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Monday, January 15, 2018

Fixing State Tax Problems Caused by Federal Tax Changes 

Several weeks ago, in So What About Those State Taxes? Surprise?, I pointed out that “The recently enacted federal tax legislation not only affects federal income tax liability but also changes state income tax liability for most taxpayers living or working in states with an income tax,” because “Most state income taxes are linked in some way to the federal income tax system.” A little more than a week ago, in What Losing Federal Personal and Dependency Exemptions Does to Michigan (and Other) Taxpayers , I described the uncertainty facing Michigan as legislators, economists, and tax professionals debate whether it is necessary to amend the state’s tax laws to prevent Michigan taxpayers from losing the Michigan personal and dependency exemption deduction. I pointed out that necessary or not, it would be wise to clarify the matter.

It seems that Michigan’s governor and legislature is taking the sensible and careful route. According to various stories, including this Detroit News article, the governor is proposing legislation to set the Michigan exemption independent of federal tax law. The legislature appears willing to enact the proposal, though it would not be surprising if it was tweaked a bit, because getting the numbers just right not only is difficult in terms of computation but also challenging in terms of the meaning of “just right.” The Lieutenant Governor explained that the proposal probably reduces tax revenue a little bit, in contrast to the $840 million tax increase that Michigan taxpayers would otherwise face in 2018 and the $1.6 billion increase they would face in 2019. For many taxpayers, the state tax increase that would otherwise occur would more than wipe out the mere pittance of a federal income tax decrease that most Americans will see.

An alternative, reducing state income tax rates, has little support because it would cause some Michigan taxpayers to face tax increases, some to face tax decreases, and the rest to maintain close to the status quo. Proponents of the exemption restoration consider it to be the simplest, and fairest, solution. It is.

This problem affects many more states than Michigan. Louisiana, for example, as I discussed last week in State Tax Increases Cut the Tax Cuts faces similar issues. By relying on federal adjusted gross income, taxable income, exemptions, or other items, states are at the mercy of whatever the Congress does. Would it make sense, as a few states have done, to avoid relying on federal items in computing state income tax? Yes and no. Doing so avoids the chaos bred by the latest trickle-down Congressional nonsense. But it leaves each state with the legislative, administrative, and judicial burden of resolving each definition and each issue independently. Even the states that separately compute state taxable income rely on federal definitions of certain underlying items.

This is a story that will grow, as more and more state revenue departments finish their analyses and present their findings to state governors and legislatures. And it will continue to grow as state legislatures consider how to react. Unfortunately, most taxpayers aren’t paying attention to these issues.

Friday, January 12, 2018

What Funds Social Security and Why Does It Matter? 

Reader Morris directed my attention to a letter to the editor of the Santa Cruz Sentinel. Helena Robertson claims that “Social Security is not funded through federal taxes,” and the newspaper used that claim as the headline for the letter. Robertson explained that “Social Security is financed through a dedicated payroll tax. . . interest earnings . . . revenue from taxation of OASDI benefits . . . and reimbursements from the General Fund of the Treasury.” Though Robertson’s litany of the sources of funding for Social Security is essentially correct, she is wrong in concluding that the payroll tax to which she refers is not a federal tax. It indeed is a federal tax. It is not a federal income tax, which perhaps is what Robertson was trying to say. My guess is that Robertson was trying to provide a foundation for dealing with the upcoming attacks on Social Security, along with Medicare and Medicaid, that will be justified by a hypocritical concern about the federal budget deficit and accumulated federal debt. Robertson’s point, which she did not articulate but which every American above the age of 12 needs to understand, is that deficits caused by cuts in federal income taxes ought not be reduced by cutting spending funded by federal payroll and self-employment taxes. That stunt is just another piece of the plan by which the wealthy oligarchs running the country scheme to take even more from the poor and middle class.

Wednesday, January 10, 2018

State Tax Increases Cut the Tax Cuts 

Two weeks ago, in So What About Those State Taxes? Surprise?, I pointed out that “The recently enacted federal tax legislation not only affects federal income tax liability but also changes state income tax liability for most taxpayers living or working in states with an income tax,” because “Most state income taxes are linked in some way to the federal income tax system.” Last week, in What Losing Federal Personal and Dependency Exemptions Does to Michigan (and Other) Taxpayers , I described the uncertainty facing Michigan as legislators, economists, and tax professionals debate whether it is necessary to amend the state’s tax laws to prevent Michigan taxpayers from losing the Michigan personal and dependency exemption deduction. I pointed out that necessary or not, it would be wise to clarify the matter.

Now comes a story out of Louisiana describing the adverse effect on Louisiana taxpayers of the tax legislation enacted in Washington, D.C. According to the story, there are two major effects that will cause most, if not almost all, Louisiana taxpayers to face automatic state tax hikes. First, Louisiana permits its taxpayers to deduct the federal income taxes that they pay. Any Louisiana taxpayer whose federal income tax liability decreases will have a lower state deduction, and thus a higher state taxable income and resulting higher state income tax. Second, Louisiana permits its taxpayers to deduct some of their federal itemized deductions. To the extent that a Louisiana taxpayer shifts from itemizing deductions for federal income tax purposes to claiming the federal standard deduction, that taxpayer will lose the itemized deductions that otherwise would be deducted on the Louisiana income tax return.

The Louisiana legislature could ameliorate these effects by amending state tax law to permit taxpayers to deduct, for example, 110 percent or 120 percent of federal income tax liability. It could increase the Louisiana standard deduction, or permit deduction of itemized deductions that would have been claimed on the federal income tax return had the 2017 legislation not been enacted.

But it is unlikely that the Louisiana legislature will take steps to shield its taxpayers from this “looks good at first, isn’t so great after further review” situation. Why? Louisiana presently faces a billion-dollar budget deficit. Revenue increases are welcome. How much of an increase in state taxes will the federal tax legislation generate? Computations are underway, but officials already are using the word “significant.”

What is given by one hand is taken away by the other. Too many Americans don’t look at both hands. What a shame.

Monday, January 08, 2018

That Bonus Payment Ruse Gets Bigger 

A bit more than a week ago, in Those Tax-Cut Inspired Bonus Payments? Just Another Ruse, I explained the deceptiveness of the big deal being made of $1,000 bonus payments to employees in efforts to justify the tax legislation giveaway to corporations and oligarchs. I argued that the $1,000 bonus will be dwarfed by the consequences of the spending cuts that the Congress will enact in order to reduce the deficit caused by its sellout of America.

But it’s worse that I thought. At least we are being given the opportunity to see through the charade.

