Wednesday, May 05, 2004
So Why Am I Here?
No, not me. The law student.
Today's New York Law Journal has an article, Law Schools Steal a Page From Business Schools about changes being made by some law schools in their admissions policies and curricular design that are bringing them closer to the business school model.
Law schools are beginning to give more weight to an applicant's work experience, rather than rely solely on academic performance (grades, LSATs) and a few other characteristics. Dean David Van Zandt of Northwestern University School of Law explains that approximately 70 percent of the school's students have work experience. That is a very high number when compared to the typical law school.
I like the idea. Students who take time off from their studies and explore life outside the academy return with a sense of purpose, an understanding of the context in which they will practice, and an appreciation for why some professors (cough, cough) are as demanding as they are.
Van Zandt noted that students with work experience have a maturity and focus that law students don't have. Indeed. Though it is unquestioned that most law studentsenter law school directly from college, he suggests that they do so because they are afraid to go to work.
From the article:
I've watched students in this situation tune out, cut class, and not even purchase the books for a course. They've graduated, ignored the bar exam, and taken jobs for which even a high school education isn't a prerequisite. I've met parents at graduation who have beamed while telling me, "Finally we have a lawyer in our family" while the graduate grimaces, clearly unhappy and in psychological pain.
Parents, please let your children make informed choices about their education. Please don't send them to us if they don't want to be here. They aren't good students, they aren't happy, and they're not going to do well here or in life. Please don't try to live your life again through your children.
I was blessed with two parents who told me a lot about different careers and occupations. My father surely did not push me to attend law school. When my youngest sister followed me into law school, Dad said, in his typical witty and joking way, "Where did we go wrong?" My mother is to blame, for she said to me, when I was young, in words close to these: "It's not my place to tell you what to be when you grow up. God gave you many talents. Use them. Always have a fallback position. Go into a career that gives you an opportunity to do good and to do well. I'll love you no matter what you choose to do, so long as it's legal." Yeah, I know what she meant. But it's one of my favorite "Mom" stories.
Today's New York Law Journal has an article, Law Schools Steal a Page From Business Schools about changes being made by some law schools in their admissions policies and curricular design that are bringing them closer to the business school model.
Law schools are beginning to give more weight to an applicant's work experience, rather than rely solely on academic performance (grades, LSATs) and a few other characteristics. Dean David Van Zandt of Northwestern University School of Law explains that approximately 70 percent of the school's students have work experience. That is a very high number when compared to the typical law school.
I like the idea. Students who take time off from their studies and explore life outside the academy return with a sense of purpose, an understanding of the context in which they will practice, and an appreciation for why some professors (cough, cough) are as demanding as they are.
Van Zandt noted that students with work experience have a maturity and focus that law students don't have. Indeed. Though it is unquestioned that most law studentsenter law school directly from college, he suggests that they do so because they are afraid to go to work.
From the article:
Stanford Law School Professor Deborah Rhode said law schools, with far fewer entrance requirements than medical or business schools, provided fresh college graduates with the professional "degree of least resistance." Considering applicants' work experience, she said, would "screen out students who are in law school by default."I would add one more concern, namely, students who enter law school because their parents compel them, or otherwise pressure them, to do so. I've known students who were here because their parents, according to them, "made them." Of course, I don't understand how a 21-year-old can be "forced" to attend law school, perhaps because I come from a family that did not and does not impose career choices on the children. I know that a parent can say, "I'll pay for law school, but not medical school." I don't think that's right, but perhaps the parent knows their child well enough to know that investment in medical school tuition would be a waste. But a child who does not want to go to law school ought not attend, even if it means getting a job. Dean Van Zandt may be correct. Perhaps the child is afraid of getting a job. Or perhaps too lazy, having been accustomed to being handed life on a platter, silver or otherwise.
I've watched students in this situation tune out, cut class, and not even purchase the books for a course. They've graduated, ignored the bar exam, and taken jobs for which even a high school education isn't a prerequisite. I've met parents at graduation who have beamed while telling me, "Finally we have a lawyer in our family" while the graduate grimaces, clearly unhappy and in psychological pain.
Parents, please let your children make informed choices about their education. Please don't send them to us if they don't want to be here. They aren't good students, they aren't happy, and they're not going to do well here or in life. Please don't try to live your life again through your children.
I was blessed with two parents who told me a lot about different careers and occupations. My father surely did not push me to attend law school. When my youngest sister followed me into law school, Dad said, in his typical witty and joking way, "Where did we go wrong?" My mother is to blame, for she said to me, when I was young, in words close to these: "It's not my place to tell you what to be when you grow up. God gave you many talents. Use them. Always have a fallback position. Go into a career that gives you an opportunity to do good and to do well. I'll love you no matter what you choose to do, so long as it's legal." Yeah, I know what she meant. But it's one of my favorite "Mom" stories.
Monday, May 03, 2004
Wanna Bet?
Back to some substantive tax law. It all turns on whether entering a "no purchase required" manufacturer's sweepstakes constitutes wagering.
WHO CARES?
Well, the winner of one of those sweepstakes does. To understand why, let's look at a relatively simple bit of tax law.
A taxpayer is not permitted to deduct "losses from wagering transactions" only to the extent of gains from wagering transactions. Why is there such a rule? Presumably so that the wagering losses aren't "financed" through tax savings generated by deducting those losses. As a matter of public policy, certain activities, including wagering, if not outright prohibited, are subject to special or extra taxes (e.g., "sin taxes" on alcohol, tobacco, gambling, etc.). So denying a deduction, other than to offset wagering income, fits in with such a policy.
The taxpayer in question hit the jackpot in a manufacturer's sweepstakes. The taxpayer happened to have wagering losses from other transactions. Deducting those losses would reduce the tax liability on the sweepstakes winnings. When the taxpayer filed his return, he deducted the wagering losses. When the IRS audited the tax return, the IRS agent sought advice from the IRS National Office.
The IRS National Office issued a Technical Advice Memo (TAM 200417004), in which it concluded that the sweepstakes winnings were not "gains from wagering transactions." The IRS explained that although there is no authority defining "wagering transaction" for purposes of the deduction limitation rule (and it's right, there's nothing in the regulations, no rulings, or cases), the IRS relied on the definition of wagering for purposes of the rule requiring withholding on gambling winnings and a ruling involving excise taxes on certain wagers.
The IRS National Office concluded that the sweepstakes winnings were not gains from wagering transactions (and thus the wagering losses were not deductible) because a transaction cannot be a wager unless there is consideration provided by the person making the wager. Because no purchase was required, no consideration was paid to the manufacturer. The taxpayer's claim that he had paid consideration in the form of postage, the cost of envelopes, and the investment of his time was rejected even though he had mailed almost four dozen self-addressed stamped envelopes in order to obtain "words" to be used on the entry form.
The statute that requires withholding on gambling winnings doesn't define wagering transaction. The regulations issued under that statute don't define wagering transaction, although they refer to wagering transactions as though there's no need for a definition. The statute imposing an excise tax on certain wagers defines the wagers that are taxed through a technique of pre-defined inclusion, namely, the term "wager" means any wager that meets certain conditions. In other words, wagers are separated into those that are taxed and those that are not taxed, but wagers aren't defined. Nor is the term "wagering transaction" even used. The regulations issued under the statute repeat the statutory definition of taxed wagers.
Almost 40 years ago, the IRS issued a Revenue Ruling to address whether the excise tax on wagers applied to "merchandising plans where merchants give tickets or chances for prizes to customers in connection with the sale of merchandise." The IRS concluded that the answer was the classic "it depends" that my "we want an answer" students learn to detest. The IRS explained:
The taxpayer who won the sweepstakes was permitted to enter without making a purchase, and the purchase price of the manufacturer's product appears not to have been affected by the existence of the sweepstakes (though one has to wonder, where does the manufacturer obtain the money to pay the winner?).
The IRS and the taxpayer agreed, however, that in order for a transaction to be a "wager," three elements must be present: (1) prize, (2) chance, and (3) consideration. Prize and chance exist in a sweepstakes. So the matter comes down to whether investing $35 in an attempt to win is sufficient consideration. There is no question that even a $1 bet or $1 purchase of a lottery ticket is sufficient consideration for the bet or lottery ticket purchase to be a wager. The IRS cited cases to that effect in the TAM being discussed.
So why isn't the $35 consideration? The IRS cites an example in the regulations dealing with withholding of taxes on gambling winnings, in which a person purchases a magazine subscription and is automatically entered into a special drawing. The regulations conclude that the winnings are not gambling winnings. That example, however, isn't the same as the sweepstakes situation because the sweepstakes entrant shelled out $35 solely in return for a chance to win, and not for a magazine or a product.
Next, the IRS distinguishes the $35 as amounts paid for goods and services (envelopes and mail delivery) that the taxpayer received, and that accordingly, they were not paid for the chance to win. The problem with this reasoning is that the taxpayer could not have entered the sweepstakes without paying for envelopes and postage. The IRS position would make more sense had the taxpayer entered the contest via the Internet, but that is a different case because in that situation entry into the sweepstakes would indeed be pretty much "free."
The taxpayer's assertion that the envelopes and postage that he purchased were in turn "spent" in an effort to win the sweepstakes, that he "spent" time and effort, and that consideration need not be provided directly to the operator of the sweepstakes was met with this statement by the IRS: "Although such factors may rise to the level of consideration in some contexts, we do not agree that they do so for section 165(d) purposes." [Section 165(d) is the provision that limits the deduction for losses from wagering transaction to gains from such transactions.]
That's the critical determination, and the IRS simply states, in effect, "well, those are good arguments, but we aren't convinced they apply." WHY NOT?
The IRS attempt to explain is weak. The IRS claims that the taxpayer should be treated in the same manner as the person who entered the sweepstakes by making a purchase of the manufacturer's product, a transaction that the IRS concludes is not a wagering transaction. The IRS agreed that the taxpayer's entry through the alternate form (mailing in entries rather than purchasing the product) was distinguishable, but then concluded that "the distinction highlights the fact that his transaction did not involve consideration and was not, therefore, a wager. To state the obvious, in order to enter the sweepstakes the taxpayer was not required to pay more for Corporation's product than he otherwise would have paid; in fact, he was not required to purchase the product at all." There's no logic in that analysis. The taxpayer DID in fact invest in the sweepstakes, whereas the product purchaser does not. That difference goes to the heart of the required "consideration."
The IRS closes its analysis with this strange statement: "Although, in the aggregate, the taxpayer may have expended a greater than nominal amount on postage and envelopes, he did so with respect to many chances to win. With respect to each chance the costs incurred were relatively insignificant, and they were not paid directly for the chance to win the prize." Why is this a strange statement? Because the $1 paid for a lottery ticket is the purchase of "a" chance to win, and $35 paid for 35 lottery tickets is the same as buying 35 chances to win. Whether it is $1 or $35, a wager is a wager. To dismiss the taxpayer's sweepstakes entry cost as "relatively insignificant" flies in the face of the undeniable conclusion that $1 paid for a lottery ticket is not insignificant.
See what tax lawyers get to do? They get to study every sort of transaction that can be taxed. Which means they get to study everything. No longer do I say "just about everything" because I have in the queue an article about taxes that are imposed on things we'd never have expected. I'll get to that at a later date.
Two final thoughts.
First, I wonder what it was like for a manufacturer to pay a sweepstakes prize to someone who didn't purchase the manufacturer's product (and perhaps never did)? Endorsements anyone?
Second, the desire of taxpayers who hit the big jackpot to avoid the tax bill that comes with it is unlimited in its creativity. Many years ago a taxpayer, who frequently visited race tracks, won a $21,854 twin double. He reported this amount on his tax return as his only gambling winnings. Against this amount, the taxpayer deducted gambling losses of $21,840. In support of his claim, he submitted $23,680 in losing tickets, all allegedly purchased by him or on his behalf within a seven week period. The taxpayer had no other records of either his winnings or his losses. The IRS disallowed the deductions, and off to Tax Court they went (Green v. Commissioner, T.C. Memo 1972-131). The court noted, "Several of the losing tickets submitted unmistakably bear heel marks." Other tickets purchased on the same day and at the same track were relatively clean. The taxpayer, who was the only witness at trial, did not explain what the court called "this circumstance." The court cited to another case (for those interested, Legawiec v. Commissioner, T.C. Memo 1970-295), in which the taxpayer offered as evidence of gambling losses his losing racetrack tickets that he had tossed onto the floor of his car, and which he retrieved months later. That taxpayer, too, lost his case.
WHO CARES?
Well, the winner of one of those sweepstakes does. To understand why, let's look at a relatively simple bit of tax law.
A taxpayer is not permitted to deduct "losses from wagering transactions" only to the extent of gains from wagering transactions. Why is there such a rule? Presumably so that the wagering losses aren't "financed" through tax savings generated by deducting those losses. As a matter of public policy, certain activities, including wagering, if not outright prohibited, are subject to special or extra taxes (e.g., "sin taxes" on alcohol, tobacco, gambling, etc.). So denying a deduction, other than to offset wagering income, fits in with such a policy.
The taxpayer in question hit the jackpot in a manufacturer's sweepstakes. The taxpayer happened to have wagering losses from other transactions. Deducting those losses would reduce the tax liability on the sweepstakes winnings. When the taxpayer filed his return, he deducted the wagering losses. When the IRS audited the tax return, the IRS agent sought advice from the IRS National Office.
The IRS National Office issued a Technical Advice Memo (TAM 200417004), in which it concluded that the sweepstakes winnings were not "gains from wagering transactions." The IRS explained that although there is no authority defining "wagering transaction" for purposes of the deduction limitation rule (and it's right, there's nothing in the regulations, no rulings, or cases), the IRS relied on the definition of wagering for purposes of the rule requiring withholding on gambling winnings and a ruling involving excise taxes on certain wagers.
The IRS National Office concluded that the sweepstakes winnings were not gains from wagering transactions (and thus the wagering losses were not deductible) because a transaction cannot be a wager unless there is consideration provided by the person making the wager. Because no purchase was required, no consideration was paid to the manufacturer. The taxpayer's claim that he had paid consideration in the form of postage, the cost of envelopes, and the investment of his time was rejected even though he had mailed almost four dozen self-addressed stamped envelopes in order to obtain "words" to be used on the entry form.
The statute that requires withholding on gambling winnings doesn't define wagering transaction. The regulations issued under that statute don't define wagering transaction, although they refer to wagering transactions as though there's no need for a definition. The statute imposing an excise tax on certain wagers defines the wagers that are taxed through a technique of pre-defined inclusion, namely, the term "wager" means any wager that meets certain conditions. In other words, wagers are separated into those that are taxed and those that are not taxed, but wagers aren't defined. Nor is the term "wagering transaction" even used. The regulations issued under the statute repeat the statutory definition of taxed wagers.
