MauledAgain

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Almost a year ago, in Tariffs: Taxes By Another Name, I shared my agreement with what Tom Giovanetti, with whom I don’t always agree, had to say about tariffs in Who Pays Tariffs?. Here is what I wrote:

Tom Giovanetti offers an important analysis of how tariffs work and what the recently imposed tariffs will do to Americans and the American economy. Giovanetti points out that in the past, tariffs were a major source of federal tax revenue, that tariffs have been in place for decades, and that until recently, U.S. tariffs were significantly lower than those of the nations with which the U.S. trades. He points out that tariffs on goods imported from a particular country are not paid by citizens or residents of that country but by the Americans who purchase those goods, because the importer passes the tariff along as part of the price charged to consumers. On all of these points, he is correct.

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

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

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

Tariffs are not the path to improving the American economy. There is a place for tariffs, but those instances are limited and often should be of short duration. Giovanetti is correct. The current flood of new and increased tariffs is helping no one who needs help.

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

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

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

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

For a species that calls itself sapiens sapiens, humanity surely has its share of people who just don’t get it. Despite the warnings by those who see the risks that ignorance presents, and despite the attempts of millions of legitimate educators to stymie ignorance by teaching people how to think and research, ignorance is spreading like a virus rum amok. I have written many times about ignorance, usually focusing on tax ignorance but also expressing my concern about ignorance generally and how it is ripping apart the threads that hold civilized society together. A probably incomplete list of my commentaries about ignorance and its dangers includes Tax Ignorance, Is Tax Ignorance Contagious?, Fighting Tax Ignorance, Why the Nation Needs Tax Education, Tax Ignorance: Legislators and Lobbyists, Tax Education is Not Just For Tax Professionals, The Consequences of Tax Education Deficiency, The Value of Tax Education, More Tax Ignorance, With a Gift, Tax Ignorance of the Historical Kind, A Peek at the Production of Tax Ignorance, When Tax Ignorance Meets Political Ignorance, Tax Ignorance and Its Siblings, Looking Again at Tax and Political Ignorance, Tax Ignorance As Persistent as Death and Taxes, Is All Tax Ignorance Avoidable?, Tax Ignorance in the Comics, Tax Meets Constitutional Law Ignorance, Ignorance in the Face of Facts, Ignorance of Any Kind, Aside from Tax, Reaching New Lows With Tax Ignorance, Rampant Ignorance About Taxes, and Everything Else, Becoming An Even Bigger Threat, The Dangers of Ignorance, Present and Eternal, Defeating Ignorance, and Not Just in the Tax World, Tax Ignorance or Tax Deception?, The Institutionalization of Ignorance, and Disinterest in Tax: Should Difficulty in Understanding Justify Ignorance?.

A few days ago, I became aware of a poll that had been taken by CivicScience, a market research firm. Though the results of the poll are no longer on its web site, other outlets have shared it. According to this report, to select one of many similar and identical stories, more than 3,200 Americans were asked this question: “Should schools in America teach Arabic Numerals as part of their curriculum?” One would think all Americans but infants and the comatose would know that Arabic numerals have been taught in the nation’s schools for a long time. Yet 56 percent of those answering the question said, “No.” Only 29 percent said, “Yes.” And 16 percent had no opinion.

It doesn’t require rocket science to realize that at least almost all of those answering “no” were sharing a response generated by their limbic systems. Perhaps some people do not realize that the numerals 0 through 9 are Arabic numerals. What caused the limbic systems to overwhelm frontal lobes? As the report explains, “Maybe the word Arabic triggered it.”

The article ended with this question, “Roman numerals, anyone?” No, thank you. As I wrote 13 years ago in Giving Thanks, Again, “Thanks for Arabic numerals, because I can't imagine doing tax returns using Roman ones. And I'm thankful for the scholars who have explained that Arabic numerals are a transformation of Hindu, Indian, and perhaps even Chinese numerals.”

