MauledAgain

Bear with this rant for a moment.

Several years ago, after filing a Pennsylvania S corporation income and franchise tax return for entity #1, I received a letter from the Pennsylvania Department of Revenue Bureau of Corporation Taxes asking for a copy of the federal income tax return for entity #1. The federal return must be included with the state filing, and I was certain I had included it, as I had done every year. "Oh well," I thought, "maybe I missed it." So I made a copy of the federal return, put in in an envelope (because the reply envelope provided by the Department is way too small), went to the post office, and sent it certified mail, return receipt requested.

A year passed. After filing a Pennsylvania corporation income and franchise tax return for entity #2 (an LLC), I again received a letter from the Pennsylvania Department of Revenue Bureau of Corporation Taxes asking for a copy of the federal income tax return, this time for entity #2. Could I have messed this up AGAIN? No, especially as I hadn't messed it up in the first place. (Years ago I created a chart indicating how many copies of each schedule in each return is needed, where it goes, etc., a technique I learned in college when working part-time for a long defunct accounting firm.) So again I made a copy of the federal return, put in in an envelope (because the reply envelope provided by the Department is way too small), went to the post office, and sent it certified mail, return receipt requested.

This past Friday I get a letter from the Pennsylvania Department of Revenue Bureau of Corporation Taxes. Guess what? Yep, they want a copy of the 2002 federal return for entity #3 (also an LLC). Now I know that something is wrong. I was very careful filing the 2002 returns (and the 2003 returns, which I had filed a few weeks before getting the letter concerning the 2002 return).

I'm doing other things so I leave the copying and mailing for this week. Good thing because on Saturday, guess what I get? YES!!! Another letter from the Pennsylvania Department of Revenue Bureau of Corporation Taxes. A different individual wants a copy of the 2002 federal return for entity #2.

Yesterday I made what is becoming an annual "fix the Department's mistakes" pilgrimage to the post office, shelling out close to $10 to send the two copies, one to one person and one to another person.

I included a copy of the Department's letter, on which I explained several things:

(1) I am absolutely certain a copy of the federal return was STAPLED with the Pennsylvania return, as the instructions provide.

(2) The Pennsylvania return apparently is showing up on the desk of the person in the Bureau of Corporation Taxes WITHOUT the federal return.

(3) That means that someone is REMOVING the federal return from the Pennsylvania return.

(4) That someone must be working in the Department of Revenue's Bureau of Receipts and Control.

(5) That someone must be opening the envelope, seeing a federal return stapled to the Pennsylvania return, thinking it must have been included by mistake, and removing it.

(6) That person must not know much about Pennsylvania tax law or filing, else that person would be working in one of the tax bureaus and not the Bureau of Receipts and Control.

(7) The person in the Bureau of Corporation Taxes asking for the copy of the federal return has no supervisory control over the "someone" in the Bureau of Receipts and Control.

So, now I must figure out to whom to send a letter explaining that the Pennsylvania Department of Revenue has a serious communication and process problem. At least it's not the FBI or CIA... they have their own problems, and no one has been killed.

But, c'mon folks in Harrisburg. You can do better than this? Or maybe you can't. Maybe this is just way too complicated. As in "leave the contents of the envelope alone and let the folks in the Bureau of Corporation Taxes deal with it."

I mentioned this tale to a practitioner friend. He said, "Oh, this happens all the time." He explained that the agency with the contracts to handle local income taxes routinely loses the attached federal return even though not only is it stapled, but my friend's practice is to put a legend "FEDERAL RETURN ATTACHED AS REQUIRED. DO NOT REMOVE" on the front of the return.

This isn't rocket science. It is a frightening thought to consider why people can't do such simple things as refraining from removing federal return copies that ought not be removed.

Is it ignorance? Stupidity? Wilful maliciousness? Misguided helpfulness?

It surely isn't laziness because it burns more calories to remove the federal return copy than to leave it attached to the state or local return to which it is attached.

If this is a trend of where society is going: Scary.

Very scary.

Almost every fall, in the basic federal income tax course, a student will ask something like this: "How do they know that you had that income?" And a student will ask how the IRS decides which taxpayers should be audited.

The answer to the first question is fairly simple. Most transactions that generate income must be reported by the payor to the IRS. Think about W-2 forms, and the different versions of Forms 1099. A few types of transactions escape reporting, generally because they involve small amounts, and of course there's too much noncompliance on the part of some payors.

The answer to the second question is complex. The IRS has a variety of approaches to selecting tax returns for "audit." Keep in mind that an audit can be as simple as a computer program looking for matches between the W-2 provided by an employer and the reporting of the salary on the employee's tax return. An audit can be as complex as the eternal residence maintained by IRS auditors at the corporate headquarters of multinational corporations. Most audits are in between those two extremes. Audits can be handled by correspondence and they can take place face-to-face over a table at an IRS office. Again, there are variations between those two.

Although the IRS supposedly has not yet fully programmed its computers to match every W-2 and Form 1099, its computers are getting closer to that goal. At this level, many, and eventually most, tax returns will be audited. If one considers the computer's checking for arithmetic errors to be an "audit" (technically it isn't), then everyone's return is being "audited" though in a way that isn't surprising and that, more importantly, isn't delving into the correctness of the input numbers. It's only the computations that are being reviewed.

When it comes to audits, that is, checking on the validity of the amounts entered onto a return, the IRS should be using strategies designed to maximize the revenue outcome. It claims it does. One strategy is to focus on changes in the tax law. When the tax law is changed, tax returns with transactions within the boundaries of the tax law changes should be more likely to be audited. For example, if Congress adds a new deduction, the likelihood that most taxpayers and tax return preparers are not familiar with the provision increases the chances or errors and abuse, so tax returns claiming that deduction would get more attention.

Another strategy is to identify professions and occupations for which tax compliance is weak. The first batch included four groups, one of which was... ready? Lawyers!! Hmmm. Now there are several dozen occupations on the list.

Another strategy is to audit returns based on tips from citizens. High on the list are ex-spouses and soon-to-be ex-spouses ratting each other out. Also high on the list are tips from disgruntled employees.

Another strategy is to evaluate the status of each possible income, deduction, or credit in terms of the level of improper reporting associated with that item. For example, there are far more errors made in claiming the earned income tax credit than in claiming the standard deduction. The IRS has a system in which points are assigned to each type of income, deduction, or credit, and tax returns with higher point scores are more likely to be audited. This strategy has been difficult to apply in recent years. In order to determine which items are more likely to be reported incorrectly, the IRS needs to do full and complete audits of randomly selected returns. Whereas other audits focus on a particular item, these audits examine everything on the return, starting with the taxpayer's name and taxpayer identification number and ending with the last of each dollar or other amount entered onto the return. These audits consume much time, and for a taxpayer randomly selected to undergo such an audit, it is a nightmare. A few years ago, needing to update its scoring system, the IRS set out to do another batch of these random audits (they're not done every year). Taxpayers complained to Congress. Congress told the IRS not to do these audits. Why? They're too complicated and thus time consuming. Why are they too complicated? Because the tax law is complicated. Who made the tax law complicated? Goodness, the Congress. So the IRS is using old scoring that doesn't even include the hundreds of provisions added to the Code or amended during the past decade.

So is the IRS "getting to" the taxpayers it needs to check out? Or is it wasting its time auditing people whose returns are correct? Is the IRS doing enough audits? How would we know?

We know some things because the IRS releases information. A great place to get this information (and a lot of other government data) is the Transactional Access Records Clearinghouse which is affiliated with Syracuse University. I was invited, when TRAC was started, to be a beta tester. I recommended that it go forward, and at least this time, my prediction was correct. It has flourished. Go visit the site when you have a chance if you have any interest in government data, statistics, or even trivia to supply your dinner party conversation resource databank.

The TRAC report inspired an interesting article on MSNBC's web site. It contains much more information about related news, some of which has already found its way onto this blog in previous postings.

As expected, the debate isn't over the data but over its meaning and its relevance. Consider:

Percentage of business tax returns audited during Oct 1, 2002 to Sept. 30, 2003: 0.73 percent (that's 73 returns out of every 10,000).

Percentage of business tax returns audited during Oct 1, 1996 to Sept. 30, 1997: 2.62 percent (that's 262 returns out of every 10,000).

The odds are low in both instances, which helps explain why taxpayers tempted to ignore tax compliance are encouraged to succumb. The drop-off, though is severe. It's a 72 percent decrease in business tax return audits. It's easier to find a lottery winner among one's neighbors than to find someone whose business has been audited.

But most businesses are small, and so is it worth trying to find $5 or $50 of underreported tax liability? Isn't the big chunk of "missing revenue" to be found among the big corporations? Yes. How's the audit rate there?

Percentage of businesses with assets over $250 million audited during Oct 1, 2002 to Sept. 30, 2003: 28.98 percent.

Percentage of businesses with assets over $250 million audited during Oct 1, 1995 to Sept. 30, 1996: 33.68 percent.

That's not as much of a slide (14 percent) but it's a slide. It's no less encouraging to big companies than the overall slide is to taxpayers generally.

A decade ago, there were more than 1,000 tax fraud cases. In 2003 there were 538 tax prosecutions. In 1999 there were 247 civil tax fraud penalties, and in 2003 there were 170.

This sort of information makes it tough for the IRS to persuade taxpayers to comply, to file correct returns, and to push aside the urban legend that "everyone else is cheating on his or her tax return."

The IRS notes that the audit rate for individuals with income of at least $100,000 has increased 52% over the past two years. But most of this increase comes from the computer-generated letters checking returns for mistakes. The pace of 16 face-to-face audits for every 10,000 individual taxpayer returns continues.

