MauledAgain

If they still teach Civics or Government Process in the middle and high schools of this country, and perhaps they do in some places despite allegations that they don't teach this anywhere anymore, I wonder how they describe the process by which tax (and other) laws are enacted. It's so easy and charming to wrap the description in a presentation populated by elected representatives acting in the best interest of the nation.

It wouldn’t surprise me that if the schools taught the reality, parents and others would complain that the students were being traumatized. Imagine finding out, at a young age, that as I blogged yesterday, money talks and, worse, special interests dominate to the point that the best interest of the nation is cast into the dark shadow of the self-anointed bearers of the tag “special.”

Yesterday the House of Representatives passed its version of the 2004 tax legislation. The Senate has already passed its version. Don’t we teach (when we teach the subject) that revenue bills originate in the House and then are sent to the Senate? Well, that’s the theory. Tack on another reason why I reject teaching theory to the detriment of practice. In practice, revenue bills have originated in the Senate, and have passed Constitutional muster through a variety of procedural zig-zags that make lawyers proud and advocates of following the rules shudder. This time around, despite the strange sequence of passage, there exist two very different versions of the legislation. Accordingly, the House and Senate each appoint representatives to a Conference that will “reconcile” the two bills.

The House bill contains $140 billion in tax cuts, $98 billion in revenue raisers, for a net increase in the federal budget deficit of $34 billion over 10 years. The Senate bill is revenue neutral, that is, the budget deficit is unaffected. So there must be some big differences between the two bills. There are. So many, in fact, that reconciliation will be difficult. It’s one thing to reconcile a bill that reduces a tax rate to 23% with one that reduces it to 25% (does 24% sound right?) or a bill that sets a credit to expire at the end of 2007 with one that sets the credit to expire at the end of 2005. (Figure that one out and you’re ready for a career either as a tax lawyer or a politician.) But what if one bill creates a deduction for the cost of diapers and the other bill creates a deduction for the cost of toilet paper? The end result could be a deduction for neither, a deduction for both, or some typically complex provision permitting deductions for diapers and toilet paper manufactured in factories north of the 75th latitude on days when the temperature at 3 p.m. Eastern Standard Time exceeded 80 degrees Fahrenheit. Wait, that’s too simple. But you get the point.

So why is this Conference going to face tough challenges? Because it is being hijacked. Knowing that the core of the legislation MUST be enacted to prevent increasingly higher duties imposed by the European Union on exported American products, legislators from both sides of the aisle jumped in with this sort of blackmail: “I won’t vote for it unless there is a provision that.....” And the provisions that were included in the legislation are hand-outs to an interesting array of people. Let’s take a look:

* Reduced tax rates for corporations. Let’s see, do you think corporations will use their tax reductions to create more domestic jobs? Or do you think the folks in the executive offices earning $20,000,000 a year will get a nice cost-of-living raise so that they can maintain their lifestyles?

* Tobacco farmers get $10 billion in exchange for a repeal of the federal quota program that has financed tobacco growing. The quota should not have been there in the first place. So now taxpayers must pay to remove it.

* More favorable depreciation deductions for small jets and planes. Why? First of all, depreciation and related expensing deductions are already so favorable that it’s difficult to imagine that they could be made much more favorable. Second, the state of public air and other transportation encourages the purchase of small jets and planes by businesses and individuals who can afford them, so why encourage what already is and will be taking place? Third, what’s so special about small jets and planes? What about small boats? Or small cars? Or small flat-screen televisions? Or diapers? Or toilet paper?

* Aha, it’s more than small airplanes. More favorable depreciation deductions for restaurants. I guess there’s a shortage of restaurants and this will encourage more to open? I don’t get it. The provision is written to preclude carry-out establishments from getting this favorable tax treatment. Is this part of a plot to “make America eat out?” It appears that the fast food places qualify. I don’t get it. Wait, I already said that. But, really, I don’t get it.

* Restoration of the sales tax deduction. I’ve blogged this on several occasions, so I’ll say no more than “watch the 1986 tax reform unravel faster than it took to create it.”

* Letting compensation in the form of most stock options escape social security and unemployment taxation. Excellent. Two people earn $100,000. One is paid in cash, and the other half in cash and half in stock. The first one will pay more taxes than the second. Why?

