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Friday, December 06, 2019

Sometimes It Doesn’t Matter If It Is a Fee or a Tax 

The difference between a “fee” and a “tax” matters for different reasons. One, of course, are the prohibitions against raising taxes that don’t apply to fees. Another is the attempt to call something a fee so that it makes things more difficult for the anti-tax crowd to claim that taxes are being enacted or raised. I have written about the difference between a fee and a tax in posts such as Please, It’s Not a Tax, So Is It a Tax or a Fee?, Tax versus Fee: Barely a Difference?, Tax versus Fee: The Difference Can Matter, and When is a “Tax” Not a Tax?.

In Tax versus Fee: The Difference Can Matter, I wrote about Oklahoma legislators who were arguing about a “fee” on cigarettes. Opponents claimed it was invalid because it originated in the Senate. This is what I wrote:
Oklahoma has enacted a new $1.50 per-pack “fee” on cigarettes. This action comes on the heels of four previous failures to increase the state per-pack cigarette tax by $1.50. Opponents have sued, asking the Oklahoma Supreme Court to invalidate the legislation. They argue that the fee originated in the state Senate, thus violating the requirement in the state Constitution that revenue-raising legislation originate in the state House. The opponents also argue that enactment of the legislation during the last week of the legislative session violated the state Constitution’s requirement that revenue-raising legislation not be enacted during the last five days of a legislative session. The opponents also argue that proponents of the $1.50 charge were trying to characterize the legislation as not revenue-raising by labeling it a fee. The opponents explain that the fee “simply reincarnated the earlier cigarette tax bills under a new name.”

Though I’m no expert in Oklahoma constitutional law, it seems to me that the fee raises revenue, and thus has been enacted in revenue-raising legislation. Accordingly, the process by which it was enacted appears to have violated the Oklahoma Constitution. If, for some reason, the Oklahoma Supreme Court determines that the provisions in the constitution applies to taxes but not fees, then deciding whether the $1.50 charge is a tax or fee would be determinative. The label alone should not resolve the question. The state is not selling cigarettes to people, nor is it selling licenses to use tobacco, and thus it is difficult to characterize the charge as a fee. It would not be surprising if the Oklahoma Supreme Court, if it were to limit the requirements in the state Constitution to taxes, decided that this particular charge was a tax. It will be interesting to see what the court decides, probably sometime later this year.
That court decision did appear later that year. According to this article, the Oklahoma Supreme Court struck down the fee for the reasons put forth by the opponents of the fee.

Now the issue has arisen again, this time in Massachusetts. In this editorial column, Howie Carr objects to a “transportation climate initiative fee,” also called a “carbon fee,” for a variety of reasons. He asserts that the fee is, in fact, a tax. He dislikes the idea of a tax being disguised as a fee. He claims that the supporters of the fee are trying to avoid a requirement in the Massachusetts Constitution that new state taxes must originate in the House of Representatives. Though he has other objections to the proposal, I think that on this point he can relax. Under the Massachusetts Constitution, “All money bills shall originate in the house of representatives; but the senate may propose or concur with amendments, as on other bills.” In 1878, in Opinion of the Justices to the Senate and House of Representatives, the Massachusetts Supreme Court, addressing whether bills proposing the spending of money must originate in the House of Representatives, stated, “[W]e are of opinion that the exclusive constitutional privilege of the House of Representatives to originate money bills is limited to bills that transfer money or property from the people to the State, and does not include bills that appropriate money from the Treasury of the Commonwealth to particular uses of the government, or bestow it upon individuals or corporations.” So it seems to me, even though I’m not and expert in Massachusetts constitutional law, that whether the amount charged by the state is called a tax, a fee, or something else, if it causes money or property to be transferred from people to the state, it must originate in the House of Representatives. In other words, calling it a fee does not eliminate that requirement, and if that is what the proponents of the fee think they would accomplish, as Howie Carr suggests they are thinking, they are wrong, and Howie can relax on this point. He might want to take a look at what happened in Oklahoma with respect to the cigarette fee. He should find it encouraging.

Wednesday, December 04, 2019

Playing With Taxes? Taxes in Play? Taxes in a Play? 

Three years ago, in Deferring Death as a Tax Planning Tool, I explored the questions that popped into my head when I read Phil DeMuth’s suggestion in Four Post-Election Tax Moves To Make Today that if a decrease in death taxes is on the horizon, individuals subject to a death tax should find ways to defer death. One of the questions I considered was whether people aware of looming increases in death taxes take steps to accelerate death. I am not the first person to ask that question. For example, in Fixing Everything: Government Spending, Taxes, Entitlements, Healthcare, Pensions, Immigration, Tort Reform, Crime...(2010), Nedland P. Williams, in discussing the transition from 2010, for which the federal estate tax did not apply, to 2011, when it would, asks, “Should the person in failing health or their relatives be forced into a decision to accelerate death before the January 1, 2011 deadline?”

Last week, reader Morris emailed me with an observation. He directed my attention to the review of a play, Death Tax, put on last month at Midwestern State University in Wichita Falls, Texas. The review outlines the plot as follows:
Maxine, an elderly patient in a nursing home is convinced that her daughter is trying to kill her. She claims that if a new tax law passes in the new year, Maxine’s daughter will get substantially less money from her mother’s death. Maxine is convinced that her nurse Tina is getting bribed to slowly kill her.

Tina, a Haitian nurse who is struggling to fight a custody battle back home, is not trying to kill Maxine, but when Maxine offers a huge sum of money under the table to keep her alive it’s too good to pass up and she quickly becomes tangled in a web of deceptions.

Tina goes to her supervisor and one-time fling, Todd, for help. Trying to win Tina back, he’s forced to bribe other nurses and pay for expensive treatments out-of-pocket to keep Maxine ticking. He hopes that once Tina gets her son back, they can start a new life together.
Reader Morris noted, “This play and book seems to be based on an idea from your blog.”

Well, maybe. It could be based on Nedland Williams’ commentary. It could be based on similar commentary from someone else that I haven’t seen. Perhaps the author of the book overheard someone discussing my or Williams’ commentary. In any event, isn’t it fun that a tax issue finds attention in a theater? It depends, I suppose, on how a person defines fun.

Monday, December 02, 2019

So Are They Taxes? Fees? Both? 

