MauledAgain

A few days ago, I read a Philadelphia Inquirer article that not only strengthened my opposition to the New Jersey tax break giveaway, but that should make it even more obvious that my proposal, to provide deductions, credits, and exemptions only when promised benefits are generated, is becoming a necessity in the design of tax policy. Readers of MauledAgain know that one of the promises, substantial numbers of jobs for unemployed Camden residents, did not pan out. I have written about this failure in a series of posts, including The Tax Break Parade Continues and We’re Not Invited, and previously in 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, Where Do the Poor and Middle Class Line Up for This Tax Break Parade?, Another Flaw in the New Jersey Tax Break Giveaway, No Tax Break Until Taxpayer Promises Are Fulfilled, The Cost of Creating 27 Jobs? $8,000,000,000 in Tax Break Giveaways, and When Tax Break Giveaways, Praised as “Investments,” Deliver Low Returns.

So it’s time to add another promise to the list of disappointments. The flaw is in the New Jersey law, so it’s not a matter of the tax break giveaway recipients failing to deliver. The law permits the tax break giveaway recipients to include, in their list of why the tax break will generate more benefits than it will cost New Jersey taxpayers, the property taxes that would be paid on the facilities that the recipients promise to build. The bizarre twist to this logic is that the recipients are permitted to include those property taxes in the computation of benefits the recipients will provide to the taxpayers even though in some instances the recipients would not be paying any property taxes because they would be building on exempt property.

In other words, when benefits to New Jersey residents is calculated in an effort to demonstrate they exceed the tax break, the tax break giveaway recipients are credited with paying property taxes that they won’t be paying. So now these tax breaks turn out to have been “justified” by claiming that the recipients would create jobs and pay property taxes, even though very little of the former and in some instances none of the latter materialized.

The importance to the recipients of this fake credit cannot be disregarded. One company was credited with almost $5 million of property taxes, taxes that it would not pay but that it was permitted to count as a benefit to New Jersey taxpayers, and even with that credit the total of those benefits exceeded its $260 million tax break by only $155,000. Take away the unpaid fake property tax credit, and that tax break, unsurprisingly, becomes a tax burden for the rest of New Jersey’s taxpayers. Allegedly, this company will negotiate some “payments in lieu of taxes” in favor of Camden. The New Jersey agency administering the program determined that another company, recipient of almost $140 million in tax breaks, would generate a net benefit to New Jersey of $2,500, by including $2.5 million in property taxes that the company expected it would not be paying. In all fairness, the companies did not make the computation, and some did not see the results of the computations made by state agency employees. Yet they, through representatives, lobbied for the law in question.

So how did this nonsense end up in the New Jersey statutes providing these tax break giveaways? It appears that some “politically connected” law firms “helped write the legislation,” and then represented the recipients when they applied for the giveaways. The law’s supporters continue to claim all of this was necessary in order to bring development to Camden, and that it will create thousands of jobs. I wonder how many of these supporters also claim to be advocates of “free markets” that are unhampered by government regulation and interference.

The former head of the state agency involved in approving the tax breaks, when asked if including property taxes in the computation that weren’t going to be paid, “essentially allowed projects to get through even though they weren’t paying for themselves,” testified that he “would say that’s a pretty accurate statement.” Is there any better commentary on the foolishness of the tax break giveaway program than this admission?

So I again propose that all tax breaks ought to work the way many already do. First do something. Then claim a credit or deduction. If the taxpayer needs seed money to engage in the activity that the taxpayer claims will generate the promised benefits, the taxpayer can borrow the money, perhaps even from the state or locality, at a market rate of interest, with strict protection of taxpayers against the risk of failure.

For almost as long as I have been writing commentaries on MauledAgain, I have time and again addressed the need for financial and tax literacy education in high schools. The problems that arise for people deficient in that literacy are numerous, serious, and sometimes irremediable. A select list of my postings on this topic include Economically Depressing?, Does It Matter Who or What is to Blame?, Promising Progress on the K-12 Tax Education Front, A School Tax Question: So Whose Job Is It to Teach Financial Literacy? , Additional Thoughts on Financial Literacy . . . and Taxes, Financial Literacy and Economic Inequality, and Making Headway on Financial Literacy Education?.

Now comes news in this Philadelphia Inquirer article that Dan Laughlin, a legislator in the Pennsylvania Senate has introduced a bill requiring high schools to teach a course on personal finance and to award academic credit to those who successfully complete the course. My reaction to the proposal is three-fold. First, of course this makes sense and causes me to wonder why it took so long. Second, of course there ought to have been this sort of course created and offered years ago and ought not have reached the point where the legislature must compel high schools to do this. Third, I think the list of topics that the bill requires to be taught – “understanding financial institutions, using money, learning to manage personal assets and liabilities, creating budgets, and any other factors that may assist an individual in this commonwealth to be financially responsible“ – isn’t long enough, or at least needs more specificity beyond the catch-all “other factors” language. The bill passed the state Senate unanimously, and is now in the state House of Representatives.

One question that has popped up is how the course would be funded. Laughlin claims that enactment of the proposal would be revenue neutral. Is that possible? Yes, if this course replaces another course taught by someone already on the high school faculty, or if someone already on the faculty opts to add the course to his or her workload. The likelihood of those things happening is far from certain.

Pennsylvania is not the first state to pass this sort of legislation. A handful of states do so, including New Jersey, which enacted a requirement that financial literacy be incorporated into the middle school curriculum. But schools need not wait for legislatures to command them to teach these sorts of courses. For example, according to the Philadelphia Inquirer article, two teachers at Aspira Olney High School in Philadelphia have been co-teaching a personal finance course for a few years, though they had to obtain a grant and seek donors to fund the course. One of the two had to write his own textbook for the course, which suggests that there is a shortage of appropriate materials for the course.

Teachers who need to learn how teach, or what to teach in, this sort of course can use resources provided by the Philadelphia Federal Reserve Bank, and in the process earn professional development credit. Perhaps those with business school degrees and those who took one or a few business courses could jump in more easily and more quickly.

There are those who might argue that this sort of education should be undertaken at home. Yes, that would be ideal. Even getting children started on some basic concepts while they are at home would be helpful. Unfortunately, there are many, perhaps too many, parents who themselves lack the understanding of these matters, let alone the ability to teach financial literacy to their children. I addressed this concern in A School Tax Question: So Whose Job Is It to Teach Financial Literacy? , in which I wrote:

The role of K-12 education is two-fold. It is to prepare students to live life, and to prepare students who wish to continue their education to do so. To prepare students to live life, the K-12 system needs to teach the things that ought to be known or understood by all citizens regardless of chosen profession. Financial literacy is one subject that comes to mind, along with civics, first aid, reading, writing, and arithmetic.

My advice to K-12 educators throughout the nation is simple. Start teaching financial and tax literarcy before being compelled to do so by the legislature, because when and if the legislature decides to mandate these courses, it might inject itself into the process to a degree much more intense than you would prefer.