The connection between ignorance and bias is powerful. Bias triggers ignorance, because bias deters people from exploring and getting to know and understand “the other.” Ignorance triggers bias, because the lack of knowledge and understanding creates a fertile field for bias to take root and blossom.

Ignorance and bias is a deadly combination. They cast a long, deep, dark shadow over the light of knowledge, understanding, wisdom, and reason. If ignorance and bias were not so dangerous, one might be tempted to laugh at those “No” responses. Laughing at ignorance and laughing at bias does nothing, however, to curtail or eliminate those diseases that threaten all of us.

New Jersey imposes its sales tax and an occupancy fee on short-term rentals. Well, on some short-term rentals. If the rental is arranged through a licensed real estate broker, are exempt. Owners who rent their properties through home-sharing markets, such as Airbnb and Vrbo, are not exempt. Nor are owners who rent directly to their tenants. The issue is particularly contentious for owners of properties along the New Jersey shore, where short-term rentals are ubiquitous. Now, according to this story, the New Jersey legislature is considering a bill that exempts owners who deal directly with a tenant.

Supposedly, the tax is “aimed at home-sharing marketplace Airbnb.” It seems to me that a tax imposed on a particular individual or company, whether by name or narrow definition, is wrong. In a sense, it can be characterized as confiscatory. Whether such a tax gets enacted against one company and not another would seem to depend on how much money each company spends fighting the tax or contributing to the campaign coffers of legislators.

Though I think user fees are an appropriate way to raise revenue, I also think they need to be applied to a specific concern. So the analysis would begin with this question: Why impose a tax on short-term rentals? The answer, I am guessing, is that short-term rentals can bring into the community people who have no sense of belonging, do not have as much civic pride in the area as do permanent residents, and are more likely to cause damage, require public safety services, and otherwise burden the community. That’s not to say all or even most short-term tenants lack civic pride, as many return summer after summer to the same property.

So if these taxes and fees on short-term rentals are being justified on account of extra costs incurred by the community because of short-term tenancies, then those taxes and fees should be imposed on all short-term rentals. To impose them on some, but to exempt others, is discriminatory. What is the justification for exempting certain types of short-term rentals? There is no connection between the channel through which the rental is arranged and the burdens that the tenants impose on the community that require funding in order to ameliorate.

Airbnb, which understandably opposes the exemptions, notes that rentals arranged through newspaper classifieds and magazine advertisements should not fall within an exemption because newspapers and magazines provide rental marketplaces. Airbnb suggests that piling exemption on exemption confuses would-be renters and makes the rental price change depending on the channel used to enter a lease. Airbnb has a point. When an exemption is created, it opens up the door to additional issues that involve defining who and what fit within the exemption, and who and what does not. Exemptions create complexity. Sometimes exemptions make sense and can be justified. In other instances they do not, and in those cases the complexity is a price not worth paying. Add to that the fact that when exemptions are reduced or eliminated, the overall rate of taxation can be decreased.

I have no idea what will happen with these New Jersey rental taxes and fees. My guess, though, is that it won’t turn out well.

There continues to be unhappiness in Michigan as its governor and legislature confront the challenge of fixing the state’s abysmal transportation infrastructure. Two months ago, in When Partisan Nonsense Muddles the Tax Debate, I addressed a meme that claimed Michigan’s governor was tripling the state’s gas tax, an act that would add $600 to $1,200 to each driver’s annual gasoline bill. In my commentary, I pointed out the obvious errors, such as the governor’s lack of power to increase the tax, the absurdity of the $600 to $1,200 annual tax increase claim, and the absurdity of claiming that 45 cents is not triple 29 cents. I shared the question I posed to those advocating what the meme claimed, by asking, “So what's your solution to the need to repair and maintain roads and highways? Tolls? (Also regressive) Privatization with even higher tolls (every such attempt in the USA failed, with governments having to take back responsibility for the roads, especially as those private companies are based in Europe)? Higher income taxes on wealthier people so that the ‘poor people’ don't pay additional gasoline taxes?”