As reported in various stories, including Fortune article, Southwest Airlines plans to give its employees a $1,000 bonus. According to this Bloomberg report, the bonus will cost Southwest $70 million, while the tax changes will add between $1 billion to $1.5 billion to the airline’s bottom line. “Here, employee, have a crumb.” Worse, the same report describes Southwest’s decision to delay some of its Boeing orders, causing one analyst to describe it as a bad day for Boeing. I wonder how many Boeing employees will be getting a pink slip.

It’s not just employees getting the short end of the deal. According to various reports, including this one, Comcast plans to deliver $1,000 bonuses to its employees. Generous? At the same time, it also is being reported that Comcast is raising its rates. So its customers apparently are paying for those bonus payments. Why is there a need to raise rates if a huge infusion of cash is coming in from that corporate rate cut?

In the meantime, employees of non-profit employers aren’t getting a bonus. This includes government employees. That’s right. Those police officers, fire fighters, EMTs, non-profit institution health care workers, and others who are no less deserving of a bonus will face not only an empty bonus envelope but risk pay cuts and being laid off, as the tax cut giveaway will require cuts in federal financial support of state and local services.

When I see posts on facebook about people who voted for the cabal running the federal government lamenting the broken promises, stressing over things like cuts in funding for programs that keep people alive with food and health care, and crying, “This isn’t what I voted for. This isn’t what I expected,” I cringe. Was it that difficult to pay attention and let knowledge push out the ignorance. Did these people not hear what Michael Bloomberg told the nation?

It amazes me how some people can remain so devoted to those who treat them so badly. Politics has become one huge dysfunctional relationship.


Friday, January 05, 2018

What Losing Federal Personal and Dependency Exemptions Does to Michigan (and Other) Taxpayers 

Last week, in So What About Those State Taxes? Surprise?, I pointed out that “The recently enacted federal tax legislation not only affects federal income tax liability but also changes state income tax liability for most taxpayers living or working in states with an income tax,” because “Most state income taxes are linked in some way to the federal income tax system.”

A reader pointed me to a Detroit Free Press article explaining that the changes to federal income tax law will increase state income tax liabilities for Michigan taxpayers by $1.4 billion. The principal reason for this impact is the loss of federal personal and dependency exemptions in the federal income tax law. Under current Michigan income tax law, the computation of Michigan taxable income begins with federal adjusted gross income, is increased and decreased by a variety of adjustments, and is decreased by $4,000 for each personal and dependency exemption claimed on the taxpayer’s federal income tax return, as illustrated by the Michigan income tax form.

Of course, this last-minute development has caused Michigan politicians to examine and discuss what to do about the situation. Many suggest doing something to prevent this outcome, including enacting a Michigan exemption not tied to the federal income tax system. Others want to lower the rate, but face opposition from advocates for higher tax relief for the poor and middle class. Still others want the state to let its tax revenue increase, because they predict that it will be needed to offset expected cuts in direct and indirect federal financial assistance to states.

What caught my attention was a dispute about the impact of the loss of the federal personal and dependency exemptions. Many Michigan tax experts agree that with that loss, taxpayers will be claiming zero exemptions on their federal income tax returns and thus will enter zero on their Michigan income tax returns where it requests the “Number of exemptions claimed on” the federal return. Yet one economist argues that the elimination of the federal personal and dependency exemption deduction simply means that it has been reduced to zero for purposes of computing federal income taxes but that it has not been eliminated. This economist informed the Michigan Department of Treasury that no legislative action is required and that “Michigan's income tax payers will not lose their state income tax exemptions ... and will not be subjected to a large income tax hike.” He might be correct. According to Michigan Compiled Laws section 206.30(2), the Michigan exemption deduction is based on the “number of personal or dependency exemptions allowable on the taxpayer's federal income tax return pursuant to the internal revenue code.” Section 151(d)(5), as enacted by section 11041 of Public Law 115-97 reduces the federal exemption amount to zero and then provides that “For purposes of any other provision of this title, the reduction of the exemption amount to zero under subparagraph (A) shall not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under this section.” Though it is modified by “For purposes of any other provision of this title,” and not “For all purposes, including state income tax computations,” the reference in Michigan law to the “number of personal or dependency exemptions allowable on the taxpayer’s federal income tax return” should be sufficient to preserve the Michigan deduction.

Two concerns for Michigan are apparent. First, the instruction on the Michigan income tax return and the explanation in the instruction booklet that refer to exemptions “claimed on the taxpayer’s federal income tax return” need to be changed. Why? Because taxpayers will not be claiming exemptions on the federal return. The reference will need to be to exemptions “allowable for federal income tax purposes,” or, “exemptions that would be claimed on the federal income tax return if the federal exemption amount were other than zero.” I doubt that the revised Form 1040 will still include a line for personal and dependency exemptions so that all taxpayers can insert a meaningless zero. It is possible that the revised Form 1040 will continue to ask for identification of dependents for other purposes, but it also is possible that the request for dependency information will be relocated to forms for credits or which that information is necessary. It is likely that identification of personal exemptions, in contrast to dependency exemptions, will be requested. And that leads to the second concern. Michigan taxpayers, along with those in other states with similar statutory and instruction language, will need to figure out what their federal personal and dependency exemptions would have been had the federal income tax law not been changed, even though they don’t necessarily need to do that when filling out their federal income tax returns. Developers of tax preparation software surely are not overjoyed.

All of this further reinforces the inescapable fact that the Congress did a slipshod job of dealing with tax “reform” and “simplification.” It did not reform the tax law nor did it simplify the tax law. It simply let the donor class, the 150-some families that now run the country, grab whatever they could grab in step one of a multi-step “return to feudalism and call it free market capitalism” plan that ought to be called “socialism for the oligarchy.”

Wednesday, January 03, 2018

Just When I Thought Congress Had Reached Rock Bottom When It Comes to Taxes . . .  

Like most Americans, I do not hold Congress in high regard. Actually, I think the Congress has failed miserably in meeting its obligations to serve America. It has increasingly focused on serving the desires of those who fund their election campaigns.

When it comes to taxation, the quality of tax legislation, policy aside, has decreased over the past several decades. The number of technical amendments that are required continues to increase. Mistakes are rampant. Ambiguous terminology propagates wildly. Bewilderment among tax professionals grows and grows, as making sense of what is written in the legislation becomes more and more of a challenge with decreasing likelihood of success and widening frustration.