What about sole proprietors, many of whom engage in small transactions not subject to Form 1099 reporting and some of whom engage in "pay cash, pay less" arrangements? In 2002, 114 sole proprietors out of every 10,000 were audited, and that fell in 2003 to 110 out of 10,000.

The IRS takes the position that increasing the number of audits is not the principal key to increasing compliance. Instead, it prefers to target tax scams, such as the "tax protestor" packages marketed by brave folks who file tax returns while encouraging others not to do so, as well as similar plans shared by folks who at least prove their consistency, though not their intelligence, by setting an example by refusing to file returns or by filing blatantly frivolous or false returns.

Apparently the IRS resources are being pumped into audits of corporations engaged in corporate tax shelter schemes. It takes an average of 7.5 months to figure out what's going on in the smoke and mirrors arrangements.

Where do those resources come from? Not from a Congress that keeps trying to show that penny-wise pound-foolish is its approach to government spending. No, those resources come from other areas within the IRS, principally audits of other taxpayers.

The proposed budget should add 600 business auditors and 4,400 other auditors, tax collectors, investigators, and the like. But even if Congress approves the requested budget (which I doubt it will), the IRS will STILL be fielding an audit staff that is 2,000 less than what it had in 1996.

As discussed in an an earlier posting on this blog, most of the increase in the IRS budget, if it gets it, will go to salary increases that Congress requires but does not fund. Anyone getting an idea here of who's responsible for this mess?

The TRAC information also shows that more than 600 top-notch revenue agents left the IRS last year. Although the number of individual returns has risen by more than 16 million, there are now roughly 16,500 revenue agents at the IRS. In 1995, there were more than 24,000.

Last week, Tax Notes reported that the IRS Oversight Board concluded that the IRS needs a budget increase twice what has been requested by the Administration. Of course, at least one member of Congress immediately criticized the Oversight Board's report.

And there's the root of the problem. Many members of Congress, eager to earn support among their constituencies, take an "anti-tax" posture that is more rhetoric than reason. Surely they don't advocate "no taxes." And surely they don't advocate "unenforced taxes." Or do they?

But perhaps these members of Congress simply are reflections of our society. Consider this analogy. Everyone "knows" that there's very little chance of being stopped for speeding on an interstate highway when driving at 5 or even 10 miles an hour over the limit. If highway police tried to enforce the speed limit without exception, there would be an outcry. It has happened. So, for years, drivers have edged their speedometers to 63 when the limit is 55. But during the past year or two, a few drivers are ramping their speeds up to 90 and 100. On urban interstates. Even during rush hour. Why?

The psychologists can jump in at this point. A little "cheating" on a tax return (such as padding an expense account) gathers the same hardly-noticed social disapproval as does a little "cheating" on the speed limit. But then along comes a group that takes the tax return noncompliance into the world of gross fraud, and a group that takes highway speed limit compliance into the world of gross stupidity.

The driver demonstrating the meaning of "sapiens sapiens" might be drunk or on drugs. Taxpayers may be driven to such behavior after dealing with their tax returns, but substance abuse hardly qualifies as a reason for tax noncompliance. The racing driver might be late, and a deadline-pushing taxpayer might makes some sloppy mistakes. But none of this is implicated in most of the tax noncompliance cases or highway madness.

What's implicated is the mushrooming of the "I'm special and more important than you" philosophy that has spawned itself from the "me generation" mentality of the 70s. Anti-authoritarian, noncompliant, socially offensive, and short-sighted in their thinking, these folks are tearing down the walls of civilization here at home. Politicians appear to be afraid of them. After all, many of them have money, power, and influence. Others simply figure that they'll "get theirs" by imitating the ones who have the money, power, and influence.

So before joining the chorus of those who condemn the anti-authoritarian, noncompliant, socially offensive, and short-sighted behavior of small groups of people in other nations, let's consider how we tolerate and succumb to the same sort of activity by small groups of people here at home. The first step in resisting a movement is refusal to join.

Here's to filing a well-intentioned, as correct as possible, compliant tax return. Here's to avoiding 90 mph driving on urban interstates.

April 15 is only 3 days away. There are 83 hours until the "file the return or file the extension" deadline.

Oh, my returns are finished. Have been. For a week. How else would I have time to chatter on and on about taxes on April 12?

The other day the GAO released a report on A Comparison of the Reported Tax Liabilities of Foreign and U.S.-Controlled Corporations, 1996-2003. The information is not surprising to those who keep current with news about corporate culture. Corporate tax departments, rather then being charged with compliance, are treated as profit centers, compelled to generate "profits" by finding ways to make each year's tax liability less than that of the previous year.

The major findings (quoting from the report, in which USCC means U.S.-controlled corporation and FCC means foreign-controlled corporation) include:

** A majority of all corporations reported no liabilities during these years [1996-200] with a higher percentage of FCCs doing so than SCCs, an estimated average of 71 percent and 61 percent, respectively. However, the results were reversed for large corporations with a greater percentage of large USCCs reporting no tax liability.

** A greater percentage of USCCs than FCCs reported tax liabilities of less than 5 percent of their total income, an estimated 94 percent and 89 percent, respectively, in 2000. The results were similar for large corporations. In 2000, an estimated 82 percent of large USCCs and 76 percent of large FCCs reported taxes of less than 5 percent of their total income.

** However, FCCs reported less tax liability per gross receipts than USCCs; in 2000, an estimated average of $11.88 in tax liability per $1,000 in gross receipts compared with an estimated $14.75 reported by USCCs. A similar relationship held for large corporations.

Keep in mind that for the period in question, 1996-2000, the U.S. (and much of the world) economy was robust, corporate profits rose, and the stock market ballooned.

Other data shows that by 2003, corporate taxes had fallen even further. They fell so far that there is only one year for which those receipts were lower: 1934. Moost of us weren't around then, but if we paid attention to our parents or our history books we know that 1934 was during the height of the Great Depression. It is unlikely corporate profits in 1934 were anything like those in 2003.

Here's the million dollar question. Or perhaps it is a billion dollar question.

If corporate taxes decrease while corporate profits increase, what are the corporations doing with the excess? If profits go from 30 to 40 and taxes drop from 15 to 8, the amount available after taxes increase from 15 to 32.

Let's see. Are corporations using this money to hire more employees? Hardly. Most of them are dismissing employees.

Are they using this money to improve their products? Not if the floor tiles I bought are any indication. Not if the Microsoft blue screen of death is representative. Ironically, automobiles and small trucks do appear to be getting better. Of course, they're more expensive.

Are the corporations using this money to increase charitable contributions? Not really. The tax law limits the corporate charitable contribution deduction to 5% of income so there's not much of a tax incentive to donate.

So where's the money going?

Some of it is flowing overseas to pay independent contractors to arrange for work done by laborers paid a fraction of what U.S. employees earn.

Some of it supposedly is being paid in the form of higher dividends, but the preliminary data on that issue suggest this is not the case. see Story Number Five in my earlier posting on that topic.

Could it be higher salaries for the CEOs and CFOs and COOs and other upper-level management? Higher salaries that permit them to set up foundations that are used to influence and control matters of social policy, government, and life generally in ways far more disproportionate than what the typical citizen can do?

The politicians need to be careful. This information isn't going to be easy to spin into anything other than what it says.

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An addendum. As tough as the job market is, several railroads are scurrying about trying to find workers. Apparently there's a shortage of people who are qualified. Sorry about this, but when I read this news my first thought was, "Goodness, these people apparently haven't been trained."

Have a nice weekend.

One might think that a tax law amendment that reduces the tax rate on dividends would be simple. Perhaps "dividends are taxed at a rate of 15 percent."

Simple isn't allowed. Simple lets too many people understand what's going on. Simple puts tax experts out of work.

So, instead, Congress chose complicated.

"For purposes of this subsection, the term "net capital gain" means net capital gain (determined without regard to this paragraph) increased by qualified dividend income."

OK, that means, "dividends are taxed at the rates applicable to capital gains."

But what's "qualified dividend income"?

It means dividends received during the taxable year from domestic corporations and qualified foreign corporations.

Ah, the old "define something by using terms that themselves must be defined" approach. It takes 20 lines of text to define "qualified foreign corporation."

Wait.

"Such term" (that is, qualified dividend income) "shall not include...." Here follows a list which need not be repeated to make the point. Seven lines of text, followed by eight lines of text co-ordinating the reduced rate with the deduction for dividends received that can be claimed by corporations that receive dividends. Then there is an 11-line subparagraph dealing with "special rules."

All of this, however, fades when it is time to deal with the effective date. The effective date for the reduced rate of tax on dividends is "taxable years beginning after December 31, 2002." For almost all individual taxpayers, that means the lower rates first apply to 2003. Tax returns for 2003 are those being prepared at this time. The effective date is NOT in the Internal Revenue Code. It is in the amending act.

However, a special rule states: "In the case of a regulated investment company or a real estate investment trust, the amendments made by this section shall apply to taxable years ending after December 31, 2002, except that dividends received by such a company or trust on or before such date shall not be treated as qualified dividend income (as defined in section 1(h)(11)(B) of the Internal Revenue Code of 1986, as added by this Act.)"

Huh?

To understand this provision, it is necessary to understand how a regulated investment company (RIC) and a real estate investment trust (REIT) is taxed. Generally, if it receives income and passes it out to its shareholders, then it gets a deduction. In other words, the shareholder and not the company is taxed. The shareholders are the folks who invest in these companies.

