Friday, August 18, 2017

A Good Guess In a Tax-or-Fee Prediction 

The email arrived a few days ago from a reader with the simple subject line, “you were right.” For a moment, before opening the email, I scanned my memory banks for any reminder of having engaged in a debate, dispute, discussion, or disagreement with the sender of the email. There was nothing. When I opened the email and read it, I realized that this reader was telling me that my prediction with respect to the outcome of a tax-or-fee lawsuit in Oklahoma had turned out to be correct. In all honesty, it turned out to be a good guess.

I described the issue in question in Tax versus Fee: The Difference Can Matter. The Oklahoma legislature enacted a new $1.50 per-pack “fee” on cigarettes. It did so after four previously failed efforts to increase the per-pack cigarette tax by $1.50. Repeating what I had written in Tax versus Fee: The Difference Can Matter:
In this era of tax hatred, it has become commonplace for legislators, lobbyists, and other advocates to use the label that sells. Thus, in Please, It’s Not a Tax, I criticized the use of the term “tax” by opponents of a fee, who clearly were trying to ride the anti-tax wave to prevent enactment. And in So Is It a Tax or a Fee?, I criticized the use of the term “fee” by proponents of a fee that they had earlier labeled a “tax,” because calling something a fee doesn’t get the attention of the anti-tax crowd to the extent a tax does.

In Tax versus Fee: Barely a Difference?, I concluded by suggesting, “Ultimately, whatever it is called, it ought to be measured sensibly, imposed only after appropriate public notice, hearings, and legislative action, and paid if the legal obligation to do so exists.”
Not surprisingly, the enactment of the “fee” in Oklahoma generated a challenge. I explained the challenge:
Opponents have sued, asking the Oklahoma Supreme Court to invalidate the legislation. They argue that the fee originated in the state Senate, thus violating the requirement in the state Constitution that revenue-raising legislation originate in the state House. The opponents also argue that enactment of the legislation during the last week of the legislative session violated the state Constitution’s requirement that revenue-raising legislation not be enacted during the last five days of a legislative session. The opponents also argue that proponents of the $1.50 charge were trying to characterize the legislation as not revenue-raising by labeling it a fee. The opponents explain that the fee “simply reincarnated the earlier cigarette tax bills under a new name.”
Then I stepped into the world of predicting the outcome of litigation, an exercise often punctuated by error, surprise, disappointment, and embarrassment. Of course I tried to dampen expectations by opening with an admission of my limitations:
Though I’m no expert in Oklahoma constitutional law, it seems to me that the fee raises revenue, and thus has been enacted in revenue-raising legislation. Accordingly, the process by which it was enacted appears to have violated the Oklahoma Constitution. If, for some reason, the Oklahoma Supreme Court determines that the provisions in the constitution applies to taxes but not fees, then deciding whether the $1.50 charge is a tax or fee would be determinative. The label alone should not resolve the question. The state is not selling cigarettes to people, nor is it selling licenses to use tobacco, and thus it is difficult to characterize the charge as a fee. It would not be surprising if the Oklahoma Supreme Court, if it were to limit the requirements in the state Constitution to taxes, decided that this particular charge was a tax. It will be interesting to see what the court decides, probably sometime later this year.
Recently, the Oklahoma Supreme Court indeed addressed the issue. It concluded that the legislation in question was a revenue-raising measure, and, as such, was subject to the requirements that it originate in the state House and not be enacted during the last five days of a legislative session. Reviewing the history of the legislation, the court determined that revenue raising was the purpose of the legislation, particularly because the legislation replaced revenue-raising proposals that had not been enacted and because the legislation did not focus on any purpose other than revenue raising. The court made it clear that using the word “fee” to describe a tax does not transform a tax into a fee.

In all fairness, it was a fairly easy issue on which I guessed. In other words, it was not entirely a guess because there was enough information with which to engage in analysis. It was an educated guess. Was I right? This time, yes. But not always. I live with constant reminders of that fact.