Too often, the words “tax” and “fee” are misused. Sometimes a tax is called a fee even though it is a tax. Much more frequently, a fee is tagged as a tax, principally by opponents of the fee who are trying to resonate with the emotional tuning of those who have a say in whether a proposed fee should be enacted or an existing fee should be increased. I have written about this imprecision, and have explained the difference between a tax and some other charge appears in posts such as Please, It’s Not a Tax, So Is It a Tax or a Fee?, Tax versus Fee: Barely a Difference?, Tax versus Fee: The Difference Can Matter, When is a “Tax” Not a Tax?, and When Use of the Word “Tax” Gets Even More Confusing.

The confusion becomes extremely precise when both the word “tax” and the word “fee” is used to describe the same charge. Reader Morris shared with me his bewilderment at the use of both terms in this article, describing issues arising from the passage of Initiative 976. The headline refers to “car-tab taxes.” The body of the article uses the same term but also refers to the charge as “car-tab fees.” So what are they?

It turns out that the confusion is attributable to the scope of Initiative 976. As described in this overview, that initiative was intended to reduce both taxes and fees. Washington imposed license fees on vehicles, base vehicle taxes, local Transportation Benefit District fees, electric vehicle fees, certain motor vehicle excise taxes, and other “taxes and fees” related to transportation. Car tab fees, as in effect before the initiative was adopted, included standard vehicle fees, which included a renewal fee, a county filing fee, a license service fee, and a service fee, along with a vehicle weight fee and transportation benefit district fees. They also paid motor vehicle excise taxes and an electric vehicle tax.

Apparently, with this bundling of fees and taxes leaves some people referring to them as car-tab fees, other referring to them as car-tab taxes, and still others referring to them by both terms, as seen in the article. Technically, the bundle should be called “car-tab fees and taxes,” but perhaps that’s too long for some people’s comfort.

If there is anything to be learned from this, perhaps it is the need to do away with multiple fees and taxes and to consolidate them into a much shorter list. The chances of that happening are about the same as the chances of cable companies and telephone companies consolidating the plethora of fees that they include in their invoices.

Friday, November 29, 2019

The Price for Anti-Tax Success Can Be Catastrophic 

Readers of MauledAgain know that I am not one of those people who object to taxation as a matter of principle and who oppose every attempt to enact or increase a tax even if paying a tax is a more efficient and cheaper way to deal with the issues the tax is designed to address. One excellent example of this narrow-minded approach to citizenship and government is the never-ending opposition to increases in fuel taxes or enactment of an alternatives such as a mileage-based road fee. As I wrote in Paying the Price for Anti-Tax Damage with respect to opposition to increasing taxes to fix transportation infrastructure, “Hit a pothole, incur hundreds of dollars or more of repair costs, and those tax cuts or avoided tax increases pale in comparison.”

Reader Morris has alerted me to another example of how refusing to increase taxes can be catastrophic. According to this Sacramento Bee article, voters in El Dorado County rejected a proposal to enact a tax to fund the county’s rural firefighting efforts. The situation is a bit more complicated than it appears. As wildfires erupted throughout California, causing loss of life and horrific property damage, the state legislature allocated $918 million for fire protection, but most of that money went to urban and suburban areas, with just a pittance reaching rural fire departments. Of course, rural areas are more at risk for wildfires and those wildfires tend to spread rapidly in those areas. It’s unclear why the funds appropriated by the state were allocated in a manner disadvantageous to rural fire districts, but it might be the consequence of a statute enacted in the late 1970s setting the allocation each rural government received from property taxes, which for rural communities was low because in the 1970s their firefighters were volunteers and costs were much lower. As is the case nationwide, the number of volunteer firefighters has plummeted, for a variety or reasons, including the requirement they be trained as professionals, demographics, and a declining sense in many communities of civic engagement.

The bigger question is why voters in a rural area, though perhaps justified in thinking that they pay sufficient taxes to the state and ought not pay even more, would risk the underfunding of their fire protection. Even if they lobby and protest to get a bigger share of the state appropriation, that process will take time. And if it succeeds, the taxes that would have been raised at the local level could be refunded to the taxpayers, and future taxes suspended.

As a result of the failure to enact the local tax, firefighter jobs are being terminated. Some, perhaps most or all of these firefighters, were battling wildfires while the proposed tax was being turned down at the ballot box. So it wasn’t a matter of people arguing that taxes should not be enacted to deal with something that hasn’t happened and almost certainly would not happen. It’s not as though the proposal was for a tax to deal with an invasion from the inhabitants of the planet Jupiter. Yet, according to the article, voters in California’s rural areas remain devoted to conservative anti-tax principles and are “convinced that higher taxes won’t solve their problems.” Perhaps when a wildfire tears through their community and there are no firefighters or not enough of them, and a lack of sufficient equipment, they can consider contemplating what happens when the theory of tax hatred meets the practical reality of life.

The outcome in El Dorado County is not unusual. According to the article, roughly half of proposals in rural areas to enact taxes to support local fire departments are rejected. The mayor of another town explained, “People don’t like to vote a tax upon themselves. There’s a reluctance. You’ve got to have a pressing need.” The rejection vote in this mayor’s town took place three months after a wildfire destroyed more than a thousand homes in a nearby town. So perhaps when the wildfire is 100 yards from the town and moving fast, rather than evacuating, the anti-tax folks will conclude that there is a “pressing need” and hold a referendum to enact a tax that can be used to hire firefighters and purchase equipment. How’s that going to work out? According to the mayor, having more firefighters would not necessarily change the outcome of a wildfire, claiming that additional firefighters would not have stopped the 2018 Carr Fire that killed 85 people. Yet that’s not the benchmark. How many people would have died if the number of firefighters and the number of firefighting apparatus being used to fight that fire had been less?

What makes things worse in California are two anti-tax propositions. Proposition 13, enacted more than 40 years ago, limits property taxes to one percent of property value. Proposition 218, enacted more than 20 years ago, requires a two-thirds majority of voters to enact the sort of tax that has failed in the rural counties. One opponent of the tax, not revealing whether he was an expert in fighting firefighters, claimed that the firefighters are “already overpaid” and that “they’re burning their fire trucks parking too close to fires.” Of course, he disappeared before providing any evidence or analysis of firefighting techniques.