Almost 40 years ago, the IRS issued a Revenue Ruling to address whether the excise tax on wagers applied to "merchandising plans where merchants give tickets or chances for prizes to customers in connection with the sale of merchandise." The IRS concluded that the answer was the classic "it depends" that my "we want an answer" students learn to detest. The IRS explained:
The liability of a merchant for the wagering taxes would depend in each individual case upon the manner in which the merchandising plan is operated. If it is reasonable to infer from the circumstances surrounding the operation of the plan that a customer does not pay more for merchandise in order to obtain such tickets or chances than he would otherwise pay for the merchandise alone, then no "wager" subject to the excise tax would appear to have been placed. Conversely, if a customer does pay more for merchandise in order to obtain a chance on a prize than he would otherwise pay for the merchandise alone, such excess amount would appear to constitute a consideration for the chance and a "wager" subject to the excise tax. Among the circumstances that should be considered are (1) the value of the chance in relation to the price paid for the merchandise, (2) the relative price of the merchandise as compared with the price charged by comparable merchants who do not award prizes in connection with sales of merchandise, (3) the present price of the merchandise as compared with the price charged by the same store before adoption of the plan, and (4) the emphasis that the merchant places on the chance in selling his merchandise. Consideration should also be given to such factors as whether chances are distributed with sales of all merchandise generally and whether they are offered only with sales of a particular kind of merchandise not ordinarily carried in the store.
The taxpayer who won the sweepstakes was permitted to enter without making a purchase, and the purchase price of the manufacturer's product appears not to have been affected by the existence of the sweepstakes (though one has to wonder, where does the manufacturer obtain the money to pay the winner?).
The IRS and the taxpayer agreed, however, that in order for a transaction to be a "wager," three elements must be present: (1) prize, (2) chance, and (3) consideration. Prize and chance exist in a sweepstakes. So the matter comes down to whether investing $35 in an attempt to win is sufficient consideration. There is no question that even a $1 bet or $1 purchase of a lottery ticket is sufficient consideration for the bet or lottery ticket purchase to be a wager. The IRS cited cases to that effect in the TAM being discussed.
So why isn't the $35 consideration? The IRS cites an example in the regulations dealing with withholding of taxes on gambling winnings, in which a person purchases a magazine subscription and is automatically entered into a special drawing. The regulations conclude that the winnings are not gambling winnings. That example, however, isn't the same as the sweepstakes situation because the sweepstakes entrant shelled out $35 solely in return for a chance to win, and not for a magazine or a product.
Next, the IRS distinguishes the $35 as amounts paid for goods and services (envelopes and mail delivery) that the taxpayer received, and that accordingly, they were not paid for the chance to win. The problem with this reasoning is that the taxpayer could not have entered the sweepstakes without paying for envelopes and postage. The IRS position would make more sense had the taxpayer entered the contest via the Internet, but that is a different case because in that situation entry into the sweepstakes would indeed be pretty much "free."
The taxpayer's assertion that the envelopes and postage that he purchased were in turn "spent" in an effort to win the sweepstakes, that he "spent" time and effort, and that consideration need not be provided directly to the operator of the sweepstakes was met with this statement by the IRS: "Although such factors may rise to the level of consideration in some contexts, we do not agree that they do so for section 165(d) purposes." [Section 165(d) is the provision that limits the deduction for losses from wagering transaction to gains from such transactions.]
That's the critical determination, and the IRS simply states, in effect, "well, those are good arguments, but we aren't convinced they apply." WHY NOT?
The IRS attempt to explain is weak. The IRS claims that the taxpayer should be treated in the same manner as the person who entered the sweepstakes by making a purchase of the manufacturer's product, a transaction that the IRS concludes is not a wagering transaction. The IRS agreed that the taxpayer's entry through the alternate form (mailing in entries rather than purchasing the product) was distinguishable, but then concluded that "the distinction highlights the fact that his transaction did not involve consideration and was not, therefore, a wager. To state the obvious, in order to enter the sweepstakes the taxpayer was not required to pay more for Corporation's product than he otherwise would have paid; in fact, he was not required to purchase the product at all." There's no logic in that analysis. The taxpayer DID in fact invest in the sweepstakes, whereas the product purchaser does not. That difference goes to the heart of the required "consideration."
The IRS closes its analysis with this strange statement: "Although, in the aggregate, the taxpayer may have expended a greater than nominal amount on postage and envelopes, he did so with respect to many chances to win. With respect to each chance the costs incurred were relatively insignificant, and they were not paid directly for the chance to win the prize." Why is this a strange statement? Because the $1 paid for a lottery ticket is the purchase of "a" chance to win, and $35 paid for 35 lottery tickets is the same as buying 35 chances to win. Whether it is $1 or $35, a wager is a wager. To dismiss the taxpayer's sweepstakes entry cost as "relatively insignificant" flies in the face of the undeniable conclusion that $1 paid for a lottery ticket is not insignificant.
See what tax lawyers get to do? They get to study every sort of transaction that can be taxed. Which means they get to study everything. No longer do I say "just about everything" because I have in the queue an article about taxes that are imposed on things we'd never have expected. I'll get to that at a later date.
Two final thoughts.
First, I wonder what it was like for a manufacturer to pay a sweepstakes prize to someone who didn't purchase the manufacturer's product (and perhaps never did)? Endorsements anyone?
Second, the desire of taxpayers who hit the big jackpot to avoid the tax bill that comes with it is unlimited in its creativity. Many years ago a taxpayer, who frequently visited race tracks, won a $21,854 twin double. He reported this amount on his tax return as his only gambling winnings. Against this amount, the taxpayer deducted gambling losses of $21,840. In support of his claim, he submitted $23,680 in losing tickets, all allegedly purchased by him or on his behalf within a seven week period. The taxpayer had no other records of either his winnings or his losses. The IRS disallowed the deductions, and off to Tax Court they went (Green v. Commissioner, T.C. Memo 1972-131). The court noted, "Several of the losing tickets submitted unmistakably bear heel marks." Other tickets purchased on the same day and at the same track were relatively clean. The taxpayer, who was the only witness at trial, did not explain what the court called "this circumstance." The court cited to another case (for those interested, Legawiec v. Commissioner, T.C. Memo 1970-295), in which the taxpayer offered as evidence of gambling losses his losing racetrack tickets that he had tossed onto the floor of his car, and which he retrieved months later. That taxpayer, too, lost his case.
Friday, April 30, 2004
What is a Post-Modern Student?
Or, better yet, what is an MTV generation student? Or a post 9-11 student?
Why do I ask?
Prof. Ann Althouse of Wisconsin Law has posted some questions about my classroom clicker post.
After quoting this part of my post:
I think some of us (Prof. Althouse, and I, and others, excluded) have indeed caved to the student desire to be fed information. I've seen it. I don't intend to yield, but I seek the carrot that will re-ignite the enthusiasm that brings the applicant to the law school and that too many of them lose by the time they reach my class.
There is something very fascinating about the disconnect between the admissions applications and the passivity evident in too many law school classrooms. For decades, every law school applicant has expressed a desire to acquire a legal education for use in doing good in the world or for changing the world for the better, and yet for at least the past 20 years many of us have observed a shift from classrooms in which the students carried their principles into open discussion to classrooms in which students feverishly take notes, play games, or otherwise withdraw from active participation. I do think most (though not all) law school applicants mean what they say; I've met too many money-hungry power-seeking law students to think that all of them mean what they say. Perhaps there's a connection between these attitudes and the existence of a higher value on taking and absorption than on giving and sharing? I may be a cynic, but there's no question in my mind that the very intelligent pool of individuals self-selecting themselves for application to law schools know how to write admissions essays, and so I don't think the admissions process helps at all in separating applicants on the basis of their genuine goals.
I'm completely in favor of encouraging, compelling, cajoling, and even shoving students into accepting responsibility, not only for their education and for their budding legal careers, but also in their lives generally. There is a disconnect between "the person [the student] claimed to be when [he or she] applied to [law] school" and the disregard of responsibility that some law students manifest. By second year, at least, some students put more energy into finding shortcuts than in immersing themselves into the law.
This isn't to paint all law students with a broad brush. Many of them arrive mature, responsible, eager, diligent, honest, and driven. They hold to those traits, and they do well. They bring honor to the school. But even some of these folks, who blossom in clinics and take the lead in pro bono activities, crawl into shells when they're in the classroom. They're doing the work, but they're living in the cone of silence. Perhaps it's appropriate to say, "You are an adult. You can choose to speak or be silent." Yet there are those who would say that the student has a responsibility to participate both in the classroom and in their out-of-class preparation and assimilation. How can we, the faculty, make that happen?
Law faculty use all sorts of "techniques" to hear their students' voices: calling on students randomly, publishing in advance lists of students on whom they will call on a given day, meeting with students outside of the classroom before class, offering grade bumps for volunteering, and more. My experience and the experiences shared by my colleagues are very similar. Maybe Paul Caron is right: students fear saying something in front of their peers that would cause them embarrassment or ridicule. But isn't the practice of law filled with opportunities for lawyers to speak in front of peers, at the risk of being embarrassed or ridiculed? Interestingly, students in my courses aren't "shy" about communicating through email. I'm flooded with messages, and I encourage it. I prefer that they post to the digital classroom discussion board, and I tell them that, but they rarely do, mostly, as they tell me, because it's not anonymous.
As for the students who "give up" and prefer to distract themselves during class, my conjecture is that something happens to them between admission to law school and their arrival in my courses. I think they are disillusioned. I think they are disappointed to learn, though it is no surprise, that only 10 percent of them are in the top 10 percent (a place many of them inhabited while in college), and they're not in that group. They discover that law and the practice of law aren't as television portrays them. They decide that the law can crush idealism faster than the blink of an eye.
Though, as I've noted, many of them, far more than the top 10 percent, keep plugging, having heard the stories of students whose grades zoomed up in the second year, it's a sizeable group that "gives up." They shop for the outline from the student who took the course the previous year, surrendering the opportunity to learn through creating one's own outline. A few go so far as to cheat. Others complain on student evaluations and sometimes in direct conversation, "Just tell us what the law is," "Don't ask us questions that you don't answer," "There's too much to read," (that in response to a reading load of approximately 25 pages per class), "Don't make quiz results turn on the difference between two words... that's ridiculous," and "Doesn't this guy know that there's a lot more we have to do in our lives than prepare for his course?" (These are some sample quotes, and there are many others that say the same thing in different words.) I've addressed many of these complaints in a series of law school newsletter columns:
Money for Nothing and Work for Free?, Crumbling Myths & Dashed Expectations, Learning to Teach and Teaching to Learn, and Time CAN Be on Your Side: Or at Least by It.
Perhaps the students are different at Wisconsin than they are here at Villanova, but I doubt it. Prof. Althouse and I share the same goal, that is, to persuade students to bring their full slate of academic skills into the classroom through preparation, participation and assimilation. We disagree on how to get there. We're not alone in our concerns and our advocacy of one or another approach, for surely the Journal of Legal Education is loaded with articles addressing one or another of the issues enveloped in the "class participation" discussion. I'm not ready to confer "the answer" on classroom clickers, but I really do want to try. Most of the techniques I have used and that I have observed others using have generated disappointing poor results; for me, only the "during semester" in-class and out-of-class exercises and quizzes have had a noticeable impact.
Almost ten years ago, a student came up to me after class and said, "We notice that you are frustrated with our inability to follow your reasoning past three steps." "You are observant," I replied. The student, who was a few years older than most of his classmates said, "Understand that we are the MTV generation. We aren't accustomed to concentrating on any one thing very long. We struggle to visualize words and what they mean." Shortly thereafter I created my first "moving" Powerpoint slide set. Was I "giving in"? Yes and no. Though I won't relent in demanding that students contribute to their own education, I'm willing to operate in an environment with which they are familiar. They need pictures? Fine, I'll make pictures. They want remote control? Fine, they can have clickers. Especially if it counteracts their desire to be quiet and passive in the classroom.
If all that the classroom clicker does is to entice students into a "getting into it" mindset and to keep them there, even in the face of less-than-desired class rankings, the disillusionment of discovering law isn't what they thought it would be, and the frustrations of learning to think in a new way, then it will be a worthwhile approach. If it helps them feel "involved" in the material, great. If it compels them to think, marvelous. And if it means I can double or triple the number of in-class quizzes throughout the semester and to quadruple the number of times I learn whether the students are "getting it," stupendous.
Perhaps giving students some classroom anonymity at the expense of some of their autonomy is a necessary trade-off. It's not ideal, but law faculties have yet to invent the ideal. Prof. Althouse, and I, and others, will keep searching. And we'll keep discussing and debating and writing about it. And from time to time we will share our thoughts and our plans. I surely hope I'll have an opportunity to share classroom clicker experiences. So write to my Dean and tell him to buy me some clickers. Thanks.
Why do I ask?
Prof. Ann Althouse of Wisconsin Law has posted some questions about my classroom clicker post.
After quoting this part of my post:
The typical post-modern student wants to be passive, to be fed information, and to regurgitate it. That's been the educational experience of most of these students. (Too) many of the teachers that these students have encountered, eager for high rankings on student evaluations, prefer to play to the crowd, placate the desires of students weaned on television, and refrain from pushing students to become active participants in their own education. …She writes:
If indeed post-modern culture prevents a return to the days of holding students responsible by putting them on the spot, de-valuing their baseless complaints on student evaluations about work load and academic expectations, and failing those who fail, then perhaps getting them involved by "making the work fun" is worth the effort. The clickers are toy-like, they are almost identical to the TV remote with which the student is deeply familiar, they are snazzy and exciting, and they equalize the participation level at something other than zero. Faculty using the clickers claim that the students are enthusiastic about them. That's not a surprise. So surely it's worth a try.
Hmmm.... which side is he really on? When did we cave to "post-modernism"? Do young people today really see themselves in these terms or are they tired of being characterized as the MTV generation and so forth? Aren't we post-9/11 now, so that it's not too late to talk about a serious world of real values and consequences?
I've never seen a personal statement in an admissions file that was all about how the applicant has been spending his life so far playing video games and is hoping to find some snazzy, exciting, familiar devices to play with in the classroom. Nearly every file portrays an individual who is serious about taking on the challenges of learning how to be a lawyer and who has a strong record of independent, responsible academic achievement. No one writes, I'm looking for a place where the teachers will hover over me and feed me information and expect to see me glazed and numb unless they excite me the way TV excites me! On paper, every applicant is hot for a big challenge. I want to hold them to their own representations, not shrug and view these idealized self-portraits as a post-modern joke. Let the joke run the other way: we take these things seriously, we believe you are adults, we think the practice of law is challenging and serious and important, and we are going to treat you like the person you claimed to be when you applied to this school and made us believe you deserved to sit in that seat you are slumping back in right now!
I think some of us (Prof. Althouse, and I, and others, excluded) have indeed caved to the student desire to be fed information. I've seen it. I don't intend to yield, but I seek the carrot that will re-ignite the enthusiasm that brings the applicant to the law school and that too many of them lose by the time they reach my class.
There is something very fascinating about the disconnect between the admissions applications and the passivity evident in too many law school classrooms. For decades, every law school applicant has expressed a desire to acquire a legal education for use in doing good in the world or for changing the world for the better, and yet for at least the past 20 years many of us have observed a shift from classrooms in which the students carried their principles into open discussion to classrooms in which students feverishly take notes, play games, or otherwise withdraw from active participation. I do think most (though not all) law school applicants mean what they say; I've met too many money-hungry power-seeking law students to think that all of them mean what they say. Perhaps there's a connection between these attitudes and the existence of a higher value on taking and absorption than on giving and sharing? I may be a cynic, but there's no question in my mind that the very intelligent pool of individuals self-selecting themselves for application to law schools know how to write admissions essays, and so I don't think the admissions process helps at all in separating applicants on the basis of their genuine goals.