Wednesday, August 16, 2017

Taxing a Tax 

Cook County, Illinois, enacted a one-cent-per-ounce tax on sugary drinks. The county also imposes a sales tax, which together with the state sales tax, amounts to 9 percent. According to this report, among others, Yvan Wojtecki has started class-action litigation against McDonald’s Corp. because it included the beverage tax in computing the sales tax. An example helps understand the issue. Assume a person purchases a 25-ounce soda for $2.00. The beverage tax is 25 cents. Should the sales tax be 9 percent of $2.00, or 18 cents, or should it be 9 percent of $2.25, or 20 cents? Though the two-cent difference might seem miniscule, a person who makes that purchase every day is looking at an extra $7.30, and though that, too, might appear trivial, for a family of six people, it becomes $43.80, or almost $4 a month. What makes the issue huge, and thus fodder for a class-action lawsuit, is the impact when applied to all consumers. More than 5 million people live in Cook County. Not all of them purchase sugary drinks. But Cook County also hosts tourists, business visitors, and commuters who live outside the county. If 3 million people purchase 25 ounces of soda every other day, and that is probably a very low estimate, the state and county are hauling in an additional $10,950,000 in revenue each year. On the higher end, if 5 million people, which offsets visitors, tourists, and commuters who purchase soda against residents who don’t, purchase 50 ounces of soda every day, the state and county fill their treasuries with an additional $73,000,000 each year. Perhaps the amount in issue is in the middle, and whatever it is, it isn’t a one-year-only deal.

What is the correct answer? I’m not an expert in Illinois and Cook Country sales taxes. It seems to me that the tax applies to the retail cost of taxable items, that tax is not a taxable item, and that the retail cost of an item does not include tax. I welcome reactions from Cook County tax practitioners who can enlighten me, and readers of MauledAgain, on the technical application of the state and county sales tax.

Along with other problems cited in the foregoing and other reports, this is yet another example of the administrative challenges posed by taxes that might appear, theoretically, to have some merit, but which, when thrown into the cauldron of practical reality, generate a variety of problems.

Monday, August 14, 2017

Taxes, Passwords, and the Consumption of Hours 

I’ve been using computers, in one way or another, since 1972. I have owned a personal computer of one sort or another since 1983. I have been “on the internet” since the early 1990s. I started browsing with Mosaic and Cello. It ought not be a surprise, considering the parallels between the thought processes of tax analysis and the thought processes of programming and coding, activities in which I have engaged over the years. So of course I’ve been familiar with cybersecurity and passwords for a long time. Like every computer and internet user, I’ve been prompted to change my password on a regular basis by some websites and organizations, and I have changed them on my own initiative from time to time for a variety of reasons.

When I noticed a recent story describing how Bill Burr changed his position on password security, particularly his previously recommended frequent changing and use of upper case letters, lower case letters, numbers and special symbols, I was delighted. Without going into all of the reasons I think frequent password changes create their own risks, and why inserting numbers and special symbols into passwords can be counter-productive, I wondered how long it would take before the “it’s time to change your password” messages would stop arriving.

One of the interesting bits of information from the story came from a researcher at Microsoft, which no longer follows Bill Burr’s guidelines. Cormac Herley revealed that “Collectively, humans spend the equivalent of more than 1,300 years each day typing passwords.” It’s unclear if that includes the time invested in trying to remember a password. It does not appear to include the time invested in creating a password, particularly because the advice of not using the same password for multiple purposes makes very good sense for a variety of reasons.

The idea that significant time is invested – and arguably wasted – dealing with passwords caused me to think about complaints that time invested – and sometimes wasted – dealing with taxes is burdensome and detrimental to economic progress as well as individual well-being. So I decided to make a comparison.

According to the Taxpayer Advocate’s 2012 annual report, taxpayers invest roughly 6.1 billion hours each year handling their taxes, though it conceded that this number “is difficult to measure with precision.” So, too, I am confident, is the measurement of hours invested in typing passwords.

If people invest 1300 years each day typing passwords, that means they invest 474,500 years each year typing passwords (1300 x 365). There are 8,760 hours in a non-leap year, so those 474,500 years are the equivalent of 4,156,620,000 hours (474,500 x 8,760). That’s about two-thirds of the time invested in handling taxes. Yet I do not hear as many complaints about password typing as I hear about handling taxes, and perhaps that’s because people don’t have the same, usually negative, attitude about taxes as they have about passwords. As the old saying goes, time flies when you’re having fun, and though typing passwords might not qualify as “fun” – though they may be at the entrance to something that is fun – doing taxes is, for all but a few people, not fun.

