MauledAgain

Though the United States federal income tax moving deduction was suspended by the 2017 tax legislation, there continues to be a moving expense deduction under Canadian tax law. Reader Morris recently shared an article describing the tax return experience of a Canadian taxpayer, John Konecny, who moved from his school-year teaching job in southern Ontario to his summer teaching job in eastern Ontario and back again back again each year. His case involved several issues, such as whether the move was for work or vacation purposes, and though in an earlier case the judge said no, in a later year the revenue authority accepted his position. What caught my eye, and presumably what got the attention of reader Morris, was how Konecny moved.

When the moving expense deduction was in force in the United States, tax return preparers typically thought in terms of expenses for moving vans, travel by automobile, plane, or train from the old residence to the new residence, moving supplies, temporary storage of household items, and similar things. But those weren’t the sort of costs Konecny incurred on his last move.

One of the other issues in the case that Konecny lost was whether the total moving expenses were reasonable. In that case, when dealing with the cost of the moves, the judge said to Konecny, “Could you move in a canoe?” So Konecny took up the challenge and that’s how he moved from his one teaching job to the other. It ended up being about 30 percent cheaper than his previous moves by automobile. According to a moving company professional, the cost incurred by Konecny in moving by canoe was “about what a professional moving company would have charged.” He added that he didn’t think people moving by canoe would put moving companies out of work and concluded, "I've been in the business 37 years and I've never heard of it. It's hilarious!"

A Canadian tax law professor noted, "This fellow did something slightly unusual in the selection of the mode of transportation. But in principle, he's doing the exact same thing as the person who's going across the country in an automobile. He's just doing it on the cheap." That’s quite right.

Though at one time moving by canoe in Canada was “commonplace,” it apparently no longer is. I suppose during the nineteenth century, before the United States income tax was enacted, people moved by riverboat, and perhaps canoes. But I’m confident few, if any, people move that way nowadays. But if someone did during the time that the moving expense deduction was operative, or does so in the future when and if it returns, the fact that a canoe or riverboat is used rather than an automobile, rented truck, or airplane ought not make a difference.

Though some of Konecny’s previous moving expense deduction claims had been denied, the costs of his canoe move were allowed by the revenue authority. Konecny thinks “he may be the first person to have successfully claimed expenses for a move by canoe since the Income Tax Act underwent a major rewrite in 1972.”

So what’s next? Konecny explained, "So my friends have suggested a really great move would be dog sled." That’s NOT going to work in Ontario for moves undertaken in the summer. But perhaps someone else in Canada might do a move by dogsled in the winter. But, again, it ought not make a difference other than some of the costs, such as dog food and harnesses, might be novel.

Sometimes, tax law isn’t quite so boring. Sometimes it gets interesting.

Reader Morris directed my attention to this story, asking me, “Can a fee that is not a tax be considered double taxation?” The answer is no. How can something that is not a tax be considered a contributor to double taxation?

According to the story, people shopping at stores in a Pasco County, Florida, shopping center have noticed a 0.50 percent charge on their receipts tagged “FL PUF 0.50%.” Several people complained to the county tax collector. He explained that it was not a tax, and that in his opinion, “It’s almost fraudulent.” Though the letters “FL” suggest that it is a state-imposed tax, it is a public user fee. That’s the “PUF” portion. It is a fee charged by the developer of the shopping center.

The fee is computed as a percentage of the total price, including the Florida sales tax. That means the developer is collected an amount equal to 0.50 percent of the sales taxes paid by shoppers at the shopping center. The county tax collector commented, “You’re getting hit twice. It’s double taxation almost.”

After the tax collector pointed out that there should be signs explaining that the fee is being charged, signs appeared at the stores in the shopping center. The developer, however, refused to comment when asked by the writer of the story for more information. Some stores are paying the fee on behalf of their customers.

The fee is not a tax. It is not imposed by a government, nor does the revenue it generates go to a government. Thus, there is no double taxation.

Too often people toss the word “tax” around in situations where there is no tax. For example, Major League Baseball imposes a Competitive Balance Tax on clubs that spend more than specified amounts on player salaries. This fee often is called the “luxury tax.” But it’s not a tax and it ought not be called a tax. It’s a fee. There’s a difference.

I have discussed the difference between a tax and a fee in posts such as Please, It’s Not a Tax, So Is It a Tax or a Fee?, Tax versus Fee: Barely a Difference?, and Tax versus Fee: The Difference Can Matter. Those discussions focused on the difference between different types of charges imposed by governments. In the case of the fee charged by the shopping center developer, and the fee or charge imposed by Major League Baseball on high-spending clubs, the amount being charged is not being charged by a government. In the analysis of whether something is a tax or fee, the first question is whether it is being imposed by a government. If the answer is no, the amount being charged is not a tax, and thus it is not necessary, nor appropriate, to debate whether the amount in question is a tax or fee.

The addition of the signs in the stores resolves the underlying problem. The use of short acronyms, such as “FL PUF,” confuses people, and suggests that perhaps the amount added to their bills is a tax, particularly when “FL” is matched with “0.50%.” Why not “DEV FEE” instead of “FL PUF”? Hopefully the signs are legible, conveniently located, and easy to understand. Perhaps the sign should include, and perhaps it does include, a legend stating, “This is not a tax.”

According to this report, voters in the city of Lowell, Michigan rejected by an almost 2-to-1 margin a proposal to enact a 1 percent (0.5 percent for nonresidents) income tax to fund road repairs. The city manager attributed the result to the anti-tax movement, pointing out that people want services but do not want to pay for them. The reporter pointed out that other Michigan cities have income taxes but did not elaborate on what the revenues were used to pay.

To me, the issue is how road repairs should be funded. For more than 15 years the debate has been between advocates of fuel taxes versus and advocates of the per-mile road fees, which I have discussed in commentaries 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, Plans for Mileage-Based Road Fees Continue to Grow, Getting Technical With the Mileage-Based Road Fee, and Once Again, Rebutting Arguments Against Mileage-Based Road Fees. I think most advocates on both sides of that debate would agree that an income tax is not the best, nor even appropriate, means of raising road repair funds. There is little correlation between a person’s income and the wear-and-tear that the person imposes on city streets. Fuel taxes and the mileage-based road fee bear some correlation between fuel quantity or mileage and the impact of driving on roads, though the latter has a higher degree of correlation.