And how much would the tax have cost voters? According to the article, it would require another $71 to $182 per year for a property. With the firefighting department being downgraded, I wonder how much the insurance companies are going to increase the homeowner insurance premiums in rural areas. Would it be surprising if these voters, who objected to paying another $71 to $182 faced annual premium increases of $150 to $250. Perhaps they don’t have insurance. I wonder if they have any hesitation in asking for federal relief provided from funds paid by taxpayers in other states.

Fortunately for some communities, attempts to raise taxes to maintain firefighting capacity have succeeded. Why? In one county, the fire district director explained, “[T]hey love their fire department [and its fire protection and medical services.]” He added, “I don’t like taxes either. I’m just like the next guy. But we don’t mind paying taxes, so long as they see what their money’s going to. So long as it’s guaranteed to go to that.“ Of course, taxpayers have a right to expect that taxes enacted for a specific purpose are used for that purpose.

At this rate, firefighting will eventually be privatized. That’s nothing new. That’s the way it was in Philadelphia when Benjamin Franklin introduced the idea of community firefighting. His logic was magnificent. When the house or wooded area of a neighbor who hasn’t purchased private fire protection, and there no longer is a taxpayer-funded public fire service, the firefighting service purchased by the anti-tax homeowner isn’t going to be of much help. Especially in a rural area consistently threatened by wildfires.

Wednesday, November 27, 2019

Quest'anno è il Ringraziamento 

For as long as I’ve been writing this blog, I’ve been sharing a Thanksgiving post to express my gratitude for a variety of people, events, and things. Aside from 2008, when I did not post and I don’t have any recollection of why or how that happened, I’ve dedicated a post on or around Thanksgiving. I started in 2004, with Giving Thanks, and continued in 2005 with A Tax Thanksgiving, in 2006 with Giving Thanks, Again, in 2007 with Actio Gratiarum, in 2009 with Gratias Vectigalibus, in 2010 with Being Thankful for User Fees and Taxes, in 2011 with Two Short Words, Thank You, in 2012 with A Thanksgiving Litany, in 2013 with “Don’t Forget to Say Thank-You”, in 2014 with Giving Thanks: “No, Thank YOU!” , in 2015 with Thanks Again!, in 2016 with Thankfully Repetitive, in 2017 with Never-Ending Thanks, and in 2018 with Particularly Thankful This Time Around.

As I stated the past six years, “I have presented litanies, bursts of Latin, descriptions of events and experiences for which I have been thankful, names of people and groups for whom I have appreciation, and situations for which I have offered gratitude. Together, these separate lists become a long catalog, and as I have done in previous years, I will do a lawyerly thing and incorporate them by reference. Why? Because I continue to be thankful for past blessings, and because some of those appreciated things continue even to this day.” When I re-read those lists, I realized that the people, events, and things for which I am appreciative are far from obsolete.

So once again I will look back at the past twelve months, and remember the people, events, and things for whom and for which I give thanks. If some of these seem repetitive, they are, for there are gifts in life that keep on giving:Thirteen years ago, in Giving Thanks, Again, I shared my Thanksgiving advice. I liked it so much that I repeated it again, in 2009 in Gratias Vectigalibus, yet again in 2013 in “Don’t Forget to Say Thank-You”, still again in 2014 in Giving Thanks: “No, Thank YOU!” , even yet again in 2015 in Thanks Again!, even still again in Thankfully Repetitive, yet once more in Never-Ending Thanks, and last year in . Particularly Thankful This Time Around. For me, it does not lose its impact:
Have a Happy Thanksgiving. Set aside the hustle and bustle of life. Meet up with people who matter to you. Share your stories. Enjoy a good meal. Tell jokes. Sing. Laugh. Watch a parade or a football game, or both, or many. Pitch in. Carve the turkey. Wash some dishes. Help a little kid cut a piece of pie. Go outside and take a deep breath. Stare at the sky for a minute. Listen for the birds. Count the stars. Then go back inside and have seconds or thirds. Record the day in memory, so that you can retrieve it in several months when you need some strength.
I am thankful to have the opportunity to share those words yet again.

Monday, November 25, 2019

When the Tax Software Goes Awry 

One never knows when, if at all, a tax issue will pop up in a television court show, and if one does pop up, what it will involve. Usually, the description of the episode does not mention tax, and the tax issue comes up collaterally. The other day, however, I knew there was going to be a tax issue because the description in the channel guide told me so. Of course I watched, because it would add to the ever-lengthening list of television court show episodes on which I have commented, including Judge Judy and Tax Law, Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, More Tax Fraud, This Time in Judge Judy’s Court, You Mean That Tax Refund Isn’t for Me? Really?, Law and Genealogy Meeting In An Interesting Way, How Is This Not Tax Fraud?, A Court Case in Which All of Them Miss The Tax Point, Judge Judy Almost Eliminates the National Debt, Judge Judy Tells Litigant to Contact the IRS, People’s Court: So Who Did the Tax Cheating?, “I’ll Pay You (Back) When I Get My Tax Refund”, Be Careful When Paying Another Person’s Tax Preparation Fee, Gross Income from Dating?, Preparing Someone’s Tax Return Without Permission, When Someone Else Claims You as a Dependent on Their Tax Return and You Disagree, Does Refusal to Provide a Receipt Suggest Tax Fraud Underway?, When Tax Scammers Sue Each Other, One of the Reasons Tax Law Is Complicated, An Easy Tax Issue for Judge Judy, Another Easy Tax Issue for Judge Judy, Yet Another Easy Tax Issue for Judge Judy, Be Careful When Selecting and Dealing with a Tax Return Preparer, Fighting Over a Tax Refund, Another Tax Return Preparer Meets Judge Judy, Judge Judy Identifies Breach of a Tax Return Contract, When Tax Return Preparation Just Isn’t Enough, Fighting Over Tax Dependents When There Is No Evidence, If It’s Not Your Tax Refund, You Cannot Keep the Money, Contracts With Respect to Tax Refunds Should Be In Writing, and Admitting to Tax Fraud When Litigating Something Else.

This time, it was episode 63 in season six of Hot Bench. The case as well as a tax-focused television court show episode could begin. One of the judges opened with this description of the case: “The thing Americans fear most, being audited by the government.”

The plaintiffs, a married couple, sued the accountant who prepared their federal and state tax returns. The Commonwealth of Virginia Department of Revenue, after noticing larger than usual deductions and credits, contacted taxpayers, asking for an explanation. In turn, the plaintiffs contacted the defendant, who examined the returns and concluded there had been a software error.

