MauledAgain

Reader Morris picked up on a related story. According to this report, radio personality Moira, legally Lynn Dictor, is running for the office of tax collector in Seminole County. The story inspired reader Morris to ask me, “What qualifications do you need to be a tax collector?” He also observed, “It would appear anyone would be better than the previous Seminole county tax collector.”

The short answer to his question is, “It depends.” The duties and responsibilities of tax collector depends on the language of the statute or ordinance that creates the position. In Seminole County, according to the Seminole County Tax Collector web site, the tax collector issues certified copies of birth certificates, collects the county local business tax and issues receipts for payment of those taxes, serves as agent for “performing limited permit application processing functions” for concealed weapons permits, handles title, education, and other services for vehicle dealers, provides most driving license services for county residents, sells hunting, fishing, and related licenses and permits, maintains records for those licenses and permits, and collects property taxes. In contrast, in New Jersey, according to state rules, municipal tax collectors computes and bills taxpayers, cooperates with the assessor, the board of taxation, and other financial authorities, designs and implements efficient methods of issuing bills, has a working knowledge of property tax exemptions, abatements, and deductions, and electronic data processing of tax rolls and tax billing, receives and accounts for payments of taxes, ensures proper disposition of collected funds, maintains detailed accounting records, processes electronic data related to collections, initiates and implements enforcement, assists in foreclosures, provides reports to the governing body and appropriate municipal officials, ensures compliance with all statutes, rules, regulations, and directives pertaining to municipal tax collection, and may be assigned certain secondary duties such as, but not limited to, tax search officer, collector of utility accounts, municipal treasurer, and treasurer of school monies. In New Jersey, tax collectors are not involved with issuing birth certificates or concealed weapons permits, and is not involved in supervising vehicle dealers apart from taxes. Both Florida and New Jersey, and presumably other states, have specific, detailed requirements for certification as a tax collector that relate to the skills and knowledge necessary to carry out the specified duties. In New Jersey, the qualifications include successful completion of courses though it appears this need not be done until the collector is elected or appointed. It seems a similar provision applies in Florida. Thus, running for office does not require having any specific qualifications, though winning election subjects the successful candidate to the education and other requirements.

As for reader Morris’ observation that “anyone would be better than the previous Seminole county tax collector,” I note that as bad as things seem to be, they can always get worse. Life is full of stories about people hitting rock bottom only to have the bottom fall out. I can imagine tax collector behavior even worse than what has been alleged against the former Seminole County tax collector, but I will refrain from putting ideas of this sort into people’s heads. Yes, it could be worse though the chances of that are very slim, and with any luck, things will get better for the people of Seminole County when it comes to the tax collector.

A few days ago, up popped a re-run of a Judge Judy episode, specifically season 25, episode 10, from earlier this year. It probably aired originally on a day that I was teaching or otherwise occupied. It was a contract case, and I was not expecting the focus on tax that developed.

The plaintiff had hired the defendant, a tutor, to assist her two children with their academic studies. The defendant is a tutor by profession, with roughly 25 clients for whom he renders tutoring services each week. In March of the academic year in question, the defendant sent a letter to his clients, indicating that he was going to reduce his tutoring activities. However, he explained that he was still in school, that school was expensive, and that he would appreciate a donation of $3,000 from each client as a thank-you for having tutored their children. He promised that for any client who transferred $3,000 to him, he would continue to tutor their children.

The plaintiff testified that she received the letter and thereafter had a conversation with the defendant about the letter. She agreed to pay him $3,000 in exchange for his agreement to tutor one of her children until that child’s graduation. The graduation was in the following year. The defendant argued that by “graduation,” he meant the end of the current academic year. That is when he stopped tutoring, after engaging in five one-hour tutoring sessions with the plaintiff’s child. The plaintiff sued for return of $2,500, based on the defendant’s $100-per-hour fee.

Early in the proceedings, as the plaintiff was describing the situation, Judge Judy asked her, “Did you 1099 the defendant?” After explaining what she meant by that, namely, sending a Form 1099 to the IRS for both the previous tutoring payments and the later $3,000 amount, the plaintiff replied, “No.” Judge Judy then asked the defendant how much income he had reported on his income tax return for the year. He replied with a number a little bit in excess of $42,000. The testimony had already revealed that the defendant had an hourly rate of $100 sometimes discounted to $90, and that he tutored roughly 25 clients per week for an hour each. Using these numbers, Judge Judy determined that his income would be at least $112,500, assuming he tutored 50 weeks a year. The defendant and Judge Judy went back and forth on the appropriate number of weeks, with the defendant pointing out that he did not tutor during the summer and during school breaks. Judge Judy finally decided that 39 weeks was a more appropriate figure, and concluded that his income was at least $80,000.

So why was this discussion of Forms 1099 and the defendant’s tax return relevant. Judge Judy explained that she asked these questions “to know who I am dealing with.” After holding that the plaintiff was entitled to a $2,500 refund from the defendant, Judge Judy repeated what she had earlier mentioned, specifically addressing the defendant with these words: “Cross your fingers that the IRS is not watching.”

Though there are complex rules about the introduction of tax returns into evidence in a case that is not a tax case, in this instance tax returns were not introduced. Instead, Judge Judy simply asked the defendant for one piece of information from his tax return. She formed an opinion about him, not by questioning the truthfulness of his answer, as there was no basis to know what actually was reported on the return, but by estimating what he should have reported. That estimate may or many not have been within range of reality, but unless the defendant was overstating the amount of tutoring he did or what he charged, there seemed to be a discrepancy big enough to cause Judge Judy to consider the defendant someone of questionable character. It would have been interesting to observe this case tried in a different venue with lawyers representing the parties, to see if the line of questioning would have been pursued, to see if an objection would be raised, and, if so, to see what the ruling on the objection would be.

Of course, we will never know if the IRS, or more accurately, someone working for the IRS, watched the episode. And we will never know if the defendant was audited or, if he was, what the outcome of the audit turned out to be. But we do know that we never know when what was done on a tax return will be the subject of some sort of inquiry.

Now comes news that the Administration has cancelled the tariff, not quite a month after they went into effect. It claimed that the reason for the cancellation was a return of Canadian imports to normal, yet that was the case back in August when the tariff went into effect. The more likely reason was the realization, by someone with the capacity to see the bigger picture, that Canada’s retaliation would be damaging to American jobs. Of course, the realization might be a narrower perception, namely, that the loss of even more American jobs because of an ill-advised tariff is unwelcome as an election approaches.

Canadian officials took pains to emphasize that, contrary to Administration statements suggesting otherwise, Canada had not negotiated the cancellation of the tariff nor had it agreed to conditions that the Administration stated it expected of Canada. Nowhere has anyone apologized for an unwise decision that was the opposite of what the Administration advertised.

