of these points, he is correct. He doesn’t mention that in some limited instances the tariffs might be helpful to a particular American company or its workers to the extent the shift in purchasing decisions increases that company’s sales and profits, though those increases might be offset by the increased costs the company faces when it purchases components and supplies and that its workers face when making their consumer purchases. In sum, this omission isn’t a flaw in his explanation, but a detail that probably has no meaningful impact on the analysis.

Giovanetti describes the “national security” justification presented by the current Administration for its tariff decisions as “an embarrassing fiction.” Of course it is. And when he argues that “any discussion about tariffs should at least be informed by an accurate understanding of who actually pays,” he is spot on.

Giovanetti characterizes the tariff as a tax, specifically, a border tax. It is. In some ways, the word “tariff” is less offensive to some than the word “tax.” It is not unlike a sales tax or a value added tax. And it falls on the person purchasing the item subject to the tariff, just as a sales tax or value added tax falls on the consumer.

Tariffs are not the path to improving the American economy. There is a place for tariffs, but those instances are limited and often should be of short duration. Giovanetti is correct. The current flood of new and increased tariffs is helping no one who needs help.
Now comes some interesting insights into the economic impact of tariffs already imposed. According to this Slate article, the tariffs that have already been imposed by the current Administration amounts to a $62.5 imposition that ultimately is paid by those who purchase the goods subject to the tariff. Over the ten-year budget window, this amounts to one-third of the tax cuts dished out by the 2017 tax legislation. When factoring in secondary effects, such as price increases by other countries that export to the United States and by United States manufacturers, the existing tariffs will eat up two-thirds of the 2017 tax cuts. Though the article doesn’t get into the details, it seems to me that a more important comparison is the impact at each income level. Tariffs ultimately are paid by consumers. Low and middle income taxpayers spend a much higher portion of their income, often all of their income, whereas the wealthy spend only a small portion of their income on goods, and it is on some of those goods that the tariffs are imposed. So the bottom line is that for low and middle income taxpayers, the tariff-driven increased cost of what they purchase will exceed what small crumbs they received on account of the flawed 2017 tax legislation. On the other hand, for the wealthy, the tariff-driven increased cost of what they purchase will hardly make a dent in the huge handouts they received from that legislation. It ought to surprise no one that, once again, those who are revered by too many of the low and middle income individuals in this nation have implemented a reverse Robin Hood maneuver, taking from the poor and middle classes and giving to the wealthy. As they do this, the tariff king claims that China will pay the tariffs. His lack of understanding of basic economics is a disgrace.

Pending are another batch of tariffs that would double what already has been imposed. This would amount not only to an offset of the 2017 tax cuts but a tax increase equal to one-third of those cuts. Though I have objected to the 2017 tax legislation, I do not support paying for it with tariffs, because the effect is to require low and middle income taxpayers to pay tariff-driven price increases that are many times the tax breaks they received, while doing little, if anything, to reverse the giveaway to the wealthy and to large corporations.

Ultimately, the impact of these price increases will be to deflate the economy. Already Wall Street has been showing signs of price erosion. That’s because at least some investors realize that consumers will need to eliminate purchases of some items in order to pay the higher prices being posted for other items. Sometimes these sorts of economic disadvantages are prices that must be paid for something more worthwhile. But in this instance, the tariffs are having no effect on what China is doing. In the meantime, the anti-welfare, anti-handout Administration has been dishing out, and plans to dish out more, bailout money to farmers and others being devastated by the tariffs. When everyone else being similarly devastated lines up for some handouts, will the suddenly-socialist Administration be as generous? I doubt it.

I wonder how many Americans will figure out that when they see price jumps of 20 and 30 percent on some items that they will realize they are facing tax increases imposed by the self-styled chief advocate of cutting taxes. But, that’s how con artistry works. Read the books.

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