MauledAgain

Stuart Levine has posted a response to my summary of our on-going discussion concerning estate tax repeal/modification. It's not a disagreement with the summary, but a sharing of additional concerns about my proposal to impose income taxes on gains at death (which he calls the CGUD tax).

Because I'm paying attention to other, more immediate tax issues, such as gasoline tax suspension/reduction, I will be brief in my response even though I had contemplated letting the discussion sit until the issue resurfaces in the Congress.

Stuart's first point is that "it is truly revolutionary to throw out a tax regime with a system of rules and decisional interpretations that has been built up over many years in favor of a wholly new design." Indeed, it is. And though Stuart is correct that this ought not to be done blithely, there are times when wholesale revision is necessary. Just because something exists or has existed for a long time is not enough, in and of itself, to perpetuate its existence. Akin to zero-based budgeting, a tax system ought to prove its worth year after year, rather than rest on past glories. The estate tax has created far more problems than it is worth.

Stuart notes that "One aspect of the current tax regime that contributed to the force of the political drive to abolish the estate tax in its entirety was the failure to automatically adjust the unified credit to take account of inflation." He is correct. The same can be said of the income tax personal and dependency exemption, which went from the $600 on which a person could live 60 years ago to a minuscule $3,100 on which no one can live today. As Stuart notes, this problem energized the "force of the political drive" but isn't the only flaw. Fixing it before the political storm erupted might have kept the issue off the radar of the folks who want estate tax repeal without any substitution, but now that the cat is out of the bag, I'm not certain that the die-hard repeal advocates would relent if the unified credit were adjusted as Stuart proposes.

Stuart suggests that "many of the abuses in the present system can be easily abolished" and gives insurance trusts and family limited partnerships as examples. He also notes, realistically, the political pressure that insurance companies would bring to bear against abuse correction with respect to insurance trusts. It's not as though I'm against fixing abuses. What concerns me is that after Stuart fixes these, those folks with nothing better to do in their lives than to dream up ways to reduce their clients' share of tax revenue payments will conjure up some other crafty device that won't hit the IRS radar for a while and then will require several years of legislative activity. What do we get? A parade of increasingly complicated and voluminous estate tax provisions. For an example of how that can happen, see the income tax. Look, for example, at the mess subchapter K has become as the battle for abuse prevention has been fought at the fringe of almost every Code subsection.

Stuart then points out that "the manner in which qualified plans are taxed has to be changed, since they are frequently subject to both income tax and estate tax at roughly the same time." I agree. Here's an area of tax law that affects a huge portion of taxpayers, and it has to be one of the most complicated areas of taxation. When people tell me Partnership Taxation is the toughest area of the Graduate Tax Program, I tell them that I think the deferred compensation/employee benefit area takes first prize. Maybe I'm wrong. No matter. Stuart is right. Whether it's the worst, or second to worst, messy part of the tax law, it needs to be fixed.

Stuart then turns to "what [he] perceive[s] to be some negative aspects of the CGUD Tax."

He doesn't think that the CGUD tax could be sufficiently progressive. That is true, as the report he quotes points out, if we use the same tax rates in place today. However, as a staunch advocate of taxing capital gains at the same rates as other income, the income tax revenue of the CGUD tax would be far more than what was computed for purposes of the comparison made in the study. And I would not be adverse to higher income tax rates on incomes (including CGUD) above, say, $10 million, with perhaps progressive rates within that "above $10 million" range.

How do I square that with my overall tax philosophy? I see those high rates (or perhaps a substitute) as a "user fee." Most people who are wallowing in tens of millions, hundreds of millions, and billions of wealth, are in that position because the market for their products has doubled, tripled, etc., on account of population increase. The user fee is a way of getting these folks to repay society for society having bred a large consumer base. It's also a user fee for society having globalized into a wider market that contributed to this wealth. After all, could a professional athlete make $20 million a year to play ball if the population of the U.S. was still 40 million and the population of the world, say, 800 million? Could the maker of the consumer products whose sales enriched the families Stuart mentions have been sufficiently voluminous to generate that wealth had there not been a world population explosion? I know these thoughts will cause some to brand me a "socialist" (as already has happened) even though Stuart thinks I'm "somewhat conservative" in my outlook. That's why I introduce the user fee concept, which is what someone with my outlook uses as the core revenue generating justification.

Stuart thinks that the CGUD Tax "would be both extraordinarily complex and subject to a whole new set of rules." I think not, though I can contemplate the lobbyists having a field day turning a simple concept into a special interest morass. My proposal, rather than setting up a separate and new user fee (or excise tax), rides on the income tax system which already is in place. A final income tax return already is filed for almost all decedents. My proposal eliminates the filing of transfer tax (estate, gift, GST) returns without creating new returns to be filed. If the rules are drafted properly, there ought not be the "years of controversy and litigation" that Stuart thinks "would likely result." After all, the principal reasons for controversy and litigation in the tax world are (1) bad drafting that is incomplete, ambiguous, inconsistent, and not thought through, and (2) taxpayers who use the complexities and bad drafting of tax law to find an unjustified personal tax benefit. Stuart's concern about complexity justifies my demand that anything that is enacted be drafted properly and free of special interest interference.

Stuart notes that "the current estate tax carries with it a strong incentive to make charitable contributions." The existing income tax charitable contribution deduction (which does need a LOT of fixing) would be available to offset the gains taxed at death. Perhaps the limitations based on AGI should be made inapplicable to "at death" charitable contributions. Stuart raised a good point, and though it take us deeper into the drafting of my proposal, it illustrates the benefit of discussion. Time, perhaps, to let our readers chime in.

All around the country, in reaction to the gasoline price increases triggered by the adverse impact of Hurricane Katrina on domestic refinery capacity, taxpayers and politicians are clamoring for a reduction or suspension of gasoline taxes. As described in this report, legislators in Maine, Tennessee, Wisconsin, and Michigan have called for such action. In Pennsylvania, the governor is considering a suspension. In Michigan, legislation to this effect has made it through the state House. Although surely legislators and governors in other states not highlighted in the report have joined in this tax-cutting chorus, a complete list is not critical to the analysis.

Now there is pressure growing for the Congress to suspend the federal excise tax on gasoline. According to the L.A. Times, at least one bill has been introduced in the Congress to this end.

It will not surprise anyone that I am opposed to cutting gasoline taxes. Doing so would be adding fuel to the fire, pun intended. Why?

1. Higher prices cut demand, and anything that lowers price, including proposed freezes as well as the suggested tax reductions, will hold demand steady rather than cutting it. Considering that the world's oil supply is being consumed faster than it can be replaced, consumers should not be enabled in the gasoline and oil-consumption frenzy. Yes, I know how dependent we and our economy are on oil, but the one of the blessings from an otherwise horrific disaster is that people may be compelled to think rather than emote about gasoline prices, supply and demand, exploration, environment, alternatives, and the need to think about something more than the next day or the next election. Those who want to dig into the issue with perspectives not found in the mainstream media may find the news and commentary at The Oil Drum to be informative, alarming, and even frightening.

2. Cutting or suspending taxes generates a revenue loss. Almost every gasoline tax, state and federal, is "dedicated" to specific expenditures. If the revenue is cut, the expenditures cannot be made. "So what?" may ask the opponents of "big" government. The "so what" is answered by a list of the things funded by gasoline taxes. In most states, the tax generates funding for road and bridge repair. Imagine what happens if the tax is suspended, bridges are not repaired, and there is a catastrophic bridge collapse. Who will be the first in line crying about "the failure of government to plan for and fund disaster prevention"? To their credit, Massachusetts legislative leaders rejected the gasoline tax reduction proposal for this very reason. There is hope. One person commented that the reduced revenues ought to be made up by freezing work on repairs and projects in the home districts or states of the members of Congress who vote for a gasoline tax reduction or suspension. I'd like to hear them explain how the resulting loss of jobs was so good for the citizens who they are supposedly trying to help.

3. Even in states where monies can be moved from other funds to make up for the lost gasoline tax revenue, there are problems. In Wisconsin, the proposal is to make up the gasoline tax revenue loss by cutting money that would have been used in the public school system. If that isn't unwise, it's simply stupid. Cutting education funding at a time when education isn't doing exactly a top-notch job getting people ready to live in the modern world (do they teach survival techniques, rescue skills, and CPR in our high schools?) is pretty much close to eating the seed corn. Fortunately, the governor and some legislators in Wisconsin have raised their eyebrows at the proposal.

4. Cutting gasoline taxes has so little impact on an individual that it can be seen as nothing more than window dressing, soundbite generation, and posturing for votes. In Pennsylvania, a suspension of the state's 30-cent-per-gallon gasoline tax would save the average driver $66 over four months, but it would cost the state $660 million in highway maintenance money.

5. There is no guarantee that the reduction in the gasoline tax would cause a concomitant reduction in the price at the pump. The bureaucracy required to make pump price reductions occur would be enormous and expensive. And there's no guarantee it would be effective. Surely we would hear claims that a further increase "wasn't as high as it otherwise would be" as though something like that could be proven. The governor of Pennsylvania, acknowledging this problem, noted that the state is investigating the use of paying rebates to motorists when they renew vehicle registrations. Yep, more bureaucracy.

Yes, there is a problem. Gasoline prices have increased, dramatically, as a result of a catastrophe. This is not a surprise. Experts have predicted that any sort of natural disaster, accident, terrorist or criminal act, or other cause of a disruption would cause price spikes. Was anyone listening? Perhaps they listened as closely as they listened to the weather forecasts. Prices still are not at an inflation-adjusted equivalent to gasoline prices in the late 1970s, when a supply disruption caused by OPEC's political decision spiked the prices. People adjusted.

