MauledAgain

Though I try to blog on Mondays, Wednesdays, and Fridays at a minimum, there's not going to be much tonight. I've been writing for most of the day, so rather than shift gears and write much more, I figured I'd give my readers an insight into what the other writing involves.

At present I am updating BNA Tax Management Portfolio 560, Income Tax Basis: Overview and Conceptual Aspects. First came the research, much of which is now complete. Because I am updating the portfolio (and not creating it for the first time as was the case in 1997), I must craft ways to find references to events that have taken place since 1997 that affect income tax basis.

Almost everything affects basis. It's the glue that holds the income tax together. Most income inclusions and exclusions, nonrecognition, deductions, and credits have some impact on, or are measured or limited by, basis or one of its variants (such as adjusted basis, recomputed basis, etc.)

Much has changed since 1997 when it comes to research. In 1997 my research was primarily paper oriented. And much of it was done by a student hired by the school to be a research assistant. Now, my research is primarily digital, and I do it myself (principally because I no longer have the luxury of multiple research assistants, who can train their successors, and it takes me less time to do it myself than to bring law students up to speed on tax research).

To find legislative changes, I had to do something other than search the entire Code for the word basis (which I did (myself) in 1996 while working on the feasibility study for the portfolio). So I went to the Thomas Legislative Information site, which is a fine site, identified each act that amended one or more Code provisions, and searched it for the word "basis."

To find regulations changes, I used Lexis, an on-line research source that I've been using (online) since 1976. Yes, 1976. So I'm comfortable with it, have evolved with it, and have nothing against its chief competitor.

To find caselaw changes, I used RIA, the on-line successor to the multi-volume print looseleaf service that I began using while in law school in the mid 70s. I met that looseleaf service while working at an accounting firm during my college days, and when it went online and evolved to a nicely functional service, I told the school to cancel the print subscription. So for those who think that the digital revolution has NOT had a beneficial impact on the environment and office space, I point to the liberation of two full shelves in my office (and to some other space saving changes that prevented me from suffocating in paper).

After doing the research I work my way through the portfolio from start to finish, examining each sentence and each of the almost 3,000 footnotes. I ask myself if there is anything in my research (or in my memory) that would require a change. Then I work through the research results, jumping from place to place in the portfolio to revise the appropriate portions.

That's what I've been doing, and I have some more to do. Then will come some mundane, tedious, and very necessary tasks to check cited authorities to see if they have been affirmed, overruled, reversed, etc. After that, it's time to find articles published since 1997 about basis, to upgrade the Worksheets, update the bibliography, revise (if necessary) the description sheet, and to generate a Table of Contents.

And when this (the last of the tax overview portfolios that are under my care) is finished, there will be some chapters to update for Tax Practice Series, and then it's time to recycle once again through the overview portfolios. Yes, TM 501, Gross Income: Overview and Conceptual Aspects, hasn't been updated since 1998. It seems as though it was yesterday.

And remember: were it not for all this writing I'd be talking. Imagine that.

Sometimes the briefest of comments will not only get my attention but also stir up the distaste that I have for unfairness. Today's Philadelphia Inquirer [need registration to access], carries a story in which David Christensen of Livonia, Michigan, describes why he drove to Washington to pay last respects to President Ronald Reagan. Christensen mentioned "that he once received a D college paper for defending Reagan's view that tax cuts for the wealthy ultimately would benefit Americans at all income levels."

It is appalling to me that a person’s ability would be scored by an educational institution or a member of its faculty on the basis of political, economic, or religious beliefs, unless, of course, the institution was one dedicated to a particular ideology, theory, or theology. The purpose of education is to teach people how to think, not to do the thinking for them. A good teacher knows the difference. Insecure educators, partisans, and narrow-minded zealots do not.

It is easy to believe David Christensen’s story. It happens often, and even once is too often. It happens, if not everywhere, almost everywhere. It happens, so I am told by my students, at the law school where I teach. I believe those students because I have heard one or another colleague make statements totally consistent with the notion that a student should be evaluated in the context of the political, social, or economic theory which they support. Students describe how they learn to write “what the teacher wants to hear” rather than what they would write if they were no so constrained. The result, learning how to cloak the truth and speak for profit, is a lesson that ought not be taught.

Surely a good teacher can ask questions that compel students to defend a position. A student can and should learn how to defend a position with which the student does not agree. In my field, a lawyer who does not believe that capital gains should be taxed at a lower rate than other income surely needs to know how to represent a taxpaying client who has recognized capital gains, or to prepare a tax return on which capital gains are reported and taxed at those low rates.