I deplore ignorance. If there is any one theme that has sustained itself through all of the activities in which I have engaged, it is my effort to curtail ignorance. Though I doubt ignorance can be exterminated, I have no intention of stopping my efforts. Every little dent in ignorance is a step forward for the entire species. It is no surprise that I write about ignorance fairly often. Consider this sampling of my commentaries: 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, Is Tax Ignorance Eternal?, and Who Should Be Fixing the Ignorance Problem?.

Many of my discussions of ignorance have focused on tax ignorance, and almost all of my discussions have involved stories originating within the United States. But ignorance knows no national boundaries. A recent Deloitte survey in the United Kingdom reveals how serious the ignorance problem has become. The survey was in the form of a quiz about taxation in the United Kingdom. The highest possible score was 30. The average person surveyed scored 10.6, with almost half scoring 10 or less. What is even more frightening is that those aged 18 to 24 scored the lowest. Only 19 percent of those surveyed could identify the top income tax rate.

Matt Ellis, Deloitte’s managing partner for tax and legal matters explained why it is important for people to understand basic tax concepts even if they are not tax professionals. "It’s important that people – especially younger generations entering the workplace for the first time – understand what is deducted from their pay slip and why." Daniel Lyon, Deloitte’s head of tax policy, noted, Educating people on tax affairs could help to inform both people and policy. In order to ensure a UK tax system in which people are satisfied with how much they pay and why, education is key.” Interestingly, 76 percent of those surveyed agreed that basic tax concepts and information should be taught more in schools.

Education about tax matters. So does education about pretty much anything. Unfortunately, when access to education is denied, or education is underfunded, or those who should be seeking education instead seek something else, the long-term consequences are dire. There is a connection between lack of education or insufficient education and the willingness to accept foolish ideas, believe false information, or to go along with a scam artist.

Ignorance isn’t a problem threatening just one nation. It threatens every nation. It is a planetary scourge, at the root of many of the problems people identify and want to solve. Without addressing the ignorance issue, attempts to solve the world’s problems are far less likely to succeed.

Grover Norquist is at it again. Not that he has ever stopped his crusade against taxes and his efforts, to use his words, to “drown [government] in the bathtub.” I have written about his dangerous anti-tax campaigns in posts such as Debunking Tax Myths?, If the Government Collects It, Is It Necessarily a Tax?, Tax Policy, Elections, and Money, and Tax Ignorance or Tax Deception. Aside from criticizing his bullying tactics in trying to force his anti-tax ideology onto the nation, I have roundly dissected his arguments and demonstrated the deep flaws in his premises and his reasoning. I have also discussed the atrocious outcomes in places where his tax and government philosophy has prevailed, though for a short time given the need to reverse the bad decisions based on his advice. In all fairness, he and I do agree on at least one thing, the futility of putting tax return preparation in the hands of the Internal Revenue Service, so he’s not totally beyond redemption.

Two weeks ago, Norquist, as president of Americans for Tax Reform, sent a letter to Senator Mitt Romney. He told Romney that he, Romney, was wrong to argue that the President lacks authority to index capital gains. Norquist’s argument is that the word “cost” – which is one of many benchmarks for computing basis, which in turn is used to compute gain – can be interpreted to mean “cost plus inflation.” He relies on Verizon v. FCC, a 2002 decision by the Supreme Court, in which the court determined that the word “cost” in the context of rate setting under section 252(d) of the Telecommunications Act of 1996. The case, though, has no bearing on the issue of indexing tax basis because it involved a different statute, did not address inflation or indexing, was focused on the inclusion or exclusion of future costs in contrast to historical costs, and involved a statute giving an administrative agency a interpretative delegation authority for which there is no comparable provision dealing with tax basis. It is no surprise that the Department of Justice has concluded that the executive branch, specifically the Treasury, has no legal authority to index tax basis for inflation.

Norquist also argues, quoting the Tax Foundation, that “the lower rate on capital gains does not mitigate the inflation issue, as taxpayers still face tax liability whether they made a real gain or real loss.” That is such nonsense. How, for example, is a taxpayer whose capital gains tax rate is zero percent end up facing tax liability on capital gains? Or consider these comparisons between capital gains taxed at the maximum capital gains rate and capital gains computed with indexed basis but taxed at regular rates. For purposes of simplicity, I will use a 20 percent capital gains rate and a 40 percent regular rate. A person purchases an asset for $10, and later sells it for $100. The $90 capital gains, taxed at 20 percent, generates tax liability of $18. Assume instead, that inflation has doubled, and the $10 basis is indexed to $20. The gain of $80, taxed at 40 percent, generates tax liability of $32. That’s not an improvement for the taxpayer. Assume instead, that inflation has quadrupled, and the $10 basis is indexed to $40. The gain of $60, taxed at 40 percent, generates tax liability of $24. That’s still not better for the taxpayer. It’s only when inflation would cause a roughly six-fold increase in of basis, to $60, that the $40 gain, taxed at 40 percent, would generate a tax lower than $18.

Norquist also quotes the Tax Foundation with this tidbit of a jewel: “Indexing provides important protection for all citizens, even those who have no capital gains, by reducing government’s ability and incentive to raise effective tax rates by inflating the currency.” Those without capital gains are subject to tax rates that already are indexed for inflation. Those with capital gains are subject to tax rates that are substantially lower than regular tax rates. Why the push for indexing when special low rates already exist? The answer is easy.

What Norquist and his money-addicted acolytes want, of course, is BOTH indexing AND special low rates. Oink, oink. Norquist claims it is wrong to tax inflation. Fine. As I explained last month in The Menace of Impetuous or Maniplative Tax Policy Announcements and When Lower Tax Rates Aren’t Enough, I am opposed to indexing capital gains unless there is a concomitant repeal of the special low tax rates for capital gains, as I described in. One or the other. Not both. Greed is bad. Very bad.

As I pointed out in If the Government Collects It, Is It Necessarily a Tax?, “Grover Norquist is not a tax guru. He does not practice tax law, nor tax accounting. He is not a commercial tax return preparer. He would struggle to earn points on any well-designed tax law exam.” So why should legislators charged with setting tax policy take tax policy advice from him?

As I wrote not long ago, I am not a fan of the New Jersey tax break giveaway that promised substantial numbers of jobs for unemployed residents of Camden. I reject the idea of jobs being created by giving tax breaks to wealthy individuals and corporations that do not need more employees. I have written about the flaws of this approach, particularly the New Jersey tax break giveaway, in posts such as The Tax Break Parade Continues and We’re Not Invited, and previously in 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, Where Do the Poor and Middle Class Line Up for This Tax Break Parade?, Another Flaw in the New Jersey Tax Break Giveaway, No Tax Break Until Taxpayer Promises Are Fulfilled, and The Cost of Creating 27 Jobs? $8,000,000,000 in Tax Break Giveaways.