* Repeal of the basis limitation for player contracts transferred in connection with the sale of a franchise. Let’s guess who benefits from this one. Hmmm. Those bankrupt professional sports clubs?

* Occupational taxes relating to distilled spirits, wine, and beer. I guess with tobacco production getting whacked a substitute is needed? Maybe the alcohol industry is suffering? After all, rumor has it that people have stopped drinking. I don’t get this one, either.

* A temporary waiving of the customs duty on ceiling fans manufactured overseas. Huh? Our exports are being subjected to EU fees and we’re giving up a source of revenue? Will this create jobs at the ceiling fan factory somewhere in the U.S.? Are ceiling fans being kept out of this country because of the customs duty? Is there a run on “foreign” ceiling fans because it’s fashionable to have them? Or is it a matter of “foreign” ceiling fans being of higher quality? Goodness, I wish there had been a $1,000,000 customs duty on those floor tiles I purchased that turned out to be manufactured overseas. Then perhaps that garbage would have been kept out of our country and off the store shelves.

* Reduction of the excise tax on hunting arrows. I’m a tax lawyer, and I wasn’t aware that there was one.

* Repeal of the excise tax on tackle boxes. My students must feel short-changed because they’ve not heard about that one from me, either. Of course, even if I was paying attention to it there wouldn’t have been time to mention it in the classroom.

* Repeal of the excise tax on fish-finding sonar devices. Not only did I not know about this excise tax before this legislation began its crawl through the Congress, I didn’t know that there were such things as fish-finding sonar devices. How about winning lottery ticket prediction devices? Or even mislaid important book finding devices? Well, I do know that my portable phone has a beeper that serves as a “lost portable phone hand unit finding device.” Now if someone could invent a brain finding device......

* Almost two dozen provisions, most of them allowing deductions or credits, will be extended. When originally enacted, they were set to expire so that their negative effect on revenue (and their contribution to the federal deficit) would be limited. I wish I had hired a member of Congress to help me when I was a teenager. If curfew was set at 9 p.m. (yes, I had one that early on the weekends), on the trade-off that it would minimize the negative impact on sleep deprivation and potential unacceptable behavior, I could simply get an extension at 8:55. Better yet, I could get an extension at 10:30 retroactive to 9 p.m. No wonder I would make an unsuccessful politician: if I couldn’t pull off this stunt with my parents, how would I ever pull similar stunts sitting in D.C.? And to top it off, no one has shown that each of these renewed provisions has in fact been a boon to the economy.

Now I turn to a provision that is beyond annoying. The legislation had a provision that repealed the partnership section 754 election (which most partnerships made), making basis adjustments mandatory. This would simplify the tax law (yay!), even to the point of making the Partnership Taxation course a wee bit easier (though it would require an investment of time for me to conform the class notes, problem answers, powerpoint slides, TaxJEM CATLI exercises, etc.). So what did they do to this provision? They leave the section 754 election in place, add a mandatory basis adjustment if there is a basis decrease of more than $250,000 (leaving the details to regulations that will need to be written), and tack on several special rules for basis adjustments. Outcome? Tax law is more complicated, Partnership tax course becomes more difficult, and I still need a huge investment of time, without any worthwhile return in terms of tax law quality.

So that’s why it’s so nice to hear the words of a member of Congress who had the courage to stand up to the blackmailers and hijackers. He called this legislation “an orgy of self-indulgence.” I use another word from the same part of life: legislators are prostituting themselves. A careful link of each provision with its sponsor(s) demonstrates the tie-in to vote acquisition, as described in an article in today’s Philadelphia Inquirer. Yes, those are strong words, but enough is enough. With all the serious and deadly threats facing this nation, with the economy threatening to shift into inflationary mode, with the risk of $100 or more per barrel oil prices, and with the mess that the tax code is, you would think that legislators acting in the best interest of the nation would do what is right rather than what is expedient. The baby-boomer “me generation” mentality is blossoming richly in the world of lobbyist meets legislator.

Notice, for example, that nothing is done to fix the alternative minimum tax trap that will afflict additional tens of millions of taxpayers over the next few years. Oh, wait, they added the vaccine against hepatitis A and the trivalent vaccine against influenza to the list of taxable vaccines. By the way, the tax is generally 75 cents per dose. Can somebody explain this one to me? Goodness, why not just impose a tax on sick people of $2 per day per illness? That might get rid of the budget deficit. Sorry for the sarcasm.