Now comes some sort of answer, though it is not a reply to my particular commentary. In this opinion piece, Annie Patnaude claims that the answer to the funding challenge simply is, “Spend smarter, not more.” So how would that work?

Patnaude argues that increased gasoline taxes are taxes that “hard-working Michiganians can’t afford.” Perhaps Patnaude thinks Michiganians can more easily afford the costs of bad roads. Perhaps she thinks it is cheaper to pay for tire and wheel replacements, suspension repairs, alignments, and the hospital bills for those injured in accidents caused by poorly maintained highways. When she calls gasoline tax increases “unneeded,” perhaps she thinks vehicle damage, personal injury, and death are the true necessities. Somehow, though she laments the increases in gasoline taxes, she fails to take into account the impact of inflation. As she points out, the federal tax was three cents in 1956. Though she criticizes the raising of the tax at an “exponential rate,” she fails to note that three cents in 1956 is equivalent to 28 cents in 2019. Yet she complains about the current 18.40 cent per-gallon federal gasoline tax. In other words, the Highway Trust Fund has been underfunded for most of its existence if the 3 cent per-gallon tax in 1956 is the benchmark. If the federal gasoline tax is to be increased, it should be increased not only to bring the total to the inflation-adjusted 2019 amount of 28 cents, it needs to provide for a “catch up” for the decades of negligent Congressional underfunding. The time has come to pay the price for following the siren songs of the anti-tax crowd.

Patnaude argues that the current federal gasoline tax generates sufficient revenue to “improve our roads and bridges.” The goal, though, isn’t to “improve” roads and bridges. The goal is to make them safe. Filling some potholes improves a road. But filling some potholes doesn’t make that road safe if there remain unrepaired potholes, to say nothing of weakened bridge supports.

Patnaude points out that federal Highway Trust Fund revenues have been diverted to other projects. On this point she is correct, but the percentage devoted to things not connected with highway transportation is but a drop in the bucket. Even if those funds had not been used to fund, for example, transportation museum exhibits, the nation’s highways would not be better than they are, aside from a few miles here and there. Patnaude’s focus on the federal gasoline tax, though her opinion piece began with a focus on the Michigan gasoline tax, demonstrates her deliberate or unintentional disregard of the fact that the federal Highway Trust Fund is designed to deal with certain roads, such as Interstate highways, whereas state gasoline taxes are the primary source of revenue for state and local highways, of which Michigan has many, most in disrepair.

Patnaude then lists how she thinks highway revenue can be distributed in a manner that reflects “spend smart.” She gripes about the Davis-Bacon Act, environmental protection regulations, and “other permits and clearances.” She complains about the process taking many years, presumably causing costs to increase in the interim, though she doesn’t articulate that point. She requests that states have “greater freedom to construct and maintain their roads and bridges.” They have that now. What she really advocates is giving states the “freedom” to build and maintain highways without regard to environmental or labor regulations. She is particularly adamant about the Davis-Bacon Act. Why? That act requires the payment of “prevailing wages” to those who work on highway construction and repair. What’s so bad about prevailing wages? They are higher than the low-wage, barely-above-minimum-wage that the oligarchs want t pay workers. Cheap labor, free labor, the difference is a matter of degree and semantics. Otherwise, Patnaude doesn’t offer much in terms of specific proposals, budgets, and financial analyses to support her sound-bite quip that seems fine theoretically, but that lacks any support in terms of practical application.

Patnaude concludes by asking, “Are you ready to pay almost $300 more in taxes for your gasoline this year?” Any person using logical analysis would answer, “Sure, if that means I no longer run a 50 percent risk of hundreds of dollars in tire and wheel replacements and automobile repairs, a 10 or 20 percent risk of thousands of dollars in medical bills, and a tiny risk of death.” Three hundred dollars is a great price for that assurance, isn’t it. Well, at least Patnaude is using a more reasonable $300 amount, rather than the ridiculous $600 to $1,200 amount tossed about by those with even more reactionary approaches to the issue.

