MauledAgain

No, I’m not referring to the tax exams that stand between a student’s coursework and practice experience. What has been pulled from the back burner of this blog is something I’ve discussed many times, though not recently. It’s the mileage-based road fee, which I first discussed in Tax Meets Technology on the Road, and analyzed again in Mileage-Based Road Fees, Again, Mileage-Based Road Fees, Yet Again, Change, Tax, Mileage-Based Road Fees, and Secrecy, Pennsylvania State Gasoline Tax Increase: The Last Hurrah?, Making Progress with Mileage-Based Road Fees, Mileage-Based Road Fees Gain More Traction, Looking More Closely at Mileage-Based Road Fees, The Mileage-Based Road Fee Lives On, Is the Mileage-Based Road Fee So Terrible?, Defending the Mileage-Based Road Fee, Liquid Fuels Tax Increases on the Table, Searching For What Already Has Been Found, Tax Style, Highways Are Not Free, Mileage-Based Road Fees: Privatization and Privacy, Is the Mileage-Based Road Fee a Threat to Privacy?, and Are the Bells Tolling for Highway Infrastructure Chaos?

Thanks to an alert reader of MauledAgain, I’ve become aware of exciting news from Oregon. That state is going to enroll volunteers in a program, under which drivers, instead of paying a fuel tax, will pay a mileage-based road fee. Oregon is testing the transition from twentieth-century highway funding into twenty-first-century highway funding. Logistically, drivers will receive a credit for fuel taxes paid at the pump, which might leave them with a balance due or might generate a credit. Steps have been taken to minimize intrusions on privacy, by giving the volunteers a choice between a GPS-based system and a GPS-free system. Volunteers also receive a credit for miles driven out of state or on private property.

More than 4,000 comments have been posted in reaction to the story. Several amuse me. One complaint is that the test program is nothing more than an attempt to increase taxes. That conclusion suggests that the driving public will be paying more for nothing more. Yet in reality drivers will be getting road repairs and road improvements, which in turn will lower tire and front end alignment costs, save lives, prevent injuries, and economize time. Another complaint is that “the new tax would be unfair” to electric and hybrid car owners because the “program targets hybrid and electric vehicles.” That makes no sense. The fee is imposed on vehicles, which no matter their type of propulsion, use highways, wear out road surfaces, and contribute to traffic jams. Fortunately, an advocacy group for the electric-vehicle industry has come out in support of the test program “because every driver should pay for road repairs.” Yet another complaint is that the fee discriminates against people living in rural areas. The flaw in that perception is that the fee discriminates no more and no less than does a liquid fuels tax. If someone living in the countryside drives, on average, three times as much as someone driving in the city, that person would pay a mileage-based road fee three times what the city driver pays. That is no different from using three times as much fuel and thus paying three times as much in gasoline taxes.

Three other states – California, Washington, and Indiana – are studying the possibilities of adopting a mileage-based road fee. Oregon has administered two earlier tests, though on a very limited basis. This test encompasses many more drivers and is, in many ways, a big deal. In that sense, it is like a tax exam.

Sometimes, in trying to help people understand the facts beneath tax policy issues, I wonder why many have difficulty grasping the essentials, and thus being misled or even duped by the sound bit and buzz phrases tossed about by politicians and lobbyists. The inability of so many people to understand why flattening tax rates does just about nothing to simplify tax law, or to comprehend how phase-outs cause tax rates on middle incomes to be higher than those on high taxable incomes, probably correlates with deficiencies in arithmetic understanding.

A recent article on housing sales in the Philadelphia area provides an example of how easy it is to be confused. The article quotes the chief economist at Meyers Research, who also is a senior fellow at the Lindy institute for Urban Innovation at Drexel University. Referring to the 23 percent average drop in value of area homes during the housing bust that began in 2007, he noted that because the typical area home has recovered only 5 percent of that 23 percent, values “must appreciate an additional 18 percent to recover the loss completely.”

Consider this example. Assume that before the housing crash, a home was worth $100,000. A 23 percent drop in value brings the home’s value down to $77,000, because the drop in value is $23,000, that is, 23 percent of $100,000. Now assume that the home recovers 5 percent of its value. That means the home’s value increases by $3,850, as $3,850 is 5 percent of $77,000. The home is now worth $80,850 ($77,000 plus $3,850). To reach $100,000 the home needs to increase in value another $19,150 ($100,000 minus $80,850). $19,150 is 23.7 percent of $80,850, not 18 percent. If the home’s value increased an additional 18 percent, as suggested by that chief economist, its value would increase by $14,553 (18 percent of $80,850 is $14,553), bringing its value to $95,403. That outcome would not cause the property “to recover the loss completely.”

I’ve seen a similar analysis, and have had to bite my tongue, when someone claimed that an increase in a success rate from, to use easy numbers, 20 percent to 30 percent was a 10 percent improvement. It is a 10 percentage point improvement but a 50 percent increase (because the increase of 10 percentage points from 20 percent to 30 percent is 50 percent of 20 percent). This “percentage of a percentage” challenge stumps a fair number of students studying corporate taxation when they encounter section 302(b)(2)(C). That provision requires a determination of whether a shareholder’s percentage of stock ownership after a transaction is less than 80 percent of the shareholder’s percentage of stock ownership before a transaction. In other words, a student or practitioner must consider whether, for example, 58 percent is less than 80 percent of, for example, 70 percent. It’s not, because 80 percent of 70 percent is 56 percent.

The sort of thinking in which a brain engages to do these analyses is not unlike the sort of thinking in which a brain engages in order to do all sorts of other things, such as reading and playing music, programming computers, or figuring out how many gallons of paint to purchase in order to paint a room. Years ago, when one of my sisters, then in elementary school, was trying to persuade my parents to find a way to get her excused from arithmetic classes, my mother pointed out that no matter what she did in life, she would need to understand numbers. My sister said there were things she could do that did not require understanding basic arithmetic. I sat back, quietly to the surprise of some, enjoying my mother’s refutation of every possibility that was offered. Think about it.

All sorts of things are being tried to help students learn arithmetic. I’ve seen some of the Common Core examples. I understand what its advocates are trying to do, but I’m not persuaded that it is working. The best way to learn something is to immerse one’s self in it. Has that been happening? I don’t think so. And so we end up with a nation of taxpayers, too many of whom don’t understand the underlying arithmetic when faced with tax and other policy issues. It gives the edge to those who understand arithmetic, know how to use that understanding in nefarious ways, and lack the polished conscience that deters the ego from doing so.