The good news is that knowledgeable observers predict that the Senate will not pass legislation that increases the deficit. But whatever the Conference crafts must get enough votes in each chamber to pass. Supposedly the Democrats supporting the legislation won’t do so without the tobacco farmer payout. Can someone explain why legislation to fix glitches with the taxation of U.S. business abroad to comply with World Trade Organization rulings on our treaties has to be held hostage to tobacco?

So that means legislation with the existing goodies but higher taxes on somebody (guess who?), or legislation with most of the goodies removed, or some combination (probably even more complex). Don’t look for a final vote until the fall (late enough to leave the IRS with 7 days to redo the forms for 2004).

People ask me why I can be so cynical and sarcastic. I’ve shared one reason. Don’t ask for the rest. At least not just yet.

It is said that money is the root of all evil. I disagree. Money simply is a tool. Money can be used to do good, and it can be used to do evil. The desire for money is a desire for the things that money permits a person to have or to do.

People will do almost anything for money. Though one person might rule out some money acquisition plans, others eagerly adopt those plans. Though few individuals would do anything for money, humanity as a group has probably done everything for money that can be done.

Money sends a message. Those with money are in a different position than those who do not have it. The amount of money that a person has tells us nothing about the person: poverty can arise from laziness as easily as it arises from misfortune, and wealth can be acquired through honest labor and through crime.

Many people seem to think that most other people have more money. Many people resent those who have, or appear to have, more money. Some people renounce money, take vows of poverty or their equivalent, and try to live as though money and property mean little. Of course, in the long run, they do mean little. It's the intervening time, though, that gives money a chance to be used for good or evil.

Some folks think that they are entitled to take money at their own whim. It is somewhat easier (though costly in the long run) to rob a bank than to sweat in a factory, coal mine, or construction pit. It also is easier (and again costly in the long run) to take services without paying. And that brings me to the first of today's news items that inspired this monologue about money. The Philadelphia Inquirer reports that the Delaware River Port Authority has caught yet another "toll cheat" allegedly responsible for more than $20,000 in unpaid bridge tolls. This person owns a trucking company whose trucks zoomed through E-ZPass lanes 2,559 times without paying tolls. The truck that was stopped was driven by an employee of the company whose commercial license had been suspended. Wow, doesn't this make us feel so safe and secure?

What's this fellow's mindset (assuming that the allegations are true)? Was it curiosity or a dare to see if it was possible to avoid the toll, that ripened into an addiction? Was it greed? Was it an attempt to avoid financial problems? Was it an attitude of "me first and the rest of the world isn't as important as I am?" My guess is that it is another instance of selfishness and greed, reflecting outlooks on life that are learned somewhere and that somehow escape reformation as a person grows and develops. Under almost every moral code, it simply isn't right.

The second item presents tough questions. Several years ago three McDonalds employees were killed when an emotionally ill driver plowed a car into the restaurant where the employees were working. I'll set aside my questions concerning the state of mental health care in this nation. What's getting attention at the moment is McDonald's refusal to pay a small life insurance benefit to the family of one of the deceased employees. Legally, McDonalds appears to be correct, because the employee had been promoted to manage, was still in the probationary period for that position, and thus did not qualify for the life insurance benefit. But from every other direction, morally, ethically, and even in terms of business common sense, McDonalds is taking a short-sighted position.

Yes, this is about money. The amount involved is so small it probably disappears in the "rounding to the nearest $100,000" that occurs on McDonald's financial statements. If the question is a concern about precedent, the answer is that not very many McDonalds employees die while working during the probationary period.

Part of the problem is what the McDonalds life insurance plan appears to do. Had the employee in question not been promoted, she would not have been in a probationary period and the life insurance would have been paid. But because she was promoted, which suggests she had been doing at least a good job, she is punished because she was pushed back into a probationary state as to the new position. Isn't there a difference between benefits for new employees and benefits for new employees who are promoted to new jobs? Sure, it makes sense to have a probationary period to see if she could handle the new job, but why cause her to forfeit the life insurance benefit that had vested once she finished her initial probationary period? I'm guessing that there was some bad drafting, and perhaps the pending result wasn't what was intended.