One particular pair of provisions illustrates the incompetence of how Congress deals with taxation. In the recently enacted legislation is a new section 864(c)(8) and a new section 1446(f). Section 864(c)(8) provides that a nonresident alien individual’s or foreign corporation’s gain or loss from the disposition of a partnership interest is effectively connected with the conduct of a trade or business in the United States to the extent that the person would have had effectively connected gain or loss had the partnership sold all of its assets at fair market value. The new provision applies to dispositions occurring after November 26, 2017. New section 1446(f)(1) provides that if any portion of the gain on disposition of a partnership interest would be treated under new section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States (“effectively connected gain”), then the transferee must withhold a tax equal to 10 percent of the amount realized on the disposition. There is an exception if the transferor provides an affidavit to the transferee stating that the transferor is not a foreign person. The Treasury is authorized to issue regulations or guidance necessary to carry out the purposes of new section 1446(f), including application of the exception. New section 1446(f) applies to sales, exchanges, or other dispositions occurring after December 31, 2017.

Taxpayers and others affected by these new provisions have informed Treasury and the IRS that compliance without guidance presents significant practical problems. There are a variety of situations in which a transferee will be unable to determine whether it must withhold under new section 1446(f). If dispositions take place through a broker, the broker is permitted to withhold on behalf of the transferee but without guidance, brokers are unable to do so.

The solution advanced by the Treasury, explained in IRS Notice 2018-18 is to suspend withholding under new section 1446(f) with respect to publicly traded partnership interests. It intends to issue regulations or guidance in the future, and those rules would be prospective. They also will include transition rules to allow sufficient time to prepare systems and processes for compliance.

Putting aside the question of whether the Treasury can suspend withholding required by the Internal Revenue Code, consider how practical reality meant nothing to the Congress when it enacted these new provisions. It enacted, in late December, withholding requirements effective on January 1. Though it provided for the issuance of regulations and guidance, it assumed that regulations and guidance could be produced in several days, and during a holiday period. That cannot happen, and any member of Congress involved in drafting or voting on tax legislation has an obligation to understand that it takes months, and sometimes years, to analyze provisions, identify issues, allow for public comment, and propose, let alone adopt, regulations or guidance. Worse, the Congress assumed that transferees, brokers, and their bookkeepers, accountants, and tax professional advisors, together with their programmers, could put together the necessary procedures and software in that same period of several days.

This is what happens when a Congress, in a rush to satisfy greedy donor oligarchs, throws together a mish-mash of provisions that have not been vetted, have not been subject to public scrutiny, have not been drafted with comments from those who are affected, have not been aired in public hearings, and that have been jammed down the throat of a nation the overwhelming majority of whose citizens opposed the sloppy and ill-advised greed-grab.

Considering that a good bit of the newly enacted legislation poses similar problems, both in terms of interpretation and application as well as in redesign of software and business operating procedures, will the Treasury suspend enforcement of those provisions while it tries to put together regulations and guidance in a feeble attempt to fix the mess that the Congress has created? Should it? Does the Congress even understand this issue? Or is it too busy getting instructions from its handlers for the next batch of badly written and ill-advised legislation?

Is it any wonder that Americans hold its Congress in such low esteem? Is it not sufficiently shocking to Americans that the members of Congress, aside from a few brave but outshouted and outvoted members, doesn’t really care what Americans think?

Monday, January 01, 2018

Getting Tax Cut Benefits to Those Who Need Economic Relief: A Drop in the Bucket But Never a Flood 

A reader pointed me to a Detroit Free Press article explaining that the Michigan Public Service Commission has directed regulated public utilities to analyze the impact of the recently enacted federal income tax cuts on their financial position and to propose how the tax savings will generate reductions in utility bills for consumers. This is an important, though in the scheme of things minor, outcome of the recent legislation. It is important because if corporations and businesses getting tax cuts reduced prices across the board, consumers – the largest and most important component of a capitalist economy – would benefit and in turn spend their cost savings to spark genuine, in contrast to bubbled, economic growth. It is minor because regulated public utilities are a tiny piece of the economy.

Imagine if corporations and businesses were required to use their tax cuts to reduce the prices of their goods and services rather than using them to engage in mergers, buy back stock, increase dividends, or toss bonus crumbs to some employees while axing thousands of jobs. Not only are those sorts of regulations going to be enacted, the same folks who brought us the tax cuts favoring the oligarchy also have on their agenda the elimination of every regulation they can find a way to trash. These folks praising the evisceration of the EPA and its regulations haven’t yet disclosed how they expect Americans to deal with filthy air and polluted drinking water. I’m sure the wealthy think they will be able to avoid those consequences for themselves. Just imagine what the deregulation of public utilities will do to most Americans. So that drop in the bucket of shifting tax cuts to consumers might not last very long.

Friday, December 29, 2017

Those Tax-Cut Inspired Bonus Payments? Just Another Ruse 

For months, I have been criticizing the Republican tax legislation for a variety of reasons. I have also criticized the defenses that its supporters have tossed at the American people. For example, in Another Word for Fake Tax Math, I pointed out the absurdity of claiming that the legislation would increase American household income by $4,000 per year.

Shortly after the tax legislation was signed into law, its supporters began celebrating as well-timed press releases began to emerge from a handful of corporations that will benefit immensely from it. For example, as reported by Forbes and others, AT&T announced it would pay a $1,000 bonus to each of its roughly 200,000 U.S. employees. Supporters of the tax “reform” roared in self-congratulations.

Closer analysis, though, reveals the reality of what lies underneath the press releases. Consider AT&T’s situation. First, the bonus will not cost it $200 million (200,000 x $1,000). Why? Because AT&T will deduct those bonuses in 2017, and thus, as explained by this Fortune report, will save $70 million in federal taxes. Though not mentioned, AT&T also will save state taxes, probably in the low tens of millions. The net cost to AT&T is not $200 million but on the order of $110 to $120 million, perhaps less. Second, the bonuses would have been paid in any event, in early 2018, but by committing to payment now, AT&T, an accrual-method taxpayer, can deduct the payment in 2017 rather than in 2018 when its tax savings would be less. Third, a few days later, according to numerous reports, including this one, AT&T announced plans to lay off more than a thousand workers. Using a rough estimate of $50,000 salaries and benefits, AT&T stands to cut its expenses, net of taxes, by at least $50 million a year beginning in 2018. In some ways, it is possible to consider those laid-off employees as paying the price for those touted bonus payments. Fourth, AT&T did not need tax cuts to fund these bonuses, considering that it has almost $50 billion in cash reserves.