Once again, as they did 26 years ago, people will adjust and reset priorities. The argument that it is a "food or gasoline" choice is true for the very poor, who also face "food or medicine" choices. For most other families, the answer may be in cutting gasoline use, consolidating car trips, postponing the unnecessary frill purchase. The solution is to assist the poor rather than cut gasoline prices for everyone, including those who are wealthy enough to use gasoline unwisely. For example, do driveways really need to be cleared with gasoline-powered leaf blowers rather than brooms? Youngsters, rather than complaining about their parents' decision to forego purchase of a new video game cartridge so that gasoline can be purchased, can earn some money and get in shape by hiring themselves out to sweep driveways and shovel snow by hand. It's good exercise, too. How necessary is the consumption of gasoline for recreational use of all-terrain vehicles? What I'm saying, without digressing into another topic, is that the gasoline price spiking may end up as a catalyst (another pun intended) for a change in the overly materialistic, luxuriated culture that has overtaken almost all of America save the very poor.

After all, the nation has itself to blame for this problem. Prices have increased because there is a lack of excess refinery capacity. No one wants a refinery built in or near their town. Yet almost everyone wants what refineries produce. This sort of "have it all" scenario, symbolic of the platforms on which most politicians run for office and on which many people look at life, simply doesn't work. And now, thanks to nature, we are finding out what some have known for decades. It's also a nation which, by not doing good planning and giving developers free reign, has ended up with most people living so far from their places of employment and shopping that gasoline consumption has had to increase. I'm not advocating additional government regulation of what is an almost-too-late-to-fix-it problem. I'm simply asking where was the common sense when decisions were being made? The current crisis certainly provides an excellent reason and a fine opportunity for some deep, long-term, well-pondered consideration of where this nation is, how it got to be where it is, and, most importantly, where it is going. Yes, and how it is going to get there, literally and figuratively.

Yes, to the extent higher prices reflect price gouging, and a small portion of the increase does, then what politicians can do is to support those officials who have the responsibility to enforce existing laws against price gouging. A few highly publicized arrests and prosecutions should get the message across to most of the opportunists who use national crises to line their own pockets. Suspension of gasoline excise taxes does absolutely nothing to end price gouging. It might even encourage it by making people less concerned about it and thus less likely to file complaints.

If anything, gasoline prices should be increased. After all, their inflation-adjusted equivalent has been dropping for years. As a practical matter, it would be politically impossible to increase gasoline prices (at least until the next hurricane or other natural disaster takes out half of the remaining refinery capacity). But surely it makes no sense to cut taxes that are too low as it is. After all, a gasoline tax is a user fee imposed for the maintenance of the highways and bridges used by the consumers of gasoline. And user fees ought to reflect the true cost of what is being used.

I can't imagine what we will hear from the politicians when home heating bills start arriving in late November and early December. More of the same, I'm afraid.

Last week, in a post that examined my initial reaction to the impact of Hurricane Katrina on the tax system and my suggestion that the decision on making estate tax repeal permanent be delayed, which then happened, I commented:

I'm more than willing to make estate tax repeal permanent, in exchange for taxing capital gains at death subject to a sensible exemption.

In his generally favorable reaction to my post, which he kindly labelled as a "must read regardless of one's location on the political spectrum," Stuart noted:

(However, he is willing to consider a full estate tax repeal in exchange for taxing capital gains at death subject to what he terms a "sensible" exemption. Here, we part company.)

Our subsequent email correspondence has helped us identify the issues raised by the trade-off I suggest that go beyond the basic arguments for and against estate tax repeal. Though the postponement of the decision may be, as Stuart points out in another post, a death warrant (I know, I know, ...) for the estate tax repeal plan, it is helpful, while the matter is still fresh in our minds, to outline the parameters of the trade-off issues so that when/if the estate tax issue returns to the spotlight there will be a foundation on which to build further, more extensive discussion. Of course, it would not surprise me to see the advocates of estate tax repeal push their proposals back on to center stage a few months from now. All of us know how it works in horror movies, as we think or yell, "He's not dead yet, don't celebrate too soon."

The suggestion that the estate tax be replaced with an income tax on net gain inherent in the decedent's assets at death reflects a wish to correct a fundamental flaw in the income tax system. Permitting these gains to escape income tax forever gives an advantage to those who can afford to hold on to their assets until death, specifically, those who are relatively more wealthy. Factored into a computation of effective income tax rates, this tax escape pretty much contributes to a regressivity in the tax system. Considering that one of the "defenses" for the failure to tax built-in net gain at death is the estate tax that is imposed on the value of the assets holding the gain, any repeal, or even significant minimization of the estate tax, removes that "defense" and requires re-examination of the question.

Taxation of net built-in gain at death is simple. Determining the values of the assets is fairly easy, because it is done not only for federal estate tax purposes, but for state inheritance and estate tax purposes and for state probate purposes. Those estates that as a practical matter don't value assets are almost surely to be within the scope of an exemption structured to let the net built-in gains of poor decedents and those with modest amounts of gains to escape taxation. The adjusted basis of the assets in question can be determined. After all, if the decedent in fact sold such an asset before dying, the need to determine the basis would exist and would be satisfied using the various rules in place to determine adjusted basis. I always scoffed at the argument, raised decades ago as one justification for repealing the short-lived and effectively eliminated taxation of built-in gains at death, that such a provision was "unadministrable" because "no one knew how to figure out, factually, the decedent's adjusted basis in the assets." Hogwash. If the decedent sold the assets, there is no way the courts, the IRS, or even the advocates of letting built-in gains at death go untaxed would accept an argument from the decedent, "Hey, I can't report gain because there's no way of figuring out the adjusted basis because, after all, if I died moments before the sale, there would be no way of figuring out the adjusted basis according to the advocates of not taxing built-in gains at death."

The amount of the exemption needs to be determined after doing some revenue estimation computations that I cannot do because I don't have the information available to the revenue estimators. That is, we need to know how much of an exemption would cause taxation of non-exempt gains to generate revenue equivalent to what the estate tax generates. To do that, we need an income tax rate. The amount of the exemption also needs to be set sufficiently high so that poor and low-income taxpayers do not get taxed. Whether the exemption should be $300,000 or $1,000,000 can be debated, but it ought not be $10,000,000.

There are several approaches to determining the income tax rate. One is to use the rates applicable to taxable income generally. But because this might put a decedent's gains into a higher bracket than would apply if the decedent sold the property uniformly over lifetime, there is a case to be made for using a lower, flat rate. However, because the highest income tax rate is less than the highest estate tax rate, the potential application of higher rates doesn't necessarily require that it be avoided.

The problem of liquidity, that is, finding cash with which to pay what would be the decedent's final income tax liability, can be solved by using the same sort of payment deferral arrangement that exists in the present estate tax for postponement of estate tax payment with respect to certain types of assets. There would be no need to reinvent the wheel.

In our email correspondence, Stuart raised some good questions about the impact of the proposed trade-off of estate tax repeal for taxation of built-in gains at death. I've merged our emails into a dialogue of sorts.

Stuart: I believe that such a tax would, unless modified by some degree of progressivity, shift the tax burden represented by the current estate tax downward, from the more wealthy to the less wealthy and even the middle class. (By way of example, the wealthy have a greater ability to do tax planning that would allow matching of recognized losses and gains, etc.

Jim: If the exemption is set at the appropriate level, and existing income tax rates are used, the burden would be progressive and would not shift the revenue sourcing downward. In fact, properly designed, it would shift it upward, because there would be far less opportunity to escape taxation. The current estate tax is riddled with loopholes that let enormous amounts of wealth go untaxed. The income tax that applies to gains provides far fewer opportunities. Providing the current income tax system is repaired to prevent the use of artificial losses that some taxpayers seem to "discover" in time to offset gains, the income tax is less fragile than the estate tax. There are far more estate tax planning games than gain avoidance games, and with some cleaning up of the grantor trust provisions, the concept of "actual or deemed" ownership can be retained.

Stuart: Perhaps more significantly, intuitively, I suspect that a tax on untaxed capital gains would more than likely burden "new" wealth. That is, a family that has built a significant business with a fairly low basis would be taxed more than, say, a Bush in (at least) the fourth generation of wealth accretion.

Jim: To the contrary, I think taxing capital gains at death favors the new wealth. A taxpayer who starts a business and dies within a short period of time has a high basis to value ratio (unless the thing took off, in which case taxation would not be as burdensome). If the taxpayer started the business 40 years before death, there would be more tax, but the business formed by the taxpayer's grandfather and passed down through gifts, where the basis would be much lower relative to value, would bear a higher burden. So it's "old" wealth that would be carrying the higher burden. That's all transitional, for once in place, basis would step up at death, and thus the business
held for the longer period of time (say, 40 years) would be taxed more than the one held for, say, 10 years. Which may not be that bad of an idea.

Stuart: Finally, how would the system work if, say, Dad gave stock to Sonny. Would the tax be deferred upon Dad's death? In that case, there would be significant gifting and property would likely never get taxed.

Jim: The gift question is interesting. After all, the gift tax "backs up" the estate tax. Because there's no chance, really, of section 102 being repealed, one approach is to tax the donees on the built-in gain when the donor dies (when there would be a higher likelihood of liquidity because the donee is likely to be an heir of the donor). Another possibility is to require donors to include in gross income the net gain built into gifted property. Alternatively, gifted property could be added back and treated as belonging to the donor, with something equivalent to an unlimited section 2035 mechanism. Or, as an alternative to that, gifted property gifted (rather than consumed) by the donee could be added to the capital gains tax applicable when the donee dies.