Thus, the good teacher asks “What are the two best arguments in favor of position x?” or “Which of the following statements would not be consistent with an argument in favor of position y?” A good teacher can ask for a description of the advantages or disadvantages, or both, of position z. The skills that these questions demand a student learn and acquire are of value not only in the law but also in many other disciplines. Though in class I ask students for their opinions on questions as to which there is no right or wrong answer and how they would deal with the matter, I do not put those sorts of questions to them on a graded exercise or exam. For example, I ask them if they think it is a good idea to be an organ donor, to get a sense of their awareness of the issue and to transition to the next question, but I understand that some students might have theological or other objections to organ donation. That sets up asking them how they would put the issue to a client when doing estate planning work for the client, and gets them sensitized to the realities of practice, where clients indeed arrive with a wide variety of perspectives. It would be unconscionable for me to give A grades to organ donors and D grades to those who object.

That is why I think that it is unacceptable to base a grade on a student’s conclusion with respect to a position for which there is no right or wrong answer. In contrast, a professor can evaluate how well a student crafts an argument, the quality of the writing, spelling, and grammar, the scope and quality of the research, the structure and organization of the answer, and the relevance of the issue. Holding a student’s grade hostage to the teacher’s ideology is flat-out wrong.

It’s ironic, isn’t it? Hindsight tells us that David Christensen was correct, and that the instructor was wrong on several points. It’s a bit too late to undo the damage that was caused, though perhaps and hopefully David Christensen got on with his career and found interviewers understanding of how the D on his transcript was a measure of his teacher’s dogmatism rather than Christensen’s ability.

To all those who teach, instruct, and profess: we are stewards. We are guides. We are charged with nurturing and educating those whose minds are entrusted to our care. We must let our students remain persons of reasonable minds so that in life, they can be among those reasonable minds who differ when there is a matter on which reasonable minds can differ. Let us not take that away from them nor punish them for not sharing our view of the world.

An interesting thread on the ABA-TAX listserve gets into a topic that probably interests many more folks than just those who subscribe to the listserve. I think that this would be useful information, even if to use to make a point, for people who aren't tax professionals.

We know that the tax law has become absurdly complicated. We know that tax returns have grown in size for many people. Even those who use tax preparation software and file electronically discover, when they print out their returns, that the amount of paper needed to file a tax return has increased. There are hundreds of IRS forms so surely there will be piles of paper.

The thread started when one subscriber asked for advice concerning the logistics of filing a 500-page federal estate tax return. He described the return as "large" but another subscriber brushed that aside, describing 10,000 to 20,000 page estate tax returns that his firm had prepared, and mentioning 20,000 to 40,000 page partnership tax returns for oil and gas partnerships. One measured three feet in height.

Egads! Of course, someone wanted to know how do you staple a large return. The answer is, you don't. The person describing the gargantuan returns described a process of boxing the return in multiple boxes, labelling them, and going through hoops to make certain the IRS would get the entire return. Others mentioned ACCO fasteners taped down with book binding tape. Makes sense, considering the thing is at least the size of a book. Another suggestion was that an index and cross reference chart be included.

Finally, another subscriber couldn't resist the "here we go with a 'mine's bigger than yours' debate" jab. So, here's an invitation to a contest (no prize awarded other than a moment of fame in my blog): what's the largest tax return (number of pages) ever filed with the Internal Revenue Service? Second category: what's the largest tax return (number of pages) ever filed with a state or local government? [I'm using number of pages because weight will vary according to the paper stock used, and likewise the height could vary a bit depending on paper stock.] Email your entries .... your descriptions, that is, NOT the return, ha ha ha.

And hope that the income tax approach to life doesn't show up at toll booths......

Unquestionably, Ronald Reagan's impact on the tax world was the enactment of the Internal Revenue Code of 1986. Replacing the Internal Revenue Code of 1954, it simplified the tax law by removing a variety of exclusions and deductions in exchange for fewer and lower tax rates. Prof. Mike Waggoner at Colorado Law says, "Many students of taxation consider that act to have been the recent high water mark in the U.S. tax system." I'm among them.

Much of that accomplishment has been trashed during the past decade and a half. Both major political parties share the blame, along with lobbyists who represent individuals, entities and industries that consider themselves special and more worthy than the rest of us, although by the time Congress finishes with the politically correct tax policy of "everything for everybody" we end up with the mess we have today.

The most disappointing aspect of the deterioration of the tax law is that the compromises reached in 1986 are discarded on an inequitable basis. In my description of the effort to restore the sales tax deduction, I point out one example of this problem. If the sales tax deduction is restored, will rates be increased to offset the revenue impact? After all, removal of the sales tax deduction was part of the price paid for lower rates. In all fairness, though, the rates were increased during the 90s without a concomitant restoration of the various deductions and exclusions that had been abandoned. Nonetheless, a legion of other deductions and credits were enacted during the same period. Keeping score isn't easy in the tax game.