Perhaps a different wording of the ballot question would have generated a better outcome. What would have been the outcome to the following question (assuming the city had authority to pursue any of the choices)? Are you in favor of (pick one) (1) a 1-percent income tax (0.5 percent for nonresidents) to fund road repairs, (2) a 5-cent-per-gallon increase in fuel taxes to fund road repairs, (3) a one-fifth-of-one-cent per mile mileage-based road fee to fund road repairs, (4) a $20 increase in the annual vehicle registration fee to fund road repairs, (5) cutting to once a month trash collection to fund road repairs, (6) eliminating city snow plowing to fund road repairs, or (7) doing nothing, letting the roads get worse, and paying for tire, wheel, front-end alignment, and other costs incurred from driving on bad roads.

My guess is that a run-off between the top two or three vote-getting choices would be necessary.

Throughout the years I have decried not only the growing wealth and income inequality that threatens the survival of the nation, but also the tax cuts for the wealthy that exacerbate those inequalities, fail to generate the promised benefits to those who are not wealthy, and that undermine the fiscal integrity of the government. On several occasions, I have compared the economic abyss into which the nation is heading with feudalism, another structure that benefitted a handful of oligarchs at the expense of the other 99 percent.

For example, seven years ago, in What Sort of War is the “Real Budget War?, reacting to the combination of tax cuts for the wealthy and benefit reductions for everyone else, I wrote:

Or is the great wealth shift – the one that occurs when Social Security, Medicare, Medicaid, and other programs benefitting so many Americans are cut so that taxes can be reduced for the wealthy in exchange for empty promises of jobs – going to be the event that future historians identify as the defining moment in the transition of this nation from democratic republic to corporate feudal fiefdom?

Almost two years ago, in What Losing Federal Personal and Dependency Exemptions Does to Michigan (and Other) Taxpayers, I shared this perspective:

All of this further reinforces the inescapable fact that the Congress did a slipshod job of dealing with tax “reform” and “simplification.” It did not reform the tax law nor did it simplify the tax law. It simply let the donor class, the 150-some families that now run the country, grab whatever they could grab in step one of a multi-step “return to feudalism and call it free market capitalism” plan that ought to be called “socialism for the oligarchy.”

Three months later, in Who Should Decide Tax Policy?, I explained why erosion of the income tax threatens the well-being of the nation:

One of the principal purposes of the income tax is to eliminate the wealth and income inequality that almost destroyed the nation’s economy during the era of unregulated wealth when a paradise existed for robber barons. By distorting the income tax, Congress has, over the past three and a half decades, reopened paradise for the wealthy. Congress claims to act on behalf of everyone, but it acts in accordance with the conditions imposed on the funding its members receive. One of those conditions is to make it even easier for the wealthy to restore the oligarchy of feudalism, which is their paradise.

Several days ago, I noticed that another commentator is making the same comparison. In

a Philadelphia Inquirer opinion piece aptly titled, “Today’s CEO pay echoes the feudalism of William the Conqueror,” Sam Pizzigati described medieval feudalism as “a time, in some ways, not unlike our own.” He points out that 50 large corporations pay their CEOs “more than 1,000 times what they paid their median workers in 2018.” In one instance, the CEO pay is 3,566 times the median employee salary. Pizzigati provides an interesting perspective: “If some lord in 1066 had collected 1,000 times the earnings of his peasants, those poor unfortunates would still be working today — 953 years later — to make as much as their lord pocketed in a single year.” Though some people think, and claim, that the lowly-paid worker or peasant should be grateful that he or she “even has a job,” a system in which the person doing most of the work earns one-one-thousandth of the person reaping most of the benefits of that work violates pretty much every decent moral, philosophical, and theological approach to life that the species has created.

Pizzigati notes that CEOs, seeking ever-increasing amounts of compensation, have “boosted short-term stock values by any means necessary, from cooking the books to inflating the housing bubble to flooding poor communities with opioids.“

If I were to criticize Pizzigati’s commentary, it would be the omission of any mention of the wealthy who are not CEOs. While CEOs pulling in annual incomes measured in seven and eight digits are among those on the high side of the inequality border, they’re pretty much earls compared to the royalty pulling in eight and nine-digit incomes, many of which flow from trust funds to the benefit of people who haven’t lifted a finger to do anything deserving of compensation at that level. But perhaps Pizzigati didn’t take his commentary this far because of word or other space limitations imposed by the newspaper. Or perhaps he has another commentary in the works.

Pizzigati notes that there are several ways to curtail this growing inequality. He describes the Portland, Oregon, tax on corporations that pay their CEOs more than 100 times the median pay of their workers. San Francisco has a similar tax on its ballot next year, and seven states are considering the same sort of tax. Presidential candidate Bernie Sanders is proposing a tax plan at the federal level to deal with this discrepancy. Pizzigati suggests another approach, namely, giving corporations with “modest CEO-worker pay gaps a leg up in the [government contract] procurement process.”

What’s frustrating is that there existed a mechanism to tamp down the wealth and income inequality that is so dangerous to a democratic republic. It’s called a progressive income tax, and when its rates were high enough, brakes were applied on the acquisition of ever-increasing amounts of income and wealth. Those rates were torn down by those who claimed high income tax rates are bad for the country. Why? Pizzigati puts it this way, “And the more CEOs get, the more they want, and the more recklessly they behave to get it.” The same can be said of the non-CEO oligarchs who also can’t get enough income and wealth.

Some call it greed. A better perspective is to see it for what it is. It’s an addiction. It’s an addiction to wealth and money, driven by various insecurities. And unlike some addictions that are limited in the scope of their harms, this addiction threatens to destroy the nation. As I wrote in Judge Judy Almost Eliminates the National Debt about the attacks on the IRS and the income tax:

Unfortunately, because a majority of the Congress underfunds the IRS and at least one member of the executive branch wants to eliminate government, it is * * * no wonder more and more people toss aside their civic obligation to pay taxes. It will be interesting to hear their stories after governments collapse and the feudal system returns.

I suggest they engage in some intensive studies of history. Especially the parts about the demise of feudalism.

A week ago, in The Role of Age in Taxation, I shared my distaste for the idea that once a person attains a particular age, that person should be relieved of paying taxes. I pointed out why age is an irrelevant factor in determining tax liability. In that commentary, I also addressed the claim that people without children should not pay taxes for education purposes.

Shortly thereafter, reader Morris pointed me to this cleveland.com article, noting “I thought you would find this article disturbing.” Reader Morris is correct. The news in this article indeed is disturbing.

According to the article, early in 2019 attempts were made to insert into the Ohio budget a provision giving a tax break for wealthy residents of Hunting Valley. The break would absolve these residents from paying property taxes used to fund public education. The governor vetoed the provision, but attempts to enact the tax break continue. Hunting Valley is the nation’s 17th wealthiest towns in the country. According to the article, its mean household income is $507,214, and the average home value is $1.3 million.