I expect Stuart will reply on his blog. When he does I'll post a link. Then, because the issue has retreated to the back burner, he and I will wait until it resurfaces before continuing with an extensive continuation of our dialogue.

In yesterday's post I predicted that tax incentives for the rebuilding of New Orleans and the rest of the devastated Gulf Coast would come in the form of empowerment or other zones similar to those already in existence, such as the New York Liberty Zone:

I think a large area will be declared an empowerment zone, or perhaps be given a special category not unlike the New York Liberty Zone, generating special tax treatment for wages paid to individuals working in it, amounts paid to rebuild facilities located in it, money invested in enterprises formed to operate in it during or after reconstruction.

This evening an (look at 4:14 P.M.) AP report picked up by New Orleans' WWL-TV (operating out of Baton Rouge) explained that Representatives Peter King and Charles Rangel are working on legislation that does exactly that, create empowerment zones for the damaged areas. Considering that King is a Republican and Rangel a Democrat, it is safe to predict a high likelihood that this legislation will be enacted in some form. King and Rangel expect the tax relief to exceed the $8 billion enacted after September 11, 2001, for the New York Liberty Zone.

An aside: The same AP report asserts that not all $8 billion of the New York Liberty Zone tax incentives were claimed.

Yesterday, I commented in a post about the impact of Katrina on taxation:

I really do hope the members don't waste time on things that can be postponed, such as permanent estate tax repeal or additional lowering of rates on capital gains.

In Friday's post, Taxes and Sustaining a Civilized Society, I argued:

And it surely is not time to make estate tax repeal permanent. Yes, I know that certainty is good for planning, but there are a lot of things that are and must remain uncertain when it comes to planning. I'm more than willing to make estate tax repeal permanent, in exchange for taxing capital gains at death subject to a sensible exemption. But the nation needs time to contemplate such a plan, and September 2005 is too soon.

Some, it appears, are listening. And agreeing.

One of those someones is Senate Finance Committee ranking minority member Max Baucus, who declared, "I am supportive of working on repealing the estate tax, but now is not the appropriate time…" At the moment, his position on the estate tax permanent repeal proposal isn't the focus. It's the willingness to postpone that debate so that other, far more urgent matters can be given attention. According to this report, the scheduled vote on the estate tax debate has been postponed indefinitely.

So perhaps my pessimism, which surely oozed through those two posts from which I quote myself, will turn out to have been a bit too intense. Is it any wonder? It's becoming easier and easier to be pessimistic about too many things.

What a way to celebrate Labor Day. A day set aside for Americans to think about and express appreciation for the contribution made to the nation, its people, and its economy by those who labor at their chosen or assigned tasks has not only evolved into a "last gasp of summer" vacation jaunt for many, it has also, this year, become a day of sobering estimation of what Hurricane Katrina has done to the livelihoods of many Americans. Estimates vary. According to this site, referencing this article, as many as 750,000 people have been left jobless by the storm and its aftermath. A higher estimate of one million jobs is offered by an economic forecasting expert in this report.

Whether 750,000, a million, or some other number of jobs have been lost, there are a lot of people who are going to face tough times in the near future. Some may have easily relocated skills. Others, though, are totally dependent on the devastated area for their livelihood. Shrimpers can't pick up and do their job in central Kentucky. River boat pilots can't parlay their skills into navigating the plains of Kansas. Oil field workers and refinery technicians won't find work in the farmlands of Missouri.

It matters very much to American that some way be found to help these displaced workers get back to doing what they do best. Those shrimpers, and the other fisherfolk, bring in one-third of America's seafood harvest. The river boat pilots help bring America's grain to market. By now, anyone who can read or understand cable news talk knows why those oil field workers and refinery technicians need to get put back to work expeditiously. These are but a few examples, because surely there are all sorts of other jobs that suddenly disappeared but that are needed by Americans.

How will that happen?

More than a few commentators have tossed around a variety of ideas for rebuilding the facilities, the buildings, the institutions, the towns, yes, the life, damaged or destroyed by the hurricane and the subsequent flood wall breaches. Many of those ideas involve taxes. That is not a surprise.

The connection between jobs and taxes is close, intricate, and ancient. It's not just the inclusion of wages in gross income. That part is straight-forward. It's the use of the tax law to encourage the creation of jobs that is complicated, frequently changed, and surely ready for another entrance onto the tax stage.

There is an income tax credit for a portion of first-year wages paid to individuals in targeted groups. Targeted groups are, for the most part, those who traditionally have difficulty finding jobs, such as members of family receiving certain public assistance, certain veterans, individuals between age 18 and 25 who reside in an economically distressed area, and another half dozen specific and carefully defined groups. The credit was temporarily expanded, until the end of this year, to include second-year wages in the case of individuals who are long-term family assistance recipients. There is a separate credit for a portion of wages paid to certain members of Indian tribes.

There are deductions for compensation, subject to certain limitations. There are deductions for contributions made to retirement plans, also subject to certain limitations. The cost of many fringe benefits, even those not subject to taxation when received by the employee, are deductible by the employer.

There are indirect incentives. To the extent the tax law encourages investment in certain activities, or purchase of particular types of items, the industries making those items and the entrepreneurs operating those activities will face increased demand and hire more workers to meet that demand. So the theory goes, and sometimes it works that way in practical application. After all, every once in a while a bad-armed pitcher can hit the side of a barn.

Will the tax law be used to encourage, fund, and motivate the recovery? I would be shocked if it weren't. That's not to say there won't be non-tax laws enacted or amended, for surely a long list of things need attention, and some aren't even financial in nature. But the tax law is going to be the beneficiary of many changes, enacted as early as this fall.

What do I predict? I think the existing credits will be expanded. The temporary expansion for second-year wages will be extended beyond this year. I think a large area will be declared an empowerment zone, or perhaps be given a special category not unlike the New York Liberty Zone, generating special tax treatment for wages paid to individuals working in it, amounts paid to rebuild facilities located in it, money invested in enterprises formed to operate in it during or after reconstruction. I've read suggestions that the low-income housing credit be adjusted so that it attracts investment into rebuilding the some of the hundreds of thousands of destroyed or damaged homes. It would not surprise me to see hundreds of activities, investments, purchases, and other enterprises nominated for special tax treatment.

Should the tax law be used in this manner? It depends, in part, on one's outlook and in part on one's conclusions on the effectiveness of using the tax law to encourage economic behavior. Is there not sufficient incentive in the private sector, absent tax provisions, to undertake what needs to be done? Yes, there is, but there are insufficient resources. How does an uninsured homeowner rebuild? Part of the problem, of course, is that the existing tax law has flaws that put many taxpayers in a worse financial position than they would be if the tax law were more equitable, sensible, and efficient. But even a zero tax rate on a displaced homeowner won't pay for rehabilitation of a home. But would it not make sense to distribute grants rather than fooling with the tax law? Yes, and I think that we will see a variety of new and expanded grant programs. In fact, most of the tax incentives that I think will be enacted do not reach directly to the worker, the homeowner, or the individual. They reach businesses, trying to encourage them to hire and invest in ways that ameliorate distressed economic conditions in a specific area. Why not direct grants to businesses instead of indirect payouts through the tax code? Yes, why not? Would that not be easier to administer?

One of the causes of tax law complexity is the relocation of social welfare and similar programs from other laws and federal agencies into the Internal Revenue Code and the IRS. Many of the newest credits and other incentives, such as those applicable to empowerment zones, renewal communities, and the like, require the IRS to issue regulations that are reminiscent of regulations issued by those other agencies. Some go so far as to incorporate regulations issued by other agencies. Why can't those other agencies do this work and administer these sorts of programs? Could it be that the IRS, despite being perpetually maligned in the press, holds a secret place of respect in the heart of Congress? That speaks volumes about the federal bureaucracy, but I doubt much needs to be said after the past 9 days to make this point. It's been made. Unfortunately, at huge cost.

There are serious questions that need analysis and that will be the subject of intense debate before the specifics of these anticipated tax law incentive enactments are worked out. Some reach far beyond the details of the upcoming reconstruction. Some will be framed as a referendum on whether tax dollars should be used to rebuild New Orleans. Others will focus on whether tax dollars, through direct grants or tax incentives, should be used to encourage rebuilding of homes on barrier islands and other at risk areas. There will be a parade of soundbites advocating the construction of affordable housing for the poor and lower middle class, and how the tax law should be fine-tuned to accomplish such a result. That's assuming the tax law can produce the desired consequences.

It's unclear whether the various tax law provisions that now substitute for other agency programs are effective. Despite a credit for hiring native Americans, the economic conditions on Indian reservations, aside from casino enterprises, remain difficult. Poverty among tribal members remains high, and an embarrassment for the nation. Many of the enterprise zones and renewal communities continue to stagnate economically. Even an alleged success story such as the New York Liberty Zone is difficult to assess because New York probably would have recovered without such incentives.

These sorts of provisions are complicated. And I'm no fan of complex tax law. In all fairness, if the alternative is a complex law for some agency other than the IRS, is that any real improvement? But there is some good news on the complication front. If Congress piggybacks the Hurricane Katrina tax incentives onto existing provisions, and can manage to avoid fiddling with the definitions, the increase in complexity can be minimized. However, if Congress chooses to enact totally new incentives rather than working with existing credits and empowerment and similar zone definitions, it will make the complexity problem much worse.