Reagan's tax legacy was tarnished long before he reached his grave. No matter how many things are named after him, the trashing of the tax code will remain as a reminder of what once was, replaced by something that cannot, under any circumstance, be called an improvement. The best memorial to Reagan, and the best gift to all citizens, would be for Congress to fix the tax code. Don't hold your breath.

I suppose it's possible to teach (and learn) taxation without paying attention to politics, but it's so deceptive. There is such a chasm between the ideal tax policy analysis and the reality that generates the tax law. Many students appear to bring into the classroom some sense that the tax law is the product of mathematical analysis based on maximizing the benefits of a well running economy. Sometimes I think some of the static that I get from my students is a venting of the disappointment that overwhelms them when they learn, from me, how so much of the tax law comes into being.

I'm fair. Every political party (which, for the most part, means the Democrats and the Republicans) gets criticized. So, too, are most politicians, though rarely by name. The ones who get the attention are the ones whose names get attached to tax provisions. I'd rather have a marble monument or a bronze statue than my name tagged to a provision of the tax code (even though with my surname the possibilities are almost infinite and surely scary).

Today we learn that the Chair of the House Ways and Means Committee plans to introduce a new tax bill to replace pending legislation which is being considered in order to comply with agreements between the European Union and the United States. The simple explanation is that some existing U.S. tax law provisions give U.S. corporations an advantage that shifts the competitive balance in trade between the E.U. and the U.S. The upshot is that Congress needs to fix the problem to head off all sorts of problems.

So what happens? Legislation to fix the problem in a way that will comply with the agreements is introduced. Legislators object. Enough that passage of the bill is unlikely. Some, I suppose, have the outlook that the U.S. ought to do whatever it wants without regard to other nations or international agreements. But most, it appears, see the opportunity to hold necessary legislation hostage for their benefit or for the benefit of selected constituents.

So this time around the leadership that is sponsoring the legislation will have things added to it as a way of picking up enough votes in the House to get it passed. A report on the Tax Analysts website explains that the leadership “has considered adding a tobacco buyout proposal and a federal tax deduction for state sales taxes to entice key blocs of votes.” A spokeswoman for the Ways and Means Committee described these issues as matters of “tax policy.” Clever.

In an ideal world, tax legislation reflects what is best for the nation. In a political world, tax legislation reflects the desires of the successful lobbyists. By definition, lobbyists represent factions, groups, segments, and individuals. What lobbyist represents the nation? All of them claim that they do. Some people believe them.

The restoration of a state sales tax deduction would be one more regressive step away from the feeble simplification accomplishments of the 1986 legislation. But it would be worse than a return to the status quo. The 1986 legislation rested on the notion that rates would be reduced in exchange for eliminating certain deductions. The sales tax deduction was removed, in part, because it was difficult to administer and easily “miscalculated.” I know that people living in “no income tax” states consider themselves at a disadvantage because they pay non-deductible sales taxes, but the reality is that state tax levels vary from state to state, that there are states with high sales AND income taxes and states with low income taxes and high sales taxes, and all other sorts of combinations. By allowing a deduction for state income taxes but not state sales taxes, the federal tax law encourages state legislatures to shift away from regressive sales taxes, though few have done so. Whether state legislatures should be so encouraged is a debatable issue, but it ought to be debated. Yet not a peep has been heard from the Congress on this issue.

During the intervening 18 years rates have been increased (especially with hidden rate increases in the various phaseouts) without a restoration of deductions, though rates were then reduced to some extent in more recent legislation. Now it appears a deduction will be restored, without an increase in rates.

None of this makes for good tax policy. Consider an automobile that is modified by its co-owners. One day it is agreed that the engine will be made more powerful, which requires changes to the emissions control system and the transmission. Would it make sense to undo the changes to the transmission at a later date without adjusting the engine? No. There is a need for an overall evaluation of the vehicle. So, too, the tax law. It needs to be viewed holistically, as a functioning unit with parts that must harmonize one with the other. Hacking at it with nickel and dime amendments, with bits and pieces modifications, and with disregard for the inter-relationships is wrong, inefficient, and unwise, has been going on too long with the usual absurd results, and is being sustained by the “vote buying” efforts of the House leadership.

If the members of the House who refuse to approve the international tax legislation that is required without getting something in return insist on using national needs as a tool to enrich their constituencies, let them vote no. Put the spotlight on them, and let the citizenry respond. At present, few people outside the tax world (and probably not all of those within it) understand that more erosion of sensible representative government is underway.

As an educator, the difference between ignorance and stupidity matters to me. It matters more, I suppose, to those handling admissions to the school, but it matters to me because I can do something about ignorance. Stupidity is a bigger challenge.