A recent case, Rolle v. Comr., T.C. Memo 2015-93, illustrates the dependency tie-breaker rule. The taxpayer married Raina in 2006. During 2011, the taxpayer, Raina, and their children lived together from January 1 through July 31. On or about July 31, the taxpayer and Raina separated. The children were in Raina’s sole custody from August 19 through December 31. The facts do not disclose where the children were from August 1 through August 18. The taxpayer filed a federal income tax return for 2011, claiming head of household status and claiming the children as dependents. Raina filed a separate tax return for 2011, and also claimed both children as dependents. The IRS issued a notice of deficiency to the taxpayer, changing the filing status to single, disallowing the dependency exemption deductions, and making other adjustments.

The Tax Court determined that each of the two children was a qualifying child of the taxpayer and of Raina. Accordingly it turned to the tie-breaker rule. Under the parental tie breaker rule in section 152(c)(4)(B), if the parents claiming a dependency exemption deduction for a qualifying child do not file a joint return, the child is treated as the qualifying child of the parent with whom the child resided for the longest period of time during the taxable year, or if the child resides with both parents for the same amount of time during the taxable year, the child is treated as the qualifying child of the parent with the highest adjusted gross income.

Because both children resided with Raina for at least 347 days, and with the taxpayer for no more than 230 days, the Tax Court held that the taxpayer was not entitled to dependency exemption deductions for the children. Presumably, the IRS did not challenge Raina’s dependency exemption deductions for the children.

Stanley Druckenmiller, a billionaire hedge fund manager, has reacted, according to this story to “proposals to tax the rich to pay for more social service for the poor.” According to Druckenmiller, “That’s not where the money is.” So where’s the money? Do the poor have it? Is it buried somewhere?

Perhaps the kindergarten teachers have it. Oh wait. This story explains that the top 25-income-earning hedge fund managers earn more than all of the nation’s kindergarten teachers put together.

And if that isn’t disturbing, keep in mind that those teachers pay federal income taxes at ordinary income rates. The hedge fund managers, using a loophole called “carried interest,” manage to pay taxes at the much lower capital gains rates. Yes, special low rates defended as necessary to encourage the sale of property, a rather questionable claim, apply to income earned from performing services, but no kindergarten teacher dare have the audacity to use or request special low rates in computing federal income taxes on the income they earn from performing services.

Yes, where’s the money?

In a recent decision, Hyler v. Comr., T.C. Summ. Op. 2015-34, the Tax Court held that a taxpayer’s casualty loss deduction claimed in 2012 was not allowable in that year because during that year, and even as late as 2015, the taxpayer was continuing to pursue reimbursement from those alleged responsible for the loss. The taxpayer lived with his wife in a rented house. On June 2, 2012, while they were away visiting friends, a fire destroyed the house and all of its contents. The taxpayer’s personal property was insured but the insurance company paid only $60,000 because that was the policy limit. The taxpayer and his wife sued the landlord, in 2014 that case was set for trial, and by February 2015 meetings had been scheduled to mediate the matter.

The Tax Court explained that under Regs. Section 1.164-1(d)(2)(i) a loss is not sustained until it can be ascertained with reasonable certainty whether reimbursement will be received. Citing Hudock v. Comr., 65 T.C. 351 (1975), the court noted that a casualty loss is not recognized in the year of occurrence if there exists at that time a reasonable prospect of recovery on a reimbursement claim, and that settlement, adjudication, or abandonment of the claim is the event that renders the loss “sustained” for purposes of section 165. According to the court, because the taxpayer’s claim for reimbursement was very much alive and active in 2015, and had been so since shortly after the fire, the loss was not sustained in 2012.

What particularly caught my eye when reading the opinion were these two sentences: “The Woodside Fire Protection District reported that the fire likely started in the kitchen but did not state a specific cause. Petitioner believes that the fire may have started because of rodents and/or faulty electrical wiring.” Long-time readers of MauledAgain may recall that more than nine years ago, a house fire supposedly started by a burning mouse triggered four posts:

Why Tax Law Can Fire Us Up
Follow-Up Report Extinguishes Blazing Mouse Tale (but not the tax issues)
Tax Law and Rodents Afire
The Flaming Rodent Tax Trilogy Gets a Sequel

They also may remember that ten months later, in Animals, Fire, and the Tax Law, I wrote about the issues arising when a cat started a fire by knocking over a candle. It’s unclear from the Hyler case whether mice were once again at work or rats need to be added to the list.

A recent case, Cowan v. Comr., T.C. Memo 2015-85, required the Tax Court to decide when the relationship of a foster parent to a foster child ends for federal income tax purposes. The taxpayer was the guardian of a child, who was placed in the taxpayer’s home from 1991 through 2004. In 2004, the child attained the age of 18 and the guardianship ended. In 2006, the child had a child. The taxpayer had continued to support the child, and after the child’s child was born, the taxpayer supported both the child and his child. Not surprisingly, on her 2011 income tax return the taxpayer claimed dependency exemption deductions for the child and the child’s child, along with an earned income tax credit, a child tax credit, and head of household filing status.

The IRS issued a notice of deficiency denying the dependency exemption deductions, the credits, and the head of household filing status. Thereafter, the IRS conceded that the child was a qualifying relative of the taxpayer and that the taxpayer was entitled to a dependency exemption deduction with respect to the child.

The Tax Court rejected the taxpayer’s argument that the child’s child was a qualifying child. One of the requirements that must be satisfied in order for a person to be a qualifying child is a relationship test. To satisfy that test, the claimed dependent must be a child of the taxpayer, a descendant of that child, or a brother, sister, stepbrother, or stepsister of the taxpayer or a descendant of that sibling or stepsibling. To be a child, a person must be the taxpayer’s son, daughter, stepson, stepdaughter, or eligible foster child of the taxpayer. Because the child that had been placed with the taxpayer was not the taxpayer’s child, stepchild, sibling, or stepsibling, the taxpayer’s claim would prevail only if the child was an eligible foster child. An eligible foster child is “an individual who is placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.”

The taxpayer argued that the child remains her foster child because they continued their relationship and hold each other out as parent and child. The Tax Court, however, determined that the taxpayer’s guardianship terminated in 2004 when the child attained majority. At that point, the child no longer could be said to be someone who “is placed” with the taxpayer.