This sort of “deal making” demonstrates that headlines and tweets mean more to the President than does substance, in the same vein that peace agreements between countries that have never been at war is all bluster and disguise. Hailed as a triumph for American workers, the tariff is nothing more than a menace to American workers. Again I ask, how many people complaining or worrying about their economic situation, their health challenges, and their safety will take the time to understand what actually is happening?

Six cents? How does this happen? The story doesn’t answer my question.

What the stories tell us is that somehow a 90-year-old woman suffering from Alzheimer’s disease came up six cents short on her 2019 real estate taxes. Somehow, with interest and administrative costs, her debt grew to $300.

The town put the woman’s house on the market, on the same day the woman’s daughter learned what had been happening. The daughter noted that even if her mother knew about the six cents, she probably would have quickly forgotten. Though the town’s tax collector had spoken with the woman and realized that something was wrong because she wasn’t understanding the problem, the town moved forward with the planned tax sale. After contacting everyone in the town’s government, the daughter received a response from the mayor, who stated, "Naturally it's really embarrassing the town would put someone's home up for sale over six cents. It's silly." The mayor admitted that “the system needs fixing.” The system, he explained, “is all computer-generated, not something that a human can correct.” It was only a movie, but it’s becoming real: “Open the pod bay doors, please, HAL. Open the pod bay doors, please, HAL.” Seriously, nice programming. End sarcasm. The daughter wondered why no one in the tax collection office could figure out how to come up with six cents in order to prevent the tax sale mandated by state law from being triggered. The daughter paid the tax bill and the house was taken off the market.

Two things make the story even more disturbing. The woman had enough money to pay the six cents. The woman now doesn’t remember or understand that the house won’t be sold, and is calling her daughter almost constantly asking if her house is going to be sold, if she needs to pack, if she will find a place to live.

So here is my question. Why aren’t the real estate taxes in that town, or in New Jersey, rounded down, or down and up? The IRS, for example, permits taxpayers to round amounts to the nearest whole dollar. Pennsylvania requires rounding. As explained, for example, in the instructions to form PA-40, “On the PA-40 form and schedules, show money amounts in wholedollars. Eliminate any amount less than $0.50 and increase any amount that is $0.50 or more to the next highest dollar.” If the woman’s tax bill in the New Jersey story had been rounded, it would have been rounded to zero. That would have prevented the attempted tax sale, the time invested by the daughter making phone calls, and the anxiety endured by the woman and her daughter. Perhaps some good will come out of this story and New Jersey and the town will fix the problem before another person gets snagged by the broken system.

Now comes another press release from the Department of Justice describing a guilty plea in response to yet another indictment of a tax return preparer. The preparer was arrested and charged by criminal complaint rather than indictment. That might be the reason I was unaware of the case, or perhaps it’s because I didn’t notice any press releases about the criminal complaint.

This time, it is a former IRS employee charged with aiding and assisting the preparation and filing of at least 70 false tax returns for herself and others. The preparer has pleaded guilty to four counts of aiding and assisting the filing of a false tax return and four counts of filing a fraudulent tax return by an employee of the United States. The preparer was an IRS employee for more than 22 years, serving as a Lead Contact Representative. A Lead Contact Representative assists other IRS employees who are trying to resolve difficult and complex questions from taxpayers. During those 22 plus years, the preparer was given training in tax law, ethics, information protection and disclosure, privacy, identity theft, and identity protection.

From 2012 through 2018, the preparer electronically filed more than 500 tax returns for herself and other taxpayers. She did so in violation of IRS rules that prohibit employees from “Engaging in the preparation of tax returns for compensation, gift, or favor.” In pleading guilty, the preparer admitted that between approximately February 2012 and April 2018, she prepared or assisted in preparing and filing of at least 70 tax returns for herself and others that she knew contained materially false items such as false individual retirement account deductions, false medical expenses, false and inflated unreimbursed business expenses, false tax preparation fees, and false child and dependent care credits.

Someone seeking assistance in preparing and filing a tax return might find it tempting to get help from a friend or relative who works for the IRS. The temptation finds strength not only in the assumption that an IRS employee understands tax law – many do but not all IRS employees deal with taxes – but also on the assumption that an IRS employee has some sort of insight into how to file a return that is highly beneficial to the taxpayer and in a manner that reduces or eliminates the risk of audit. That’s a temptation deserving of nothing but complete rejection. It never occurred to me, until now, to suggest that taxpayers ask their potential preparers if they are current IRS employees. If the answer is yes, stop and go find someone else. On the other hand, if the person is a former IRS employee, they can offer expertise and experience that is helpful. The distinction matters, so it is best to do some background checks and research just as one would do when looking for a physician or roofer.

About a month later, in Perhaps Yet Another Reason Not to Run for Tax Collector, I reacted to another story about the same tax collector. Additional federal charges were brought, accusing him of using information from surrendered drivers’ licenses to manufacture fake IDs with his picture on it. After this indictment was handed down, he resigned his office.

A month after that, in Running for Tax Collector (or Any Other Office)? Don’t Do These Things, I shared my thoughts on yet more news about the same tax collector. In a superseding federal indictment, was been charged with sex trafficking a minor. According to the indictment, he was able to get “personal information from motor vehicle records to engage in commercial sex acts and accessed personal information to engage in ‘sugar daddy’ relationships, including with someone who was between the ages of 14 and 18.” The tax collector’s attorney said that his client denies the charges.

Two days ago, in When Behaving Badly as a Tax Collector Gets Even WorseI wrote about still more news about the same tax collector. According to the story, six women who worked for him at the tax collector’s office settled lawsuits and complaints against the Tax Collector’s Office, based on allegations of sexual harassment, racial discrimination, and First Amendment violations. Shortly after I wrote Monday’s post, reader Morris sent me a link to the same story published by another news outlet. I let him know that I had seen the story and that my commentary would appear on Monday. Soon thereafter, reader Morris sent me a link to yet another story about the same tax collector. Somehow I missed this story, which was published about a month ago. According to the story, Seminole County records reveal that the tax collector spent more than $65,000 in county funds to purchase computer servers for a blockchain company that he had formed. Eventually he repaid the county, at about the time the Tax Collector’s Office retained an attorney to represent it in one of the criminal investigations underway with respect to the tax collector’s activities. At this point the County undertook a forensic audit and discovered that the tax collector had funneled roughly $3.5 million to friends and associates through consulting contracts and employment. The tax collector, who has been charged with using information from surrendered drivers’ licenses to manufacture fake IDs and using motor vehicle records to engage in commercial sex acts, planned to use his private blockchain company to take information from property tax records, tax payments, and drivers’ licenses onto a blockchain to start a digital ID arrangement. The tax collector had a private business partner in his enterprise, and he caused the Tax Collector’s Office to hire that partner as blockchain advocate and legislative affairs director drawing a taxpayer-funded salary. The tax collector referred to these allegations with a word describing excrement from a bull, and launched into criticism of the federal government and its “all out assault on anyone that attempts to embrace crypto and change the way our financial system is set up.” I suspect that when people voted for this fellow they did not know what he had been doing and what he would end up doing. Perhaps close investigation, analysis, and critical thinking would have revealed something. Perhaps not. But I fear that even if it did, too many people would simply see the candidate’s party affiliation and pull the lever or push the button or check the box or do whatever was necessary to put the candidate into office despite the red flags. That has happened with the nation’s highest office so it’s likely that it would have happened with a minor office such as tax collector even if the electorate knew what was happening. There’s ignorance and there’s willful disregard of information. Both are dangerous. Both put people at risk. Both threaten democratic (lower case “d”) values. Both are a sorry testament to the deterioration of this nation.