Ignorance means "not knowing" and it also can mean "not understanding." Both of these nots can be untied with education. Ignorance does not mean, as some people think, stupidity. A very bright person who does not know something is ignorant as to that unknown thing. Of course, if a person is ignorant with respect to almost everything it's possible that the person is stupid. Or lazy.

Stupidity is simply the inability to learn something, even if it is in front of the person trying to learn it. Of course, a person can be stupid as to some things and not others. Sadly, a few people are stupid as to pretty much everything.

I started thinking about ignorance and stupidity this weekend when I received yet another scam email from someone (or perhaps more than one) trying to gather information that would permit them to break into bank accounts. I happen to have a credit card account with the bank in question, but I know that I received the email randomly, because there is no connection between my email addresses (other than one) and the bank.

Sufficiently knowledgeable about computers, I visited the site to which the email directed me. The email claimed that the bank had done maintenance on its accounts and needed information from me so that it could restore access. If I did not reply, I was warned, I would not be able to access my account. What account? All I do is send money to this particular bank.

Of course, the web site was a page that caused the actual bank web site to appear underneath a web form that requested just about everything except my blood type and my grade in my college statistics courses. I had some fun filling out the form. Did you know I was born more than 500 years ago? Or that I live in Antarctica?

A visit to the bank's web site turned up a list of several dozen email scams, none of which matched the one I had received. So I added it to the bank's list. Maybe they'll catch the perpetrators. These clowns were so stupid that they're probably leaving tracks.

What saved me here was a combination of education and intelligence. Mostly, though, education. I read. Therefore, I know about these email scams. I knew not to provide passwords, social security numbers, and similar information to ANY web site. But I can imagine that some people succumb to these emails. Some portion of those getting the emails have money in that bank, and some portion of those people in turn respond to the email because they think that it is legitimate. This is mostly a matter of ignorance. I say mostly, because a very intelligent person who was ignorant of all the warnings about these emails might nonetheless figure out that it was a scam.

What to do? Let's educate people. Let's educate our children. Let's teach people practical things and save the theory for dessert. When our children start walking we teach them not only to avoid going into the street alone but WHY they ought to stay out of the street. Likewise, when people start using computers we need to teach them to avoid scams and how to spot them, together with WHY they need to know how to identify these scams. As a nation we have the intelligence and the resources to do this. We don't need a government program. WE SIMPLY NEED FOR EACH PERSON WHO UNDERSTANDS (AND KNOWS) HOW TO SPOT THESE SCAMS TO APPROACH SEVERAL FRIENDS AND RELATIVES AND TO TEACH THEM. For free. As a gift. As a public service. It might take the scaling back of some government-sponsored education programs that consume class time for purposes generating little or no benefit to make time for teachers to share this information with their students.

Suppose that someday no one responds to any of these scam emails. What will happen? Will the scammers keep sending them, as hope springs eternal? Or will the scammers become trees falling in uninhabited forests?

The stupidity side of this gets claimed by the scammers. One of the clues that popped out at me was the atrocious spelling and grammar in the message. Understand, I'm not a fluent linguist, I make spelling errors, and my grammar is far from impeccable. But I have enough intelligence (and education) to know that if I am going to solicit someone in a given language I OUGHT TO LEARN HOW TO SPELL AND WRITE IN THAT LANGUAGE (or to get someone to do it for me).

Another clue was the overwhelming list of information requested. Trying to get that much information is not unlike the bank robber who is caught because he adds so much to the sack that he can't run very quickly from the police.

Yet another clue, which I will not describe in detail because it may lead to these scammers being apprehended, involved their programming. I do some programming. I don't have a degree in it (or three degrees as does someone I know), but I can figure it out when I need to do so. Guaranteed, an educated intelligent programmer could run circles around the idiots that created this email. I wasn't even LOOKING for this clue. I'm sure had I spent more time I would have found more clues of this sort, but I left that to the folks who get paid to deal with this stuff.

So let's check in on our friends and family who use computers. Talk with them. Perhaps they are already up to speed on this situation. If not, explain things. If necessary, set up their computers to reduce or eliminate the opportunities for them to give away, unwittingly, sensitive information. It's a lot easier than dealing with the consequences of learning that their bank account has been cleaned out.

Memorial Day is a good time to think about war. It's a day we remember those who died because of war. That's a lot of people to remember. Surely in the hundreds of millions if we remember all of them, military and civilian alike, in all the wars that have been fought.

Some people think that the current war in Iraq is "all about oil." It isn't. It's about several other things, but it's not about oil. After all, there have been countless wars, some unending, in Africa during the past several decades, and there's little, if any, American or other outside involvement. And yet Africa is the most resource-rich continent. If war was simply about resources, Africa would be a conflagration far more terrible than the violence that currently afflicts much of the continent.