I wonder how many of these hours are overlap? How many hours do people invest in typing passwords in order to access and file tax returns? I have no intention of trying to answer that question.

Friday, August 11, 2017

What Can I Buy At a Tax Sale? 

Most adults have probably seen or heard the phrase “tax sale,” and some probably have an idea of what that means. Others surely know what it means. Simply put, when a taxpayer has failed to pay real property taxes assessed on a parcel of real estate, the taxing jurisdiction puts either the property up for sale or sells a lien on the property. Under either approach, the purchaser ends up as owner of the property unless, in some instances, the delinquent taxpayer redeems the property by paying the taxes within a specified period of time.

When people who understand tax sales think about them, they contemplate the sale of residences, commercial buildings, parking lots, and similar parcels. But tax sales can reach another type of property. It happened recently in San Francisco, according to this report and others, as the story has gone viral.

In San Francisco, decades ago a developer built homes and a street for people living in those homes to access the nearest public road. Ownership of the street, along with other common areas, was placed in a homeowners’ association. At some point, the association retained a property management firm, which handled care of the street and common areas, providing services such as pothole repair and snow removal. One of the firm’s responsibilities is to pay the real estate taxes assessed on the street. For many years the tax bill, in the grand total of $14, was sent to an address at some other place in San Francisco. It is an address with no apparent connection to the property management firm, the homeowners’ association, or any of the home owners. Not surprisingly, the bill went unpaid. Finally, the city put the street up for sale in a tax sale. But the city did not post any notice on the street, nor did it deliver a notice to the property management firm, the homeowners’ association, or any of the home owners. In 2015, at an auction, the street was sold for $90,000. The accumulated unpaid tax bills had reached $944, which appears to have included interest and costs as well as the unpaid taxes. The purchasers admit that they “got lucky” and had purchased the street without seeing it. The property management firm, the homeowners’ association, and the home owners did not learn of the sale until very recently, roughly two years after the sale.

A lawyer for the homeowners’ association claims that the sale was illegal. The city disagrees, claiming that it followed all proper procedures. What happens next? Though litigation might be on the horizon, in the meantime, the owners of the street have the legal right to charge the home owners for driving or parking on the street and for using the common areas. There also is the possibility that the new owners of the street and common areas will try to sell the property back to the homeowners’ association for an amount that generates a profit. The purchasers suggested they might build themselves a home on the street if that can be done in compliance with land use regulations. Apparently, the new owners recently attempted to persuade the homeowners’ association to buy back the street and common areas.

The development is one of the city’s most expensive neighborhoods. Homes have been listed for amounts in the single and double-digit millions. The neighborhood has its own private security guard force. Apparently, no one thought of checking city records to make certain that the tax office had the correct address to which to send the bills.

I wonder if this story will encourage people to scan tax sale notices looking for private roads on which taxes have not been paid. Imagine being charged a fee by some stranger for driving and parking on the road in front of your house. Perhaps it is best to avoid purchasing property for which access is limited to private roads. Perhaps there are some lessons in this story for those who advocate privatization as the cure-all for the nation’s economic challenges. But perhaps the biggest lesson is this: if you own real property, and you or your representative or agent has not received a tax bill during the past year or more, check with the tax office lest the property be sold out from under you.

Wednesday, August 09, 2017

When Someone Else Claims You as a Dependent on Their Tax Return and You Disagree 

Tax is everywhere, so it ought to be no surprise that it pops up in television court shows more frequently than many people might guess. Thanks to a reader, another episode is added to the list of those on which I have commented. That list includes Judge Judy and Tax Law, Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, More Tax Fraud, This Time in Judge Judy’s Court, You Mean That Tax Refund Isn’t for Me? Really?, Law and Genealogy Meeting In An Interesting Way, How Is This Not Tax Fraud?, A Court Case in Which All of Them Miss The Tax Point, Judge Judy Almost Eliminates the National Debt, Judge Judy Tells Litigant to Contact the IRS, People’s Court: So Who Did the Tax Cheating?, “I’ll Pay You (Back) When I Get My Tax Refund”, Be Careful When Paying Another Person’s Tax Preparation Fee, Gross Income from Dating?, and Preparing Someone’s Tax Return Without Permission.