About a month later, in Perhaps Yet Another Reason Not to Run for Tax Collector, I reacted to another story about the same tax collector. Additional federal charges were brought, accusing him of using information from surrendered drivers’ licenses to manufacture fake IDs with his picture on it. After this indictment was handed down, he resigned his office.

A month after that, in Running for Tax Collector (or Any Other Office)? Don’t Do These Things, I shared my thoughts on yet more news about the same tax collector. In a superseding federal indictment, was been charged with sex trafficking a minor. According to the indictment, he was able to get “personal information from motor vehicle records to engage in commercial sex acts and accessed personal information to engage in ‘sugar daddy’ relationships, including with someone who was between the ages of 14 and 18.” The tax collector’s attorney said that his client denies the charges.

Another month has gone by, and yes, there is still more news about the same tax collector. According to the story, six women who worked for him at the tax collector’s office have settled lawsuits and complaints against the Tax Collector’s Office. Those lawsuits and complaints were based on allegations of sexual harassment, racial discrimination, and First Amendment violations. Though the settlements took place over the past 10 months, information about them only recently began to appear. The allegations, based on testimony from the women and from witnesses, include the use of racial epithets, discrimination against women of color, dismissals in violation of state law based on campaigning for the tax collector’s primary election opponent, failure to discipline other employees for making inappropriate sexual jokes and comments, social media posts denigrating a Muslim employee, and firing that employee after she filed a complaint.

Not surprisingly, the Tax Collector’s Office denied the allegations and claimed that the employees who were dismissed were terminated for legitimate business reasons. At least one case settled not because the Tax Collector’s Office wanted to dispose of the matter quietly, but because the plaintiff decided, after learning of the tax collector’s resignation, that “it was in the best interest of the Tax Collector’s Office and the residents of Seminole County” that the case be settled rather than become the focus of a “public spectacle.”

The amounts paid by the Tax Collector’s Office to settle the lawsuits and complaints are taken from a county self-insurance account, which is funded by taxpayers. There is something a bit disturbing about a tax collector collecting taxes, some of which go into a fund used to compensate employees of the office who claim to have been mistreated one way or another by that same tax collector.

There will be more to this story. The tax collector has pleaded not guilty to all of the criminal charges filed against him. His trial is set for early next year. In my earlier posts on the situation, I lamented the “lies, ignorance, dirty tricks, altered images, fake videos, and false allegations permeating political campaigns,” and how it deters decent people from running for office, including that of tax collector. In my last commentary, I wrote:

It remains to be seen if the former Florida tax collector is convicted or acquitted. Perhaps he will take a plea. No matter how this plays out, it won’t be good. If he is convicted or takes a plea, it will, in the minds of many people, reinforce their belief that “all politicians are corrupt.” If he is acquitted, he nonetheless has suffered and yet another instance of false accusations polluting the system will have accomplished what its perpetrators sought, as it would not be easy for him to repair the damage.

Perhaps all of this will encourage voters to do more research rather than blindly voting for candidates of a particular party. Perhaps one day every voter in this country will register as an independent. That would make the Founders happy, but that’s a discussion for others to continue.

The chart consisted of these words and numbers:

Corporate Taxes
Trump: 21.0%
Biden: 28.0%
Income and Payroll Taxes
Trump: 37.0%
Biden: 52.0%*
Small-Business Taxes
Trump: 29.6%
Biden: 39.6%
Capital Gains and Dividend Taxes
Trump: 23.8%
Biden: 43.4%

Having looked at Biden’s tax proposals, I immediately realized that the chart was misleading, oversimplified, and in its present form, frightening to anyone who hasn’t done serious examination of Biden’s tax proposals. In the text, Moss puts a notation, “Keep in mind, these figures are for the highest or maximum tax bracket for each of the four categories. What you ultimately pay is your effective tax rate, a blend of the different tax brackets ratcheting higher as income moves higher. Of course, effective tax rates are unique to each person’s individual tax situation, and I thought it would be helpful to look at the new proposed highest brackets where there’s the potential for the most change.” The problem is that the folks putting a circle around the chart and circulating it are focusing only on the chart, and the people who look at social media posts in which the chart appears will focus on the chart, unless they are like me and already understand the misleading nature of the chart. That means most people will look at the chart, think that they are going to be hit with big tax increases under the Biden proposals, and retweet or forward the chart to others. This is how misinformation goes viral.

There would have been much less panic, much less re-posting, and much less circulation of the chart had it been captioned. If the top of the chart contained the legend, “What Happens to Rich People Under Biden’s Tax Proposals,” then most people would have thought, “This doesn’t affect me.” But, of course, there’s much more publicity if something gets a high amount of re-circulation, so leaving the chart in its indeterminate form works. It’s common knowledge that people’s eyes are drawn to photographs and charts rather than text, so that disclaimers about photographs and charts need to be part of the photograph or chart and not buried in accompanying text that might not even show up adjacent to, or near, the photograph or chart depending on the formatting, especially when the publication is in digital form.

Moss, however, also claims that “Biden’s proposal would affect a very large swath of the American economy and paychecks,” and though he points out that “the largest tax hikes [gp] to high-earning individuals and corporations,” the implication is that everyone gets hit with a tax hike.

Moss claims that raising the corporate rate will “impact” individuals’ “401(k)” plans. Yet fewer than one-third of workers invest in a 401(k) plan, and those that do tend not to be among the Americans suffering the most under the current dysfunctional economy. On top of that, whether increases in the corporate tax rate translate to declines in the value of 401(k) plans is debatable.

When it comes to the proposed payroll tax changes, at least Moss gets it right. He explains that it would affect “business owners who earn a salary of over $400,000 annually” and would affect “high-earning business owners.” In the current crisis, those folks are not suffering, those folks do not need tax relief, and those folks already are awash in a series of tax cuts for the wealthy that have failed to create the promised jobs for those who are suffering from how the current dysfunctional economy favors the wealthy.

Moss claims that Biden plan includes “reducing or eliminating existing tax deductions” for small businesses. What Biden plans to do is to undo the unwise deductions inserted into the tax law in 2017. Even though advertised as good for small business, the bulk of the benefits went to the wealthy, not unlike how loan programs designed to help small businesses funneled money into the bank accounts of large corporations and wealthy individuals. Fixing this mess is not something deserving of lamentation.