Those who think that the war in Iraq is "all about oil" argue that the ultimate goal of the war advocates is to generate low crude oil prices, thus generating the dual effect of cheap gasoline at home and an economic lever to use against OPEC (which, the argument goes, would be forced to lower prices in order to sell its product). Ironically, the war in Iraq has had the opposite effect. Crude oil prices are skyrocketing, in part because of investor fears that the long-term effect of the chaos in Iraq will be its spread into the rest of the region.

But that's only part of it. The reason oil prices are rising is primarily the increased demand from China. Back we go to Economics 101. Demand rises, and prices follow. The same thing is happening with concrete, because China's demand for that product has soared. Unlike oil, which is a limited resource, the ingredients for concrete are vast in quantity, and the snag at the moment is insufficient manufacturing capacity.

Yet there are those who think oil prices can be pushed down if Americans drove more fuel-efficient automobiles. For example, in today's Philadelphia Inquirer, John Grogan claims that demand for gasoline is the cause of the increase in prices and that if we all drove fuel-efficient vehicles the problem would be alleviated, if not solved. Strange, though, that demand increased by a few percentage points over the past year and prices soared by many times that amount. It's China, John. Today gasoline and concrete, tomorrow rice and corn.

Grogan advances four proposals. He's right on with one of them and off the mark with the other three.

He advocates an increase in the gasoline tax. He's right. A gasoline tax is a direct charge on the product, maps to the environmental and resource supply damage that its use causes, and matches consumption with cost. He rightly criticizes Allyson Schwartz, a candidate for Congress, who in a display of idiocy and pandering to those ignorant of economics, proposed LOWERING the state gasoline tax. Duh. Granted, Schwartz seems to have good intent: make gasoline cheap(er). But how about milk, pharmaceuticals, and ice cream while you're at it? Hey, why not make everything as cheap as it was in 1957? First problem: reducing tax revenue means that road will get less maintenances (that's where the gasoline tax revenue goes), and Pennsylvania's roads are in bad shape as it is. Second problem: the tax reduction won't get passed on to the consumer; instead, the producers and retailers will maintain prices and increase profits. Third problem: there's no justification for making gasoline cheaper when in real dollar terms it STILL is CHEAPER than it has been in the past. Schwartz is playing to the crowd, and though that makes good politics, it makes for bad national security, bad national energy policy, and bad just about everything. So on this issue, Grogan scores a point.

Grogan then advocates a higher sales tax on fuel-inefficient vehicles. There already is a federal excise tax on gas guzzlers, though it is riddled with exceptions that form loopholes large enough to drive Hummers through. Some gaz guzzlers (e.g., fire trucks) cannot and should not be subject to higher taxes. Other gas consumption items, which don't qualify as gas guzzlers, would escape. Recreational snowmobiles? Gasoline powered leaf blowers? Before pointing the finger at gas guzzling vehicles, Grogan ought to consider all gasoline consuming equipment and separate the necessary from the unnecessary. On this issue, Grogan scores half a point for making us think about the inefficiencies of the existing gas guzzler tax and doesn't score the other half because he oversimplifies the matter.

Grogan then advocates eliminating highway and bridge tolls for vehicles that get maximum gasoline mileage. Why? Supposedly to encourage purchase of such vehicles. But there's a problem. The problem is that fuel efficiency doesn't measure gasoline usage. Which is worse, a teenager racking up 20,000 miles a year tooling around in a 30 mpg vehicle, or a carpenter driving 10,000 miles a year going from job to job lugging tools and materials in a vehicle that gets 20 mpg? Who's burning up more gasoline, and to what end? Grogan would eliminate tolls for the teenager? Nah, that's not the answer. After all, all vehicles cause wear and tear on highways and bridges, and if they are toll facilities, then the toll should be paid. No points here for Grogan, because he's measuring the wrong thing.

Finally, Grogan advocates using increased gasoline taxes to provide rebates to people purchasing hybrid and other fuel efficient vehicles. First problem: this will drive up demand for products already in short supply, which means their prices will go up, which means net of the rebate the consumer isn't better off and will still find other vehicles cheaper in terms of cost. Second problem: most of these vehicles are small and dangerous, and ought populate the highways only after trains (yes, trains) are put back on the tracks. No one seems to be saying much about the two and three trailer tandem monsters that are clogging the highways and getting involved in a disproportionate share of the accidents. Grogan claims people purchase SUVs and other large vehicles to show up their neighbors. I think otherwise. I think they buy these things because they feel safer. They may or may not be safer, but feelings seem to matter in some of these purchase decisions. I still don't understand why, considering all the marvels of modern technology that lets surgeons transplant hearts, computers to run on microboards, people to live in space, etc etc, that there's still no serious progress in designing things that use (free) solar energy. (Electric vehicles, for example, simply shift oil consumption from gasoline at the pump to crude oil or natural gas at the electric generating power plant.)