Congress needs to move quickly. Yes, time is needed to debate the serious questions I mentioned, along with the others that did not get articulated. But taking time to craft new provisions rather than using existing ones would extend the suffering of those displaced workers who need jobs, preferably the ones they had. Worse, trying to do the technical drafting at the last minute, in the wee hours of the morning when most brains are at the low ebb of their biological cycles, guarantees the combination of complexity and technical error. It will be interesting to see how Congress, whose members understandably have been critical of the sluggishness with which government responded to the crisis, reacts when time is of the essence. I really do hope the members don't waste time on things that can be postponed, such as permanent estate tax repeal or additional lowering of rates on capital gains.

The nation's workers, and the nation, deserve no less.

"Taxes are what we pay for civilized society." So spoke then Supreme Court Justice Oliver Wendell Holmes. He said that back in 1927 in a case called Compania General de Tabacos de Filipinas v. Collector of Internal Revenue, 275 U.S. 87. That was a long time ago, when there were Collectors of Internal Revenue, but no Commissioner of Internal Revenue. Yet the statement, trite as it might seem, carries a strong message.

Although the term "tax" has been used in many places and at many times to mask what today could be called pillaging, theft, or collection of protection money, in principle taxes are what citizens pay so that they can live, work, play, and flourish in a society that provides opportunities, safety, and support not found in an "every person for himself or herself" barbaric or backwards existence.

Without taxation, and more specifically efficient and just taxation, society cannot exist. Even the utopian dreams of the idealists, in which there is no government and no hierarchy, requires some sort of contribution. Though the genesis of such an experiment might be characterized by unanimous voluntariness, it isn't long before mandatory rules need to be created and enforced. Why? Because some people think they are special, and deserve to curtail their contribution to fit their individual wishes. Whether this is human nature, or something learned from culture, is a question to which no one has provided a definitive, proven answer.

In most modern societies, taxation is mandatory, but it is enacted by representatives of those (or, technically, some of those) who elect those representatives and will pay those taxes. Those same representatives specify the details of what gets taxed and how taxes are computed. In theory, citizens subject themselves to taxes because they accept the fact that the services they want from government need to be funded. In theory, the democratic process permits discussion, free determination, and election of representatives who put the needs of the nation at the top of the list. In practice, of course, it doesn't work that way. Many taxpayers don't vote. Representatives are more sensitive to the demands of lobbyists and special interest groups than to efficient and just taxation. When taxes do enter the electoral or political arena, almost all of the chatter is about tax rates.

One significant disadvantage of the practical reality, in contrast to the theoretical principles, under which tax law is developed is the complexity that it brings to the tax law. Complexity generates noncompliance on account of confusion and misunderstanding, fraud because there are always people who consider themselves and their goals paramount and superior to law and who find unending opportunities in the rabbit warrens of the tax law, economic inefficiencies because those with the loudest lobbyists aren't often those with the best arguments, societal malaise because honest citizens feel overwhelmed by the reports of the annual $300 billion in owed but unpaid taxes, and governmental inadequacies because of the time, attention, and resources consumed by the political tax game.

Many of my commentaries on taxation offer up criticism of tax complexity. But today I want to focus on another significant disadvantage of the practical reality. What turned my attention to this problem is the unacceptable, horrifying, distressing, and embarrassing aftermath of Hurricane Katrina.

Yesterday, last evening, and this morning, as the news reports filtered in, I began to wonder if the people of New Orleans and the other damaged areas thought for a moment about the civilized society that taxes supposedly were purchasing. Despite the glimmers of hope, the heroics of the courageous, and the kindness of some strangers, the dark side seems to have ascended over not just New Orleans, and not just the Gulf Coast, but over the nation. We are seeing non-civilization at its finest, in other words, we are seeing the best of barbarism. It is a barbarism rooted in lack of discipline, and fueled by the inadequacies of the governments charged with protecting those who live and want to live in civilized society.

It's too soon to do a full analysis that will help us learn how to react to the next natural or person-generated disaster. We do know there will be one. All of the efforts to prevent person-generated disasters do nothing, and cannot do nothing, to prevent the formation of the next Category 5 hurricane or to control where it goes. And for those advocating the use of taxes and government controls to "remove global warming and end hurricanes," as one brilliant observer (he says sarcastically) advocated, keep in mind that some of the worst hurricanes occurred long ago, even during the time of the earth's "Little Ice Age" from which it began to emerge not that long ago.

No matter which government, official, agency, program, or process is targeted by the critics, the question for me is whether these arms of government could have been, and in the future will be, more responsive, more organized, more aware, and more effective had there been more resources available to them long before the inevitable happened. Understandably, I am a firm believer the mere availability of resources is no guarantee, because resources in the hands of mediocre bureaucrats, sound-bite politicians, corrupt officials, or lazy civil servants are wasted resources. There are understandable reasons some citizens advocate turning as much as possible over to the private sector. Nonetheless, there are some things only a government can do when disaster strikes and that cannot be put into the hands of the private sector, regardless of how one resolves the continuing debate over which governments, state, local or federal, should be involved and to what extent.

When the time does come to study what happened, I am confident that in addition to things that money doesn't necessarily buy, such as planning creativity, honesty, intelligence, and leadership, there will be a long list of things that money could have provided. Others have already started these lists, from water inflow protection similar to those in the Netherlands, more FCC concern about cell phone tower location and design (and less on the more attention-getting but far from life-saving concerns about trivial immaturities on the airwaves), and arrangements to provide evacuation transportation to the sick, vehicle-deprived, and helpless. I haven't yet seen much discussion about the other possible disasters in other possible locations, where different terrain, different population numbers, different potential evacuation routes, different disaster causes, and other factors require something more than the "let's react to and prevent a repetition of the last problem put the money into airplane defense while terrorists and nature cook up something different" mind set that neglects or gives minimal attention to planning for the eventual huge earthquake in the Midwest, the destruction of pharmaceutical plants making insulin, or alien hackers taking down the Internet.

To make resources available to government, taxation is necessary. Well, we have taxation. So perhaps the better analysis is that to make sufficient resources available to government, sufficient taxation is necessary. Few welcome taxation, but fortunately most understand its necessity provided its proceeds are used appropriately. Support for taxation is a measure of support for the government programs funded by tax proceeds.

During the past several decades, the anti-tax movement gathered steam and rolled through the political landscape. The impetus for this movement is understandable. Aside from corruption and other commonly held unacceptable activities, the most significant object was the use of tax proceeds to fund government programs that did more to enrich bureaucrats than the intended beneficiaries, and to nourish government programs that were inconsistent with the goals of those who flocked to the anti-tax movement. Cries for tax reduction reflected a frustration with a political process that was not responsive.

Unfortunately, the cries for tax reduction drowned out the rest of the argument. Full and open debate on how tax proceeds ought to be spent took a back seat to the rush to find ways of "cutting taxes." Trickle-down or not, even with the occasional tax increase (including one that doomed the re-election of one president), taxes were cut. Tax revenues increased at times as the economy grew, with tax cut supporters claiming that tax cuts were the cause of the economic upswings. Does that mean cutting taxes to almost zero would generate almost infinite tax revenues? No. The economy bounces up and down for many reasons, tax being just one, and not necessarily the most important one.

But when the need for tax revenues increased, when the belated response to terrorism finally found attention in the halls of Washington power, those in control decided not to increase taxes. Instead, they marched on with the tax-cutting programs. The federal budget deficit returned. And grew. Guaranteed, Hurricane Katrina isn't going to be put on the list of things that reduced the federal budget deficit. Neither is the military action in Iraq. And even today, members of Congress continue to discuss legislation to reduce taxes more, and to extent the reductions.

The nation allegedly is at war. We are allegedly at war with terrorism, or terrorists, or terrorist-sponsoring states, or insurgents, or well, bad people, I suppose. Whether or not one supports none, one, or all of the various military actions undertaken in connection with this war, it is inconceivable to me how one can disagree with the notion that if there is a war the war must be funded because wars cost money. Would opposition to specific military campaigns been stronger, or developed sooner, had taxes been increased to fund the campaign, as good fiscal management demands? Maybe. My guess is that those who supported a campaign, or at least most of them, would have acquiesced, reluctantly or otherwise, to a tax increase. The failure to seek a tax increase, or at least to put the brakes on the tax cutting, probably reflected a policy of trying to make everyone happy even though the long-term cost is far higher than would be the cost of an immediate, and thus smaller, tax increase. I've been told, and I've read, that when the nation went to war in 1941, and even as it was preparing to do so in 1939 and 1940, taxes were increased. I don't know if there was much griping, or how extensive it was, but people knew that war means war. It requires sacrifice. My parents have described what life was like under a rationing program for a long list of items. The nation allegedly is at war. A few individuals and their families, constituting a very tiny percentage of the population, have made and are making sacrifices. The rest of us, it seems, are living lives that somehow don't seem consistent with what life is like during war. Perhaps I am wrong, but for me, war is like pregnancy. Either a woman is pregnant or she isn't. Women cannot be partially pregnant or have limited pregnancies. Concepts of limited war or partial war get used not only to create the sorts of conditions that preclude victory, as happened in Vietnam and Korea and as is beginning to happen in Iraq, but also to deflect the effects of war-waging decisions so that war seems, somehow, more palatable. War, at times, unfortunately, is necessary. War, though, should never be palatable.