There are people in New Jersey who agree with me, including the governor. He appointed a task force to explore the extent to which these tax break giveaways have generated the promised benefits. A New Jersey Senate panel also is hearing testimony on the issue. According to this Philadelphia Inquirer article, the CEOs of two of the companies receiving these tax breaks have testified that but for the tax breaks they would have placed their offices in a state other than New Jersey.

Susan Story, CEO of American Water, one of the recipients of the tax break giveaways, stated, “Incentives are and should be smart investments for the future of underserved or economically distressed cities throughout our state. They should be carefully designed, implemented, and tracked to ensure they are delivering as promised.” The investigation by the task force has turned up evidence that these tax break giveaways are not “delivering as promised,” along with other evidence of improper procedures in the granting of the tax break giveaways. When eight billion dollars in tax breaks generate 27 jobs among the group identified as the intended beneficiaries of the tax break, the tax break surely deserves being tagged as a giveaway, and not to the intended beneficiaries.

What boggled my mind were the attempts by two CEOs to justify the giveaways. Tom Doll, CEO of Subaru of America, another tax break giveaway recipient, revealed that “Doll said the company had contributed more than $5 million to Camden-based charitable organizations since 2016.” That sounds wonderful, until one remembers that the company received $118 million in tax breaks. Story, of American Water, noted that her company had “donated $900,000 to a local nonprofit that teaches Camden students how to use technology, with a goal of later hiring some of those people,” and “had contributed $200,000 to the Camden School District for science and technology studies, and donated computers and other equipment.” Again, that sounds wonderful, until one remembers that American Water received $164 million in tax breaks.

The dynamic of threatening to locate or relocate in another state needs further analysis. The short-term reaction by legislators is the temptation, often followed, to dish out tax breaks for fear of losing a business to another state. Yet that other state, as it continues to issue its own tax breaks to attract companies, will find itself facing revenue shortfalls, requiring it either to raise taxes on other companies and individuals, or curtailing services. That, in turn, will encourage those other companies and individuals to relocate, perhaps to the state that originally refused to be blackmailed into creating a no-tax or low-tax paradise for the companies issuing the original relocation threats. Economics, including tax policy, and like nature, continually seeks to rebalance things, though it doesn’t happen overnight and sometimes takes years.

As I’ve argued for years, the deal with these companies should be along the lines of the following: “OK, if you relocate here, or stay here, and prove that you generated the economic benefits you are promising, then, and only then, will you receive a tax break.” It’s that simple. If every federal, state, and local government adopted that approach, the economy would improve. Don’t believe me? Try it. Prove me wrong.

The other day, in A Sales Tax Question: What Is “Prepared Food” And Who Should Define It?, I described the clamor that arose in Connecticut when the Department of Revenue Services defined “prepared foods,” on which an additional one-percent sales tax is imposed, in line with definitions used in other states following the general principles set down in the Streamlined Sales and Use Tax Agreement. As I wrote, “Essentially, legislators claim that the executive branch has included more items in the definition that the legislature intended.” I concluded

It seems to me that if the legislature wanted the additional one percent sales tax to apply to specific items but not other items, it could have, and should have, incorporated into the statute a definition of “prepared foods.” The concern isn’t so much which items are included, but the lack of guidance provided by a legislature some of whose members are complaining about failure to follow legislative intent but who could have provided specific legislative intent by drafting a precise statute. Some of the items included in the list prepared by the Department of Revenue Services would be treated as prepared foods in other states and some would not. It is the legislature that needs to make the determination. If there are items that legislators are “shocked” to see included in the list of “prepared foods” they could have avoided the situation by inserting into the statute the items that they do not consider deserving of being subjected to the additional one percent sales tax. Alternatively, they could have taken the definition used in another state and adopted it or adapted it. Legislators need to understand that imprecise and ambiguous legislation invites executive branches of government to finish the legislative tasks the legislature did not complete.

Reader Morris has alerted me that now comes a revised policy statement from the Department of Revenue Services explaining that the one-percent additional sales tax on “prepared foods” would apply only to items subject to the basic sales tax, and not to additional items. The Department pointed out that there were two possible interpretations of the statutory amendment, and chose to shift its position from one to the other in response to the outcry from the legislature. I continue to wonder why the legislature could not have made itself clear from the outset, rather than needing rescue from an executive agency.

Politicians, lobbyists, oligarchs, and some others often use the “taxes deter investment” and “taxes chase people out of states and cities” arguments to defend reducing taxes for people whose after-tax income is plentiful. Legislators too often buy into these claims, sometimes offering anecdotes and often relying on a theoretical construct that relies on assuming people dislike taxes so much that they are willing to uproot themselves to avoid them.

Recently, as reported in this Philadelphia Inquirer story, Pew Charitable Trusts conducted a “first-of-its-kind” survey to determine why approximately 60,000 people move out of Philadelphia every year.

The top reasons people leave are jobs and safety. For people with school-age children, the top reason was “better schools.” Interestingly, no one reason was dominant. Many survey respondents provided more than one reason. Most people who left the city weren’t so much escaping Philadelphia but were heading for “new opportunities elsewhere.” Roughly 70 percent of those who departed agreed that Philadelphia is a “good or excellent place to live.”

Interestingly, to quote the story, “What didn’t get mentioned much, particularly in the open-ended responses: local taxes.” Only six percent of the respondents mentioned taxes in writing their responses to an open-ended question asking why they moved away. When answering a specific question about ““high taxes in Philadelphia,” only 22 percent classified it as a major reason for leaving.

So much for the canard that taxes are the primary, or even a major, reason people move from one place to another. What tax policy needs are more empirical surveys of practical reality and fewer theories that make for tempting sound bites but offer little in the way of solid foundation.

Some states that impose sales taxes require those taxes to be collected on the sale of “prepared foods.” Effective administration of a sales tax requires a definition of “prepared food.” Many states follow the model definition offered by the Streamlined Sales Tax Governing Board, with and without variations. See, for example, the definition in the Streamlined Sales and Use Tax Agreement. Some states make tweaks to the suggested definition. Thus, for example, New Jersey provides this definition:

Sales of prepared food are subject to Sales Tax. Prepared food, which includes beverages,
means:
• Food sold in a heated state or heated by the seller; or
• Two or more food ingredients combined by the seller and sold as a single item; or
• Food sold with eating utensils provided by the seller.
Food that is only cut, repackaged, or pasteurized by the seller, as well as eggs, fish, meat, poultry, and foods that contain these raw animal foods that require cooking by the consumer are not treated as prepared food. The following are not treated as prepared food, unless the seller provides eating utensils with the items:
• Food sold by a seller that is a manufacturer;
• Food sold in an unheated state by weight or volume as a single item; and
• Bakery items sold as such, including bread, rolls, buns, bagels, donuts, cookies, muffins, etc.