Americans could stop driving and return to riding horses. And it wouldn't make a difference. Demand for oil and oil products in China (and eventually in other countries moving into a globalized economy) would continue at levels that would sustain current oil prices. And it wouldn't change a thing in world politics. All of the problems that lead to war would remain. All of the people whose behavior sparks war would remain. Tens or hundreds of millions, maybe billions, would and will still die. Gasoline has nothing to do, really, with whatever it is that causes some people to inflict unwarranted violence and evil on God's creation and others to find the courage to stand up to the bullies to protect freedom and liberty from the encroachment of the totalitarians.

You can interpret that last sentence in as many ways as you wish. It's deliberately ambiguous. It's designed, as much of my classroom teaching is designed, to make you think. For when the ability and right to think is suppressed, then all is lost. So, this Memorial Day, let's think about thinking. We can start by remembering all those who gave gifts that cannot be rejected.

Just a short post today, because I am preparing the basic tax course for the fall semester. Fall? Now? Yes, especially as the book has changed, yet again, the second time in 22 months. Ah, the students will be so pleased to learn that last year's outline won't be of as much use as they thought.

A letter in today's Philadelphia Inquirer [you need to register to access it] from Vincent Benedict of Collegeville, Pa., relates a story that is scary. Reacting to a commentary advocating holding teachers to a higher standard (a goal with which I heartily agree), Mr. Benedict explains that while working as general sales manager for WCBS Radio he interviewed a Penn State grad whose major was math. He asked her "Can you tell me what 15 percent of 200 is?" She responded with a straight face, "Oh, I don't do percentages." Mr. Benedict then told of several other similar situations that left him (and me) appalled. But I'm not surprised. From what I see in my teaching and in my business transactions, a lot of people don't do a lot of things that we'd expect they'd could do and should be doing.

Let's see....

"I majored in math, I want a job that requires math skills, but I don't do percentages."

"I majored in engineering, I want a job that requires engineering skills, but I don't do computations."

"I majored in chemistry, I want a job that requires chemisty analysis skills, but I don't do formulas."

"I majored in law, I want a job that requires legal skills, but I don't do cases."

"I majored in psychology, I want a job that requires psychology skills, but I don't do listening."

"I majored in car repair, I want a job that requires car repair skills, but I don't do oil changes."

"I majored in surgery, I want a job that requires surgery skills, but I don't do ...." Worried yet?

Let's rephrase it:

"I majored in whatever, I want a job that pays but that does not require me to do."

Huh?

"Yes, after all, I'm entitled."

Says who?

"The media. The politicians. Some parents."

Before we blast the teachers, understand the pressure that they face when their students' parents show up and DEMAND high grades so that their children can attend colleges and go through the same process so that ultimately the tuition purchases a degree (rather than the opportunity to learn). The degree as license to be paid, no matter how obtained, is a concept that is beginning to cast a large shadow over the concept of a degree as a certification of academic or educational accomplishment, learning achievement, and skills acquisition. Several years ago, a PARENT of a law student showed up at the law school and hassled one of my colleagues about her child's grade. HER CHILD WAS AN ADULT ENROLLED IN A GRADUATE PROGRAM. Hey, Mom, let your child grow up, and hey, let your child make the effort so that your child can learn what his or her gifts and limitations are. And stop teaching your child that every failure is someone else's fault. Your child isn't perfect. Neither are you. So if your child can't or won't do percentages, fine. That's not a crime. But don't advise, encourage, or compel her to major in math. And don't lead her to expect to be paid as though she does do percentages.

Mr. Benedict closed by pointing out that he pays thousands of dollars a year in school taxes. His unspoken statement is that he doesn't think he, the students, or society are getting their money's worth. We're not. Partly because some teachers aren't qualified, and partly because the ones who are qualified aren't allowed to do their teaching and to be honest with the students. And all of that is infected with a reluctance on the part of society to impose discipline, which is an absolute prerequisite to learning.

I pay attention to Philadelphia tax policy because I live near the city. Though most of my tax teaching and writing involves federal taxes, I have written about state and local taxes so the issues and the technical analyses are matters with which I am familiar.

The city of Philadelphia faces an uncertain, and potentially disastrous, financial future. Hundreds of thousands of residents and jobs have left for other places, city tax revenue has decreased as a result, and demands for city services have increased as those unable to leave look to the city for assistance with the very problems that keep them from leaving. Making the situation worse is the decline in federal funding of programs thrust upon the city (as they are upon all states and localities) by the social engineers in Washington who don't quite have the ability to get to the root of the problem.