Now the nation faces another, more serious catastrophe. Hurricane Katrina has all but destroyed a city. It has closed the nation's largest port. It has shut down a significant portion of gasoline refinery capacity. It has closed and damaged much of the Gulf of Mexico oil and natural gas production, the latter getting very little attention, but wait until October's chills set in for that to flare up as a mainstream media and politician soundbite. A quarter of the nation's coffee supply is rotting in New Orleans warehouses. Steel, zinc, rubber, and bananas must find their way in through some other port, if that is possible. Most of the grain harvest, and other domestic agricultural product, has no way out. If 9/11 disrupted the economy, Hurricane Katrina has the potential to devastate it.

And thus I turn back to taxes. Money is being spent, and more money will be spent, by governments on rescue, relief, and recovery. Government surely will spend money on rebuilding, as will the private sector. Where does government get that money? Does it borrow, thus increasing the deficit and thus fueling the "foreign ownership of dollars" problem? Does it raise taxes, thus taking money out of the private sector? Doesn't the private sector have a better chance of spending the money more efficiently than does the government? Perhaps taxes need to be raised. Certainly, they should not be lowered.

There are several things, however, that need to be considered when someone advocates raising taxes. One is whose taxes? Another is what income? And a third is what rate? Too often tax increases are rate increases on those already paying taxes. It is time to consider raising taxes on those whose taxes are not as high as they ought to be. Those folks happen to be the ones enjoying low tax rates on dividends and capital gains. I've yet to see the evidence that lowering taxes on dividends and capital gains, but not on wages is better for the economy. Many of the displaced people in the Gulf Coast region have been paying taxes at higher rates than those imposed on dividends and capital gains.

As I've often said, the answer to all the arguments about the taxation of capital gains is to index basis. The low rate on capital gains does nothing but to encourage speculators and others who parlay the low rates into economic gain that doesn't generate real goods. A dollar is a dollar. By indexing capital gains, and then making dividends and capital gains subject to the same rates as other income, Congress not only raises necessary revenue, it simplifies the tax law. It might even permit fixing the alternative minimum tax problem before the middle class gets taxed into poverty and the ultra-wealthy continue to amass wealth.

It is time to put an end to the dividend tax rate preference. Sure, a retired person living on dividends who saves $400 in taxes has been duped into thinking a low rate on dividends makes sense, but that person would benefit more from a sensible and realistic personal exemption deduction that reflects the poverty income level. Throwing $400 to a retired person living on dividends so that someone earning $3,000,000 a year in dividends can save taxes so there is more money for their investment game is not the way most Americans would design a tax system if they had a real say in the matter.

And it surely is not time to make estate tax repeal permanent. Yes, I know that certainty is good for planning, but there are a lot of things that are and must remain uncertain when it comes to planning. I'm more than willing to make estate tax repeal permanent, in exchange for taxing capital gains at death subject to a sensible exemption. But the nation needs time to contemplate such a plan, and September 2005 is too soon.

The tax reform commission has been blessed, or cursed, with good, or bad, timing. Attention is focused on the suffering in the Gulf Coast, and even many miles inland, so we are forgetting that the commission will be issuing a report in the not so distant future. To me, it's a great opportunity. This disaster can be a catalyst for genuine tax reform. After all, we have been reminded that the nation's tax policy, like its energy and other policies, isn't quite up to what it needs to be to accommodate these sorts of disasters.

We have been warned. Despite all the death and destruction, the nation still has a chance to reset its course. The next time, we may not be so lucky. Yes, the next one could be worse. Much worse. Is the nation ready? Oh, how I hope so. But I fear not.

Several months ago, I reported on the Littriello case, in which the District Court held that the "check the box" regulations were valid. In the analysis, I explained how two lines of thought had developed:

Well, some commentators took the position that the IRS lacked the authority to permit something not a corporation to be taxed as a corporation. Or to let an LLC be treated as a division of a corporation. They rested their argument on the Supreme Court's decision in Morrissey v. Comr., 296 U.S. 344 (1935). In that case, the Court held that the Treasury was not barred from revising the entity classification regualations to treat business trusts as a corporations nor that it exceeded its powers in providing that the extent or lack of control by the trust beneficiaries was not solely determinative of the classification. The Court also held that because the trust's characteristics were like those of a corporation, it was an association taxed as a corporation. The commentators consider that decision, absent Congressional revision of the statute, to preclude Treasury (and the IRS) from permitting an entity that is like a corporation from being treated other than as a corporation. For example, in "Can Treasury Overrule the Supreme Court?, 84 B.U. L. Rev. 185 (2004)," (available here) Gregg Polsky argues, quoting from a message to me in response to my question about the issue, "that the regulations are invalid even assuming arguendo that they are consistent with the statute. In a nutshell, my argument is based on three Supreme Court decisions holding that the executive branch is bound by the Court's prior interpretations of a statute. *** Accordingly, I argue that, because the regulations are wholly inconsistent with Morrissey v. Comm'r, 296 U.S. 344 (1935), they would be determined to be invalid if challenged." Vic Fleischer, on the other hand, comes out on the other side, as he explains here. For another analysis supporting pass-through treatment as the default, see John Lee, Entity Classification and Integration, 8 Va. Tax Rev. 57 (1988).

The taxpayer, citing Gregg Polsky's article, moved the district court for reconsideration. The Court considered the argument "even though it amounts to a renewed motion rather than a true reconsideration."

In its Memorandum and Order, the court held that even though the natural answer to the question posed in the title of Polsky's article is "no," that isn't the question. The Court concluded that the "check the box" regulations do not have the effect of overruling the Supreme Court, and that the Morrissey decision does not required invalidating the regulations. The Court stated:

Certainly, the check-the-box regulations are the subject of academic and theoretical questioning. Professor Polsky has proposed that the Treasury has gone too far in adopting regulations concerning corporations and other associations. However, it is a theory only that the check-the-box regulations violate the Internal Revenue Code definitions because those definitions were made in effect permanent by Morrissey. The Court does not believe that Morrissey forever incorporated in all future Treasury regulations a particular definition of an “association.”

Of course, as I pointed out in my initial posting on Littriello, the possibility of appeal cannot be discounted, and this most recent development does not appear to remove or even significantly reduce the possibility, whatever it may be, of an appeal.

The district court's most recent pronouncement rekindled the "academic and theoretical" discussion. One tax law professor directed attention to the case of Estate of Hubert v. Comr., in which the Supreme Court held that the IRS had taken a position that conflicted with the existing regulations. He noted that the suggestion Treasury could fix the problem by revising the regulations, which it did, would not be barred by the failure of the IRS to prevail in the Estate of Huber case. Treasury cannot "undo" the result in the case, but it can change the rules provided it is acting within the scope of the authority delegated to it by Congress is issue regulations. Permit me to elaborate. Thus, even if in Morrissey the Supreme Court held that the regulations then in effect had a certain meaning and applied in a certain way, there is no reason that the Treasury cannot revise those regulations, because the Morrissey case did not hold that the regulations then in effect were the only permissible interpretation of the statute. At least that's my take on the issue.

Gregg Polsky noted that when he wrote the article, his thinking resonated with the consensus of administrative law scholars that the Supreme Court held the position that once it interpreted an ambiguous term, that interpretation was binding on the executive branch, a consensus reflected in opinions issued by "most (if not all) of the lower courts". He noted, though, that in the recent case of National Cable and Telecommunications Ass'n v. Brand X Internet Services, the Supreme Court explained that the consensus was wrong. In other words, the prediction is that any argument against the validity of the "check the box" regulations based on the Supreme Court's decision in Morrissey will be rejected.

Stay tuned, though I doubt there will be any surprising developments even if an appeal is taken. Keep in mind that Littriello does not preclude the Treasury from changing or revising the "check the box" regulations to the extent it decides it needs to do so. Littriello simply precludes taxpayers from challenging those regulations in the rare instances when they work against the taxpayer, as described more fully in my initial posting on Littriello.

The just-announced news that the Bush Administration is releasing crude oil from the strategic petroleum reserve raises this question: Why?

Officially, the government is "lending" the oil to refineries. Assuming the loan is repaid, the disadvantage for the nation's security is temporary, and that's assuming that removing a small portion of the reserve causes more of a security risk than not replacing the crude oil that cannot reach the nation because the port of New Orleans is closed.

Practically, with at least eight refineries closed on account of the storm, who will refine the crude oil that is being loaned? Apparently there are a few refineries operating elsewhere that can use some crude. Yet at least ten percent of refining capacity has been shut down. In a matter of weeks, there will be gasoline shortages, to say nothing of huge price increases.

My guess is that the loan of crude oil from the strategic petroleum reserve is not so much designed to "calm the markets" as was announced, but to create some sort of pyschological message that "we are in control of this mess." A close examination of the situation tells me that nature is in control. And that's about it.

It comes back to supply and demand. Supply has been cut. There's no question about that. There's also no question that there is no excess or replacement capacity available, because no new refineries have been built in this country for more than thirty years. It is tempting to take the position that those who opposed refinery building as a matter of principle, a group very different than those who opposed specific refinery construction proposals in specific areas, ought to be prohibited from purchasing gasoline. But that is about as popular a proposal as is the one to bar from highways those who opposed their construction. Of course, why should popular trump sensible?

As for cutting demand, perhaps $3.50 or $4.00 per gallon prices will get Americans thinking. Perhaps there will be fewer vehicles flying by me when I'm driving 65 or 70, making me feel as though I'm standing still. Perhaps errand consolidation will take hold. Perhaps less business travel and more video conferencing? Perhaps fewer energy-gobbling houses being built? Perhaps more serious efforts at conservation?

