MauledAgain

Back in October, in An Unfair and Unwise Tax to Fund Roads, I commented on the Michigan wholesale tax on the sale of marijuana from growers and processors to retailers. This tax surely is passed on to the retail purchasers. The proceeds of the tax are used to fund part of the cost of improving Michigan's roads. Reader Morris, who alerted me to the enactment of this tax, asked, “Is the Michigan Marijuana tax to fund the roads a better tax policy than a vehicle mileage fee?” My answer was a resounding no. As I wrote to Reader Morris, “Some marijuana users use roads, others don’t. A lot of road users don’t use marijuana. What’s next? Taxing people who buy peanut butter to fund schools?”

The other day Reader Morris alerted me to a proposal in Tennessee to tax marijuana, a proposal resting on the assumption that the state will legalize the use of marijuana. Two Tennessee legislators have suggested using the revenue to fund road maintenance and repairs. The author of the cited article analyzes how much revenue would be raised and points out that it would be insufficient to fund all road costs. That's not the problem with the proposal.

Reader Morris asked me, " Is the Tennessee pot tax for potholes any fairer or wiser to fund state roads?" Again, my answer is no. He also pointed out, "Obviously the Tennessee lawmakers did not read your blog post below," referring to the October post mentioned above. Well, perhaps they did read it, though I doubt it. Or, as Reader Morris suggests, they didn't read it. Had they, or their staff, done adequate research, they would have found the post and shared with their constituents and the anticipated marijuana purchasers in Tennessee their justification for requiring those users to fund highway repairs and maintenance. The author of the cited article notes that "The phrase 'pot for potholes' may capture attention." This sort of slogan, which the author of the article points out flies in the face of numbers that suggest a more limited reality, is a sad continuation of sound bites and tweets that spare human brains the sort of exercise that keeps them in shape for necessary critical thinking. Sounds cute, produces ugly results.

I repeat the challenge I raised in the October post,

Anyone who can show me a rational link between the sale of marijuana and the deterioration of roads is invited to educate me. Perhaps there are government expenses that can be rationally linked to the sale, or perhaps use, of marijuana. Perhaps something involving government funding of specified health care services. But why should people who may not be using roads bear the burden of financing those roads while far greater numbers of people who do use the roads aren’t subject to the marijuana wholesale tax? And anticipating reactions, for those who think I am defending, advocating, or involved in the sale, distribution, and use of marijuana, or am working on behalf of marijuana lobbies, I am not. I am simply pointing out the disconnect between the tax and the intended use of the revenues it produces, just as I would react the same way to a tax on candy, shoes, computers, clothing, or pet supplies to fund roads.

