MauledAgain

One of the things that I must emphasize to students when explaining what they should be doing during class time is the need to avoid the transcription game. Too many students enter my courses continuing to think that the key to learning is to write down everything that is said, as close to word-for-word as is possible. In doing so, they divert their cerebral resources from what they should be doing.

Years ago, a student showed me a transcription of one of my advanced tax courses. It had every false start sentence, every umm and err, every student comment, in short, everything. The student explained that she had been a legal secretary and was good at this. Indeed, she was. Some years thereafter, a student gave me a copy of his class notes. They filled a binder. They were not quite a transcription but they were close. What does a student do with the transcription? Memorize it? No, not in my courses, because they are open book. Index it? No, not in this day and age of the word processing document and the find function. I think some students want to use it as a resource from which they can extract segments to submit as answers to questions. The flaw is that many questions cannot be answered with text from a transcription.

I explain to students that notes are just that, notes. After five minutes of discussion, there may be one or two phrases or sentences worth memorializing. Consider what happens if a student asks a question and I choose to reply. Some students don’t need my reply, but some of them insist on writing it down. If the student who asked the question still doesn’t get it, I try another approach. Some students will transcribe that. Why? If they already get it, the continued dialogue with the student who asked the question doesn’t make another point. It’s repetition. My favorite example, though, is to share with my class what has happened in the past, at least until I started sharing this story. I was reading a sentence from the Internal Revenue Code, stressing certain phrases and rattling through the less relevant language. I expected students to be following along in their copies of the statute. I was surprised when a student asked me to repeat what I had said because he was having trouble writing down all the words. I told him he already had all the words. And, yes, this was an instance where even a student who had not read the assigned statute before class should have realized I was reading from the Code, because I had explained before I started to do so that I was doing so. For the same reason, I provide the Powerpoint slides before class, so that students can enhance the main points rather than sit and write everything they see on the screen. Yet I see students trying to write what’s on the screen, while surely missing the points that are being made as the class explores each part of the problem solution or flowchart.

The goal, I elaborate, is understanding and comprehension. Note taking should reflect that goal rather than the goal of collecting words, phrases, sentences, and paragraphs. It matters less that a student can repeat the words I used to explain something than to have the ability to explain it using his or her own words.

Coupled with this problem is the long-standing complaint by students that I talk too fast. Too fast means too fast for transcription. By moving at thinking speed rather than writing speed I discourage transcription. A former colleague, later a dean at another school and a legal educator for whom I have much respect, listened to me some years ago gripe about students who want me to speak in plodding rhythms so they can transcribe every word. He shared with me something he had picked up somewhere along the line. It takes more time to write than to read, more time to read than to speak, more time to speak than to listen, and more time to listen than to think. In other words, thoughts move through the students’ minds more quickly than they can write them or speak them. The same is true of my mind. That is why many of us tend to speak quickly lest the five things we want to share begin to disappear before they are expressed. Trying to write every word representing those five things rather than using a catch phrase of some sort bogs down the process. If a student is fully prepared for class, much of what is being said or worked through already is in, or should be in, the student’s brain and preparatory notes. Ideally, by the second year of law school, a student should be using the classroom experience to modify and enhance notes taken during pre-class preparation rather than to create whole-cloth a new set of materials that then need to be integrated with the pre-class notes. Transcription increases the workload in much the same manner as happens when students buy every student guide ever published for a particular course and then try to put it all together. I tell them that they would need years of full-time endeavor just to do that for one of their four or five courses. That’s not what they should be trying to do. And I do my best to discourage it.

Next: post-class assimilation

Having instructed the students as to what I expect them to be doing before they arrive in class, I then turn to what they are expected to do in class. I begin by describing what will occur during class and the opportunities that will be presented to them to sharpen and revise what they have absorbed during their pre-class preparation and to determine the extent to which they have grasped the material.

The primary focus of class time, aside from the introductory classes, is to examine problems similar to those that clients would bring to the lawyer, and to consider questions similar to those clients would pose to the lawyer or those that a partner might ask of an associate. In other words, the goal is to put the students in situations that resemble law practice as nearly as possible. A perfect simulation isn’t possible, but it is important for students to know that class is the equivalent of a laboratory.

Knowing that many of the students are in their third semester of law school, having finished a year during which almost all of their class time has been devoted to case analysis, I explain to them the different role case analysis has in the course. I do this because in my early years of teaching the course, students complained that I did not “take us through the cases as our first-year professors did.” I explain to the students that they are now experts in reading, briefing, and analyzing cases. We don’t have time to go through the litany of questions dealing with the identification of the parties, the procedural posture of the case, the applicable law, and the other ingredients of a classic first-year case brief. Instead, as we work through a problem or deal with a question, students should be prepared to bring forth one or more cases that they have read and digested in support of an argument or to rebut an assertion that has been made. The cases, in other words, are tools, as are the statutory and regulatory provisions, rather than the central characters in the educational process.

It then is time to turn to the thorniest piece of the in-class experience. I tell the students that there will be some introductory lectures for most of the topics. I also tell the students that I have struggled for many years with this aspect of the course. The advantage of the introductory lecture of 5, 10, or 15 minutes is to give each student a chance either to affirm what he or she picked up from pre-class preparation or to raise a hand and request clarification on something that did not make sense. At this point in my teaching career, I have a pretty good idea of which bits of black-letter principles are likely to cause consternation and which are sufficiently obvious to merit little or no attention until we turn to the problems. The disadvantage of the introductory lecture is that some students interpret it as an invitation to set aside pre-class preparation and to treat the introductory lecture as information acquisition. I warn students not to do this, because if they are encountering what they are hearing for the first time at the beginning of the class, they will not have time to process it in the 30 seconds that might exist between the end of the introductory lecture and the commencement of the examination of the first assigned problem for the topic. So why do I retain the introductory lecture? The alternative, which is to dive into the first assigned problem, is frustrating and ineffective. Repeated questions from unprepared students cause the flow of the class to become distracted and jumbled, which few students appreciate, and if those questions are ignored, students become angry because they feel ignored and short-changed for their tuition dollars. Until there is an institutional culture similar to that found in other graduate programs, where faculty and students come into the classroom with much more equivalency, the jumping right in approach is counterproductive in a course with so much to do and so little time in which to do it. Understanding that much of the inability to emulate other graduate programs is the lack of the LL.B. and LL.M. education that should precede doctoral work, I made the choice to take the approach that caters to the students’ preference for introductory lectures.

Finally, I tell the students that we will be using student response pads, or "clickers" very often during most of the course. Sometimes their answers are graded, and more on that later. Most of the time the answers tell them and tell me whether or not they’re getting it. Sometimes I pose the clicker question as soon as we reach a problem. Some questions, I inform the students, are simply for my edification and cannot be answered incorrectly. For example, at the appropriate point I ask them if they have dealt with time value of money. The answers vary from year to year. The bulk of the questions, though, require them to select answers, pick the best argument, identify facts that are needed or, alternatively, irrelevant to solving the problem, or identify applicable authority. The benefit of instant feedback appeals to the students. As one would expect, they’d rather find out during the semester than on the exam that they don’t grasp a concept or, worse, that they have a "bad habit" in their analytical reasoning skills that taints most of their answers.

Next: discouraging the transcription game

Students who are preparing for a law school class, particularly those in certain areas of the law, will become frustrated rather easily when they compare the amount of time they are investing with what they appear to be getting out of that investment before they go into the class. This frustration is one of the leading causes of students deciding to ignore the assignments and hope that they can pick up what they need to know simply by going to class or, worse, getting their hands on an old outline.

I urge students to try to identify what isn’t coming together for them as they prepare for class. Though sometimes it is the complexity of the material, it is not unusual to discover that the stumbling block is the student’s lack of familiarity with the transaction in question. Far more likely to be a problem in tax, contracts, or property than in torts or criminal law, the shortcoming arises from the student’s presence in a doctoral program in a field in which the student does not have a bachelor’s or master’s degree. Only law has this bizarre and absurd arrangement. Graduate students in history have been through a good dose of history classes, and the same can be said of graduate students in chemistry, engineering, and a variety of other disciplines. Even medical students are required to take certain courses so that time isn’t wasted in medical school catching up on basic concepts. The J.D. as a "fake doctorate" as I pointed out in Dr. Maule, I Presume?.

To get this point across, I share with the students the struggles of their predecessors who, when dealing with a problem assigned for the life insurance topic, simply gave up because they did not understand what life insurance is and how it works. Their reaction was intensified by the second half of that particular day’s assignment, the taxation of annuities. For every student who was afflicted with ignorance about life insurance, there are three who have no clue about annuities. So, I tell them, this class is burdensome because they are learning not only tax but also the underlying transactions. The fewer that they understand, the more challenging and frustrating is the course. I know this, they need to know this, and many of them are shocked. But, I assure them, if they are aware that this is what is happening, they are in a better position to keep it from spiraling out of control.

Next: in-class learning methods

I begin the student focus by addressing pre-class preparation. I tell the students that their assignments for each topic are in the Course Outline and Assignments document, that the assignments are set forth in a specific sequence, and that they should go through the assignments in that sequence. They are in that sequence for a reason, and if a student tries to go through them in some other arrangement, the student is doing nothing but creating additional challenges that are needless and worthless.