And it's not just oil. It's coffee. I learned last month, during a visit to New Orleans, that more than half the nation's coffee arrives through that port. It's bananas, many of which come through Gulfport. It's steel, much of which comes in through New Orleans because it is four times more expensive to ship it overland than up the river on barges.

And it's not just imports. In a few weeks, farmers in the Midwest will begin harvesting grain and other crops. American remains the world's breadbasket, and almost all of these agricultural products leave through New Orleans. If some way isn't found to move this product out, people in other nations will be facing food shortages.

And it's not that easy to shift transportation. Again, there is no excess capacity on railroads, and very little in the highway trucking industry, to take the enormous quantities of grain and food, oil and steel, rubber and other products that move on Mississippi River barges. We live in a "just in time" economy, which leaves the nation at risk not only from international disruptions but also from natural disasters.

As the nation attempts to deal with this huge catastrophe, Congress will turn to issues of financial aid and holding the economy on course. What does this mean for the tax law? Increases to fund the tens of billions of dollars needed to rebuild and provide relief? Decreases to put more money into the economy so that the private sector can recover? Would tax decreases fuel the price increases that are looming not only for oil, gasoline, natural gas, chemicals, and other oil-derived products, but also coffee, steel, rubber, bananas, lumber, concrete, wallboard, other construction materials, medical supplies, and all the other materials necessary for the rebuilding of the Gulf Coast? Should significant credits be enacted or enlarged for projects such as construction of gasoline refineries, processing of used cooking oil as fuel, redeployment of rail and highway truck resources to move Mississippi River barge traffic content? Will Congress make charitable contributions for hurricane relief tax-advantaged in some way, even though it's too late in the year to make them deductible for 2004? Will Congress enact prospective restrictions on casualty loss deductions for properties built on barrier islands and other unsafe places?

My prediction is that as the far-reaching consequences of this disaster become apparent to politicians and citizens, it will have long-term implications for a variety of public policy issues, including taxation. It may make environmental impact fees, user fees, and other "think about what you are doing" charges more palatable. Perhaps Congress will start readjusting priorities, giving serious thought to what sorts of activities truly need to be tax-favored and what sorts of things ought not be. If anything, it ought to raise the public outrage against those who are not satisfied with tax cut after tax cut, special credit after special credit, but who create, sell, and buy illegal tax schemes to reduce their taxes to far less than their fair share. I'll leave commentary on the KPMG settlement to a later time, even though its timing is a serendipitous brush stroke on the larger canvas of tax policy.

Here's wishing the best for all those people in New Orleans, the rest of the Gulf Coast, and the inland areas devastated by this disaster. I know a few of them. I haven't heard from any of them. I do hope that when Congress begins to play with the tax law, it does things that helps these people and not those who seek to enrich themselves at the expense of another person's suffering.

The connection between tax law and energy policy may appear to many folks to be as close as the connection between tax law and baseball, but anyone who works with the tax law knows that there are two connections. The direct connection is the use of tax law to regulate energy. These come in the form of income tax credits and deductions that favor one or another energy policy or taxpayer behavior with respect to energy. The indirect connection is the impact of energy policy on the economy, and vice versa, and the tax law provisions that have been enacted in reaction to economic fluctuations reflecting the energy market.

My dislike for using the income tax law to regulate behavior is no secret. I have a similar disdain for economic regulation that is inconsistent with basic economic rules of supply and demand. My original posting on the effort by some in Hawaii to set artificial gasoline prices, and the followup, stress the theoretical and practical deficiencies in taking such a narrow-minded and short-sighted approach to a much broader and longer-term problem.

A story in Saturday's Philadelphia Inquirer shed more light on the attempt by certain legislators, other politicians, and some citizens to force the natural economic world to suit their particular wishes. Apparently, the effort in Hawaii, which may or may not get past its governor's veto, has triggered similar discussions in other states.

The Philadelphia Inquirer article points out that although some of the proposal's supporters cite price-fixing by gasoline retailers as justification for taking action, federal investigations discovered "no evidence" of price fixing. In fact, government regulating of gasoline prices, which itself is price-fixing, generally causes less competition and higher prices. I'll add that it also will cause reduced supply.

Another argument is that gasoline is a commodity similar to electricity and water, and that its price should be similarly regulated. I suppose those making this argument haven't noticed the disruption in electricity and water markets. The regulation of electricity is a significant factor in the brownouts, blackouts, and grid failures that have plagued portions of the country, striking more seriously in areas where government control receives stronger public support by those with a philosophy that the government knows better. Treating gasoline as a commodity is certain to bring lines at service stations and critical supply failures. This "regulate commodities" argument makes no sense, because taken to its logical limit, it would require government to regulate the price of commodities such as food, beverages, clothing, .... ah, didn't they try that in the very successful Soviet Union as part of repetitive Five-Year plans, he asks sarcastically.

The supporters of government gasoline price fixing insist that "like electricity, gasoline is too vital to the economy to be left in the hands of these corporations that have been gouging us," a quote from Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Los Angeles, which is a consumer advocacy group. The price of gasoline increases for a variety of reasons. First, speculators gambling on the commodities markets have driven up the price of crude. Second, oil producers such as Saudi Arabia and other OPEC members, countries that don't belong to OPEC, foreign companies, and domestic corporations, set prices. Most of them, other than domestic corporations, aren't going to change their prices in response to the acts of a state or even federal legislature. Third, when demand exceeds supply, prices increase. Mr. Heller's organization, and others like it, would be doing everyone a bigger favor if they pushed for actions that increased supply and decreased demand. If, in fact, price gouging is taking place, there already exist laws that permit and require criminal and civil prosecution of those who are gouging, that is, those who are charging more than the market price. The FTC, however, has concluded that price fixing by the industry has not been demonstrated.

The story reports that the Service Station Dealers of America, a trade group, agrees with the idea of government gasoline price fixing. This organization claims that "Fuel is basically a commodity, almost something that should be regulated by the public services commissions, because there is no other product out there that so many consumers depend on." Almost a commodity? Is that like partially pregnant? No other product that so many consumers depend on? Medicine? Food? Beverages? Clothing? Cell phones? C'mon, enough with the "I want a low price for what I sell so I can make money selling it at a high price and I don't think anyone retailing another product is quite as special as I am or as deserving of government assistance" rap. Americans, if they stop and think, and set aside the limbic system reaction to pump prices, can see through these sorts of statements.

Fortunately, others point out the obvious. John Felmy, chief economist for the American Petroleum Institute, simply states, "That would be the stupidest thing on Earth we could do. It would throw us back into the 1970s." In the 1970s, the federal government imposed oil and gasoline price controls. What happened? There were supply shortages, and lines at the gasoline prices. I write from experience for the edification of the tens of millions of Americans who did not drive automobiles in the 1970s for one reason or another, including having been born or having arrived in this country after that decade. What happened when the price controls were lifted in 1981? There was a surge in oil and gasoline supplies, and prices settled at amounts less than inflation-adjusted prices. Wow, a real world proof of the theoretical contention that price controls do not work. I wonder if they teach this episode in the nation's high schools? I doubt it, because if they did, people would be far less impressed with the Pied Piper calls of those who advocate government control.

Now that demand has increased to bump against a finite supply, prices are beginning to climb to what is still less than inflation-adjusted amounts. So where's the justification for pretending that supply is so plentiful that prices should decline?

Some gasoline dealers claim that wholesale gasoline prices are manipulated by the oil companies to reflect the economics of the particular neighborhood in which the gasoline station is located. Called zone pricing, the wholesale price reflects traffic patterns, neighborhood income levels, the degree of competition from other dealers, and similar factors. Some of what enters into zone pricing is market economy. If traffic is heavy, demand increases and pressures the supply. If nearby stations lower their prices, it suggests a decrease in demand or an increase in supply, unless the price reduction is artificial, which raises question of whether existing laws are being violated. If so, existing laws ought to be enforced. The notion that gasoline should be sold at the same price in all locations ignores major differences between locations. Locations further from the distribution terminal require higher shipping costs. Locations in high rent districts need to recoup those higher rents. Locations in areas with higher labor costs also need to recoup those costs. That's part of Hawaii's problem, according to Andy Cassel, who wrote his Friday's column, Filling up on retrograde price controls, at about the same time I was penning my very similar opinions on the Hawaii government price fixing proposals. He pointed out to me in our email exchange, that labor and rent costs in Hawaii are unusually high, something I had heard at about the same time from a colleague who grew up in Hawaii. So, of course, the price of gasoline in the "Hawaii zone" will differ from those in Houston, just miles from a refinery. Incidentally, vendors of just about every consumer product price their wares based on the local economies in which those items are sold.

Now that hurricane Katrina has created havoc in the oil and gasoline markets, another ill-advised cry has blown through the news. The thought is that because the weather-induced shutdown of Gulf oil platforms has cut crude oil production and the closing of the Gulf ports has delayed the unloading of oil imports, it is time to release crude oil from the strategic petroleum reserve.

Why?

What will they do with it? People seem to be forgetting that many of the gasoline refineries are also off-line because of the weather. It is unknown if all will return to pre-storm capacity once the air clears.

In fact, the gasoline price problem is not so much a problem of crude oil supply as it is one of gasoline supply. The gasoline supply is limited because the nation lacks adequate refining capacity. I wonder how many of the folks clamoring for price controls are among those who oppose the construction or expansion of gasoline refineries? Quite ironic, but not unusual, because it is another example of not wanting to pay the price. "I want low gasoline prices but I oppose the construction or expansion of gasoline refineries" is sung to the same tune as "I want less traffic congestion but I oppose the construction or expansion of highways " chant. What it comes down to is this: "I want everyone else out of my way and I want to be at the front of the gasoline line."