Similar analyses can be done for the handful of other companies that are tossing a few pennies at employees while laying off others. The CEOs of hundreds of other companies, responding to a Merrill Lynch survey, described in this report, revealed that the tax cuts, coming on top of huge cash reserves and record profits, will be used to buy back stock and to engage in mergers. Those moves reduce jobs. They don’t create them. Those moves reduce competition and raise prices. Those moves further enrich the oligarchs.

So when the smoke clears and the mirrors are removed, corporate cash reserves will grow, some employees at a handful of companies will get a few crumbs, and others, perhaps many others, will lose their jobs. Next year, when Congress bows yet again to the desires of the oligarchs and cuts Medicare and Social Security, ostensibly to reduce the horrible deficit, the employees receiving the a tiny bonus might set it aside to make up for their health and financial needs in retirement. If they think that the a few dollars will make up what they stand to lose, they will be engaging in the same sort of misguided reasoning that has led this country to the mess in which it now finds itself.

Wednesday, December 27, 2017

So What About Those State Taxes? Surprise? 

The recently enacted federal tax legislation not only affects federal income tax liability but also changes state income tax liability for most taxpayers living or working in states with an income tax. Why? Most state income taxes are linked in some way to the federal income tax system.

One example includes the six states that compute state taxable income by reference to federal taxable income. The recent federal income tax changes remove many deductions, thus increasing taxable income, while reducing rates somewhat. Unless the state also reduces its rates, its taxpayers will be applying the same rates to a higher taxable income. Though state legislators might welcome this infusion of additional revenue, its taxpayers will not be pleased. Many will be surprised.

Another example includes the roughly two dozen states that allow itemized deductions by reference to itemized deductions for federal income tax purposes. Because itemized deductions for federal income tax purposes have been reduced, taxpayers in these states who itemize deductions for state income tax purposes, a group that includes taxpayers who do not itemize for federal purposes, face higher taxable incomes and thus higher state income tax liabilities.

Yet another example are state income tax credits based on federal income tax credits. Because some federal income tax credits have been repealed or modified, the effect on state income tax liabilities in these states generally will be an increase for some taxpayers.

Similar situations exist with respect to state corporate income taxes and other business taxes that use federal taxable income or other federal items as a beginning point for, or part of, the computation of state tax liability. It would not be surprising to tax experts, though perhaps surprising and certainly unpleasant to taxpayers, to learn that state tax liabilities have increased. In some instances, if a state tax system incorporates particular federal corporate deductions, business taxpayers might experience state tax liability decreases.

As is the case with determining whether someone’s federal income tax liability will be reduced, and if so, for how long, by the legislation, the only accurate analysis is to run the numbers. Relying on generalizations, averages, or other simplistic observations is useless for a person or business doing tax planning.

One important lesson is that when running the numbers to determine the effect of this legislation, the impact on state tax liabilities must be taken into account. In the many instances where federal income tax liability has decreased by a small amount, there very well may be a state tax liability increase that not only wipes out the federal tax reduction but generates an overall increase in tax liability for the taxpayer.

Another important lesson is that state legislatures must now analyze the situation and decide what, if anything, to do. Some legislatures will welcome the additional revenue. Others will discover that corporate and business tax revenues will decrease. In some states, individual income tax revenue will increase and business tax revenue will decrease. In other states, tax revenue from both groups will increase.

But I doubt in the rush to placate their campaign donors and serve the oligarchs, the members of Congress and the Administration responsible for this horrific federal tax legislation considered any of these issues. These issues did not, and do not, matter to them. Nor do the tens of millions of taxpayers now facing state tax liability increases.

Monday, December 25, 2017

Taxmas? 

A week ago, in Giant Tax Cut for Christmas? Ha Ha Ha or Ho Ho Ho?, I criticized the absurdity of the President’s claim that Americans would receive “a giant tax cut for Christmas.” A one or two percent reduction in tax liability is not “giant.” A 30 or 50 percent reduction might qualify as “giant,” but unless someone is a member of the oligarchy or the owner of a huge corporation, those sorts of tax reductions aren’t in anyone’s fireplace stocking.

Some commentators are tagging the enactment of the legislation as “Taxmas.” That term has been around, with a different meaning, for a few years. For example, the Urban Dictionary defines it as the “period after the end of the financial year when you get your tax return.” The chief architect of this first step in eviscerating or eliminating Medicare, Medicaid, and Social Security used the word in the first line of his ridiculous ode to the oligarchs.

A tax-teaching colleague and friend at another law school pointed out that there is a bilingual meaning to the term. Roughly translated, it means “more tax.” Indeed, that’s what it is for the unfortunate folks not given a short ride on the “here’s a few crumbs” holiday train.

My reply is that, spoken aloud, the term has yet another meaning. It’s a tax mess. Indeed it is. Riddled with drafting errors, consequences unforeseen by its advocates but easily spotted by the tax experts whose advice was not sought nor heeded, inconsistencies, huge opportunities for game playing by those able to afford clever tax advice, and long-term tax increases ignored by those enjoying the momentary short-term tidbit of a dime today to pay a dollar next year, the legislation qualifies as one of the worst, if not the worst, Congressional work products ever seen in this nation.

As is said of gifts, it is the thought that counts. Too many Americans have no idea of what members of Congress and their placated oligarchic donors are actually thinking. Ignore the words. Talk is cheap. Consider the actions, and the actions that await the nation. Sometimes that carbon in the stocking isn’t a diamond but is coal.

I wonder what the infant whose birthday is being celebrated today would think about all of this. No, actually, I don’t wonder. He told us, “Take care! Be on your guard against all kinds of greed; for one's life does not consist in the abundance of his possessions.” Did we listen?

Friday, December 22, 2017

Tax Legislation As a Symptom of National Political Dysfunction 

There is something very wrong with the American political system. That’s not news, at least not to those who carefully observe, study, and analyze the machinations of politicians and the majority of oligarchs who support them financially and whose bidding most of them eagerly do. Unfortunately, many Americans could care less about these issues, worrying instead about trivial matters that mean nothing in the long run.

The Republican tax plan is a magnificent demonstration of the dysfunctional national political system. According to one poll, FIFTY-FIVE percent of Americans oppose it, and only 33 percent support it. According to another poll, only 26 percent support the plan. Other polls show similar results.

So how is it that legislation with very little public support and significant public opposition gets approved by the Congress and the Administration? The answer is simple. It’s for the same reason that the policies of medieval kingdoms followed the instructions of royalty and nobility no matter what the peasants preferred. It’s the same reason that the policies of dictators trump the wishes of the citizenry.