I'm completely in favor of encouraging, compelling, cajoling, and even shoving students into accepting responsibility, not only for their education and for their budding legal careers, but also in their lives generally. There is a disconnect between "the person [the student] claimed to be when [he or she] applied to [law] school" and the disregard of responsibility that some law students manifest. By second year, at least, some students put more energy into finding shortcuts than in immersing themselves into the law.
This isn't to paint all law students with a broad brush. Many of them arrive mature, responsible, eager, diligent, honest, and driven. They hold to those traits, and they do well. They bring honor to the school. But even some of these folks, who blossom in clinics and take the lead in pro bono activities, crawl into shells when they're in the classroom. They're doing the work, but they're living in the cone of silence. Perhaps it's appropriate to say, "You are an adult. You can choose to speak or be silent." Yet there are those who would say that the student has a responsibility to participate both in the classroom and in their out-of-class preparation and assimilation. How can we, the faculty, make that happen?
Law faculty use all sorts of "techniques" to hear their students' voices: calling on students randomly, publishing in advance lists of students on whom they will call on a given day, meeting with students outside of the classroom before class, offering grade bumps for volunteering, and more. My experience and the experiences shared by my colleagues are very similar. Maybe Paul Caron is right: students fear saying something in front of their peers that would cause them embarrassment or ridicule. But isn't the practice of law filled with opportunities for lawyers to speak in front of peers, at the risk of being embarrassed or ridiculed? Interestingly, students in my courses aren't "shy" about communicating through email. I'm flooded with messages, and I encourage it. I prefer that they post to the digital classroom discussion board, and I tell them that, but they rarely do, mostly, as they tell me, because it's not anonymous.
As for the students who "give up" and prefer to distract themselves during class, my conjecture is that something happens to them between admission to law school and their arrival in my courses. I think they are disillusioned. I think they are disappointed to learn, though it is no surprise, that only 10 percent of them are in the top 10 percent (a place many of them inhabited while in college), and they're not in that group. They discover that law and the practice of law aren't as television portrays them. They decide that the law can crush idealism faster than the blink of an eye.
Though, as I've noted, many of them, far more than the top 10 percent, keep plugging, having heard the stories of students whose grades zoomed up in the second year, it's a sizeable group that "gives up." They shop for the outline from the student who took the course the previous year, surrendering the opportunity to learn through creating one's own outline. A few go so far as to cheat. Others complain on student evaluations and sometimes in direct conversation, "Just tell us what the law is," "Don't ask us questions that you don't answer," "There's too much to read," (that in response to a reading load of approximately 25 pages per class), "Don't make quiz results turn on the difference between two words... that's ridiculous," and "Doesn't this guy know that there's a lot more we have to do in our lives than prepare for his course?" (These are some sample quotes, and there are many others that say the same thing in different words.) I've addressed many of these complaints in a series of law school newsletter columns:
Money for Nothing and Work for Free?, Crumbling Myths & Dashed Expectations, Learning to Teach and Teaching to Learn, and Time CAN Be on Your Side: Or at Least by It.
Perhaps the students are different at Wisconsin than they are here at Villanova, but I doubt it. Prof. Althouse and I share the same goal, that is, to persuade students to bring their full slate of academic skills into the classroom through preparation, participation and assimilation. We disagree on how to get there. We're not alone in our concerns and our advocacy of one or another approach, for surely the Journal of Legal Education is loaded with articles addressing one or another of the issues enveloped in the "class participation" discussion. I'm not ready to confer "the answer" on classroom clickers, but I really do want to try. Most of the techniques I have used and that I have observed others using have generated disappointing poor results; for me, only the "during semester" in-class and out-of-class exercises and quizzes have had a noticeable impact.
Almost ten years ago, a student came up to me after class and said, "We notice that you are frustrated with our inability to follow your reasoning past three steps." "You are observant," I replied. The student, who was a few years older than most of his classmates said, "Understand that we are the MTV generation. We aren't accustomed to concentrating on any one thing very long. We struggle to visualize words and what they mean." Shortly thereafter I created my first "moving" Powerpoint slide set. Was I "giving in"? Yes and no. Though I won't relent in demanding that students contribute to their own education, I'm willing to operate in an environment with which they are familiar. They need pictures? Fine, I'll make pictures. They want remote control? Fine, they can have clickers. Especially if it counteracts their desire to be quiet and passive in the classroom.
If all that the classroom clicker does is to entice students into a "getting into it" mindset and to keep them there, even in the face of less-than-desired class rankings, the disillusionment of discovering law isn't what they thought it would be, and the frustrations of learning to think in a new way, then it will be a worthwhile approach. If it helps them feel "involved" in the material, great. If it compels them to think, marvelous. And if it means I can double or triple the number of in-class quizzes throughout the semester and to quadruple the number of times I learn whether the students are "getting it," stupendous.
Perhaps giving students some classroom anonymity at the expense of some of their autonomy is a necessary trade-off. It's not ideal, but law faculties have yet to invent the ideal. Prof. Althouse, and I, and others, will keep searching. And we'll keep discussing and debating and writing about it. And from time to time we will share our thoughts and our plans. I surely hope I'll have an opportunity to share classroom clicker experiences. So write to my Dean and tell him to buy me some clickers. Thanks.
The LanSkool Experience
The use of clickers in the classroom is a technological advance on a more elaborate and complicated approach that I used in the early and mid 1990s when teaching Computer Applications in the Law (later Digital Legal Practice Skills) and Computer Applications in Tax Law. These courses, introduced in the late 1980s when most law students had little computer skills, gave students the opportunity to learn how to use spreadsheets, databases, communications programs, and even a little BASIC programming in the context of handling legal issues in subject areas that they had already studied. The Computer Applications in Tax Law course (an LL.M. (Taxation) course) was limited to tax issues, and much to the surprise of faculty and students alike, the Computer Applications in the Law and Digital Legal Practice Skills course (both in the J.D. program) involved all sorts of law school topics and very little tax.
The course was taught in a classroom adapted for these courses. There were 24 desktop computers, networked to each other and to a desktop available for the professor. The course was limited to 24 students, but became so popular that I agreed with the Associate Dean to allow 48 students to enroll, by putting them into teams and having each team use a desktop. When advance enrollment reached into the mid 50s, I succumbed and let the extra 6 or 8 students squeeze into the back row.
These were the first course in which I discovered that what came to be called "active learning" really did improve the education of the law students. They were given problems to work through, both in class and out of class. One year I had the entire class, as one team, design a litigation control database. It was challenging to manage but the students learned a lot, not just about litigation control and tracking, but about working in teams.
The school purchased a program called LanSkool, which permitted the professor to "see" what was on the screens of each of the desktops hooked to the network. It was cumbersome and slow, but it worked. It also permitted the professor to "take over" one, several, or all of the desktops, so that the students could "see" what the professor was doing as something was explained. And it permitted the professor to take what was on one student desktop and "beam it" to all the desktops. It enhanced collaborative learning, and it was fun.
Of course, I did not tell the students that this capacity existed. The course had been taught for 3 or 4 years before we "discovered" and acquired LanSkool. I had noticed that some of the students were using their desktops to do the same sort of thing that students today do with laptops, hand-held devices and cell phones. They were surfing the web, sending and reading email, playing solitaire, etc. They INSTALLED on the network (clever, aren't they?) a multi-player golf game.
So, during the first class after LanSkool was installed, I "surfed the desktops" and of course found the golf game underway. So I said to the class, "What club to use here?" and it was GREAT to watch the puzzled faces turn to shock as I "beamed" the golf game screen to the entire class. That did it. That ended the solitaire, email, and everything else that was a distraction. Oddly, I was able to do the same thing with the next class, causing me to wonder if the student rumor mill was more hype than reality. By the third semester with LanSkool, the word was out.
Many law faculty think it is horrible to embarrass a law student in this or any other manner. Once I asked a law student if she needed help with the down or across words in a puzzle she was doing during class, after several classes of general warnings about the negative impact on professionalism of doing crossword puzzles in class. How students manage to get to my second year courses thinking that lawyers in a courtroom, a client interview, a meeting with a partner, or a deposition can do crossword puzzles or play Solitaire is easy to understand, because a walk past first-year classrooms (where the door is in the back) will bring within sight dozens of laptop screens, with Solitaire being readily visible on many of them.
If and when wireless networks are installed in our classrooms, it might be beneficial to install today's equivalent of LanSkool (which apparently no longer is marketed under that name). There are many ways of sending the same message, and if one way fails, use another.
Oh, the courses in which I was using LanSkool? They were "shelved" so that I could pick up the Decedents' Estates and Trusts course. By that time, law students were arriving with pretty good computer skills and the shelving of the courses would not have an adverse impact on the students.
The course was taught in a classroom adapted for these courses. There were 24 desktop computers, networked to each other and to a desktop available for the professor. The course was limited to 24 students, but became so popular that I agreed with the Associate Dean to allow 48 students to enroll, by putting them into teams and having each team use a desktop. When advance enrollment reached into the mid 50s, I succumbed and let the extra 6 or 8 students squeeze into the back row.
These were the first course in which I discovered that what came to be called "active learning" really did improve the education of the law students. They were given problems to work through, both in class and out of class. One year I had the entire class, as one team, design a litigation control database. It was challenging to manage but the students learned a lot, not just about litigation control and tracking, but about working in teams.
The school purchased a program called LanSkool, which permitted the professor to "see" what was on the screens of each of the desktops hooked to the network. It was cumbersome and slow, but it worked. It also permitted the professor to "take over" one, several, or all of the desktops, so that the students could "see" what the professor was doing as something was explained. And it permitted the professor to take what was on one student desktop and "beam it" to all the desktops. It enhanced collaborative learning, and it was fun.
Of course, I did not tell the students that this capacity existed. The course had been taught for 3 or 4 years before we "discovered" and acquired LanSkool. I had noticed that some of the students were using their desktops to do the same sort of thing that students today do with laptops, hand-held devices and cell phones. They were surfing the web, sending and reading email, playing solitaire, etc. They INSTALLED on the network (clever, aren't they?) a multi-player golf game.
So, during the first class after LanSkool was installed, I "surfed the desktops" and of course found the golf game underway. So I said to the class, "What club to use here?" and it was GREAT to watch the puzzled faces turn to shock as I "beamed" the golf game screen to the entire class. That did it. That ended the solitaire, email, and everything else that was a distraction. Oddly, I was able to do the same thing with the next class, causing me to wonder if the student rumor mill was more hype than reality. By the third semester with LanSkool, the word was out.
Many law faculty think it is horrible to embarrass a law student in this or any other manner. Once I asked a law student if she needed help with the down or across words in a puzzle she was doing during class, after several classes of general warnings about the negative impact on professionalism of doing crossword puzzles in class. How students manage to get to my second year courses thinking that lawyers in a courtroom, a client interview, a meeting with a partner, or a deposition can do crossword puzzles or play Solitaire is easy to understand, because a walk past first-year classrooms (where the door is in the back) will bring within sight dozens of laptop screens, with Solitaire being readily visible on many of them.
If and when wireless networks are installed in our classrooms, it might be beneficial to install today's equivalent of LanSkool (which apparently no longer is marketed under that name). There are many ways of sending the same message, and if one way fails, use another.
Oh, the courses in which I was using LanSkool? They were "shelved" so that I could pick up the Decedents' Estates and Trusts course. By that time, law students were arriving with pretty good computer skills and the shelving of the courses would not have an adverse impact on the students.
Classroom Clicking
It hasn't yet been 72 hours since the NY Times article about Prof. Paul Caron's use of clickers in his courses at the University of Cincinnati Law School and already the reactions are beginning to reverberate throughout the law academy.
The clicker is a device that a student uses to send an instantaneous response to a computer that the professor can access to see the responses. The appeal of the clicker is its suitability to promoting "active learning" in the classroom, which is an attempt to shake post-modern students out of what Paul calls the "cone of silence." It lets all of the students, rather than a few (whether volunteers or persons selected by the professor), participate. It keeps them focused on the course, and makes distractions dangerous. It could (and Paul says it does) put an end to cell phone messaging, game playing on laptops, web surfing, and other activities that students somehow think will make them better lawyers when they are retained by a client with a problem involving issues studied in the course in which they are presently enrolled. It encourages attendance. The key to making the clicker approach work is that each one is "tagged" to a particular student, so that the professor knows who is responding to a question, and who isn't.
It didn't take long for other law faculty to respond. For example, Prof. Ann Althouse, who's at Wisconsin Law, explains in her blog posting on classroom clickers that her first reaction was "a childlike I-want-one-for-Christmas-too attitude." She explains her familiarity with the cone of silence. I, too, know the cone, and Ann, I'm totally with you on wanting a clicker system (and I want it NOW! (grinning)). Rather than posting on this topic yesterday, I invested the time sending emails to the dean and faculty with the topic, "I Want (Uh, Need) This ASAP". (I learned the "need" thing from my children.) True to form, by the time the committees are formed and the issue slogs through the law school bureaucracy, these clickers will have been made obsolete by some sort of direct brain wave measuring device.
And that takes us to Prof. Althouse's concern that the use of clickers will interfere with student classroom autonomy, something that she asserts "[s]tudents deserve." She writes:
I disagree. Once upon a time, I had the same outlook. But then I changed my mind. Why? Almost a decade ago, I reached the frustration point when, for the umpteenth time, a student sat in my office in late February, reviewing a not-so-wonderful grade from a course taken in the fall. (Why it takes 2 months for grades to be released, at a point when the student barely remembers the exam (and I have lost a good deal of my familiarity with it) is another topic that needs some serious attention, but not today.) In tears, the student kept saying, "If only I knew that I had a totally wrong approach to the material." I asked myself, "Why didn't this student know?" and "Why is this such a pattern, that students don't know that they are not learning properly and I don't know that they're missing the boat?"
The answer was two-fold. I couldn't do much about one, but I could do something about the other. Why the student had reached the second year of law school devoid of some basic lawyering skills was a question I could answer, but was a problem over which I had (and still have) no control. Why the student was not learning from me how to learn, how to analyze problems, how to plan, and how to write answers was a reflection, perhaps, on my teaching. I decided that I would give feedback to the students during the semester, so that they could make adjustments in their learning process before it "was too late." It would also help me understand which aspects of my teaching were working and which ones were not.
Thus I started the practice of administering "exercises" during the semester. The exercises require students to describe what additional facts must be obtained from the client, to identify flaws in statements made by hypothetical practitioners, to contrast statutes and regulations, and to engage in a variety of other lawyering tasks. Some of the exercises require short answers and are administered through the digital classroom. Others are administered, in class, without notice. These may consist of multiple choice questions, true/false questions with explanations, argument selections, chart completion, or some other design that minimizes the need for extensive writing. Because students might have legitimate reasons for missing class, and because I do not want to sit in judgment of each reason or excuse for an absence (based on experience using that approach), I let the students drop the two lowest scores of the ten scores. The total score from the 8 exercises with the highest scores counts for one-third of the course grade.