The taxpayer then argued that the tax law permits other relationships created by law to persist despite the cessation of the legal circumstances that created them. She pointed to Regulations section 1.152-2(d), which provides that “The relationship of affinity once existing will not terminate by divorce or the death of a spouse.” Thus, for example, once a person becomes an in-law by virtue of marriage, that person remains an in-law even if death or divorce ends the marriage, at least for purposes of the dependency exemption deduction. The Tax Court rejected the argument, concluding that a foster relationship is not a relationship of affinity because it is not based on marriage. The Tax Court also concluded that there was no basis for extending a principle applicable to marriages to foster situations because the former are “by default perpetual, lasting (absent divorce0 until the death of one of the spouses,” whereas foster relationships “are by definition temporary.”

These are the sorts of outcomes that are difficult to explain to clients. There is a good bit of sense in the argument advanced by the taxpayer, and it fails because of the technical nature of the “everlasting affinity” regulation. That regulation, in many respects, is unwise, particularly with respect to the impact of divorce. It comes as a surprise even to students in the basic federal income tax course to learn that for purposes of the dependency exemption deduction, a person’s brother-in-law or sister-in-law remains a brother-in-law or sister-in-law even if the person becomes divorced from the spouse. For some, it’s even worse, as it means a father-in-law or mother-in-law remains so despite divorce. As a practical matter, though, one would not expect an individual to be supporting his or her former sibling-in-law or parent-in-law, though it can happen.

The regulation should be amended to provide that divorce ends a relationship by affinity. Might that ever disadvantage a taxpayer? It would only if a taxpayer was supporting a former sibling-in-law or parent-in-law, who attained that status through divorce in contrast to death, and that sort of situation would be rare. When I teach the basic tax course, I ask students to give me a set of facts where that plausibly could happen. As an aside, students dislike those sorts of questions, as they prefer “tell me the facts and I’ll give an answer” challenges whereas I am convinced that their thinking skills are sharpened by my “I’ll tell you the answer now give me the facts” puzzles. One answer is a guy whose best guy friend has a sister. The guy marries his friend’s sister, perhaps in disregard of his friend’s advice. The marriage fails, and the guy remains best friends with his now former brother-in-law. Years pass, the best friend falls on hard times, and the guy supports him. If he moves the friend into his household, the best friend would be a qualifying relative, provided the income and support tests are met. If not, there’s no dependency exemption deduction. Is that a terrible outcome? No, because there would be no dependency exemption deduction if the guy had not married his best friend’s sister. In other words, someone supporting his best friend, who also happens to be a former brother-in-law, should not be treated differently from someone else who is supporting his best friend who never became a brother-in-law.

When people ask me why I sometimes say that tax law is “fun,” this is one of the examples I provide. What really is fun, and I don’t usually confess this, is watching the looks on their faces when I take them through the “once a sibling-in-law, always a sibling-in-law” tax principle. Perhaps they are thinking, “once a tax geek, always a tax geek.” Perhaps.

Readers of this blog know that I think it is silly to reject fixing potholes with tax increases because of the “no taxes” meme, when that means drivers will be facing much larger outlays to replace tires, wheels, and vehicle parts, to pay for front-end alignments, and to finance the costs of accidents, injuries, and deaths.

Those who haven’t had a chance to explore my thinking on this issue can check out Liquid Fuels Tax Increases on the Table, You Get What You Vote For, Zap the Tax Zappers, Potholes: Poster Children for Why Tax Increases Save Money, When Tax and User Fee Increases are Cheaper, Yet Another Reason Taxes and User Fee Increases Are Cheaper, When Potholes Meet Privatization, When Tax Cuts Matter More Than Pothole Repair, Back to Taxes and Potholes, and Battle Over Highway Infrastructure Taxation Heats Up in Alabama.

Last week, Michigan voters rejected a proposal to fund road repairs with an increase in the sales tax and replacement of the sales tax on fuel sales with an increased fuel tax. So Michigan returns to the drawing board, while its drivers continue their demolition derby encounter with some of the worst roads and bridges in the country.

The usual suspects claim that the solution is to cut spending on other programs in order to fix the roads. These anti-tax advocates have persuaded almost 40 percent of Michigan voters to support the “cut programs” alternative. Yet when asked in a poll what programs should be cuts, according to this story, 88 percent did not want cuts to K-12 education, 86 percent did not want cuts in health care assistance for the poor, elderly, disabled, and children, 76 percent disliked cuts to public safety, and 63 percent rejected cuts to colleges and universities. So what to cut? Apparently, nothing. From the theoretical concept of “cut programs to avoid taxes at all costs” to the practical reality of finding programs to cut, the failure of federal and state governments to protect their citizens is a disgrace to democracy, and an unfortunate deference to the oligarchy and their misguided fan club. Remember that next time you hit a pothole and start complaining. Hopefully those who vote against fixing the roads are the only ones who have that experience, though reality promises to spread the pothole damage far more equally than most other things in monetized America.

Two weeks ago, in An Immoral Tax?, I explained, as I have done previously in Capital Gains, Dividends, and Taxes, As I Expected, Tax Deform(ity), and The Rich Get Richer: The Tax Law’s Role?, that repeal of the estate tax makes sense and has its advantages provided unrealized appreciation does not escape taxation at death. In response, a reader directed me to William G. Gale’s Adjusting the President’s Capital Gains Proposal.

Although Gale describes the proposal to tax unrealized appreciation at death as “a welcome change that would close a huge loophole,” he points out “a serious flaw,” namely, the challenge of keeping records so that unrealized appreciation can be computed at death. That computation requires two facts. One is the fair market value of the asset. The other is the adjusted basis of the asset. Because fair market value must be computed not only for the few taxpayers who are subject to the federal estate tax, but also for purposes of taxpayers who are subject to state estate and inheritance taxes, as well as those who sell inherited property, determination of fair market value does not pose significant challenges. The value of most assets can be determined from market quotes, appraisals, and similar information.

Determining the decedent taxpayer’s adjusted basis in property can be problematic. Many taxpayers do not keep track of their adjusted basis in property, particularly property that is not publicly traded or that was acquired many years previously. This conundrum is what caused the failure of carryover basis to stick. Carryover basis would give the heirs the decedent’s adjusted basis rather than a basis equal to fair market value at death.

What doesn’t get much attention is the fact that when the taxpayer gives property to another person during lifetime, the donee’s adjusted basis is the decedent’s adjusted basis. If determining the taxpayer’s adjusted basis is as impossible as the defenders of the basis step-up at death loophole claim, then why has it endured in existing tax law for almost as long as the federal income tax has existed?