As I have repeatedly explained, the answer, when it comes to financing the maintenance and repair of roads, bridges, and tunnels is the mileage-based road fee, which I has been the subject of my commentaries for almost 17 years, and which also is supported by a growing number of individuals and organizations. For those interested in the mileage-based road fee, including how it works and refutations of arguments offered against it, take a look at my commentaries, 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, Once Again, Rebutting Arguments Against Mileage-Based Road Fees, Getting to the Mileage-Based Road Fee in Tiny Steps, Proposal for a Tyre Tax to Replace Fuel Taxes Needs to be Deflated, A Much Bigger Forward-Moving Step for the Mileage-Based Road Fee, Another Example of a Problem That the Mileage-Based Road Fee Can Solve, Some Observations on Recent Articles Addressing the Mileage-Based Road Fee, Mileage-Based Road Fee Meets Interstate Travel, If Not a Gasoline Tax, and Not a Mileage-Based Road Fee, Then What?>, Try It, You Might Like It (The Mileage-Based Road Fee, That Is) , The Mileage-Based Road Fee Is Superior to This Proposed “Commercial Activity Surcharge”, The Mileage-Based Road Fee Is Also Superior to This Proposed “Package Tax” or “Package Fee”, Why Delay A Mileage-Based Road Fee Until Existing Fuel Tax Amounts Are Posted at Fuel Pumps?, Using General Funds to Finance Transportation Infrastructure Not a Viable Solution, In Praise of the Mileage-Base Road Fee, What Appears to Be Criticism of the Mileage-Based Road Fee Isn’t, Though It Is a Criticism of How Congress Functions, Ignorance and Propaganda, A New Twist to the Mileage-Based Road Fee, The Mileage-Based Road Fee: Simpler, Fairer, and More Efficient Than the Alternatives, Some Updates on the Mileage-Based Road Fee, How to Pay for Street Reconstruction, Stop the "Stop EV Freeloading Act" Because The Mileage-Based Road Fee Is a Much Better Way to Go, Why Is Road Repair and Maintenance Funding So Difficult for Public Officials to Figure Out?, Should (Will) Implementing the Mileage-Based Road Fee Cause Privatization of Highway Infrastructure?, The Freedom Caucus Doesn’t Understand that the Mileage-Based Road Fee is “PRO-Freedom,” Not the Opposite, A Mileage-Based Road Fee by Any Other Name?, Does the Mileage-Based Road Fee Work for Local Road Maintenance?, Washington State Mileage-Based Road Fee Proposal Changes: Is It Better?, The Mileage-Based Road Fee Is Much Better Than a Federal Fuel Tax Increase, Ride-Share Drivers and the Mileage-Based Road Fee, and International Aspects of the Mileage-Based Road Fee.

About a week ago, Pennsylvania State Senatore Lisa M. Boscola described her plan to suspend the state's liquid fuel taxes for 60 days. The proposal is intended to help reduce the cost of fuel, which has been rising rapidly during the past three weeks.

Aware of the impact this cutoff in revenue for the maintenance of highways, bridges, and tunnels, Boscola's plan includes the issuance of bonds to replace the lost revenue. What she did not describe was how revenue would be raised to pay interest on the bonds and to pay for bond redemption. That money either comes from increased taxes or from reduced spending. So while taxpayers might rejoice at lower prices at the pump, they will not be so happy when they face increased income, sales, or other taxes, or when spending is cut for programs that are their favorites. So in the long run the tax suspension is nothing more than kicking the can down the road. Ultimately taxpayers, not only motorists, will pay the price.

Yes, increased gasoline and diesel prices are frustrating, harmful to most drivers' wallets, and detrimental to the economy. Boscola is trying to solve a problem caused by someone else. Perhaps it would be better if we insisted that those who cause a problem or break something be the ones who fix the problem or make the repairs. If someone else solves the problem, those afflicted by the problem are less likely to identify those who caused the problems and less likely to take steps to ensure that those same people don't cause yet another problem.