Does it work? Yes. That is, there has been improvement. Rather than leaving the students to their own pursuits in the classroom, my parentalistic approach of "getting on them" (as they describe it) has increased the level of preparation, has compelled them to assimilate long before the traditional cram time of the exam period, has alerted them to basic flaws in their learning algorithms that weren't previously identified in their educational careers, and has spilled over into their achievements in other courses. It must work. Some (too few) of my colleagues have followed my lead, though with variations and alterations, as they, too, try to deal with similar issues. The students complain bitterly until the middle of the semester, when the tide begins to turn, and by the end of the exam (long after student evaluations are submitted), they are thanking me. My favorite endorsement came from a group that stopped by after an exam; one of whom said, "We thought you were a total jerk but now we see what you've done. You've got to find a better way to make students understand this at the beginning of the semester."
Does it solve the problem? No. The passive students continue to "dominate" the classroom. The cone of silence remains, even when I use the lame attempt to "poll" the students on a problem answer. Years ago, when I had the time-wasting practice of calling on students (who were unprepared and hemmed and hawed until I gave up on them), a student asked me to refrain from calling on her because she was shy. I asked her if she would make that request of partners, judges, administrative hearing officers, clients, witnesses, and others. To this day I never quite figured out what she thought the practice of law would involve. And the notion of a "shy lawyer" continues to haunt me as a oxymoronic classic. In the New York Times article, Paul explains that many students were embarrassed to speak out in class, especially if it meant admitting they did not understand something, and that "They were petrified of looking dumb in the eyes of their classmates..." If the clickers push them past that point, great.
The typical post-modern student wants to be passive, to be fed information, and to regurgitate it. That's been the educational experience of most of these students. (Too) many of the teachers that these students have encountered, eager for high rankings on student evaluations, prefer to play to the crowd, placate the desires of students weaned on television, and refrain from pushing students to become active participants in their own education. (I'm not alone in this opinion, though I wonder why the author of Remembering the Old Lions (Chronicle of Higher Education, 2 Apr 2004 (subscription site)) had to use a pseudonym. Is it really that dangerous to criticize the negative consequences of the "pamper and coddle" approach?)
If indeed post-modern culture prevents a return to the days of holding students responsible by putting them on the spot, de-valuing their baseless complaints on student evaluations about work load and academic expectations, and failing those who fail, then perhaps getting them involved by "making the work fun" is worth the effort. The clickers are toy-like, they are almost identical to the TV remote with which the student is deeply familiar, they are snazzy and exciting, and they equalize the participation level at something other than zero. Faculty using the clickers claim that the students are enthusiastic about them. That's not a surprise. So surely it's worth a try.
In all fairness to Ann Althouse, there is a risk that some professors would use the clickers to acquire information from students that is inappropriate or that would be used in inappropriate ways. She wonders if it would be acceptable to collect political profiles, say, in a Constitutional Law course. Perhaps, but I'm not so sure that the political affiliations of law students are much of a secret, because we know who belongs to the Federalist Society and the various other organizations. But Ann is wisely warning us that taking polls through the clicker on the students' experiences (e.g., in Criminal Law, asking who has been arrested or used an illegal drug) is dangerous. The questions asked in the Sociology class featured in the New York Times article (race, household income) could be on the edge, but there are ways to track this sort of data by anonymous number rather than student name (especially because it would not and should not enter into evaluation in the same manner as responses to substantive legal questions).
By the way, the fact that Paul teaches tax has absolutely nothing to do with my positive response to the story. It does, however, assure me that clickers can be used effectively in my tax courses. Will the same be the case in my Decedents' Estates and Trusts course? Hopefully my law school will give me the opportunity to find out.
In the meantime, who else is using these? In what courses? What has been the experience? Let me know. You'll get some free press. If being hailed on my blog can be considered press. (It's free, that much is indisputable. And hold on those "you get what you pay for" comments. Be nice.)
The clicker is a device that a student uses to send an instantaneous response to a computer that the professor can access to see the responses. The appeal of the clicker is its suitability to promoting "active learning" in the classroom, which is an attempt to shake post-modern students out of what Paul calls the "cone of silence." It lets all of the students, rather than a few (whether volunteers or persons selected by the professor), participate. It keeps them focused on the course, and makes distractions dangerous. It could (and Paul says it does) put an end to cell phone messaging, game playing on laptops, web surfing, and other activities that students somehow think will make them better lawyers when they are retained by a client with a problem involving issues studied in the course in which they are presently enrolled. It encourages attendance. The key to making the clicker approach work is that each one is "tagged" to a particular student, so that the professor knows who is responding to a question, and who isn't.
It didn't take long for other law faculty to respond. For example, Prof. Ann Althouse, who's at Wisconsin Law, explains in her blog posting on classroom clickers that her first reaction was "a childlike I-want-one-for-Christmas-too attitude." She explains her familiarity with the cone of silence. I, too, know the cone, and Ann, I'm totally with you on wanting a clicker system (and I want it NOW! (grinning)). Rather than posting on this topic yesterday, I invested the time sending emails to the dean and faculty with the topic, "I Want (Uh, Need) This ASAP". (I learned the "need" thing from my children.) True to form, by the time the committees are formed and the issue slogs through the law school bureaucracy, these clickers will have been made obsolete by some sort of direct brain wave measuring device.
And that takes us to Prof. Althouse's concern that the use of clickers will interfere with student classroom autonomy, something that she asserts "[s]tudents deserve." She writes:
By law school, they are adults and they should be taking responsibility for their education. They will soon enough have clients relying on them, and there will be no lawprof wired in to supervise whatever they decide to do. With classroom autonomy, students can play video games or blog or IM or sleep or think about their personal affairs or even engage and learn something. The consequences are there and they will need to live with them come exam time. If they aren't up to keeping track of their responsibilities autonomously, why should they be unleashed with law licenses on an unsuspecting public?
I disagree. Once upon a time, I had the same outlook. But then I changed my mind. Why? Almost a decade ago, I reached the frustration point when, for the umpteenth time, a student sat in my office in late February, reviewing a not-so-wonderful grade from a course taken in the fall. (Why it takes 2 months for grades to be released, at a point when the student barely remembers the exam (and I have lost a good deal of my familiarity with it) is another topic that needs some serious attention, but not today.) In tears, the student kept saying, "If only I knew that I had a totally wrong approach to the material." I asked myself, "Why didn't this student know?" and "Why is this such a pattern, that students don't know that they are not learning properly and I don't know that they're missing the boat?"
The answer was two-fold. I couldn't do much about one, but I could do something about the other. Why the student had reached the second year of law school devoid of some basic lawyering skills was a question I could answer, but was a problem over which I had (and still have) no control. Why the student was not learning from me how to learn, how to analyze problems, how to plan, and how to write answers was a reflection, perhaps, on my teaching. I decided that I would give feedback to the students during the semester, so that they could make adjustments in their learning process before it "was too late." It would also help me understand which aspects of my teaching were working and which ones were not.
Thus I started the practice of administering "exercises" during the semester. The exercises require students to describe what additional facts must be obtained from the client, to identify flaws in statements made by hypothetical practitioners, to contrast statutes and regulations, and to engage in a variety of other lawyering tasks. Some of the exercises require short answers and are administered through the digital classroom. Others are administered, in class, without notice. These may consist of multiple choice questions, true/false questions with explanations, argument selections, chart completion, or some other design that minimizes the need for extensive writing. Because students might have legitimate reasons for missing class, and because I do not want to sit in judgment of each reason or excuse for an absence (based on experience using that approach), I let the students drop the two lowest scores of the ten scores. The total score from the 8 exercises with the highest scores counts for one-third of the course grade.
Does it work? Yes. That is, there has been improvement. Rather than leaving the students to their own pursuits in the classroom, my parentalistic approach of "getting on them" (as they describe it) has increased the level of preparation, has compelled them to assimilate long before the traditional cram time of the exam period, has alerted them to basic flaws in their learning algorithms that weren't previously identified in their educational careers, and has spilled over into their achievements in other courses. It must work. Some (too few) of my colleagues have followed my lead, though with variations and alterations, as they, too, try to deal with similar issues. The students complain bitterly until the middle of the semester, when the tide begins to turn, and by the end of the exam (long after student evaluations are submitted), they are thanking me. My favorite endorsement came from a group that stopped by after an exam; one of whom said, "We thought you were a total jerk but now we see what you've done. You've got to find a better way to make students understand this at the beginning of the semester."
Does it solve the problem? No. The passive students continue to "dominate" the classroom. The cone of silence remains, even when I use the lame attempt to "poll" the students on a problem answer. Years ago, when I had the time-wasting practice of calling on students (who were unprepared and hemmed and hawed until I gave up on them), a student asked me to refrain from calling on her because she was shy. I asked her if she would make that request of partners, judges, administrative hearing officers, clients, witnesses, and others. To this day I never quite figured out what she thought the practice of law would involve. And the notion of a "shy lawyer" continues to haunt me as a oxymoronic classic. In the New York Times article, Paul explains that many students were embarrassed to speak out in class, especially if it meant admitting they did not understand something, and that "They were petrified of looking dumb in the eyes of their classmates..." If the clickers push them past that point, great.
The typical post-modern student wants to be passive, to be fed information, and to regurgitate it. That's been the educational experience of most of these students. (Too) many of the teachers that these students have encountered, eager for high rankings on student evaluations, prefer to play to the crowd, placate the desires of students weaned on television, and refrain from pushing students to become active participants in their own education. (I'm not alone in this opinion, though I wonder why the author of Remembering the Old Lions (Chronicle of Higher Education, 2 Apr 2004 (subscription site)) had to use a pseudonym. Is it really that dangerous to criticize the negative consequences of the "pamper and coddle" approach?)
If indeed post-modern culture prevents a return to the days of holding students responsible by putting them on the spot, de-valuing their baseless complaints on student evaluations about work load and academic expectations, and failing those who fail, then perhaps getting them involved by "making the work fun" is worth the effort. The clickers are toy-like, they are almost identical to the TV remote with which the student is deeply familiar, they are snazzy and exciting, and they equalize the participation level at something other than zero. Faculty using the clickers claim that the students are enthusiastic about them. That's not a surprise. So surely it's worth a try.
In all fairness to Ann Althouse, there is a risk that some professors would use the clickers to acquire information from students that is inappropriate or that would be used in inappropriate ways. She wonders if it would be acceptable to collect political profiles, say, in a Constitutional Law course. Perhaps, but I'm not so sure that the political affiliations of law students are much of a secret, because we know who belongs to the Federalist Society and the various other organizations. But Ann is wisely warning us that taking polls through the clicker on the students' experiences (e.g., in Criminal Law, asking who has been arrested or used an illegal drug) is dangerous. The questions asked in the Sociology class featured in the New York Times article (race, household income) could be on the edge, but there are ways to track this sort of data by anonymous number rather than student name (especially because it would not and should not enter into evaluation in the same manner as responses to substantive legal questions).
By the way, the fact that Paul teaches tax has absolutely nothing to do with my positive response to the story. It does, however, assure me that clickers can be used effectively in my tax courses. Will the same be the case in my Decedents' Estates and Trusts course? Hopefully my law school will give me the opportunity to find out.
In the meantime, who else is using these? In what courses? What has been the experience? Let me know. You'll get some free press. If being hailed on my blog can be considered press. (It's free, that much is indisputable. And hold on those "you get what you pay for" comments. Be nice.)
Wednesday, April 28, 2004
More on the Marriage Penalty
The headline read "House: No More Marriage Penalty" on the FoxNews web site but thankfully the story itself gets it right. An interesting quote from a senior fellow at the Center on Budget and Policy Priorities, who concludes that the number of couples receiving a marriage bonus exceeds those who incur a marriage penalty. The Congress rejected an attempt to keep the alternative minimum tax from negating the effect of the legislation ostensibly reducing the marriage penalty. Fascinating. Congress trumpets "WE ARE LOWERING YOUR TAXES" and in fact the taxes (for 13 million taxpayers) don't go down. Too bad FTC and other truth-in-advertising laws don't apply to politicians.
The headline at the CNN web site pretty much got it right. The story itself is the same news feed from the Associated Press.
I couldn't find the story on the MSNBC web site. Drat. I wanted to see if all three major independent news web sites would use the same story and write different headlines.
The bill now goes to the Senate, which has not yet scheduled debate. So don't go spending the anticipated tax reductions quite yet. In fact, considering there's a good chance that this will be yet another tax reduction bill that doesn't reduce taxes for most taxpayers, it might be prudent to wait until a pro forma 2005 tax liability is generated for you by your tax software or by your tax advisor.
Who knows? By 2005 the entire tax playing field could be significantly different. Nowadays, in the tax world, 15 months into the future is as far away as 16 seems to a 13 year old who can't wait to get her drivers' license! Actually, it's as far away as the years Nostradamus contemplated, but it's too late in the evening to start trolling through his quattrains looking for hidden predictions of next year's tax laws. That's just a wee bit too goofy. Even for me.
The headline at the CNN web site pretty much got it right. The story itself is the same news feed from the Associated Press.
I couldn't find the story on the MSNBC web site. Drat. I wanted to see if all three major independent news web sites would use the same story and write different headlines.
The bill now goes to the Senate, which has not yet scheduled debate. So don't go spending the anticipated tax reductions quite yet. In fact, considering there's a good chance that this will be yet another tax reduction bill that doesn't reduce taxes for most taxpayers, it might be prudent to wait until a pro forma 2005 tax liability is generated for you by your tax software or by your tax advisor.
Who knows? By 2005 the entire tax playing field could be significantly different. Nowadays, in the tax world, 15 months into the future is as far away as 16 seems to a 13 year old who can't wait to get her drivers' license! Actually, it's as far away as the years Nostradamus contemplated, but it's too late in the evening to start trolling through his quattrains looking for hidden predictions of next year's tax laws. That's just a wee bit too goofy. Even for me.
The Marriage Penalty That Will Not Die!
Sounds like the name of a horror movie, except that it's not a movie but a real problem. For married people. And for unmarried people. Anyone who pays taxes, whether or not married, is affected by this issue, and really should take some time to understand it.
The marriage penalty gets a lot of attention. It plays well in the soundbites of politicians. If you listen to them (the soundbites), you might end up thinking that the problem has been solved. It hasn't been solved, and relying on soundbites and the chest-thumping self-declared hero-annointing of politicians who think that they are solving the problem (and that they are heroes for doing so) is dangerous. It causes people to be mis-informed. As an educator, I simply hate that. People being mis-informed, that is.
Today's Philadelphia Inquirer carries a report [go to the Philadelphia Inquirer site, search for "marriage penalty" and then log in (or register if need be (it's free))] explaining that the Democrats and Republicans are in "rare accord" on making the marriage penalty relief enacted in 2001 permanent.
Let's clarify what happened. In the 2001 tax legislation, an attempt was made to eliminate the marriage penalty by "equalizing" the 15% bracket and the standard deduction. To reduce the negative tax revenue impact, the changes, even though enacted in 2001, were scheduled to be phased in beginning in 2006. Legislation enacted in 2003 accelerated these changes to 2003 and 2004, and left them set aside for 2005, to be followed by another phased in beginning in 2006, which would make the changes fully in place by 2009, but under the terms of the 2001 legislation these changes would be "undone" in 2011. [If you ever wonder why the tax law is so complex, it's this sort of political maneuvering and gaming that shifts to taxpayers the compliance burden of deciphering what is behind the smoke and mirrors. All of this "it's there, later, no, now, but just part of it, and wait, then it's back, slowly, and yep, then it's gone" silliness is an attempt to make the budget impact appear to be less severe than it otherwise would be.] What's at issue now is legislation to leave these changes in place not only for 2004, but for 2005 through 2010. The 2011 "undoing" affects ALL of the changes made in the 2001 legislation, a list of provisions that reaches far beyond this marriage penalty issue. The legislation to "make the marriage penalty solution permanent" passed the House of Representatives earlier this week. Of course, it isn't permanent because of the 2011 problem.