Gale proposes that taxpayers be permitted to compute adjusted basis by allowing them to claim a “standard basis,” a concept derived from the standard deduction. Just as the standard deduction provides an alternative to computing actual itemized deductions, the “standard basis” would provide an alternative to computing actual adjusted basis.

Gale suggests, as an example, setting standard basis at 20 percent of fair market value. He explains that by keeping the percentage low, taxpayers would be encouraged to keep basis records. That might make sense going forward, but there are trillions of dollars of existing assets for which at least some taxpayers have not maintained records.

Gale’s idea makes sense, though I would modify it. I would scale the percentage based on how long the taxpayer held the property. Perhaps "standard basis" should equal the fair market value of the asset multiplied by the standard basis percentage. The standard basis percentage would equal 100 percentage points reduced by 2 percentage points for each year the property has been held, but would not be less than 10 percent. Because the gain would be reported on the decedent’s final income tax return, two special adjustments should be provided. First, to the extent that ordinary income rates apply to unrealized gain, after computing that portion of the tax liability, it would be cut in half to offset the impact of income bunching. That reduction would not apply if the tax rate were a flat rate, such as the rate applicable to capital gains. Second, all taxpayers would be permitted to reduce unrealized appreciation by a standard amount, perhaps twice the exclusion applicable to sales of a principal residence, in order to avoid imposing taxes on principal residences and very small estates.

There are several lessons to be learned from a recent story about the attempt by the IRS to subject to federal income taxation the nearly $50,000 in gifts received by a cancer survivor from individuals who contributed to a GoFundMe account set up on behalf of the cancer survivor. One lesson is that the IRS error, claiming that gross income includes gifts that are excluded by statute from gross income, not only will cost the taxpayer time and money but also will subject her to stress, which is not what she needs. The taxpayer, even if successful in preventing the IRS from taxing what ought not be taxed, will incur costs, and lost time (from a life seemingly destined to be shortened by a difficult illness), in undoing the damage.

Another lesson is learned by asking the question, “How could this possibly happen?” This isn’t rocket science. The exclusion of gifts from gross income is so basic that students in the introductory federal income tax course request that the exam consist of questions at this level of difficulty. For the curious, no, that doesn’t happen.

A colleague at another law school suggested that GoFundMe, having paid over nearly $50,000, issued a Form 1099 to the taxpayer, with a copy to the IRS. The IRS computer then generated a 30-day or 90-day letter because the $50,000 was not on the taxpayer’s return. This colleague calls the process “shoot-first-make the-taxpayer-explain.” Two solutions were proposed, one, requiring the IRS to bear the burden of examining these mis-matches, the other, modifying the Form 1099 so that third-party payors could mark the payment as likely excludible from gross income. Both would require the expenditure of IRS resources, which the Congress so generously has been cutting to pieces.

When I read this colleague’s reaction, my immediate thought was, “This is precisely why I have no faith in ReadyReturn.” ReadyReturn is the proposal to have the IRS prepare returns and let the taxpayer figure out if it’s correct.

As readers of this blog know, I’m not a fan of ReadyReturn. In October 2005, I addressed the ReadyReturn concept, in Hi, I'm from the Government and I'm Here to Help You ..... Do Your Tax Return. I revisited the issue in March of 2006, in ReadyReturn Not a Ready Answer. A year later, in Ready It Was Not: The Demise of California’s Government-Prepared Tax Return Experiment, I shared the news that California’s experience with the program persuaded it to end the program. Yet I had to return to the topic in As Halloween Looms, Making Sure Dead Tax Ideas Stay Dead, where I noted the refusal of the ReadyReturn advocates to admit the failure of the program. And in December 2006, I reacted to the attempt to resurrect the failed program, in Oh, No! This Tax Idea Isn’t Ready for Its Coffin. Yet the advocates of the proposal, despite all of the many problems and its failure in California persisted. In October 2009, in Getting Ready for More Tax Errors of the Ominous Kind, I again pointed out why people should not fall for something described as simple, bringing relief, and carrying a catchy title. I looked at it again in January 2010, in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable. Later that year, in April 2010, I was interviewed by National Public Radio on the advantages and disadvantages of ReadyReturn; a summary of the discussion and the reaction to it, along with links to previous discussions is in First Ready Return, Next Ready Vote?. In 2012, as pressure from its advocates resurfaced, I extensively analyzed the ReadyReturn proposal, in a 14-part series. That, however, was not enough to diminish the insistence of ReadyReturn advocates that the only thing blocking success for the program was Intuit’s lobbying, a concern I addressed in Simplifying theTax Return Process.

So it’s rather serendipitous that shortly after the advocates of ReadyReturn engaged in their annual tax-season campaign to persuade reporters and taxpayers to encourage legislative adoption of their proposal, as evidenced by this story, along comes news that the IRS, when left to make determinations of what should and should not be on a taxpayer’s return, cannot get it right. Whatever the reason for this sort of error, the IRS isn’t ready for tax preparation prime time. As I wrote to the author of that story, “Your article paints a picture suggesting that but for Intuit’s lobbying the ReadyReturn proposal would be enacted, which probably is true, and gives readers the impression that Intuit is standing in the way of a good thing. To the contrary, Intuit is preventing taxpayers from being pulled into a system that relies on antiquated IRS computers, that puts more burdens on an underfunded and understaffed IRS, and that promises to make tax compliance worse for most taxpayers.”

In other words, ReadyReturn is a variant of “shoot-first-make the-taxpayer-explain.” Only a savvy taxpayer, or one with sufficient means to retain a savvy tax practitioner, might catch the glitch. As I shared with my colleagues, “The theory seems fine (though it isn’t). The practical application fails miserably.”

In September of last year, in Tax-Exempt Status Benefits Aren’t Necessary Unless There is Net Income, I responded to calls for eliminating the tax-exempt status of the NFL by pointing out that doing so would not make the NFL liable for taxes on its revenue of $327 million. Claiming that the NFL is escaping taxation on its revenues overlooks the reality of income tax deductions. Because the Joint Committee on Taxation estimates that roughly $11 million of tax revenue is lost each year, the NFL probably is collecting from its constituent teams a little more than what it is paying out on their behalf. I also concluded that the NFL should not be tax-exempt, but that the prospect of hauling in tax revenue of more than $100 million each year is nothing more than a fanciful dream.