If the tax break is enacted, it almost certainly would destroy the school system in which the town is located. It also could cause similar requests in other affluent Ohio localities. Enactment of the tax break would encourage everyone to seek tax breaks, based on the claim that if the wealthy don’t pay, why should anyone else? Of course, elimination of taxes and the shifting of education into oligarchic privatization is the goal of the anti-tax crowd.

Apparently, the wealthy individuals resent paying property taxes to fund public education because so few of their children attend public schools. Yet they do not explain why families bringing in more than half a million dollars a year in income cannot afford private school tuition and public education property taxes.

As part of the renewed effort to get the tax break, these wealthy residents are using their money in an attempt to put people on the school board who will support their position. Perhaps that’s why they feel impoverished by their obligation to pay property taxes. It costs a lot of money to purchase public offices.

What the wealthy residents of Hunting Valley don’t understand is that they do not pay real property taxes to fund public education for their children. That perception is at the root of their attempt to avoid paying taxes. Instead, they pay real property taxes to educate America, and an educated America is good for everyone, including wealthy people. As I wrote in Cut Taxes + Cut Spending = Reduced Education?:

People [who do not want to pay real property taxes to fund public education because they do not have children in public schools are] clueless when it comes to identifying the indirect benefits they receive by living in a nation with an educated citizenry and workforce that contributes to the high standard of living they’ve had the opportunity to attain, in comparison to most other places on the planet. These folks are expertised in the “taxes are good when they benefit me but otherwise are evil” approach and in the “I like to take but hate to give” philosophy of life.

Perhaps the wealthy folks in Hunting Valley are satisfied that the private school education being received by their children will contribute to their children’s success in life. Their children will end up as business owners and professionals. But who will be their customers and clients? Who will be their employees? Who will cut their lawns? The people that they need in their life also need to be educated, because very few businesses and professional practices can succeed in a country in which 99 percent of the population is uneducated, badly educated, or undereducated. Paying taxes to fund public education is an investment and not an expense. Perhaps these wealthy people in Hunting Valley need some additional education to learn more about economics, tax policy, and civic virtue than they apparently understand at the moment. Eventually, perhaps they will learn that the property taxes they pay to fund public education will provide a return on investment far superior to the alternatives.

Reader Morris emailed me last week, commenting that someone must be reading my blog posts. I certainly hope so, and I hope that the someone is plural. Actually, blogspot provides statistics so I do have a rough idea of how many people are reading MauledAgain.

Reader Morris directed my attention to one of the many posts in which I have advocated holding back tax breaks until the recipient delivers on the promises that are used to justify the tax break. For several years, I have been criticizing handing out tax breaks before the recipient does what the recipient promises to do in exchange for the tax breaks, and advocating holding back the tax breaks until the recipient actually does what the tax break requires, 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 When Tax Break Giveaways, Praised as “Investments,” Deliver Low Returns. Reader Morris directed my attention to the final paragraph of that last post, in which I wrote:

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.

What prompted the comment by reader Morris was a new strategy proposed by the Connecticut Department of Economic and Community Development outlined in this article. As described in the article, politicians in Connecticut are reluctant to continue “forking over upward of $200 million a year” funded with borrowing that are used to “bribe handpicked businesses with custom-tailored packages — grants, loans and tax credit awards worth as much as $40,000 per job and sometimes even more.” David Lehman, commissioner of the Department of Economic and Community Development, is proposing to the legislature a new approach. The tax break, essentially a refund of a portion of the state income tax already paid by the tax break recipient, would be paid after the recipient creates at least 25 eligible jobs. The jobs would need to exceed a preset pay threshold.

Whether the Connecticut proposal reflects someone reading my MauledAgain blog posts or something that popped up independently in the mind of someone in Connecticut is a question I cannot answer. Perhaps someone in Connecticut can. If indeed that person reads MauledAgain, I hope they let me know. What matters most is that the proposal is implemented, not so much whether it originated in my mind or someone else’s brain.

It will be interesting to see how the proposed Connecticut approach plays out in Connecticut, assuming the legislature approves it. As one legislator put it, “You’re rewarding good behavior.” That surely is a much better approach than dishing out tax breaks and hoping that promises are kept. So who would object to this approach? The folks who have been lining their pockets with tax break money while fulfilling few, if any, of their promises. It’s time to put an end to what these takers have been doing.

Readers of MauledAgain know that television court shows get attention from me when they involve tax issues. I have written about several dozen episodes, including 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, When Tax Return Preparation Just Isn’t Enough, Fighting Over Tax Dependents When There Is No Evidence, If It’s Not Your Tax Refund, You Cannot Keep the Money, and Contracts With Respect to Tax Refunds Should Be In Writing.

Recently, reader Morris found a five-year-old Judge Mathis episode involving a tax issue. I thank reader Morris. He knows that although I get to see many television court show episodes, there are probably even more that I have missed for one reason or another.

The linked video is a snippet from a longer segment, which I cannot find. So I am guessing that the dispute between the plaintiff and defendant involved much more than the issue on which the snippet focuses. The judge’s offhand remark about the plaintiff and defendant having some disagreement about infidelity strengthens that guess.

It appears that one of the transactions between the plaintiff and defendant was an arrangement through which the defendant, apparently at the time a boyfriend of the plaintiff, claimed the plaintiff’s daughter on his 2013 tax return for purposes of the child tax credit even though the youngster was not his child.

The plaintiff explained that the defendant was supposed to “give me half the taxes.” The judge asked the plaintiff if she and the defendant were married. She replied no. He asked if the defendant had adopted the child. Again, the plaintiff answered no.

So the judge, referring to the agreement, asked, “You know that’s illegal?” The plaintiff replied, “They told me it was fine.” The judge asked, “Who told you? The IRS?” The plaintiff replied, “No, the people at the tax [preparation office].”

Judge Mathis then asked for the tax form on which the child had been claimed. After looking at it, he explained that the tax return preparer had put the plaintiff’s child as “daughter” on the defendant’s return even though the child was not his. Judge Mathis pointed out that someone had lied to the tax return preparer.

Judge Mathis then asked the plaintiff, “You still want half of the taxes?” The plaintiff replied, “I don’t know,” and the judge told her, “So you’ll go to jail with him?” He then summed up the issue, “So the agreement was he would give you half of the taxes for the illegal tax return that he filed.” At that point it appeared that the plaintiff was not going to recover that amount.

Then the defendant interposed, “As far as the taxes go, I feel,” and the judge interrupted him with “Leave that alone.”