West Virginia provides this definition:

Prepared food is defined in any one of the following ways:
A. Food sold in a heated state or heated by the seller.
B. Food items that are combined by the seller for sale as a single item except:
1. Food that is only cut, repackaged or pasteurized by the seller.
2. Eggs, fish, meat, poultry and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration.
3. Foods sold in an unheated state by weight or volume as a single item unless sold by the seller with utensils.
4. Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, bars, cookies and tortillas unless sold by the seller with utensils.
5. Food sold by a seller that is primarily a manufacturer (NAICS section 311), except Bakeries (section 3118) unless sold by the seller with utensils.

Maine provides this definition:

The definition of “prepared food” contains three categories:
(1) All meals served on or off the premises of the retailer. This category includes sandwiches (whether prepared by the retailer or by someone else) and heated food. However, fully-cooked frozen sandwiches are not considered “prepared food” and are therefore subject to the general sales tax rate. See Instructional Bulletin No. 12 (“Retailers of Food Products”) for more information.
(2) All food and drink prepared by the retailer and ready for consumption without further preparation. This category includes:
a. Food products that are not individually prepackaged for resale and that are served from self-serve areas (such as salad bars and “coffee nooks”) designed to offer customers food for immediate consumption;
b. Food prepared for sale in a heated state regardless of cooling that may have occurred, such as pizza, pieces of chicken, convenience meals, or rotisserie chicken;
c. Bakery items such as cookies, donuts, bagels, etc., that are prepared by the retailer;
d. Deli and bakery platters, such as cold cuts, cheeses, appetizers, finger rolls, bakery products, crackers, and fruits or vegetables.
“Without further preparation” means that the product does not require boiling, frying, grilling, baking or cooking. “Further preparation” does not include toasting, microwaving, or otherwise heating a product for palatability (rather than for the purpose of cooking the product).
(3) All food and drink sold by a retailer at a particular retail location when the sales of food and drinks at that location that are prepared by the retailer account for more than 75% of the gross receipts reported with respect to that location by the retailer. See Paragraph C(2) below for details on how to calculate the “75% rule.”
The definition of “prepared food” excludes “bulk sales of grocery staples.” See Section 4 below. Other than deli and bakery platters, “prepared food” does not include cutting and repackaging a grocery staple. For example, a pound of ham sliced from the deli case as requested by the customer, or fruits/vegetables that are cut and repackaged in cups or bowls, are exempt “grocery staples.”

Similar definitions are provided by many other states.

It is against this background that a dispute has arisen in Connecticut over the meaning of “prepared food,” as reported in this Hartford Courant story. Essentially, legislators claim that the executive branch has included more items in the definition that the legislature intended. The statute in question imposes an additional one percent sales tax on restaurant food and “prepared meals.” The Department of Revenue Services included within the scope of the additional sales tax items such as “popsicles and other frozen treats, doughnuts and bagels, pizza slices, hot dogs, smoothies, power bars, a hot bag of popcorn, and even pre-packaged bags of lettuce and spinach,” as well as “beer, fruit juices, milkshakes, hot chocolate, wine and distilled alcohol like brandy or rum, . . . coffee and tea if purchased prepared to drink, rather than as coffee grounds or in tea bags.”

It seems to me that if the legislature wanted the additional one percent sales tax to apply to specific items but not other items, it could have, and should have, incorporated into the statute a definition of “prepared foods.” The concern isn’t so much which items are included, but the lack of guidance provided by a legislature some of whose members are complaining about failure to follow legislative intent but who could have provided specific legislative intent by drafting a precise statute. Some of the items included in the list prepared by the Department of Revenue Services would be treated as prepared foods in other states and some would not. It is the legislature that needs to make the determination. If there are items that legislators are “shocked” to see included in the list of “prepared foods” they could have avoided the situation by inserting into the statute the items that they do not consider deserving of being subjected to the additional one percent sales tax. Alternatively, they could have taken the definition used in another state and adopted it or adapted it. Legislators need to understand that imprecise and ambiguous legislation invites executive branches of government to finish the legislative tasks the legislature did not complete.

I am not a fan of the New Jersey tax break giveaway that promised substantial numbers of jobs for unemployed residents of Camden. Readers of MauledAgain know that I reject the idea of jobs being created by giving tax breaks to wealthy individuals and corporations that do not need more employees. I have written about the flaws of this approach, particularly the New Jersey tax break giveaway, in posts such as The Tax Break Parade Continues and We’re Not Invited, and previously in 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, Where Do the Poor and Middle Class Line Up for This Tax Break Parade?, Another Flaw in the New Jersey Tax Break Giveaway, and No Tax Break Until Taxpayer Promises Are Fulfilled.

In that last post I commented on the news that the New Jersey tax break giveaway lacked oversight, and that New Jersey had “failed to hold companies accountable for the jobs and investments they promised.” The news followed an audit by the state’s comptroller, whose office was unable to verify the 3,000 jobs that the tax break recipients claimed to have created or kept.

Now comes more news, and it isn’t good for the folks who engineer tax breaks for their friends by making claims that those giveaways are for the benefit of the unemployed in Camden who seek jobs. This time, the state’s Economic Development Authority examined 25 construction projects undertaken in Camden by companies receiving the tax breaks. Aside from the fact those jobs are temporary, it is unclear whether those 1,098 jobs involved hiring 1,098 individuals or included jobs held in succession by one individual. In any event, the report refers to individuals, and reveals that of the 1,098 construction jobs, only 27, or 2 percent, went to residents of Camden. Almost one-fourth went to individuals not resident in New Jersey, and three-fourths went to individuals living beyond the boundaries of Camden County, in which Camden is located. So much for bringing jobs to Camden. It would have been cheaper for the state to have sent checks to those 27 Camden residents.

Supporters of the giveaway called the report “meaningless.” Why? They claim that jobs other than construction jobs were unreported. The report was limited to construction jobs because the only information available to the Economic Development Authority was construction payroll reports. The authority’s failure to obtain information demonstrating the promised job creation was one of the reasons for the audit of its operations, and the political turmoil that ended with the non-renewal of the tax break giveaway program, an outcome for which I advocated. Supporters also claimed there were construction projects not included in the authority’s report. Even if several hundred additional jobs were created in Camden, as the tax break supporters argue, it still would have been cheaper for the state to write a check than to shell out the $8 billion in tax breaks it handed to the politically privileged enterprises that grabbed those tax cuts.

I continue also to advocate for a different approach to the “tax cuts and promised jobs” snake oil sales pitch offered by the wealthy who are starving. The process should be reversed, and companies that want to claim a job creation tax break should be required first to produce iron-clad evidence that jobs have been created and maintained for a specified period of time. This approach would spare tax breaks from becoming victims of broken promises. Broken promises have no place in a tax system.

Too often, I have observed the menace that ignorance presents to civilization. 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?, and The Institutionalization of Ignorance.

Now comes a survey from the American Council of Trustees and Alumni (ACTA) that explored the state of “civics education at the postsecondary level.” The results are frightening:

26% of respondents believe Brett Kavanaugh is the chief justice of the U.S. Supreme Court, and 14% of respondents selected Antonin Scalia, who died in 2016. 15% of the college graduates surveyed selected Brett Kavanaugh. Fewer than half correctly identified John Roberts.