Now comes news that the NFL plans to give up its tax-exempt status. The cited article mentions the same $327 million figure, and though describing that amount as revenue, does not clearly articulate that this amount is not taxable. If the Joint Committee’s estimate is accurate, the loss of the tax exemption is more symbolic than lucrative, and it would not surprise me that the a taxable NFL would be careful to have its revenue from the teams equal the amounts it spends on their behalf to manage the league. Its tax liability will be at or close to zero. Someone needs to get that message across before the Congress starts spending revenue it thinks will be forthcoming but that isn’t going to be there. I’m trying, but until a news outlet with a wide national scope and tens of millions of followers does so, the nation will continue to carry yet another bundle of tax ignorance in its basket of burdens.

A recent Tax Court case, Iglicki v. Comr., T.C. Memo 2015-80, highlights the tax disadvantages of falling behind on alimony payments. When a husband and wife divorced, the signed a separation agreement, requiring the husband to pay child support to the wife. Spousal support was required only if the husband defaulted on the child support obligation. If that happened, the husband’s obligation to pay spousal support would continue until the wife died, the husband died, or the husband made 36 payments. Two months after the agreement was signed, the state court entered a final divorce decree, which incorporated the agreement. Thereafter, the former husband moved to Colorado, defaulted on the child support payments, and thus began incurring spousal support obligations. The former wife sued in a Colorado court for enforcement, filed a verified entry of judgment with the court setting forth the past due child and spousal support, and obtained a writ of garnishment against the former husband’s wages. Not long thereafter, the former husband paid the child support arrearages. During the following year, child support payments for that year and a portion of the past due alimony was paid by the former husband through wage garnishment. The husband deducted the alimony arrearage payments on the joint return he filed with his new wife.

The IRS denied the deduction, arguing that the payments did not constitute alimony because they did not satisfy section 71(b)(1)(A) and (D). The court held that the payments did not satisfy section 71(b)(1)(D), which requires that the payor have no obligation to make the payments after the death of the payee. For that reason, the Court did not address section 71(b)(1)(A), because failure to meet the requirements of any of the subparagraphs of section 71(b)(1) disqualifies the payments as deductible alimony. The Court concluded that section 71(b)(1)(D) was not satisfied because the verified entry of judgment did not provide for the obligation to pay the past due alimony to end at the former wife’s death, and because under Colorado law the obligation to pay the past due alimony becomes a final money judgment for which the obligation to pay does not end at the creditor’s death. Colorado law specifically provides that the judgment survives the deaths of the debtor and creditor. To make matters worse, the Tax Court upheld the IRS assertion of an accuracy-related penalty because the former husband and his new wife did not provide reasonable cause for deducting the alimony.

It is not that readily obvious to most taxpayers, and even to many tax professionals, that an alimony payment that would be deductible if paid, even if paid late, becomes nondeductible if the payee causes the past due amount to be reduced to a money judgment. Aside from the interest and other penalties imposed under state law, the delinquent payor of alimony faces yet another level of adverse consequences for the delay in payment. The tax deduction is lost and an additional federal tax penalty is imposed. The cost of not paying on time becomes a multiple of the alimony that was originally owed. I wonder how many domestic relations lawyers warn their payor clients about this risk. And I wonder how many who do point out the disadvantages of falling behind in payments include this risk in the list of reasons to be timely with the payments.

As described in several recent stories, including this one, some Philadelphia business and political leaders are proposing a major change in how Philadelphia raises tax revenue. Though the proposal would require permission from the state legislature, it’s worth giving it a moment or two of thought.

The core components of the proposal are a reduction in the wage tax, a reduction in some business taxes based on income and receipts, an increase in the real property tax imposed on commercial properties, and a better balance between the valuation of land and improvements when formulating the real property tax. One argument in support of the proposal is that other cities, which are performing better economically than Philadelphia, get more of their revenue from fixed assets such as real estate and less from sources that easily are moved out of the city, such as labor and business receipts. Another argument is that the current system reflects taxation in the industrial age, which has passed away, rather than taxation for a modern economy.

The advocates of the proposal claim that many companies that want to be in Philadelphia stay away because of the disproportionate reliance on the wage tax. Yet if revenue is to be maintained, would not the proposal still claim as much, if not more, tax revenue from businesses? The proposal emphasizes the need to give residential property a real property tax break. Where does the city get the revenue to offset that reduction? Does it make a difference to a business whether it is paying a higher real property tax or its employees are paying a higher wage tax? The proposal points out that the city currently taxes “things that can and do easily move to the other side of [city boundaries],” but isn’t the issue one of getting businesses to move into the city? Will the inflow increase simply because the total taxes on business are generated by the real property tax becoming a higher portion of the total tax burden?

Or does the proposal work only if it is, in disguise, an effort to reduce taxes. And, if so, how does that assist a city strapped for cash and drowning in debt, facing a huge pension deficit, unable to fund its schools, and struggling to provide municipal services?

One of the forces that has shaped federal and some state tax policies during the past decade is the unflagging efforts of the ultra-rich, or at least most of them, and their fans and hired hands, to reduce their tax liabilities to zero and to benefit from as many tax breaks as possible. The desire of the wealthy for even more wealth is endless. The destruction of the middle class and the agony of the poor mean nothing when an limitless thirst for money at all costs consumes the insatiable rich. They invent whatever marketing ploy they think will grab the votes of the easily duped voters, such as the discredited trickle-down theory, alleged private sector superiority, unfounded claims they are job creators, and offensive assertions that they are makers and the poor are takers.

Why do those drowning in wealth feel compelled to acquire more? The answer might be found in a remark by New Jersey’s governor.

Chris Christie made two comments the other day, as reported in this story. He complained that the federal tax law is too complex, though he suggested that the complexity of tax returns increases as one’s wealth increases. That assertion, of course, is silly, but is harmless in the sense that everyone’s tax return is more complex than it needs to be.

Christie’s second comment is what caught my eye. Christie claimed that he and his wife “are not wealthy by current standards,” and that he does not consider himself a wealthy man. He added that he doesn’t think most people consider him to be wealthy.

By all accounts, Christie and his wife are worth roughly $4 million. The wealthiest one percent of Americans are those with net worth of $3.9 million or more. The median American household has a net worth of $71,000. By this measure, Christie is wealthy, though not ultra-wealthy. Christie and his wife reported adjusted gross income of nearly $700,000 in 2013. Adjusted gross income of more than $400,000 puts someone into the top one percent. The median American household has income of $52,000.

So how does someone with net worth of $4 million and income of $700,000 end up declaring himself not wealthy? Because as long as there is more money to acquire and more wealth to accumulate, what one has, at least for many people, is not enough. And apparently, the more one has, the more likely it is that one does not think one has enough. Money is like any addictive substance in that regard. Someone without it doesn’t feel a need to acquire more of it, but once turned on to it, the compulsion doesn’t go away. It was just two years ago when Ann Romney said, “I don’t even consider myself wealthy.” Are there any wealthy people who DO consider themselves wealthy?