The only thing heartening about this situation is that at least half of Americans realize what is happening. Unfortunately, thanks to gerrymandering, voter suppression, and domestic and foreign propaganda, the majority no longer controls what happens. By the time the dust settles from the economic implosion this legislation will generate within a few years, the majority will be even weaker and the oligarchy much richer and much stronger.

Wednesday, December 20, 2017

Tax Propaganda 

There’s a commentary going viral on the world wide web and social media that clearly is designed to suck Americans into supporting a terrible tax proposal. It takes five of the strongest arguments against the giveaway to corporations and wealthy individuals, labels them as “myths,” and then trots out false information to deflect attention from the truth.

The first claim is that the legislation will generate $4,000 per household. I disposed of this falsehood in Another Word for Fake Tax Math. It’s too bad some people will stick to their lies even after their mendacity is highlighted.

The second claim is that the “Senate tax bill increases the amount of taxes paid by the rich.” Increases? That is laughable. The tax brackets applicable to the rich are decreased, and even the strongest supporters of the legislation crow about the reduction of taxes on the alleged “job creating” wealthy. One would think that those defending this monstrosity of tax legislation would at least coordinate their false advertising.

The third claim is that “93 percent of taxpayers would see a tax cut or no change in 2019.” What is omitted is the unfortunate news that by 2025, at least 25 percent of taxpayers, almost all in the lower and middle brackets, will experience tax increases.

The fourth claim is that repealing the Affordable Care Act individual mandate will not “force anyone to give up their coverage.” But eliminating the mandate also eliminates subsidies, and when those disappear, millions of Americans will lose their health insurance coverage.

The fifth claim is that repealing the Affordable Care Act individual mandate will not raise insurance premiums. Where do people without health insurance go when they have a health problem? The emergency room. Are they turned away because they have no insurance and cannot afford to pay? No. Who pays? The hospital, which then raises its rates, which then cause insurance companies to raise premiums, which means that those with health insurance pay higher premiums to subsidize those without health insurance. Because this happens in the private sector, everyone in the chain takes their cut. It’s far less efficient than if it is handled through a non-profit government agency.

The sixth claim is that “when business taxes go down, worker’s wages go up.” That is nonsense. I explained the truth about this absurd claim in Tax Cut Cash To Be Used for Job Creation?. Corporate executives are admitting they are not raising wages nor creating jobs, but either adding to already huge stockpiles of cash or increasing dividends to high-end investors. Corporations do not need more cash, and they surely haven’t been adding jobs and increasing wages with the hoards of cash they already hold.

The seventh claim is that “American corporations pay a federal income tax rate of 35 percent.” No, they do not. That is the nominal rate, and most corporations, after taking into account a variety of tax breaks, end up paying at an average rate of half that percentage. Some even pay at a rate of zero, and a few even receive payments rather than making payments.

The eighth claim is that this tax legislation will not increase the federal budget deficit. The basis for this claim is the same nonsense that infects trickle-down and supply-side economic theory. The idea that the economy will blossom when money is funneled to corporations and wealthy individuals overlooks the simple fact that what drives an economy is demand. If a nation wants higher demand, cut the taxes of those who are not in the top one, two, or even five percent of the income and wealthy array. But the money-addicted who control the government and their allies won’t tolerate that sort of approach, because they lack the ability to understand that letting go of cries for tax cuts now means a much better long-term economic benefit for everyone, and they lack the courage to try.

The last time this absurd approach to tax policy was adopted, the nation got a short-term money “sugar high” and then the economy crashed in one of the worst recessions in the nation’s history. This time, because the cuts are so much larger, the high will be bigger, probably shorter, and the crash will be even worse.

If the manufacturers of this tax propaganda are so sure of themselves, surely they would be willing to agree to my A Debt Prevention Tax Cut Escrow Proposal. Let’s see if they can put THEIR money where their mouths are.

Monday, December 18, 2017

Giant Tax Cut for Christmas? Ha Ha Ha or Ho Ho Ho? 

According to several reports, including this one, the President announced, “We want to give you, the American people, a giant tax cut for Christmas. And when I say giant, I mean giant.”

So how big is a “giant” tax cut? According to the President, “The typical family of four earning $75,000 will see an income tax cut of more than $2,000, slashing their tax bill in half. It's going to be a lot of money. You're going to have an extra $2,000.” Aside from the fact that a lot of American families of four earning $75,000 aren’t going to see a $2,000 tax cut, because that number is an average and a handful of such families will reap much larger tax breaks, $2,000 is not “giant.” Nor is it “a lot” of money. Spread over a year, $2,000 is $38.46 per week. Nor was any mention made of the fact that the tax cut disappears after a few years and then all of these families will be hit with tax increases.

So who gets the “giant” tax cut? One guess, folks. It’s not the poor and lower middle class, who are in most need of economic assistance. Of course, it’s the wealthy. For those earning more than $1,000,000, the average tax cut, as reported here, will be $114,000. Now, that is “giant.” For those earning more than $10,000,000, the average tax cut, according to this analysis, will be $700,000. Those in the bottom one-fifth of the income scale, incidentally, will see, on average, $60, or slightly more than a dollar a week.

The only thing giant about all of this con game nonsense is the pile of dung that will need to be shoveled up when the inevitable tax-cut-driven crash occurs two or three years from now. And we know who will get stuck with that job.

Friday, December 15, 2017

Understanding the Mileage-Based Road Fee 

For more than a decade I have advocated the enactment of mileage-based road fees to replace the increasingly less effective and less efficient liquid fuels tax. One slice of my reasoning is not unlike the realization, a long time ago, that reliance on taxes imposed on telegraph messages wasn’t going to work once newer technology came along. I have explained how the mileage-based road fee works, and why it is the best solution on the table, in posts such as Tax Meets Technology on the Road, Mileage-Based Road Fees, Again, Mileage-Based Road Fees, Yet Again, Change, Tax, Mileage-Based Road Fees, and Secrecy, Pennsylvania State Gasoline Tax Increase: The Last Hurrah?, Making Progress with Mileage-Based Road Fees, Mileage-Based Road Fees Gain More Traction, Looking More Closely at Mileage-Based Road Fees, The Mileage-Based Road Fee Lives On, Is the Mileage-Based Road Fee So Terrible?, Defending the Mileage-Based Road Fee, Liquid Fuels Tax Increases on the Table, Searching For What Already Has Been Found, Tax Style, Highways Are Not Free, Mileage-Based Road Fees: Privatization and Privacy, Is the Mileage-Based Road Fee a Threat to Privacy?, So Who Should Pay for Roads?, Between Theory and Reality is the (Tax) Test, Mileage-Based Road Fee Inching Ahead, Rebutting Arguments Against Mileage-Based Road Fees, On the Mileage-Based Road Fee Highway: Young at (Tax) Heart?, To Test The Mileage-Based Road Fee, There Needs to Be a Test, What Sort of Tax or Fee Will Hawaii Use to Fix Its Highways?, And Now It’s California Facing the Road Funding Tax Issues, If Users Don’t Pay, Who Should?, Taking Responsibility for Funding Highways, Should Tax Increases Reflect Populist Sentiment?, When It Comes to the Mileage-Based Road Fee, Try It, You’ll Like It, and Mileage-Based Road Fees: A Positive Trend?.