That simply isn't a sensible way to participate in the civic life and the political debates of the nation. We can and ought to do better.

It really is a shame when politicians fall over each other trying to dish out subsidies to their favorite industries. Although direct subsidies aren't unusual, tax subsidies are becoming ever more popular, because politicians think they're easier to slip past the taxpayers who foot the bill. Fortunately, despite its several negatives, the Internet and modern communications technology has made it difficult for these sorts of deals to escape scrutiny. Unfortunately, despite the attention, these give-aways continue to spill out of legislatures.

The latest target of my criticism is legislation pending in the California legislature, which would extend a state income tax credit to the motion picture industry for films produced in California. The Los Angeles County Economic Development Corporation has released a study, done on behalf of the California Film Commission, that supports the proposed tax credit. The principal concern is that tax incentives offered to the movie industry by other states (seven at last count with proposals pending in another eight) and even other countries (at least seven) will encourage film makers to take their business elsewhere.

Perhaps the California legislature should not be criticized for considering legislation to offset the impact of similar legislation in other states. After all, California didn't "start it," at least with respect to the film industry. On the other hand, state tax incentives in California tax law reach way back in time, so perhaps this is another example of something that had its genesis in California, swept through the nation, morphed into alternative applications, and came back to haunt California.

But there's no need to single out California to make the point. ALL of the jurisdictions who play this game, using taxpayer money to "entice" privileged industries to relocate their business, have run afoul of both a conceptual and a practical principle.

Conceptually, governments ought not to engage in business engineering. They've done enough damage and made enough mistakes with social engineering. The free market principle means "free of government interference" even if government involvement would be beneficial to some citizens. Only when business or other activity threatens the health or welfare of the jurisdiction should a government step into the market. So, if legislatures are looking for opportunities to interfere in the free market, they ought to stick to important safety and health concerns such as development of pharmaceuticals for avian flu, assistance to local transit authorities for security planning and operations, regulation of the sale of alcohol to vehicle drivers, and similar matters that concern the population and not a specially selected segment.

The California Film Commission study points out that the film industry is important to California's economy. That's true. After all, all businesses in California are important to its economy. Who wants to tell an entrepreneur, "Your business isn't important." Tell that to the business owner when he or she hits insolvency. Tell that to the employees who lose their job. The film industry in California, though, is big. Depending on whose numbers are accepted, anywhere from 88,000 to 245,000 people work in the industry, with most of the 245,000 being temporary employees, many of whom presumably have "day jobs." The payroll, again depending on whose numbers are used, is anywhere from 6 to 17 billion dollars. There is no question that the film industry generates jobs, opens up secondary market opportunities for other businesses such as suppliers, caterers, and security guards, pays substantial state and local taxes, and contributes significantly to the economic health of the Los Angeles area economy and in a somewhat less bountiful way to the state economy. But, so, too, do other industries. Why are they not the recipients of similar incentives? Because they aren't in a position to relocate? Or perhaps they aren't populated by high-profile, high-paid "celebrities" who not only think their political views are more valuable than those of the rest of us, but who also have access to politicians and are in a better position to "lobby" for their pet projects.

California may be "stuck." As the report explains, without some economic adjustment, the high costs of production in California, coupled with other economic challenges such as union labor contract negotiations and non-economic difficulties such as community hostility to film and commercial activity on local streets, will encourage more producers to seek other locations for their activities. There is no question that tax incentives have contributed to film, commercial, and other production activity relocating to places outside of California. The question is whether California needs to use the tax law to restore balance to a free market thrown into disarray by the proliferation of tax (and other) incentives in other states.

Practically, it isn't all that clear that tax incentives narrowly tailored to a specific industry solve the problem. In fact, they may create problems.

For example, the report does not explain if the out-migration of film production from California would not have occurred, or would have been less frequent, in the absence of these other states' tax incentives. There's no way of knowing. Surely a film producer in another state isn't going to respond that the production would have moved in any event, because that would be killing the golden goose laying the tax incentive eggs. Of course the tax incentive is necessary, or so they say. The reality may well be that the production would have moved even without the incentive, because of the reasons cited by the study, such as high costs, labor issues, neighborhood objections delaying production, and similar problems. But there are far fewer great games that can be played than to get someone to pay an incentive for what would have happened even in the absence of the incentive.

Similarly, although the report points out that the film industry is growing and will continue to grow, it doesn't consider the possibility that the increase in film production in other states may simply be a reduction in the growth of the California film industry rather than a reversal. The report cites one major threat to the California film industry, piracy, but that problem affects film productions in all areas and is not one that can or should be solved with the tax law. The report also describes the advantages that California has in luring or keeping film production, such as production infrastructure, talent, and excellent film schools and other institutions. The report points out that video game designers have been moving into California. So is there really a problem? In other words, have the tax incentives in the other states been all that harmful to California?

Perhaps not. After all, there's another problem with targeted tax incentives. In order for the tax burden of the film industry, for example, to be reduced, the tax burden of other taxpayers must be increased. Or, state tax expenditures on health, safety, education, and other essential and legitimate government services need to be cut, shifting the cost to the population generally, particularly through increases in local taxes. This puts upward pressure on the wage demands of workers in the state, it puts upward pressure on prices charged by other entrepreneurs in the state, and it puts upward pressure on interest rates as localities increase borrowing to cope with the impact of the state income tax incentive. Though the arrival of a production in the state brings a temporary boost to that state's economy, particularly that of the area in which the production exists, it isn't necessarily sufficient to offset the negative impact of the true cost of the specialized tax incentive. After all, the decision to bless one industry, thus shifting costs to another industry, may encourage those other industries to leave the state.

Economic growth isn't nurtured by states fighting with each other for a piece of the existing pie. If there is growth in the film industry, it's because more people want to see films. Perhaps the films are better. Perhaps air-conditioned theaters have an attraction in summer. Perhaps people have chosen to remain close to home, and to increase movie viewing, rather than traveling to some insecure location. Tax incentives have nothing to do with this growth. Has any state enacted a tax credit for going to the theater or for watching a movie on cable? I don't think so. Notice that the incentives don't go to the citizenry in general, but to "out of towners" who will take the bulk of the film profits with them when they leave.

The film industry is rolling in money. It's not in trouble as are industries such as the airlines, not that I'm advocating tax breaks for airlines. The film industry can afford to pay outrageous salaries to its "stars" and if times get tight, those "stars" ought to take pay cuts. At the moment, of course, they don't need to do so, because the industry is more than financially capable of paying those salaries. The maneuvering for a California state income tax credit appears to be more a matter of exploiting a new money-grabbing opportunity than it is a genuine request from a truly endangered industry.

The chief benefit of this proposal is that it provides yet another opportunity to point out to those who advocate using tax law to engage in social and business engineering, rather than simply to raise revenue for legitimate government activity, the dangers of opening the door to these sorts of tax law provisions. Once the tax law is used to promote some supposedly worthy social policy objective, it will be used to promote every social policy objective, worthy or not, and to promote all sorts of activities, regardless of their importance, economic value, or social worthiness. Ultimately, those with money, access, and power find ways to acquire more money and power through these indirect subsidies, and those without money, access, or power continue as the chumps of the elite. Perhaps it can be proven that using the tax law to engage in social engineering is as likely or even more likely to transform a democracy into an oligarchy as it is to balance the rights and economic opportunities for all citizens.

In the final analysis, California is going to play the game because other states are playing the game. And when they look to Uncle Sam, all they see is the tax incentive game gone wild. Under these circumstances, it is almost certain that no one in power is going to step up, suggest blowing the final horn, and make an effort to close down the tax incentive carnival. Even if the tax reform commission tries to go that route, there's too much vested interest and imbedded power standing in the way.

So why did I bother writing this post? Because hope springs eternal. Because perhaps that glimmer of hope radiating from the irate Pennsylvania citizens pounding their legislatures for giving themselves a pay raise under questionable circumstances (a story left to another time) might catch hold. Perhaps citizens will indeed begin to realize that ultimately the power is theirs. Perhaps they will take it back. Perhaps they will demand accountability. If, and only if, the common good gets to trump the "we are special" claims of the tax incentive seekers. We'll see.

My very recent post about the attempt in Hawaii to control wholesale gasoline prices so amazed me that I decided to dig deeper.

According to a story in the Honolulu Advertiser, the effort is as much a political dance, as I thought, as it is a legitimate process to protect consumers.

* The Public Utility Commission is attempting to implement a law passed last year by the state legislature, but legislative support "appears to be waning." Bills have been introduced that would permit the governor to veto any price cap.

* The governor, to her credit, opposes the cap.

* Most of what is being done has been designed and drafted by a consulting firm from Virginia, which is being paid $121,000. It would have been better to allocate the $121,000 to low-income Hawaiians to assist them with energy bills.

* Though the consulting firm claims, in a most oxymoronic statement, that price caps will cause more market-driven wholesale gasoline prices, it admits that the proposed cap formula and monitoring system is complex, and, get this, doesn't guarantee low prices for consumers. Why? Because "there is no guarantee the savings will be passed on to consumers because the cap applies only to wholesale prices." Brilliant. Just brilliant.

* The proposed formula requires the commission to set 96 separate price caps each week, using a complex formula. By how much will taxes need to increase to pay the salaries of the people who will need to be hired to do this work for the commission's staff?