Even if McDonalds is perceived as being so focused on money retention (a corollary to money acquisition), the decision not to pay the benefits makes no sense. Making money requires expending money. McDonalds could have stepped up, made the payment, explained that it was doing so it was not under a legal obligation because of technical glitches in the drafting (if that were the case), and picked up some big time goodwill bonus points. Of course, then it could have sued the lawyers who did the drafting, if in fact that is the problem.

Instead, McDonalds faces a boycott, reported by John Grogan in today's Philadelphia Inquirer. Some folks are holding to principles that takes money off the top rung of the nation's ladder. They are speaking the language that corporations speak, namely, profits. Corporations seem unable to speak any other language. Corporations (and limited liability companies) are the ultimate tool of a money-based capitalist society, because they protect the individual wealth of the owners and make investor return the controlling benchmark for decision making. They have their own culture just as they have their own language. It is a culture that fails in many ways.

Here's the "big mosaic" question. If the deceased worker's family is in dire need of the life insurance proceeds, and ultimately fails to get paid, would they be justified in zooming through E-ZPass without paying?

The answer is no.

But that the question exists tells us that much remains to be done in terms of how society, and the nation, and, yes, the world, deals with money, mental health, values, attitudes, and education. It is sad that someone died because another person was unhappy. It is sad that a corporation holds fast to a technicality that makes no sense. It is sad that someone can conclude his trucks ought cross bridges at someone else's expense.

And it is sad that someone decides to participate in a tax evasion plan under which bonus payments were deposited into Swiss bank accounts and not reported to the IRS. The Philadelphia Inquirer also reported today that the employer in question, who had fled to Cuba, was arrested in Berlin. But this post is already long enough, so I'll pass on this story, for now.

I'm not sure now if I should have read the paper this morning. I need to find something to read that reports good deeds and acts of kindness.

The National Law Journal published an article today on Top Law Professors' Star Power. Essentially it is a description of what some law school deans "describe as an ongoing talent raid on academic stars." Examples are presented of law professors lured from one law school to another, generally with inducements other than simply money. Some of the wild rumors are debunked, but it's clear that some very nice perks are being dangled in front of some law professors.

It means that the days of institutional loyalty are fading even in the legal academy. Of course, institutional loyalty generally has been seriously eroded during the past thirty-some years. Professional athletes jump ship, corporations toss out long-time employees, people are known to ditch relationships once they get what they wanted, attorneys move from firm to firm every few years, and consumer brand-name repeat buying has dropped.

Now I’m not pleading for a return to the days of one-institution or one-firm careers, though it would be nice if professional sports teams could cobble together dynasties and be rewarded for good drafting, excellent player development, and superior coaching. Surely there are good reasons to move on, when people do move on, though I don’t think that’s always the case.

At least with respect to law faculty, one of the primary considerations appears to be family issues. Professors who are part of two-person households generally can’t pick up and leave when they want, but also find it necessary to search for a new position if the other member of the duo gets a “too good to refuse” career offer in some other location. Some of the faculty who moved did so when the nest emptied, and the youngest child went off to college. In some instances, the child’s decision to attend school in a particular city made that metropolitan area attractive to the parent. I’m not so sure, though, that I want to follow my children (and with my son in Manchuria for six months where the temperature reaches umpteen below zero I am CONVINCED I do not want to tag along, much as I love the fellow). And there is absolutely no doubt that children do not want their parents dropping by their college dorm room every other day.

The fascinating part of the article isn’t that law professors are beginning to move from school to school with the same frequency as professional athletes change teams or attorney change law firms. It’s that the upper-tier law schools are recruiting law faculty from other institutions. At one time, years ago, most law firms, law schools, and many businesses refrained from tampering. After all, if you did it to someone else, someone might do it to you. Now, of course, other than some anti-tampering rules protecting sports franchises, it’s not uncommon for people to try prying attractive candidates away from their present positions. About the only two places it remains offensive (and I’m not so sure that’s the case) is trying to persuade someone to leave a spouse and trying to persuade the Pope to abandon Catholicism and convert to some other religion.

So where is this heading? Will it be like professional sports, where the top stars make millions and the rest of the roster scrapes by on rookie salaries, veterans’ minimums, and journeyman’s wages? Will it be like corporate America, where the star CEOs pull in tens of millions and the rest of the labor force ekes a living from minimum wages? Will it be like the law firms, where the top partners pull down big bucks, and many of the other lawyers do quite comfortably (financially, that is, for they surely get worked over in terms of hours and stress)?