There are two lessons to be learned. One is a picky point. What was in dispute in this issue was not “half the taxes” but half of a “tax refund.” The parties and the judge consistently used “taxes” rather than “tax refund,” an inaccurate description I’ve heard more than a few people use when describing tax refunds. The other lesson is that one should be careful when speaking in public, especially when on radio, television, or social media. The judge did the defendant a favor by cutting him off, but the damage had already been done. I doubt that IRS agents are watching television court shows to find the two or three or ten percent that involve tax errors and tax fraud, but there is a chance that the tax return in question was pulled for audit back in 2014 or 2015. We’ll never know. What we do know is that it absurdly foolish to claim that someone who is not a child is a child.

Recently, Kathi Angelone of Cape Coral, Florida, wrote letter to the editor of the Cape Coral News-Press. She wrote:

I have not been blessed with children, but since renting my first apartment at age 21, I have been paying property taxes to pay for our schools. Hundreds of thousands of dollars to educate other people's children.

Shouldn't there be an age limit on paying school taxes? Shouldn't there be a limit on what you are compelled to pay? Especially here, in Lee County where impact fees have been waived for over a decade? Why aren't the people who are causing the need for more schools be obliged to finance them? Why are seniors, like me, who have paid for other people's children, to our financial detriment still pay for these schools?

The Lee County school budget is over $1 billion. Where is the scrutiny of the spending? When will a commissioner propose an age limit for paying school taxes? Way past time, in my opinion.

I answered this question last December, commenting on a facebook meme that might have influenced Angelone. In Warped Perspectives on Tax Policy, I wrote:

Facebook is beginning to challenge television court shows as a provider of material for this blog. A few days ago, someone posted a meme that showed up on my newsfeed. It was a picture of several elderly gentlemen sitting on a bench, with the following caption: “After the age of 65 you should be 100% tax exempt. You have already more than paid your dues. Like and share if you agree.” Of course, I did not like or share the post. But I did comment.

My reaction to this meme was simple. It was a rhetorical question. I asked, “So those 70 year old billionaires would be tax-exempt? Really?”

The first response was a comment that failed to address the question. It was a typical me-focused, toss-aside-a-wider-perspective analysis, the sort that leads to stereotyping groups because of one person or incident. The response stated, “I just turned 65 and I've paid my fair share.” Was this response intended to imply that all people who have “just turned 65” have paid their fair share, whatever that might be? Does it distinguish between people who have attained the age of 65 and are wealthy and those who have attained the age of 65 and are destitute? Or does it lump together all persons who have attained the age of 65 without distinguishing economic situations even though the issue is an economic issue?

The second response was another example of this narrow, view-the-world-through-my-lens-and-ignore-the-wider-perspective thinking that is destroying not only the nation but the planet. The response stated, “I totally agree with these old gentlemen . Work your aaa off for over 45 years, pay more than your fair share and the Govmt , still taxes your partial pension, they screw you coming and going . And now they want to screw You again , while congress has all the perks of men and women who goof off.” Without defining “fair share,” this commenter went beyond the claim of the first commenter and decided the payment had been “more than” a fair share.

Whether a tax reflects ability to pay, or not, or whether a tax or user fee reflects usage, or not, certainly age should not be a consideration in whether someone is subject to, or exempt from, a particular tax.

In addition to the absurd “I’m over 65 and thus should be exempt from taxation” claim on which I commented in response to the facebook meme, Angelone also argues that she has paid enough to “educate other people’s children” and that school taxes should be paid by people with children in the schools. I shared my reaction to this position in Cut Taxes + Cut Spending = Reduced Education?, in which I wrote:

People without children in the schools will continue to complain about taxes and clamor for cuts in everything, arguing that they don’t benefit because they have no children in the school, forgetting that when they were in school plenty of taxpayers without children in the schools contributed to their own education and forgetting that while their own children were in school others without children, now long gone, were pitching in. And they’re clueless when it comes to identifying the indirect benefits they receive by living in a nation with an educated citizenry and workforce that contributes to the high standard of living they’ve had the opportunity to attain, in comparison to most other places on the planet. These folks are expertised in the “taxes are good when they benefit me but otherwise are evil” approach and in the “I like to take but hate to give” philosophy of life.

When I encounter tax policy perspectives such as the ones expressed by Angelone, I understand part of the reason the nation faces the problems it has encountered. As I wrote in Warped Perspectives on Tax Policy:

It is unfortunate that much of the political and social unrest, including angry reactions to taxation, reflects a lack of a wider perspective that can be acquired both through formal education and through traveling outside the bubble, whether it’s a gated community, a closed social or religious community, or a neighborhood characterized by a singularity of perspective. Too many people think that when the encounter something, it becomes a truism. Thus, we observe people attaining a particular age and turning it into a category with attributes reflecting a singular or limited experience. So we see “I am over 65, I have paid taxes, I am being taxed on my pension, and I don’t have as much money as I would like” being translated into “Everyone who is over 65 should be exempt from paying taxes because [presumably] everyone over 65 is in the same position I am in because everyone over 65 is in the same economic position.” The flaw in the reasoning, if that is what it can be called, is obvious the moment thought is given to the proposition. The inability to view things from a wide enough perspective, reflecting a broad exploration of life, causes people to see things from a warped perspective, one that does not reflect all of reality. Here, I saw it with respect to taxation, but it exists not only with respect to economic issues but also with respect to political, religious, cultural, and social issues. It’s a narrowness of experience that become a narrow-mindedness of cognitive dissonance. It is a dangerous thing except for those who profit from the narrow-mindedness of the masses.

Unfortunately, narrow-mindedness is becoming even more, not less, prevalent, like a disease that becomes a pandemic. No wonder the nation is in trouble.

From the outset of this blog, I have made it a point to work Halloween into MauledAgain, usually looking for the silly or goofy but occasionally taking a more serious approach. The posts began with Taxing "Snack" or "Junk" Food (2004), and have continued through Halloween and Tax: Scared Yet? (2005), Happy Halloween: Chocolate Math and Tax Arithmetic (2006), Tricky Treating: Teaching Tax Trumps Tasty Tidbit Transfers (2007), Halloween Brings Out the Lunacy (2007), A Truly Frightening Halloween Candy Bar (2008), Unmasking the Deductibility of Halloween Costumes (2009), Happy Halloween: Revenue Department Scares Kids Into Abandoning Pumpkin Sales (2010), The Scary Part of Halloween Costume Sales Taxation (2011), Halloween Takes on a New Meaning and It Isn’t Happy (2012), Some Scary Halloween Thoughts (2013), The Inequality of Halloween? (2014), When Candy Isn’t Candy (2015), Beyond Scary: Tax-Based Halloween Costumes (2016), Another Halloween Treat? I Think Not (2017), and If Halloween Candy Isn’t Food, Is it Medicine? (2018).