The increases in tax rates on capital gains and dividends that Moss dislikes again will impact the wealthy and not the large majority of Americans who struggle to earn income from wages. Again, this is a case of reversing tax giveaways that have benefitted the wealthy and done little or nothing for the people struggling in today’s economy.

Moss drags out the long-disproven but too-often-repeated claim that higher taxes on the wealthy are bad for the economy and that the only way to get the economy to work for everyone is to funnel money into the coffers of the rich. That’s nonsense. What makes the economy work is demand, because demand creates the need for jobs, and attracts investment into goods and services that are needed rather than in overseas shelters, newly-invented financial products, and other gimmicks designed to give the wealthy something to do with their money when they don’t need all of it to buy lobbyists, politicians, and elections. Circulating money into the hands of the poor and middle class is what makes and keeps a nation great. Moss writes, “Resolving the deficit problem will take robust economic growth,” and that “Tax hikes stand only to smother this rebound.” Yet tax hikes that claw back unwise tax cuts and put money into the hands of consumers is what generates economic growth. I have written about supply-side economic policies, most recently in The Illogic of Tax Cuts Based on Supply-Side Theory, which has links to some of my other commentaries on the subject.

Moss points out that over the next ten years the Biden tax proposals would raise $3.5 trillion in revenue. He suggests this is unacceptable. Yet this is nothing more than reversing the flow of trillions of dollars to the wealthy provided by a series of unwise tax giveaways to the rich over the past few decades. Rebalancing the accounts is necessary, and in the long run will benefit everyone, even the wealthy, more than trickle-down nonsense ever did or could.

Moss praises the idea of indexing capital gains by Executive fiat while maintaining special low tax rates on capital gains. Aside from the fact indexing basis requires Congressional legislation, it is a bad idea absent the repeal of special low tax rates for capital gains. In fact, I prefer indexing coupled with the repeal of those special low tax rates for capital gains. I explained why in posts such as Tax Hogs at The Tax Trough, Defending the Indefensible Tax Idea: A Reflection on Tax Policy Ignorance, When Lower Tax Rates Aren’t Enough, and Clamoring for Tax Basis Indexing AND Special Low Rates: Inspired by Greed.

When Moss states that taxes is “one issue coming to the forefront of our nation’s decision-making process,” he is correct. He also is correct that “Tax policy is a hot-button issue in most presidential elections.” What he overlooks is the need for the distribution of accurate and fully informative explanations of competing tax proposals. His fear-inducing chart that has caused people to fear their taxes will increase under Biden’s proposals when, in fact, they will not, does not help the discourse. It fuels emotion over logic. And it totally neglects what the other major candidate’s tax proposals will do to people: while the wealthy wallow in their tax breaks, those dependent on payroll tax revenue will suffer. Sadly, many of the people circulating the chart are the ones most likely to be hurt if the nation does not change its tax course.

Taking some liberties, I have adapted the phrase to describe a similar situation, in which “leaders” act in ways that demonstrates a lack of understanding about what those they are leading want to see happen. In some ways, it is the failure of “leaders” to understand the meaning of “servant leadership,” which is a far nobler way to describe the role and responsibilities of those who are elected or appointed to positions of leadership.

In this instance, I am referring to the silly decision by the current Administration to defer payroll taxes for the rest of 2020, an action I have criticized in posts such as Tax Policy by Dictatorship and Muddying the Tax Waters: When Certain Members of Congress Are Frightened. Many commentators have also explained why this action is unwise, and have pointed out the many technical and logistical challenges presented by an idea that was not well thought through past the theory stage. The practical problems are significant.

Because of the many practical problems presented by this foolish decision, and wary of being held liable for making up the deferred taxes with respect to employees whose employment ends before the employer has a chance to withhold the deferred payroll taxes, many employers are declining to stop withholding the payroll tax. In Thanks, but no: Small businesses shun payroll tax deferral, Joyce M. Rosenberg shares the reaction of company owners who have declined to go along with the current Administration’s desperate attempt to close barn doors after the horses have escaped. Payroll tax deferral, of course, does nothing for the unemployed who are in the most need of help. Employers who care about their employees also worry about the consequences of their workers being slammed with a doubling of their payroll tax withholding in early 2021 when there is no promise that their financial situation will give them capacity to absorb that hit.

One employer noted that the deferral isn’t really a tax break because the “money is still due by April 30” of 2021. He is correct that it is not a tax break, despite the attempt by the current Administration to con people into thinking that this deferral is a “tax break” for the rank-and-file worker. Other employers point out the lack of guidance leaves them at risk of being forced to pay large lump sum amounts to the Treasury. In several states, state law puts employers in dicey situations with respect to cutting take-home pay in 2021 to make up for the omitted withholding. Still other employers wonder if employees have an option of electing into or out of the deferral, whether the decision rests with the employer, or whether an employee or union vote can be binding on all employees. Employers also point out that the administrative effort required to implement a four-month deferral isn’t worth the distraction from the more important long-term planning and operation of their businesses. Anecdotally, some employees don’t want the deferral because they, too, are wary of what the future will bring. A major payroll processing company, which says it is “ready to adjust its computer systems to stop withholding the tax if companies request it,” notes that “so far, there’s little interest” in cutting back the payroll tax withholding.

Perhaps increasing numbers of people are realizing that con game gimmicks are best avoided in the same way emails from alleged Nigerian princes and phone calls from law enforcement imposters should be. Sometimes what appears to be a good thing is only a good thing for the person making the offer and brings nothing but sorrow and devastation to the alleged beneficiary of the gimmick. Hopefully even more people realize that this stunt is just the testing of the waters for a permanent elimination of payroll taxes and the eventual destruction of Social Security and Medicare.

At first reading, it appeared that yet another tax return preparer had been indicted. Indictments of tax return preparers is becoming more frequent, and though I discussed one in 2009 in Tax Fraud Is Not Sacred, there have been three indictments this year that I have described in Another Tax Return Preparation Enterprise Gone Bad, More Tax Return Preparation Gone Bad, and Are They Turning Up the Heat on Tax Return Preparers?.

Curious, I searched and found a local Las Vegas news report that shed more light on the indictment. Bradford is described in the story as a developer, who had recently been involved in developing a property near the Las Vegas Raiders practice facility. The story also noted that he is a certified public accountant. So is he a developer who prepares tax returns? A tax return preparer who got into real estate development? According to this web site, he heads a firm of construction engineers. According to the Relationshipscience web site, he also is president of MVP REIT, Inc., and has served on the board of Vestin Group, Inc., which according to Bloomberg is a real estate fund managing firm that “offers real estate loans for commercial, construction, acquisition and development, land, and residential sectors.” The reference in the news release to “others” suggests that this is a more complicated case than a tax return preparer entering false information on tax returns. How entangled it is remains to be seen. . It does seem, though, that there is yet another reason to think that the IRS and Department of Justice are turning up the heat on tax return preparers.