When Ed Rendell, now governor of Pennsylvania, was elected mayor of Philadelphia, he pushed through a plan for economic revitalization of the city. A key part of the plan was the REDUCTION of business taxes so that businesses would not only stop leaving the city but return, joined, it was hoped, by new businesses. The plan seemed to work, at least to the extent that it stemmed the flood of departing residents and businesses. Certain areas of the city saw increases in business. Young professionals began moving to popular neighborhoods, causing a demand for residential units that sparked a building and renovation boomlet.

The Rendell plan was designed to reduce taxes over time, with the increased revenue from resurging business and other taxable activity permitting further increases as the years progressed. This process, however, has hit an obstacle. Calls were made for the repeal of already enacted future decreases in the wage tax.

A commission was formed to study the problem. The chair of the commission provided testimony before City Council that conflicted with the report that the commission presented. Confusion, back room deals, posturing, and all the other wonderful attributes of politics clouded the situation.

Yesterday City Council passed a series of bills that would reduce or eliminate taxes. For example, the insanely silly gross receipts tax (which is paid by a business even if it is not making money) would be repealed. The Mayor, John Street, who succeeded Ed Rendell, vows to veto the bills, and it appears that there are insufficient votes to override the veto. The Mayor's position is that the city cannot afford to give up any more revenue. The amount in question is a very small percentage of city revenue.

So what will happen?

More people will leave the city. More businesses will leave the city. Those who can, will, and those who can't, and who need city services, will remain. The city may end up going through a "Detroit experience" before the politicians wake up, or better yet, the people wake up and replace the politicians.

It isn't inconceivable that Philadelphia will try to get the legislature in Harrisburg to permit a "Phoenix experience" by absorbing the surrounding counties (whose financial picture, though not terribly rosy, is nowhere as dire as that of the city). The debate that will rage when that proposal is made will make national headlines. And if it happens, the increased tax burden on suburban residents and businesses will compel another exodus, this one adding to the plight of a Commonwealth that already is sliding in the wrong direction, especially in terms of not being attractive to business.

Philadelphia was once the capital of the nation. It was once a vibrant city. Its economic and social health has suffered. It is now seriously ill. And yet there are some who want to stay on the same course. Why? Because they think it has worked? Maybe for them, and their friends, but surely not for the people.

End of lecture. Now I'll sit back and watch the next episode. And I'm sure I'll have something to say about it.

An AP story that broke out of nearby Chester, Pa., explains a cafeteria worker managed to get the IRS to send her a tax refund of more than $2,000,000 by pretending to be the Hawaiian princess Abigail Kinoiki Kekaulike Kawananakoa. The cafeteria worker, Abigail Roberts, allegedly used the princess' social security number. Though she seems to share a first name with the princess, she was born Charlotte Veronica Kuheana.

The IRS was able to get most of the refund back, by issuing warrants to the bank where it was deposited. The IRS has sued Roberts and her husband to recover the rest of the money.

Let's stop and consider some questions:

1. How did Roberts obtain the social security number of the princess? My guess is "Easily." Too many companies and institutions use social security numbers when they ought not to do so, and very many people don't comprehend that they can refuse to provide a social security number to a private enterprise for identification purposes (in contrast to the requirement of providing it to an employer).

2. Why put $2,000,000 in one bank when FDIC insurance is limited? It's not as though there's only one bank in the country. In another decade that might be a problem, but not at the moment.

It gets better.

This wasn't the first time Roberts duped the IRS into sending her money to which she was not entitled. In 2001 she was acquitted of tax fraud after she tricked the IRS into sending her $34,000 that belonged to a trust for Hawaiian royals. Acquitted? Yes, because the judge ruled that there was insufficient evidence that she had INTENT to commit a crime. Her attorneys said she was afflicted with "irrational insistence upon an identity that is not her own."

OK, then here is another question:

3. Why doesn't the IRS program its computer system to flag all returns that involve the Hawaiian family of which Roberts claims to be a part, and then double check that the return is valid by contacting the alleged filer? After all, if the real princess also files and uses her social security number, won't the computer system pick up on the duplication? Hmmm. Not if the pretender files early. To prevent this problem, the IRS would need to hold refund check mailing until all returns are filed.

4. Isn't there a system in place to check huge refunds? Most taxpayers who get refunds see checks in the range of $100, $500, $1,000, maybe $5,000. Sometimes $10,000. But TWO MILLION DOLLARS? That HAS to make the red flags wave.

5. Interpolation suggests that in 2007 Roberts will go for a refund of $133,000,000. Unless, of course, someone fixes the system. Prevention surely is worth the price when the outcome is so expensive.