Let's clarify something else. These changes soften the marriage penalty. They do not eliminate it. They cannot eliminate it. There are at least two dozen elements of the federal income tax law that contribute to the marriage penalty. There surely are more, because it's easy to miss things that are buried in the law and not labelled as such. The legislation in question affects two of those elements. Technically, there are multiple marriage penalties, and that, too, needs some attention to understand what is happening in Congress.
Is this confusing? Sure. If the folks reporting the news can't figure it out, how are taxpayers supposed to learn? (Easy. Keep reading my blog, haha. Better yet, enroll in a tax course.) For example, read what the Philadelphia Inquirer report says: "The provisions in the 2001 tax-reduction legislation that eliminated the marriage penalty are set to be gradually reduced starting next year and to expire by 2010 unless Congress extends them." Well, that's not correct. I'm sorry that I need to nitpick, but it's essential that readers understand what really is happening, and the preceding quote is incorrect in several ways. First, the provisions in the 2001 tax legislation did NOT eliminate the marriage penalty. It softened it a bit. And it didn't happen in 2001, but in a future year that eventually became 2003. Second, those provisions are not set to be gradually reduced starting next year. They end next year. Abruptly. Not gradually. Third, that's not the end of it. They are scheduled to gradually come back into the tax law and will be fully back in place in 2009. Fourth, they will expire in 2011, not "by 2010."
But there's a problem, and according to the report some Democrats (but I'm sure some Republicans also are on board) are pointing out that straightening out the mess involving the equalization of the 15% bracket and the standard deduction doesn't do a thing to solve the marriage penalty that afflicts lower-income taxpayers who claim the earned income tax credit. And they are correct. So the current tax legislation has been amended in an attempt to deal with THAT marriage penalty. One of the sponsors of that fix was a Republican, so there's no doubt that this is not a partisan issue. Unfortunately, the softening of the earned income tax credit marriage penalty (that afflicts lower income taxpayers) won't be fully in place until 2008. Why should those folks wait while married couples with higher incomes get more immediate relief? Perhaps money talks?
But there are more problems. Even with these changes, the marriage penalty will survive. Big-time. How big? Imagine two people who discover that by getting married their tax bills climb from $12,462 each (filing as unmarried individuals) to $37,135 when they file a joint return. I've put the computations on another web page (partly because this post is long enough already and partly because I yet haven't figured out how to get these into the blog in a sensible format). True, it's an extreme example, but it illustrates that tweaking the standard deduction does nothing for taxpayers who itemize their deductions, and whose marriage puts them into a higher bracket, triggers deduction and exemption phase-outs, and removes the active management loss exception to the passive loss rules applicable to rental property. And that's just a few of the tax law elements intensifying the marriage penalty. You'll note that this is an item I make available to students in my Introduction to Federal Taxation course at Villanova's Law School, and one of the best days of the semester is when I take them through this and observe the body language and hear the gasps (especially from the students who are seeing it for the first time in the classroom because they didn't bother to do their reading and prepare for class as required [which is another story for another day, even though it connects because it suggests an answer to the question, "Where do all these unprepared lawyers and legislators come from and how did they get to be that way?"] It gets even better. Keep reading.
The interaction of all these "marriage penalty elements" in the tax law with one another doesn't just cause marriage penalties. Marriage penalties afflict some married couples. Other married couples end up with what the scholars call the "marriage bonus." If one of the two individuals in the example of the marriage penalty ended up marrying a person with no income rather than a person with comparable income, the tax liability DECREASES. In the same example, the tax liability of $12,462 goes down to $8,425. The numbers are on that same other web page.
This is when the fun starts in the tax course. "So," I ask, "what effect is the tax law having?" The response is usually in the form of "Well, it seems that if you marry someone who stays home rather than working the tax system provides a reward, but if you marry someone who has income of more than some small amount, the tax system penalizes you." "Quite correct," I reply, "and do you think it is intentional?" They look at each other and part of the "welcome to adulthood" light bulb array turns on. It's fun. There have been years when students spontaneously cried out, without waiting to be recognized, "You're kidding" and "This *****." I do my best to convince them that it's not my doing (even though I'm a "tax person"), that it's not the fault of the IRS, but that it is ... yes ... the Congress.
Oddly, as a general proposition, the marriage penalty is not an issue for folks with very high income. Consider the marriage of two people earning two, three, ten million dollars a year. [Yes, we could be talking celebrity or celebrity-athlete marriage here, but you can figure those out for yourself. After all, THEY didn't write the tax law, and I doubt that "marriage penalty" is in their conversation.] The person earning several million dollars a year already is in the highest tax bracket, has had their deductions and exemptions fully phased out, and pretty much has already been subjected to the marriage penalty elements in the tax law. So the marriage doesn't have the same tax penalty impact as it does for two people earning 80, 90, 120, or 150 thousand dollars a year. Strange, isn't it? I'll leave aside for now, because this post is beginning to become a law review article, the impact of the alternative minimum tax which can put marriage penalty salt into its stealth tax wound.
When I updated that other web page from 2003 to 2004, I noted two things. First, the marriage penalty decreased by a few hundred dollars. Second, the marriage bonus increased. That is not surprising. Whatever is done to soften the marriage penalty intensifies the marriage bonus. That is why all the tweaking and twisting won't solve the problem.
So even though the pending legislation doesn't solve the problem, what little it does is expensive. It will cost at least $96 billion over 10 years, an amount computed without considering the recently added changes to soften the earned income tax credit marriage penalty. So, of course, the "how do we pay for this?" debate once again has jumped into the spotlight. Here it gets partisan. Oddly, it's the Democrats who want to cut spending (or, as I am sure is their preference, raise taxes) and it's the Republicans who rejected those ideas but who haven't explained what they plan to do other than let the deficit increase.
So what's the solution? Simple. Admit that marriage should have nothing to do with income taxes. I know that sounds blasphemous to some, but let's consider how marriage affects other taxes. A single person purchases a $300,000 home. That person pays a property tax, let's say, of $5,000 a year. If a married couple purchases that home, the property tax is $5,000. A single person eats dinner at a restaurant in Pennsylvania and orders $40 of food. The sales tax is $2.40. If two single persons have dinner together, and order $80 of food, the sales tax is $4.80. If the two people get married and return to the restaurant for another $80 dinner, the sales tax is, yes, $4.80. User fees generally are the same. Whether the two people in the car are married or not, the bridge toll is $3. There are some user fees, for example, the National Park fee, which provide discounts for "families" and I'll leave for another time the various arguments that can be made in favor of, and against, such discrimination against people who do not constitute families (e.g., widows and widowers).
An income tax is measured by taxable income, which should be some sort of "ability to pay" marker. Once upon a time, the justification for joint returns was the practice, in community property states, of splitting the income of the sole-wage-earning (usually) husband between the spouses, so as to get lower rates on each. After common law states enacted community property schemes to permit their citizens to use this technique, Congress codified the practice with the joint return. Big mistake. Throughout the Code there are provisions that state, "For purposes of ....., community property laws shall not be taken into account." (or terms to that effect). So there's no reason on this account for joint returns.
Defenders of the joint return point to the different financial dynamic of families. One argument is that the two spouses commingle their funds, so how could they possibly separate their finances into two returns. The answer is simple. Income is reported by the person on whose W-2 or 1099 reports it, and if it is a joint account, it is split. Deductions are reported by the person who made the expenditure, and if it is made from a joint account, it is split. Advocates of joint returns also suggest that married couples should incur lower tax liabilities because they have more expenses. I disagree that they necessarily have more expenses because they very well could be getting the benefit of economy of scale (after all, they probably have one home instead of two, and they still have two cars). The biggest expense would be the costs of raising children, a matter that should be addressed through adjustments to the deduction for dependency exemptions.
Ideally, at the same time Congress would junk the AMT, the phaseouts, most of the deductions and credits, increase the exemption amount per person to the poverty level, permit persons who don't need the exemption (because they have no or little income) to sell the exemption to others (just as corporations can sell pollution allowances), and lower the tax rate to a 2 or 3 tier structure that would provide serious progressivity when measured against gross income.
The chances of this happening? About as high as my getting elected to Congress to make the futile attempt to get such reform enacted. There are too many vested interests whose primary commitment, dedication and loyalty is to themselves, their cause, their organization, their political party, their wallet, and their friends, rather than to their country and the taxation ideals on which it was originally built.
So, go ahead. Believe the headlines. "Congress Eliminates Marriage Penalty." Then take a peek at your return. Run the numbers (or get someone to do that for you if you really, really hate or fear numbers, though I doubt you really do). Then decide who's inviting you to a good education and who's trying to con you.
The marriage penalty gets a lot of attention. It plays well in the soundbites of politicians. If you listen to them (the soundbites), you might end up thinking that the problem has been solved. It hasn't been solved, and relying on soundbites and the chest-thumping self-declared hero-annointing of politicians who think that they are solving the problem (and that they are heroes for doing so) is dangerous. It causes people to be mis-informed. As an educator, I simply hate that. People being mis-informed, that is.
Today's Philadelphia Inquirer carries a report [go to the Philadelphia Inquirer site, search for "marriage penalty" and then log in (or register if need be (it's free))] explaining that the Democrats and Republicans are in "rare accord" on making the marriage penalty relief enacted in 2001 permanent.
Let's clarify what happened. In the 2001 tax legislation, an attempt was made to eliminate the marriage penalty by "equalizing" the 15% bracket and the standard deduction. To reduce the negative tax revenue impact, the changes, even though enacted in 2001, were scheduled to be phased in beginning in 2006. Legislation enacted in 2003 accelerated these changes to 2003 and 2004, and left them set aside for 2005, to be followed by another phased in beginning in 2006, which would make the changes fully in place by 2009, but under the terms of the 2001 legislation these changes would be "undone" in 2011. [If you ever wonder why the tax law is so complex, it's this sort of political maneuvering and gaming that shifts to taxpayers the compliance burden of deciphering what is behind the smoke and mirrors. All of this "it's there, later, no, now, but just part of it, and wait, then it's back, slowly, and yep, then it's gone" silliness is an attempt to make the budget impact appear to be less severe than it otherwise would be.] What's at issue now is legislation to leave these changes in place not only for 2004, but for 2005 through 2010. The 2011 "undoing" affects ALL of the changes made in the 2001 legislation, a list of provisions that reaches far beyond this marriage penalty issue. The legislation to "make the marriage penalty solution permanent" passed the House of Representatives earlier this week. Of course, it isn't permanent because of the 2011 problem.
Let's clarify something else. These changes soften the marriage penalty. They do not eliminate it. They cannot eliminate it. There are at least two dozen elements of the federal income tax law that contribute to the marriage penalty. There surely are more, because it's easy to miss things that are buried in the law and not labelled as such. The legislation in question affects two of those elements. Technically, there are multiple marriage penalties, and that, too, needs some attention to understand what is happening in Congress.
Is this confusing? Sure. If the folks reporting the news can't figure it out, how are taxpayers supposed to learn? (Easy. Keep reading my blog, haha. Better yet, enroll in a tax course.) For example, read what the Philadelphia Inquirer report says: "The provisions in the 2001 tax-reduction legislation that eliminated the marriage penalty are set to be gradually reduced starting next year and to expire by 2010 unless Congress extends them." Well, that's not correct. I'm sorry that I need to nitpick, but it's essential that readers understand what really is happening, and the preceding quote is incorrect in several ways. First, the provisions in the 2001 tax legislation did NOT eliminate the marriage penalty. It softened it a bit. And it didn't happen in 2001, but in a future year that eventually became 2003. Second, those provisions are not set to be gradually reduced starting next year. They end next year. Abruptly. Not gradually. Third, that's not the end of it. They are scheduled to gradually come back into the tax law and will be fully back in place in 2009. Fourth, they will expire in 2011, not "by 2010."
But there's a problem, and according to the report some Democrats (but I'm sure some Republicans also are on board) are pointing out that straightening out the mess involving the equalization of the 15% bracket and the standard deduction doesn't do a thing to solve the marriage penalty that afflicts lower-income taxpayers who claim the earned income tax credit. And they are correct. So the current tax legislation has been amended in an attempt to deal with THAT marriage penalty. One of the sponsors of that fix was a Republican, so there's no doubt that this is not a partisan issue. Unfortunately, the softening of the earned income tax credit marriage penalty (that afflicts lower income taxpayers) won't be fully in place until 2008. Why should those folks wait while married couples with higher incomes get more immediate relief? Perhaps money talks?
But there are more problems. Even with these changes, the marriage penalty will survive. Big-time. How big? Imagine two people who discover that by getting married their tax bills climb from $12,462 each (filing as unmarried individuals) to $37,135 when they file a joint return. I've put the computations on another web page (partly because this post is long enough already and partly because I yet haven't figured out how to get these into the blog in a sensible format). True, it's an extreme example, but it illustrates that tweaking the standard deduction does nothing for taxpayers who itemize their deductions, and whose marriage puts them into a higher bracket, triggers deduction and exemption phase-outs, and removes the active management loss exception to the passive loss rules applicable to rental property. And that's just a few of the tax law elements intensifying the marriage penalty. You'll note that this is an item I make available to students in my Introduction to Federal Taxation course at Villanova's Law School, and one of the best days of the semester is when I take them through this and observe the body language and hear the gasps (especially from the students who are seeing it for the first time in the classroom because they didn't bother to do their reading and prepare for class as required [which is another story for another day, even though it connects because it suggests an answer to the question, "Where do all these unprepared lawyers and legislators come from and how did they get to be that way?"] It gets even better. Keep reading.
The interaction of all these "marriage penalty elements" in the tax law with one another doesn't just cause marriage penalties. Marriage penalties afflict some married couples. Other married couples end up with what the scholars call the "marriage bonus." If one of the two individuals in the example of the marriage penalty ended up marrying a person with no income rather than a person with comparable income, the tax liability DECREASES. In the same example, the tax liability of $12,462 goes down to $8,425. The numbers are on that same other web page.
This is when the fun starts in the tax course. "So," I ask, "what effect is the tax law having?" The response is usually in the form of "Well, it seems that if you marry someone who stays home rather than working the tax system provides a reward, but if you marry someone who has income of more than some small amount, the tax system penalizes you." "Quite correct," I reply, "and do you think it is intentional?" They look at each other and part of the "welcome to adulthood" light bulb array turns on. It's fun. There have been years when students spontaneously cried out, without waiting to be recognized, "You're kidding" and "This *****." I do my best to convince them that it's not my doing (even though I'm a "tax person"), that it's not the fault of the IRS, but that it is ... yes ... the Congress.