So, dividends received before 2003 but paid out in 2003 don't qualify for the lower tax rate. There is a requirement that RICs and REITs provide to their shareholders Forms 1099 that tell the shareholders how much of what they earned is a qualified dividend. That makes sense, as only the RIC and REIT managers would know.

Except that they don't.

In a much-needed article on this matter, a Philadelphia Inquirer reporter takes readers behind the scenes to see tax Forms 1099 in the making. To read the full article, go to the Philadelphia Inquirer and go to the business section for today (April 7), click on the article, and then log in or register (it's free).

Todd Mason points out that these companies sent out Forms 1099, and then discovered they hadn't done the computations properly. So they send corrected Forms 1099. Sometimes they correct the corrected Forms 1099.

If the taxpayer has already filed his or her return, there may be a need to file an amended return. What fun.

But first, why are the companies having such problems figuring out what portion of the dividends qualify for the lower rate?

First, because although some dividends clearly qualify, and some clearly do not, others are in an in-between area that requires so much additional analysis that companies sent the Forms 1099 before that analysis was complete. Why? Because the tax law requires that those Forms be sent by January 31. No matter that Congress has made things more complicated.

Second, the IRS changed its mind on some technical points, and issued revised rules. But by the time it did this, it had already posted on its web site, and mailed, instructions to Form 1040. Which, of course, became out of date, and wrong. So, taxpayers must go to the IRS web site to get the correct instructions.

Another wrinkle in the mix is the requirement that the shareholder (the taxpayer) own the stock for at least 61 days in a 121-day period during which the dividend is paid. The IRS puts the burden of determining if this requirement is met on the taxpayer, not the company.

In many instances, the change on the corrected Forms 1099 will be such a low dollar amount that filing an amended return won't be prudent. There's no point in spending money and investing time because the tax liability is a few dollars lower on account of a few dollars of dividend income previously characterized as not qualified being re-characterized as qualified.

The IRS reminds taxpayers that if an amended return is warranted (an increase in tax liability or a significant decrease in tax liability) it should not be filed until the original return is processed, usually a matter of a month or two.

It's not that there should be a better way to enact and administer tax laws. There is. The question is why the Congress insists on making the simple complicated. The answer is that someone benefits. And it surely isn't the typical taxpayer who is compelled to deal with this nonsense.

Do you think any of the presidential candidates even understands this?

Ask them.

Allan Sloane, a Newsweek journalist, has shared Six Fixes for the Tax Mess". Though he claims it is arrogant for an "unelected media-elite guy like [him]" to make these proposals, I disagree. As he says, "as April 15 nears, we all become tax experts." It's not arrogant, it's useful. Would that everyone give some thought to the matter. Would that a certain 535 people who work in D.C. give some thought to the matter.

He's talking policy, not technical drafting. So here's my quick reaction to his proposals.

1. Reform the Estate Tax.

He suggests keeping the tax, with a much higher indexed exemption ($3.5 million a person), with the top rate cut from 48% to the maximum individual income tax rate (35% at the moment).

My take: If the estate tax stays, these modifications make sense. As long as there has been an estate tax, there have been people finding ways to avoid it. Each ploy is met with a legislative response, making the law even more complicated, and dragging in the not-so-wealthy (even aside from the exemption amount problem). Instead, I'd rather see unrealized gains subject to income tax at death. The income tax is graduated, the starving orphans don't have parents with unrealized gains in their assets (because they don't have assets), and without a huge exemption the use of death as an income tax avoidance planning tool would be significantly curtailed.

2. Keep the 10% Bracket and 'Marriage Penalty'

I think Mr. Sloane means keep the 10% bracket and marriage penalty relief, because that's what he describes.

My take: I agree, and I'd go further: marital status should be irrelevant in computing taxes, just as it is irrelevant in computing bridge tolls. See James Edward Maule, "Tax and Marriage: Unhitching the Horse and Carriage, 67 Tax Notes 539 (1995)."

3. Create a Trust Fund We Can Trust

Mr. Sloane suggests letting the Social Security trust funds buy mortgage-backed securities and such, but not Treasury securities or stocks. He would require the Treasury to pay cash interest on the fund's T-bonds, rather than paying with Treasury IOUs.

My take: Mr. Sloane's conclusion that this would put the Social Security funding mess in our faces is correct, and it is a good idea. Call it full disclosure or truth-in-advertising. Anything that clears out the smoke and breaks the mirrors is a good idea.

4. End the Tax Cut For Dividends And Capital Gains

He starts by sounding like me in my income tax classes. "Come on, already. Income is income." Bingo.

My take: I'm all for this proposal. But I would add indexing of basis because the current tax code is premised on a reluctance to tax artificial amounts generated by inflation. Not too long ago I shared an overview of the arguments on both sides of the capital gains rate debate and the reasons for my support of full taxation with indexed basis.

5. A War Surcharge

Mr. Sloane suggests a 10% temporary war tax to pay for the war on terror, rather than financing it with borrowings from foreign central banks. Families with relatives stationed in Iraq and Afghanistan would be exempt. He points out that "Civilians are supposed to sacrifice during a war. ... Instead of sacrificing, civilians are partying with tax cuts."

An interesting idea. Close to a user fee, which I've always supported. Two quibbles: some people who have received tax cuts aren't partying, but he's right: many people are living their lives as though there is no war. There is. The other quibble is that I'd extend the exemption to all military (definitions already in the Code) because Iraq and Afghanistan are not the only places where the military is fighting the war on terror.

6. Fix the Alternative Minimum Tax

Mr. Sloane is quite right in pointing out that the two major presidential candidates are steering clear of the "mess" that is the AMT. He wants to eliminate it and raise rates to offset it.

My take: I agree. Mr. Sloane admits he doesn't know exactly how it would play out, and as he wanders closer to the tax labyrinth he hesitates. No wonder. Get too close and there are few brain cells left with which to write Newsweek columns!! Seriously, this is a huge problem, one that I have previously discussed.

So, all in all, high marks to Mr. Sloane. I'm going to try to send him an email and invite him to comment on my comments. I'll let you know if he replies.

Taxes are everywhere. Some, like the income tax and even the sales tax, jump in our faces. Others aren't so obvious. Take a close look at the itemization on a phone bill. We can do that when we have the time.

But do we ever look closely at the breakdown of what we pay to park our cars? Probably not. At least, I haven't. The rare occasions when I drive into center city Philadelphia and park, I pay the garage fee and never thought about the tax.

Until today, when KYW, the local news station, reported that the mayor was proposing an increase in the parking tax to help reduce the budget deficit. Reaction was mixed, and instructive.

An opponent claimed that even a $1 increase in the tax would deter people from coming to Philadelphia and would contribute to the growing erosion of Philadelphia as a city that's in the loop of fashionable places. Advocates of the tax increase expressed hope that it would encourage more people to use public transportation, which one particular advocate described in very favorable terms.

I disagree with both of them. A $1 increase to a $20 parking fee, which is a 5% increase, isn't going to get much attention from tourists and occasional visitors. The percentage is low and so is the absolute dollar increase. Commuters who drive and park every day will notice what would amount to a $250 increase in parking expenses. But do the commuters have much of a choice? (Of course, some do. They can try to find jobs in the suburbs. Or, if they own businesses, they can move to outside the city limits.)

If the public transportation system was reliable, safe, and timely, perhaps it would draw more riders. An increase in the parking fee might cause ridership to grow. My experience with public transportation in Philadelphia is that it rarely gets me from where I am to where I need to be, rarely runs on time and thus is useful only if I don't care when I get to where I need to be, and is never available when I arrive back in town on an Amtrak train bringing me to 30th Street Station. The system is still locked into the "live in the suburbs work in the city" mentality of the mid twentieth century. As a private system, the city system began to struggle financially as employers and businesses fled the city, the state caused a government agency (SEPTA) to be formed to take it over, SEPTA grabbed the profitable suburban lines (Frontier, Red Arrow and others) and everything would have collapsed but for taxpayer money used to shore it up. Drivers and mechanics go out on strike on a regular, staggered basis (city division running, suburbs on strike is followed by city division contract settled but suburbs are out on strike), and the word unreliability glows even more brightly.

I predict that the proposed parking tax increase, if enacted, will have minimal effect on jobs leaving the city. It will have no noticeable effect, and maybe no effect at all, on the number of cars entering center city. It's one of those taxes to which so few people pay attention that it can be raised by a $1 here and a $1 there and the complaints and criticisms offered by those who do notice are drowned in the noise of car engines and squealing tires.

Personally, because I advocate user fees, I favor parking taxes. Bringing a vehicle into center city and parking it there imposes burdens on society that are borned by governments on behalf of society. It wouldn't surprise me that the per-day cost of burdens imposed on center city by the arrival of a car exceeds what the parking tax would be after the proposed increase. Exhaust soot blackens buildings and fouls the air, long-term health care costs rise on account of the damage to lungs and skin and other body parts from the fumes, police are needed to handle traffic congestion, traffic lights need to be maintained, accidents impose costs in a variety of ways, and the list goes on and on and on.

I wonder what would happen if the parking tax were set at the true economic cost. I suspect it would cause a significant decrease in the number of cars being driven into center city. And it would also cause more jobs to leave.

Hint: "The hidden costs of driving in the U.S. amount to at least $184 billion per year, including $40 billion for road costs not covered by fees and tolls and $56 billion for health damage due to air pollution." (from The Center for a New American Dream, citing "The Roads Aren't Free," a July 1998 paper by Clifford Cobb of Redefining Progress.

One last tidbit, from the web site of the Perimeter Transportation Coalition, a site well worth the visit if you are interested in a full discussion of the true costs of driving a car:

"This one is a little mind-numbing, but its worth slogging through.