There is one exception to the "read in order" advice. I tell the students that before proceeding to any assigned problems they should go back and re-read the assigned Internal Revenue Code provision, and as they do the problem to go back to any of the other materials. I do this so that they become more familiar with statutory, and where applicable, regulatory language, and because the process of repetition solidifies their grasp of the material. This is one instance in which my “student focus” would need to be modified for courses that do not, for whatever reason, deal with statutory or regulatory material.

Then I turn to what may be the most important part of this segment. I tell them that the learning process requires then to try doing the problem, even if they get stuck part way through the process, or even if they end up with a result that does not make sense. I stress to them that effort matters more than outcome. I explain that the process of trying immerses them in the material. I also explain that even if they fall down trying to apply the law to the facts, they need to absorb the facts. There is nothing more embarrassing, I tell them, than asking a partner "who is X?" when the partner already answered that question in the memo or email that the partner previously sent to the associate. Thus, I tell them, consider the problem to be a memo or email from a partner. Even if they cannot figure out if the exception to the exception applies, they need to know the names of the parties, the transactions in which they engaged, the number of items, the total dollars transferred, the year or years if given, and so on. I warn them that when they ask in class, "Where did you get that from?" and the answer is in the problem, they should consider what the repercussions would be if they asked the question of a partner at the law firm. I also tell them that I am not impressed when, while we are working on part (a) of a problem, someone raises his or her hand and asks, "What if such-and-so were instead this-and-that?" when part (d) of the problem asks that precise question. There are no points for creativity when the question suggests that the student does not know what part (d) asks, because it implies that the student did not read and prepare the problem.

I further explain that there is a huge difference between no effort and a failed effort. The student who tries to solve the problem but fails has learned something, for one can learn by failing, especially in a controlled environment such as a classroom. On the other hand, the student who makes no effort learns nothing. Even if that student subsequently acquires the answer to the problem, it will not make as much sense as it does to the students who are so much more familiar with the analysis because they immersed themselves in the thinking process.

There is value in this preparation. And, yes, it will take time. They should expect to invest one to two hours of time outside of the classroom, before class, for each 50-minute classroom session. Why such a wide variance? It depends, for one, on the particular topic and the length of the assigned material. It depends, as well, on the student’s reading speed, comprehension ability, familiarity with the underlying transaction, and grasp of topics previously covered. Some classes will demand 3 hours of preparation but others only 30 minutes. The first class, I point out to them, the one in which they are sitting, probably required a grand total of 5 minutes of preparation. Yes, I’m practical, and realize I’m carrying the load for that first class.

Next: how the inherent flaw in the law school learning process makes preparation more difficult

Two summers ago, in Structuring the Basic Tax Course, Part I, I commenced a series of 40 posts that explored “how and why I have structured the basic tax course that I teach in the way that I do.” My inspiration for the series was a set of conversations that I had with two colleagues, one who would be teaching the course for the first time at Villanova, and the other, for the first time, period. We discussed what topics to cover in detail, what topics to skim, what topics to omit, the mix of problems, case analysis, lecture, and other approaches, and the sequence in which the topics should be presented. They didn’t end up imitating my course, and that wasn’t my intention. They did benefit, and they have told me this, from my insights and I did influence some of what they do.

This summer, I begin another series, though it will not reach 40 posts. This time I am going to share the portion of my first-day overview in all of the courses I teach that I call "student focus." In short, it is my explanation to students of what I expect from them, and why I expect from them what I expect. It is not limited to tax courses, and I know that because I have taught courses other than tax courses. With some modification, it ought to be beneficial in any law course, or, for that matter, in any course in any discipline.
I break the student focus explanation into five parts. First, I talk about pre-class preparation. Second, I discuss what happens, or should happen, during class. Third, I talk about post-class assimilation. Fourth, I discuss how their efforts will be scored and graded. Fifth, I share some ideas about ways in which they can make their responsibilities easier to meet, and in an efficient manner. Each of these segments addresses several points, and I intend to work through these as this series of posts progresses.

Why have I concluded that a student focus explanation is worthwhile? Because early in my teaching career I discovered that my students weren’t doing what they should be doing, seemingly because they did not know what they should be doing, or if they did know, they did not understand why. Because my students have been in law school before they reach my course, it is reasonable to question why they don’t have these things already wired into their brains. I don’t know the answer. It could be that they’re not absorbing it when they first encounter it, or it could be that they’re not encountering it. My student focus explanation also has the salutary secondary effect of letting students know at the outset what is expected by me, and giving them the opportunity to drop the course and head in some other direction if my expectations are more than they are willing to try meeting.

What I am planning to write is not a transcription of what I say in class. I have no such transcription, and to the best of my knowledge, none exists. I deliberately do not read from a script, but simply work the students through the principal points I wish to address, embellishing them in the manner that appears to be working best for the particular group of students in the room at that moment. But although the precise words change from course to course and semester to semester, the gist of the presentation remains the same.

Next: pre-class preparation

Someone commenting on What Is Taxation? caused as thought to cross my mind. The anonymous commenter took the position that taxes are not like club dues nor are they payment for services.

So, if taxes are not equivalent to club dues or payment to services, the objection must rest in the allegedly involuntary nature of taxes. But taxes are not involuntary. A no-tax political party could repeal all taxes if it gained control through elections, but that won’t happen because too many people realize the danger of having no taxes and appreciate why taxation must exist. Nonetheless, if the tax-opposing minority wants an out so that they’re not at the mercy of the majority, perhaps there is a solution. This is when the thought entered my brain.

What if the world’s nations --- all of which share a universally held commitment to imposing taxes --- set aside an area of land and invited all those who disliked taxes to settle there. It would be agreed that no nation would invade Taxlessland, that every nation would sell good and services to, and purchase goods and services from, Taxlessland just as it does with other nations. The only restriction other than those generally applicable to all nations would be that the nation of Taxlessland would be prohibited from imposing taxes. It could have a government, but it would need to figure out how to make the government operate other than through the imposition of taxes, import and export fees, user fees, or any other sort of government exaction. There would be a sufficient number of settlers so that a simple barter economy would not suffice.

What would happen when a citizen of Taxlessland stole from another? What would happenn when a natural disaster hit? If currency was required, who would print it? Who would pay for the cost of printing it? Would a utopian community of generous neighbors emerge? Or would a strong-armed bully take over? Would vendettas replace a governmental justice system? Would the law be taken into the hands of whomever acted at his or her own whim? Would anarchy ensue?

I don’t know if the proposal would permit unhappy citizens of Taxlessland to return to their former abodes. Perhaps, if they were willing to embark on a mission to educate the tax objectors still living in their former countries. Those who teach from experience bring a certain genuineness to their efforts, and that surely would be the case in this instance.

Oh, there would be one more condition. Cameras would be placed throughout the territory and in the public spaces of Taxlessland, and transmitters would send the audiovisual information to satellites so that the rest of the world could see what happens. It would be the best reality tv show imaginable, would it not?

In my last post, I asked, "Come to think of it, what tax isn't disliked?" In Tax as a Hate Crime?, I noted, "There are people who hate taxes." Though some people, perhaps many people, can bring themselves to accept the need for paying taxes, the act of paying taxes probably is not in and of itself a source of pleasure or happiness. It doesn't generate the same sense of doing good as does, for example, making a charitable contribution.

In the string of posts that began with Pay Taxes, Be Happy, and ending, at least for the moment, with What's So Bad About Higher Taxes on Millionaires and Billionaires?, one of my themes was that the reason people in countries with relatively higher taxes are happier, according to various surveys, is because in the long run they get something that they otherwise would not be getting.

At a certain level, life would be great, would it not, if there were no taxes? Imagine having a salary of $75,000 and taking home all $75,000, or at least taking home everything except what was withheld to go into a retirement fund. But would life not even be better if there were no bills to pay? Imagine having a salary of $75,000 and not needing it because there was no mortgage to pay, no utility bills, no food bills, no bills for anything. Preposterous? Of course. So callled free-market enthusiasts would point out the absurdity of expecting something for nothing, and would explain that if no one paid for utilities, no one would provide them because there would be no economic profit in doing so. Cannot the same be said about paying taxes? Are not those who oppose taxes, and those who support low or no taxes on income other than wages, asking for something for nothing or for next-to-nothing? People object to increases in fuels taxes, even to keep up with inflation, but they gladly drive on highways that someone, somehow is providing.

The argument over taxes and happiness masks a deeper issue. It's not a matter of tax opponents advocating that all things should be free. They want people to pay for utilities, schools, roads, and food. But they want the money to go to so-called private industry rather than government. They don't want government providing anything because anything that government provides cuts into the profit-making opportunities of those with capital. Yes, some even advocate privatizing national defense, along with toll roads and charter schools. Ironically, these free-enterprise folks gladly stand in line, or pay lobbyists to stand in line, seeking tax dollars in the forms of direct subsidies, tax credits, or government contracts to fund their private enterprises.

What's their argument? The argument is that the private sector is more efficient at doing these things than is the government. The argument was successfully advanced almost thirty years ago, and with a few interruptions, we've had almost a generation of experimenting to see how well things go when the private sector runs the show. After some seemingly resounding success, masked by increases in debt far more so than by innovation and productivity, and costing much in terms of environmental and social costs, the outcome has overwhelmed the national and global economies. The house of cards came down. I wonder how many people who were happy that their taxes were being cut and cut and cut, are happy now?