I have written so many times about tax return preparers who disregard the law that I refrain from commenting every time a tax return preparer is accused of, convicted of, or sentenced for tax fraud. Examples of my commentaries include posts such as Tax Fraud Is Not Sacred, More Tax Return Preparation Gone Bad, Another Tax Return Preparation Enterprise Gone Bad, Are They Turning Up the Heat on Tax Return Preparers?, Surely There Is More to This Tax Fraud Indictment, Need a Tax Return Preparer? Don’t Use a Current IRS Employee, Is This How Tax Return Preparation Fraud Can Proliferate?, When Tax Return Preparers Go Bad, Their Customers Can Pay the Price, Tax Return Preparer Fails to Evade the IRS, Fraudulent Tax Return Preparation for Clients and the Preparer, Prison for Tax Return Preparer Who Does Almost Everything Wrong, Tax Return Preparation Indictment: From 44 To Three, When Fraudulent Tax Return Filing Is Part of A Bigger Fraudulent Scheme, Preparers Preparing Fraudulent Returns Need Prepare Not Only for Fines and Prison But Also Injunctions, Sins of the Tax Return Preparer Father Passed on to the Tax Return Preparer Son, Tax Return Preparer Fraud Extends Beyond Tax Returns, When A Tax Return Preparer’s Bad Behavior Extends Beyond Fraud, More Thoughts About Avoiding Tax Return Preparers Gone Bad, Another Tax Return Preparer Fraudulent Loan Application Indictment, Yet Another Way Tax Return Preparers Can Harm Their Clients (and Employees), When Unscrupulous Tax Return Preparers Make It Easy for theblo IRS and DOJ to Find Them, Tax Return Preparers Putting Red Flags on Clients’ Returns, When Language Describing the Impact of Tax Fraud Matters, Injunctions Against Fraudulent Tax Return Preparers Help, But Taxpayers Still Need to Be Vigilant, Will the Re-Introduced Legislation Permitting Tax Return Preparer Regulation Be Enacted, and If So, Would It Make a Difference?, Can Fraudulent Tax Return Preparation Become An Addiction?, Tax Return Preparers Who Fail to File Their Own Returns Beg For IRS Attention, Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf, When Dishonest Tax Return Preparers Are Married, There Was Nothing Magical About This Tax Return Preparation Business, Don’t Get Burned By a Tax Return Preparer, Tax Fraud School: When It’s Not Enough to Be a Fraudulent Tax Return Preparer, It’s Not Just Tax Return Preparers Assisting in the Preparation of Fraudulent Tax Returns, Overused Fraudulent Tax Return Preparation Ploys, It’s Not Just Law Enforcement That Confronts Misbehaving Tax Return Preparers, When An Injunction Doesn’t Stop a Tax Return Preparer from Filing False Returns, Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad, When It Comes to Fraudulent Tax Returns, It's Not Always the Preparers, A Procedural Twist on Dealing with Fraudulent Tax Return Preparers, Can Tax Return Preparers Learn from the Misdeeds of Other Preparers?, Should Tax Return Preparers Use Their Full Legal Names?, Is There Ever a Free Lunch, Even in the Tax Return Preparation Business?, Is the Tax Return Preparer or the Client Responsible For Unjustified Deductions?, When Preparing False Tax Returns Seems to Lack a Financial Motive, Was This Convicted Tax Return Preparer Courageous or Foolish?, One-Stop Shopping for Tax Return Preparation and Unrelated Merchandise?, and How Much Prison Time Should Be Imposed on a Tax Return Preparer Convicted of Preparing and Filing Fraudulent Returns?

Yet sometimes the preparation of fraudulent tax returns involves a twist that is somewhat different. According to this Department of Justice press release, a former IRS employee took things several steps further. This individual had been employed as an IRS contact representative from 1998 to 2009. She prepared and filed income tax returns for other people between July 2020 and April 2023. She did not list herself as the tax return preparer, making the returns appear as though these taxpayers prepared the returns on their own. She listed ineligible depends on the returns, generating higher refund amounts. She did not inform these taxpayers that she was doing this. Worse, she filed forms with the IRS directing portions of these excess refunds be deposited into her personal bank accounts. She used these funds for her own personal benefit.

She didn't stop there. Between April and October of 2020, she applied by telephone for Social Security retirement and spouse and widow benefits with the Social Security Administration. But she didn't apply for herself. She applied on behalf of other individuals who had no knowledge that she was doing this. She directed the Social Security Administration to send the benefits to her personal bank accounts. She used these funds for her own personal benefit.

Eventually, she was identified and charged. She pled guilty to four counts of aiding and assisting in the preparation and filing of a false tax return and one count of theft of government money.

According to this follow-up Department of Justice news release, which is what caught my attention, a few days ago she was sentenced to 18 months in prison, followed by three years of supervised release.