All of this, of course, can be avoided by adopting a sensible “pay for what you use” approach. My idea, supported by a number of advocacy groups, is a road use fee based on miles driven and weight of vehicle (heavier vehicles do more damage), and though several states are experimenting with it, it meets much opposition. I have explained, defended, and advocated for the mileage-based road fees for many years, in posts such as Tax Meets Technology on the Road, 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?, So Who Should Pay for Roads?, Between Theory and Reality is the (Tax) Test, Mileage-Based Road Fee Inching Ahead, Rebutting Arguments Against Mileage-Based Road Fees, On the Mileage-Based Road Fee Highway: Young at (Tax) Heart?, To Test The Mileage-Based Road Fee, There Needs to Be a Test, What Sort of Tax or Fee Will Hawaii Use to Fix Its Highways?, And Now It’s California Facing the Road Funding Tax Issues, If Users Don’t Pay, Who Should?, Taking Responsibility for Funding Highways, Should Tax Increases Reflect Populist Sentiment?, When It Comes to the Mileage-Based Road Fee, Try It, You’ll Like It, Mileage-Based Road Fees: A Positive Trend?, Understanding the Mileage-Based Road Fee, Tax Opposition: A Costly Road to Follow, Progress on the Mileage-Based Road Fee Front?, Mileage-Based Road Fee Enters Illinois Gubernatorial Campaign, Is a User-Fee-Based System Incompatible With Progressive Income Taxation?. Will Private Ownership of Public Necessities Work?, Revenue Problems With A User Fee Solution Crying for Attention, and Plans for Mileage-Based Road Fees Continue to Grow.

So, once again I ask the same questions that I have asked time and again. Why are legislators so reluctant to acknowledge that they have been living in the twenty-first century for two decades and that it’s time to use twenty-first century solutions? Will legislatures act before it is too late?

A few days ago, reader Morris directed my attention to letter written to the Lincoln Journal Star. The writer purports to claim he has no interest in Trump’s tax returns, yet he took the time and made the effort to welcome others to be interested in his disinterest.

Though the letter writer suggests a variety of reasons that tax, and Trump’s tax returns, defy understanding, he doesn’t explain why the fact that something is difficult to understand should be ignored. Most medical problems and diseases are difficult to understand, but thankfully medical researchers haven’t abandoned efforts to learn.

What caught my attention, though, was this claim: “I don't understand the tax code, and I don't think anyone else does, either.” Forget that many tax professionals understand the tax code, though admittedly it often requires intense intellectual effort and some degree of patience to work though some provisions. Instead, keep in mind what we were told by Trump back in August of 2015, on a radio show in Birmingham, Alabama. He claimed, “Who knows taxes better than me?” in a manner implying that the answer is “No one.” So is the letter writer suggesting that Trump was not telling the truth when he made this claim? Or is he suggesting that Trump understands his own tax returns but that no one else does, even though Trump did not prepare those returns?

From my commentary on that episode, ”Who Knows Taxes Better Than Me?”, I will share the benchmarks that can be used to identify people who do, in fact, understand the tax law, perhaps save for a provision or two. Not that having done all of these is what’s required, but having engaged in most of these demonstrates why the letter writer is wrong:

• Has read the Internal Revenue Code cover to cover at least twice.
• Has read the U.S. Master Tax Guide or a similar publication cover to cover for several years in a row.
• Has read a considerable portion of the Treasury Regulations dealing with taxes.
• Has read state taxation statutes.
• Has read local tax ordinances.
• Has done tax planning.
• Has drafted documents intended to implement a tax plan.
• Has prepared hundreds of tax returns.
• Has prepared their own tax returns.