Recently, reader Morris directed my attention to a letter to the editor in the Sacramento Bee. The writer was reacting to an article describing the possibility of California substituting a per-mile road fee for its gasoline tax. This is not surprising news, because California has been exploring the mileage-based road fee for several years, as I discussed in Between Theory and Reality is the (Tax) Test.

The letter writer was upset with the idea of a mileage-based road fee. He writes:
Now all those people who purchased hybrid or electric cars will get punished along with the rest of us. It won’t matter whether you get 5 miles to the gallon or 50 miles to the gallon, you’ll pay the same tax. Right now, if you drive more miles, you buy more gas and pay more tax.
His comments demonstrate why it’s important to gather facts before conducting analysis and reaching conclusions. First, paying for the use of roads is not punishment, because paying for the use of roads is no different from paying for the use of an apartment, a rental car, or a seat in a movie theater. Second, it is not true that the same tax applies regardless of fuel economy, because the mileage-based road fee can take into account, and in some experiments has taken into account, factors such as vehicle weight, number of axles, and fuel economy. Third, it is not true that driving more miles means buying more gasoline, because the amount of gasoline purchased depends in part on fuel economy, in part on traffic conditions, in part on driver acceleration, braking, and speed tendencies, and in part on vehicle occupant use of air conditioning and similar features. Fourth, the notion that hybrid and electric vehicles, unlike liquid-fueled vehicles, do not generate pollution is misleading, because pollution is generated when power plants produce the electricity used to charge those alternative fuel vehicles.

Understanding the mileage-based road fee requires study. It requires time. It requires thought. It requires analysis. It requires much more than first-impression reaction. I have tried, for more than a decade, as have others, to explain how the mileage-based road fee works. It’s not too late to become acquainted with the details.

Wednesday, December 13, 2017

Tax Cut Cash To Be Used for Job Creation?  

Though it is only one instance of many, the confession from the CEO of the home builder Toll Bros. provides more proof that tax cuts for corporations and wealthy individuals do not create jobs. As reported by Joseph N. DiStefano in his recent column, the legislation being railroaded through Congress will put between $80 million and $150 million of additional cash in to the bank accounts of Toll Bros. Though the CEO thinks the windfall will be on the lower side and outside analysts suggest it will be on the higher side, there is no doubt that Toll Bros. will have a much improved cash flow. When asked by a stock analyst what the company plans to do with the cash, the CEO admitted, “We don’t have any particular direction for that cash.” Goodness. There must be some operatives in D.C. who are annoyed that the CEO didn’t trot out the usual propaganda, “Oh, we will hire more employees.” My guess is that the Toll Bros. CEO is too smart to make a promise that he knows would not be kept. Toll Bros. did not announce plans to hire more employees because it has no plans to do so, and has no plans to do so because it does not need more employees. Even though the Toll Bros. CEO did not earmark the expected tax cut windfall for any specific purpose, the company plans to pay more to investors and top executives. That’s not job creation. That’s simply an increase in the flow of wealth and income into the bank accounts of the wealthy.

What might encourage Toll Bros. to create more jobs? The answer is simple. More demand for its product, which is housing. For demand to increase, there needs to be an increase in the number of people willing and able to purchase that housing. With tax cut money flowing primarily to people who don’t need more housing, and insufficient tax cut funds ending up in the wallets of people who would like, but cannot afford, to purchase Toll Bros. housing, the disastrous tax legislation isn’t going to do what its advocates claim. Worse, the proposed reductions of the mortgage interest and real estate tax deduction will make housing less affordable for all but the wealthy.

It’s bad enough that the greedy and insatiable money addicts manipulate, lie, and distort in order to feed their habit. What’s worse, far worse, is the willingness of too many people to buy into the lies, accept the distortion, and embrace the manipulation. Is it a personality flaw? An educational defect? A delusional expectation? An epidemic of apathy? Why is it so difficult for enough people to comprehend the heist that is about to get underway?

Monday, December 11, 2017

A $1.5 Trillion Tax Gamble, With Someone Else’s Money 

In a recent commentary, George Will rushes to the defense of the badly drafted, error-riddled, unwise, and catastrophic monstrosity of a tax bill being railroaded through the Congress. Though Will usually speaks with wisdom and manifests common sense, this time he seem to be swept up in the false euphoria of getting something done for the sake of getting something done.

Will describes opposition to the legislation’s tax cuts because they benefit the wealthy as a “recyclable denunciation of any significant tax cut.” Of course it is a recyclable criticism, because the tax cut advocates keep recycling their policies and those policies keep recycling into economic messes. As I’ve pointed out multiple times, this tax-cut-for-the-wealthy approach, despite apparent short-term success, has failed in the long-term every single time. Will argues that because the “top 1 percent of earners supply 39 percent of income tax revenues,” they should get a chunk of the tax cuts. But they’re getting far more than 39 percent. Will conveniently forgets, or intentionally fails to mention, that the purpose of the income tax is to prevent income and wealth inequality and to prevent the establishment of A dynastic oligarchy. He concludes that for a tax cut to be effective it “must be primarily a cut for the affluent.” That is absolute nonsense. What would work, though politicians lack the courage to pursue what works, is an increase in taxes on inherited, that is, non-earned, income and wealth coupled with steep tax decreases for the consumer class that drives the demand that fuels the economy.

Will then dismisses concerns that the tax-cut advocates will use the deficits generated by the tax cuts to justify cutting Social Security and Medicare. He is confident that the President, who “vowed to oppose” such cuts, will adhere to his promises. It’s disappointing that Will has confidence in someone keeping promises who has a track record of not doing so and whose mendaciousness has risen to levels of which the Tempter in the Garden would be envious.

Will concedes that the legislation is a gamble. He concludes, though, that it is a “wager . . . worth trying.” Of course, if the wager turns out well, the wealthy are even wealthier and everyone else, to a greater or lesser extent, is worse off or perhaps holds an even keel. And if the wager turns out badly, it’s not the wealthy who will feel the pain. It’s always safe to gamble with someone else’s money.