Oddly, as a general proposition, the marriage penalty is not an issue for folks with very high income. Consider the marriage of two people earning two, three, ten million dollars a year. [Yes, we could be talking celebrity or celebrity-athlete marriage here, but you can figure those out for yourself. After all, THEY didn't write the tax law, and I doubt that "marriage penalty" is in their conversation.] The person earning several million dollars a year already is in the highest tax bracket, has had their deductions and exemptions fully phased out, and pretty much has already been subjected to the marriage penalty elements in the tax law. So the marriage doesn't have the same tax penalty impact as it does for two people earning 80, 90, 120, or 150 thousand dollars a year. Strange, isn't it? I'll leave aside for now, because this post is beginning to become a law review article, the impact of the alternative minimum tax which can put marriage penalty salt into its stealth tax wound.
When I updated that other web page from 2003 to 2004, I noted two things. First, the marriage penalty decreased by a few hundred dollars. Second, the marriage bonus increased. That is not surprising. Whatever is done to soften the marriage penalty intensifies the marriage bonus. That is why all the tweaking and twisting won't solve the problem.
So even though the pending legislation doesn't solve the problem, what little it does is expensive. It will cost at least $96 billion over 10 years, an amount computed without considering the recently added changes to soften the earned income tax credit marriage penalty. So, of course, the "how do we pay for this?" debate once again has jumped into the spotlight. Here it gets partisan. Oddly, it's the Democrats who want to cut spending (or, as I am sure is their preference, raise taxes) and it's the Republicans who rejected those ideas but who haven't explained what they plan to do other than let the deficit increase.
So what's the solution? Simple. Admit that marriage should have nothing to do with income taxes. I know that sounds blasphemous to some, but let's consider how marriage affects other taxes. A single person purchases a $300,000 home. That person pays a property tax, let's say, of $5,000 a year. If a married couple purchases that home, the property tax is $5,000. A single person eats dinner at a restaurant in Pennsylvania and orders $40 of food. The sales tax is $2.40. If two single persons have dinner together, and order $80 of food, the sales tax is $4.80. If the two people get married and return to the restaurant for another $80 dinner, the sales tax is, yes, $4.80. User fees generally are the same. Whether the two people in the car are married or not, the bridge toll is $3. There are some user fees, for example, the National Park fee, which provide discounts for "families" and I'll leave for another time the various arguments that can be made in favor of, and against, such discrimination against people who do not constitute families (e.g., widows and widowers).
An income tax is measured by taxable income, which should be some sort of "ability to pay" marker. Once upon a time, the justification for joint returns was the practice, in community property states, of splitting the income of the sole-wage-earning (usually) husband between the spouses, so as to get lower rates on each. After common law states enacted community property schemes to permit their citizens to use this technique, Congress codified the practice with the joint return. Big mistake. Throughout the Code there are provisions that state, "For purposes of ....., community property laws shall not be taken into account." (or terms to that effect). So there's no reason on this account for joint returns.
Defenders of the joint return point to the different financial dynamic of families. One argument is that the two spouses commingle their funds, so how could they possibly separate their finances into two returns. The answer is simple. Income is reported by the person on whose W-2 or 1099 reports it, and if it is a joint account, it is split. Deductions are reported by the person who made the expenditure, and if it is made from a joint account, it is split. Advocates of joint returns also suggest that married couples should incur lower tax liabilities because they have more expenses. I disagree that they necessarily have more expenses because they very well could be getting the benefit of economy of scale (after all, they probably have one home instead of two, and they still have two cars). The biggest expense would be the costs of raising children, a matter that should be addressed through adjustments to the deduction for dependency exemptions.
Ideally, at the same time Congress would junk the AMT, the phaseouts, most of the deductions and credits, increase the exemption amount per person to the poverty level, permit persons who don't need the exemption (because they have no or little income) to sell the exemption to others (just as corporations can sell pollution allowances), and lower the tax rate to a 2 or 3 tier structure that would provide serious progressivity when measured against gross income.
The chances of this happening? About as high as my getting elected to Congress to make the futile attempt to get such reform enacted. There are too many vested interests whose primary commitment, dedication and loyalty is to themselves, their cause, their organization, their political party, their wallet, and their friends, rather than to their country and the taxation ideals on which it was originally built.
So, go ahead. Believe the headlines. "Congress Eliminates Marriage Penalty." Then take a peek at your return. Run the numbers (or get someone to do that for you if you really, really hate or fear numbers, though I doubt you really do). Then decide who's inviting you to a good education and who's trying to con you.
Monday, April 26, 2004
How Private is Confidential?
I've never done a survey, and I haven't been able to find anything, but it seems to me that most taxpayers think that the information on their tax returns should not be disclosed by the IRS. Many probably think that it ought not be disclosed ever. I'm also guessing that many taxpayers have little confidence that their tax return information will remain private. Part of that, I think, is based on the stories that emerge from time to time about IRS employees "checking up" on their neighbors' or friends' tax returns, or from a general sense that one "cannot trust" the government.
As a general matter, the IRS is prohibited from disclosing tax return information. But the Internal Revenue Code provision imposing that restriction contains a long list of exceptions. The IRS is required to make a report each year to the Congress (technically, to the Joint Committee on Taxation) disclosing each instance it discloses tax return information under one of the exceptions.
The report for 2003 has been published. It covers disclosures made during 2003.
Total number of disclosures of tax returns or tax return information: 3,744,087,686. Yes, that is three BILLION plus. Keep in mind that roughly 125,000,000 federal income tax returns have been filed for each of the past few taxable years. So that's roughly THIRTY instances of disclosure for each tax return.
To whom are these disclosures made?
Leading the list are disclosures to state officials with responsibility for administering state tax laws. Of the 2,430,943,771 disclosures, most were made by sending extracts of Master File tapes (the digital record of the information filed on the return). At approximately 20 per return, these numbers reflect transmission to the states of information on items such as dividends, interest, property sales, business income, etc.
Next on the list are disclosures to the Bureau of Census and Bureua of Economic Analysis. There were 1,147,490,191 disclosures. I'm guessing that some or many of these were probably in the form of statistical summaries and groupings.
Third place went to disclosures to Congressional Committees and their agents, including the General Accounting Office. These disclosures cannot carry identifying information other than in closed executive session or with the written permission of the taxpayer. These disclosures, therefore, are most likely summaries of taxpayer filing "habits" with respect to particular types of transactions. Oh, there were 149,235,637 of these disclosures.
In fourth place, at 8,781,942, were disclosures to child support enforcement agencies. It's pretty clear what this is about, and it's pretty clear that identifying information is a necessary part of the disclosure. This disclosure is one of many exceptions falling into the "disclosure for purposes other than tax administration" category.
Fifth through seventh places were claimed by the three remaining categories that numbered in the millions: 2,809,898 to the General Accounting Office (to assist it in auditing the IRS and other agencies), 2,446,199 to the Department of Agriculture (to assist with agricultural censuses), and 2,305,866 to the tax treaty authorities of foreign countries. Surely this last batch included identifying information.
Then the numbers drop off significantly, but the identity of those to whom disclosure is made is a stark reminder that even if tax returns are filed carefully and honestly they can put a taxpayer in an awkward situation. Of course, if the tax return is filed dishonestly, it gets worse. Consider these statistics: 57,849 disclosures to U.S. Attorneys, the FBI, the Drug Enforcement Agency, and other law enforcement agencies, along with 455 disclosures to U.S. Attorneys of return information other than certain taxpayer information, 1,763 disclosures to apprise appropriate officials of criminal or terrorist activities or emergency circumstances, 1,724 to U.S. Attorneys in connection with ex parte orders, and 6 disclosures to Department of Justice employees preparing for or conducting grand jury proceedings.
Sometimes it's the taxpayer who triggers the release of information: 11,118 disclosures to persons designated by the taxpayer as approved to receive the disclosure (these are usually instances in which the taxpayer has lost tax returns and is letting his or her tax advisor obtain copies from the IRS).
So what taxpayers may not realize is that although their tax return information is confidential, and ought not appear on a web site somewhere, it doesn't simply "go to the IRS and stay there." Even if the system worked flawlessly (and I doubt that it does), information on the return finds its way to other places, sometimes tagged with the taxpayer's identity.
Is this bad? Not necessarily. The idea of using tax return information to track down child support deadbeats, to assist in the enforcement of state tax laws, to support criminal proceedings against a criminal, or to be used to improve the tax law and its administration (e.g., through audits of the IRS, reviews of taxpayer filing patterns) makes sense. Because this is being done, taxpayers ought to understand that the tax return is more than a tax return. It has elements of a census form, and creates a trail of evidence which should disturb those not abiding by the law (but which seems to bother law-abiding citizens far more than it does those who disregard the law).
Some folks do not like the idea that the IRS shares this information. One in particular is James Plummer, a Policy Analyst at Consumer Alert. He awarded the National Consumer Coalition Privacy Group's "Privacy Villain of the Week" designation to the IRS because of these disclosures. In his explanation, he makes some important points but then overstates the case against the IRS.
It is true, as he explains, that the IRS computer systems are "insecure and vulnerable to hackers." But whose fault is that? I continue, with little success, to help people understand that it is the Congress, perhaps in trying to keep taxes low (he says sarcastically), that doesn't appropriate sufficient funds (and then when it does try to deal with the situation, finds an IRS that has a variety of tax administration problems reflecting years of Congressional neglect).
And yes, the IRS (for reasons that baffle me and don't seem defensible) signed people up for junk mail. If you find this rather bizarre, take a look. And maybe the IRS web site uses too many third-party "cookies," as explained in this report, though I doubt that puts tax return information at serious risk of disclosure.
But I think that Mr. Plummer goes a bit overboard when he asserts that the disclosures to the Census bureau were made so that "pointy-headed bureaucrats can engage in social-engineering schemes designed to undermine the free market choices individuals make in their daily lives." There surely are social engineering schemes, but they're not hatched or cultivated in the Census Bureau. There are enough politicians out there buying votes by promising another goodie from Uncle Sam and theoreticians hiding behind think tank and academy walls conjuring up these schemes without any need for the Census Bureau to help out.
His claim that the disclosures made to the Department of Agriculture were "so that that Department's bureaucrats could actively work to control the market for food, which results in higher prices for consumers at the grocery store" startles me. If there is federal government interference afflicting the food markets (and I don't doubt that there is), it is a gift of, YES!, the Congress.
And, when he argues that the disclosures made to foreign taxing authorities "undermines foreign investment in America, resulting in a weaker economy, with fewer jobs, higher prices and less innovation." he overlooks the long-term inefficiency of attracting foreign investment by assisting individuals and corporations in tax evasion schemes. This nation should be selective in making decisions to lure businesses to operate within its borders. Refusing to turn down money no matter its source or its tax-evasion impact sells out the principles on which this nation was built. If the only way to attract foreign investors is to be a tax haven, then this nation is in horrendous shape.
Finally, Mr. Plummer's statement that "this disclosure habit of the IRS is just one way the bureau undermines privacy" suggests to me that he thinks the IRS is making these disclosures because it wants to do so. To the contrary. The IRS makes these disclosures because it is REQUIRED to do so. By the law. Law enacted by, c'mon, you can see this one coming a mile away, YES, the Congress. Does Mr. Plummer want the IRS to ignore the disclosure laws? If he does, he'd be advocating the very sort of non-compliance that he justifiably criticizes when he notes that the IRS has not cracked down the way it should and ought to crack down on IRS employees "browsing" tax return information of their friends and neighbors.
The IRS makes for an easy target. Congress helps make it an easy target. It takes the heat off Congress. Mr. Plummer, please don't let your important and valid points miss their mark by being directed at the IRS rather than the Congress. And please don't overstate your case because it distracts us from the genuine problems in the tax return disclosure area.
Of course, if we simplified the tax law, there would be far less information sent to the IRS. But that's another topic for another day.
As a general matter, the IRS is prohibited from disclosing tax return information. But the Internal Revenue Code provision imposing that restriction contains a long list of exceptions. The IRS is required to make a report each year to the Congress (technically, to the Joint Committee on Taxation) disclosing each instance it discloses tax return information under one of the exceptions.
The report for 2003 has been published. It covers disclosures made during 2003.
Total number of disclosures of tax returns or tax return information: 3,744,087,686. Yes, that is three BILLION plus. Keep in mind that roughly 125,000,000 federal income tax returns have been filed for each of the past few taxable years. So that's roughly THIRTY instances of disclosure for each tax return.
To whom are these disclosures made?
Leading the list are disclosures to state officials with responsibility for administering state tax laws. Of the 2,430,943,771 disclosures, most were made by sending extracts of Master File tapes (the digital record of the information filed on the return). At approximately 20 per return, these numbers reflect transmission to the states of information on items such as dividends, interest, property sales, business income, etc.
Next on the list are disclosures to the Bureau of Census and Bureua of Economic Analysis. There were 1,147,490,191 disclosures. I'm guessing that some or many of these were probably in the form of statistical summaries and groupings.
Third place went to disclosures to Congressional Committees and their agents, including the General Accounting Office. These disclosures cannot carry identifying information other than in closed executive session or with the written permission of the taxpayer. These disclosures, therefore, are most likely summaries of taxpayer filing "habits" with respect to particular types of transactions. Oh, there were 149,235,637 of these disclosures.
In fourth place, at 8,781,942, were disclosures to child support enforcement agencies. It's pretty clear what this is about, and it's pretty clear that identifying information is a necessary part of the disclosure. This disclosure is one of many exceptions falling into the "disclosure for purposes other than tax administration" category.
Fifth through seventh places were claimed by the three remaining categories that numbered in the millions: 2,809,898 to the General Accounting Office (to assist it in auditing the IRS and other agencies), 2,446,199 to the Department of Agriculture (to assist with agricultural censuses), and 2,305,866 to the tax treaty authorities of foreign countries. Surely this last batch included identifying information.
Then the numbers drop off significantly, but the identity of those to whom disclosure is made is a stark reminder that even if tax returns are filed carefully and honestly they can put a taxpayer in an awkward situation. Of course, if the tax return is filed dishonestly, it gets worse. Consider these statistics: 57,849 disclosures to U.S. Attorneys, the FBI, the Drug Enforcement Agency, and other law enforcement agencies, along with 455 disclosures to U.S. Attorneys of return information other than certain taxpayer information, 1,763 disclosures to apprise appropriate officials of criminal or terrorist activities or emergency circumstances, 1,724 to U.S. Attorneys in connection with ex parte orders, and 6 disclosures to Department of Justice employees preparing for or conducting grand jury proceedings.
Sometimes it's the taxpayer who triggers the release of information: 11,118 disclosures to persons designated by the taxpayer as approved to receive the disclosure (these are usually instances in which the taxpayer has lost tax returns and is letting his or her tax advisor obtain copies from the IRS).
So what taxpayers may not realize is that although their tax return information is confidential, and ought not appear on a web site somewhere, it doesn't simply "go to the IRS and stay there." Even if the system worked flawlessly (and I doubt that it does), information on the return finds its way to other places, sometimes tagged with the taxpayer's identity.
Is this bad? Not necessarily. The idea of using tax return information to track down child support deadbeats, to assist in the enforcement of state tax laws, to support criminal proceedings against a criminal, or to be used to improve the tax law and its administration (e.g., through audits of the IRS, reviews of taxpayer filing patterns) makes sense. Because this is being done, taxpayers ought to understand that the tax return is more than a tax return. It has elements of a census form, and creates a trail of evidence which should disturb those not abiding by the law (but which seems to bother law-abiding citizens far more than it does those who disregard the law).