When people conclude that because they don’t understand something no one else does, ignorance wins. When people conclude that because they don’t understand something, any explanation or attempt to educate another person deserves no attention, ignorance wins. Ignorance thrives on disinterest. The advancement of civilization is grounded in curiosity. We cannot learn, and grow, unless we are interested. The ignorance that can thrive on disinterest can be fatal, to life, to liberty, and to the pursuit of happines..

Two of the many deficiencies in tax policy that I have criticized have met up, and the results aren’t pretty. It demonstrates that when the process for making tax law is flawed, the outcome is bad.

The first deficiency is one that I have criticized in a series of posts. I have always considered the New Jersey tax policy of dishing out tax breaks to companies that it entices to move to New Jersey, or to move to Camden from within New Jersey, to be unwise, indefensible, and yet another shifting of economic power and wealth from the poor and middle class to large corporations and wealthy individuals. I have written about these giveaways many times, including When the Poor Need Help, Give Tax Dollars to the Rich, Fighting Over Pie or Baking Pie?, Why Do Those Who Dislike Government Spending Continue to Support Government Spenders?, When Those Who Hate Takers Take Tax Revenue, and Where Do the Poor and Middle Class Line Up for This Tax Break Parade?, The Tax Break Parade Continues and We’re Not Invited, and Another Flaw in the New Jersey Tax Break Giveaway. Though the claim that handing out tax reductions ultimately raises tax revenue is offered as justification for these deals, the reality is that these sorts of tax breaks are as effective as trickle-down tax cuts, that is, they’re not. Worse, when a small business applied, it was rejected, because in the words of the Economic Development Authority, it did not want to set a precedent that would encourage small companies to merge “for the sole purpose of securing tax incentives.”

The second deficiency is the distortion of the tax legislative process through the blending of special interest groups being too involved, the legislation being rushed, and often pushed through without public hearings. The result is a mess, a combination of unintended consequences and unjustifiable tax breaks. I have written about the flawed tax legislative process many times, most recently in in Bad Tax Law: The Price for Railroading, Special Interests, and Deficient Thinking, and More Bad Tax Law: The Price For Not Listening to The Citizenry

Now comes a New York Times report that the New Jersey legislation under which the tax breaks handed out to companies relocating to Camden was amended by an attorney whose clients included many of the companies getting the tax break. What happened?

While the bill was working its way through the New Jersey legislature, it was handed over to a real estate attorney. His law firm is described as having ties to Democratic legislators and other politicians. The attorney was not registered as a lobbyist for the legislation, and his law firm claims that what was done by the attorney does not constitute lobbying.

So why was the attorney permitted to play the role of a legislator? The attorney declined to comment, but his firm explained that it “was asked by policymakers, including those in the Legislature, to review this legislation and offer input and suggestions on ways it could be strengthened.” One wonders why they didn’t invite all attorneys, or even all tax attorneys and other tax professionals, to mark up the legislation. The public was not informed that a private individual had changed the language of the legislation.

The changes made by the attorney not only increased the amount of tax credits available to certain clients, but also included language that extended the tax breaks to additional clients not included in the original legislation.

What brought this to light is an investigation of the tax break program after people began to realize, as I had predicted, that the benefit to the state’s residents was but a fraction of the tax breaks dished out to the companies involved in the program. For example, the $260 million tax break given to Holtec International was predicted to generate $155,520 in benefits for the state, along with 235 new jobs, and yet the tax break was approved.

When generally applicable legislation, such as a tax bill, is crafted to benefit a particular person or company, legislatures rarely publicize the name of the beneficiary. Instead, dense language is used in what is becoming an increasingly unsuccessful attempt to hide what is happening, For example, the private attorney inserted language giving a tax credit to a “qualified business facility located in a priority area housing the United States headquarters and related facilities of an automobile manufacturer.” Who might that be? Well, it’s Subaru of America. No other company fits the definition.