The defendant explained to the court that when he examined the returns, he figured out that the software pulled amounts from the federal return onto the state return, generating erroneous deductions and credits. He also explained that when he spoke to someone at the Department of Revenue, that person informed him that thousands of Virginia taxpayers had been affected by this software glitch. Accordingly, the Department of Revenue waived all penalties but did not have the authority to waive interest.

The plaintiffs argued that the defendant should have noticed the error before filing the returns, and wanted him to pay the entire amount demanded by the Department of Revenue. The defendant replied that it was an error by the software and not his fault. He also pointed out that he was willing to pay the interest owed by the plaintiffs, but that during negotiations the plaintiffs refused that offer because they wanted him to pay the entire amount due, including the tax.

The court concluded that the defendant had not acted intentionally or maliciously and that the tax that was due was an obligation of the taxpayers that they would have paid on time had the software error not occurred. Accordingly, the court held that the defendant was liable for the interest.

No one mentioned the maker or seller of the tax software in question, and I have not made more than a cursory attempt to identify it because my search terms did not generate anything helpful. Errors in tax software do happen, as do errors in all sorts of software. That is a risk of using tax software. Yet when tax returns are prepared manually, errors also occur, and at a higher rate. Sometimes risk cannot be avoided, and the best course is to take steps that reduce risk even if it cannot be eliminated.

Friday, November 22, 2019

When Use of the Word “Tax” Gets Even More Confusing 

On several occasions I have written about the misuse of the word “tax.” My explanation of the difference between a tax and some other charge appears in posts such as Please, It’s Not a Tax, So Is It a Tax or a Fee?, Tax versus Fee: Barely a Difference?, Tax versus Fee: The Difference Can Matter, and When is a “Tax” Not a Tax?. All but the last of those posts focused on the difference between different types of charges imposed by governments. In the last of those posts, I described why a fee or charge imposed by a person or entity that is not a government is not a tax and ought not be called a tax.

Now my attention turns to an interestingly named “google tax.” As described in this article, several countries have enacted taxes to deter “multinational corporations from shifting income to low-tax jurisdictions.” The taxes have formal names, such as Multinational Anti-Avoidance Law in Australia and Diverted Profits Tax in the United Kingdom, but these tax end up being called a “google tax” because they have been enacted in response to tax planning techniques used extensively by Google.

Recently, I discovered that the term “google tax” is being used to describe charges that are not taxes. According to Seth’s Blog, there is “The Google tax. Actually, there are two.”

The first of the two “taxes” described in the blog is the amount companies pay to push their google search results to more prominent positions. The second is the presumably increased cost of starting up businesses because new businesses are more difficult to find using google search.

It appears, though the Seth’s Blog commentary doesn’t say so, that Google’s monopoly or near-monopoly market position forces businesses to pay an amount they don’t want to pay and that they cannot avoid. That, however, does not make amounts paid to Google, or amounts paid to position a new business so that it shows up more often in Google searches, a tax.

There are many instances in which a person has no choice but to pay, even though the theorists claim that a person can always choose not to make a payment and suffer the consequences. Consider a person who arrives late at night at an airport after a long flight delay, is hungry, and discovers that not only are all but one of the food establishments closed but also that the open one has only hot dogs and apple juice in stock. The person might feel as though they have no choice but to pay for a hot dog and apple juice. Yes, in theory, the person can choose not to purchase the hot dog and apple juice, and suffer the consequences, such as hypoglycemia and dehydration. But as a matter of practical reality, the person has no choice. That does not make the cost of the hot dog and apple juice a tax.

From this perspective alone, the use of the word “tax” by Seth’s Blog to describe a charge imposed by a private enterprise is no different from the use of the word “tax” to describe the fee or charge imposed by Major League Baseball on high-spending clubs. That’s bad enough, but Seth’s Blog uses the phrase “google tax” when, in fact, that phrase has already been put to use as a shorthand to describe actual taxes that go by a variety of names.

So there is double confusion. Something that is not a tax is being labeled a tax, and it is being labeled with a phrase that already is in use to describe what are, in fact, taxes.

The term that would better, and far more accurately describe the costs criticized by Seth’s Blog is “monopolistic charge.” Note that I am not critiquing the substance of the concern raised by Seth’s Blog, as I think monopolistic charges pose a variety of concerns, dangers, and inequalities. My complaint is that by using the word “tax” the criticism of a private enterprise comes across to many people as another reason to criticize government, when in fact the problem is not one of government but of the private sector that survives beyond the voting booth. Once again, the misuse of the word “tax” is confusing and counterproductive.

Wednesday, November 20, 2019

The Scope of a Mileage-Based Road Fee 

Reader Morris, like many other readers of MauledAgain, knows that I am an advocate of the mileage-based road fee. For years, he has been reading my many posts on the topic, including 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, Mileage-Based Road Fees: A Positive Trend?, Understanding the Mileage-Based Road Fee, Tax Opposition: A Costly Road to Follow, Progress on the Mileage-Based Road Fee Front?, Mileage-Based Road Fee Enters Illinois Gubernatorial Campaign, Is a User-Fee-Based System Incompatible With Progressive Income Taxation?. Will Private Ownership of Public Necessities Work?, Revenue Problems With A User Fee Solution Crying for Attention, Plans for Mileage-Based Road Fees Continue to Grow, Getting Technical With the Mileage-Based Road Fee, and How Not to Raise Money to Fix Roads.

Recently, reader Morris came across an article from a year and a half ago. After reading the article, I understood why reader Morris asked me the questions he posed.

The article explains the challenge facing local governments in Indiana that are required to spend enormous sums of money to fix local roads suffering significant damage from the horses used by the Amish to pull their buggies. The steel horseshoes chip up the asphalt and create divots, and cause even more damage where hot mix asphalt is used. The chipped asphalt and divots also increase the opportunity for water to get into the surface and cause potholes. One county reports that half of its roads have been damaged by horseshoes. At least one county regulates the materials used in horseshoes, which lessens the impact, but heavy-duty horseshoes are needed if roads are wet, icy, or snow-covered. Rubber horseshoes have been proposed, but they wear out quickly. Local sheriffs and police have been reluctant to stop buggy drivers to check the shoes on the horses. In one area, the Amish plan to limit use of the heavy-duty shoes to the snowy half of the year and switch to less abrasive shoes in April, though it’s unclear whether this will make much of a difference.