Some folks do not like the idea that the IRS shares this information. One in particular is James Plummer, a Policy Analyst at Consumer Alert. He awarded the National Consumer Coalition Privacy Group's "Privacy Villain of the Week" designation to the IRS because of these disclosures. In his explanation, he makes some important points but then overstates the case against the IRS.
It is true, as he explains, that the IRS computer systems are "insecure and vulnerable to hackers." But whose fault is that? I continue, with little success, to help people understand that it is the Congress, perhaps in trying to keep taxes low (he says sarcastically), that doesn't appropriate sufficient funds (and then when it does try to deal with the situation, finds an IRS that has a variety of tax administration problems reflecting years of Congressional neglect).
And yes, the IRS (for reasons that baffle me and don't seem defensible) signed people up for junk mail. If you find this rather bizarre, take a look. And maybe the IRS web site uses too many third-party "cookies," as explained in this report, though I doubt that puts tax return information at serious risk of disclosure.
But I think that Mr. Plummer goes a bit overboard when he asserts that the disclosures to the Census bureau were made so that "pointy-headed bureaucrats can engage in social-engineering schemes designed to undermine the free market choices individuals make in their daily lives." There surely are social engineering schemes, but they're not hatched or cultivated in the Census Bureau. There are enough politicians out there buying votes by promising another goodie from Uncle Sam and theoreticians hiding behind think tank and academy walls conjuring up these schemes without any need for the Census Bureau to help out.
His claim that the disclosures made to the Department of Agriculture were "so that that Department's bureaucrats could actively work to control the market for food, which results in higher prices for consumers at the grocery store" startles me. If there is federal government interference afflicting the food markets (and I don't doubt that there is), it is a gift of, YES!, the Congress.
And, when he argues that the disclosures made to foreign taxing authorities "undermines foreign investment in America, resulting in a weaker economy, with fewer jobs, higher prices and less innovation." he overlooks the long-term inefficiency of attracting foreign investment by assisting individuals and corporations in tax evasion schemes. This nation should be selective in making decisions to lure businesses to operate within its borders. Refusing to turn down money no matter its source or its tax-evasion impact sells out the principles on which this nation was built. If the only way to attract foreign investors is to be a tax haven, then this nation is in horrendous shape.
Finally, Mr. Plummer's statement that "this disclosure habit of the IRS is just one way the bureau undermines privacy" suggests to me that he thinks the IRS is making these disclosures because it wants to do so. To the contrary. The IRS makes these disclosures because it is REQUIRED to do so. By the law. Law enacted by, c'mon, you can see this one coming a mile away, YES, the Congress. Does Mr. Plummer want the IRS to ignore the disclosure laws? If he does, he'd be advocating the very sort of non-compliance that he justifiably criticizes when he notes that the IRS has not cracked down the way it should and ought to crack down on IRS employees "browsing" tax return information of their friends and neighbors.
The IRS makes for an easy target. Congress helps make it an easy target. It takes the heat off Congress. Mr. Plummer, please don't let your important and valid points miss their mark by being directed at the IRS rather than the Congress. And please don't overstate your case because it distracts us from the genuine problems in the tax return disclosure area.
Of course, if we simplified the tax law, there would be far less information sent to the IRS. But that's another topic for another day.
Friday, April 23, 2004
AAG (Tax) Speaks at Harvard
.... and gets blogged.
Sounds bad, but it isn't. It's nice to show up in someone's blog. And that's what happened to Eileen O'Connor, Assistant Attorney General for the Tax Division at the Department of Justice. Her speech at Harvard Law School has been written up on Per Curiam, a law blog maintained by two students at Harvard. She addressed three topics: tax shelters, the "wall" between tax law enforcement and intelligence, and the use of John Doe summonses in tax cases.
Word of Warning: if you find yourself drifting to their affiliated Sports Law blog, you could end up browsing for hours. So don't go there 10 minutes before a meeting or class, because it will be tough to drag yourself away from the computer. Trust me, I speak from experience.
Sounds bad, but it isn't. It's nice to show up in someone's blog. And that's what happened to Eileen O'Connor, Assistant Attorney General for the Tax Division at the Department of Justice. Her speech at Harvard Law School has been written up on Per Curiam, a law blog maintained by two students at Harvard. She addressed three topics: tax shelters, the "wall" between tax law enforcement and intelligence, and the use of John Doe summonses in tax cases.
Word of Warning: if you find yourself drifting to their affiliated Sports Law blog, you could end up browsing for hours. So don't go there 10 minutes before a meeting or class, because it will be tough to drag yourself away from the computer. Trust me, I speak from experience.
Getting it Right
No, that's not a political statement. It's about being correct. Oops, not politically correct. Tax correct.
The tax law is complicated. So complicated that many taxpayers shell out dollars to preparers and to tax software vendors because they cannot do the return without help.
Let's for a moment accept the tax world as it is. Tax law is complicated. Returns are difficult for the typical taxpayer to prepare. Commercial assistance is available but it comes at a price. Where does the taxpayer unable or unwilling to pay for assistance turn? Where does the confused preparer (yes, they exist) turn?
For taxpayers, there are VITA programs (Volunteer Income Tax Assistance) programs. Those programs don't exist everywhere. And where they do, they have a limited range of expertise.
Ah, let's contact the IRS. On Wednesday, the IRS Commissioner shared some information with the House of Representatives Appropriations Committee's subcommittee that handles IRS oversight.
When the IRS fields a phone call (it answers roughly 85 percent of them, so I guess the other 15 percent tire of waiting and hang up?), its representatives answered roughly 80 percent of the questions correctly.
They had started at a lower rate, apparently because the IRS changed the scripts that are used by the representatives to interview the folks calling for help. The drop-off in correctness compared to last year was so significant that the IRS re-wrote the scripts. This caused the correctness rate to climb back to within one percentage point of last year.
Before getting to the plans disclosed by the IRS for dealing with this, let's think about two things.
First, why are the IRS representatives using scripts? A person who knows the tax law doesn't need a script. A checklist, perhaps. The problem with a script is that it cannot predict the taxpayer's response. (I've dealt with software vendor representatives who use scripts, and it's almost laughable at times, because the person's second question often has nothing to do with my answer to the first question. It also reminds me of the football coach who scripts the first, say, 20 play. So if the quarterback is sacked for a 12-yard loss on second down, the team blunders forward with the halfback plunge because that's the next play in the script? Bizarre (except, in all fairness, most coaches using scripts have some flexibility built into their plan.)) My guess is that the scripts are being used by the IRS representatives because they wouldn't otherwise know what to say. And that brings me to the second concern.
Second, is 80 percent (give or take a few percentage points) acceptable when it is the government to whom the taxes are paid that is giving the assistance? My answer: no. There are places where 80 percent is phenomenal and unlikely to happen (think baseball batting average or basketball shooting percentage). But in the things that matter, how can 80 percent be acceptable? Of course, the IRS says it isn't and has plans to change it. Would our society accept an 80 percent successful surgery rate? Or 80 percent of traffic signals properly functioning? Or 80% of children in day care being returned safe and sound each day to their parents? No.
In my classes, I use 80 percent as a benchmark in grading. A student who can do at least 80 percent of what I could do on the exam earns an A. Why is 80 percent acceptable in that context? Because I'm dealing with a student (who may or may not intend or decide to practice in the subject matter). The student has had 14 weeks to learn a significant amount of material while also learning 4 or 5 other subject areas. The student is not being held out as a professional. The student is not being paid. The student does not, and should not, have the life or property of a client at risk.
I teach my students not so much the actual law but how to learn the law, because the law keeps changing. I teach my students how to identify the "bad habits" or tendencies that prevent them from attaining a correct response, and then assist them in making adjustments. It's similar to coaching.
Is the IRS training its representatives? Are the representatives being fed "information" which they don't process but simply read back from a script? Do the representatives UNDERSTAND the tax law or merely KNOW some rules? When the IRS says that it wants to make managers more accountable for improving services (that's half the plan), does it plan to have the managers do the teaching? If they're not, then it's the teachers who need to be held accountable. When the IRS says that it wants to set up teams to supervise the program, identify problems and set priorities (that's the other half of the plan), does it intend to emphasize training (or retraining) in one area at the expense of another?
Does the IRS have enough funding to handle the millions of calls that it receives? Would it have an easier time of it if Congress refrained from enacting so many complicated provisions and then tinkering with them each year? Is the 80 percent rate a combination of many representatives with rates in the upper 90s and a few with rates in the 40s? If so, is the IRS constrained from firing the representatives because of civil service protections? (Moving a representative to another position, even if the representative is more suited to that other position, leaves a gap in the phone answering team, because the IRS would need more resources to replace the representative.)
Who is being hired to be a representative? Someone who has been through a law school tax course or two? Someone with a college degree? A high school diploma?
How much training do the representatives receive? What sorts of exercises and active learning are used? Are the representatives taught to solve problems? Do they ever read the actual law, such as the Code or regulations? Are they using summaries of the law? If so, how accurate are those summaries?
Leave it to a teacher (by profession, by avocation, and by genetic heritage) to ask these sorts of questions, but it boggles my mind that the federal agency charged with having sufficient expertise to administer the tax law can get only 80% of the questions correct.
Tax law, fortunately or unfortunately, is not baseball or basketball. Eighty percent doesn't cut it. It's time, again, he says exasperatedly, for the Congress to step up to the plate and GET IT RIGHT.
Closing thought: I wonder if any member of Congress, doing his or her own return (hahahaha), called the IRS for help. I wonder if the answer that was provided was correct or incorrect. I wonder.
The tax law is complicated. So complicated that many taxpayers shell out dollars to preparers and to tax software vendors because they cannot do the return without help.
Let's for a moment accept the tax world as it is. Tax law is complicated. Returns are difficult for the typical taxpayer to prepare. Commercial assistance is available but it comes at a price. Where does the taxpayer unable or unwilling to pay for assistance turn? Where does the confused preparer (yes, they exist) turn?
For taxpayers, there are VITA programs (Volunteer Income Tax Assistance) programs. Those programs don't exist everywhere. And where they do, they have a limited range of expertise.
Ah, let's contact the IRS. On Wednesday, the IRS Commissioner shared some information with the House of Representatives Appropriations Committee's subcommittee that handles IRS oversight.
When the IRS fields a phone call (it answers roughly 85 percent of them, so I guess the other 15 percent tire of waiting and hang up?), its representatives answered roughly 80 percent of the questions correctly.
They had started at a lower rate, apparently because the IRS changed the scripts that are used by the representatives to interview the folks calling for help. The drop-off in correctness compared to last year was so significant that the IRS re-wrote the scripts. This caused the correctness rate to climb back to within one percentage point of last year.
Before getting to the plans disclosed by the IRS for dealing with this, let's think about two things.
First, why are the IRS representatives using scripts? A person who knows the tax law doesn't need a script. A checklist, perhaps. The problem with a script is that it cannot predict the taxpayer's response. (I've dealt with software vendor representatives who use scripts, and it's almost laughable at times, because the person's second question often has nothing to do with my answer to the first question. It also reminds me of the football coach who scripts the first, say, 20 play. So if the quarterback is sacked for a 12-yard loss on second down, the team blunders forward with the halfback plunge because that's the next play in the script? Bizarre (except, in all fairness, most coaches using scripts have some flexibility built into their plan.)) My guess is that the scripts are being used by the IRS representatives because they wouldn't otherwise know what to say. And that brings me to the second concern.
Second, is 80 percent (give or take a few percentage points) acceptable when it is the government to whom the taxes are paid that is giving the assistance? My answer: no. There are places where 80 percent is phenomenal and unlikely to happen (think baseball batting average or basketball shooting percentage). But in the things that matter, how can 80 percent be acceptable? Of course, the IRS says it isn't and has plans to change it. Would our society accept an 80 percent successful surgery rate? Or 80 percent of traffic signals properly functioning? Or 80% of children in day care being returned safe and sound each day to their parents? No.
In my classes, I use 80 percent as a benchmark in grading. A student who can do at least 80 percent of what I could do on the exam earns an A. Why is 80 percent acceptable in that context? Because I'm dealing with a student (who may or may not intend or decide to practice in the subject matter). The student has had 14 weeks to learn a significant amount of material while also learning 4 or 5 other subject areas. The student is not being held out as a professional. The student is not being paid. The student does not, and should not, have the life or property of a client at risk.
I teach my students not so much the actual law but how to learn the law, because the law keeps changing. I teach my students how to identify the "bad habits" or tendencies that prevent them from attaining a correct response, and then assist them in making adjustments. It's similar to coaching.
Is the IRS training its representatives? Are the representatives being fed "information" which they don't process but simply read back from a script? Do the representatives UNDERSTAND the tax law or merely KNOW some rules? When the IRS says that it wants to make managers more accountable for improving services (that's half the plan), does it plan to have the managers do the teaching? If they're not, then it's the teachers who need to be held accountable. When the IRS says that it wants to set up teams to supervise the program, identify problems and set priorities (that's the other half of the plan), does it intend to emphasize training (or retraining) in one area at the expense of another?
Does the IRS have enough funding to handle the millions of calls that it receives? Would it have an easier time of it if Congress refrained from enacting so many complicated provisions and then tinkering with them each year? Is the 80 percent rate a combination of many representatives with rates in the upper 90s and a few with rates in the 40s? If so, is the IRS constrained from firing the representatives because of civil service protections? (Moving a representative to another position, even if the representative is more suited to that other position, leaves a gap in the phone answering team, because the IRS would need more resources to replace the representative.)
Who is being hired to be a representative? Someone who has been through a law school tax course or two? Someone with a college degree? A high school diploma?
How much training do the representatives receive? What sorts of exercises and active learning are used? Are the representatives taught to solve problems? Do they ever read the actual law, such as the Code or regulations? Are they using summaries of the law? If so, how accurate are those summaries?
Leave it to a teacher (by profession, by avocation, and by genetic heritage) to ask these sorts of questions, but it boggles my mind that the federal agency charged with having sufficient expertise to administer the tax law can get only 80% of the questions correct.
Tax law, fortunately or unfortunately, is not baseball or basketball. Eighty percent doesn't cut it. It's time, again, he says exasperatedly, for the Congress to step up to the plate and GET IT RIGHT.
Closing thought: I wonder if any member of Congress, doing his or her own return (hahahaha), called the IRS for help. I wonder if the answer that was provided was correct or incorrect. I wonder.
Wednesday, April 21, 2004
Well, Did He or Didn't He?
File his own tax returns, that is.
Who?
Roosevelt. Franklin.
I mentioned in my last post that when looking at the tax returns of several previous Presidents, it appeared to me that Franklin Roosevelt had done his own return. The handwriting and the signature show similar writing strokes and ink density.
I tried to research this, though I admit I haven't dug up all the published biographies of Roosevelt. A search of the web didn't produce much. (Among the links produced by the various search term combinations I used was a page explaining how George Bush, John Kerry, Hugh Hefner, and Franklin Roosevelt are related to each other. That's a totally different topic, and if you can't wait for me to dig into it, visit the Maule Family Genealogy page and click on the link to "My Cousins, the Presidents.")