"Are you living far away from work so that you can afford "more house?" Most couples will "consume" approximately eight (8) cars during their 30 year mortgage. We assume that you would buy an average-priced new car (about $20,000 in 1996) every seven years, and that the value of that car at the end of seven years would be practically nil. Calculating fuel, depreciation and maintenance at $.22/mile, and about 15,000 miles each year, you would tally up about $185,000 in operating expenses during the life of your house mortgage. Figuring an average annual inflation in the price of a new car (and its out of pocket expenses) to be 5%, and that average finance rates would be about 10%, your investment in cars over a 30 year mortgage would be about $400,000. How much "more house" closer to work would that buy?"

After all of this, maybe I should walk home. It's only a mile and a quarter. So what that it's raining and there are no sidewalks? I only have 35 pounds of computer equipment to lug.

Tax just doesn't go away. Today it grabs three different headlines. The gasoline tax is getting attention as part of the debate over gasoline prices, the IRS wants more money to pursue tax delinquents, and the City of Philadelphia moves ahead with tax breaks for one company.

The Gasoline Tax

The gasoline tax is just one piece of a much bigger discussion concerning gasoline prices. There are some who advocate reducing the federal tax on gasoline to alleviate the economic impact of higher gasoline prices on consumers. That idea won't work and it makes no sense.

Why won't it work?

First of all, the federal gasoline tax is not the cause of the higher prices. The gasoline tax is a fixed per-gallon amount (rather than a percentage) and it hasn't changed as gasoline prices have increased.

Second, even an elimination of the federal gasoline tax wouldn't bring prices down much. Perhaps elimination of state gasoline taxes (usually higher than the federal tax) would have an impact, but that won't happen. Almost every state in the nation faces severe budgetary constraints, even crises, and no state is going to surrender revenue.

Third, if gasoline prices at the pump are reduced through reductions of the gasoline tax, producers will increase prices at the wellhead. OPEC has said as much. So a reduction in gasoline taxes simply shifts more American dollars to oil producing nations.

Why does it not make sense?

First, the gasoline tax pays for highway maintenance and improvements. Reduce the tax and the revenue must come from some other source. So a consumer who pays less for gasoline and more for some other tax (such as a state or local roads tax) isn't any better off.

Second, if the gasoline tax is reduced and highway maintenance and improvement projects are shelved, consumers will pay more to keep their vehicles operating. Bad roads mean tire damage, shock absorber failure, and a wide variety of ailments caused by the bouncing, shaking, and crashing.

Third, trying to keep gasoline prices artificially low treats the symptom rather than the ailment. Gasoline prices reflect supply and demand. Supply is limited and demand is skyrocketing. Nations with emerging economies, such as China, or recovering economies, such as Japan, generate more demand for energy. China's population may be as high as 1.5 billion, an increase of 500 million over the past several decades. Automobiles are replacing bicycles in some Chinese cities. Americans aren't conserving gasoline. Why tinker with the real cost of a product other than to buy votes.

So what to do?

First, let the market determine the price. Make certain that the crude oil manipulations of the 1970s aren't being repeated. Impose a windfall profits tax on oil producers if that is necessary to curtail profiteering on the market. As the price increases the next few suggestions will find more takers.

Second, gasoline consumers can re-evaluate their consumption. What sort of vehicles do they drive? Are they fuel efficient? How many miles do they drive? Are they necessary? How is it that it seems every high school student of driving age attending a suburban high school MUST drive to school (while the school buses run around half empty)? I laugh when people criticize me for driving a vehicle that gets fewer miles per gallon than does their vehicle, because I drive fewer miles in a year than many of these folks drive in a calendar quarter.

Third, consumers can (and will) re-evaluate spending priorities. Have a chat with parents and grand-parents and ask them how they "got by" on far less income. Simple. Their children wore hand-me-down clothing, there was very little in the way of "designer" clothing to purchase at inflated prices (and few succumbed to that silly mystique), children weren't pampered with the privileges of adults, and homes were smaller.

Fourth, public transportation needs to be revamped. Most people use cars because the public transportation system doesn't "take me there." Attempts to build new lines meet resistance because of the cost.

A lot of these solutions require people to take a long-term view. That doesn't happen. Long-term views require patience, planning, and thought. Long-term views don't mesh well with sound bites. And that is a nice transition to the second tax story for the day.

The IRS Wants Money for Enforcement

The IRS has asked Congress for more money so that it can audit more taxpayers, collect more delinquent taxes, and pursue tax criminals. The number of IRS employees assigned to these tasked DROPPED 21 percent between 1998 and 2003.

Congress has always been reluctant to fund the IRS. After all, Congress went so far as to put restraints on the IRS to keep it from being an unkind agency that tried to get people to pay their taxes. Taxes that THE CONGRESS, not the IRS, imposed. Even though studies show that every $1 invested in IRS tax enforcement generates $8 of tax revenue, and even though there are hundreds of billions of unpaid taxes collection of which surely would make a difference in the deficit problem, members of Congress are reluctant to campaign for re-election against someone who gathers votes by painting the incumbent as someone who voted to turn the IRS loose on the taxpayer.

There's a HUGE disconnect at work here. There's no long-term assessment of what is being done and funded. Long-term analyses just don't sell in the sound bite world.

Why has the IRS cut back on the number of employees doing tax enforcement?

Here's how it works. The Congress appropriates money to the IRS. Some years Congress has cut the total. Other years it has increased it a small amount. Then Congress mandates that all federal employees get raises. The Congress, however, doesn't increase the agency budget to cover the raise. So, for example, the IRS must find $100,000,000 to cover CONGRESSIONALLY MANDATED pay increases, and it must take that $100,000,000 from something else in its budget. Like tax collection and enforcement.

Talk about killing the goose that lays the golden eggs. On this one, Congress once again scores negative points. And that transitions to the next story, which is about another legislative body.

A Philadelphia Tax Break

Philadelphia City Council gave preliminary approval to a plan that reduces the local tax burden of Ace Ltd., an insurance company. Why?

Because Ace says that it will leave if it doesn't get the tax break. And it would take its 1,000 jobs elsewhere.

That sort of talk (threat) scares politicians, so they scramble to deliver concessions. Unless, of course, it's an ordinary citizen who says "I must leave if they don't reduce the tax burden." Then the citizen leaves. Along with so many others that the city's tax revenue drops. So the city increases taxes on businesses, which threaten to leave.

The official justification is that by cutting Ace's taxes the city will retain jobs. Pretty convincing argument, I guess, because only two council members (one a Democrat and one a Republican) voted no (both, interestingly, sons of former mayors). Only one person showed up to speak against the proposal.

So what happens if this gets approved? Are new jobs created? No. Do city tax revenues increase? No. Do city tax revenues decrease? Yes. How does the city make up for the decrease? It could reduce services, increase taxes on other taxpayers, or borrow money. The first choice drives more individual taxpayers (and small businesses) out of the city or out of business. The second choice does the same thing. The third choice requires further cuts to finance the interest payments, and poses a long-term threat to the city's financial stability. It wasn't that long ago that New York City almost defaulted on its debt.

The city is in a spiral. A revenue death spiral. How can it get out of it? What is needed is clear: it needs a tax base. It needs jobs. It needs businesses willing to set up shop in the city and it needs people willing to live in the city. It needs a reversal of the trends of the past 30 years.

Why do people not live in the city? Most say it is the high taxes and the low quantity and quality of services. I think it is more than that. I think it is a matter of people not wanting to live or work in a place that suffers from the inefficiencies and political games that afflict Philadelphia government. People don't "see" Philadelphia as a great place to live and work. Philadelphia needs to examine WHY people are reluctant to live and work within its boundaries. It needs to ask questions and it needs to be prepared for answers that it won't like and that will cause much angst. It needs to admit that the policies of the last 30 years, even if suspended for a mayoral term here or there, don't work and should be rejected. THAT will require a huge shift in the way things are done in Philadelphia.

My guess is that it will not happen. The unions are too strong (helping Philadelphia earn more points with the MTV Real World negative headline fiasco), the politicians too entrenched (the Fumo private tax collection deals come to mind as an example), the entitlement advocates too short-sighted, and civic pride too wounded for the city to come back absent an upset in the way things are done. It won't happen because people are walking away rather than staying to fight for change. Giving up tax revenue to keep 1,000 jobs in the city is a band-aid on a hemorrhage.

So, gee, how's YOUR day going?

I wonder how many people say or think "time to face the music" when they sit down to being preparing their tax returns. I'm sure a lot of people have some sense of dread when tax time arrives.

This morning I heard a radio announcer plug his station by relating a report that someone had advised listening to soothing music while doing tax returns. Of course, he pointed out that his station would be playing soothing music and thus everyone doing tax returns should listen. Interesting approach to building up an audience!

I dug around, and the best I could find is some advice in this newsletter. It has a long list of techniques for dealing with the stress of tax time, and listening to soothing music is one.

My reaction is, "Can't hurt." Studies show music affects mood, body and brain chemistry, blood pressure, and health. Soothing music won't simplify the tax law, it won't make the forms easier to understand, it won't reduce the time needed to do the return, and it won't lower the tax bill. It just might make coping with all of those stress generators a bit easier.

Maybe we can start a list of recommended music. "Music for Doing Tax Returns." Wonder if that would have kept Napster alive, ha ha ha. Send in your recommendations. I'll post up a list.

And, no, absolutely no way the IRS (or any court) would buy the argument that the cost of the music is deductible as a tax return preparation expense or as a medical expense deduction.