18% of respondents identified Congresswoman Alexandria Ocasio-Cortez (D-NY), a freshman member of the current Congress, as the author of The New Deal, a suite of public programs enacted by President Franklin D. Roosevelt in the 1930s. 12% of the college graduates surveyed selected Alexandria Ocasio-Cortez.

63% did not know the term lengths of U.S. Senators and Representatives. Fewer than half of the college graduates surveyed knew the correct answer.

12% of respondents understand the relationship between the Emancipation Proclamation and the 13th Amendment, and correctly answered that the 13th Amendment freed all the slaves in the United States. 19% of the college graduates surveyed selected the correct answer.

It’s one thing to be ignorant of the nuances of quantum physics, or the computation of stress loads on bridges, but it’s a totally different matter when people are ignorant of the core principles that hold together civilized society.

In its description of the survey, ACTA says this about the civic knowledge crisis:

Colleges and universities contribute significantly to the problem by chipping away at their core requirements in essential areas of knowledge: students graduate unprepared for informed citizenship and the workforce. U.S. history is often first on the chopping block: Only 18% of colleges require students to take foundational courses in U.S. government or history.

Its president explained:

Colleges have the responsibility to prepare students for a lifetime of informed citizenship. Our annual What Will They Learn? report illustrates the steady deterioration of the core curriculum. When American history and government courses are removed, you begin to see disheartening survey responses like these, and America’s experiment in self-government begins to slip from our grasp/

Though there certainly is a role for institutions of higher learning to assist students in learning civics, too often colleges and universities are tasked with remedial education to offset the damage caused by the failure of K-12 educators to teach these core principles to their students. Parents also must share in responsibility for this failure, because the opportunity to explain basic principles to their children pop up daily. Of course, part of the problem is that so many of the parents are themselves ignorant about too many things.

If every high school graduate heading for college was properly educated and prepared, there would be no need for institutions of higher learning to offer courses that cover material and issues that ought to be in the K-12 curriculum. That’s not a proposal to eliminate advanced courses that offer opportunities to do deeper analyses of the core principles. For example, at the K-12 level, students need to learn that there are three branches of the federal government, that there are two chambers in Congress, that Senators are elected to a six-year term, and similar basic information. When students reach college, those who are interested can enroll in courses that explore whether there should be term limits, or what the consequences of eliminating the electoral college might be. Every remedial course that a college student needs to take makes it almost certain that the student will lose the opportunity to take a course that pushes analytical skills and knowledge to a higher level. That’s why it is essential for K-12 education systems to deal with this problem.

If I were to run for President – and fear not, I have no plans to do so – my slogan would be “Make America Well Informed Again.” That pretty much would solve many existing and future problems.

It’s been a while since I have written about the absurd claims tossed about concerning the size of the Internal Revenue Code. If I were to write every time someone published misinformation about that issue, I would be spending most of my time writing blog posts. As it is, I have dealt with these ignorant claims in many posts, beginning with Bush Pages Through the Tax Code?, and continuing with Anyone Want to Count the Words in the Internal Revenue Code?, Tax Commercial’s False Facts Perpetuates Falsehood, How Tax Falsehoods Get Fertilized, How Difficult Is It to Count Tax Words, A Slight Improvement in the Code Length Articulation Problem, and Tax Ignorance Gone Viral, Weighing the Size of the Internal Revenue Code, Reader Weighs In on Weighing the Code, Code-Size Ignorance Knows No Boundaries, Tax Myths: Part XII: The Internal Revenue Code Fills 70,000 Pages, Not a Surprise: Tax Ignorance Afflicts Presidential Candidates and CNN, The Infection of Ignorance Becomes a Pandemic, Getting Tax Facts Correct: Is It Really That Difficult?, Reaching New Lows With Tax Ignorance, and Incorrectly Breaking Down the Internal Revenue Code.

Reader Morris recently directed my attention to an online discussion initiated by someone asking, “Is the US tax code only 2,600 pages long?” This person was reacting to a report questioning the erroneous claim that the Code contains 70,000 pages, pointing out that numerous web sites and other sources repeat this error, concluding that the Code is not 70,000 pages long, and suggesting that it is “about 2,600 pages long.” The person starting the discussion reacted to this report by asking “Is 2,600 really a more accurate number when it comes to speaking about the size of the US tax code?”

Responses ranged from sensible to frightening. One person suggested that “you have to read 70,000 pages to understand the tax code.” Perhaps that is true, perhaps it isn’t, but reading pages that are not part of the Code does not make those pages part of the Code.

After another person pointed to a web site making the 2,600 page claim, yet another person pointed out how that number was computed by quoting that site: "In the 2013 edition, the last page is numbered 4,037. Now, that’s not exactly right either, for two reasons: The book starts at page 100, and then skips 500 pages in its numbering...," and then pointed out that the author of that site subtracted another 800 pages to get to the estimate of 2600. That person then explained that the quote “claims an actual book, apparently available to tax preparers (the author seems to claim to be one).” The actual “book” would be title 26 of the United States Code, available to anyone. That title also has been published by commercial companies, and those books also are available to anyone. There is no “secret Code” floating about available only to tax preparers. To this, another respondent argued, “I wouldn't consider the tax code a book either.” Sorry, it’s a book. Yes, it also has been published in digital format, but it is a book.

One person commented that the Code contains 3,700,000 words, requiring 10,000 pages because there are 250 to 300 words per page. Another respondent disputed the words-per-page number, arguing that it should be 500, whereas someone else claimed it should be between 700 and 1500. The actual number depends on font and margin, but using the font and margin used in most publications of the Code, the number is roughly 700.

One person pointed out that word counts make more sense than page counts, and I agree. Without an agreed-upon font and margin parameter, changes in the number of words per page change the number of pages.

One person, replying to another, stated, “There are three levels that could reasonably be referred to as tax code: the U.S.C., the CFR, and official IRS guidance that does not arise to level of rule-making. Unless people use specific terms like "United States Code" and "Code of Federal Regulations", they are not being precise. Saying the tax code is only 2,600 pages, by ignoring the CFR and only considering the USC is misleading.” What nonsense. The term “Internal Revenue Code,” or “Code” when used in that context, refers to the CODE, which is title 26 of the United States Code. Regulations in the Code of Federal Regulations (CFR) are NOT part of the Internal Revenue Code and are not part of title 26, or any other title for that matter, of the United States Code. The same is true of IRS guidance.

Another commenter pointed to the Government Printing Office web site, claiming that the Code is 3,998 pages. But the books being sold to which the commenter refers contain annotations, which are not part of the Internal Revenue Code. Those annotations contain references to amendments, and show what the Code looked like before each amendment. In many instances the annotations to a Code section are multiple times the size (in words and pages) of the Code section in its current form.