Recently, I noticed new phrases. Perhaps they have been in use for several or more years and I haven’t noticed. It’s the “parent tax,” or the “dad tax,” terms used to describe the candy that a parent extracts from a child for having accompanied the child on the neighborhood candy collection tour, though the “dad tax” has a broader scope. According to this commentary asking how much the tax should be, “74% of parents admit to taking at least a few pieces of their kid's Halloween candy. That's a lot but that still seems low to me. I think every single parent is swiping at least one piece of candy,” and “4% of parents surveyed said they typically eat all of their child’s Halloween candy.” Wow.

Another commentator explained, “The way I see it, if the government is going to tax an adult's income 20-30%, than the child should have to pony up that amount of their Halloween candy. Think of it as preparing them for the REAL WORLD, which very much involves paying taxes.”

When I was a child, my parents did consume a small portion of what my siblings and I brought home. But it wasn’t a matter of an involuntary “tax” teaching us that in the “real world” we would be paying taxes. It was a lesson in sharing. We were given insights into why it would be appropriate and generous to offer candy to our parents in appreciation of their help, not only in accompanying us around the neighborhood but also in assisting the design and construction of costumes. That is why, even after we reached ages at which we created and built our own costumes and went about multiple neighborhoods on our own, we continued to share our “candy loot” with our parents. It was only when we undertook paid employment that we discussed budgeting and learning to share household expenses, albeit at a minimal level. The “there are taxes” lesson was being learned “on the job.”

So although some people think Halloween presents an opportunity to teach children that “the government” is going to “take some of what you earn,” I think it provides an even better opportunity to teach children the concepts of generosity, empathy, and sharing. Those character traits are disappearing too rapidly among certain segments of society.

And, no, I did not take or accept Halloween candy from my children. Despite my sweet tooth, by the time they were of Halloween-adventuring age, I had reached the point where I tried more diligently to reduce sugar intake. I had enough candy coming in from other sources. But, yes, my children did offer. That is what mattered.

Reader Morris posed a question to me. “Can a robot write a tax blog?” I didn’t reply directly to him. He now will get my answer.

Yes.

Of course.

But the more important question is whether a robot (or artificial “intelligence” software) can write a sensible, comprehensible, accurate, well-reasoned tax blog?

The answer?

Perhaps. Someday.

Artificial “intelligence” software has been used to write stories, news, novels, music, movies, musicals, poetry, and probably other things I’ve not noticed. Some of it is very good, some of it is hilarious, some of it is atrocious.

If you want a good laugh at the sorts of things artificial “intelligence” can do, check out These Hilarious Scripts Written By A "Bot" Will Make You Laugh Out Loud.

If you want to be terrified at the prospect of artificial “intelligence” taking over activities reflecting human creativity, read this article about computers generating fake news.

And when artificial “intelligence” goes wrong, sometimes it can make a person cry with laughter, but too often it will make people cry in horror.

I suppose at some point an enterprising software engineer, or a robot, will write code that creates a virtual James Edward Maule, that will pick up writing MauledAgain when I decide, or life decides for me, that it is time for me to stop writing a tax blog. Of course, there are those who think that even now the MauledAgain blog is being written by a robot. Or perhaps, more accurately, an android.

Once again, it’s time to respond to the arguments put forth against the mileage-based road fee. For many years, I have explained, defended, and advocated for the mileage-based road fee, 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, Plans for Mileage-Based Road Fees Continue to Grow, and Getting Technical With the Mileage-Based Road Fee.

This time, it’s an analysis presented by Glostone Trucking Solutions. In all fairness, the analysis lists both pros and cons, and is a reaction to the floating of trial balloons suggesting that commercial trucks be subjected to a mileage-based road fee. Though commercial trucks, on average, create more wear and tear on highways and require the building of stronger bridges and taller tunnels, they are not the sole cause of highway expense. Any mileage-based road fee ought not be limited to commercial trucks.

Glostone notes, “Privacy concerns remain the biggest fear, that a mileage-based system could allow the government to track the whereabouts and movements of motorists.” I responded to this concern in Is the Mileage-Based Road Fee a Threat to Privacy?, addressing an Adam Brandon editorial:

Brandon * * * seems nervous about the prospect of the possibility that “the government will know where you are at all times.” But the mileage-based road fee device will not provide that capability. Why? Because it can track only the location of the vehicle. Thus, even if a government wanted to know, and figured out, that a person’s vehicle was in a shopping mall parking lot, there would be no way of knowing from that information which stores the person visited, what the person purchased, or how much the person paid for those purchases. Nor would it provide any information about the identities of individuals with whom the person met or the content of their conversation. As I explained in my last post on the topic, Mileage-Based Road Fees: Privatization and Privacy:

And, yes, there is a risk that a mileage-based road fee system can be used to determine where a vehicle has been. Vehicles, of course, do not have privacy rights. But because people assume that an owner of a vehicle is wherever the vehicle happens to be, it is understandable that knowing where a vehicle has been might reveal where the owner has been. Of course, a mileage-based road system need not track location, though those being considered and those in place do so, provided that the fee did not change based on the road being used. Connecting to the odometer would suffice. It also is important to remember that for many decades, the location of vehicles has not been a private matter hidden behind the sacrosanct walls of a person’s home. For a long time, law enforcement officials, investigative journalists, and even nosy neighbors have been able to determine where a vehicle has been, aided by the existence of license plates, bumper stickers, and other identifying characteristics. There’s nothing private about being in public.

Thus, Brandon’s concern that “tax collectors can access our physical location at the touch of a button” is overstated, because at best, the only location that could be accessed is the location of the vehicle. And considering that the system could be outfitted with a delay such as that used with EZPass and similar systems, because information about the use of the road need not be real-time for a fee to be imposed, by the time the button is pushed the vehicle very well could be at another location, its driver could be out of the vehicle, or another person could be driving the vehicle.

Existing technology, such as roadside cameras, credit card receipts for fuel purchases, electronic toll systems such as EZPass, and observations by law enforcement authorities, already provide substantial information concerning the location of a vehicle. Similarly, the location of an individual when in public areas is not a secret. The mileage-based road fee does not generate a significant increase in the revelation of vehicle location information, and does nothing to increase the disclosure of individual location information.

The Glostone analysis concedes that advocates of the mileage-based road fee “say privacy concerns are addressable,” and cites the limits Oregon places on the data recorded by the tracking device. Indeed, those who raise privacy concerns either haven’t yet thought through the analysis, or oppose the mileage-based road fee for other reasons and use privacy concerns to tap into the fears of the ignorant.