The latest addition to the list comes from a Judge Faith case involving two sisters. The plaintiff sued her sister for $600. Plaintiff stated that she lived with her mother until mid-November of 2013, and then moved in with her older sister, the defendant. The defendant asserted that the plaintiff was in her legal custody for the entire year, and stayed with her during the year. When the plaintiff denied living for the entire year with the defendant, the judge asked the plaintiff where she lived for the other ten and a half months of the year. The plaintiff replied, “With my boyfriend.” The plaintiff said that she worked throughout the year and supported herself during the year.

The plaintiff explained that the defendant had asked her if she, the defendant, could claim the plaintiff as a dependent on the defendant’s tax return and claim the plaintiff’s “school credit” in exchange for a $600 payment from the defendant to the plaintiff. The judge asked the defendant if the plaintiff had indeed approached the defendant to ask for $600 because the defendant had claimed the plaintiff as a dependent and ought not to have done so. The defendant answered that she asked the state official overseeing her legal custody of the plaintiff if she could claim the plaintiff as a dependent and that the official answered, “Yes.”

The judge explained that the alleged agreement may or may not have existed, but that she did not need to decide the question because it had no bearing on her conclusion. She explained that if the plaintiff thought that the defendant had wrongfully claimed the plaintiff on the defendant’s tax return, the plaintiff’s remedy was not to sue her sister, but to file her own tax return claiming a personal exemption for herself. The judge also explained that doing this would alert the IRS that two taxpayers were claiming the same person, and cause the IRS to investigate and resolve the matter.

Unfortunately, there is no way for one person to guarantee that another person will not claim that person on a tax return. If some other person does so, the way to preserve the exemption for one’s self is to file a return and claim it, triggering an IRS examination of both returns. Nor is it appropriate, under existing law, to enter into an agreement to let a person claim an exemption to which that person is not entitled, whether gratuitously or for any amount of money. Agreements with respect to multiple support arrangements or exemptions for children of divorced or separated (and certain other) parents are a different matter, because the law specifically provides for those sorts of agreements.

Monday, August 07, 2017

Claiming Depreciation and Expensing Deductions on Property Owned and Leased by Others 

It is a general principle of tax law that a taxpayer is not permitted to claim depreciation or expensing deductions on property owned and leased by someone else. Yet it required a Tax Court decision, Drah v. Comr., T.C. Memo 2017-149, to get this point across to a taxpayer.

The taxpayer was an independent contractor who provided services to FedEx. He also was the sole owner of a corporation that also provided services to FedEx, and that paid the taxpayer a salary. The corporation filed a tax return for 2011 on which it reported its income and expenses, including the wages it paid to the taxpayer. However, the taxpayer, although filing and receiving an extension of time in which to file his 2011 return, failed to do so. The IRS prepared a substitute return and issued a notice of deficiency to the taxpayer. The taxpayer conceded the income amounts on the substitute return, but argued that as an independent contractor he was entitled to various deductions, including depreciation and section 179 expensing deductions.

The depreciation and section 179 expensing deductions claimed by the taxpayer related to a 2009 Workhorse P42 truck. However, the truck was leased by the taxpayer’s wholly-owned C corporation. It was not owned by the taxpayer. It was not leased by the taxpayer. The lease agreement between the lessor and the corporation provided that the lessee corporation “will not be treated as the owner . . . for federal income tax purposes.” Thus, any deduction for depreciation or section 179 expensing would be claimed by the lessor.

The taxpayer argued in the alternative that he was entitled to deduct the lease expense. That argument was rejected because the taxpayer was not the lessee of the truck. The taxpayer did not introduce into evidence the corporation’s tax return, so it was not known if the corporation had claimed a deduction for the lease payments that it made. If it had not claimed those deductions, the only option would be the filing of an amended return if the statute of limitations had not expired.

It is not unlikely that the C corporation broke even or reported a loss, and that the lease deduction would be more valuable to the taxpayer. That is perhaps why the corporation ought to have made an S election. Without more facts, there is no way to move beyond the word “perhaps” in this instance.

Friday, August 04, 2017

Ignorance of Any Kind, Aside from Tax 

The other day, while reading the Philadelphia Inquirer, a headline, “One professor's general knowledge test: ‘They don’t know as much as they need to know,’” caught my attention. It wasn’t the word “professor’s” but the quote that triggered my interest. So, of course, I read the article, which has a different headline, “Mona Lisa was an artist, and other answers to a New Jersey professor's final test” on the paper’s web site.