After all, it is possible to compute what a person needs to provide food, shelter, clothing, medical care, education, and other necessities for the household. So to what end is additional income and wealth desired? Perhaps to acquire fancier clothing, more comfortable shelter, a nice vacation, and richer food. But there is only so much one can spend on these sorts of consumables. What happens to the vast excess held by the wealthy? As I shared the other day in An Immoral Tax?, it permits them to “buy the Congress, own monopolies, dictate terms in the “free” market, eliminate choice, and live like the gods they are trying to be.” So long as there is someone who appears to be closer to owning everything, all of the others who are addicted to money and the power that it can purchase when owned in large quantities will feel poor. And so the pursuit of money by those addicted to it continues to destroy the nation, while those afflicted with the addiction continue to blame everyone else, calling them lazy, tagging them as takers, and holding those not as well-off in disdain even as they sucker them into voting for policies that feed the addiction.

An economist, Mark Pauly, has presented an interesting tax proposal aimed at offsetting the costs imposed on society by parents who refuse immunizations for their children. By his own admission, it’s not a new idea. In 1905, Massachusetts imposed a $5 fine on those refusing to be immunized against smallpox, and challenges were rejected by the Supreme Court. Does it matter whether the amount that must be paid is tagged as a tax or as a fine? To me, calling something a tax means that the underlying transaction or activity is legal whereas calling something a fine means that the underlying transaction or activity is illegal. The last time I checked, refusing immunization is not a crime, though it is rather foolish. Foolishness is not a crime.

Pauly notes that rejecting immunizations is not the only thing parents do that put their children at risk. He points out that some parents permit their children to “play contact sports, race dirt bikes, and eat potato chips.” He does not propose a fine or tax on those activities. He seems to rest the distinction on the harm caused to others by the activity. Yet a child playing contact sports or racing dirt bikes can injure someone else. For that, there is a solution in tort law. Tort law, however, is inadequate to deal with the children who are infected by, for example, measles during the Disneyland outbreak, because identifying the unvaccinated children roaming the facility is not possible. The problem exists because some children cannot be immunized because of age or immune system problems. Pauly does limit his proposal to immunizations for communicable diseases, thus leaving the decision to not have tetanus shots free of the proposed fine.

Pauly addresses the question of how to compute the appropriate amount of a fine. The concept is simple. Divide the economic cost of the harm done by failure to immunize by the number of children who could be, but have not been, immunized. Using the Disneyland outbreak as an example, Pauly computes the cost as follows. First, he puts a dollar amount of roughly $3,000 for each case of the 300 measles cases that happened to cover public and private health care costs, for a total of $1,000,000. Second, he puts a value of $4,000,000 to $8,000,000 on the projected one death per 300 cases. Third, he divides the $5,000,000 to $9,000,000 total by the estimated 40,000 children in California who could be, but have not been, immunized, thus generating a fine of roughly $125 to $225 per unimmunized child.

Pauly argues that this approach removes the need to inquire why the parent refuses to have the child immunized. He suggests that the tax or fine – he calls it both at different points – would persuade some parents who are on the fence about the issue to have the child immunized. The cost of the immunization is covered by health insurance, so there is no competing economic disadvantage. On the other hand, Pauly notes that a fine or tax of $125 or $225 might not persuade adamant opponents of vaccination to change their minds. So he suggests increasing the tax if experience demonstrates it is not having the desired effect.

Pauly suggests that the proceeds of what he calls a tax “be used for any good public purpose,” though he suggests it would make sense to devote the proceeds to help those who contract measles. Presumably, that assistance would be taken into account in the event a tort claim succeeded.

One of the rough edges in his example is that it assumes the measles outbreak at Disneyland was caused by an unvaccinated child from California. That probably is what happened, but it’s also quite possible that a child from some other place brought the disease to California while on vacation. But even taking the computation to a national level faces the reality of international travel. If left to states to implement, one can imagine border guards demanding travelers show proof of immunization and paying the fee if failing to do so. There are nations that refuse entry to individuals who appear to be carrying a disease or who don’t prove vaccination against specified diseases, though the number of unvaccinated people crossing national borders is far from a handful.

Though this proposal probably won’t advance, it does spark conversation. And even if that is all it does, it serves a good purpose. But let’s face it. Action on this issue won’t happen until there is a measles or other pandemic, and public demands for protection of society gets far more vocal than presently encountered.

Let’s talk about taxes and immorality. Usually, that connection arises when debates are underway with respect to taxes on alcohol or tobacco. But it has now been extended to include debate over the federal estate tax. Though opponents of the estate tax usually reserve their immorality objections to matters of who is sleeping with who, who’s watching what, and who’s visiting where, this time around they have outdone themselves. Or at least one of them has stepped up to speak for estate tax opponents.

According to Republican Representative Kevin Brady, the federal estate tax “is, at its heart, an immoral tax.” Is it?

If the discussion is going to focus on tax morality, it ought to include examination of stepped-up basis at death. This provision is of much more value to the ultra-rich than it is to the typical American taxpayer who doesn’t own much of anything that benefits from the step-up in basis. And if the typical American taxpayer does benefit from a stepped-up basis, the amount that it permits to escape income taxation is rather small.

On the other hand, stepped-up basis at death is a substantial tax loophole for the ultra-rich. For those taxpayers, it permits billions and tens of billions of dollars of income to go untaxed, forever. The effect is a spiral, by which wealth accumulates at the very top and everyone else treads water or sinks. And somehow that’s the moral alternative?

Last week, the House of Representatives passed a repeal of the estate tax. The tax, designed to prevent the income and wealth inequality that threatens democracy, has been eroded over the years. Its existence has been used to justify letting the gains in appreciated property go untaxed, while passing to heirs who are treated as though they purchased the property for its fair market value at the time the decedent died.

The repeal is touted as something to “make it possible for the wealthiest Americans to do what the other 99.8 percent already can do – pass their assets to their children without a federal estate tax.” Let’s be serious. A huge portion of the 99.8 percent don’t own anything to pass to their children. And those who do, don’t have very much, and if things continue as they have been going there will be even more of the 99.8 percent who will have much of anything to pass to their children.

As I’ve advocated in the past, in Capital Gains, Dividends, and Taxes, As I Expected, Tax Deform(ity), and The Rich Get Richer: The Tax Law’s Role?, repeal of the estate tax makes sense and has its advantages provided unrealized appreciation does not escape taxation at death.