Reactions to this statement have included denial that he said it, claims that he was referring to the deferred 2020 payroll taxes, claims that if carried out the plan would terminate Social Security, arguments that there are insufficient general fund revenues to make up for the loss of payroll tax revenue, and assertions that repealing the payroll taxes will cause the economy to recover so strongly that the government will be awash in revenues that can be used to replace the lost payroll tax revenue. No one seems to be paying attention to the impact of payroll tax repeal on Medicare, but perhaps someone has and it just hasn’t come to my attention.

Of course he said it. Of course he wasn’t referring to the deferred 2020 payroll taxes. Those claims are attempts by his cronies to walk back a proposal that any sensible, clear-headed, carefully thinking American knows would rip apart an essential fabric of American society. Those claims arise out of fear that voters will react to what might appear to be a premature revelation of true intent.

What about the claim that repealing a tax will generate at least as much, if not, more revenue that the repealed tax generated? It’s just another version of the myth that cutting taxes increases tax revenue by at least the amount of the repealed tax. That hasn’t happened. Would repealing the payroll tax terminate the Social Security program? Technically, no, because, according to the Social Security Administration, there are enough funds in the social security trust funds to continue making payments for roughly another three years. But then what? Does the funding of social security become a political football every year? Does it get held hostage every time Congress cannot agree to a budget? Do payments get suspended every time the government “shuts down”?

As the allegations and denials spread throughout news outlets and social media, two members of Congress wrote a letter to Stephen Goss, Chief Actuary of the Social Security Administration. Charles Grassley, chair of the Senate Finance Committee, and Kevin Brady, ranking member of the House Ways and Means Committee, both Republicans, chastised Goff for “using [his] office for political purposes.” Specifically, they objected to the fact that Goss replied to a question from three Senators asking the Social Security Administration to analyze “hypothetical legislation” that would eliminate the payroll tax. Grassley and Brady argued that the “hypothetical legislation” did not exist because it “has not been proposed by anyone and has never, to our knowledge, been proposed or referred to the Senate Finance Committee or Committee on Ways and Means, at least in modern history." Duh. That’s why it was described as hypothetical and was not a reference, for example, to a pending bill. What’s so terrible about asking for the consequences of legislative action even if no bill has been introduced? Grassley and Brady provide the answer in their letter, “The intention behind the Senators’ inquiry was clear: argue that the President would ‘terminate’ payroll taxes that fund Social Security, leaving the trust funds without that important source of revenue, and then argue that the President and others want to destroy Social Security.” Exactly. The inquiring Senators want the American public to understand the consequences of what the current President has proposed. Waiting until a bill is introduced, after the election, would prevent voters from having information that is critical to their decision making. Though Grassley and Brady are correct that “no one has proposed the legislation” to repeal the payroll taxes, certainly the current President has announced his intention to have someone do so on his behalf if he is re-elected. Because Grassley and Brady are among those with a vested interest in the re-election of the current President, and surely fear the consequences of a different outcome, they are keenly aware that the current President’s proposal, if not deflected or hidden behind smokescreens and mirrors, is damaging to their political agenda.

The letter also contains allegations about previous reports by the Chief Actuary being partisan with respect to issues having nothing to do with the payroll tax proposal. It also suggests that questions could be posed by other “hypothetical legislation” reflecting suggestions made years ago about other aspects of the Social Security program. These deflections do nothing but muddy the tax waters. The innuendo, to use their word, tries to conflate a simple question about an outrageous proposal with other issues raised by the letter writers in an attempt to distract people’s attention with some “whataboutism.” It highlights their anxiety about the damage being done by the revelation of what the current President and his allies and cronies want to do.

Grassley and Brady express annoyance that the response by the Goss to the question “provided fuel for the ensuing misleading political messaging that was the most likely desired outcome of the Senators’ inquiry on their ‘hypothetical.’” Of course. Truth always provides fuel for discourse. Why would Grassley and Brady prefer that the Chief Actuary of the Social Security Administration NOT explain to Americans the consequences of the current President’s proposal? The answer is simple. They do not want people to know the truth if the truth stands in the way of their agenda. They go so far as to claim that the question posed to Goff refers to a proposal that “does not correspond to any proposal by the Administration.” Of course it does. What the current President said is clear and unquestionable. He wants to repeal the payroll taxes. The question posed asked about the consequences of repealing the payroll taxes. Perhaps if Grassley and Brady don’t like the answer, they can ask themselves why they are defending a person whose proposal generates answers they don’t like, and that they know a great number of Americans don’t like. Or perhaps it’s not that they don’t like the answer, but that they fear the consequences of everyone else knowing the answer, and understanding the reality of what the current President plans to do if re-elected.

The order prohibited the reassessment from changing the total revenue raised by each of the affected taxes, which are the county real property tax, the municipality or township real property tax, and the school district real property tax. In other words, the tax RATE would be decreased to the extent the total fair market value of assessed properties INCREASED.

Here is an example. Suppose the total assessment of properties in the taxing jurisdiction before reassessment was $100. Suppose the tax rate was 5 percent. The revenue would be $5. If after the reassessment the total assessment of the properties is $150. To maintain total revenue of $5, the tax rate would be reduced to 3.33 percent.

When the reassessment was announced, and notices published on web sites, mailed to property owners, and discussed in newspaper and other articles, it was made very clear that the tax rate would need to be reduced because the overall assessments were expected to increase. And now that the reassessment is complete, aside from appeals, indeed the total assessment of properties has increased. That was bound to happen, because overall properties had been underassessed compared to fair market value.

Once the reassessment was complete, the county sent each property owner a notice of the new assessment. Technically, the county sent several notices with opportunities for property owners to challenge underlying facts, such as the size of the parcel, the number of bedrooms, and similar characteristics. After that part of the process ended, the county sent the final reassessed value, with provisions for appeal if the property owner disagreed.

It didn't take long for expressions of unhappiness to pop up on neighborhood social media sites. Some property owners complained, paraphrasing, "My assessment went up so my taxes will go up." Several property owners complained about jurisdictions having "extra money" to spend. Despite attempts by others to explain the reality, some people continued to argue that the explanations were not true facts.

One point that had been made consistently throughout the process was that the real property tax for a particular property could end up increasing, decreasing, or staying the same, depending on the change in the tax rate and the change in assessment for a particular property. How can that happen?