Oh, the stress of it all. I'm off to listen to some music. "Music to Write Blogs By." ???

Law school has become even more popular. Applications are up. Acceptance ratios are down (it's tougher to get in). It seems that everyone wants to be a lawyer (though that really isn't the case). What everyone wants to be is a sports agent (or at least it so seemed when Charles Barkley, visiting some years ago for a Sports Law Forum, asked that question).

Law school deans and faculty like to think that they are doing something very special. They like to proclaim that they are "teaching people to think like lawyers." Because one of my specialties is tax law, I wondered, "Am I trying to teach people to think like tax lawyers?"

More than two decades of teaching has educated me. I'm not teaching people to think like tax lawyers and law faculty aren't teaching people to think like lawyers. Sounds strange. But it isn't.

What are we doing? We are teaching people to think. Period.

In some ways, that's not so special. Engineering faculty teach people to think. Philosophy faculty teach people to think. Chemistry faculty teach people to think. Even public speaking faculty teach people to think.

Well, at least that's what we're supposed to be doing.

Surely there are nuances of difference. Engineers use numbers more than do lawyers and lawyers use words more than do engineers, but ultimately words and numbers aren't all that different.

So, what's the big deal?

The big deal is that most people don't learn how to think in the way that the excellent lawyers, the excellent engineers, the excellent chemists, the excellent of anything think. That is, rigorously, carefully, completely, rationally, and intensely. Whether it is the engineer designing a bridge, a construction worker installing its beams, a lawyer preparing the paperwork, or a chemist researching the formula for the paint, we want the thought process going into the project to be rigorous, careful, complete, rational, and intense. Too often, in much of what people do, the thinking doesn't measure up. And all of us pay the price. True, all of us, at one time or another, some more than others, fail to think through before acting or speaking (after all, much of what the public speaking faculty do is to stress the need to think before speaking).

Let's look at each of these characteristics, and let's consider how shortcomings can afflict our lives.

1. Rigor. This refers to the discipline of staying on schedule, of getting thoughts ordered and sequenced, and of persevering in the face of confusion or failure. Most college graduates, even the best of the best who show up in law school, acquire a habit of letting things go until the end of the semester. It's a bad habit, and they dislike our attempts to break them of it. When things are left until the last minute, there's no cushion for error and no allowance for the unexpected. Things get rushed. Matters get glossed over. Superficiality begins to reign. Things get sloppy. Sloppy, of course, being the opposite of rigor. Think of the defective merchandise that gets purchased, the contractor who fails to show or shows late only to put in a rushed effort, the missed diagnosis, the forgotten surgical sponge. Haste makes waste, but dawdling leads to rushed catch-up. I never understood attorneys who leave filings until the deadline, and then miss it. What's the harm in getting something done ahead of time? It's nice to see highway departments paying contractors bonuses if they finish early. It's nice to have a contractor show up early, and finish sooner than expected (it HAS happened).

2. Careful. To be careful is to pay attention to what one is doing, or analyzing, or moving, or saying, or, yes, thinking. To be careful is to test one's attempt, to question one's hypotheses and premises, to re-check computations, to look again for spelling, punctuation, and grammar errors. Without care, there is more sloppiness. Care reflects a value, that is, that the matter being considered makes a difference. There's some emotion in that element, and it is a good emotion. It is the emotion of inspiration.

3. Complete. To be complete is to finish the process. Many law students struggle with the notion that if they begin the analysis with "if the dog that bit the plaintiff wasn't on a leash, then...." they need to explain what happens if the dog WAS on a leash. Computer programmers learn early that to program "IF A > 6, THEN" requires dealing with A = 6 and A < 6 either by precluding it or allowing for it. Well, some computer programmers so learn. Others don't. Almost all of the time that a program crashes, it's because the designer did not THINK THROUGH TO THE END.

4. Rational. To be rational is to keep irrelevant information out of the thought process. There are times when emotion matters, and emotion is a characteristic that can be studied and discussed (and thought about) in rational terms. Unfortunately, higher education has become infected with one of the nastiest children of political correctness that exists: the exaltation of feelings over all else. A modified variant of "if it feels good, do it" (that is, don't THINK about the consequences, to one's self or others), it provides a safety net for the unprepared, the incapable, the lazy, and the dishonest. After all, we feel what we feel, and there is no right or wrong about it, right? So by encouraging students to proclaim how they feel, without pushing them to THINK about a matter as a way of learning how to deal with the feelings, we create a society in which impulse reigns over civilized order. THINK about that. It's no wonder we are afflicted with the sorts of ills that plague early 21st century life. Drive-by school shootings, corporate and tax fraud, terrorism, irresponsible activity, drug overdoses, and the entire litany of social disorders can be attributed, at least in part, to the exaltation of feeling over reason. When students stand up in mock appellate court and say to me in response to a question, "Your Honor, petitioner feels that..." I interrupt them (much to their chagrin) and announce, "Counsellor, I am interested in what petitioner thinks, not in what petitioner feels." Other faculty do likewise. Would that we had the opportunity to say that to more people. Granted, there are times when feelings matter, but feelings don't matter if the issue is whether the dog was or was not on the leash.

5. Intensity. Intensity requires focus. It requires concentration. It requires pushing to the side the distractions that interfere with the thinker's line of reasoning. Law students are distracted no less than, and perhaps more than, people generally. Often the difference between a student with a 3.7 GPA and a student with a 2.8 GPA is the difference in distractions afflicting them during exam time. When a person's house catches fire, or their mother dies, or their child is sick, or their spouse gets uncooperative, the person's thinking shifts elsewhere. These and a long list of other distractions have happened to my students over the years. Some distractions are life lessons; after all, no one practices law (or any other profession or trade) without distractions. Learning how to deal with them is a life skill. But self-made distractions ("we felt like going golfing because it was the first nice day of spring so we missed class") don't evoke the same sympathy and concerns as do the car accidents on the way to an exam. Overlaying the distraction issue are the multi-tasking and depth issues. Lawyers need to juggle multiple thought threads as they analyze an issue (so, too, do a lot of other people). Lawyers (and others) need the ability to work through multiple-step analyses that require 10, 15, 20 steps. About a decade ago, a student who was a few years older than most of his colleagues said to me after class, "You said you noticed we have problems with this issue. Do you know why?" "Tell me," I responded. "It requires us to stay focused on 8 steps, which take time and effort we aren't used to giving. We're the MTV generation. We can't stay on one thing for more than 5 seconds or 3 steps." He was very very right. All these attention-deficit disorder problems might reflect society's inability to teach (from birth) the qualities of paying attention. A child parked in front of cartoons doesn't develop the same thinking skills as does one put in front of books or toys that require the child to think their way through to something.

Yes, there is something about teaching children to think that would make law school a natural next step rather than the jarring awakening that it is for most students. I am no fan of most pre-K, K-12, and undergraduate education programs. There are some very good ones, and there are some very good teachers. Remembering that parents, entertainers, celebrities and politicians also are teachers, in one way or another, too many teachers aren't teaching what needs to be taught.

Not only are many of the youngsters being encouraged to let feelings stifle rational thought, they end up thinking that the acquisition and regurgitation of information is the essence of education. It isn't. In this regard, most law school faculty, especially in the dreaded first-year, don't help. Closed-book final examinations that constitute 100% of the course grade encourage cramming and memorization, and rewards those with good memories. The best thinkers often don't have the best memories.

When I tell my students that being a lawyer means being a problem solver and a problem preventer (in technical terms, being arbitrators, judges, litigators, planners, and drafters), they stare at me. No, it's NOT like it is on television. The best lawyers are those with the most developed ability to THINK. Good practice for thinking are exercises such as crossword puzzles, anacrostics, and similar puzzles. In fact, DESIGNING a crossword puzzle is even better exercise. Some smile, others groan. "If you don't like to think, why do you want to be a lawyer?" I ask. The honest ones sometimes say, "Money." Other honest ones say, "I feel I need to change the world." (Don't we all?)

I've been writing a series of articles over the past few years, distributed to our students, which emphasize these and other aspects of learning to become a lawyer. I must be onto something. Faculty and practitioners have sent me notes expressing deep agreement and similar sentiments. Faculty and deans at other law schools have asked for (and received) permission to duplicate and distribute one or another of the articles to their students. Two of the articles were reprinted in a national law teaching journal. The best part is that no one has expressed disagreement. Hmmmm.

If we, the law faculty, succeed in our task, we have reshaped minds that haven't been shaped to think and we have polished those that have been so shaped. We have prepared students not simply to be lawyers or to think like lawyers, but to think in ways that are beneficial for all sorts of disciplines. By the tenth anniversary of law school graduation, at least half of the graduates are NOT in traditional legal positions. They discover that people in other fields respect and admire the analytical, rational, disciplined thinking that the law school graduate can contribute. Maybe the most successful of the graduates are the ones who went to law school to learn how to think, period. (I confess. I went to law school because I wanted to be a tax lawyer, and while working as a tax accountant I noticed that the tax lawyers were having more fun doing what they were doing. Oh, yes, they were making more money, but so what? Look where I ended up. Teaching. That's another story.)

My perspective on all of this was reinforced the other night, when a student formerly enrolled in Partnership Taxation (considered the most demanding and difficult course in the post-graduate program in which I also teach) said to me, "It's amazing. I struggled in Partnerships at first, but eventually it came together and I did well, as you know. What you don't know is that since then my grades improved dramatically. You showed me how to think about things, how to organize and structure arguments and information, how to process through material, in ways that I can use in all my courses. I wish I hadn't put off taking Partnerships as long as I did." Indeed, that was a most gratifying statement.