One country imposes a $100 annual buggy plate fee, and another imposes a $55 fee. The $100 fee generates about $150,000 in annual revenue, but the cost of repaving one mile of road is roughly $100,000. In other words, the buggy plate fee doesn’t come close to covering the cost of repairs.

Reader Morris asked me three questions. Here are my answers.

First, he asked, “How would you design a horse and buggy mileage fee?” One feature of the mileage-based road fee is that the amount per-mile can be adjusted to reflect the size, weight, and other road damage characteristics of the vehicle. Every mileage-based road fee proposal that I’ve seen suggests higher per-mile fees for tractor trailers than for cars. Some are more refined, with the per-mile fee being proportional to weight. So it would not be difficult to set the per-mile fee for conveyances that do not have motors. It would require some research and analysis to determine the per-mile fee that would offset the damage done by horseshoes. Undoubtedly, it would increase what currently is being paid, but a $55 or $100 annual plate fee is much less than what is paid by other users of the road who are subject to fuel taxes.

Second, reader Morris asked, “How do you define carriage?” I don’t see a need to define carriage. If the per-mile fee were set differently for horse-drawn vehicles, as it presumably would be for trucks, then the required definition would be for “horse-drawn” or “animal-drawn,” just as there would need to be definitions for “truck” if the per-mile fee was set, in addition to or alternatively to a weight standard, differently for trucks.

Third, he asked, “Could you argue the fee or tax is unconstitutional because it applies to the Amish population and discriminates against their religious principles?” The fee, like the annual buggy plate fee, is not in and of itself unconstitutional. The buggy fee does not discriminate against the Amish, and in fact it shifts the cost of the damage done by horseshoes onto those paying fuel taxes or otherwise funding the road repairs. Religious principles might generate an issue when it comes to the placement of a mileage-based road fee tracking device in the buggy. I don’t know if that would violate religious principles of the Amish. I know that “Amish” is too general of a term to describe religious principles, because there are a variety of sects within the ambit of “Amish,” with different interpretations on various issues. Is the placement of a mileage-based road fee device in a buggy equivalent to using an electronic device or appliance powered by electricity, assuming it is not touched by anyone in the buggy, or is it similar to the use of electrically-powered highway street lights while out at night? Would it be similar to the red blinking lights some jurisdictions require on buggies? Someone proficient in the nuances of Amish theology is welcome to share their thoughts on whether a mileage-based road fee device would violate Amish religious principles.

Monday, November 18, 2019

Fun With Moving Expense Deductions, Canadian Style 

Though the United States federal income tax moving deduction was suspended by the 2017 tax legislation, there continues to be a moving expense deduction under Canadian tax law. Reader Morris recently shared an article describing the tax return experience of a Canadian taxpayer, John Konecny, who moved from his school-year teaching job in southern Ontario to his summer teaching job in eastern Ontario and back again back again each year. His case involved several issues, such as whether the move was for work or vacation purposes, and though in an earlier case the judge said no, in a later year the revenue authority accepted his position. What caught my eye, and presumably what got the attention of reader Morris, was how Konecny moved.

When the moving expense deduction was in force in the United States, tax return preparers typically thought in terms of expenses for moving vans, travel by automobile, plane, or train from the old residence to the new residence, moving supplies, temporary storage of household items, and similar things. But those weren’t the sort of costs Konecny incurred on his last move.

One of the other issues in the case that Konecny lost was whether the total moving expenses were reasonable. In that case, when dealing with the cost of the moves, the judge said to Konecny, “Could you move in a canoe?” So Konecny took up the challenge and that’s how he moved from his one teaching job to the other. It ended up being about 30 percent cheaper than his previous moves by automobile. According to a moving company professional, the cost incurred by Konecny in moving by canoe was “about what a professional moving company would have charged.” He added that he didn’t think people moving by canoe would put moving companies out of work and concluded, "I've been in the business 37 years and I've never heard of it. It's hilarious!"

A Canadian tax law professor noted, "This fellow did something slightly unusual in the selection of the mode of transportation. But in principle, he's doing the exact same thing as the person who's going across the country in an automobile. He's just doing it on the cheap." That’s quite right.

Though at one time moving by canoe in Canada was “commonplace,” it apparently no longer is. I suppose during the nineteenth century, before the United States income tax was enacted, people moved by riverboat, and perhaps canoes. But I’m confident few, if any, people move that way nowadays. But if someone did during the time that the moving expense deduction was operative, or does so in the future when and if it returns, the fact that a canoe or riverboat is used rather than an automobile, rented truck, or airplane ought not make a difference.

Though some of Konecny’s previous moving expense deduction claims had been denied, the costs of his canoe move were allowed by the revenue authority. Konecny thinks “he may be the first person to have successfully claimed expenses for a move by canoe since the Income Tax Act underwent a major rewrite in 1972.”

So what’s next? Konecny explained, "So my friends have suggested a really great move would be dog sled." That’s NOT going to work in Ontario for moves undertaken in the summer. But perhaps someone else in Canada might do a move by dogsled in the winter. But, again, it ought not make a difference other than some of the costs, such as dog food and harnesses, might be novel.

Sometimes, tax law isn’t quite so boring. Sometimes it gets interesting.

Friday, November 15, 2019

When is a “Tax” Not a Tax? 

Reader Morris directed my attention to this story, asking me, “Can a fee that is not a tax be considered double taxation?” The answer is no. How can something that is not a tax be considered a contributor to double taxation?

According to the story, people shopping at stores in a Pasco County, Florida, shopping center have noticed a 0.50 percent charge on their receipts tagged “FL PUF 0.50%.” Several people complained to the county tax collector. He explained that it was not a tax, and that in his opinion, “It’s almost fraudulent.” Though the letters “FL” suggest that it is a state-imposed tax, it is a public user fee. That’s the “PUF” portion. It is a fee charged by the developer of the shopping center.

The fee is computed as a percentage of the total price, including the Florida sales tax. That means the developer is collected an amount equal to 0.50 percent of the sales taxes paid by shoppers at the shopping center. The county tax collector commented, “You’re getting hit twice. It’s double taxation almost.”

After the tax collector pointed out that there should be signs explaining that the fee is being charged, signs appeared at the stores in the shopping center. The developer, however, refused to comment when asked by the writer of the story for more information. Some stores are paying the fee on behalf of their customers.

The fee is not a tax. It is not imposed by a government, nor does the revenue it generates go to a government. Thus, there is no double taxation.