Is it any wonder American voters are angry? Unfortunately, too many of them end up voting for the people who are part of the system that causes so many problems for so many voters. I wonder how many voters in New Jersey will read the full New York Times report. I wonder if the fact it’s longer than a tweet or sound bite, and requires putting together multiple analytical threads and events, will deter people from getting educated on the flaws in the nation’s political systems that need to be fixed before it is too late. Will they ask themselves, “Why wasn’t *I* permitted to mark up legislation to give myself or my friends and families a special tax break?” Perhaps they will realize that the answer is, “You don’t matter to the people wrecking the nation’s political system and endangering the nation itself.”

It was just a week ago, in Bad Tax Law: The Price for Railroading, Special Interests, and Deficient Thinking, that I expressed my surprise and delight when a former tax counsel for the House Ways and Means Committee admitted that the 2017 tax law change causing church employees to be taxed on parking provided by a church did not get the “months and months of planning and consideration” that was invested in areas of the tax law best described as being of the most importance to large corporations and the wealthy. My surprise reflected my long-standing dissatisfaction with how Congress deals with tax, and for that matter all other sorts of, law.

For example, in Apologizing for the Tax Law Efforts of the Congress, I had this to say about its efforts:

I confess that my reaction when students groan in reaction to the bewilderment and frustration sweeping over them as the course works its way through just a small bit of the tax law surely is not an expression of remorse on behalf of the Congress. No, I yield to the temptation to criticize the consequences of the inattention, the ignorance, the vote-grabbing, the currying of favor with special interests, the sloppiness, and the last-minute rushing on the part of Congress that causes the nation to have such an abysmal tax law.

The legislative process is flawed. Why? In Birthdays in the Tax Law (and Obituaries?), focusing on the definition of “attaining” an age, I explained why a simple concept had become muddled:

So that means the phrases “attains the age” ends up with two different interpretations. Does it make sense to give a phrase two different meanings when the statute using the phrases does not do so? Of course, this is once again a matter of Congress not thinking through the implications of what it enacts. That’s probably because few members of Congress actually read, let alone think deeply about and think through the consequences of, the legislation on which they vote.

I reached the same conclusion in Tax and Perfection, in which I discussed a flaw in the statutory language dealing with interest deduction limitations: “Had the Congress and its various staffs invested a little more time by having brains attached to other eyeballs think through the ramifications and issues implicated in the bonus taxation legislation, far fewer resources would have been wasted in the ensuing flap over the matter.”

Recently, news has been spreading about another glitch in the 2017 legislation. For example, this article explains in more detail how an attempt to change the tax rate schedule applicable to trusts has caused tax increases on the order of $5,000 for surviving spouses and children receiving benefits on account of the death of the other spouse and parent who died while on active military service. Though people are calling it the military widow’s tax but I am certain there are widowers who also are experiencing this outcome. It is estimated that thousands of people have been hit with this tax increase.

The change in the tax law was designed to prevent wealthy individuals from putting assets into trusts benefitting their children in order to gain the advantage of lower tax rates. Though that sounds like a provision unfavorable to the wealthy, the change was accompanied by a doubling of the amount of assets exempt from the estate tax, which more than offsets the income tax change. In the case of non-wealthy families getting by on military survivor benefits, no offsetting provision was enacted.

According to the report, “congressional aides and others involved” in the drafting of the legislation, “nobody at the time realized the impact the change would have on military families.” Why not? Isn’t it the job of congressional aides to analyze proposed legislation? Has it not been, at least until the recent autocratic approach to government permeating D.C. in 2017, a matter of course to hold public hearings so that educated and intelligent people out “beyond the Beltway” can share their insights on proposed legislation. I am confident at least one person, and probably more, would have said, “Hey, look what this would do to families receiving military survivor benefits.” But in the rush to railroad the legislation through the Congress, the people dead set on having it their way and no other didn’t bother to pay attention to the people they supposedly represent, and instead let those “others involved,” who lack the sort of broad overarching understanding of tax law that once was a staple of Congressional tax legislative process, toss about their ideas without regard to those insufficiently privileged to sit in the smoke-free back room.