The Glostone analysis describe cost as the “largest problem.” It notes that the devices would need to be installed in all vehicles. The device don’t cost very much and are very easy to install. I have one in my car. It took all of 5 seconds to install. The Glostone analysis claims that the mileage-based road fee “would require every vehicle owner to periodically report distance tax and create a costly new bureaucracy that would have to audit these reports,” and that the “added bureaucracy alone could eat up any gains in tax revenue.” The tracking device reports without any need for owner intervention. Digital technology eliminates the need for the roomfuls of eyeshade-wearing human auditors.

The Glostone analysis notes that existing laws that address gas tax revenues would need revision. That’s correct, and I discussed this a few days ago in Getting Technical With the Mileage-Based Road Fee. It’s very easy to do. Model legislation would provide a template for legislatures.

The Glostone analysis claims that a mileage-based road fee “could reward users or increase purchases of less efficient vehicles while monetarily punishing drivers of energy-efficient cars by leveling similar charges for all drivers, weakening incentives to buy energy-efficient electric and hybrid cars.” If the mileage-based road fee was designed in that fashion, that would be the outcome, and it would be foolish. One of the advantages of the mileage-based road fee is that the tracking device can be calibrated to the weight, energy efficiency, pollution output, and similar characteristics of the vehicle. It obtains this information because it is plugged into the vehicle’s OBD port.

The Glostone analysis points out that “Some drivers in rural areas worry may have to pay more because they drive farther between destinations than do urban drivers. They argue that while they do drive greater distances on the roads, they drive at faster speeds that are more fuel-efficient.” The response is simple. The longer the road, the more expensive it is to build and maintain. The tracking device, as I pointed out, can and should be calibrated to adjust for the higher fuel efficiency. Even under the existing fuel tax, drivers who drive more miles pay more tax because they use more fuel. Thus, the mileage-based road fee isn’t disadvantaging them in that manner.

Finally, the Glostone analysis reminds us that “these on-board distance tracking devices may be vulnerable to tampering.” I also addressed this concern in Is the Mileage-Based Road Fee a Threat to Privacy?, again addressing the Adam Brandon editorial:

Brandon also poses an interesting concern. He predicts that some people, in an attempt to avoid paying the fee, would tamper with the device. Or at least would try. He’s correct, because it is unquestionable that people exist who want something for nothing and want road use for free. The answer is not to ditch the proposal, for the same reason people don’t stop buying houses because burglars exist. The response is to create a device that is as tamper-proof as possible, and to provide for serious penalties for those caught trying to tamper with the device. But when Brandon tries to explain why the possibility of tampering demonstrates what he sees as the inadvisability of the proposal, he makes an awkward assertion. Brandon claims, “Do we really own our own cars if we are not allowed to modify them?” The answer is yes. Under current law, it is illegal to tamper with odometers, certain safety features, catalytic converters, and some other items. Adding the mileage-based road fee device to the list does not make the owner of the vehicle any less an owner.

The Glostone analysis closes by arguing that “the debate needs to continue,” that “technology needs to advance,” that “an increase in funding for infrastructure cannot wait,” that “something will change,” and that “we all need to educate ourselves.” It also claims that there “is no simple, cost efficient answer that is available with today’s technology and social climate.” I disagree in part. The technology exists, and it is cost efficient. As for the social climate, perhaps a few more bridge and tunnel collapses and a surge in damage, injuries, and deaths from potholes, badly marked highway lanes, and other existing problems will bring about social climate change. As the Glostone analysis puts it, “In all likelihood, the answer will be a long term conversion process that starts with what can be done today (tax increase) and move towards a VMT as technology improves and social attitudes change.” I happen to think the time frame will be much shorter than long term. I give it three to five years.

In their new book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them PayEmmanuel Saez and Gabriel Zucman demonstrate that in 2018, the average federal income tax rate on capital was less than the average federal income tax rate on wages. That hasn’t happened for at least 100 years. I’m confident that it has never happened in the history of the federal income tax, because one of the chief purposes of that tax was to moderate the income and wealth inequality of the 1890s that caused so much disruption to the nation’s economy.

For the past 38 years, average federal income tax rates on capital have been dropping, and those on wages and self-employment income have been rising. Though the former have been higher than the latter throughout the past century-plus, they changed places in 2018. The reason is simple to identify. It was that ill-advised tax cut legislation of 2017. Proponents of that legislation claimed that it would fuel tremendous increases in business investment. That hasn’t happened. They claimed that wages would increase to levels necessary for workers to pay for the necessities of life. With the average bonus increasing between 2017 and 2018 by a penny, and with more workers needing to take on a second or third job to succeed, the promises of those who have continued to preach supply-side trickle-down nonsense were, as usual, quite false.

In their book, Saez and Zucman challenge the theory that tax rates on capital should be low, even zero. Advocates of special low and zero tax rates on capital claim that by lowering or eliminating taxes on capital, owners of capital have more resources to hire more workers and increase worker pay. Of course, that hasn’t happened. Instead, the tax cuts handed out to the owners of capital, particularly large corporations and wealthy individuals, were stashed or used to pay dividends or buy back stock. And of course, this process compounds the growth of capital, enlarging the income and wealth inequality gaps.

So why don’t tax cuts for the owners of capital create jobs? I answered that question many times, most recently in in Tax Cuts for Employers Do Not Create Jobs:

Whether it’s an existing business paying less tax or a new business writing off capital expenditures, those folks are not going to hire people unless they have something for those people to do. To have something for those people to do, those businesses, whether existing or start-up, need to sell goods and services. To sell goods and services, these businesses need customers. To have customers, these businesses need a vast consumer class that can afford to make those purchases. The proposed legislation [the 2017 tax cut deal] gives some of the consumer class a few dollars and actually raises taxes on another portion of the consumer class, thus reducing their purchasing power. Aside from that deep flaw, why would companies spend $1,000,000 on a piece of equipment in order to reduce taxes by $200,000? Why deplete those huge cash reserves by $800,000 if the equipment isn’t needed because there’s no one to purchase the goods it makes or the services it provides? Talk about voodoo economics.

So it’s no surprise that wealth inequality is growing at an alarmingly dangerous rate.

Aside from the question of whether taxes should have been cut when there is a budget deficit, if taxes were to be cut, the question of how those cuts should have been directed was answered incorrectly. Putting into the hands of the bottom 90 percent the unneeded tax breaks that were handed to the large corporations and top one percent of individuals would have caused an upsurge in true economic demand, required owners of capital to hire more workers, and increased tax revenues to offset the budget impact of the cuts. That’s called demand-side economics, and it works. It’s time to put supply-side economics in the rubbish bin of history.