Still another person suggested that the 70,000 page total reflects a total of federal and state tax codes. That’s possible, but it answers a different question.

Even though the number of pages in the Internal Revenue Code can be debated because of font and margin issues, it hasn’t yet reached 2.600. The number of words has not yet reached 3,700,000. To those who want to write about this issue, go ahead and count the words in the Internal Revenue Code. As of a particular date, there is one answer.

Unfortunately, the 70,000-page claim, the ten-million-words claim, and the conflating of statute with regulations and guidance won’t go away. The degree to which people attach themselves to these positions and refuse to let go both bewilders me and frightens me. The inability to learn and grow is dangerous.

In Incorrectly Breaking Down the Internal Revenue Code, I wrote, “Ignorance of this sort is appalling. It is dangerous. It is unjustified. It needs to be identified, and discredited. Unfortunately, we live in a world with this sort of misinformation flourishes and spreads. How sad.” Someone needs to convince me that ignorance can be discredited. I now doubt that ignorance can be eliminated.

The list of television court show episodes that have inspired MauledAgain commentary is getting longer. That’s not a surprise, because the list of television court show episodes is getting longer. The portion that involve tax issues is very small, but a very small percentage of a very large number is a large number. Yet, I suppose I haven’t seen every television court show that involves a tax issue, so my long list could be even longer. Those who are curious or otherwise interested can check out my previous commentaries arising from television court shows by looking at Judge Judy and Tax Law, Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, More Tax Fraud, This Time in Judge Judy’s Court, You Mean That Tax Refund Isn’t for Me? Really?, Law and Genealogy Meeting In An Interesting Way, How Is This Not Tax Fraud?, A Court Case in Which All of Them Miss The Tax Point, Judge Judy Almost Eliminates the National Debt, Judge Judy Tells Litigant to Contact the IRS, People’s Court: So Who Did the Tax Cheating?, “I’ll Pay You (Back) When I Get My Tax Refund”, Be Careful When Paying Another Person’s Tax Preparation Fee, Gross Income from Dating?, Preparing Someone’s Tax Return Without Permission, When Someone Else Claims You as a Dependent on Their Tax Return and You Disagree, Does Refusal to Provide a Receipt Suggest Tax Fraud Underway?, When Tax Scammers Sue Each Other, One of the Reasons Tax Law Is Complicated, An Easy Tax Issue for Judge Judy, Another Easy Tax Issue for Judge Judy, Yet Another Easy Tax Issue for Judge Judy, Be Careful When Selecting and Dealing with a Tax Return Preparer, Fighting Over a Tax Refund, Another Tax Return Preparer Meets Judge Judy, Judge Judy Identifies Breach of a Tax Return Contract, and When Tax Return Preparation Just Isn’t Enough.

This time, I actually observed a first-time airing of a Judge Judy episode (episode 260 of season 23), in contrast to my usual pattern of watching reruns. I never know what will pop up when I turn on the television to a channel with a court show. This time, I was surprised, because the description of the episode did not give a hint that a tax issue was involved. That happens from time to time.

The plaintiff sued her daughter, claiming that her daughter went to the plaintiff’s storage unit while the plaintiff was in jail, and stole items. The defendant daughter claimed that she went to the storage unit at her mother’s request, found items that the plaintiff had stolen from other people, and gave the items back to those people.

The defendant counterclaimed that the plaintiff claimed the defendant’s children as dependents on the plaintiff’s income tax return. When Judge Judy asked the defendant how much she earned that year, The defendant replied that she had earned about $3,000.

The plaintiff tossed aside the defendant’s counterclaim by explaining that she got “nothing back” from the IRS. But when asked by Judge Judy to prove she did not get “anything back,” the plaintiff offered a document that turned out simply to be a letter from the IRS telling the plaintiff that it was auditing her return and not paying a refund at that time.

Judge Judy asked the defendant to prove that the plaintiff claimed the defendant’s children as dependents. The defendant replied that she had no proof. So Judge Judy dismissed the defendant’s counterclaim. She then dismissed the plaintiff’s claims because the plaintiff had no proof that she owned the items that she claimed had been taken from her storage unit.

What interested me was the plaintiff’s position that not getting a refund somehow could justify dismissal of the defendant’s counterclaim. Suppose that the defendant somehow could prove that the plaintiff did claim the defendant’s children as dependents.

First, if the impact on the plaintiff’s tax situation was relevant, and I doubt that it would be other than to show motive, the issue would not be whether she received a refund. The issue would be whether claiming the children as dependents reduced her tax liability. For example, it could reduce the amount due, which is just as much a benefit as a refund.

Second, if the defendant did prove that the plaintiff claimed the defendant’s children as dependents, and did so improperly, and caused the defendant to not claim the children as dependents, the issue would be whether and if so, how much, of an adverse impact the plaintiff’s action had on the defendant. With such a low income, the value of the dependency exemption deductions to the defendant probably would have been zero, but it is possible the defendant would have qualified for a refundable earned income credit or a more favorable filing status, or both. There were insufficient facts to make this determination, because the defendant’s lack of evidence that the plaintiff claimed the defendant’s children as dependents removed the need to discover those facts. On top of this, iIt is also possible that the defendant would have been told to file an amended return, the statute of limitations not having yet passed, claiming the children, in light of the fact that the plaintiff’s returns were being audited and any possible refund being delayed. In other words, the defendant’s counterclaim might not have been ripe for review.

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, Time for a Salt Tax to Replace a Soda Tax?, and So the Soda Tax Really Was About the Revenue and Not So Much About Health. One of my criticisms is that the soda tax misses the mark if the goal of its supporters is truly to reduce sugar intake, because not only does the soda tax apply to some liquids that are not unhealthy, it also fails to reach most items that contain sugar. As I wrote in So the Soda Tax Really Was About the Revenue and Not So Much About Health:

One of my several criticisms of the soda tax is that it singles out certain liquids that contain sugar, and ignores other sugary substances. . . .

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.

And now comes news of a a study that suggests a better way to combat obesity and its attendant health problems: put a tax on “high sugar snacks” rather than simply on sugar-sweetened drinks. The study was conducted in the United Kingdom but surely the results would be the same if conducted in the United States. The researchers discovered that “high sugar snacks . . . make up more free sugar . . . intake than sugary drinks.” So I was on the right track with my suggestion that the “soda tax” should have been, and should be, a “sugar tax.” There’s a difference. As the researchers concluded, “Reducing purchases of high sugar snacks therefore has the potential to make a greater impact on population health than reducing the purchase of sugary drinks.”

The researchers determined that a tax on “high sugar snacks” would reduce a person’s weight by an average of 1.3 kilograms (almost 3 pounds) over a year. In contrast, the soda tax reduces a person’s weight by an average of just 203 grams over one year (less than half a pound). That’s a six-fold difference.

The researchers suggest that taxing “high sugar snacks” is something "worthy of further research and consideration as part of an integrated approach to tackling obesity." They point to the fact that their study lasted only one year, though they are confident that running a similar study over a longer period of time would not generate different outcomes.