Here is an example. Suppose there are five properties, subject to a hypothetical rate of 5 percent:

Property	Former assessed value	tax
Property 1	100	5
Property 2	120	6
Property 3	150	7.50
Property 4	200	10
Property 5	300	15

So the total assessed value is 870, and the total tax revenue is 43.50. Now suppose these are the new assessments:

Property	New assessed value
Property 1	150
Property 2	150
Property 3	180
Property 4	250
Property 5	400

The total assessed value after reassessment is 1130. To maintain revenue at 43.50, the new tax rate must be set at 3.85 percent (after a slight rounding). Therefore, the new amount of tax for each property, compared to the pre-reassessment tax, is as follows:

Property	New assessed value	New tax	Old tax	Change
Property 1	150	5.78	5	+0.78
Property 2	150	5.78	6	--0.22
Property 3	180	6.93	7.50	--0.57
Property 4	250	9.63	10	--0.37
Property 5	400	15.40	15	+0.40

So of the five properties, taxes have increased on two and have decreased on three. Though the arithmetic can be a bit tedious for some, it is troubling that two basic principles cannot be understood. With the prohibition against using reassessments to increase total revenue, the idea that taxing jurisdictions will have “extra money” is contrary to logic and common sense. Similarly, the mere fact that the assessment on a property has increased does not mean that the tax will increase, because until the new rate is set, the required computation to make a comparison cannot be done. This, too, is a matter of logic and common sense. Too many people either lack one or both of these traits or simply refuse to make use of them. One need not understand quantum physics to understand the basic principles, and examples, of the reassessment process. Put another way, jumping to conclusions without having all the facts, or having the facts but failing to perform critical analysis, is dangerous in so many ways. These flaws, insufficient or erroneous information and failure to think rather than respond emotionally when emotion is irrelevant, are two of the underlying causes of many of the problems troubling the nation.

But even at the peak of my tax involvement, and even now, no, just no, I will now wear this, I will not buy this, I will not desire this. But I won't laugh at anyone who does.

Just take a look.

The truth, easily discernable by anyone willing to expend a bit of intellectual energy, is that Biden’s tax plan focuses on people earning more than $400,000 annually. The vast majority of Americans earn less than that amount.

So why do people start and spread these untruths? The answer is simple. Fear. Fear plays out in two ways.

First, there are those who fear losing and who therefore make statements that they think will reduce their chances of losing. It’s a pattern one sees in many young children, who, when confronted by a parent or other authority, deny whatever it is they have done because they fear the punishment. If and when the child learns that the punishment for lying is orders of magnitude greater than the punishment for whatever was done, the child might decide that the better course is to tell the truth and then argue a defense. “I didn’t take the cupcake” becomes “Yes, I did take the cupcake and here’s why it was necessary.” Perhaps that is how some youngsters decide to become lawyers.

Second, there are those who fear something or someone and who thus become easy victims of the liars and con artists. Most people, especially those who are struggling financially, not only object to tax increases but fear them, or, more specifically, fear the impact of higher taxes on their lives. What better way to get their attention and control their behavior, including voting decisions, than to play on that fear? “Don’t vote for this person because they are going to increase your taxes” might be a lie but it works if the people to whom it is addressed are too intellectually lazy to do some research that will reveal the mendacity of the statement.

Most fear arises from ignorance. Yes, there are some situations that are real and understandably trigger fear. But too often people fear something that would be worthy of fear if true but that is simply the fear monger using a lie in an effort to evoke a response, whether as a prank, as an effort to control a person or someone’s behavior, or as a political move. Education, research, and critical thinking can dispel most fear. But too many people let their emotion of fear push aside the intellectual aspect of their humanity. Fear should be reserved for those things truly deserving if fear.

In the long run, it’s much easier to tell the truth. Too many people, unfortunately, have not learned that lessson.

A few days ago, in a MarketWatch opinion piece, Alicia H. Munnell addressed a question posed by the headline, “Should we rethink how we tax Social Security benefits?” My answer is, as it has been since 1983, when the inclusion of some social security benefits were first included in gross income, a resounding “Yes.” Of course, the more important question is, “How?”

Munnell suggests that the model for taxing social security benefits should be how 401(k) plans are taxed. Yet she also concludes that no more than 50 percent of social security benefits should be taxed. She bases this conclusion on two facts. First, the portion contributed by the employer into the social security trust fund is not included in the employee’s gross income. Second, the portion contributed by the employee, which equals the portion contributed by the employer, is included in the employee’s gross income.

Munnell, however, misses a third, very important fact. She includes in her analysis on the difference between the taxation of traditional 401(k) plans and the taxation of Roth 401(k) plans. In the traditional plan, the employee is not taxed on employee contributions to the plan, and is taxed on the amounts withdrawn during retirement. In the Roth plan, the employee pays tax on what is contributed to the plan and does not pay tax on the amounts withdrawn during retirement. Here’s the catch. Even though the contributions to these plans earn income from whatever investments the plan makes, because the plans are tax-exempt, no taxes are paid while the plans are earning income on the accumulated contributions. In the traditional plan, that investment income is taxed when it is included in the amounts that are withdrawn. In the Roth plan, that investment income never gets taxed. To me, that is a flaw. Munnell also claims that if the tax rate does not change between the working years and the retirement years that the tax treatment of the traditional Is “equivalent.” However, not only does this claim ignore the non-taxation of the investment income in a Roth plan, it also ignores the time value of money, because deferring the tax payment until retirement is itself a benefit to the employee.

Determining the appropriate amount of Social Security benefits that should be taxed must begin with the definition of gross income. Simply put, gross income is the amount of a person’s income. Income is the person’s increase in economic wealth that has been clearly realized, and it is included in gross income unless it qualifies for a specific exclusion from gross income. Putting aside the niceties of what “clearly realized” means, a concept that students in a basic tax class struggle to comprehend and that requires deep, intensive reading and analysis of more than a few cases, and that in the context of social security is more a matter of timing than anything else, to the extent a social security recipient receives more than what the recipient contributed that was already taxed, the recipient has gross income.

It is easy to determine the extent to which a social security recipient has gross income. The question is timing. And that question is easily answered. Suppose a social security recipient contributes $50,000 to social security over a working lifetime. Basic tax law principles dictate that the recipient should not be taxed on the first $50,000 received in social security benefits. Thereafter, all of the payments should be taxed. It’s that simple. The key, of course, is knowing how much the person has contributed. The Social Security Administration has a record of that information. So why wasn’t that approach adopted? The official explanation was that the information was not available or, at best, not easily retrieved by the Social Security Administration. Whether or not that was true 37 years ago – I don’t think it was – it certainly isn’t the situation today. The real reason in 1983 was the need for revenue, to offset the adverse consequences of the 1981 tax cuts, and the approach I advocated would delay revenue from the taxation of social security benefits for several years as people simply recovered what they had paid in. Granted, it would have been a bit more complicated than that, to deal with the fact that some people already receiving social security benefits would have already received what they contributed and would be immediately subject to tax. But the simple approach I championed was rejected in favor of what was a more complicated gyration of computations made even worse a few years later.

There is another flaw in the current system. A person who dies before receiving benefits equal to what was contributed, and who has sufficient modified adjusted gross income to be taxed on social security benefits, can end up being taxed even though they lost money by contributing more than they got back. And offsetting that flaw is yet another, which is that someone who lives long enough to receive more than what was contributed ends up not being taxed on what unquestionably is a clearly realized increase in economic wealth.