It is unlikely that it could have been avoided. The storm clouds of a tax increase battle have been gathering over Pennsylvania since late last year. Once the economy went into a tailspin, it was inevitable that state tax revenues would decline, because the things on which state taxes are based diminish in frequency, value, and amount. When state revenues fall, there are three options: increase taxes, cut spending, or find some combination of those two choices. States cannot print money, and the borrowing for operating budget purposes isn't an option under the state's constitution, which requires a balanced budget. Pennsylvania's governor is a Democrat. The Senate is controlled by the Republicans and the House by Democrats, but barely. The governor is a lame duck, barred from seeking a third term. The stage is set for some intense negotiations.

At first it appeared that the shortfall could be covered without increasing the sales or income taxes and without chopping into state spending. Not long thereafter, as predictions of additional revenue shortfalls are made, the prospect of spending cuts loomed over the state capital. Fast forward a few months, and as the size of the shortages in the state budget continued to increase, murmurings of increases in the state income tax among some Democratic legislators could be heard. The governor responded by expressing his dislike for an increase, but refused to take a position opposing it. During the next few weeks, he continues to distance himself from an increase even as Democratic leaders in the House start to go public with the idea. Last week, the governor switched gears, announcing support for a "temporary increase" in the income tax, for as long as three years. This paragraph summarizes a more detailed chronology found here.

According to a a variety of sources, including this report, the governor is proposing an increase in the state income tax from 3.07 percent to 3.57 percent. Because the existing rate is so low, as state income taxes go, a one-half of one percent increment amounts to a 16 percent increase. An increase from 3.07 percent to 3.57 percent would increase state revenue by 1.5 billion dollars annually. That's assuming, I suppose, that the taxable income of state residents does not continue to decline as the economy limps along. The state income tax rate was last raised in 2003, from 2.8 percent to 3.07 percent, after the current governor managed to convince the legislature to go along with his budget plans. The increase in question would add roughly $20 a month to the state income tax liability of someone earning $50,000. Because the Pennsylvania income tax does not apply to pensions or social security income, it will have little effect on retirees other than those with significant investment income.

Republicans in the legislature are adamantly opposed to any increase. Because they control the Senate, they can prevent enactment of the proposal. Republicans argue that there is no such thing as a temporary tax increase and that the budget solution is to cut spending, principally welfare and education. Some Democrats also keep their distance from a tax hike, but for practical rather than philosophical reasons. Next year is a re-election year, and every incumbent Democrat who votes for a tax increase surely will be opposed by a tax-resistant Republican. Republicans also oppose the governor's attempt to tax natural gas extraction, an activity expected to become very prevalent now that there are more efficient ways of getting natural gas out of enormous existing and newly-discovered fields in the state. As a footnote, almost twenty years ago Pennsylvania's income tax rate was increased, and then after a year, dropped, though not back to the rate it had been before the increase. It is possible for temporary tax increases to remain temporary.

Republicans argue that a tax increase is wrong because there are "so many . . . being laid off, being required to work reduced hours, and worrying about how to pay their mortgage." Though tax increases don't affect people who have no jobs and thus no state income tax liability, they do have an adverse impact on those whose income has been reduced. The governor responded by pointing out that the spending cuts proposed by Republicans will eliminate even more jobs, reduce the opportunity to create new ones, and have a long-term adverse effect on the income-generating capacity of the state's citizens. Uneducated people, it should be noted, have a tougher time finding jobs and a smaller chance of finding jobs that pay enough to get by, let alone live comfortably.

The governor claims that a tax increase is "inevitable." He points out that he has already cut spending during the current fiscal year, and has trimmed a good chunk of spending from his proposed budget for the upcoming year. But even with those cuts, he argues, the state income tax needs to be increased. Why did he change his position on the tax increase? During the past four months, the state's estimated revenue for the year fell by $1 billion.

So the budget battle lines are drawn, and the skirmishing has begun. The Senate passed a budget that did not contain tax increases. A House committee tossed it out. One more bit of information needs to be added to the mix. If a budget is not in place by June 30, the state's spending authority terminates. Observers predict that the chances of a budget being approved by then are slim to none. Some commentators think that the governor is using the threat of an income tax increase as a negotiating ploy. Lobbyists are chiming in, with statements as predictable as their employers or sponsors, and their arguments simply repetitions of the same tired claims trotted out every time taxation is debated. Those opposing taxes point out that citizens will howl in anger if the income tax, the most disliked tax, is increased but don't mention the screaming complaints that will be heard once people figure out what gets cut if taxes are not raised. Those seeking to raise taxes argue that spending cuts will worsen the short-term employment situation and the long-term job opportunities of today's students, but brush aside the claim that tax increases will cause businesses and perhaps even residents to locate elsewhere. Considering that almost every state faces budget deficits and isn't reducing taxes, the number of options available to those seeking to increase a small income tax increase is rather limited. A curve ball in the situation is that cuts in state funding of public education will ensure increases in local property taxes, another tax that isn't well liked. Come to think of it, what tax isn't disliked?

Knowing that no one wins if a budget is not enacted by June 30, the governor announced, according to this report, that he's open to a stopgap budget. This would permit the state to continue operations, to issue paychecks to state employees, to keep state offices open, and to continue providing state services. Republicans reacted favorably, saying they are "willing to have a conversation." But at least one Democrat noted that since stopgap budgets need to be negotiated, it makes more sense to negotiate the budget in its entirety.

A stopgap budget is just that. It's a cease-fire, and not a truce or a cessation of hostilities. As one legislator said, "The disadvantage [of a stopgap budget] is that it would only postpone the day of reckoning." As alarming as it may seem for June 30 to arrive with no budget in place, since the governor took office six years ago, the number of budgets that have been enacted by the deadline is a grand total of zero. Yes, zero. But in none of those years was the situation so serious and the division between the two camps so wide. And in some of those years the state government partially shut down. In none of those years was a stopgap budget used, because it has been 32 years since there has been one. The governor admitted he did not know how the process worked, and assumed there were legislators who do. There probably are a few state legislators who were in the House or Senate in 1977. But what might they remember?

The only way this logjam is going to be broken is if the state's citizens bring pressure on law makers to stop the political posturing and get to work on the details. Both sides need to disclose fully and fairly the impact of their proposals. It's not enough just to tell someone earning $50,000 that he or she is looking at a $20 state income tax increase. It's not enough just to assert that cuts in spending would cause harm. The proposals need to be described in sufficient detail so that people know how many state offices will be permanently closed, which programs would terminate, which jobs would be eliminated, and which services would cease. For example, simply saying that x number of driver license renewal centers would close doesn't hit home. People figure it will be someone else's inconvenience. When the impact is seen after the fact, people don't have the same leverage that they do when the issue is under discussion. Local school boards need to announce what would happen if state funding for public education is cut by y percent or z percent. How much higher will the next property tax increase be? How many sports will be cut? How many teaching vacancies will go unfilled? Perhaps when all is said and done, the opposition to taxes that is funded and driven by those who can most afford to pay what needs to be paid will be overwhelmed by the demands of a citizenry for a government that is responsive to them and not to the adherents of a tax policy that failed at the national level and will fail at the state level, as it has, for example, in California.

It started rather simply. An OECD report informed us that the nations whose people ranked the happiest in a new survey are those with tax rates among the highest. In The Happiest Taxes on Earth, Thomas Kostigen suggested that the reason for this phenomenon may be that these particular nations provide so much for their citizens that their taxpayers feel that they get something in return and know what it is, whereas in the United States people "are never really quite sure of what we get in return for paying them, other than the world's biggest military." Kostigen noted that people who worry about being able to get health care and other services tend not to be happy.

In Pay Taxes, Be Happy, I examined Kostigen's premise, and suggested that another factor for unhappiness with taxes is the perception, on the part of some, of taxes as nothing more than a reduction in the possibilities of accumulating wealth. I noted that if the extent to which governments provided needs was the determinant with respect to happiness and taxes, then one would expect the deepest unhappiness about taxes to come from those whose basic needs have not been met, but yet the crusade for the elimination of taxes on everything but wages has been led by those already swimming in huge amounts of wealth. My thoughts and questions brought a response from Peter Pappas, in Tax Happiness: Inventors of Sauna Happier than Inventors of Polio Vaccine. He suggested that Americans "have created more life-altering inventions and made more evolution-enhancing discoveries than the rest of the world combined . . . because they are empowered to do so by a system that forces them to rely on their own merits" and then posed questions both to Kostigen and myself. I replied in Forget Lives, Liberties, and Happiness: The Pursuit of Wealth and Power , explaining that although no one knows why some people are so intent on "making a killing" and accumulating far more wealth than is necessary to live comfortably or even luxuriously the cost to society of that behavior is too high. I also pointed out that his assumption that people in high-tax countries have produced far fewer "objective accomplishments" than have Americans was factually questionable. Pappas rejoined in Tax Law Professor James Maule Responds, arguing that "pursuers of great wealth" are good for society. In Making A Living but Not a Killing: The Discordant Symphony of Wealth Creation and Wealth Grabbing , I elaborated on my position, highlighting the differences between wealth creators and wealth grabbers, emphasizing the tendency of the former, and their supporters, to resist taxation designed to marginalize the latter through higher taxes on exceedingly high incomes because they somehow consider taxation of the excessively wealthy to be a threat to entrepreneurs who are trying to "make a living" rather than "making a killing."