Here is an example to show how repeal of the estate tax without appreciation creates a difference in how the .2 percent and the 99.8 percent are treated. Rather than making their treatment equivalent, as the “make it possible” sound bite seems to suggest, it pours more fertilizer into growth of income and wealth inequality. Taxpayer A has a job paying modest wages, and over a 50-year career manages to invest $100,000 in stocks that grows to $500,000 by the time A retires at age 70. Pressed for cash, A must sell the stock, and pays tax on $400,000 of capital gains. In the meantime, taxpayer B, who lives off the income from trust fund, receiving $5,000,000 annually, stashes excess cash – after all, spending $5,000,000 a year isn’t as easy as most people think – and over a 50-year period manages to put $50,000,000 into stocks, which grows to $250,000,000 by the time B reaches age 70. B never sells the stocks because B has no need for cash beyond what the trust fund spits out. Both A and B die. What can A pass to A’s heirs? Certainly not the entire $500,000 portfolio, because A had to sell it and send some of the proceeds to the Treasury. What can B pass to B’s heirs? The entire $250,000,000 of stocks, which B’s heirs take with a basis of $250,000,000. So if for some reason they sell those stocks, they are not takes on the $200,000,000 of gain in the stocks. Nor was B taxed on that $200,000,000. In other words, it’s far easier for a wealthy person to escape tax than it is for a person of modest means. The estate tax paid by B under current law makes up for part of this shortfall. Now the devotees of the ultra rich want to eliminate the estate tax. By doing so, they would remove the only thing that reduces to some extent the disparity in the tax treatment of A and B. And somehow that is more moral than the current system?

If anything is immoral, it is the persistent attempt by the ultra rich or at least most of them, through their puppets, to become even wealthier. Why? The answer is simple. So that they can run everything. They can buy the Congress, own monopolies, dictate terms in the “free” market, eliminate choice, and live like the gods they are trying to be. THAT is what deserves to be called immoral. There was a time when this sort of behavior would outrage the overwhelming majority of Americans. Now, not only does it bring very little outrage, all sorts of poor people and people of modest means cheer on the immorality of these pernicious tax policies. And, that, in a sound bite, is what is wrong with America.

According to this recent article, Philadelphia’s City Controller has determined that many real estate agents doing business in Philadelphia do not have a city business license or a city tax account. The controller estimates almost $400,00 in taxes were not paid between 2010 and 2014. According to a random sampling of real estate agents, almost half did not know they needed those accounts, and many said they did not know where or how to get them. Some of the noncompliance consists of failure to collect wage and business privilege taxes.

Perhaps one reason compliance with city taxes is low, and enforcement ineffective, is the confusing array of taxes faced by businesses in the city. Why not simply require businesses to pay income tax on their activities in the city? It would be easy to piggy-back on the state income tax returns filed by those businesses. In effect, that tax would compensate the city for the benefits that the businesses receive from the city. Repeal the business privilege tax, the business license fee, and the assortment of other nuisance taxes. As for paying the wage tax, simply piggy-back on the withholding that the businesses do for federal income tax purposes.

Both of these piggy-back proposals would require a business to determine the percentage of income earned in the city, and the percentage of wages its employees earn in the city. The former is no different from the need to determine the percentage of income earned in Pennsylvania and earned in other states for state income tax computation and credit purposes. The latter presents a challenge only with respect to employees who work both in and outside the city. Tracking where an employee is working is part of the process of running a business, so it ought not be as difficult as hunting down a variety of city tax and license forms and returns and figuring out how to comply with an assortment of miscellaneous taxes.

The bottom line is obvious. The simpler the tax, the higher the compliance. Too often legislators make things more difficult than they need to be, often with the goal of assisting a supporter in finding a murkiness in which to hide tax avoidance, and often because they’re clueless about looking at the big picture. Few, if any, legislators do their own tax compliance. That needs to change.

As described in a recent article, Congressional tax writers are looking for a way to give to partners and S corporation shareholders the benefit of the reduced tax rates that are planned for C corporations. They do not want to lower the individual rates, which are the rates that apply to partners and S corporation shareholders who are individuals.

The problem exists because partnerships and S corporations, with a few exceptions for some S corporation income, are not subject to the federal income tax. Instead, the owners of these enterprises are taxed on the partnership’s or S corporation’s income. They also can deduct their share of losses, provided a variety of conditions are satisfied, the net effect of which is that a good chunk of those losses aren’t deducted.

The answer, to me, is simple. The answer is to require partnerships and S corporations to pay federal income tax, at corporate rates, on their income. The response, of course, is that this would subject the income to the same “double taxation” that afflicts C corporations and their shareholders. After all, S corporations were designed to give to small corporations the benefits already afforded partnerships of having the income taxed only once.

The solution to that obstacle, to me, also is simple. Permit partners and S corporation shareholders to withdraw income from those enterprises free of federal income tax. That eliminates any concern about double taxation.

These solutions, however, pose two huge challenges. The first is the need to deal with a transition period. Conceptually, the solution is easy. Permit the partners and shareholders to withdraw the income on which they were taxed but that remains in the enterprise. The details of that approach would be a bit more complicated. The second is the reaction of state and local governments. If they did not conform their approach to the taxation of partners and S corporation shareholders to the federal approach, we would find ourselves back in the even-more-complicated-than-now days when most states did not recognize the S corporation election. Adjustments to reflect the difference in approach were, are, and would be, complicated. However, the fact that state tax laws would need to be amended or otherwise afflict state taxpayers ought not be the driving force behind federal income tax reform.

How likely is it that this approach would be adopted? I’m not holding my breath. I’d be glad to describe it and defend it if Congress asks. Will it? I’m not holding my breath.

For those seeking free houses and free land, The Penny Hoarder has a list of cities that are giving away houses that need fixing up, cash rewards to people renting living space in the city, and cash rewards to people who live and work in the city. In some instances the cash rewards can be as high as $20,000. One city is offering almost 3 acres of land, worth $175,000, to any business that creates 24 new jobs in the city. In some instances, the recipient must be employed by a company that is a partner with the city in operating the program. In other instances, a person receiving an empty building lot for free must promise to build a house and live in it for a specified period of time. Among the cities and towns engaged in this sort of rehabilitation effort are Detroit, Michigan, Lincoln, Kansas, any city in Saskatchewan, Canada, Camden, Maine, and Curtis, Nebraska.