So, that's what it's about. The irony is that students usually don't realize why law school is the way that it is until after they graduate and live the practice life. Or, perhaps, after they take a few more courses. Weirdly, we ask them to evaluate our teaching while they are in the course. I'd rather get their evaluations three years after graduation. Too many of my colleagues through the country are so reluctant to weather the criticism that comes from students who don't understand why we need to demand rigor, care, completeness, rationality, and intensity that they succumb to the "pamper them" and "be nice to them" and "entertain them" student demands. Fortunately I have enough of an ego to withstand the winds blowing in from all sides.

If you got this far, thanks for reading this. Perhaps it will help you contemplate the world a bit differently, or perhaps it will shed new light for you on the issues of education, education funding, and school discipline that are of great concern to so many of us.

Remember: the children we educate today, the lawyers and doctors and engineers we educate tomorrow, are the ones who will be taking care of us next week when we are in our 80s and 90s. WE HAVE NO CHOICE BUT TO DO AN EXCELLENT JOB FOR WE CANNOT DEMAND EXCELLENCE IN RETURN WITHOUT HAVING GIVEN OF IT.

This isn't what I planned to post today and I still expect to get to that in a few hours.

But I just had to react to John Kerry's proposal to stop the outsourcing of jobs by lowering corporate tax rates. OK, so the headline is misleading. He proposes to tax U.S. corporations on taxable income worldwide without most of the exceptions that currently exist in the law and that permit the corporations to defer payment of their taxes. That would raise revenue which in turn would be used to lower corporate tax rates (whereas other members of his party would use the revenue for other purposes).

I'd like to see the computations used to generate these conclusions. Think about it.

First, if the deferred income is taxed, the corporations will claim a foreign tax credit for the taxes paid to other countries on that foreign income. I assume, I hope that whoever did the computations took this into account. There's a lot of foreign tax credit out there waiting to be claimed simply because it cannot be claimed if the foreign income isn't taxed by the U.S.

Second, how does this keep jobs in the U.S.? If a company can pay someone in India $20 to do what it would need to pay an American $100 to do, how does a change in the tax rate from 35% to 33.25% change the outcome? It STILL is more profitable for the corporation to move the job to India.

So, I have a gut suspicion that Kerry wants to soundbite his "I propose to lower taxes" slogan to rebut accusations that he supports tax increases. I'm sure that when the critics point out that he is cutting CORPORATE taxes (as if Enron, Adelphia, Worldcom, and the rest need tax cuts) he'll claim "to create jobs."

The problem, of course, is that the tax law encourages investment in offshore jobs not simply through the corporate tax rate and deferred foreign income provisions but through the effect of the tangled web of complex provisions woven throughout the Internal Revenue Code. It's a thicket of provisions that amplify the effects of other provisions, in a structure that is far more complex than Kerry's simplistic proposal.

Of course, the current Administration and its allies in the Congress are responsible for a chunk of this mess. It is this group which passed tax cuts encouraging investment in equipment (including equipment manufactured overseas) rather than in people. It is this group which cuts taxes on dividends and capital gains.

The unfortunate part of all this sound-bite competition is that it is misleading, erroneous, simplistic, ineffective, inefficient, unwise, inappropriate, and blatantly political. What is more unfortunate is that many Americans will listen and conclude it "sounds good to me" because they don't know any better. What a way to select leadership.

The answer to the political soundbite problem is, of course, the same as the answer to the jobs problem.

In a word: EDUCATION.

Which is what I had intended to discuss, and will.

And no, I don't support education because I am an educator. I am an educator because I am a fan of education.

Hang around a university campus long enough and you notice an interesting phenomenon: during exams, it not only gets very quiet but the tension is thick. It's human nature to leave things go to the last minute, which is an approach that doesn't work very well except, perhaps, for baseball hitters deciding precisely where to swing (and that's a matter of waiting until the last fraction of a second).

It's much the same with income tax returns. A small group files early, gets it out of the way, and watches the rest of us with glee. The early birds often are eager to get their refunds. Another small group files for the automatic extension, making August 15 the due date. To do this, the taxes need to be paid (and if an additional amount is owed in August, there's interest to pay, and perhaps penalties). But most folks wait until the last minute, which is rapidly approaching. And then the panic sets in.

Years ago, most people could do their tax return in an hour or two. The tax law was fairly straight-forward, especially for people who weren't running their own business, weren't invested in partnerships, and didn't have international transactions. Now, a larger portion of the taxpaying population is involved in partnership investments, international investments (including those done through mutual funds), and their own businesses. The tax law has become so complex, that a long list of social engineering credits (child credit, HOPE credit, lifetime learning credit, etc etc) and the alternative minimum tax intrude on many, many returns. The tax computation itself, if there are capital gains (again, likely for those invested in mutual funds), is a post-traumatic flashback to the days of high school physics and calculus.

"Oh, but there is software to do that!" is a frequent response. Yes, there is, but it's only as good as the information provided to it. The taxpayer still needs to dig through records, make evaluations of expenses in order to categorize them, and to determine if prerequisites to deduction or income exclusion are met. Information once irrelevant to the tax return now matters. As I plowed through my return several weeks ago (no, I'm not finished, but I figured I'd get the easy part done first), I concluded that there was very little of my life that the tax law doesn't touch or require me to account for in some way. Here's a small list of the sort of information about my life that the tax law demands I put on the tax return:

* My name, address, age, marital status, and other family information
* My employer's name, and all the information one finds on a W-2
* Information about any business I operate
* Information about my house: the expenses of owning and maintaining it, including real estate taxes, mortgage interest, utilities, repairs, insurance, etc. etc., the total square footage, the square footage of the home office, the cost of each major improvement and the year it was done (that includes the purchase of a new heater after the one in the house when I bought it blew up, and it also includes the new roof, and the raising of part of the roof).
* Information about the equipment I acquire for my home office, such as computers, the scanner, the printer, etc.
* Information about the software I purchase for my business computers
* Information about my car, because I occasionally use it for business (and also use it for charitable purposes)
* Information about my telephone usage, dividing it between business and personal use
* Information about the charities to which I contribute, and a lot of information about my activities with my church (because it is a charity)
* Information about my bank account, retirement plan, and any income-producing asset
* Information about the state and local taxes I pay

The government has become an information glutton. Here we go again: can you imagine this sort of interrogation before paying a toll to cross a bridge?

And my situation is far from the worst. For example, there are families that have extraordinarily high medical expenses, so they must provide all sorts of medical information. If they sold property, or had a casualty loss (such as a car accident), there's even more information to provide.

I rhetorically suggest to the students in my basic tax course that by the end of the semester they should be making a list of the information about their lives that would NOT potentially be required on a tax return. Shoe size? Favorite ice cream flavor? The list is short, and trivial.

The frustration for many people is not just filling out complicated forms. It's needing to stop at line 342 and wandering into a treasure hunt through one's files to determine the date on which something was purchased years ago, or the number of miles driven for charity, or the portion of a hotel bill that reflects telephone charges incurred for business purposes. It's tough to see how the cost of all this record keeping and research (in terms of time expended, space allocated, and dollars spent) is better for the nation's economic and social health than is the cost of "giving up" most of the social engineering provisions in the tax law. The answer, of course, is that it is good for the politicians. Which, to politicians, means that it is good for the country.

So within a week or so life is going to get chaotic for a lot of people. There will be a spike in the phone calls and emails coming my way with the "I have a quick question" introduction. Of course the question is quick, it's the answer that might run on and on. "Is it deductible" is only three words. There are no substantive tax law provisions dealing with deductions that are shorter than multiple sentences of many words.

It could be worse. Every few years or so, a member of Congress, displaying either a sick sense of humor or a seriously misguided but well-intentioned desire to improve the quality of life, suggests that the problem would be solved if the due date for a tax return was moved from April 15 to the taxpayer's birthday. It wouldn't work. Even with provisions dealing with taxpayers born on February 29, even with provisions dealing with people whose birthdays happen to fall on a holiday in a given year, and even with provisions providing for the selection of a filing date by a married couple who don't have the same birthday (almost always the case though I do know a married couple who share the same birthday and I tease them about the good planning that cuts birthday restaurant dinner visit costs in half), the plan won't work. It simply would take the angst of April 1 - April 15 and spread it throughout the year. Toss in the insult of having to file a tax return on one's birthday (what a gift!). Then imagine that by July the IRS notices a pattern of errors on filed returns, and it issues a notice that requires everyone who has filed by that time to re-file. It is far better for the returns to be filed early so that the IRS can identify quickly the "common mistakes" being made.

The only solution, I think, is a law requiring members of Congress to file their own tax returns, without any professional assistance, and without using tax return software. Walk a mile in our shoes.

In the meantime, I am finished with my return but for one item. I am waiting for a charity to send me a Form something or other that is an appraisal certification for a gift of property that I made last year. I cannot file the return without sending this Form by postal mail to the IRS Service Center in New England. Imagine if my birthday had been January 4.

Amazing.

I post my small description of searching for citations to my articles. I discover that one of them is available on-line from the publisher without having to subscribe to Westlaw, Lexis, etc.

In an earlier posting about marriage and taxes, I had commented that I had previously written about the topic but that the article wasn't available, so why bother linking.

Guess what? Yes, this is the article that I found. So, you can read it here. It's part of Tax Analysts' Tax History Project, a grand undertaking supported by the excellent efforts of many, including Tom Field, the creator and driving force behind Tax Analysts. He also taught me State and Local Taxation in my LL.M. program more than a few years ago, and was my thesis advisor for my research into the impact of federal income tax integration on state income tax systems. That, in turn, led to the projects and writings on state income taxes and subchapter S corporations, which in turn led to... oh, that's all best left for another post.