Now Andrew Oh-Willeke, of Wash Park Prophet, has joined the fray. In Maule on Wealth, he explains that my position is "strikingly negative about what is involved in becoming and being wealthy" and then proceeds to explain why he disagrees with me on "multiple counts." Let's take a look.

Though agreeing that "business enterprises frequently engage in conduct that harms the environment and produces worker injuries," Oh-Willeke contends that these harms would exist whether business leadership are eking out a living or raking in the bucks. He contends that "some of the most environmentally destructive businesses in the world, and often also the most hazardous to workers, are small, family owned farms, logging operations, and mines owned by people who are just barely getting by." After decades of reading about the disappearance of family farms and the rise of mega-agribusiness and the conglomeration of formerly small logging and mining operations, after several years of reading about and seeing the impact of mountains being cut down to hills by huge mining companies, I find it very difficult to buy the mega-business line that, "It's not us, it's the little guy" because there just aren't very many little guys out there anymore. Box stores have killed the little guys on Main Street, acquisition-greedy corporations have swallowed up the competition and even enterprises in other industries, handing their CEOs tens of millions or more for accomplishing these decrements in competition, and monopolies and oligopolies dominate too many industries. In any event, the few "small, family-owned" businesses that are just scraping by are in no danger of being affected by my proposals to increase tax rates on annual incomes exceeding $1,000,000 and to increase even more the tax rates on annual incomes exceeding $10,000,000. If these small, family-owned enterprises want to survive the next round of mega-corporation expansion, they'd be wise to jump on board my proposal.

Oh-Willeke then argues that "the vast majority of revenues generated by the vast majority of businesses" generate "modest salaries for ordinary workers and often modest returns for investors some of whom are mere ordinary individuals saving for future middle class wants and needs." This is true, but it misses the point. Oh-Willeke adds, though, that "what we define as 'profit' … is usually a minority of revenue, and senior executive compensation … is usually a small fraction of average profit and an even smaller fraction of business revenues." So what? Whether the person earning $50,000,000 a year is running a business that generates profits of $30,000,000 or $300,000,000 doesn't change the relative value of a $50,000,000 annual income nor does it change what the person earning that income does with it. Nor does the ratio of compensation to revenue or to profit change the harm that is generated when a company, in order to pay the $50,000,000, cuts jobs. Worse, there are more than a few instances where huge salaries for upper managements are being paid by enterprises generating little, if any, profit for the modest investor and cutting wages for the rank-and-file. Add to those economic harms the costs to individuals and other businesses who must endure or whose employees must waste time sitting on hold trying to deal with a broken product, malfunctioning software, garbled paperwork, or nonresponsive suppliers because there are too few employees as a consequence of the layoffs undertaken in order to preserve the high-end salaries. Again, though some think that the interests of the employees with modest salaries and the investors saving for future middle class wants and needs dovetail with those of the mega-wealthy, that sort of thinking is precisely what the mega-wealthy want to happen, because it lets them hold middle America hostage for their greed and power games.

Oh-Willeke also disagrees with my contention that wealth is created through labor. He thinks "[i]t would be nice if something like a labor theory of value … was supported by strong economic data." He gives as an example, the experience in Zimbabwe with its productive agricultural lands. Formerly owned and managed by a "few thousand white plantation owners," and worked by native Zimbawean labor in an arrangment "the nature of [which] looked a lot like the pre-Civil War American South," the farms were seized by the government and given to the farm workers. Everything went amok. Of course it did. As Oh-Willeke explains, "the farm workers were not up to the task of managing the land. . . . the plantation owners knew how to run their farms, while their workers did not." And why not? The answer is that they lacked education. Their wages did not permit educational opportunities of the sort needed, the government did not collect taxes sufficient to provide educational opportunities of the sort needed, and that country was afflicted with monopolistic or oligopolistic control, depending on whether one views the former system, of educational opportunity.

Oh-Willeke disagrees with my assertion that "By definition, the 'pursuers of great wealth' must exploit others and damage the world, for if they were not to do so, the world's resources would remain distributed among all people in rather even distribution, with variations of far less magnitude than exist today." First, he notes that the "most downtrodden" are more in a position of irrelevance than exploitation because they "don't participate in, or have a connection to, wealth creators in the economy." I disagree. These people are seriously affected by national and global economies. They are far more likely to live in areas of air, water, and land pollution precisely because they lack the clout, translation, economic resources, to resist having their homes treated as the world's dumps. The are far more likely to be pushed aside if their lands contain resources of any value. Because they have nothing in the economic sense, they are far more vulnerable to being hauled off, voluntarily or involuntarily, deceptively or honestly, to exploitative situations. Second, Oh-Willeke, though admitting that the "world certainly isn't free of exploitation," claims that "those who participate in creating wealth, even as 'replaceable underlings' typically come out far ahead of those who aren't involved at all." This is the "something is better than nothing so be grateful for the crumbs from the table" argument. During the nineteenth century, pro-slavery advocates often argues that slaves were better off as slaves on plantations than they would have been "back in Africa." Even if true, that does not make it right, nor does it mitigate, let alone justify, the harms that were being done by the exploitation. Oh-Willeke, though, uses as his examples situations involving what appear to be consensual arrangements, namely, people settling for low wages or even modest wages paid by someone with a huge income, people who theoretically have the choice to turn down the job. The problem is that there is no choice when a person has children to feed, and a family to house. This is why minimum-wage jobs exist and find takers, often far more qualified than the position warrants. Employers know that hungry people aren't in an equal bargaining position. Oh-Willeke's example of China as a place where the workers are better off than the peasants is but a limited snapshot of an economy and culture that is reeling from the true costs of a nascent ultra-wealthy class. The Chinese system does not pay the costs of the environmental damage that it is imposing on the country, and if that cost were met rather than deferred, the workers would be no better off than the peasants though the elites would be making good use of the lessons that they have learned studying the practices of the ultra-wealthy in other nations and cultures.

Oh-Willeke then argues that it is easier to "restrain, regulate and redistribute earnings from the externalities created by large enterprises than it is to do the same with small enterprises" because [b]ig businesses are easier to regulate and have a harder time simply cheating on their taxes -- they manipulate and twist the tax rules, but, with rare exceptions, follow them." So we are to believe that it's the "little guy" who sets up the controlled foreign corporations, the hidden Swiss bank accounts, the offshore trusts, and the subsidiaries in the Caribbean? I think it's the opposite. The big businesses are so big and have so many resources that they can afford not only to set up tax avoidance mechanisms but also to hide what they are doing from an overworked, out-resourced, and out-numbered IRS audit team. How many tax shelter cases involved individuals and companies with incomes or revenues, respectively, of less than $250,000? How many involved individuals and companies with incomes or revenues, respectively, in the millions? To the extent the "little guy" is cheating, it's because he sees what the ultra-wealthy are doing. It's because he knows that the middle class faces higher average marginal rates than do the ultra-wealthy.

Yet in the end, Oh-Willeke backs down. He accepts that "those who have more have no obligation to share with those who have less, as a price for conducting business in an orderly society, like the United States, as opposed to one where government is ineffectual, like Somalia." So unlike those who want to reduce or eliminate taxation on everything but wages, Oh-Willeke is taking a position that leaves us arguing, ultimately, about the rates that should be imposed on those million-dollar incomes. But the truly disturbing and yet hopeful revelation is this one from Oh-Willeke: "I am no longer nearly so convinced that behind every great fortune is a great crime, as I was a couple decades ago." Some of what happens when great fortunes are amassed isn't, technically, criminal. But I don't think that's what Oh-Willeke means. I think he means that he once thought as I do now, but that something changed his mind. What was it?

Roger Corbin is hoping that you don't. Get the picture, that is. The picture of Roger Corbin being arrested, cuffed, and taken to jail on charges of tax evasion. Actually, it's not a picture, it's a bundle of pictures. News photographers aren't known for snapping just one exposure. But why would news photographers show up, along with reporters and other journalists, at an arrest? The answer is that Roger Corbin is a member of the Nassau County, N.Y., legislature. In other words, he's someone in whom the public is interested, especially when arrested and charged with tax fraud and lying to federal agents.

Corbin, not suprisingly, claims he is innocent. Charged with taking money from a developer involved in a federal contract in the region, and not reporting it as income, Corbin at first told federal agents that he had not received the money. That was back in November of last year. A few weeks ago, Corbin disclosed that he had lied when answering questions at the November interview with the federal authorities. With almost a quarter of a million dollars at issue, Corbin is looking at approximately $70,000 in unpaid taxes, interest, penalties, fines of up to $1,000,000, and probable prison time if convicted. And there's more. Surely New York State and the various local jurisdictions will ride the outcome of the federal litigation to collect the state and local taxes due on the amounts that were received and unreported, if those allegations are proven.

Yet at the moment Corbin's primary attention isn't on the charges of tax evasion and lying to federal agents. Instead, he asked the court to block several news publications from using the pictures that were taken of him during the arrest. One photo can be found in this Newsday story about the arrest. Newsday is one of the news outlets involved in Corbin's complaint. Despite arguing that the pictures generate prejudicial publicity by the government, Corbin failed to persuade a federal judge to block publication of the photos.