Congress is now “scrambling” to fix the mess. Would it not be easier to make certain the legislation is well done before enacting it? There’s no reason not to get input from multiple sets of eyes and brains from segments of society that are diverse geographically, politically, socially, economically, financially, and experientially. That, however, is something oligarchs and their acolytes don’t like to do.

The story is sad and infuriating, has happened too often, and continues to happen. Because of wrongdoing by an accuser, a police officer, a prosecutor, a judge, an expert witness, or multiples or combinations of them, an innocent person is convicted and imprisoned. Years later, exculpatory evidence is found, and the innocent person is released. And then the innocent person sues the jurisdiction where the wrongful conviction occurred. This happened, for example, to a group known as the Beatrice Six. Six individuals were falsely convicted of raping and murdering a woman in Beatrice, Nebraska, in 1985. Twenty-four years later, in 2009, the truth came out and they were released.

The six were convicted in part because of forensics presented by Joyce Gilchrist, who later was determined to have assisted in other false convictions. The six also were forced into giving false confessions. The forensic scientist who did the original analysis was not called to testify, even though she had determined there was no forensic match between the defendants and the crime scene. After being released the six falsely convicted individuals sued Gage County, where the crime and convictions had occurred, but by the time the case went to trial in 2014, the lead plaintiff had died. Two years later, a jury awarded the plaintiffs or their successors in interest $28 million. The county appealed, but lost. On March 4, 2019, the United States Supreme Court denied the final appeal. Attorney fees and interest have raised the cost to $31 million.

So Gage County needs to come up with $28 million. It raised property taxes to the maximum permitted under state law. Because that was not enough, the county sought state legislative approval to impose a sales tax. As reported a few days ago in this story, the Nebraska legislature approved the request, the governor vetoed the legislation, and the legislature overrode the veto. The governor vetoed the legislation because he wanted the tax to be approved by voters. Usually, voters must approve sales tax increases. It was predicted that voters would not approve the sales tax because many of them did not live in the county in 1985, and some still believe that the six are guilty despite the exonerating DNA evidence. Compounding the problem is the county’s failure to have adequate insurance at the time of the false conviction to cover these sorts of claims.

Interestingly, some legislators who are members of the anti-tax movement voted for the tax increase. One of them has provided an explanation that ought to be printed in bold lettering and placed in the front of every legislature in the country: “This is a time when campaign promises become meaningless and situations must be solved.” I’m thinking, for example, of the funding required to fix infrastructure, to protect Americans from catastrophic health costs, and to build up adequate cyber-security against attacks by enemies.

The justification for approving the sales tax is to prevent the cost from falling entirely on property owners who pay property taxes. What is unclear to me is how much of the sales tax will be paid by people who are not property owners in the county. Aside from renters who make purchases, the only other source would be visitors and tourists, who probably aren’t numerous. Using a sales tax will shift some of the burden from farmers with large land holdings, but reduced income, to town residents, whose property taxes typically are lower than those imposed on farmers.

I don’t know if anyone other than the county was sued. Perhaps Joyce Gilchrist, the police, the prosecutors, and the others who were involved in the false conviction were sued. Perhaps they are long gone from this planet. Perhaps they are bankrupt. The problem that I see is the shifting onto taxpayers the price that must be paid when officials, some elected, some not, and third parties recruited by those officials, act wrongly. It is said that holding officials responsible for the costs of their bad decisions would discourage people from running for office. Yet it’s not a question of holding people responsible for the outcomes of decisions made in good faith. When there are intentional failures to comply with the rules, to follow the proper procedures, or to everything that must be done, asking innocent taxpayers to bear the burden of those failures is difficult to justify. Perhaps taxpayers who voted for those officials knowing that those officials are prone to acting wrongfully should be taxed, but there is no way to identify those taxpayers, some wrongdoing officials aren’t elected, and proving that taxpayers knew that officials were prone to act wrongfully and would do so once elected is near impossible.