According to the first press release, "the charge of aiding and assisting the preparation and filing of a false tax return provides for a sentence of up to three years in prison, one year of supervised release and a fine of up to $250,000. The charge of theft of government money provides for a sentence of up to 10 years in prison, three years of supervised release and a fine of $250,000." There is no mention in the sentencing of any fines. She could have faced as much as 13 years in prison, four years of supervised release, and $500,000 in fines. Nor is there any mention of restitution, that is, the Social Security Administration recovering the amounts paid to her.

And this makes a mess for the individuals for whom she prepared returns and in whose names she acquired social security benefits. The taxpayers for whom she prepared returns face the aggravation of figuring out how much of their refund that they should have received went to the preparer, and how what she did affects their accounts with the IRS. The individuals in whose name she acquired social security benefits face the aggravation of clearing their accounts so that when they become eligible and do apply for benefits the computations are distorted by what this person did.

The damage done by people who behave fraudulently, whether with taxes, social security, false texts from police departments or the Pennsylvania Turnpike Commission, online sales scams, phone calls designed to extract social security, Medicare, bank account, and credit card numbers, and whatever else goes in this list, reaches wide and deep. It is unfortunate that not enough is being done to identify and deal with these scammers and to prevent additional instances. They are far more of a threat than some of the people currently getting attention.

So this situation was posed to me. A brokerage provides financial information to its clients during the calendar year. However, it does not provide information that shows how much from each transaction, if any, will be reported as dividends, capital gains distributions, short-term capital gain/loss, or long-term capital gain/loss. Nor does it provide information that permits a client, or a client's advisor, to calculate even an estimate of how much will be reported, if any, in each of those categories.

When the Forms 1099 are received, they show amounts significantly in excess of what was expected based on the previous year's transactions. So it turns out that the estimated tax payments are insufficient. By the time the Forms 1099 arrive, it is too late to adjust the final federal and state estimated tax payments for the calendar year. The Forms 1099 usually arrive in late January or during February, whereas the final estimated tax payments are due on or before January 15. And even increasing the final estimate payment isn't sufficient to avoid estimated tax underpayment penalties because one-fourth of the increased amount of estimated tax that should have been paid would have been due on each of the four estimated tax payment due dates.

What are the possible solutions other than paying the estimated tax underpayment penalties?

One is to make wildly high estimated tax payments on the assumption that the year's brokerage income will increase significantly, to the order of doubling or tripling. I knew someone who did this, mostly because of an unwillingness to have an amount due when filing and an aversion to incurring the estimated tax underpayment penalty.

Another is to ask the brokerage to provide tax relevant information throughout the year. Good luck with that.

Yet another is to ask the brokerage to withhold federal and state taxes on amounts falling into those categories even if not distributed to the client. Though some brokerages may be willing to do something along those lines, many don't or won't or can't.

Fun. Not.

No one enjoys paying taxes. But without taxes civilization is impossible. So just as people who need root canals pull themselves together and undergo the procedure because they know the alternative is even more unpleasant, people who understand why taxes are necessary pull themselves together, file their returns, and pay their taxes. Many, perhaps most, people do so while truthfully reporting their income, deductions, and credits.

In a recent press release, the Department of Justice announced that a pizza shop owner pleaded guilty to one count of tax evasion. What did the pizza shop owner do? He deposited some of the business receipts into a bank account and took the rest in cash. He used the cash to pay himself and to pay most of his employees "off the books."

When it came time to file tax returns, the pizza shop owner gave his accountant access to the shop's bank account records, knowing that those records did not reveal the cash receipts that had been funneled to the owner and the employees without passing through the bank account. The owner lied to the accountant, claiming that the business employed the owner and three other individuals when in fact there were about 25 employees. As a result, the income tax returns for the business and for the owner that were prepared by the accountant were false. In addition, the employment tax returns were false. Both income and employment taxes were underpaid. Note that this is an instance where a tax return preparer was not the creator of the tax fraud.

According to the Department of Justice, the owner faces a maximum possible term of five years in prison. Nothing was mentioned about restitution to the government, or doing something so that the employees are given appropriate credit for purposes of qualifying for Social Security and Medicare. If that situation is not fixed, on whom falls the burden when those employees eventually end up with fewer retirement and health benefits than what they otherwise would have received?