It gets worse. Corbin's attorneys decided to appeal the judge's decision. But the judge ruled that his decision cannot be appealed and refused to issue a certificate of appealability. He explained that none of the exceptions permitting a defendant to appeal before being convicted were applicable in the case. The internet being what it is, and the photos having been published, the issue quickly became moot, because there is no way that the photos in question could be retrieved and removed from the public eye.

The issue is a difficult one, even though the law is about as clear as the law can be. Photos of a someone, even a politician, being arrested have negative effects on that person. Whatever reputation the politician had is tarnished. The politician's re-election prospects almost always are damaged. Finding an unbiased jury becomes more difficult. If the charges turn out to be false, or cannot be proven, it is almost impossible to rehabilitate the person's reputation and standing in the community. On the other hand, legislators are public servants. When charges are brought, they ought not be hidden from the public, and if the person is arrested, that event is news. It makes it even more essential for politicians to steer very clear of questionable financial practices and to be very careful when filing tax returns.

The payments that Corbin seems to have admitted having received were received in private. Perhaps the publicity accorded the arrest should be extended in some way so that money cannot change hands with a legislator in private settings. How that could be implemented is as dicey a challenge as is striking the balance between adverse publicity and the public's right to know.

Proposals to impose taxes on sugar-containing beverages and to increase taxes on alcohol have resurfaced, this time at the federal level, as suggestions for coming up with the funds required to implement any sort of serious health care reform.

The sides are shaping up in the debate. For example, the Center for Budget and Policy Priorities thinks such a tax makes sense. On the other hand, In The Return of the Soda Tax Proposal, focusing on the one-cent per ounce tax on sugared drinks prposed by Kelly D. Brownell, director of the Rudd Center for Food Policy and Obesity at Yale University, I concluded:

I simply don't think that a tax on sugar-containing beverages, or even a tax on supposed unhealthy foods, will make a difference, because it doesn't attack the root cause of the problem. What activity or item can be taxed when the problem is a psychological one rooted in lifestyle and culture? Even if it could be identified, and I don't think it can be, would it be appropriate to tax it? No.

A google search for " sugar beverage tax 'health care reform'" turns up thousands of hits. Everyone has an opinion.

The advocacy for and against increases in the scope and level of so-called "sin taxes" has brought all sorts of rhetoric to the table, but none tops this comment from Representative Stephen Lynch of Masachusetts, as reported in this BNA article. According to Lynch, "I have one of the most Irish districts in the United States of America and there are folks in my district that would consider a massive increase on the beer tax as a hate crime.” It might be worth noting that Lynch's district includes brewers Samuel Adams and Harpoon.

There are people who hate taxes, and there are people who think that this nation's labyrinth of tax systems is a crime, but this is the first time I've seen or heard taxation described as a hate crime. Lynch's comment can be seen as itself a hate crime, a notion raised by John Cummings in his BizTaxBuzz post on the issue. He simply notes, "No reports yet on whether any of Mr. Lynch’s constituents regard this statement itself as a hate crime." Cummings does not explain why the comment itself might be a hate crime, but one wonders about the implications in the statement by Lynch. The connection between people of Irish descent and drinking, a stereotype prevalent in culture beyond Lynch's observation, suggests both that Irish descent makes drinking inevitable and that there is some sort of Irish monopoly on alcohol consumption of the sort to generate these types of comments. In Drinking Occasions, Dwight B. Heath explains, citing Richard Stivers, "Hair of the Dog: Irish Drinking and American Stereotype, "The stereotype of Irish drinking and drunkenness is still often applied to Irish-Americans, although they actually have a much higher rate of abstention than most other segments of the U.S. population."

Although it appears Cummings was correct when he stated, Sin Taxes Fizzle in Congress, the more troubling aspect of the discussion is not that the proposal was made, for thinking through a proposal, no matter its feasibility, is educational, but that it generated the sort of comment that Lynch put forth. It's troubling not only that he milked a stereotype to make a point that could have been made in other ways, but that he equated taxation to a hate crime. Considering what has happened in the past several weeks in this nation, as violence unquestionably qualifying as hate crimes erupted in too many places, he could have found a better choice of words. Taxation is not a hate crime.

In Forget Lives, Liberties, and Happiness: The Pursuit of Wealth and Power, I responded to two questions posed by Peter Pappas of The Tax Lawyer's Blog. Today, in Tax Law Professor James Maule Responds, Mr. Pappas makes some important and thought-provoking points in his rebuttal. It helps to read these three posts before wading into this one. Mr. Pappas explains that in his comparison of the "wealth-creation artist" to the "symphony-creating artist" he "assumed that each would not pursue their art by engaging in immoral conduct" but that I begin "with the premise that anyone who desires great wealth must be willing to harm others and the environment in order to achieve that end" but that I don't "make the same assumption about the music composer." He's right, except that these aren't premises, but observed outcomes.

Mr. Pappas points out that among composers and other artistic talents one can find people who are "equally or more obsessive and ruthless in pursuit of his or her art than is the wealth-seeker." Absolutely. I did not intend to suggest that all symphony-creators were paragons of virtue, goodness, and sinlessness. Oddly, two of the three examples provided by Mr. Pappas involve artistic genuises who did themselves in, perhaps before they had a chance to engage in or extend the ruthless behavior that otherwise awaited the world. I did intend to suggest that "wealth-seekers" who succeed in accumulating amounts far in excess of their needs do end up, sometimes intentionally, sometimes unwittingly, and almost always remorselessly, imposing huge costs on others, excessively harming the environment, unduly putting the economic well-being and security of nations at risk, engaging in monopolistic or oligopolistic behavior, riding on the backs of others, and unduly infringing the rights of others. By definition, it is impossible to accumulate huge amounts of wealth without pushing others aside, a fact demonstrated by the repeated and unrelenting pursuit of monopolies and oligopolies by the wealth-seekers. In other words, it is possible to become a great artist without exploiting others or damaging the world. By definition, the "pursuers of great wealth" must exploit others and damage the world, for if they were not to do so, the world's resources would remain distributed among all people in rather even distribution, with variations of far less magnitude than exist today. Borrowing from Mr. Pappas, "to suggest otherwise flies in the face of human experience."

Mr. Pappas notes that "the pursuer of great wealth" benefits society by supporting his or her own family and extended family, creating jobs, contributing to charity, paying taxes, and meeting the demand for goods andservices. I disagree. The people who are doing these things aren't pursuers of great wealth. They're pursuers of making a living through independent action. They're entrepreneurs. They probably do provide more for society than do symphony-creators if one accepts a measurement of worth that reflects dollars and that precludes psychic value. No matter, the point isn't whether entrepreneurs are more worthwhile than composers, but whether the power-hungry pursuer of great wealth is a benefit or burden to society. Unfortunately, some of the world's power-hungry wealth pursuers began as enterpreneurs and then ran amok, giving entrepreneurs a bad name. Entrepreneurs create wealth. Wealth seekers desire and take the wealth created by others.

It is important to understand the distinction between a wealth creator and a wealth seeker. The slaves on the Southern plantations created wealth. One problem was that they ended up with very little of it, just barely enough to survive. The same can be said of the track and yard workers employed by the railroad barons and the migrant farmworkers employed by huge agribusinesses. The argument that entrepreneurs create wealth is a truism that misses the point. Yes, entrepreneurs contribute to the creation of wealth by providing services in the management of workers, the organization of projects, the implementation of ideas. And most entrepreneurs generate some modest amount of return, compensating them for their efforts. Most entrepreneurs earn not much more than their employees. Most entrepreneurs don't try to stomp out their competition. Most entrepreneurs end up being destroyed by the monopolists and oligopolists. Most entrepreneurs are wealth-creators, but they, just like the workers, become the victims of the wealth-grabbers.

As the wealth-grabbers muscle their way into domination and control of a market, entrepreneurs face the choice of closing up shop, caving in and selling out, or becoming yet another money-grabber. Whether the product is illegal drugs or operating system software, black market alcohol or telecommunications, this is how the modern but damaged capitalist system plays out. Greed, and psychological addiction to money and power, infect the market place. Among the billionaire wealthy are those who claim they needed to do what they did in order to survive, while their employees scrape by on minimum wage. Survival for the latter means this evening's dinner, whereas survival for the former means keeping within striking distance of whoever currently tops the asset ownership list.

The problem isn't the entrepreneur who earns twice or three times, or even ten times, the average compensation of his or her employees. It's the CEO or conglomerate owner who pulls in pay and perks that are thousands and tens of thousands times the average salary of the rank-and-file. However one puts a value on what the wealth-seeker creates, it surely isn't tens of thousands times the value of what the minimum wage employee produces. Either those employees need hefty raises, or the CEO and conglomerate owner need pay cuts. For those who claim that CEO and similar pay is determined by "the market," keep in mind that few people enter that market, that it is a market frequented and controlled by a handful, and that the reciprocal and mutual treasure-dividing is out-of-bounds for most people, including the entrepreneurs who seem to think that criticism of the wealth-grabbers threatens the well-being of the wealth-creating entrepreneur.