Yet in his commentary Will himself hedges his bets. He concedes that the advocates of this horrific legislation do not know with certainty that it will work. Will goes so far as to claim that nobody knows. He fails to mention that some of us, at least, know with certainty that in the long run this legislation will not work. How do we know that? It didn’t work in the past, and it won’t work now. But insanity, like addiction, is doing the same thing repeatedly, despite bad outcomes, because the brain cannot let go of that to which it is attached. Examining the Congress through that lens is far more instructive than dragging out the same disproven laughable justifications so typical of addicts’ excuses.

Will concedes that the hopes of the tax-cut advocates require continuation of the current economic expansion, one which is 44 months past the average length of an expansion and which is almost certainly headed for a recession. In reaching for a higher rate of expansion, the proponents of this senseless tax legislation risk a recession bordering on depression. Why trade slow but steady growth for a speedy but risky shot of economic adrenalin? That’s how addiction works.

Will then exposes the underlying hypocrisy of the entire racket. He writes, “What the legislation’s drafters anticipate, indeed proclaim, is that Congress will not allow to happen what the legislation says, with a wink, will happen.” The tax cuts for individuals are set to expire in 2025, though corporate tax cuts are tagged as eternal, but one of the chief architects of the legislation claims that a future Congress will extend those cuts. Perhaps. Perhaps not. It’s a gamble, predicting what a future Congress might do. In the meantime, Will concedes that this smoke-and-mirrors approach “is an $800 billion fudge, a cooking of the books.” Once upon a time, people went to jail for doing those sorts of things. Now they are elected to Congress and high office, appointed to positions of fiduciary responsibility, and worshipped as heroes by a segment of the population claiming to have a monopoly on moral righteousness.

I expected much better from George Will. I wonder why he has chosen to ride with the gamblers. Whether using one’s own money or someone else’s, there are certain gambles a person ought not take, for reasons of moral righteousness. This horrendous tax legislation is a perfect example of a gamble that must be avoided, mostly because, aside from being morally unrighteous, it is a sure losing bet.

Friday, December 08, 2017

Robots Doing Tax Planning? 

A bit more than a year ago, in Robots Doing Tax Returns?, I explained the reasons I hesitate to jump on the “let the robots prepare tax returns” bandwagon. After pointing out the shortcomings of self-driving vehicles and allegedly intelligent traffic signals, I shared these thoughts:
The folks who think that artificial intelligence, which is nothing more than complex software, can replace tax return preparers face a stark reality. For some taxes, surely artificial intelligence has advantages. But for any tax preparation that requires judgment, wisdom, experience, and intuition, artificial intelligence fails. Perhaps decades from now, when neuroscientists have figured out how judgment, wisdom, experience, and intuition are reflected in the biochemical and electromagnetic functions of the human brain work, and software engineers have figured out how to translate those functions into computer code, the idea of robots doing federal income tax returns might come to a worthwhile fruition. Until then, the likelihood of crashes that weren’t supposed to happen and time wasted at badly programmed traffic signals will make the robot tax return preparer a fine wine that no one should drink before its time.
Nothing during the past 15 months has changed my mind.

Recently, I heard a story about artificial intelligence being used to do tax planning. At a meeting of tax professionals, the presenter shared the advice generated by an artificial intelligence system designed to do tax return preparation and tax planning. The system generated some very bizarre ideas. For example, it suggested that an elderly couple whose only income was social security benefits should start their retirement planning by setting up an IRA and contributing to it. It also suggested that a middle-aged couple who had paid off the mortgage on their residence should borrow money to purchase another home in order to create mortgage interest deductions and additional real estate tax deductions. Those sorts of responses on a tax exam would earn an inescapable F grade.

As I suggested in Robots Doing Tax Returns?, “technology needs to generate results that have at least the quality they would have if an expert did the work.” I understand technology. I understand how it can fail. I understand that failure can be at least as bad, if not worse, than the outcome when an expert fails. For that reason, I cautioned, “For me, until a technological ‘advance’ is ready for prime time, it needs to remain in the world of testing and experimentation. It ought not become mandatory or widespread until it proves its superiority.”

The rush to let artificial intelligence and robots “do the work,” a temptation perhaps fueled by expectations of leisurely lives, poses grave risks. Quoting again from Robots Doing Tax Returns?, “Technology is no better than the programmers who design the hardware and software. Sometimes I wonder if the advantages of multiple sets of eyes and brains reviewing the product are being lost on account of cost-cutting goals that misperceive the difference between long-term and short-term success.”

At the moment, very few people are likely to communicate directly with an artificial intelligence system to get advice. But most people are communicating with experts, advisors, and guides to get help. It makes sense to ask questions to get assurances that the assistance isn’t simply being cranked out of an artificial intelligence system, bereft of judgment, wisdom, experience, and intuition.

Wednesday, December 06, 2017

A Debt Prevention Tax Cut Escrow Proposal 

Every now and then an idea pops into my head. This time, after reading a story about Senate Majority Leader McConnell’s absurd claim that cutting taxes will raise revenue, I decided it’s time to hold government officials, elected or appointed, to their claims. They should be held financially, if not criminally, liable for making promises that don’t pan out, knowing that they cannot pan out, and causing misery for Americans.

Every sensible and educated economist, analyst, and financial professional who has examined the monstrosity of a tax bill being railroaded through the nation’s capital reaches the same result. The proposed legislation would cause the federal deficit to balloon, with attendant short-term and long-term adverse consequences. Though they disagree on the exact number, almost all are somewhere north of one trillion dollars.

So in rushes McConnell, anxious to placate the oligarchs who are demanding the additional wealth that the legislation will shift from the non-wealthy to the oligarchy. He makes the same ridiculous claim that was made when previous tax legislation of this sort was foisted on America. He claims that the tax cuts will generate enough economic growth to produce additional tax revenue. That didn’t happen in the past and it won’t happen now. The recipients of tax reductions will not be generating economic growth. They will not be buying much of anything because they already have what they want and need, other than more cash in the offshore bank. The recipients of tax reductions will not be hiring workers, because they don’t have any work for them to do. The recipients of tax reductions, financed by increased taxes on a significant swath of the poor and middle class, are too few in number to trigger the sort of consumer demand that stokes the fires of healthy economies.