Too often people toss the word “tax” around in situations where there is no tax. For example, Major League Baseball imposes a Competitive Balance Tax on clubs that spend more than specified amounts on player salaries. This fee often is called the “luxury tax.” But it’s not a tax and it ought not be called a tax. It’s a fee. There’s a difference.

I have discussed the difference between a tax and a fee in posts such as Please, It’s Not a Tax, So Is It a Tax or a Fee?, Tax versus Fee: Barely a Difference?, and Tax versus Fee: The Difference Can Matter. Those discussions focused on the difference between different types of charges imposed by governments. In the case of the fee charged by the shopping center developer, and the fee or charge imposed by Major League Baseball on high-spending clubs, the amount being charged is not being charged by a government. In the analysis of whether something is a tax or fee, the first question is whether it is being imposed by a government. If the answer is no, the amount being charged is not a tax, and thus it is not necessary, nor appropriate, to debate whether the amount in question is a tax or fee.

The addition of the signs in the stores resolves the underlying problem. The use of short acronyms, such as “FL PUF,” confuses people, and suggests that perhaps the amount added to their bills is a tax, particularly when “FL” is matched with “0.50%.” Why not “DEV FEE” instead of “FL PUF”? Hopefully the signs are legible, conveniently located, and easy to understand. Perhaps the sign should include, and perhaps it does include, a legend stating, “This is not a tax.”

Wednesday, November 13, 2019

How Not to Raise Money to Fix Roads 

According to this report, voters in the city of Lowell, Michigan rejected by an almost 2-to-1 margin a proposal to enact a 1 percent (0.5 percent for nonresidents) income tax to fund road repairs. The city manager attributed the result to the anti-tax movement, pointing out that people want services but do not want to pay for them. The reporter pointed out that other Michigan cities have income taxes but did not elaborate on what the revenues were used to pay.

To me, the issue is how road repairs should be funded. For more than 15 years the debate has been between advocates of fuel taxes versus and advocates of the per-mile road fees, which I have discussed in commentaries 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, Mileage-Based Road Fees: A Positive Trend?, Understanding the Mileage-Based Road Fee, Tax Opposition: A Costly Road to Follow, Progress on the Mileage-Based Road Fee Front?, Mileage-Based Road Fee Enters Illinois Gubernatorial Campaign, Is a User-Fee-Based System Incompatible With Progressive Income Taxation?. Will Private Ownership of Public Necessities Work?, Revenue Problems With A User Fee Solution Crying for Attention, Plans for Mileage-Based Road Fees Continue to Grow, Getting Technical With the Mileage-Based Road Fee, and Once Again, Rebutting Arguments Against Mileage-Based Road Fees. I think most advocates on both sides of that debate would agree that an income tax is not the best, nor even appropriate, means of raising road repair funds. There is little correlation between a person’s income and the wear-and-tear that the person imposes on city streets. Fuel taxes and the mileage-based road fee bear some correlation between fuel quantity or mileage and the impact of driving on roads, though the latter has a higher degree of correlation.

Perhaps a different wording of the ballot question would have generated a better outcome. What would have been the outcome to the following question (assuming the city had authority to pursue any of the choices)? Are you in favor of (pick one) (1) a 1-percent income tax (0.5 percent for nonresidents) to fund road repairs, (2) a 5-cent-per-gallon increase in fuel taxes to fund road repairs, (3) a one-fifth-of-one-cent per mile mileage-based road fee to fund road repairs, (4) a $20 increase in the annual vehicle registration fee to fund road repairs, (5) cutting to once a month trash collection to fund road repairs, (6) eliminating city snow plowing to fund road repairs, or (7) doing nothing, letting the roads get worse, and paying for tire, wheel, front-end alignment, and other costs incurred from driving on bad roads.

My guess is that a run-off between the top two or three vote-getting choices would be necessary.

Monday, November 11, 2019

How Greed and Anti-Tax Sentiment Puts Us on the Road to Feudalism 

Throughout the years I have decried not only the growing wealth and income inequality that threatens the survival of the nation, but also the tax cuts for the wealthy that exacerbate those inequalities, fail to generate the promised benefits to those who are not wealthy, and that undermine the fiscal integrity of the government. On several occasions, I have compared the economic abyss into which the nation is heading with feudalism, another structure that benefitted a handful of oligarchs at the expense of the other 99 percent.

For example, seven years ago, in What Sort of War is the “Real Budget War?, reacting to the combination of tax cuts for the wealthy and benefit reductions for everyone else, I wrote:
Or is the great wealth shift – the one that occurs when Social Security, Medicare, Medicaid, and other programs benefitting so many Americans are cut so that taxes can be reduced for the wealthy in exchange for empty promises of jobs – going to be the event that future historians identify as the defining moment in the transition of this nation from democratic republic to corporate feudal fiefdom?
Almost two years ago, in What Losing Federal Personal and Dependency Exemptions Does to Michigan (and Other) Taxpayers, I shared this perspective:
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.”
Three months later, in Who Should Decide Tax Policy?, I explained why erosion of the income tax threatens the well-being of the nation:
One of the principal purposes of the income tax is to eliminate the wealth and income inequality that almost destroyed the nation’s economy during the era of unregulated wealth when a paradise existed for robber barons. By distorting the income tax, Congress has, over the past three and a half decades, reopened paradise for the wealthy. Congress claims to act on behalf of everyone, but it acts in accordance with the conditions imposed on the funding its members receive. One of those conditions is to make it even easier for the wealthy to restore the oligarchy of feudalism, which is their paradise.
Several days ago, I noticed that another commentator is making the same comparison. In

a Philadelphia Inquirer opinion piece aptly titled, “Today’s CEO pay echoes the feudalism of William the Conqueror,” Sam Pizzigati described medieval feudalism as “a time, in some ways, not unlike our own.” He points out that 50 large corporations pay their CEOs “more than 1,000 times what they paid their median workers in 2018.” In one instance, the CEO pay is 3,566 times the median employee salary. Pizzigati provides an interesting perspective: “If some lord in 1066 had collected 1,000 times the earnings of his peasants, those poor unfortunates would still be working today — 953 years later — to make as much as their lord pocketed in a single year.” Though some people think, and claim, that the lowly-paid worker or peasant should be grateful that he or she “even has a job,” a system in which the person doing most of the work earns one-one-thousandth of the person reaping most of the benefits of that work violates pretty much every decent moral, philosophical, and theological approach to life that the species has created.