Cheryl Copeland, an English professor at Camden County College who recently retired, created, administered, and analyzed a 100-question test because she “wanted to know what students know about the world.” The 120 students who took the test, as well as Kevin Riordan, the reporter who wrote the story, were not permitted to use research devices or to access the internet. There were no study guides or prep classes. It was a short-answer test. Copeland did not grade the test. She simply wanted to get an idea of how students were faring in their learning endeavors. Though she is an English professor, questions on the test also included questions about music, art, civics, math, geography, American and world history, current affairs, finance, and astronomy. The questions can be found embedded in the story at the link provided in the previous paragraph.

How did the students perform? Fewer than half the questions were answered correctly. Although 95 percent could identify the Titanic, only four percent could identify Toni Morrison. No one aced the test, though it’s not clear what percentage would have been required for an A, nor do I understand how that conclusion can be reached if the test was not graded. Perhaps for purposes of the story, Copeland went back and scored the answers.

Copeland explained that she did not intend to “dis the students,” but has “disdain for the school systems” they attended. She alleged that “Middle and high schools are denying students this core of knowledge.” To evaluate that claim, I would need to see the syllabi and lesson plans for middle and high schools. Yes, it’s possible that schools aren’t addressing these basic pieces of knowledge and analysis, but it’s also possible that students aren’t paying attention, are learning but quickly dumping information from their brains to make room for the flood of mostly useless information circulating on television and the internet, or have not developed the ability to answer short-answer questions. But as I’ve pointed out many times in my MauledAgain posts, something is wrong with American education. It could be teachers, students, parents, school boards, school administrators, or, as I suspect, some combination of those and other causes.

Copeland addressed the argument that it doesn’t matter whether someone can answer these questions because they can find them on the internet. She expressed the opinion that a person should be able to answer questions without looking up the answer. I agree and disagree. I agree for several reasons. First, there are instances when there isn’t enough time to look up an answer. For example, everyone should know the meaning of a red octagonal sign with the letters STOP printed on it. Second, too often when something is researched on the internet, what is discovered consists of nonsense, misrepresentations, misunderstood sarcasm, lies, half-truths, advertising claims, and propaganda. The process of learning, and retaining some knowledge, should, and if done properly does, include the acquiring the ability to sift through information to ascertain a solution. I disagree for several reasons. First, there is no way a human brain can retain all of the information that a person at some point needs to know or understand. In pre-digital days, people could turn to dictionaries, encyclopedias, and other resources to continue the learning process. Second, as years pass, the store of information increases and thus learning must continue other than through traditional classroom processes. Third, some of what is learned during formal education turns out to be wrong or disputed. For example, what is the answer to the question, “How many planets are there in the solar system?”

Students did very poorly when responding to the civics and current affairs questions. As Copland put it, “It was really stunning to me how little students know about our government— how many branches there are, how many senators there are, how Supreme Court justices are selected. Not knowing this material [affects] your awareness as a student, as an American citizen, and as a citizen of the world. The more you know about government, the more inclined you are to vote.” So true. She could have added, “The less you know about government, the more likely someone who is voting will make an uninformed or poorly informed choice.”

Though some might think the test was too difficult, it did not contain any questions dealing with tax, physics, calculus, microbiology, chemistry, engineering, or computer programming. That, of course, did not stop me from taking the test. How did I do? I could share the result, but I don’t want to be accused of bragging or told that I’m insufficiently acquainted with humility. But, seriously, my performance is attributable not solely to myself but also to excellent teachers, parental guidance, and an understanding and appreciation of education, knowledge, and analytical thinking.