Joe Kristan, of Tax Update Blog, commented on Mr. Pappas' post by adding "well-meanng meddlers who hobble honest wealth producers with high taxes and foolish regulation cause far more harm than dishonest wealth-seekers." Joe and I will need to agree to disagree on this one. If the wealth-grabbers didn't hobble the environment, would we not see reduced government spending on, and thus less need for taxation to fund, environmental remediation? Would we not see less need for environmental protection regulations? If the wealth-grabbers paid living wages instead of controlling markets so that a store manager was valued at 1/10,000th of the CEO, would we not see reduced government spending on, and thus less need for taxation to fund, social services? If the wealth-grabbers' companies funded the rank-and-file retirement plans as generously as they do those of the big-wigs, sould we not see reduced government spending on, and thus less need for taxation to fund, social security? Would we not see less need for deferred compensation regulation? If the greed merchants made full and fair disclosure and did not package junk into derivatives, would we not see reduced government spending on, and thus less need for taxation to fund, rescue of the afflicted? Would we not see less need for financial market regulation? The saddest part of the entire debate over wealth and taxes is that the very rich have persuaded the not-very-rich into arguing for the very arrangements that, if continued, will guarantee increasing centralization of wealth in a very few and continued destruction of the wealth-creating, make-a-living-not-a-killing entrepreneur. Increasing income tax rates, for example, on taxable incomes exceeding $1,000,000 and increasing them even more on taxable incomes exceeding $10,000,000 isn't going to hamstring the honest make-a-living entrepreneur, but it should provide some, hopefully enough, disincentive for the amassing of even larger accumulations of wealth and attendant incomes through the make-a-killing lifestyle. Given the choice between letting an elected government take the money and run things, or letting a self-appointed nobility, excuse me, oligopoly, take the money and run things, I'll vote for the former.

Mr. Pappas concludes by pointing out that "many great artists have been funded by rich patrons." Patrons, he notes, that are the "very same types he castigates as obsessive, greedy and dysfunctional." He claims that "[w]ithout a Lorenzo de Medici there would have been no Michelangelo." We don't know that. Absent a parallel universe, there's no proving nor disproving this claim. We do know there was a Michelangelo doing things before he connected with the de Medici. We do know that he eventually came to realize that repressiveness of the de Medici wasn't worth it. Surely an apologist for the de Medici might claim that THEY (not only Lorenzo but his son and others) created the art of Michelangelo. Hah. And even if it could be proven that Michelangelo would have accomplished less than he did, or nothing, it would not have justified the behaviors of the de Medici. A few centuries later, in the same European peninsula, someone discovered that making the trains run on time isn't enough to justify the greed. In the long run, wealth grabbing is a very poor idea.

My post of several weeks ago, Pay Taxes, Be Happy, has triggered two questions for me from Peter Pappas of The Tax Lawyer's Blog. In Tax Happiness: Inventors of Sauna Happier than Inventors of Polio Vaccine, he asks of me:

Why do you assume that a person having a self-interested life goal of maximing wealth is any less noble than a person having a self-interested life goal of creating a transcendent symphony?
Why can’t “making a killing” be my art and composing a symphony be yours?

Before answering, permit me to highlight the points I made in Pay Taxes, Be Happy, because it will help to see where Mr. Pappas is extracting his conclusions that I take the position that "a person having a self-interested life goal of maximing wealth is any less noble than a person having a self-interested life goal of creating a transcendent symphony" and that I object to his treating "making a killing" as his art and composing a symphony as mine. I understand he is speaking in metaphors because neither he nor I think I'm about to write a symphony, now or forevermore, and he and I both know that being a tax professional pretty much kills our chances of "making a killing."

In Pay Taxes, Be Happy, I examined the premise by Thomas Kostigen, in The Happiest Taxes on Earth that the reason people in high-tax nations are happier than those in lower-tax nations is less concern about procuring the essential services extensively provided by governments in the former and far less extensively provided by governments in the latter. I suggested that another factor for unhappiness with taxes is the perception, on the part of some, of taxes as nothing more than a reduction in the possibilities of accumulating wealth. I noted that if the extent to which governments provided needs was the determinant with respect to happiness and taxes, then one would expect the deepest unhappiness about taxes to come from those whose basic needs have not been met, but yet the crusade for the elimination of taxes on everything but wages has been led by those already swimming in huge amounts of wealth. I asked a question, namely, "Why are some people content to make enough, or perhaps not quite enough, to meet their basic needs while devoting their lives to a career, occupation, or profession that fulfills them in other ways while others are so intent on 'making a killing' that they never find happiness even as their after-tax incomes skyrocket?" I also asked, "Is it possible to be so addicted to money for its own sake that resistance to taxation, even when that taxation procures benefits, is unavoidably wired into the person's psyche?" Though it should be easy to guess how I would answer the second question from the way I phrased it, I do not know the answer to the first question that I posed. I doubt psychologists and other mental health professionals can give us a definitive response.

Turning now to the questions from Mr. Pappas, I respond to the first by explaining that although we don't know why some people are obsessed with accumulating wealth beyond what is required for life, we do know that the obsessive pursuit of wealth generates a variety of life difficulties, dysfunctions, propensity toward unwise and even illegal behavior, intensification of other addictions, and a variety of other ills. In the long run, an individual's pursuit of wealth harms society. In contrast, those who put other values ahead of wealth accumulation for its own sake or for the sake of acquiring disproportionate power end up benefitting society, whether through unpaid volunteer work, dedication to underpaid careers such as nursing and hospice care, or even, I suppose, through the creation of a great symphony or work of art. A world filled with hospital aides, Red Cross volunteers, inner city mural artists, and minimum-wage-earning services workers suggests a more peaceful, nurturing planet that one filled with greedy, money-obsessed, wealth-accumulating power addicts adept at shifting cost onto others. And that leads to the answer to the second question from Mr. Pappas.

There is nothing wrong per se with someone trying to turn "making a killing" into his or her art. The problem is that doing so is guaranteed to harm society. Is it possible to make a killing without imposing huge costs on others? Is it possible to make a killing without excessively harming the environment? Is it possible to make a killing without unduly putting the economic well-being and the security of nations at risk? Is it possible to make a killing without engaging in monopolistic or oligopolistic behavior? Is it possible to make a killing without riding on the backs of others? Is it possible to make a killing without undue infringement of the rights of others?

When one examines the lives of the "captains of industry" who made killings in the late 19th century, or the biographies of those who reached billionaire status during the 20th century, one finds all sorts of social evils being generated and compounded by the practices that were put in place. How many track and yard workers died so that the railroad barons could live in a luxury that probably hastened their own deaths? How many Ford Pinto owners, drivers, and passengers died so that anonymous shareholders could maximize profits? How many retirement finances were destroyed so that the big-wigs of Enron and dozens of other enterprises, some known, some yet to be outed, could wallow in money? How many jobs were lost because speculators, gamblers, and money addicts wanted to squeeze non-existant profits out of derivatives? Perhaps they call it "making a killing" because it kills so many people, destroys so many jobs, and ruins so many lives?

Next, turning to a question not asked by Mr. Pappas, I wonder if his list of "Great American Inventions and Discoveries" and "Great Nordic Inventions and Discoveries" proves the point that he seems to be trying to make with it. First, his list of "Great Nordic Inventions and Discoveries" is rather short. It suggests that there are so few. He lists the sauna and "the secret foreign bank account." He doesn't mention the discoveries and inventions of Niels Bohr, Jakob Nielsen, Peter Toft, Kragh and Jorgensen (the Kragh-Jorgensen rifle (used, incidentally, by the US military)), Peter Laurits Jensen, and Hans Christian Oersted (who discovered electromagnetism). And those are just the Danes. How about Anders Celsius, Carolus Linnaeus, Svante August Arrhenius, Kai M. Siegbahn, and Alfred Nobel? Those are but a few of the Swedes who have contributed discoveries and inventions that are used throughout the world. Finland gives us, to name two, Eric Tigerstedt and Artturi Ilmari Virtanen. From Norway, there's Ole Evinrude (for the curious, he invented the outboard motor), Jens William Aegidius Elling, Tor Sornes, and Erik Andreas Rotheim, among others. Second, the population of the United States, currently more than ten times the populations of Finland, Norway, Denmark, and Sweden combined, needs to generate ten times as many inventions and discoveries just to keep pace. I wonder if perhaps there is a higher proportion of scientific discovery in the Nordic countries because they're willing to impose taxes to fund education of a higher quality. Third, some of the discoveries that he puts on the American list were made at times when the tax rates were high. So perhaps it would make sense to have the list sorted into "Great Inventions and Discoveries Produced During Low Tax Times" and "Great Inventions and Discoveries Produced During Higher Tax Times" rather than assuming that taxes in America have always been lower than those in the Nordic nations. Fourth, when attributing discoveries and inventions to a supposedly low-tax America, one needs to consider the issues of whether Bell, or the Italian Meucci, invented the telephone and whether Edison, or the German Heinrich Goebel, invented the light bulb, to give but two examples of mis-attribution.

Finally, the irony in using inventions and discoveries as some sort of proof that low taxes are best, Mr. Pappas turns our attention to the too common story of the money generated by an invention or discovery going not to the person whose skill, sweat, diligence, persistence, and creativity benefitted the world, but to the appropriators who turned the gift to their own advantage. I stand by my conclusion in Pay Taxes, Be Happy:

Yet the implied suggestion in Kostigen's observation won't matter to those who are so addicted to money that they would no more adjust their attitudes toward paying taxes than they would relent in their distaste for paying for anything. They want it, they want it all, and they want it now. For them, Queen wrote their anthem. Nothing in a tax code, nothing on a "your taxes at work" sign, nothing in a blog is going to cure the deep insecurity that drives this distaste for paying taxes. Sadly, nothing, not even all the wealth in the universe, can satisfy these people and bring them happiness. Somewhere, somehow, someplace, something didn't get through to them. Even if they cannot change, perhaps the focus should be on preventing them from warping the minds of those whose resistance to paying taxes would diminish if they understood what they were getting for the taxes that they paid. It ought not cost much to do this, and there's no good reason to pass up on the opportunity. The public officials who undertake this effort will be happy that they did so.