So, of course, when I read this article, my first thought was a tax one. If a person accepts the offer, and receives free land or cash rewards, does the person have gross income for federal income tax purposes? It’s possible that there is a state income tax exclusion for these programs, and I don’t address that question because I haven’t researched it.

The answer is yes. There is no federal income tax exclusion that applies to this transaction. The notion that it is a gift, and thus excluded from gross income, fails because the recipient must do something or several things in order to receive the benefit. Not only does that fact block the gift exclusion, it also strengthens the gross income argument because it gives the transaction a compensation flavor. The amount is being received in exchange for doing something that benefits the city or town paying for it.

As unfair as it might seem to some people who think this sort of transaction ought not be taxed, that result is not unjustified. A person who wins a lottery is taxed, even though the same folks also tag that outcome as unfair. If the compensation earned by someone harvesting vegetables or fixing flat tires is taxed, then the compensation earned by someone building a home in a city also ought to be taxed.

I don’t know if anyone has taken up any of these cities or towns on the offer. Not too many people are anxious to relocate to Detroit, Michigan, Lincoln, Kansas, Camden, Maine, or Curtis, Nebraska. That’s one of the reasons these programs exist. But if someone does accept the offer, I wonder what their reaction will be when they receive a Form 1099. Worse, when they realize that they face a serious liquidity problem if the compensation is in the form of land or a house, I don’t think their reaction is going to be all smiles and handclaps.

Alaska, like most other states, is facing education funding shortfalls. So a Republican state senator, Click Bishop, has proposed a new tax. According to this story, the tax would work as follows. Anyone who earns $10,000 or more per year would pay $100. Anyone who earns $50,000 or more per year would pay $200. Anyone who earns $500,000 or more per year would pay $500.

So, a person who earns $10,000 would pay $100, which is the equivalent of a one percent tax. A person who earns $50,000 would pay $200, which is the equivalent of a four-tenths of one percent tax. A person who earns $500,000 would pay $500, which is the equivalent of a one-tenth of one percent tax. And a person who earns $10,000,000 would pay $500, which is the equivalent of a five-one-thousandth of one percent tax. Put another way, the rate on the $10,000 worker would be two and a half times the rate on the middle-class worker, ten times the rate on an upper-middle-class worker, and two hundred times the rate on the multi-millionaire. And, to rub salt into the wound, the tax would be withheld from workers’ first two paychecks of the year. Apparently Bishop’s flawed theory wasn’t introduced to practical reality.

Taxes imposed at a flat rate are regressive because they take a bigger percentage of a lower-income worker’s income than they take of a millionaire’s income. Calling this idiotic proposal regressive is misleading, because it is far worse than regressive. Perhaps it could be called what it is, that is, evil.

Perhaps we should be glad that we are being given an insight into what the so-called anti-tax crowd really wants. Flat tax advocates who support this nonsensical idea surely are caught by the inconsistency between their stated position and this absurdity. Those who oppose taxes but who support this plan are exposed for what they truly advocate, which is the oppressive destruction of the poor and the impoverishment of the middle class, all for the benefit of the oligarchy. It’s easy to understand why those members of the oligarchy who support this approach to destroying the nation do so, but I remain baffled by those who continue to support ideas that are self-destructive. Perhaps it’s time for science to research the brains of those who engage in this sort of economic masochism.

Whether or not Bishop’s plan succeeds, the nation should be very troubled that someone like him, and there are far too many with his outlook on life, gets elected to a legislature. Legislators owe their allegiance to the common weal, but too many of them are selling out to the puppet masters who finance their acquisition of a legislative seat that, for them, is more a position of power than a position of service. I doubt they understand the concept of servant-leadership which at one time inspired this nation’s legislators. And if they understood it, I doubt they’d want to subscribe to it. It gets in the way of their self-centeredness and the selfishness of the oligarchy which they serve.

The anti-tax crowd dislikes taxes, dislikes government, dislikes government services other than those provided to themselves, and delights in the dismantlement of America’s foundations while claiming to be patriots and fans of America. Though they have not yet succeeded on a wide scale throughout the nation, there are several states where they have managed to grab enough control to put their policies into full force. One such state is Kansas, which has become the tax policy and public expenditure poster child for what is wrong with the narrow mindedness and short sightedness of the “me first” culture that is eroding the well being of the nation. In two previous posts, A New Play in the Make-the-Rich-Richer Game Plan and A Tax Policy Turn-Around?, I have explained how the anti-tax crowd cut state income taxes in Kansas, only to see the state’s infrastructure and economy go down the tubes, which triggered an attempt to reverse the trend. That attempt, however, ran into a dead end when somehow, a Republican governor running for re-election and who was trailing badly in the polls managed to pull off an election night comeback that fueled memories of the national election in 2000.

Now comes news that because of the revenue shortfall generated by tax breaks for the state’s wealthy individuals, some Kansas school districts must shut down before the school year ends. This means that the children in those school districts will suffer, their education will be diminished, their chances of getting into and doing well in college, trade school, or life generally have been harmed, and the chances of this nation’s students measuring up to those in other nations have been decreased even more. Of course, educating the middle and lower classes is not a concern of the rich, because an educated citizenry finds it easier to see through the con game that has created an economy rigged for the destruction of all but the oligarchy.

The schools are shutting down because the state cut funding in the middle of the school year. The state cut funding because its revenues declined. The revenues declined because income tax cuts were enacted for the rich. Of course, the claim was that cutting taxes on the rich would generate additional revenue, but as usual, that did not happen. The theory of trickle-down, which was crushed when it met something called practical reality, continues to generate cult-like admiration among those who look for any excuse to enrich the rich while impoverishing the poor and destroying the middle class.

When per-pupil funding is cut by $950 over a six-year period, as has happened in Kansas, it is difficult to imagine that the education system will be turning out better educated students. That reduction, third highest among states, amounts to a 16 percent cut in funds available for education. It can be cheered only by the oligarchy, and its twisted fans, who cheer for the dumbing-down of America. The notion that ignorance is bliss is itself ignorant.

And how is this anti-tax effort working out for Kansas? Its economy is stagnant, and its poverty rate is increasing. Though here and there some members of the oligarchy and some of its puppets claim to be distressed by these developments, their actions say otherwise. Actions, we know, at least if we’ve had a decent education, speak more loudly than do words. It’s not that the majority of people in Kansas want this outcome. It’s that the oligarchy has learned how to impose its will on the majority, and is now engaged in an effort to render the majority incapable of out-voting the minority. Stay tuned. It is going to get much worse, and quickly.