Pizzigati notes that CEOs, seeking ever-increasing amounts of compensation, have “boosted short-term stock values by any means necessary, from cooking the books to inflating the housing bubble to flooding poor communities with opioids.“

If I were to criticize Pizzigati’s commentary, it would be the omission of any mention of the wealthy who are not CEOs. While CEOs pulling in annual incomes measured in seven and eight digits are among those on the high side of the inequality border, they’re pretty much earls compared to the royalty pulling in eight and nine-digit incomes, many of which flow from trust funds to the benefit of people who haven’t lifted a finger to do anything deserving of compensation at that level. But perhaps Pizzigati didn’t take his commentary this far because of word or other space limitations imposed by the newspaper. Or perhaps he has another commentary in the works.

Pizzigati notes that there are several ways to curtail this growing inequality. He describes the Portland, Oregon, tax on corporations that pay their CEOs more than 100 times the median pay of their workers. San Francisco has a similar tax on its ballot next year, and seven states are considering the same sort of tax. Presidential candidate Bernie Sanders is proposing a tax plan at the federal level to deal with this discrepancy. Pizzigati suggests another approach, namely, giving corporations with “modest CEO-worker pay gaps a leg up in the [government contract] procurement process.”

What’s frustrating is that there existed a mechanism to tamp down the wealth and income inequality that is so dangerous to a democratic republic. It’s called a progressive income tax, and when its rates were high enough, brakes were applied on the acquisition of ever-increasing amounts of income and wealth. Those rates were torn down by those who claimed high income tax rates are bad for the country. Why? Pizzigati puts it this way, “And the more CEOs get, the more they want, and the more recklessly they behave to get it.” The same can be said of the non-CEO oligarchs who also can’t get enough income and wealth.

Some call it greed. A better perspective is to see it for what it is. It’s an addiction. It’s an addiction to wealth and money, driven by various insecurities. And unlike some addictions that are limited in the scope of their harms, this addiction threatens to destroy the nation. As I wrote in Judge Judy Almost Eliminates the National Debt about the attacks on the IRS and the income tax:
Unfortunately, because a majority of the Congress underfunds the IRS and at least one member of the executive branch wants to eliminate government, it is * * * no wonder more and more people toss aside their civic obligation to pay taxes. It will be interesting to hear their stories after governments collapse and the feudal system returns.
I suggest they engage in some intensive studies of history. Especially the parts about the demise of feudalism.

Friday, November 08, 2019

Impoverished Rich People Begging Out of Taxes 

A week ago, in The Role of Age in Taxation, I shared my distaste for the idea that once a person attains a particular age, that person should be relieved of paying taxes. I pointed out why age is an irrelevant factor in determining tax liability. In that commentary, I also addressed the claim that people without children should not pay taxes for education purposes.

Shortly thereafter, reader Morris pointed me to this cleveland.com article, noting “I thought you would find this article disturbing.” Reader Morris is correct. The news in this article indeed is disturbing.

According to the article, early in 2019 attempts were made to insert into the Ohio budget a provision giving a tax break for wealthy residents of Hunting Valley. The break would absolve these residents from paying property taxes used to fund public education. The governor vetoed the provision, but attempts to enact the tax break continue. Hunting Valley is the nation’s 17th wealthiest towns in the country. According to the article, its mean household income is $507,214, and the average home value is $1.3 million.

If the tax break is enacted, it almost certainly would destroy the school system in which the town is located. It also could cause similar requests in other affluent Ohio localities. Enactment of the tax break would encourage everyone to seek tax breaks, based on the claim that if the wealthy don’t pay, why should anyone else? Of course, elimination of taxes and the shifting of education into oligarchic privatization is the goal of the anti-tax crowd.

Apparently, the wealthy individuals resent paying property taxes to fund public education because so few of their children attend public schools. Yet they do not explain why families bringing in more than half a million dollars a year in income cannot afford private school tuition and public education property taxes.

As part of the renewed effort to get the tax break, these wealthy residents are using their money in an attempt to put people on the school board who will support their position. Perhaps that’s why they feel impoverished by their obligation to pay property taxes. It costs a lot of money to purchase public offices.

What the wealthy residents of Hunting Valley don’t understand is that they do not pay real property taxes to fund public education for their children. That perception is at the root of their attempt to avoid paying taxes. Instead, they pay real property taxes to educate America, and an educated America is good for everyone, including wealthy people. As I wrote in Cut Taxes + Cut Spending = Reduced Education?:
People [who do not want to pay real property taxes to fund public education because they do not have children in public schools are] clueless when it comes to identifying the indirect benefits they receive by living in a nation with an educated citizenry and workforce that contributes to the high standard of living they’ve had the opportunity to attain, in comparison to most other places on the planet. These folks are expertised in the “taxes are good when they benefit me but otherwise are evil” approach and in the “I like to take but hate to give” philosophy of life.
Perhaps the wealthy folks in Hunting Valley are satisfied that the private school education being received by their children will contribute to their children’s success in life. Their children will end up as business owners and professionals. But who will be their customers and clients? Who will be their employees? Who will cut their lawns? The people that they need in their life also need to be educated, because very few businesses and professional practices can succeed in a country in which 99 percent of the population is uneducated, badly educated, or undereducated. Paying taxes to fund public education is an investment and not an expense. Perhaps these wealthy people in Hunting Valley need some additional education to learn more about economics, tax policy, and civic virtue than they apparently understand at the moment. Eventually, perhaps they will learn that the property taxes they pay to fund public education will provide a return on investment far superior to the alternatives.

Wednesday, November 06, 2019

Finding Out If My Wished-For “Perform First, Then Get Tax Break” Approach Will Work 

Reader Morris emailed me last week, commenting that someone must be reading my blog posts. I certainly hope so, and I hope that the someone is plural. Actually, blogspot provides statistics so I do have a rough idea of how many people are reading MauledAgain.