It ought not be difficult to understand that, in the long run, our prospects are brighter if the nation runs as a cooperative team of citizens and not as a collection of money-crazed killing-maker wannabes deluded into thinking they will become like those who have managed to splinter the pursuit of "life, liberty, and happiness" and who want to rewrite the core document as "the pursuit of wealth and power by those of us who have appointed ourselves to run things." It is for that reason that I would support the proposition that accumulating good deeds is more noble than accumulating wealth.

Courtesy of Paul Caron's Tax Prof Blog posting, The High Tech Alternative to "My Grandmother Died," I became aware of an Inside Higher Ed article, The New Student Excuse?, in which the author explains that a new web site is offering corrupted files for sale. Why would someone want to pay for a corrupted file, considering that usually we find people paying experts to salvage data from a corrupted file? The gist of this new "service" is to provide a means for students to buy time when they've missed or are about to miss a deadline for a paper or other assignment. The student is advised to rename the purchased corrupted file with a name that is consistent with the assignment and to send it to the professor. Supposedly, the professor will invest "several hours if not days" to discover that the file is corrupted. This delay, the student is told, provides time that can be used to finish the paper. The sales pitch contends that this approach is far better than claiming that one's grandparent has died.

The web site tries to distinguish the services it offers from cheating. Hello? Procuring extra time to do an assignment is cheating, if it is done through deception and not, for example, by a request for an extension or by qualification for disability accommodation. Considering that the website sells files of various sizes, to correspond with assignments of varying lengths, the purpose of the "service" offered by the website is obvious to anyone with a functioning brain.

What is the identity of this web site? At first I thought it best not to give publicity to this outfit. Then I realized that its existence is already known by most students and that it is the less web-savvy professoriate that needs to be made aware of what is happening in cyberspace in terms of the corrupted file ploy. After seeing the "Keep this site a Secret" tag on the website, and even though understanding that there probably is some reverse psychology at work, I decided to disclose the URL: It's Corrupted-Files.com, perhaps one of the most superficially and textually correct but substantively disingenuous web site names out there.

According to the The New Student Excuse? article, the owner of the site, whose identity is hidden, claims the site was created "as a goof," that there was no intention to sell files, but that business has been on the order of three or four downloads a day. The owner explains that this was a technique the owner used in college. The owner explained, "I didn't have much time to do my schoolwork. When I couldn't get an extension, I sent my professors a corrupted file to buy me time. I know this was not the most ethical thing but as a young entrepreneur, I did not have much of a choice as I valued my employees well above my academics." Sorry, site owner, but if you value people more than academics, you don't put your classmates to the disadvantage they suffer when you buy yourself extra time that isn't within the rules of the course. And if sales were not intended, why does the site have a "Buy Now" icon that, when clicked, lets the user make a purchase through payment options that required the site owner to establish? The claim that there was no intention to sell files is inconsistent with the existence of the purchase option. In short, it's not believable.

The site owner claims that the corrupted file ploy is not cheating. How so? Says the site owner, in describing how the question was answered when posed by a faculty member: "Well ... it's a fine line Prof. H. It's basically just a good excuse vs. outright cheating. Let's face it, how many times have you heard, 'I had a family emergency' or 'my grandma passed away?' I am simply offering a better excuse. It's not cheating in the traditional sense as the student is still doing their own work and not using a roommates' old paper or being foolish enough to purchase one online. If the student is desperate, it is fair to assume he/she has considered these paths. In such a situation, would you rather have a student make up an excuse and hand in their own work a bit late or submit someone else's work on time?" The owner of Corrupted-Files.com seems to think that the only definition of cheating is using another's work as one's own. Cheating involves accessing the test questions illegally before the test is administered, altering grades after the fact, and lying about the reason a deadline is missed. Defending the corrupted files ploy as acceptable because it's simply another way of accomplishing what others have been accomplishing in other ways is much like defending shooting as simply another way of accomplishing what people have been accomplishing through stabbing and poisoning. That it is different doesn't make it any better.

Asked why the site has not been taken down, the site owner explains that his current business colleagues and employees think it is humorous. You've got a sick sense of humor, folks. But that's not the real reason. The site owner added: "Plus, it does help students save face with their professors as CF is an alternative to buying a paper online or using a friend's old paper. CF simply buys the student time and encourages them to do their own work and not to procrastinate next time around." Excuse me, how does this site encourage people not to procrastinate? It enables their procrastination by saying, in effect, "If you waste time, if you miss deadlines because you're partying and don't have a valid excuse acceptable to the faculty member, here's the antidote." There is absolutely no incentive, no adverse consequence, that teaches any lesson that would be interpreted as, "Grow up, take responsibility, learn to manage time, tell the truth." Absolutely none.

Now some advice to faculty who buy into the corrupted file excuse. When I assign work that requires a short answer, I insist that it be sent in the body of an email and not as a file attachment. This is one reason. I don't like files because they use email server space, take time to open, potentially carry viruses, and slow down the grading process. When a file is necessary, for example, a directed research paper, I open the email when it is received, so there is no delay, or, at worst, a very short delay, in discovering if the file is corrupted. If it is corrupted, I would request a copy of the backup. If there is no backup, the student would learn that making backups is a law practice skill and failing to make backups is a reason not to be considered ready for law practice. Interpret that as one wishes. I would explain to the student that no client would accept the collapse of a deal because of a fake corrupt file, and that no court would accept a late filing because of a fake corrupt file. Assuming that the client or court won't get wind of what is happening, though it may take time, is foolish. One instance of this ploy and one's professional career is over, or ought to be. There are enough honest people wanting to be lawyers that there's no point in hesitating clearing the dishonest folks out of the profession to make room for the people with integrity.

The reason that these sorts of "games" are being played is that the people playing them think that it is acceptable. It is a cultural problem. It's not simply that someone doesn't understand how cheating comes in more forms than using someone else's work or that someone doesn't understand that faking a problem in order to buy time that is not otherwise permitted is wrong. The deeper problem is a lack of consideration for other people. A truly considerate person does not take advantage of another person by cheating. An interesting indication of this post-modern cultural phenomenon is found in the recent claim by IndyCar racer Danica Patrick that using performance-enhancing drugs would only be cheating if she got caught. According to a recent report, Patrick claims she was joking. I suppose she was joking just as the Corrupted-Files.com site owner thinks what is being done is a "goof" and "humorous." How many people heard Patrick's statement but not her belated and weak explanation? How many of those people are youngsters, particularly young women, who look up to her? What sort of message did she send?

I don't buy Danica Patrick's statement, joke or no joke. If the definition of something turns on whether the person gets away with it, the entire social structure of civilization has been turned upside down. If someone breaks into Patrick's home, steals her property, and manages to get away with it, should her insurance company reject her claims because there was no burglary? If someone takes her car and isn't caught, has there been no auto theft? What if someone forcefully has their way with her without her consent? Would there be no crime if the perpetrator is not caught?

In her explanation and apology, Patrick noted that there is concern about the use of performance-enhancing drugs and that the problem, particularly as evidenced by recent issues in baseball, is real. She admitted that "kids" think they need to do this to get ahead, and that it is "very dangerous." The issue, though, goes beyond the use of performance-enhancing drugs. It goes to the root of Patrick's more broadly applicable comment, "Well, then it's not cheating, is it? If nobody finds out?" Yes, it is cheating. And it is cheating whether it occurs on a race track or in a classroom, with illegal drugs or faked corrupted files, whether the person is caught or not caught.

Fortunately, as is the case with Corrupted-Files.com, people are speaking out adamantly to reject the message imbued in Danica Patrick's response. The reason that cheating is so wrong is evidenced by this statement by Travis Tygart of the US Anti-Doping Agency: "Although joking about the use of dangerous and unhealthy drugs that cheaters use to rob clean athletes of their dreams is no laughing matter." And that is what cheating does. It steals grades from honest students, trophies from clean racers, dignity from victims, and justice from society.

Another case involving the deduction of in vitro fertilization expenses has been decided by the Tax Court, but this time the issue isn't whether the treatment is a deductible expense but whether the taxpayer's source of the funds makes a difference. Late last year, in Are In Vitro Fertilization Expenses Deductible? I described Magdalin v. Comr., in which the Tax Court held that a man was not allowed to deduct the costs of having an anonymous female donor's eggs fertilized with his sperm and of having two other women carry two of the embryos through the gestation period. In the latest case, McGrath v. Comr., the IRS did not dispute that in vitro fertilization services provided to a married couple constituted medical care. Instead, the IRS contended that the amount paid was not deductible by the couple.

In McGrath, the married couple entered into a contract for in vitro fertilization services. The contract provided that if the services were not successful, a full refund would be made to the couple. The wife's father decided that he would pay the invoice as a wedding gift to the couple. Three years later, the procedures having failed, the couple received a refund of the fees.