I fear it is going to go the route of professional sports and corporate America. Already in the undergraduate institutions, schools are cutting costs by shifting teaching loads to adjuncts who do not qualify for most of the non-salary benefits. Many such adjuncts hold four jobs, teaching one course at each of four institutions, racing from one place to another, praying for good weather and no traffic tie-ups, and steaming about the increase in gasoline prices. Colleges and universities are under pressure to reduce the rate of tuition hikes, and if they start shelling out big bucks for the so-called “stars” there will be less for the rest.

I might be sympathetic toward this trend if the incentive was the acquisition of the best teachers. But that’s not what happens. The schools, anxious to better their positions in the rankings game, seek out the “scholars” who write the articles that are read by other scholars. They’re the folks who consider my writings, read by tens of thousands of practitioners, as “not scholarship” because they’re “too focused on doctrine and practice and insufficiently imbued with theory.” Of course, if there were to READ my writings they’d realize they’re wrong, but we can’t let facts get in the way of the logic, can we? Worse, what most educational institutions consider good teaching are performances that minimize student complaints. The irony is that good teaching will increase student complaints because students like to complain, and will complain when pushed and shoved into active rather than passive learning.

I’m not saying that law faculty who need to move for family or other reasons ought not do so. I think THEY should make the first move. And if law schools learn that someone is pondering a move, sure, it should contact the person if its faculty thinks the person would be a valuable addition. But to blanket other law school’s “scholars” with offers and invitations on the “it doesn’t hurt and there’s nothing to lose” justification in the hopes of inching up the ratings ladder is a long-term silliness. In the long-term, those leaving the school will offset the reputation impact of those who depart, and salaries for the upper echelon will skyrocket.

For me, the question is “would this person’s presence on our faculty enhance our mission of preparing people to practice law?” (Yes, I know there are many who see the mission of law schools as preparation of legal theorists to staff the next generation of law faculty, but I beg to differ and I wish law school graduates would share their thoughts on this matter with their alma maters). Yet because teaching (aside from faculty-student ratio and a few other almost meaningless statistics) doesn’t factor as such in the rankings game, it doesn’t get the right attention. (Wouldn’t it be nice if U.S. News asked practicing lawyers to rate the teaching effectiveness of their alma mater after five or more years in the practice world? No, because everyone would claim their school was and is the best. Instead, ask the managing partners to comment on what is brought to the firm by graduates of schools other than the managing partner’s alma mater.) Of particular concern is the “star scholar” who insists on a low teaching load (e.g., no more than 50 students a semester) while others grind through the grading of 300, 400, or even 500 exams a year (aside from all the other tasks that increment as class size increases).

I don’t expect my door to be knocked down (or even knocked) as this phenomenon sweeps the academy. Interestingly, I’ve been invited to seek deanships but perhaps that’s because my tax and business background, my fund-raising experience, my notoriety in the practice world, my immersion in technology, and my enthusiasm for teaching are seen as hallmarks of “deaning” rather than of “starring as a scholar.” Hey, so long as deans are the highest paid members of the faculty (and they are in most law schools), why should that be an issue, hahaha? (Anyhow, good deans are difficult to find and even more difficult to keep... the average tenure of a law school dean is under 2 years, not counting interim deans. Law faculties, they're tough, and university administrations, well, Villanova has had only 5 deans in its 50-year history. That's an average more than 5 times the current national norm. For that alone, Villanova should be in the top 20, he says with a smile.)

Much of the problem reflects the distortions of the LL.B. degree masquerading as a doctorate, of the relatively insignificant size of S.J.D. programs, and of the implantation of doctoral scholarship into what is, for all intents and purposes, a bachelors’ program. But that sequential dysfunction is a topic for another blog posting, and I promise it will be fun (at least for me) and provocative.

Gotta run. Phones’ ringing and it could be a dean at another school asking me if a chauffeured limousine, a private jet, telecommuting from a resort, and release from all faculty committee and administrative work would get me to move. Or perhaps it’s an inquiry into my availability to become dean at a top five law school and straighten out the legal education mess. I’ll let you know. Think I ought to put this blog on my resume? :-)

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.