For many years, I have explained, defended, and advocated for the mileage-based road fee, 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. When it comes time for Congress or a state legislature to consider enacting the fee, a variety of arguments will be presented on both sides of the proposition. But in addition to the hurdle of overcoming opposition, advocates of the mileage-based road fee need to pay attention to collateral and technical issues. Reader Morris brought my attention to an issue that exists in Washington State, described in this Tacoma, Washington, News Tribune article.

The state of Washington has completed a year-long trial project in which 2,000 volunteers tracked their mileage to determine what impact a mileage-based road fee would have on their finances. I have been participating in a similar study involving motorists in the I-95 corridor. I’ll write about that in the future when the study is completed.

Washington State’s Constitution contains an interesting provision, one that might exist in other states though I haven’t tried to research 50 state constitutions to find out. The 18th amendment to the Washington Constitution provides:

All fees collected by the State of Washington as license fees for motor vehicles and all excise taxes collected by the State of Washington on the sale, distribution or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes. Such highway purposes shall be construed to include the following:

(a) The necessary operating, engineering and legal expenses connected with the administration of public highways, county roads and city streets;

(b) The construction, reconstruction, maintenance, repair, and betterment of public highways, county roads, bridges and city streets; including the cost and expense of (1) acquisition of rights-of-way, (2) installing, maintaining and operating traffic signs and signal lights, (3) policing by the state of public highways, (4) operation of movable span bridges, (5) operation of ferries which are a part of any public highway, county road, or city street;

(c) The payment or refunding of any obligation of the State of Washington, or any political subdivision thereof, for which any of the revenues described in section 1 may have been legally pledged prior to the effective date of this act;

(d) Refunds authorized by law for taxes paid on motor vehicle fuels;

(e) The cost of collection of any revenues described in this section:

Provided, That this section shall not be construed to include revenue from general or special taxes or excises not levied primarily for highway purposes, or apply to vehicle operator's license fees or any excise tax imposed on motor vehicles or the use thereof in lieu of a property tax thereon, or fees for certificates of ownership of motor vehicles.

Washington courts have held expenditures for the following purposes to be within the scope of the amendment: construction of park-and-ride facilities, repayment of bonds issued to finance the building of a highway bridge, valuation of highway property in advance of transfer or lease of highway land, refunds of the gasoline tax for fuel used for off-highway purposes. The courts have held expenditures for the following purposes to violate the amendment: financing a public transportation system, relocating utilities if the relocation does not directly or indirectly benefit the highway system, paying tort judgments. Interestingly, in State Ex Rel. O'Connell v. Slavin, 75 Wash.2d 554, 452 P.2d 943 (1969), the Washington Supreme Court rejected the argument that financing public transportation was a permissible use of the funds because it would reduce congestion and wear-and-tear on highways, explaining that this reasoning would entitle private bus companies to claim monies from the highway fund.

The overriding issue is not one restricted to the use of revenues generated by a mileage-based road fee. It is an issue that affects every tax or user fee enacted by a legislature other than, perhaps, taxes destined for a “general fund.” To make certain that the revenues from a mileage-based road fee are not diverted as has happened with gasoline tax revenues and other user fee revenues, those drafting the implementing legislation must be certain to restrict the uses of those revenues. For Washington state, and other jurisdictions with similar restrictive language, the concern is that the 18th amendment does not apply to mileage-based road fees. That means an amendment to the amendment is necessary, though perhaps the same outcome could be accomplished by inserting expenditure restrictions into the enacting statute. I don’t know Washington constitutional law well enough to conclude what specifically would need to be done. As the writer of the News Tribune article put it, “State lawmakers, therefore, shouldn’t mess around with a mileage tax unless they have a parallel discussion about preserving the original intent of the gas tax.” I totally agree.

Reader Morris directed my attention to a commentary criticizing the proposal in Connecticut to use a portion of proposed highway tolls to fund improvements and additions to trains. A similar issue has arisen in California, according to this report, where the governor wants to use some of the state’s gas tax revenues to improve and add train service. In Pennsylvania, portions of turnpike tolls have been diverted to other uses.

The writer of the Connecticut commentary argues that if a toll is used for something other than the highway for which it is charged, it no longer is a user fee but a tax. People can agree or disagree with that position, but to me, it makes no difference what the charge is called. Though it might appear that the anti-tax crowd would object to the charge if it were a tax or called a tax but not if it were a user fee, the reality is that the anti-tax crowd objects to any charges made by a government or government agency no matter its name or what it is called.

Readers of MauledAgain know that I oppose shifting user fee revenue, such as tolls, from the maintenance, repair, expansion, or other benefit to that for which the user fee is being paid. I have written about this issue in posts such as Soccer Franchise Socks It to Bridge Users, Bridge Motorists Easy Mark for Inflated User Fees, Restricting Bridge Tolls to Bridge Care, Don't They Ever Learn? They're At It Again, A Failed Case for Bridge Toll Diversions, DRPA Reform Bandwagon: Finally Gathering Momentum, When User Fee Diversion Smacks of Private Inurement, Toll Increases Ought Not Finance Free Rides, Infrastructure, Tolls, Barns, Jackasses, and Carpenters, and Using Tolls to Fund Other Projects.

The question, in the case of the Connecticut and California situations, is whether use of highway tolls or gas tax revenues to fund train service is a use unrelated to the purpose for which the toll or tax is collected. Infrastructure, Tolls, Barns, Jackasses, and Carpenters, I wrote, “
One question was very telling. Someone asked, ‘Why should I pay for someone else to ride the train?’ The article doesn’t disclose the answer, or if there was an answer. But the answer is simple. The toll not only purchases an improved road, it purchases space on the improved road by making train use economically efficient and attractive to someone who would otherwise be using the road, but who would give up road use if train use was economically more desirable. That’s a far different matter than paying a toll to fund unrelated projects.”

In Revenue Problems With A User Fee Solution Crying for Attention, I described the problems arising from using turnpike tolls for other purposes:

[A] Philadelphia Inquirer report behind a paywall except for a limited number of free accesses, explores the diversion of Pennsylvania Turnpike toll revenue to other uses. This is a serious issue because the Turnpike Authority is on the verge of “financial collapse.” A significant amount of Turnpike tolls are channeled to repair and maintenance of toll-free roads throughout the state. How did this happen? More than a decade ago, in an effort to deal with the bad condition of I-80, which gets heavy east-west truck use as an alternative to the Turnpike, the legislature proposed using Turnpike funds to repair I-80 and to reimburse the Turnpike with funds raised by making I-80 a toll road. However, federal authorities blocked the imposition of tolls on I-80. That is one reason Turnpike tolls have been increased each year for the past 10 years, after a long period of occasional toll increases. Turnpike tolls also are channeled to public transit, raising the same sort of debate, objections, and responses as have been ongoing with respect to federal fuel tax revenue use. Litigation is underway, filed by an interstate trucking group who object to paying tolls for anything other than Turnpike maintenance. To the extent that public transit in Pennsylvania urban, suburban, and even rural areas removes traffic from the Turnpike, the plaintiffs in the litigation benefit from less congestion. The question is how to measure that benefit in dollar terms. But why should Turnpike users pay for the maintenance of toll-free highways that they are not using?