So when Munnell suggests that fifty percent of social security benefits “might be viewed as the appropriate share of benefits to include in adjusted gross income,” she fails to address any of the flaws in how social security benefits are taxed. Under her approach, a person dying shortly after retirement would continue to be taxed on amounts that are not income, and a person living long enough would continue to receive income free of tax that should be taxed. I should note at this point that the concern about taxing social security recipients who have low income should be, and can be, addressed not through the “base amount” and “adjusted base amount” nonsense of current law but simply by providing a standard deduction high enough to protect low-income individuals from taxation no matter the source of the income.

Several of the comments to Munnell’s opinion piece remind me of how much ignorance about social security runs rampant. One person claimed, “Most of SS is just a return of your own money, therefor tax free makes the most sense.” That is absolutely untrue, except for the unfortunate folks who die shortly after beginning to receive social security benefits. Another person made a similar claim, stating, “Social security should be treated like a Roth IRA. not taxable at all you paid income tax on that money already.” No, you did not, again, unless you unfortunately die soon after retiring. Fortunately, other persons commenting on the article pointed out these misconceptions, suggesting that people can calculate what they, or a retiree they know, has received in social security benefits and compare that to what the person contributed. Many of the comments focused on other social security issues, not the taxation question, and then addressed other tax issues, both sensibly and with demonstrated ignorance, and though I could write several book chapters separating the comments reflecting good understanding of economics, finance, and tax from those reflecting something other than a good understanding, at the moment I will leave that for others.

As a practical matter, any attempt to make changes to the taxation of social security benefits will open the door to the continuing attempt to privatize social security and put its control into the hands of private equity funds, oligarchs, and wealthy financiers. Some of the comments to Munnell’s opinion piece reflected the unrealistic expectation that no one loses money making private investments. How quickly the world has forgotten Bernie Madoff, the folks at Enron, the wizards at Adelphia, to say nothing of the investment advisors with good intentions but inadequate skill sets. Americans have become so eager to purchase the Brooklyn Bridge. It is sad what happens when the money addicts meet those ignorant of economics, finances, and taxes. Very sad.

About a month later, in Perhaps Yet Another Reason Not to Run for Tax Collector, I reacted to another story about the same tax collector. Additional federal charges were brought, accusing him of using information from surrendered drivers’ licenses to manufacture fake IDs with his picture on it. After this indictment was handed down, he resigned his office. In my commentary, I noted that I wondered why he wanted fake IDs. Perhaps an answer can be found in the next story.

Now comes yet more news about the same tax collector. In a superseding federal indictment, he has been charged with sex trafficking a minor. According to the indictment, he was able to get “personal information from motor vehicle records to engage in commercial sex acts and accessed personal information to engage in ‘sugar daddy’ relationships, including with someone who was between the ages of 14 and 18.” The tax collector’s attorney said that his client denies the charges.

In my first post on this continuing story, my focus was on the refusal of many otherwise qualified individuals to run for public office. The lies, ignorance, dirty tricks, altered images, fake videos, and false allegations permeating political campaigns are deterring those who would bring much-needed ideas and accomplishments to the public arena. I lamented the disappearance of “the days when politicians, candidates, and office holders engaged in rational, intelligent, honest, and sensible discussions and arguments about issues.” I rued how “mentality of win-at-any-price, devoid of critical thinking and cogent analysis, and reflecting any sense of quality values, has infected the political process.”

But now I think it’s worse. There indeed are people who run for office with the worst of intentions, and perhaps some who run with the best of intentions but who are sidetracked when they are caught in the equivalent of what someone in Washington, D.C., described to me when I was a federal employee as “Potomac fever.” Unfortunately, it didn’t take long for politicians, their advisors, and others to decide that if valid charges can bring down an opposing candidate or someone already in office, fake charges, even if eventually disproven, can derail a candidate’s campaign or wreck an official’s career. It’s so bad that in some instances even proof of bad behavior is overlooked by those who are trying to divert attention by making accusations against others, who may or may not be guilty of those charges. It’s because of the mud-slinging, lies, and other dirty tricks that many good, decent people stay out of politics. It’s because of the actual corruption that many people paint politicians with the “all politicians are corrupt” broad brush, just as many people paint almost everyone and everything with the broad brush of stereotyped caricatures. None of this is good for the country.

It remains to be seen if the former Florida tax collector is convicted or acquitted. Perhaps he will take a plea. No matter how this plays out, it won’t be good. If he is convicted or takes a plea, it will, in the minds of many people, reinforce their belief that “all politicians are corrupt.” If he is acquitted, he nonetheless has suffered and yet another instance of false accusations polluting the system will have accomplished what its perpetrators sought, as it would not be easy for him to repair the damage.

For anyone considering a run for tax collector or any other office, it might be wise to accumulate evidence of the truth of one’s life so that when accusations are made, a response can be delivered quickly, effectively, and with positive impact. And because many people do not decide to run for office until later in their lives, when it might be too late to gather evidence to refute the flood of falsehoods that are drowning this nation and that are unleashed whenever someone announces a candidacy, it might be wise for everyone to accumulate evidence of the truth of one’s life. After all, the tossing about of falsehoods isn’t confined, unfortunately, to the world of taxes or politics. And to make certain that the truth of one’s life is something others will admire, it is best to consider each decision from the perspective of “how will this play out if I ever run for office or, for that matter, seek a job?”

The tariff was imposed because the President “claimed that the American aluminum business has been ‘decimated’ by Canada.” He accused Canadian aluminum producers of “flooding the U.S. with exports.” There is a reason aluminum imports have increased. Demand has increased. Why? According to this editorial, “aluminum demand has gone up as pandemic quarantines have driven bar patrons home and away from draft or bottled beer. In addition, the growing popularity of hard seltzers has increased demand for aluminum cans.” It is not unrealistic to expect consumers of beverages sold in aluminum cans, including not only beer but also soda, ice tea, and other drinks, discovering the cost of their purchases going up. How many will understand why?

Oddly, according to the Aluminum Association, imports of Canadian aluminum have dropped. So much for the President’s “flooding” nonsense.

In addition to this hidden regressive tax increase, the tariff also poses threats to American jobs. Why? Canada has announced it will retaliate. According to this report, Canada is working on a list of American products, some of which are described in the report, on which it will impose tariffs. This will reduce demand and put workers in factories making those products at risk of losing their jobs. Why? Because jobs reflect demand, not supply.

So while this tariff war instigated by the “deal maker” ravages both the United States and Canada, long-time allies with a history of cooperation, does anyone benefit? According to this story, the Canadian ambassador to the United States explained that “two of the biggest beneficiaries from the Trump administration’s reimposition of 10 per cent tariff on some imports from Canada will be a Swiss trading firm and a Russian producer.” I wonder how many people complaining about the increases in the cost of beer, soda, and other beverages will take the time to understand what actually is happening.

Drum is correct that payroll taxes are progressive. People earning more than the $137,700 Social Security cap pay a lower percentage of their wages than do people earning $137,700 or less. The fix to that problem is simple. Repeal the cap. It does not require eliminating the trust fund. Repealing the cap makes the payroll tax a flat tax. I agree with Drum that the regressive nature of the payroll tax is undesirable, and to the extent he would support repeal of the cap, we are in agreement.