Wednesday, August 02, 2017

Reaching New Lows With Tax Ignorance 

Ignorance has become an epidemic. Ignorance with respect to tax issues has not been spared. Sometimes I wonder if tax ignorance is in the forefront the nation’s descent into the New Stone Age. One particularly distressing bit of tax ignorance is the wildly outlandish, totally false, intentionally misleading, and warped claim that the Internal Revenue Code consists of 70,000 or 74,000 or seventy-thousand-whatever pages and four million words. My attempt to negate this nonsense and my criticism of those who enable its growth began with Bush Pages Through the Tax Code?, and continued with Anyone Want to Count the Words in the Internal Revenue Code?, Tax Commercial’s False Facts Perpetuates Falsehood, How Tax Falsehoods Get Fertilized, How Difficult Is It to Count Tax Words, A Slight Improvement in the Code Length Articulation Problem, and Tax Ignorance Gone Viral, Weighing the Size of the Internal Revenue Code, Reader Weighs In on Weighing the Code, Code-Size Ignorance Knows No Boundaries, Tax Myths: Part XII: The Internal Revenue Code Fills 70,000 Pages, Not a Surprise: Tax Ignorance Afflicts Presidential Candidates and CNN, The Infection of Ignorance Becomes a Pandemic, and Getting Tax Facts Correct: Is It Really That Difficult?.

Until now, the ignorance has been going viral among those who know little or nothing about tax law, including those who ought to have done some genuine research before repeating something whose major claim to fame is its quality as a startling headline or terrible tweet. A few days ago, a reader directed my attention to how deeply this ignorance has infected the nation. I made my way to the link that the reader shared. I found myself on a web page inviting people to enroll in the Northeastern University D’Amore-McKim School of Business Online Master of Science in Taxation program. The headline, “Prepare for Tomorrow’s Tax Challenges Today,” was followed by this gem: “When it comes to the tax industry, the only constant is change. In fact, the U.S. tax code—which now totals nearly 4 million words—changed approximately 4,680 times between 2001 and 2012, according to the Taxpayer Advocate Service’s 2012 Annual Report to Congress.” I then turned to the National Taxpayer Advocate 2012 Annual Report to Congress and discovered that even the IRS claims there are 4,000,000 words in the Internal Revenue Code. But at least the National Tax Advocate explained how this totally incorrect number was generated:
To determine the number of words in the Internal Revenue Code, TAS downloaded a zipped file of Title 26 of the U.S. Code (i.e., the Internal Revenue Code) from the website of the U.S. House of Representatives at http://uscode.house.gov/download/title_26.shtml. We unzipped the file, copied it into Microsoft Word, and used the “word count” feature to compute the number of words. The version of Title 26 we used was dated Jan. 3, 2012, so the count does not reflect legislation enacted during the second session of the 112th Congress. In Word, the document ran 9,191 single-spaced pages. The printed code contains certain information that does not have the effect of law, such as a description of amendments that have been adopted, effective dates, cross references, and captions. The word count feature also counts page numbers, the table of contents, and the like. Therefore, our count somewhat overstates the number of words that are officially considered a part of the tax code, although as a practical matter, a person seeking to determine the law will likely have to read and consider many of these additional words, including effective dates, cross references, and captions. Other attempts to determine the length of the Code may have excluded some or all of these components, but there is no clearly correct methodology to use, and we found no easy way to selectively delete information from a document of this length.
So ignorant claims are reinforced by sloppiness and inattention to detail. Here are the problems with how the National Taxpayer Advocated counted words.

1. The National Taxpayer Advocate used an annotated version of the Internal Revenue Code rather than the official version of the Code. The National Taxpayer Advocate admitted as much by confessing that what was used “contains certain information that does not have the effect of law, such as a description of amendments that have been adopted, effective dates, cross references, and captions,” that “The word count feature also counts page numbers, the table of contents, and the like,” and that “our count somewhat overstates the number of words that are officially considered a part of the tax code.” Every commercial publisher has a digital version of the Internal Revenue Code to which editors add their own notes and commentaries. It would not have been difficult to ask one or two publishers to run a word count. It also is possible to find the Internal Revenue Code online without annotations, though in most instances it does require counting the words for each section.

2. The National Taxpayer Advocate claimed that “there is no clearly correct methodology to use” to count the words in the Code. Seriously? If it’s an official word in the Code, count it. That’s not rocket science. Yes, it would be “tedious,” as I noted in Anyone Want to Count the Words in the Internal Revenue Code?, to do this, but it’s not impossible, especially when precision matters.

3. The National Taxpayer Advocate explained that “we found no easy way to selectively delete information for a document of this length.” There are a variety of ways of doing so, ranging from starting with something less than a fully annotated version of the Code to designing macros that remove portions that are not part of the Code. It might not be easy, but usually the correct result requires a course of action that is far from easy.