The IRS argued that because the wife's father paid for the services on her behalf, she did not pay the medical expense and thus was not entitled to a deduction. The IRS cited five cases in support of its proposition that "taxpayers are not entitled to deduct medical expenses which they did not pay or which were reimbursed by some other source." The IRS paraphrased section 213, which allows the medical expense deduction for medical expenses "not compensated for by insurance or otherwise." The taxpayer did not file the pretrial memorandum or the brief that the Court ordered her to file, and thus the Court explained, "We do not know what petitioner's position is." Deciding that no error in respondent's determination or analysis was apparent, the Court held for the IRS, without getting into unspecified "[a]lternative arguments made in respondent's brief."

One way of looking at this case is that it's a simple matter of a taxpayer who failed to present an argument and thus lost by default. As such, it wouldn't mean much because the next taxpayer might take advantage of the opportunity to explain to the Court why the IRS allegedly is wrong. However, the Court's explanation that "no error in respondent's determination or analysis is apparent" suggests that the case is more than a default but rests in part on the Court's approval of the IRS argument.

Another way of looking at the case is that because the fees were reimbursed, the outcome makes sense even without any arguments from the taxpayer. The flaw in this perception of the case is that there is a difference between a deduction in one year and gross income in a later year on account of the refund of the fees and a simple lack of deduction in the first year. There are two reasons for the difference. One is the possibility that the taxpayer's marginal rate in the earlier year is higher than the marginal rate in the year of gross income from the refund. The other is the certainty of time value of money.

Yet another way of looking at the case is to explore the sense of the IRS proposition to the extent it stands for a principle precluding medical expense deduction if the check is written by another person. There is no question that if the taxpayer had been reimbursed by a third party under contractual obligation to do so, there is no deduction for the taxpayer. The payment of the medical expense by the third party, such as an insurance company, is a payment that would not have been made absent the medical treatment and the resulting medical expense. However, when the payment comes in the form of a gift from someone under no obligation to make the payment, should the medical expense be treated as reimbursed? The better argument is no, there is no reimbursement because there is no obligation. If the argument, however, rests on the assertion that the taxpayer did not pay the expense, then a taxpayer in a similar situation is best advised to have the donor write a check, not to the medical service provider, but to the taxpayer. That makes it possible for the taxpayer to write a check to the medical service provider. The taxpayer has paid the medical expense and the barrier to deduction raised by the IRS does not exist. Had the taxpayer borrowed the money and wrote the check, the deduction would have been permitted. What if the lender wrote the check to the medical services provider, considering that lenders often wish to see the money go where the borrower claims it is going? The deduction would be allowed, on the theory that the lender is writing the check on behalf of the taxpayer. Then how does one reconcile this analysis with the position argued by the IRS, and seemingly accepted by the Tax Court, in a case in which the facts state that the medical expenses in question were ones "her father paid on her behalf"?

The cases cited by the IRS involve medical expenses reimbursed on account of an obligation. In Morgan v. Comr., 55 T.C. 376 (1970), the taxpayer was compensated for medical expenses through a settlement of his tort claim. In Litchfield v. Comr., 40 T.C. 967 (1963), the taxpayer was compensated for medical expenses by payments from other parties to a legally enforceable multiple support agreement. In Robertson v. Comr., T.C. Memo. 2000-100, aff'd, 15 Fed. Appx. 467 (9th Cir. 2001), taxpayer introduced into evidence checks drawn on joint accounts maintained either with her mother or her sister, signed, with one exception, by the mother or the sister, causing the court to question whether the payments were for medical treatment of the taxpayer. The court also noted that the taxpayer did not prove who provided the funds in the joint account and under what circumstances the checks were written. In Hill v. Comr., T.C. Memo 1978-98, the taxpayer proved that he wrote checks to pay certain medical bills for which he was not reimbursed, but did not prove if other bills were paid by him or at all nor that he was not reimbursed. In Doody v. Comr., T.C. Memo 1973-126, the taxpayer failed to prove that she incurred any medical expenses, and failed to persuade the court that she was entitled to a deduction for acting as a self-insurer or for the value of self-treatment.

With the exception of the Robertson case, none of these cases bears on the question of whether the payment of medical expenses with funds received as a gift are not deductible because the gift is the equivalent of "insurance or otherwise." In Robertson, the issue would have been presented directly had the taxpayer proved that she was entitled to the funds in the account without any obligation to repay those funds to her mother or sister. In other words, unlike McGrath, Robertson did not prove that she received a gift from her mother or sister.

Whichever way one takes the analysis, the tax law is muddied. If the IRS would not have challenged McGrath had the check been written by her to the medical services provider after cashing a wedding gift check from her father, then the IRS is exalting form over substance. If the IRS would have challenged McGrath even if her father wrote her a check and she then used the money for the medical treatment, the IRS is putting a significant number of medical expense deductions at risk, because it is not unusual for family members to give cash to a relative in need of medical treatment. Worse, the tracing rules that would need to apply would resemble the insanely complex interest tracing rules. One would need to prove that the cash from Aunt Minnie was used for food and not medical bills even though the gift and other sources of money were commingled in the same checking account of the taxpayer.

The bottom line is that McGrath's father was not compensating her. He was not her insurer. He was not under any obligation to provide funds. He simply made a gift. That is very different from the tort claim settlement in Morgan, the contractually enforceable reimbursement in Litchfield, the inadequate evidence in Hill, or the self-treatment concept in Doody. It is unfortunate that the taxpayer did not present these arguments, but as often happens with pro se litigants, the lack of adequate representation of the taxpayer puts the Court in a very difficult position.

The sum involved in McGrath was substantial. It was a fee of almost $35,000. It would behoove taxpayers to exalt form over substance, if for no other reason than to make audits less likely because under this arrangement the taxpayer can produce a check written by the taxpayer, something that McGrath was unable to do.

With tax law being so wrapped up in various health care reform proposals, one hopes that this sort of problem and others like it are resolved in ways that don't make tax law or health law more complicated. Americans, whether healthy or ill, don't need this sort of nonsense.

More than a year ago, in The Return of the Federal Gasoline Tax Increase Proposal, I reacted to the proposal by the National Surface Transportation Policy and Revenue Study Commission (NSTPRSC) for an increase in the federal gasoline tax. I explained why the opponents of an increase, as well as the advocates of a reduction, suspension, or elimination of the tax, weren't looking realistically at the situation. It's a topic about which I've written many times, and that previous posting has links to most of the essays that I've provided on the topic. Early this year, I revisited the proposal in Whatever a Tax Increase is Called, Someone Needs to Sell It. But not much has been happening.

At a hearing earlier this week, Senator George Voinovich, a Republican from Ohio, commented that an increase in the gasoline and diesel fuel tax was "unavoidable." According to this editorial, his comment followed the disclosure by Senator Barbara Boxer that the Federal Highway Trust Fund may run out of money by August. The editorial opposes any increase in the tax. So, too, do many Americans.

I do not understandthe anti-tax sentiment when a tax is paid for direct benefits. Among my questions for the anti-tax crowd are these: "What do you propose be done? Should the nation's highways and bridges be permitted to deteriorate so that there are more incidents like the bridge collapse in Minnesota? Would you prefer a tax on everyone but yourself or yourself and your friends? Is this really about your insistence that you can go straight from the left-turn lane because you are special? Does your position reflect some sort of philosophy that you should get what you want for nothing? Are you unable to recognize that highways and bridges aren't free and that someone must pay for their construction, maintenance, and repair?"

Some of the group that opposes increases in the gasoline and other fuels taxes claim that an increase would, to quote the editorial, "damage the economy badly." I disagree. If the gasoline tax is not raised, roads will fall apart. The goods that are shipped by truck will be delayed in reaching their destinations and might not be delivered at all. Would that be good for the economy? On the other hand, faced with higher overall gasoline costs, Americans may think seriously about getting rid of the fuel-gobbling vehicles and replacing them with alternative transportation. Yes, it would be economically painful in the short-run, but it would generate long-term benefits. Post-modern American culture, characterized by "I want it all and I want it now" and afflicted with the urge to kill the goose that lays the golden eggs, has been poisoned by an inability on the part of most people to think in long-term increments. Highway deterioration is but one of the many catastrophes that loom for this nation if people don't restructure the way their short-term outlook masks long-term realities.

Technically, an increase in the gasoline tax is NOT an increase in what a person pays for gasoline. It's an increase in what drivers are charged for upkeep of the roads that they use. It would be much easier to make this point if the gasoline tax were separately invoiced, because those little stickers at the gasoline pump disclosing the portion of the per-gallon price that is remitted by the station operator as taxes doesn't seem to get through to people. This is yet another reason I prefer the mileage-based road fee in lieu of the gasoline tax, As I explained in Change, Tax, Mileage-Based Road Fees, and Secrecy, I am a fan of the mileage-based road fee, and although the NSTPRSC recommended one, it was disappointing that some unidentified someone in the Administration nixed the idea before the public could be educated about it.

August is only two months away. At best, the end of August is almost three months away. Time flies. The snails-pace style of Washington is going to steer this nation into a transportation disaster. The knee-jerk anti-tax crowd isn't doing anyone any favors, including themselves. When cars fall off bridges, no one is there to give special treatment to the folks who at the moment are proud of their opposition to the idea that drivers ought to pay for the transportation network that they use.