What is particularly annoying about the soda tax is that its advocate fail to address the questions I, and others, have raised about its scope and effectiveness with respect to obesity. Now that a study confirms that obesity involves more than sugar-sweetened beverages, perhaps the advocates of soda taxes can refine their thinking and legislators at every level can go back to the drawing board.

From time to time I have addressed the intersection of marijuana sales and taxation, principally the issues of how Internal Revenue Code section 280E applies to medical marijuana businesses and whether sales of medical marijuana in New Jersey are subject to the New Jersey sales tax. These posts included No Deductions for Medical Marijuana Distribution Expenses, A Not So Dopey Tax Question, Why Not Read the Entire Sales Tax Statute?, God’s Blessing Can’t Save Prohibited Deductions, and State Income Tax Deductions for the Marijuana Industry: Do They Exist and Do They Violate Federal Law?

Now another tax issue involving marijuana has popped up. According to this Philadelphia Inquirer article, marijuana growers in Alaska are caught between a per-ounce marijuana tax and declining marijuana prices. Alaska imposes a $50-per-ounce tax on marijuana. So it’s easy to understand that as the price of marijuana drops, the $50-per-ounce tax becomes an increasingly higher percentage of sale price.

Each time a legislature considers enacting, or amending, a tax, it must decide whether the tax is a percentage or a fixed dollar amount. There is a tendency to categorize fixed dollar amount taxes as user fees, but if there is no direct connection between the tax and the activity or object being taxed, it’s not a user fee. Those interested in the “user fee versus tax” discussion can look at my discussion in User Fee Accountability and my other commentaries cited therein.

When a legislature decides to measure a tax based on a fixed dollar amount rather than a percentage, it needs to consider how that tax would apply under different future economic scenarios. Assuming that the conditions existing at the time the tax is being debated will continue unchanged is a flawed approach. Good lawyers, for example, know that documents are not drafted simply for the present but also for the future, and a great example of that approach is the drafting of wills. The same approach is necessary when drafting legislation, including tax legislation.

Perhaps the per-ounce fixed dollar amount tax could have been scheduled, that is, set to be a different amount if the per-ounce price of marijuana fell into a different bracket. Or, it could have been set as a percentage, similar to how sales taxes are designed. According to the article, only a few states use a fixed dollar amount tax. The others rely on a percentage approach.

A related concern is the impact of state government actions on marijuana prices. Some in the industry argue that the price of marijuana in Alaska has declined because there is no limit on the number of grower and retailer licenses issued by the state. This concern raises a different issue, which is the intersection of tax revenue and government regulation of the activity or object being taxed. I leave that issue for another day.

More than three years ago, in Section 280A and the Tree House, I considered whether a tree house, equipped with heater, shower, and outhouse, was a dwelling unit for purposes of Internal Revenue Code section 280A. In other words, would section 280A apply if the owner used a portion as a home office or rented it out? I concluded that the answer would be “yes.”

The story about that tree house implied that the owner lived in it and was not renting it out or using a portion as a home office. Recently, reader Morris directed my attention to several stories from three and four years ago that makes the section 280A question more than a hypothetical. According to several articles, including a Patch story from Illinois, and a Chicago Tribune story, several tax issues popped up when the owner of a different tree house started to rent it out through AirBnB.

One question was whether the owner should pay property taxes on the tree house. Why would the answer be anything other than “yes”? Whether a property owner builds an addition to a home, a detached garage, or a swimming pool, property tax statutes and ordinances require that in valuing the overall property for purposes of the property tax, the value of improvements should be taken into account. The tree house, for these purposes, is no different from the cottage or addition constructed on the property.

Another question was whether the rental activity should be taxed. The town in which this tree house was built enacted an ordinance that subjects short-term rentals, such as those implemented through AirBnB, to the same tax applicable to rentals by hotels and motels. The owner’s reaction was, essentially, “not a problem provided everyone renting out properties on a short-term basis is subject to the tax.” That is understandable and sensible. A practical problem is collection of the tax, because the rent is handled by the online brokers such as AirBnB, and so the easiest collection procedure would be to have the broker add the tax to the rent paid by the tenant to the brokerage.

The town also enacted regulations limiting the size and height of new tree houses, and requiring owners to apply for a $15 permit. The regulations are designed to prevent construction of tree houses such as the one in question. It contained a bed, a kitchen, an RV-type toilet, WiFi, cable television, air conditioning, and a fireplace. Hopefully it isn’t fueled by branches cut from the tree. And where does one go during a thunderstorm? Well, those aren’t tax questions, so I’ll let others consider them.

Six months ago, in When Paying Taxes in Cash is Prohibited, I described legislation pending in Philadelphia that would prohibit stores from refusing to accept payments in cash. I pointed out that Philadelphia itself prohibits cash payments for certain transactions. That legislation was enacted, but does not get implemented until regulations are promulgated. According to this Philadelphia Inquirer report, the city has now released proposed regulations to interpret the legislation.

Under the proposed regulations, the city would be exempt from the prohibition against refusing cash payments, provided there is a “convenient location” that accepts cash. According to a city spokesperson,. the convenient location would be the Municipal Services Building in center city, and even so, the revenue, water, and licensing and inspections departments would refuse payments not made by check or money order. The spokesperson explained that these “government offices aren’t capable of accepting cash.” The spokesperson also explained that people without credit cards or other forms of cashless payment could purchase money orders, which would be accepted. Because money orders require payment of a fee, this avenue of payment imposes an additional burden on people who cannot make cashless payments.

What is bizarre is that the arguments in favor of prohibiting stores from refusing cash payments are just as strong for city offices. Concerns about people who do not have credit cards and bank accounts, usually people who are living in poverty, apply no less to people making payments to city offices than to the same people making payments to stores. Of course, objections have been raised by consumer advocacy groups, organizations helping those in poverty, and others. In Philadelphia, almost one-fourth of the population is “underbanked,” and almost 6 percent are “unbanked.” Interestingly, the primary sponsor of the legislation takes the position that the city should not be exempt.

Making it worse is the fact that some state government offices are refusing to accept cash. Of course, the city’s prohibition on refusing to accept cash cannot be enforced against the state government.

The law was supposed to take effect July 1 after Mayor Jim Kenney signed the ordinance in February, but the city delayed implementation until October as the commission hadn’t finished drafting the regulations.

The proposed regulations not only exempt the city from the prohibition on refusing to accept cash, it also exempts “Uber, vending machines, massage chairs, . . . purchases made by phone, mail, or online, parking lots and garages, wholesale clubs, rental companies, and goods sold directly to employees.” It also exempts “retailers that exclusively accept mobile payments through membership programs are also exempt,” a provision designed for Amazon even though Amazon doesn’t think the language is sufficient to give it an exemption.