It's one thing to lie about something that is private and difficult, if not impossible, for others to ascertain. It's another thing to lie about the number of employees at a pizza shop when it isn't that difficult for anyone to notice or figure out that there are more than the owner and three employees working there.

The lies brought about a short-term financial benefit. They also will cause a long-term price that is much higher than the short-term benefit.

This morning I saw an article in the Philadelphia Inquirer about a woman being sentenced for committing FEMA fraud. After a bit of research, I found the Department of Justice news release, which explained the situation. After a major disaster declaration was declared for eastern Pennsylvania on account of the damage from Hurricane Ida, the woman used social media to advertise that she could help people apply for FEMA benefits. She prepared fraudulent documents and sent them to FEMA on behalf of almost 200 people. The documents included false leases, letters from landlords, utility bills, earning records, and home repair estimates. She used photos of damaged homes that she scraped from the internet. Among the almost 200 people were owners, renters, and homeless individuals. The woman kept half of the FEMA payout for herself. Her actions caused FEMA to pay $1,744,982.64 on the false claims.

The woman was indicted on one count of fraud related to a major disaster declaration, 24 counts of wire fraud, and seven counts of mail fraud. She pled guilty to all 32 charges. She was sentenced to five years in prison.

One of the thoughts that crossed my mind was that I had recently questioned the sentence in a tax fraud case. In How Much Prison Time Should Be Imposed on a Tax Return Preparer Convicted of Preparing and Filing Fraudulent Returns? I reacted to the imposition of an 18-month prison sentence on a tax return preparer who prepared and filed about 463 fraudulent returns, causing a tax loss to the U.S. Treasury of $1,575,250. So 463 false filings causing a $1,575,250 loss to the U.S. Treasury brings an 18-month prison sentence, but almost 200 false filings causing a $1,744,982.64 loss to the U.S. Treasury brings a five-year prison sentence. Does that make sense to you?

There appears to be an additional factor. The tax return preparer was ordered to pay $1,954,673.30 in restitution, reflecting the taxes not paid by the clients plus interest and penalties. There is no mention of restitution being ordered for the woman committing the FEMA fraud. Though she retained half of the $1,744, 982 for herself, there is no indication of her assets. Yet there also is no indication of the tax return preparer's assets. Is it a matter of the judge deciding whether restitution is possible? If the tax return preparer had not been ordered to pay restitution, would a longer prison sentence have been imposed? Perhaps someone more familiar with federal sentencing practices has insights. Yet prison is a totally different experience than paying restitution, and it would be disturbing if someone with the resources to pay restitution was ordered or agreed to do so in exchange for a reduced prison sentence. What strikes me is the discrepancy in the sentencing. Does it mean that somehow FEMA fraud is more reprehensible than tax fraud? If so, why?