The answer, I think, is for taxpayers to prevent these sorts of taxes by paying attention to what is happening in government and politics. Too many people “aren’t interested” in “those things.” Too many people fail to take everything into account when evaluating government officials and candidates, often getting caught up in one issue to the detriment of all else. Worse, taxpayer oversight of government officials is lacking, as often the only recourse is the ballot box which turns up every other year or even longer. Oversight of government officials by other government officials, though fine in theory, has failed when it comes to practical application. We are seeing that now, on a scale much larger than Gage County, Nebraska. When the time comes to pay the price for the misdirected tax cuts, for the environmental damage, for the death and destruction due to infrastructure failure, and for other deliberate and wrongful decisions, perhaps American taxpayers will understand, “you were warned, you did not listen, you are now paying the price.” So sad.

Two years ago, in Is Tax and Spend Acceptable When It’s “Tax the Poor and Spend on the Wealthy”?, I criticized the use of public funds and tax revenues to finance an arena in which two professional Detroit teams will play. Now comes news in a Detroit Free Press story that just about every promise that was made to justify the grabbing of public funds and tax revenues by a wealthy family has gone unfulfilled. More than $300 million in tax revenues intended to fund the city’s schools were diverted to the construction of a playground for teams awash in their own revenues.

To justify grabbing public funds, the billionaires who own the project promised that they would create jobs for Detroit residents, build housing for low-income Detroit residents, and clean up blight that the billionaires themselves had created. According to the report, though the arena has been built, the number of housing units built by the billionaires totaled “zero as in none.” The number of Detroit residents hired to work on the construction came nowhere near the promised 50 percent of the workforce. The removal of the blight in the area between the arena and downtown Detroit did not happen, though the blight is attributable at least in part to the billionaires buying the properties in that area and letting them deteriorate in order to drive down prices in the area. There also are allegations that corners were cut in order to increase profits on the arena deal.

Some community leaders, activists, and politicians point out that the vast majority of those coming to the arena live in areas outside Detroit and thus do not bear the burden of their tax dollars paying for the arena. One politician noted, "They promised it would be something that trickled down to the neighborhood. It hasn’t trickled down. We said yes to a billion-dollar corporation for nothing in return." That’s how the game has been played for the past four decades, a con on the American people that too many Americans fail to recognize because they fail to let themselves be educated on the realities of these arrangements.

Politicians who supported the deal claim that it was successful because the arena was built and is drawing attendees. Nothing was said of the broken promises. When asked if giving half of the revenue from the arena to the billionaires, one politicians said he was “fine with that.” When asked if he understood the that funding private projects owned by the wealthy with public revenues doesn’t work out as promised, that same politician said that people need “to have a level of faith in a project,” though he claimed to be a “data-driven person.” What data is he examining? That same politician is now president of the entity set up to siphon public revenue into the hands of apparently starving billionaires.

The billionaires who profited from this heist tried to defend what happened. After claiming that they have “six decades of dedication, commitment and positive impact throughout the broader Detroit community," and noting that they “are exceptionally proud of [their] accomplishments,” they claimed to have created “thousands of jobs,” to have restored “various historic buildings,” and to have developed “a downtown sports and entertainment district which has surged since the opening” of the arena. Nothing was said of the broken promises. People who break promises don’t like to talk about those promises nor do they like people asking them about those promises. Instead, as these billionaires did, when called out on the broken promises, they accuse the questioners of being “self-interested, sensationalized and inaccurate.”

When will America wake up? Considering the extent to which 40 percent of Americans seem fine with revering those who break promises, the answer might not be “Soon enough.”