4. The National Taxpayer Advocate tried to excuse its approach by claiming that “as a practical matter, a person seeking to determine the law will likely have to read and consider may of these additional words.” Translated, this means that someone who wants to understand tax law usually needs to examine more than the words of the Code. But that doesn’t justify including words that are not part of the Code in a count of words in the Code.

An easy way to remove the extraneous material from the word count is to select, at random, ten or twenty Code sections, copy and paste them into another Word document, count the words, remove the extraneous material, and again count the words. This process generates a rough estimate of the percentage of words that are extraneous. It is a very high percentage, in some instances reaching into the high 90 percent range, and rarely falling below 75 percent.

Yet another easy way to estimate the number of words in the Code is to do some research. By research, I don’t mean using a search engine to find online commentary that simply states a conclusion, but looking for analyses that explain how conclusions were reached. For example, as I explained twelve years ago in Anyone Want to Count the Words in the Internal Revenue Code?, there were at that time roughly 400,000 words in the Code, based on the Code itself consisting of 2,000 pages. Though the Code has grown during the past twelve years, it has not come close to expanding ten-fold. Use of the percentage-of-extraneous-material method described in the preceding paragraph generates a percentage consistent with treating 7,000 pages of the 9,000-page document used by the National Taxpayer Advocate as extraneous.

Other ways of estimating the words in the Code involve weighing and measuring a paper copy of the actual Code, or something close to it. They exist. I own a copy. I described this method in Weighing the Size of the Internal Revenue Code and Reader Weighs In on Weighing the Code, and reached results consistent with the other measurement approaches. Again, a bit of research on the part of the National Taxpayer Advocate would have provided this information.

So is it sufficient that because the National Taxpayer Advocate proclaims a supposed fact that it should be repeated without being verified? No. An institution that holds itself out as offering a tax degree ought not make unverified claims. Again, some research would have turned up this analysis in Code-Size Ignorance Knows No Boundaries. In that commentary, I explained that a tax law professor fell victim to the same misinformation from the National Taxpayer Advocate, taking it further to conclude that it would take 212 hours of reading, at 300 words per minute, to get through the Code. I pointed out that, “anyone who has read the Code cover to cover, as I have on several occasions, knows that it takes far fewer than 212 hours, . . . a huge clue that something is wrong with the 3.8 million [word] claim.” I suggested that, “Every tax professional needs to read the entire Internal Revenue Code, at least once in his or her professional career.” I also speculated that the absurd claim in the National Taxpayer Advocate’s 2012 report “most likely was generated not by {Taxpayer Advocate Nina] Olson but [by] an underling to whom she assigned the task.”

In Code-Size Ignorance Knows No Boundaries, I wrote:
There are those who wonder why I persist in criticizing ignorance, especially on the part of tax professionals. Three things come to mind. First, if we tolerate, and thus enable, ignorance on something this simple, we will end up tolerating ignorance on more serious issues. Wait, we already are. Ignorance is an infection, and if it is not confined and eliminated, it spoils entire systems. Second, many of the people making these outlandish claims are doing so to emphasize the fact that the Code is a mess and the tax law needs to be fixed. I agree that the Code is a mess and needs to be repaired, but making ignorant claims in support of the position weakens the credibility of those advocating tax reform. The outlandish claim suggests that there is little confidence on their part that they can succeed if they stick to the facts. One can show the mess that the tax law has become without dishing out ignorant statements. Third, if we fail to stand up to ignorance, we let despair triumph over hope. Once upon a time, almost everyone in Europe was convinced that the world was flat, and that someone sailing west would fall off the edge. Once that foolishness was disproven, somehow we arrived at the point where almost everyone knows that the world is a globe. If we can remove flat-earth ignorance from 99.999% of the world, we surely can remove the 70,000-page Internal Revenue Code ignorance. And we ought to do so, before ignorance becomes the defining characteristic of the species.
Four years later, reading that paragraph, I am even more convinced that professionals in every field, experts in every field, and folks whose educated brains are functioning properly need to squash ignorance by enabling education. Though the problem of ignorance might be rooted in the activities of the liars, scam artists, and ministers of propaganda, its viral spread is attributable in part to the inadequacy of efforts undertaken to overcome the proclivity of many humans to seek the easy path even when the easy path is a dangerous, and often fatal, one. It is ignorance and laziness combined that permit liars, scam artists, and ministers of propaganda to thrive.

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