* The consulting firm also admits that implementing the order by the dictated September 1 effective date "may be difficult."

* So why is this being done? It appears that some politicians, including a state senator, like the idea. One claimed that the report "shows that a workable and enforceable price cap can be achieved." The same report that says there's no guarantee consumers would see any price decrease? The same report that admits that the proposal is complex and that implementation is questionable?

* The same cap supporter stated, "If wholesale prices go down I think that ultimately those savings will be passed on to consumers. The intent behind the price cap is to try to provide for fairer and more reasonable gasoline prices that would more closely track Mainland prices as well as provide savings for consumers at the pump." Right. Any idea, great politician, that gasoline costs more in Hawaii than on the Mainland because of shipping costs? And to say nothing of believing in the tooth fairy. I'll call in the morning and oh, yes, reducing wholesale prices reduces consumer prices. Right.

* The cap supporters are playing off "public frustration" with Hawaii's high gasoline prices. Industry points not only to shipping costs but to Hawaii's high taxes. Aha.

* Aha, the consulting firm also repeated conclusions in a previous, more expensive analysis ($250,000) done by a California firm, "which found the ceilings could result in gasoline shortages and oil companies leaving Hawaii." Duh. No kidding. Just what I predicted before I even dug into these details.

Yes, it's expensive to live on a remote island in the middle of the Pacific. Everything, except a few locally grown items, needs to be shipped into the state. So of course prices will be high. Duh.

A Philadelphia radio station has reported that Hawaii's Public Utility Commission has imposed a $2.15 per gallon cap on the price in Honolulu that can be charged for regular unleaded gasoline by wholesalers. Adding in taxes, that's equivalent to $2.67 per gallon. Other limits apply to other areas of the state.

The current average price in the entire state is $2.84. Predictably, the refineries who wholesale in Hawaii criticized the commission's action as counterproductive.

Of course. How long can a business survive if it is commanded to sell its product for less than the sum of the cost of the raw material and the prices paid to process that material? Does the commission think that the refineries' vendors will reduce the price they charge to the refineries? Oh, perhaps OPEC and other crude oil producers will reduce the prices they charge to their buyers, and the reduction will "trickle down" to Hawaii?

This is another limbic system, rabble pleasing, vote begging reaction to a situation that isn't going to be well managed when rational thought is pushed out the door. As I've pointed out in previous posts, the most recent one here, the solution requires cutting demand for oil, increasing supply, doing both, switching to alternative means of energy, or packaging some sort of combination of these options.

I really do hope that the refineries decide it makes no sense to sell gasoline in Hawaii for a price less than total cost of acquiring and processing it. Why? Because I want to see what the next brilliant decision to come out of Hawaii with respect to the gasoline market. Perhaps Hawaiian officials will then order gasoline producers to deliver free gasoline. Perhaps they'll even order OPEC and other crude oil producers to lower prices.

Reality check for Honolulu, anyone?

Sometimes the simplest of things can generate complicated tax law discussions, a phenomenon inconsistent with the assertion that tax law complexity is attributable to the complexity of the transactions in which taxpayers engage. According to a report in the ABA Journal eReport, when the pastor of a church challenged his congregation "to reflect their beliefs by devoting time, talent, and money to the church and the community," one member, an attorney, decided to draft simple wills in exchange for a small donation to the church by the people whose wills he drafted. The requested donation was less than his usual fee. He ended up writing about 45 wills, most for church members, and the church ended up with approximately $2,000.

It didn't take long before the tax experts scrutinized the arrangement. Prof. Ann Murphy of Gonzaga wondered if the attorney had gross income, and if he had a charitable deduction. She also asked if the church would be liable for the tax on unrelated business income. Good questions.

Simple transaction, simple rules, simple analysis, simple answer?

Nooooooo. Not at all. Well, the transaction is simple, the rules are simple, the answer is simple, but the analysis isn't.

A person who performs services for compensation must report gross income, subject to several exceptions not relevant to this discussion, such as the performance of certain services overseas. At first glance, someone unfamiliar with tax law would conclude that the attorney was not paid and thus has no gross income. But years ago, in fact, decades ago, the courts held that a person could not avoid gross income by having the compensation paid to another person. This principle reflects what is called the assignment of income doctrine, namely, assigning income to another person does not shift the tax incidence. Thus, there's no tax advantage to telling the employer or the client to pay the salary to the children, a trust for the children, or a charity. In fact, in Regulations section 1.61-2(c), the Treasury Department explicitly provides that in the sort of situation being described, the person providing the services must report the gross income.

So the attorney has gross income, and then is deemed to pay the amount involved to the church as a deductible charitable contribution. Would it make a difference if the attorney did not report the income and did not claim the charitable contribution deduction? Wouldn't taxable income, and tax liability be the same as if the gross income were reported and the deduction claimed? No, because the tax law is loaded with limitations, floors, ceilings, and other wrinkles that don't guarantee a dollar-for-dollar offset of deductions against gross income, though it can happen, but no one but the attorney knows whether any of those wrinkles would apply to his tax return. For example, if the attorney claimed the standard deduction, the charitable contribution deduction would be "wasted," though this is an unlikely scenario.

Yet isn't there something intuitively "wrong" about requiring the attorney to report gross income? After all, what if someone approaches the choir director and says, "If the choir sings Rutter's Magnificat on the third Sunday of Advent, I'll donate $3,000 to the music fund." Do the choir members have gross income? The answer surely is no, but why? Is it because the choir members aren't professionals? Suppose one or another of them is a professional, earning a living by singing during the week at other venues? Certainly there are differences between this example and the lawyer preparing the wills. The choir members did not pre-arrange the payment in exchange for their services. They did not perform a service solely for the donor, but instead provided it to the church (and I suppose, in a theological sense, as a worship gift to God). They almost surely would have sung something on that Sunday. As a practical matter, the donation probably was used to pay professional musicians whose presence would be needed for the piece, but that is a distraction from the core question.

The intuitive reaction, though, sparked an interesting discussion. One participant in the discussion initially noted that the lawyer did not receive the money, and the money was not available to him, thus precluding application of the constructive receipt doctrine, and thus precluding gross income. The constructive receipt doctrine is in part a gross income identification doctrine and is in part a timing doctrine. In its classic form, it deals with situations in which a taxpayer tries to defer gross income to a later year, because the time value of money encourages postponement of income that generates tax liability and because the tax rates in a later year might be lower. It also is a doctrine implicated in the principle that income deflected to another person is nonetheless the income of the person who performed the services because they were in constructive control of the income. But whether or not the constructive receipt doctrine applies, the assignment of income doctrine surely does, as evidenced by Regulations section 1.61-2(c).

It is fascinating that a matter as to which the law is settled can trigger extensive discussion. Yet, that is one way the law evolves. Otherwise, if no one discussed the question because the law was settled, the law would be less like to change, even if change was sensible.

The participant who raised the constructive receipt issue then backed away from that approach, and pointed out another interesting authority. In Revenue Ruling 74-581, the IRS concluded that law professors operating clinics under the auspices of law schools, who receive payment for services, and who turn those payments over to the law school, are NOT required to report gross income. It appears that the rationale is that the law professors are acting as employees of the law schools, receive the payments as agents of the school, and thus do not own the payments. This makes sense. A cashier in a store does not report as gross income the amounts paid by customers to the cashier because the cashier is acting as an employee and agent of the store owner. The gross income is the store owner's gross income. So the clinic income is the law school's gross income, but because the law school is almost certainly tax-exempt, it won't pay a tax on that income. Could the lawyer assert that the amounts paid to the church are not his gross income because he is acting as agent for the church? No, not under these facts. The lawyer is not the employee of the church. The church is not, and cannot be, in the business of preparing wills. One participant noted, in a very clever and smile-generating comment, that "I have always thought that part of a church's 'business' was to prepare people for the hereafter and seems that will-prep fits right in to that mission !" I doubt, though, this would get very far in tax litigation!

Several participants pointed out that "it does not make sense" to treat the donations as the lawyer's gross income. There's something to be said for this position. Yet, it is not unusual for the tax law to require an outcome that does not make sense.

Another participant pointed out a serious practical problem. The persons whose wills were drafted and who wrote a check to the church probably claimed charitable contribution deductions. Yet, applying the assignment of income principle, they were in effect writing checks for legal services for which no deduction is allowable (because of the personal nature of the services). The attorney, required to report the gross income, and allowed to claim a charitable contribution deduction, already claimed the deduction. It violates basic tax law principles, and policy, to permit two taxpayers to claim the same $50 charitable contribution deduction for one $50 check written to the church. Yet, absent the imposition of additional reporting rules (translate: more paperwork), the IRS is unlikely to identify these situations and correct the tax returns.

Note that if the services are provided directly to the church, there is no gross income and there is no charitable contribution deduction. Thus, had the attorney volunteered to fill out information and/or payroll tax returns for the church, there again would be an easy answer. The attorney isn't being paid, no one is making a payment "in recognition of" the attorney's volunteer work, and no income is being assigned.

And note that if the person whose will is prepared donates more than the services are worth, which apparently was the case with several of the people involved in the story, the excess would be not be gross income to the lawyer, would not be deductible by the lawyer, but would be deductible by the person making the donation. Determining what the services are worth ought not, as a practical problem, be too difficult.

Thanks to Paul Caron for bringing the story to our attention, and thanks to Bryan Camp, Joe Dodge, David Hasen, Calvin Johnson, Stuart Lazar, and Elliott Manning for their helpful, interesting, and sometimes humorous comments.

# posted by James Edward Maule @ 10:45 AM