McConnell surely knows that his claim is false. He knows that the tax legislation is one of the worst tax bills ever to get approved by the Senate. So why does he say what he says? Is he deluded? No, he simply is so beholden to the “donor class” that he says whatever he needs to say to wiggle out of the mess he is complicit in creating. He’s not alone, of course, but as the majority leader he has a higher degree of responsibility for which to answer. At the moment, the only responsibility he is exhibiting is allegiance to those who finance his campaigns and permit him to remain in office.

The extent to which McConnell is willing to make excuses for this horrendous inequality exacerbation machine is apparent from his reaction to claims that most of the tax reductions in the tax bill favor the wealthy and large corporations. McConnell claimed, “I haven’t run into anybody during this whole tax discussion who’s very successful who thinks they’re benefiting from it.” Really? What possibly could explain such an absurd claim? Perhaps McConnell hasn’t spoken to anyone. Perhaps McConnell hasn’t spoken to anyone who benefits from the legislation. Neither seems plausible. Perhaps the people who benefit from this legislation simply are unwilling to admit, or should I say, confess, that the legislation makes them wealthier. Part of the con game is to persuade Americans that this tax bill does nothing but put significant amounts of money in the pockets of the poor and middle class. Playing that game requires silence on the part of the legislation’s beneficiaries.

Now comes the best part. McConnell explained, “Look, a year or two from now, you guys can make an assessment which one of us was right. The proof will be in whether or not the economy picks up and things get better.” Instead of a year or two, how about five or six years? If, as has happened with the other enrich-the-rich tax laws, the economy bubbles for a few years and then crashes, to the further detriment of the poor and middle class, how about an escrow account funded by the folks who have championed this legislative disgrace? How about hold harmless clauses that guarantee reimbursement to those poor and middle class Americans whose tax bills increase because some wealthy individuals decided they needed even more income and assets? How about legislation permitting Americans harmed by the impending economic crash to sue those members of Congress and the Administration who voted for this dangerous legislation? Are the proponents of this legislation willing to put their money where their mouths are? The very fact that they laugh off these proposals speaks volumes. America, are you listening, learning, and understanding? Or still enthralled by the con artists and snake oil sellers?

Monday, December 04, 2017

Tax Cuts for Employers Do Not Create Jobs 

And in the long parade of those claiming that tax cuts for employers create jobs comes nonsense from Pennsylvania Senator Pat Toomey. According to Toomey, tax cuts for employers and businesses “will increase demand for workers.” He somehow thinks that by letting businesses take immediate deductions for outlays that provide benefits over a longer term, those businesses will need workers and wages will increase.

Here’s the problem, Senator Toomey. Whether it’s an existing business paying less tax or a new business writing off capital expenditures, those folks are not going to hire people unless they have something for those people to do. To have something for those people to do, those businesses, whether existing or start-up, need to sell goods and services. To sell goods and services, these businesses need customers. To have customers, these businesses need a vast consumer class that can afford to make those purchases. The proposed legislation gives some of the consumer class a few dollars and actually raises taxes on another portion of the consumer class, thus reducing their purchasing power. Aside from that deep flaw, why would companies spend $1,000,000 on a piece of equipment in order to reduce taxes by $200,000? Why deplete those huge cash reserves by $800,000 if the equipment isn’t needed because there’s no one to purchase the goods it makes or the services it provides? Talk about voodoo economics.

In the meantime, officers of existing corporations eagerly awaiting even more of a tax reduction cash windfall have made it clear that they have no intention of raising wages or hiring more workers. According to a variety of reports, including this one from Bloomberg, many companies plan to “turn over most gains from proposed corporate tax cuts to their shareholders.” Those shareholders, for the most part, are not going to rush out and increase demand for the goods and services being sold by businesses. There are too few of them, they already have what they want and need, and they will do what they did last time, stash the cash overseas and then complain that they don’t have enough and need more tax cuts. Addiction is a difficult thing.

The proposed tax legislation will not do what its supporters claim it will do. How do I know this? Similar legislation didn’t work the last time around, and the time before that, and so on. Sometimes, yes, there is a momentary glimmer of success, followed by a deep and nation-wrecking economic crash. The bigger the tax cuts, the worse the outcome, not unlike the adage, the higher one climbs, the harder the fall.

If America wants to reinvigorate its economy, it needs tax cuts for the consumer class. It needs restoration of reasonable wealth and income disparities. It needs demand-side economic policies, not another entry in the parade of supply-side, trickle-down nonsense. But America won’t get this so long as it is under the thumb of the oligarchy that benefits from the falsehoods that are sold to a gullible populace that keeps voting for people who keep doing them harm.

Friday, December 01, 2017

The Value of Sleep for Law Students 

Reader Morris sent me a link to a four-and-one-half-year-old, but still relevant, article on sleep. Written by Michael J. Breus, the article explores the need for both the right quantity and the right quality of sleep. I must confess, though I do well most nights, sometimes the quantity is diminished because I get caught up in something that I am researching or writing, usually family history material.

Morris asked me, “What role does sleep play in law school performance?” The answer is easy. “The correct quantity and quality of sleep is essential for doing well in law school, just as it is for pretty much everything else.”

Several years ago, in A Tax Question: So What Do You Do With Your Time? I discussed time budgeting for law students, an issue I have discussed with law students for decades and that in recent years has moved into the spotlight as law schools adjust curricula. I pointed out that sleeping, eating, and hygiene require 10 hours a day. Most of that belongs to sleeping.

When exam time rolls around, sleep matters more than the cramming in which many students engage. Often, alerted by a concern that there is one issue or topic with which they are not comfortable, students will stay up late trying to perfect that issue or topic, even though they’re in excellent shape for the other 150 issues in the course. What happens is that the lack of sleep causes their ability to deal with many of those other 150 issues to diminish.

When I was a student, one of my professors told me that the best thing to do the evening before an exam was to go to the movies, and then return home to sleep. He and I talked often, and so although some of my classmates were appalled to learn what I said to my professor, in the context of our many conversations, it fit. I said to him, “What they say about you is true. You are nuts.” He laughed, and said, “Just wait until you are teaching. You’ll see what I mean.” At the time of this exchange, during my second year, it had already been decided, by myself and by more than a few of the faculty, that I was destined for a law school teaching career.

And, yes, he was quite correct. During the last class in each course, I give that advice to all my students. I tell them the story that I described in the preceding paragraph. I mention that from time to time I notice articles explaining not only the need for sleep the night before an exam but why and how sleep helps memory, reasoning, and other brain functions. The movie portion of the advice matters because it gives the brain time to assimilate, rest, and reorganize, not unlike the recovery time needed when working out in the gym.

Of course, there is a time and place for sleep. It is not wise to schedule sleep during class meeting times.

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