It's that time of the year again when faculty report to the Dean what they've been doing. The Dean likes to know that the faculty has been teaching well, writing productively, and performing service for the community.

Faculty tend to discuss their writing in terms of "scholarship," and one element is the extent to which a person's writings have influenced the development or the application of law in some way. One measure of that impact, though imprecise, is the extent to which a person's writings have been cited, quoted, paraphrased, or otherwise referenced. As the Internet has grown, the ease with which one can discover that one has been cited or quoted has increased accordingly. Yet the same phenomenon brings pages of irrelevant "hits" from the search engines.

So, today, I'm spending time looking for articles and cases that cite, quote, or paraphrase me. I haven't done this for quite some time. It's not as easy as pumping my surname into the search engine, because there are a lot of people with my surname, rare as it is. There are at least a dozen variations of my full name (nickname, reverse order, use of middle initial, etc etc).

So I end up searching for a phrase from the title of each writing coupled with my surname. Interestingly, there are several other Maules (professors all) who do writing in the area of taxation. It figures! Even more interestingly, they are in other countries (Canada, England).

Hence, no long substantive tax analysis today. Just a suggestion that if you haven't "googled" yourself yet, try it. It's amazing what turns up. I'm finding myself cited, I'm finding myself quoted, I'm finding my name on library acquisition lists (those don't count for what I'm doing today), I'm finding previously unknown cousins, and I'm finding some strange stuff. Not quite as strange as the spam that rolls in with the topic "foal studebaker antonio" but strange because I'm not on the page. Or ought not be on the page.

And, yes, this blog is turning up. That doesn't mean all sorts of people are reading it, but it's creeping up on them. What a feeling. To go out on the Internet and to find one's self being mauledagain!

A friend asked me for some help the other day. He was doing a tax return for a small trust. He's not a "tax guy" but he's a smart, educated fellow who surely would do at least as well, and most likely better, than many or most of the students in the basic federal income tax course that I teach. He's been doing this trust's tax return since its inception, so I asked what's the problem? His reply was that he was bewildered by the tax computation portion of the Form 1041 Schedule D. The trust had a small amount of capital gains distributions and also received dividends qualifying for the lower tax rates.

So I agreed and he stopped by. He laughed and said he figured I could punch the numbers into "that tax program you have." Well, I do have Turbotax. So does he. But the Turbotax we have doesn't do trust tax returns. There is software available from Turbotax to do trust tax returns, but when there's only one return to do and the total income is less than $800 it isn't worth the expense.

The ultimate good news was that because the trust distributed its income and is allowed a $300 exemption deduction, it had no tax liability. The bad news was that at first I forgot to subtract the $300 so I ended up plowing through the tax computation portion of the Form 1041 Schedule D. The good news is that despite that portion of the form not being needed, it wasn't a waste of my time because I had the education experience of making direct contact with a the tax computational portion of a Schedule D other than through Turbotax. Yes, the Form 1041 Schedule D is a bit different than the Form 1040 Schedule D (the one used for individuals), but they're very similar. They share a level of complexity that to most folks looks like a differential calculus exercise.

Sometimes I think this is all part of a vast conspiracy among tax software manufacturers, lobbyists, members of Congress, and the Treasury Department. Then I do a reality check and remember that as long as there are taxes there will be a need for tax software, and that the folks at Turbotax are probably (strange as it may seem) among those in the forefront asking for tax simplification. Why? Because programming this tax complexity isn't easy, and the more chances for mistakes, the more mistakes get made. Issuing updates to fix mistakes is expensive. Early in its history, Turbotax required several updates each tax season to deal with errors, but now it's become almost perfect. The years when I would be on the phone with the Turbotax people educating them and explaining how the software wasn't tracking the tax law have faded into the past. They were always very polite but I should have held out for a lifetime subscription!

So why is the Schedule D of Forms 1040 and 1041 (and others) so complicated? Because the Congress insists that certain capital gains, and now, certain dividends, should be taxed at rates lower than those that apply to salaries, interest, pensions, the taxable portion of social security, book royalties, etc. In other words, stock market and other investing and corporate ownership is seen as more important (or at least, deserving of less taxation) than is earning a living through sweating, being retired, or conducting a business in partnership or LLC form. (To be technical, capital gains are taxed at a variety of lower rates, not just one lower rate. To keep this analysis from getting unduly complex, I'll ignore those complexities upon complexity.)

Someone, a few years ago, wrote a brief article in which they listed the arguments made by the advocates of low (or no) capital gains taxation and the arguments made by those who think capital gains should be taxed as is any other income. There were more than 6 dozen arguments on each side. This is hardly the place to list all of them or to analyze each of them. Let's instead consider the major premises.

The advocates of low (or no) capital gains taxation claim that they are being taxed on "phantom" income because some of the gain represents adjustments in price that reflect inflation. They point out that adjustments for inflation exist in the tax law for a wide variety of items (for example, the personal and dependency exemption amount, the standard deduction, the cut-offs for the phase-out of various deductions and exclusions, etc.) But they overlook the fact that the tax rate schedules themselves are adjusted for inflation. Not good enough, they reply.

The answer, therefore, is simple. Make an inflation adjustment to the basis in the asset being sold. Capital gain reflects the difference between the net selling price and the amount invested ("basis") in the asset. So if T buys stock for $100 and ten years later sells it for $400, T has capital gain of $300. If T is in the 30% marginal bracket, T pays tax of $90 on the gain. But T argues some of the gain reflects inflation. How that justifies taxing T at a rate of 5% or even (as the advocates admit is their goal, zero percent) is impossible to understand, let alone accept. Why should T's tax on the gain be $15 or $0? Let's assume that during the 10-year period in question inflation was 35% (that's roughly 3% a year compounded). What makes sense is to let T adjust the basis from $100 to $135. Then T's gain would be $265 ($400 minus $135). Taxed at 30%, T would have a tax liability on the capital gain of $79.50. That's lower than $90 but not near the unfathomable $15 or $0 that T thinks is "fair."

So the advocates of low or zero capital gains rates turn to other arguments. One is the "lock-in" effect. They claim that owners of assets who do not need to sell will not sell if the gain is taxed at regular rates, because they know that at death their heirs will take the assets with a basis equal to fair market value, thus letting the gain arising during lifetime escape taxation. There are several problems with this argument. First, it relies on ANOTHER BAD TAX POLICY to justify a SECOND BAD TAX POLICY. There is no logic in letting gains go untaxed if the property is held until death. The justification is "we don't know what the decedent's basis is." Hogwash. If the decedent made a lifetime gift of the asset, the donee's basis is the decedent's basis and there are ways of figuring it out. It's done all the time. Basis isn't information that the decedent takes to the grave. (And taxing unrealized appreciation (the technical name for these gains) at death would justify total repeal of the estate tax; of course, it would raise more revenue than estate tax repeal would lose, so it's easy to see how members of Congress would sort themselves out on this one.) The second problem with the "lock in" argument is that it presupposes that non-tax factors compelling or strongly encouraging lifetime sales do not exist. Anyone who makes investment or ownership decisions based SOLELY on the tax law is going to be poor, barring extraordinary luck. Investment advisors are known to suggest that "holding on too long" is a bad thing.

Another major argument dragged out by the low/no capital gain tax crowd is that taxation of capital gains impedes capital formation. Supposedly, if capital gains are taxed at regular rates, people will not invest in capital formation (such as corporations, LLCs, and partnerships). Well, I ask, will they bury their money? Spend it? If they spend it, what will be done with the money by those who receive it? Oh, they'll spend it. Inflation will run rampant. So savvy folks will invest to shield themselves from inflation. And that, in turn, will generate capital investment, and loosen the consumption pressure on the inflation rate. Perhaps people would invest their discretionary income (money left over after paying for the necessities of life) in interest-bearing accounts. Which, of course, means that the banks and other financial institutions would have cash that would be used for (a) making loans to people who would invest in true capital, such as equipment, machines, buildings, etc. or (b) investing in the stock market or other equity arrangements.

I could continue on and on with the dozens of arguments put forth by the advocates of low or no capital gains tax. I could add the dozens of arguments made by the opponents (and I already have outlined some of them). I could dedicate paragraphs of analysis to the question of why, if it is so good to tax capital gains at 5% or 0%, is it not just as good to tax salaries and interest and pensions at 0% or 5%. I could (and I may, in a future post) explore how we will end up with an income tax on salaries and not much else (especially if the proposal to make most contributions to savings accounts deductible). Add in the imposition of social security taxes on salaries (but not capital gains, interest, or dividends) and one quickly begins to see how two economic classes will come to exist in society. That is something that is flat out not healthy for survival of the nation. Am I beginning to sound like Howard Dean? Maybe if I refrain from screaming I'll avoid being mistaken for him. (After all, he is a Maule descendant (as you can see here ) so he must be right about something, and so I'm guessing it's probably in the tax area...)

Now, of course, with tax rates on capital gains having been lowered and then lowered again, to the point where a zero rate is rapidly approaching, the low/no capital gain tax rate folks turned to dividends. So dividends are taxed at these lower rates. Why? Supposedly it will encourage corporations to pay dividends (as to whether it does, see Story Number Five in my earlier posting on that topic. That makes no sense if the concern is capital formation, because under that theory, the corporations should retain cash to invest in additional property acquistion, in more jobs, and in business growth. Why distribute earnings to shareholders?