But when it comes to the trust fund, I disagree with his proposal. Why does the trust fund exist? It exists to ensure that payroll tax receipts do not go into the general fund where they can be spent without accountability to the Social Security payment mandate. Drum makes much of the fact that the trust fund “is nothing but a bunch of government bonds.” Technically, the excess in the trust fund, that is, the excess of receipts over expenses (chiefly Social Security payments), have been invested. They were invested in what has been perceived to be the safest investment, Treasury bonds. Thus, when those investments are cashed in during periods when Social Security payments exceed payroll tax receipts, the trust fund is using its investments. It matters not how the debtor digs up cash to redeem the investment. The Treasury can redeem the Bonds by using any sort of receipts, not simply income taxes, or by issuing replacement bonds purchased by the public. It need not tap income tax revenues.

There is another catch to the repeal of the payroll tax. Drum notes that Social Security payments are made automatically under the current system, but he neglects to mention that the amount of an individual’s payment depends on several factors which reflect the payroll tax. To qualify, the individual must have earned wages subject to the payroll tax for at least 40 quarters. The computation of the payment requires determination of how much the individual earned in qualified wages subject to the payroll tax over the person’s earning history. If the payroll tax is eliminated, another method of computing Social Security payments would be necessary, and that opens up the political battle that Drum claims would not exist if the payroll tax is eliminated.

Worse, Drum makes no effort to deal with the transition issues that his proposal raises. Are Social Security payments currently being made left alone? What happens to the person who retires and seeks Social Security days, months, or a year or two after Drum’s proposal is implemented? Does the person lose credit for the quarters they worked and the eligible wages they earned? Is the balance in the trust fund dumped into the general fund?

And, of course, payroll taxes also fund Medicare. Drum makes no mention of Medicare They also fund other programs. Drum also makes not mention of those.

If Drum wants to go after federal trust funds because he thinks the general fund is sufficient, does he propose to eliminate not only the Social Security trust funds (technically there are two, the old-age and survivors insurance fund and the disability insurance fund), but also the two Medicare trust funds, the Civil Service Retirement and Disability Fund, the Military Retirement Fund, the Employees Life Insurance Fund, the National Railroad Retirement Investment Trust, the Employees and Retired Employees Health Benefits Funds, the Foreign Service Retirement and Disability Fund, the Rail Industry Pension Fund, the Foreign National Employees Separation Pay Fund, the Judicial Survivors' Annuities Fund, the Judicial Officers' Retirement Fund, the District of Columbia Judicial Retirement and Survivors Annuity Fund, the Armed Forces Retirement Home Fund, the United Mine Workers of America Combined Benefit Fund, the Foreign Service National Separation Liability Trust Fund, the United States Court of Federal Claims Judges' Retirement Fund, the Court of Appeals for Veterans Claims Retirement Fund, the Tax Court Judges Survivors Annuity Fund, the Unemployment Trust Fund, the Railroad Social Security Equivalent Benefit Account Fund, and the Black Lung Disability Trust Fund? All of these either are funded with payroll taxes or amounts based on wages, or serve similar purposes as does Social Security. Does he propose eliminating and dumping into the general fund the Transportation Trust Fund, the Foreign Military Sales Trust Fund, the Airport and Airway Trust Fund, the Oil Spill Liability Trust Fund, and the other 89 or more trust funds held by the federal government?

Drum’s claim that “[t]here are several upsides to funding Social Security through the general fund and literally no downsides” is not supported by the evidence. There are downsides. There are too many downsides. Drum is confident that the trust fund is not necessary because “when Social Security was first started, [the trust fund . . . was a useful way of guaranteeing that Social Security couldn’t be touched in the future,” and that although it “may have been necessary 90 years ago, . . . it’s not anymore [because it’s] not the funding source that stops Congress from cutting Social Security payments, it’s the broad support for the program itself, [as it is] just too damn popular to screw around with.” Tell that to the private equity investors, their politician puppets, the GOP, and the others who want to eliminate Social Security and toss it aside as they have eliminated pensions over the past forty years, in the name of “privatization” and “capitalism” run amok. Tearing down a serious wall of defense against the money-addicted oligarchs is not, as Drum claims, “something that any progressive should support.” No one, progressive, moderate, conservative, or sensible, should support destruction of yet another pillar of American democracy. What should be supported is elimination of the payroll tax cap. It’s that simple.

This time, as reported by several sources, including Accounting Today and Ventural Broadcasting, two top White House officials have admitted that the President cannot cut capital gains tax rates unilaterally by executive order. They admitted that changes in tax rates are within the purview of the Congress. Though they seem to have remembered what they learned in their Civics course, or perhaps made the effort to find out how law-making is done in this country, it seems the President doesn’t have a clue. Presumably they have shared their knowledge with the President, but how that conversation went isn’t something disclosed to the public.

Some Americans, understandably frustrated with how politics works and convinced that a businessman would do a better job of “running” the country, voted in favor of putting a businessman in the White House. Of course, the alleged businessman was a dabbler in real estate using inherited money, and a failure at running businesses. Between stiffing workers and suppliers and going bankrupt multiple times, he demonstrated everything that a successful businessman is not. As the meme puts it, they wanted him to “run the country the way he ran his businesses,” and he certainly has.

In business, the CEO of a non-public enterprise is king, czar, emperor, and lord. The CEO answers to no one. Smart CEOs get an education by going to class, surround themselves with advisors who understand what the CEO does not, listens to and takes advice from those with superior experience, intelligence, and knowledge, and with their help navigates the treacherous world of reality. The Presidency is not a CEO position. It is the top office in one of three branches of government. Its powers are constrained. Changes in tax rates, and changes in the Internal Revenue Code, must originate in the House of Representatives and be approved by the full Congress. Though a CEO can unilaterally and even arbitrarily increase or decrease the prices at which the company sells goods and services, a President cannot unilaterally or arbitrarily change tax rates or eliminate taxes.

Of course, it is possible that the President has no intention of unilaterally cutting capital gains rates. So why propose doing so? Because some of the people who would benefit from such a move, and even people who would not but who some sort of philosophical antipathy towards taxes, and perhaps people who think he is on a path leading to his unilateral repeal of taxes that they pay, find in such an announcement “proof” that he is the “hero” they have come to think he is. The announcement gathers votes. As I wrote more than seven years ago, in The Disadvantages of Tax Incentives, “The well-being of the national economy demands stability, continuity, predictability, and reliability in the tax system. By putting personal electoral goals ahead of the nation’s well-being, Congress is selling the nation short and ultimately risks selling it out.” Rather than taking my advice, Congress continued on a path that in some ways encourages the same sort of behavior by the Executive Branch. Again, I warn, “By putting personal electoral goals ahead of the nation’s well-being, the Administration is selling the nation short and ultimately risks selling it out.”