Let's face it. The IRS (and we, the taxpayers) got lucky. Most folks pulling this stunt would have spent all the money, hidden it, taken it out of the country, or given it away.

But at least the IRS got on this pretty quickly. My guess is perhaps it WAS triggered by the filing of a tax return by the real princess.

I still think it's easier to collect bridge tolls.

If you're here, great. You may have had to play with the URL, because for some reason www.mauledagain.blogspot.com doesn't work anymore. Use mauledagain.blogspot.com (and don't let the browser's autocomplete feature dupe you back into the www. version!)

Strange that they're no longer aliasing the www. version of the URL.

I'm open to an explanation.

Finally, the hyperlinked United States Tax Court Rules of Practice and Procedure have been updated. They appear on the Jim Maule's Unofficial United States Tax Court Home Page , which also contains biographical and historical information about the Court and its judges.

The Rules were updated last summer. Yes, I have so many projects underway that this update waited for almost a year to get done. Unlike the Rules on the Tax Court's official site, my rendition of the rules permits a user to jump from one rule to another, or better yet, from the index to a rule, by clicking on a hyperlink. For tax practitioners, it's worth the visit.

Why did I do this? For money? No, there's no money exchanging hands. Because I'm bored? No, I'm not bored. Why, then?

Because in the early days of the World Wide Web, a group of us at the now-defunct Villanova Center for Information Law and Policy explored how this emerging technology could be of use to lawyers. Having been an attorney-advisor at the Tax Court, and having created the first index of its rules back in pre-digital days (almost 25 years ago), and aware that the Tax Court at the time had no site, it seemed to be a logical place to start. A public service project, if you will. It caught on, but after the Tax Court's official site opened, hits on my hyperlinked rules page dropped off. Though I've let go of the other projects, this one is too much fun and has too much of a time investment to surrender. This update, for example, took about 20 hours to complete. Much of the HTML is hand-coded, and the existing pages had to be compared with the latest edition of the rules. Updating the index took 4 hours.

So have a look. Use it. It's one of my gifts to the tax world. No deduction, though.

I just noticed that some of the links in my posts don't work and were prefaced with "www.mauledagain.blogspot.com/....." which, of course, is a link to a non-existing page. Apparently without http:// in front of the www. the link doesn't work. I guess browsers are more forgiving, because I rarely, if ever, type http:// before typint the URL.

Anyhow, I fixed the ones that I found, going back a month. If I missed some, I'm sure someone will let me know. I'm assuming that my readers are like my students: eager to find and point out a Maulegoof.

It happens.

If my efforts on my current project proceed as expected, there will be news tomorrow or Monday of interest to the tax community. Stay tuned.

It's graduation day here at Villanova (for the Law School). So I might not get to posting anything substantive later today. "Do they all have jobs?" is probably the first question that comes to the mind of someone outside the academy caught up in the "there's too many lawyers" drumbeat. As far as I know, many of the graduates have jobs lined up, a few are planning to continue their education, and most of the rest will get hired in the "post bar exam" hiring period.

In the meantime, if there's a risk of "Maule withdrawal" (as someone told me was a problem when too much time elapsed between postings on this blog), take a look at a book review I wrote for Paul Caron's "What Tax Professors Are Reading" on his taxprof blog. His sitecounter shows that hits on his blog increased more than 500% yesterday when he posted my book review. I think it's a strange coincidence having nothing to do with me. He calls it the "Maule effect." We'll find out next week, when another book review that I wrote for his blog gets posted.

A miracle.

For years I've advocated a change in partnership tax law that would simplify the Code and prevent taxpayers from unwittingly overlooking a basis election.

The tax legislation that passed the Senate on May 11 contains a provision that makes partnership optional basis adjustments mandatory. It would repeal the provision dealing with the procedures of the election. It would repeal the provision for a special basis adjustment that applies to certain transactions if the optional basis adjustment is not elected. That would moot some very complex regulations interpreting the special basis adjustment.

Nice, but....

Yep, a but. The election would remain for transfers taking place on account of the death of a partner. I'm not sure why they're doing that. The election should be mandatory for death transfers just as it would be for lifetime transfers.

If this passes, it will require a lot of short-term work to redo the course materials, the course slides, problem answers, and the CATLI exercises I offer through TaxJEM, Inc. I'm sure there's more I'll remember momentarily. But in the long run, it will make the course easier for the students and easier to teach.

But I'll wait until I see IF this legislation passes and IF the provision remains in it.
After all, I cannot find the House bill, so I don't know if this provision is in it. If it isn't, there's more chance that it would not survive the Conference at which the House and Senate bills are reconciled.