Easy. So that they can invest in other corporations. And get more capital gains. And have their net worth grow at an after-tax rate that far exceeds (relatively speaking) the net worth growth rate of folks who earn salaries and put their money into bank accounts to insure against next month's job loss. See how the gap between society's owners and society's workers is widening? When I use the phrase "economic slavery" to describe this phenomenon I get a lot of static from all sorts of people, but give it some thought.

What's really going on is the "don't tax you, don't tax me, tax that fellow behind the tree" phenomenon that has afflicted tax law development since the beginning of tax time. (The quote is attributed to former Sen. Russell B. Long.) Who's you? Who's me? Simple. You and me are the folks making the laws, that is, bringing their proposals in for enactment as rewards for campaign contributions. Where do they get all that money to contribute to the soft-money organizations? Hmmm... And who's behind the tree?

One response is to point out that most Americans own stock through their pension plans and thus share in the benefits of lower capital gain taxation. First, for many Americans in pension plans investing in stock, their stock ownership is remote and the benefits subject to the risk that the plan will go under, as has happened. Second, for many Americans, adding a few dollars of capital gains to their income would not push them into the high brackets where the benefits of 5% and 15% capital gains rates generate the most significant savings. Third, because pension plan income is not taxed to the participant until retirement (when it is taxed at regular rates), the existence of a low or zero capital gains rate for those pension plan capital gains is specious. It's like giving a person ineligible for a driver's a preferred appointment time for a driving test.

I began this discourse with a description of the complexity generated by taxing some capital gains and some dividends at lower rates than those applying to salary, pension, interest, and other income. Though the cry "it's too complicated" ought not always win the day (because sometimes there is no choice but complexity, as is, for example, the case with the chemisty applied to design life-saving pharmaceuticals), adding complexity to a system of any kind (including tax law) needs to be justified. The burden needs to be on those advocating the complexity. I submit to you that in this instance, the advocates of lower taxes on certain capital gains and certain dividends have not met that burden.

Tom Ferrick, a columnist for the Philadelphia Inquirer, had an interesting column in today's paper about the financial woes of the Philadelphia Gas Works. He took a close look at the PGW's proposal to raise rates to cover the revenue losses from people who don't pay their gas bills.

PGW has a long history of mismanagement, a problem that was recently addressed in a series of operating and personnel changes. PGW is owned by the city of Philadelphia, and contributes $18,000,000 to the city's budget. PGW faces a series of problems.

First, the cost of natural gas has skyrocketed, which has compelled PGW to increase its rates. Second, at least one-third of its customers live at or below the poverty level, so they end up not paying their bills (or paying only a portion) when their winter gas bills arrive. As Ferrick points out, a person working 40 hours a week earning $7 an hour finds it tough to pay a $500 monthly heating bill. Ironically, federal and state heating assistance isn't available to the "working poor." I thought that problem had been dealt with, but apparently there still exist programs that tend to encourage unemployment.

Third, and this is the big one, there are folks who can pay the bills but who don't, knowing that PGW is forbidden by law to shut off gas service in the winter months. Ferrick quotes and paraphrases a PGW official who calls these people "gamers" because they are gaming the system. Half of the PGW's 500,000 customers do not pay their bills on time, one-third of the customers live at or below the poverty line, and PGW intends to cut off service in April to 35,000 "severe" delinquent. Do the math. There are 80,000 customers living above the poverty line who aren't paying their bills, and at least 55,000 aren't going to lose service in April.

So, facing an anticipated $5 million loss, PGW is asking the utility commission to let it increase rates on the customers who do pay to cover the revenue shortfall from those who don't pay. What is that?

WHY, IT'S A HIDDEN TAX. It makes PGW, as Ferrick puts it, in part a social welfare agency.

Wouldn't it be better to increase taxes and use that revenue to subsidize the genuinely poor (and to hire law enforcement officials to call time-out on the gamers?). At least the tax would be deductible for federal income tax purposes, whereas increased gas bills are deductible only for businesses.

Ferrick also reports that PGW has asked Philadelphia to release it from contributing $18,000,000 to the city budget. If that happens, then the city's budget takes a shot, and it either raises taxes or cuts expenditures (i.e., services).

What a mess. When what PGW pays to acquire gas triples, there's a problem. The age-old argument about energy sources rears its head again, pitting advocates of renewable energy (solar heating) against those who posit that there's enough natural gas in the ground to last for hundreds of years. Well, then why has the price skyrocketed? There's no OPEC embargo to blame this time. Gas producers blame the government for policies that discourage or make expensive exploring and drilling for gas, the government blames the gas producers for bad planning, and I suspect that somewhere somebody sitting in an office, not getting their hands dirty, is making a lot of money moving someone else's gas around.

Even though it wouldn't end the problem, it does seem outrageous that people can game the system. People who can afford to pay, but who think they are so special that they deserve to avoid paying gas bills (so that they can acquire something else), are essentially telling the rest of us that we need to shoulder their share of the burden. PGW's reaction isn't unlike most other businesses. What you and I pay for a product covers the cost of employee pilferage of inventory, shoplifting, and the retailers' and manufacturer's bad debt expense. So who can blame PGW for doing what other businesses do? True, PGW's proposal is in the spotlight because it is regulated by the utility commission whereas most other businesses just make price adjustments. Other businesses also take steps to eliminate bad debt (by refusing to deal with deadbeats) and to eliminate theft. PGW, however, is constrained by a series of government interventions designed to protect the very poor that are in turn exploited by the gamers.

The gamers are everywhere. The problem needs to be addressed in a way that transcends PGW. The gamers are inflicting hidden taxes on all of us. The gaming isn't just the gas-bill-payment-avoidance play. It shows up whenever someone fails to do what he or she should do, and shifts the burden to the rest of us. Sometimes it's money, as in the PGW situation or in the shoplifting situation. More and more, it's time. A company ships software that hasn't been fully tested, and the consumers invest hours trying to fix it. Imagine buying a car, arriving at the dealership to discover it has four flat tires, and being handed a jack while being told to fix it yourself.

These corporate gamers have figured out that they can foist shoddy products on us and let us invest our time dealing with it. Same thing with telemarketers. We need to invest OUR time listening to them or trying to get onto a do not call list. Someone figured out that it pays to treat us this way (just as someone figured out it's cheaper to pay for deaths caused by defective products than to pay for the correction of the problem (a lot has been written about this theory and I'll leave the discussion to the experts (look at this explanation and be sure to scroll down to "Quality Cost Analysis"))). Sarcastically, I add that it's usually not a question of economic survival for the company, it's often a question of a highly paid CEOs, executives, and upper management not wanting to cut their salaries a bit so that the company can hire a few people to get the job done right in the first place.

Don't mind me. I spent four hours yesterday installing an update of Quicken that was supposed to be seamless. Even though my data was supposed to transfer over, I ended up having to enter manually all the categories (because they didn't carry over and could not be copied and pasted). There were all other sorts of problems. Who designed this thing? Who checked it? Who used it before shipping it? When the program failed, it told me to call the bank, the bank connected me with a third party servicing company, then I was transferred to a Quicken person, who wanted to send me back to a phone call with the bank, but I ended up back with the third party person. The third party technician was helpful; the person at the bank was sympathetic, as apparently I was the umpteenth person to call. Ultimately, as is usually the case, I figured a lot of it out myself. I am tempted to send Quicken an invoice for my time. But I don't have the time to continue playing the game.

Could I have avoided the update? Noooooooo. The bank and Quicken will cease supporting, or letting me use, the older version, as of sometime in April. Clever. The new version isn't any better nor is it more functional for what I want (a checkbook tracker and an on-line banking service). Instead, Quicken wants to advise me on taxes (hahahahahaha), make loans, issue me a credit card, ... why not mow my lawn, too? So I paid for what I already had, cluttered with other unwanted features that had the effect of denigrating the performance and efficiency of what I had. Why? Because of a corporate mentality that the corporation must dominate its market and all related markets. Find your niche, Quicken, and stick to it. Resist the temptation to imitate Microsoft.

Lest you think I'm simply ranting, do this: sit down and add up all the hours you spend doing something because someone else failed to do so or did something in the wrong way. Don't count hours expended taking care of children or ill family members. That's different. Think of the people to whom you've paid money only to get a product that requires you to invest more money or valuable time to fix it (want to hear the story about the peel and stick floor tiles that don't have enough glue and that turn out to be made by some company in Taiwan that is unreachable? Nah, I'll save that one for some other time). Surely, as things I've read recently indicate, it's a widespread problem. It is having and will continue to have, an erosive impact on the security, economic success, and well-being of our nation and our society.

The upshot is that we are paying people for the privilege of doing their work. We're paying extra to cover the misdeeds of others. We're paying extra to cover the costs imposed on society by the gamers. That's just flat out wrong. Most of us do not (and should not) object to paying to help the truly needy and unfortunate, especially those who suffer because society failed them in some way. It is difficult to believe that clamping down on the gamers without hurting the genuinely afflicted is a task that cannot be done. There are times I think that it's not a question of whether it can be done, but whether there is a desire to have it done. So long as the gamers win, they will keep gaming. Software virus writers, PGW gas bill avoiders, sloppy product manufacturers, intentionally incomplete software releases, no-show contractors, and the rest of gaming crowd need to be put in the penalty box.

Otherwise, we will continue to pay these hidden taxes. Thinking of them in this manner, it may change our approach to dealing with those who are benefitting at our expense and who don't deserve to do so. And if steps aren't taken to put an end to the hidden tax phenomenon, it will grow until it chokes the economy and corrupts our standard of living.

Oh, do go read Ferrick's column. He's a good writer, he tackles interesting topics, and today he resonated very well.