Another provision permits merchants to install machines that convert cash into prepayment cards, but prohibits them from charging a fee for the service. It is unlikely very many stores will invest in those machines because they cannot pay for themselves.

To paraphrase what I wrote six months ago, refusing to take cash payments for taxes, other amounts owed to governments, and even for retail purchases is inconsistent with prohibiting some businesses from refusing to take cash payments. I wrote, “a well-written statute would clear up this issue, though it would need to be a coherent statute that treated people without credit cards, debit cards, and iPhone apps in the same way no matter what it is they are trying to pay.” Neither the Philadelphia statute or its proposed regulations qualify as coherent.

Reader Morris alerted me to this New York Post article. The first thing I noticed was the headline: “Brave New World: Uncle Sam is taxing robots as companies invest in advanced tech.” As far as I know, the IRS is not, as of this moment, requiring robots to file tax returns. In fact, the article begins with these two inconsistent statements: “It’s a brave new world for the IRS: taxing robots. Uncle Sam is padding the Treasury with millions of dollars to assess bots at the same time that corporations invest more in advanced technology and labor-saving machinery, according to experts.” So which is it? Is the IRS taxing robots? Or is the IRS, and Treasury, spending money to “assess,” that is, to study, the question of whether, and if so, how, robots should be taxed? The answer, of course, is the latter.

The article quotes economist and author Mark Thornton, who explains, “Yes, governments already tax robots because they tax virtually everything that goes into developing and making robots. In a few cases, there are subsidies such as government grants for robot development. But that still means they are taxing you and me to provide the subsidies.” Parsing that explanation, perhaps what Thornton means to say is that there are state and local sales taxes that apply to at least some sales of robots or their components. That, of course, is true of any product not exempt from sales taxes, including assembly lines and their components, forklifts, cranes, whatever. There are subsidies, but I’d not use the word “few” to describe them. Robots, like other property, generate a variety of federal and state depreciation and expensing deductions, and qualify for a variety of credits.

The article then addresses Bill Gates’ proposal of two years ago to tax robots that replace workers by imposing an income tax on the salary that the displaced worker would have earned. Aside from the question of who is liable to file that return, a question that might go away if something like Turbotax and an internet connection is programmed into robots, the more challenging question is determining what the displaced worker would have been paid. Who’s to say whether the worker would have received a bonus or raise? Who’s to say that the worker would have retired early and been replaced by a worker not earning as much salary? And what is a robot? Is a piece of equipment that permits an employer to reduce the workforce necessarily a robot? Is time-keeping software that eliminates the need to hire a replacement for someone retiring from the HR department a robot?

This isn’t the first time I’ve commented on robots and taxation. More than three years ago, in Taxation of Androids and Robots, and Similar Pressing Issues, I described a discussion of the issue at a science fiction conference, but left it at that, because the focus was on the sort of robot that isn’t the sort raising the questions in the New York Post article. The New York Post article focuses on a different aspect of the question.

The problem with taxing robots on the basis of taxing the income that would have been earned by a person is that it opens the door to taxing people who do work for themselves instead of hiring someone. Should a person who retires and finds herself with time to tend to the lawn and garden be taxed on the income that would have been earned by the landscaper who she no longer retains? Should a person who enjoys do-it-yourself home improvement and who paints the living room be taxed on the income that would have been earned by the painter not hired by the homeowner? Should people who cook their own meals and eat at home be taxed on the income that would have been earned by a restaurant or take-out establishment?

The rise of robots poses all sorts of challenging questions, deep concerns, and troubling issues. Rarely, if ever, is the answer some sort of taxation. The biggest concern about the rise of robots is the loss of jobs. The answer, of course, is education. Teach and train people how to do the jobs that robots cannot do and probably will not ever be able to do, at least in the next several decades. Robots, like artificial “intelligence” programs, lack judgment. They lack wisdom. They lack empathy. They lack soul. Yes, adjustments in the economic, social, and legal fabric of civilization are, and will continue to be, needed, but taxation doesn’t provide what robots lack.

Readers of MauledAgain know that I abhor ignorance. Unlike some diseases, we know the cure for ignorance. Sometimes, though, patients refuse to take the medicine. Though I usually focus on tax ignorance, I have also focused on other types of ignorance, such as financial and literary ignorance. When I used google search to find my blog posts that mention ignorance, the resulting list numbered in triple digits. Just some of my commentaries on this national affliction include 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?, and The Institutionalization of Ignorance.

The scope of ignorance varies by issue. Whether a certain amount of ignorance is a problem depends on the matter under consideration. For example, very few Americans could name the signers of the Declaration of Independence without looking up the answer, but I doubt ignorance on this point threatens civilization. There surely is a long list of topics that fit this description. On the other hand, every American over the age of, say, fourteen should be able to name the three branches of the Federal government, and yet an Annenberg Constitution Day Civics Survey revealed that only 26 percent could name all three branches, and 33 percent could not name any of them. That is appalling, and presents an invitation to those who want to undermine democracy.

One area in which ignorance is dangerous both at a national and individual level is financial ignorance. Financial ignorance is fertile ground for spammers and scammers and other malevolent actors. I have written about this problem in posts such as Is Basic Math Enough? and Making Headway on Financial Literacy Education?

So when I saw the results of a WalletHub survey on college students and credit cards (scroll down the page to find the survey), I had to consider the results in the context of the importance of the issue. Were these issues in the world of naming all the signers of the Declaration of Independence or in the world of naming all three branches of the Federal government?

The survey revealed that 10 percent of college students think “credit cards are free money.” Should we rejoice that 90 percent know this is not the case? Or be worried that 10 percent lack understanding about credit cards even though they are enrolled in college? To me, this is an essential issue, and even if only one percent or one-tenth of one percent of college students perceived credit cards as free money, there is a problem.

Here’s another troubling revelation. When asked if they would rather miss a credit card payment or a party, 14 percent of the respondents would choose missing a credit card payment. Yes, we can be happy that 86 percent are demonstrating some sort of maturity mixed with responsibility, but one in seven lack the sort of approach to life that hopefully is developed by the time someone graduates from high school. Granted, this isn’t as much as issue of financial literacy as it is one of financial and social maturity, but literacy and maturity do tie together in many instances.

The survey also asked college students to evaluate their financial knowledge. Of those questioned, 30 percent gave themselves a grade of C or worse. It isn’t clear whether they were asked what they were planning to do to ameliorate the situation. Nor was there any benchmarks to determine whether the respondents, whether giving themselves low or high grades, were properly evaluating their financial knowledge. But the results of a 2018 Brookings survey, one of the few of its kind, suggests that financial illiteracy among college undergraduates is appalling. According to that survey, 72 percent should be giving themselves very low grades, and counting themselves lucky to earn something as high as a C.

Financial literacy is essential. Financial ignorance is dangerous. The time to make certain today’s youngsters don’t become tomorrow’s victims of scammers and businesses with shady practices is when they are in middle and high school. Accomplishing this goal requires education both in the school and at home and by teachers and parents.