The answer to that question is that using turnpike tolls to shift traffic to nearby roads by improving those roads in order to alleviate congestion on the turnpike or to make access to and from the turnpike easier falls within the scope of giving turnpike users something in exchange for the tolls they pay. That is far different from using bridge tolls to fund a soccer stadium, a mis-use of user fees I criticized in posts such as Soccer Franchise Socks It to Bridge Users, Bridge Motorists Easy Mark for Inflated User Fees, Restricting Bridge Tolls to Bridge Care, Don't They Ever Learn? They're At It Again, A Failed Case for Bridge Toll Diversions, DRPA Reform Bandwagon: Finally Gathering Momentum, When User Fee Diversion Smacks of Private Inurement, and Toll Increases Ought Not Finance Free Rides.

So what should highway user fees, whether tolls or gasoline “tax” revenues, be used to fund? In User Fees and Costs, I explained:

The toll should be based on the cost of building, expanding, improving, repairing, maintaining, policing, and monitoring the road. It isn't difficult for a cost accountant to determine how much it costs to operate the New Jersey Turnpike, the Garden State Parkway, or any other toll road. Tolls should be increased as costs increase, and though it is preferable to recalculate the cost each year, it might be easier to use some sort of inflation index and do the cost recalculation every four or five years. . . .

. . . The analysis I support is one that looks at the impact of the toll road and its use on surrounding residents, neighborhoods, and infrastructure. Traffic volume surrounding a toll road interchange is higher than it otherwise would be, and that generates additional costs for the local government. It makes sense to include in the toll an amount that offsets the cost of widening adjacent highways, installing traffic signals, increasing the size of the local police force, adding resources to local emergency service units, and similar expenses of having a toll road in one's backyard. I understand the argument that because the locality benefits economically from the existence of the toll road and its interchange that it ought not be subsidized by the toll road. It is unclear, though, whether the toll road is a net benefit or disadvantage. If it were such a wonderful thing, why are new roads so vehemently opposed by so many towns and civic organizations?

Using toll revenue to maintain and repair roads and infrastructure far from the toll road is more difficult to justify. Other than relying on arguments such as the maintenance of a high quality state-wide road network that would attract more tourists and business ventures, proponents of siphoning toll revenue to distant areas have a, sorry, tough road to hoe. A better approach would be to impose tolls on heavily used roads in those distant areas.

I reiterated this analysis, more succinctly, in Timing, Quantifying, and Allocating User Fees, by explaining, “Tolls should be used to pay for the costs of building, repairing, maintaining, and operating the toll road, and to defray the economic burden that the road imposes on the surrounding neighborhoods. Tolls should not be used for programs unrelated to the road.”

So, ultimately, the issue isn’t whether the toll is a user fee or tax, or whether the gasoline tax is a tax or user fee. Though I think both are properly classified as user fees, the issue, to me, is the expenditure side of the equation. To what purposes are the revenues from the user fee being put? When it comes to trains that alleviate congestion and wear and tear on the tolled highway, I consider that to be acceptable. Using revenues for train service distant from the tolled highway are just as indefensible as using revenues to fund a soccer stadium.

Sometimes months go by from when I see a television court show involving taxes. Sometimes it’s a day or two. Just two days after the last television court show that inspired a MauledAgain post, along comes another. It joins the list of episodes that have been the subject of previous commentaries, including 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, When Tax Return Preparation Just Isn’t Enough, Fighting Over Tax Dependents When There Is No Evidence, and If It’s Not Your Tax Refund, You Cannot Keep the Money.

This latest drama was aired on episode 56 of season 5 of Hot Bench. The plaintiff and defendant had been engaged, but they broke off the engagement. While they were engaged, the defendant was the primary, and usually only, income earner. The plaintiff took care of the children, including one of her own that was not the defendant’s child. The plaintiff claimed that there was an agreement between her and the defendant, under which the defendant promised to give her half of his tax refund for the year in issue, which was the year before they broke up. The reason, according to the plaintiff, was that the defendant claimed the plaintiff’s daughter on his tax return as a dependent. The agreement was not in writing, and the plaintiff attempted to prove its existence by asserting that there was a past pattern of the defendant giving her some amount of his tax refund.

The defendant denied that he had agreed to give the plaintiff one-half of his tax refund for the year in question, which amounted to $10,000. The defendant admitted that he had given some of his tax refund to the plaintiff from time to time when they were a couple. He explained that his refunds usually were about three or four thousand dollars, and that he gave the plaintiff an arbitrary portion of each refund. The plaintiff countered with a claim that she received $1,300 each year from the defendant out of his tax refund, though she stated that on one occasion she received $1,500.

When asked by one of the judges if there was a family court decision dealing with child support, both parties answered that there was not. Further inquiry determined that the defendant’s tax refund had been garnished for other reasons, and that he had told the plaintiff he could not pay her anything. He also claimed he did not owe her anything. He admitted that if the refund had not been garnished he might have given her $1,300.

The court held that the defendant had no legal obligation under any agreement to pay any portion of his tax refund to the plaintiff. However, the court also determined that based on the parties’ prior course of dealing, and the defendant’s statement that but for the garnishment he might have given the plaintiff $1,300, the plaintiff should receive $1,300 from the defendant, because the refund arose from a tax return for a year during which the plaintiff and defendant were engaged.

The court then admonished the parties to get their situation resolved in one or both of two ways. First, they should work out an agreement drafted with professional assistance. Second, they could go to family court to get matters settled.

The court’s advice is excellent. Unfortunately, the court’s opportunity to give this advice arose after the dispute arose. The two parties would have benefitted from this advice at the outset, but at that stage of their relationship courts would not be involved. So advice to couples who are in relationships deep enough to involve financial matters is necessary, though most such couples don’t get that advice. Here it is. They need to enter into a formal agreement, preferably with professional assistance, before things deteriorate, even if at that stage of the relationship they are convinced things never will deteriorate. Anyone who enters into an arrangement with another person concerning that other person’s receipt of a tax refund and promise to pay some or all of it, whether or not in any sort of serious relationship, would be acting most prudently if insisting on getting that agreement in writing.