Reader Morris directed my attention to one of the many posts in which I have advocated holding back tax breaks until the recipient delivers on the promises that are used to justify the tax break. For several years, I have been criticizing handing out tax breaks before the recipient does what the recipient promises to do in exchange for the tax breaks, and advocating holding back the tax breaks until the recipient actually does what the tax break requires, in posts such as How To Use Tax Breaks to Properly Stimulate an Economy, How To Use the Tax Law to Create Jobs and Raise Wages, Yet Another Reason For “First the Jobs, Then the Tax Break”, When Will “First the Jobs, Then the Tax Break” Supersede the Empty Promises?, No Tax Break Until Taxpayer Promises Are Fulfilled, When Job Creation Promises Justifying Tax Breaks Are Broken, and When Tax Break Giveaways, Praised as “Investments,” Deliver Low Returns. Reader Morris directed my attention to the final paragraph of that last post, in which I wrote:
As I’ve argued for years, the deal with these companies should be along the lines of the following: “OK, if you relocate here, or stay here, and prove that you generated the economic benefits you are promising, then, and only then, will you receive a tax break.” It’s that simple. If every federal, state, and local government adopted that approach, the economy would improve. Don’t believe me? Try it. Prove me wrong.
What prompted the comment by reader Morris was a new strategy proposed by the Connecticut Department of Economic and Community Development outlined in this article. As described in the article, politicians in Connecticut are reluctant to continue “forking over upward of $200 million a year” funded with borrowing that are used to “bribe handpicked businesses with custom-tailored packages — grants, loans and tax credit awards worth as much as $40,000 per job and sometimes even more.” David Lehman, commissioner of the Department of Economic and Community Development, is proposing to the legislature a new approach. The tax break, essentially a refund of a portion of the state income tax already paid by the tax break recipient, would be paid after the recipient creates at least 25 eligible jobs. The jobs would need to exceed a preset pay threshold.

Whether the Connecticut proposal reflects someone reading my MauledAgain blog posts or something that popped up independently in the mind of someone in Connecticut is a question I cannot answer. Perhaps someone in Connecticut can. If indeed that person reads MauledAgain, I hope they let me know. What matters most is that the proposal is implemented, not so much whether it originated in my mind or someone else’s brain.

It will be interesting to see how the proposed Connecticut approach plays out in Connecticut, assuming the legislature approves it. As one legislator put it, “You’re rewarding good behavior.” That surely is a much better approach than dishing out tax breaks and hoping that promises are kept. So who would object to this approach? The folks who have been lining their pockets with tax break money while fulfilling few, if any, of their promises. It’s time to put an end to what these takers have been doing.

Monday, November 04, 2019

Admitting to Tax Fraud When Litigating Something Else 

Readers of MauledAgain know that television court shows get attention from me when they involve tax issues. I have written about several dozen episodes, including Judge Judy and Tax Law, Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, More Tax Fraud, This Time in Judge Judy’s Court, You Mean That Tax Refund Isn’t for Me? Really?, Law and Genealogy Meeting In An Interesting Way, How Is This Not Tax Fraud?, A Court Case in Which All of Them Miss The Tax Point, Judge Judy Almost Eliminates the National Debt, Judge Judy Tells Litigant to Contact the IRS, People’s Court: So Who Did the Tax Cheating?, “I’ll Pay You (Back) When I Get My Tax Refund”, Be Careful When Paying Another Person’s Tax Preparation Fee, Gross Income from Dating?, Preparing Someone’s Tax Return Without Permission, When Someone Else Claims You as a Dependent on Their Tax Return and You Disagree, Does Refusal to Provide a Receipt Suggest Tax Fraud Underway?, When Tax Scammers Sue Each Other, One of the Reasons Tax Law Is Complicated, An Easy Tax Issue for Judge Judy, Another Easy Tax Issue for Judge Judy, Yet Another Easy Tax Issue for Judge Judy, Be Careful When Selecting and Dealing with a Tax Return Preparer, Fighting Over a Tax Refund, Another Tax Return Preparer Meets Judge Judy, Judge Judy Identifies Breach of a Tax Return Contract, When Tax Return Preparation Just Isn’t Enough, Fighting Over Tax Dependents When There Is No Evidence, If It’s Not Your Tax Refund, You Cannot Keep the Money, and Contracts With Respect to Tax Refunds Should Be In Writing.

Recently, reader Morris found a five-year-old Judge Mathis episode involving a tax issue. I thank reader Morris. He knows that although I get to see many television court show episodes, there are probably even more that I have missed for one reason or another.

The linked video is a snippet from a longer segment, which I cannot find. So I am guessing that the dispute between the plaintiff and defendant involved much more than the issue on which the snippet focuses. The judge’s offhand remark about the plaintiff and defendant having some disagreement about infidelity strengthens that guess.

It appears that one of the transactions between the plaintiff and defendant was an arrangement through which the defendant, apparently at the time a boyfriend of the plaintiff, claimed the plaintiff’s daughter on his 2013 tax return for purposes of the child tax credit even though the youngster was not his child.

The plaintiff explained that the defendant was supposed to “give me half the taxes.” The judge asked the plaintiff if she and the defendant were married. She replied no. He asked if the defendant had adopted the child. Again, the plaintiff answered no.

So the judge, referring to the agreement, asked, “You know that’s illegal?” The plaintiff replied, “They told me it was fine.” The judge asked, “Who told you? The IRS?” The plaintiff replied, “No, the people at the tax [preparation office].”

Judge Mathis then asked for the tax form on which the child had been claimed. After looking at it, he explained that the tax return preparer had put the plaintiff’s child as “daughter” on the defendant’s return even though the child was not his. Judge Mathis pointed out that someone had lied to the tax return preparer.

Judge Mathis then asked the plaintiff, “You still want half of the taxes?” The plaintiff replied, “I don’t know,” and the judge told her, “So you’ll go to jail with him?” He then summed up the issue, “So the agreement was he would give you half of the taxes for the illegal tax return that he filed.” At that point it appeared that the plaintiff was not going to recover that amount.

Then the defendant interposed, “As far as the taxes go, I feel,” and the judge interrupted him with “Leave that alone.”

There are two lessons to be learned. One is a picky point. What was in dispute in this issue was not “half the taxes” but half of a “tax refund.” The parties and the judge consistently used “taxes” rather than “tax refund,” an inaccurate description I’ve heard more than a few people use when describing tax refunds. The other lesson is that one should be careful when speaking in public, especially when on radio, television, or social media. The judge did the defendant a favor by cutting him off, but the damage had already been done. I doubt that IRS agents are watching television court shows to find the two or three or ten percent that involve tax errors and tax fraud, but there is a chance that the tax return in question was pulled for audit back in 2014 or 2015. We’ll never know. What we do know is that it absurdly foolish to claim that someone who is not a child is a child.

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