The best I can find is a letter that Roosevelt sent to "my dear commissioner Helvering" [the famous (in tax circles) Guy T. Helvering, long-time commissioner of the Bureau of Internal Revenue (the predecessor of the IRS)] in which he asks for help doing the actual computation of tax liability. The logical inference is that he was indeed preparing his own tax returns. Though his characterization of the arithmetic needed to do the computation as "higher mathematics" is a bit exaggerated (perhaps deliberately so), I do admire his foray into self-compliance in the truest sense. It's not surprising the Roosevelt would not pay others to do what almost all Americans had to do themselves.
It is interesting that a law Roosevelt signed was the cause of the complexity that baffled him. Remember, there were no hand-held calculators or personal computers in his day. A President who experiences the impact of complexity is likely to disfavor additional complexity. Roosevelt's reaction to today's income tax law, congested with computational mazes and definitional labyrinths, would be interesting to see. Of greater interest would be his reaction to the fact that the President, Vice-President, and most (if not almost all) members of Congress do NOT prepare their own income tax returns. Of course, most citizens do not prepare their own returns. If trends predict the future, by 2010 most tax returns will be prepared in India.
Despite all the complexity, defended by its proponents as a necessary evil to bring fairness, the income tax continues to be saddled with the same sort of tax avoidance (chiefly by the wealthy) that at times infuriated Roosevelt. What would he say if he noticed that among the beneficiaries of the tax avoidance techniques available under our hypercomplex tax law were present and past Presidents of the Republic?
Maybe it's time for a "sign here if you think legislators should be required to do their own tax returns" with a "let's be nice and let them use Turbotax" option. Someone can teach me the technology or programming to set up that sort of "poll." What do you think?
Who?
Roosevelt. Franklin.
I mentioned in my last post that when looking at the tax returns of several previous Presidents, it appeared to me that Franklin Roosevelt had done his own return. The handwriting and the signature show similar writing strokes and ink density.
I tried to research this, though I admit I haven't dug up all the published biographies of Roosevelt. A search of the web didn't produce much. (Among the links produced by the various search term combinations I used was a page explaining how George Bush, John Kerry, Hugh Hefner, and Franklin Roosevelt are related to each other. That's a totally different topic, and if you can't wait for me to dig into it, visit the Maule Family Genealogy page and click on the link to "My Cousins, the Presidents.")
The best I can find is a letter that Roosevelt sent to "my dear commissioner Helvering" [the famous (in tax circles) Guy T. Helvering, long-time commissioner of the Bureau of Internal Revenue (the predecessor of the IRS)] in which he asks for help doing the actual computation of tax liability. The logical inference is that he was indeed preparing his own tax returns. Though his characterization of the arithmetic needed to do the computation as "higher mathematics" is a bit exaggerated (perhaps deliberately so), I do admire his foray into self-compliance in the truest sense. It's not surprising the Roosevelt would not pay others to do what almost all Americans had to do themselves.
It is interesting that a law Roosevelt signed was the cause of the complexity that baffled him. Remember, there were no hand-held calculators or personal computers in his day. A President who experiences the impact of complexity is likely to disfavor additional complexity. Roosevelt's reaction to today's income tax law, congested with computational mazes and definitional labyrinths, would be interesting to see. Of greater interest would be his reaction to the fact that the President, Vice-President, and most (if not almost all) members of Congress do NOT prepare their own income tax returns. Of course, most citizens do not prepare their own returns. If trends predict the future, by 2010 most tax returns will be prepared in India.
Despite all the complexity, defended by its proponents as a necessary evil to bring fairness, the income tax continues to be saddled with the same sort of tax avoidance (chiefly by the wealthy) that at times infuriated Roosevelt. What would he say if he noticed that among the beneficiaries of the tax avoidance techniques available under our hypercomplex tax law were present and past Presidents of the Republic?
Maybe it's time for a "sign here if you think legislators should be required to do their own tax returns" with a "let's be nice and let them use Turbotax" option. Someone can teach me the technology or programming to set up that sort of "poll." What do you think?
Monday, April 19, 2004
CBO Report on AMT
The CBO has released a report on the alternative minimum tax, which is full of useful examples, explanations, graphs, and projections. The CBO website sometimes is slow, but it's worth re-trying if one has a deep interest in the topic. Many taxpayers should, because they are or will be paying this stealth tax, as I described and explained it in a previous posting.
Presidents and Taxes
As the first part of tax season rolled to an end (the second part ends August 15), the President, the Vice-President, and the presumptive Democratic Party presidential nominee released their 2003 tax returns, or at least principal parts of them. They can be found at the Tax History website.
With all the chatter about tax rates and whether (and on whom) they should be increased or decreased, the information provides some interesting insight. Quiz time: what do these numbers reveal about the types of income and deductions claimed by the taxpayers?
2003 Federal Taxes
Bush** Cheney** Kerry*
Adjusted Gross Income (AGI) 822,126 1,267,915 395,338
Federal Income Tax Liability 227,490 253,067 90,575
Tax as % of AGI 27.67% 19.96% 22.91%
* filed separately, does not include wife’s tax information
**filed joint return
Do the computation for your own return. Where do you fit in the array? Of course, a better comparison
would also include the impact of social security and medicare payroll taxes. As a general proposition, the lower the adjusted gross income and the higher the proportion from wages and other earned income, the higher the overall tax rate in comparison to these returns.
Which of the three benefitted the most from the "Bush tax cut" ?
Comparison of 2003 with 2002
2003 2003 2002 2002 2003 2002
AGI Taxes AGI Taxes Taxes Taxes
as % as %
of AGI of AGI
Bush** 822,126 227,490 856,056 268,719 27.67% 31.39%
Cheney** 1,267,915 253,067 1,166,735 341,114 19.96% 29.24%
Kerry* 395,338 90,575 111,540 29,946 22.91% 26.84%
* filed separately, does not include wife’s tax information
**filed joint return
When I visited the Tax History website, I noticed that returns for several other presidents were
available. For what it's worth, here are a few selected returns. Visit the site to see the others.
Year AGI Taxes Taxes as % of AGI
Bush 2003 822,126 227,490 27.67%
Clinton 1999 416,039 92,104 22.14%
Clinton 1995 316,074 75,437 23.87%
Bush 1991 1,324,456 204,841 15.47%
Carter 1977 189,160 48,162 25.46%
Roosevelt 1934 64,251 16,139 25.12%
Interestingly, it appears as though Franklin Roosevelt did his own return. The handwriting and ink seem to be the same. I don't have the time at the moment to research the question. Surely somewhere a biographer would have made note of it. I continue to think that anyone who votes to enact a tax should be obligated, constitutionally, to do his or her own tax return for that tax. This proposal is not so much an attempt to eliminate taxes (though surely most of the thousands that exist are best suited for the dust bin of history), but to encourage keeping the law simple, understandable, and favorable to compliance.
So, here we are, the first part of tax season is over. For those of you who have filed, may you proceed without hearing from the IRS (other than to receive any expected refund). For those of you who filed for an extension of time to file, and must file by August 15, may you proceed to get this behind you before it hangs around all summer like an unwelcome guest at the vacation rental home.
With all the chatter about tax rates and whether (and on whom) they should be increased or decreased, the information provides some interesting insight. Quiz time: what do these numbers reveal about the types of income and deductions claimed by the taxpayers?
2003 Federal Taxes
Bush** Cheney** Kerry*
Adjusted Gross Income (AGI) 822,126 1,267,915 395,338
Federal Income Tax Liability 227,490 253,067 90,575
Tax as % of AGI 27.67% 19.96% 22.91%
* filed separately, does not include wife’s tax information
**filed joint return
Do the computation for your own return. Where do you fit in the array? Of course, a better comparison
would also include the impact of social security and medicare payroll taxes. As a general proposition, the lower the adjusted gross income and the higher the proportion from wages and other earned income, the higher the overall tax rate in comparison to these returns.
Which of the three benefitted the most from the "Bush tax cut" ?
Comparison of 2003 with 2002
2003 2003 2002 2002 2003 2002
AGI Taxes AGI Taxes Taxes Taxes
as % as %
of AGI of AGI
Bush** 822,126 227,490 856,056 268,719 27.67% 31.39%
Cheney** 1,267,915 253,067 1,166,735 341,114 19.96% 29.24%
Kerry* 395,338 90,575 111,540 29,946 22.91% 26.84%
* filed separately, does not include wife’s tax information
**filed joint return
When I visited the Tax History website, I noticed that returns for several other presidents were
available. For what it's worth, here are a few selected returns. Visit the site to see the others.
Year AGI Taxes Taxes as % of AGI
Bush 2003 822,126 227,490 27.67%
Clinton 1999 416,039 92,104 22.14%
Clinton 1995 316,074 75,437 23.87%
Bush 1991 1,324,456 204,841 15.47%
Carter 1977 189,160 48,162 25.46%
Roosevelt 1934 64,251 16,139 25.12%
Interestingly, it appears as though Franklin Roosevelt did his own return. The handwriting and ink seem to be the same. I don't have the time at the moment to research the question. Surely somewhere a biographer would have made note of it. I continue to think that anyone who votes to enact a tax should be obligated, constitutionally, to do his or her own tax return for that tax. This proposal is not so much an attempt to eliminate taxes (though surely most of the thousands that exist are best suited for the dust bin of history), but to encourage keeping the law simple, understandable, and favorable to compliance.
So, here we are, the first part of tax season is over. For those of you who have filed, may you proceed without hearing from the IRS (other than to receive any expected refund). For those of you who filed for an extension of time to file, and must file by August 15, may you proceed to get this behind you before it hangs around all summer like an unwelcome guest at the vacation rental home.
Friday, April 16, 2004
Numbers, Numbers, More Numbers
OK, so "tax day" is behind us. (Isn't every day a tax day?)
This posting is brief because I'm investing some time wandering around the newly released statistics at the TRAC IRS web site. There is statistical information on audits, enforcement, and aggregate tax return data. The folks at TRAC (Transactional Records Access Clearinghouse) released their ninth edition of TRACIRS just as the April 15 tax filing deadline appeared.
TRAC IRS is the source for the information about IRS audit rates that I discussed in a previous post. Rather than describe everything that is on the site, I urge you to visit. Take a good look at the county-by-county summaries of adjusted gross income, wage income, average number of dependents claimed per return, etc. They paint a very interesting picture of the nation, because tax information tells us a lot about the socio-economic condition of a county.
TRAC also has statistical information for about eight other agencies, including the FBI, ATF (Alcohol, Tobacco and Firearms), DEA (Drug Enforcement Agency), Customs, and the federal government generally.
It's a playground for people who enjoy numbers. A visit to the site ought to be a requirement of every civics course in the country. (Do they still teach civics?) A careful study of the site's information would be worthwhile for every citizen who wants his or her vote to be informed. There's a lot to learn, and TRAC surely fills the supply side of the equation.
This posting is brief because I'm investing some time wandering around the newly released statistics at the TRAC IRS web site. There is statistical information on audits, enforcement, and aggregate tax return data. The folks at TRAC (Transactional Records Access Clearinghouse) released their ninth edition of TRACIRS just as the April 15 tax filing deadline appeared.
TRAC IRS is the source for the information about IRS audit rates that I discussed in a previous post. Rather than describe everything that is on the site, I urge you to visit. Take a good look at the county-by-county summaries of adjusted gross income, wage income, average number of dependents claimed per return, etc. They paint a very interesting picture of the nation, because tax information tells us a lot about the socio-economic condition of a county.
TRAC also has statistical information for about eight other agencies, including the FBI, ATF (Alcohol, Tobacco and Firearms), DEA (Drug Enforcement Agency), Customs, and the federal government generally.
It's a playground for people who enjoy numbers. A visit to the site ought to be a requirement of every civics course in the country. (Do they still teach civics?) A careful study of the site's information would be worthwhile for every citizen who wants his or her vote to be informed. There's a lot to learn, and TRAC surely fills the supply side of the equation.
Wednesday, April 14, 2004
John, How Can That Be?
Presumptive Democratic Presidential nominee John Kerry asserts that under his tax plan, "98 percent of Americans will get a tax cut."
Really?
Let's see. Does that include Americans who don't pay taxes?
OK, maybe what he meant to say was "98 percent of Americans who file tax returns will get a tax cut."
Uh, no, that won't work either. Americans who file tax returns on which tax liability is zero cannot get a cut in taxes.
OK, maybe what he meant to say was "98 percent of Americans who file tax returns that report a tax liability will get a tax cut."
OK, that might make sense.
Does it?
No. The only tax cut affecting individuals in Kerry's proposal is a tax credit for college education costs. This, of course, has no effect on the tens of millions of American taxpayers who are not paying college education costs. Perhaps their children are grown, or perhaps their children are too young for college, or perhaps their children chose not to attend college.
It's a wonderful soundbite, to claim that 98 percent of Americans would get a tax cut. It flat out cannot happen.
Kerry also claims that under his proposal "99 percent of American businesses... will get a tax cut." Does that include the corporations that aren't paying taxes? How do their taxes get cut? As I described in a previous posting, a majority of corporations don't have tax liabilities. Kerry knows this, because his proposal includes steps to curtail corporate tax shelters and increase corporate taxes. John, are you playing immovable object and irresistable force games with us?
Here we go again. Does Kerry mean "99 percent of American businesses that report tax liability will get a tax cut"? Maybe. It would be nice to know.
What's scary is that people hear these soundbites, and believe them. What's worse is that their electoral decisions are affected by them.
Of course, Kerry's presumed opponent has favored us with similar soundbites, so it's rather obvious that one prerequisite for being a politician or running for office is the ability to frame, or speak, soundbites that declare the impossible.
That settles it. I'm just flat out not qualified to run. I know too much about taxes.
And I'm also unwilling to sell out principles in order to make everyone my friend or to maximize popularity.
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Really?
Let's see. Does that include Americans who don't pay taxes?
OK, maybe what he meant to say was "98 percent of Americans who file tax returns will get a tax cut."
Uh, no, that won't work either. Americans who file tax returns on which tax liability is zero cannot get a cut in taxes.
OK, maybe what he meant to say was "98 percent of Americans who file tax returns that report a tax liability will get a tax cut."
OK, that might make sense.
Does it?
No. The only tax cut affecting individuals in Kerry's proposal is a tax credit for college education costs. This, of course, has no effect on the tens of millions of American taxpayers who are not paying college education costs. Perhaps their children are grown, or perhaps their children are too young for college, or perhaps their children chose not to attend college.
It's a wonderful soundbite, to claim that 98 percent of Americans would get a tax cut. It flat out cannot happen.
Kerry also claims that under his proposal "99 percent of American businesses... will get a tax cut." Does that include the corporations that aren't paying taxes? How do their taxes get cut? As I described in a previous posting, a majority of corporations don't have tax liabilities. Kerry knows this, because his proposal includes steps to curtail corporate tax shelters and increase corporate taxes. John, are you playing immovable object and irresistable force games with us?
Here we go again. Does Kerry mean "99 percent of American businesses that report tax liability will get a tax cut"? Maybe. It would be nice to know.
What's scary is that people hear these soundbites, and believe them. What's worse is that their electoral decisions are affected by them.
Of course, Kerry's presumed opponent has favored us with similar soundbites, so it's rather obvious that one prerequisite for being a politician or running for office is the ability to frame, or speak, soundbites that declare the impossible.
That settles it. I'm just flat out not qualified to run. I know too much about taxes.
And I'm also unwilling to sell out principles in order to make everyone my friend or to maximize popularity.