As readers of MauledAgain know, I am an advocate of the mileage-based road fee, as a replacement for and not an addition to, liquid fuel taxes. I have written about this approach to funding highways, bridges, and tunnels since 2004, 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, 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, Once Again, Rebutting Arguments Against Mileage-Based Road Fees, Getting to the Mileage-Based Road Fee in Tiny Steps, Proposal for a Tyre Tax to Replace Fuel Taxes Needs to be Deflated, A Much Bigger Forward-Moving Step for the Mileage-Based Road Fee, Another Example of a Problem That the Mileage-Based Road Fee Can Solve, Some Observations on Recent Articles Addressing the Mileage-Based Road Fee, Mileage-Based Road Fee Meets Interstate Travel, If Not a Gasoline Tax, and Not a Mileage-Based Road Fee, Then What?>, Try It, You Might Like It (The Mileage-Based Road Fee, That Is) , The Mileage-Based Road Fee Is Superior to This Proposed “Commercial Activity Surcharge”, The Mileage-Based Road Fee Is Also Superior to This Proposed “Package Tax” or “Package Fee”, Why Delay A Mileage-Based Road Fee Until Existing Fuel Tax Amounts Are Posted at Fuel Pumps?, Using General Funds to Finance Transportation Infrastructure Not a Viable Solution, In Praise of the Mileage-Base Road Fee, What Appears to Be Criticism of the Mileage-Based Road Fee Isn’t, Though It Is a Criticism of How Congress Functions, Ignorance and Propaganda, A New Twist to the Mileage-Based Road Fee, The Mileage-Based Road Fee: Simpler, Fairer, and More Efficient Than the Alternatives, Some Updates on the Mileage-Based Road Fee, How to Pay for Street Reconstruction, Stop the "Stop EV Freeloading Act" Because The Mileage-Based Road Fee Is a Much Better Way to Go, Why Is Road Repair and Maintenance Funding So Difficult for Public Officials to Figure Out?, Should (Will) Implementing the Mileage-Based Road Fee Cause Privatization of Highway Infrastructure?, The Freedom Caucus Doesn’t Understand that the Mileage-Based Road Fee is “PRO-Freedom,” Not the Opposite, A Mileage-Based Road Fee by Any Other Name?, Does the Mileage-Based Road Fee Work for Local Road Maintenance?, Washington State Mileage-Based Road Fee Proposal Changes: Is It Better?, The Mileage-Based Road Fee Is Much Better Than a Federal Fuel Tax Increase, Ride-Share Drivers and the Mileage-Based Road Fee, and An Unfair and Unwise Tax to Fund Roads.

Now comes news, brought to my attention by reader Morris, that Iceland has enacted a kilometer-based road fee. Using today’s exchange rate, the 6.95 Icelandic krona fee is approximately five and a half cents in U.S. dollars for passenger vehicles and SUVs up to three and half tons. Higher fees apply to heavier vehicles.

Iceland is not the first country to impose a vehicle fee based on distance travelled that applies to all vehicles in the entire country. There are almost a dozen countries in Europe that have enacted or are in the process of enacting distance-based fees on heavy trucks and other vehicles. New Zealand imposes a similar fee on heavy vehicles and vehicles using diesel fuel. Certain areas in Norway and several states in the United States impose similar fees. Singapore’s road pricing fee functions as both a distance-based and congestion-reducing fee.

So assuming there aren’t other countries with distance-based fees, Iceland appears to be the first country to impose such a fee on all vehicles that use public roads regardless of power source, or weight. It is likely that it won’t remain the only country to do so.

The international scope of this method of funding highways, bridges, and tunnels suggests that the term “mileage-based road fee” should be changed to “distance-travelled road fee” because Iceland does not measure distance in miles. It uses, as does most of the world, kilometers. Interestingly, Iceland’s law has a provision for vehicles driven in Iceland that measure distance in miles. Of course, it’s an easy to do the arithmetic conversion, so it’s no big deal.

As another tax filing season will soon begin, it’s instructive to see how individual taxpayers in this country prepare their federal income tax returns. According to the Treasury Department’s Report on the Replacement of Direct File, the breakdown is as follows:

51 percent – paid preparers
42 percent – commercial software
3 percent – filed on paper
2 percent – Free File
1 percent – VITA (Volunteer Income Tax Assistance Program)
1 percent – TCE (Tax Counseling for the Elderly)
0.2 percent – FFFF (Free File Fillable Forms)
0.2 percent – Direct File

When I was a child observing my father sitting at the kitchen table filling out tax returns, I was unaware that there were people who paid other people to do what clearly was, at least from my father’s commentary, an unpleasant task. He filed my tax returns for me when I was very young – I started working at age 8, story for another time – but I insisted on doing my own returns as I entered my teen years. Unlike my father, I found the process interesting and intellectually challenging. I hesitate to conclude it was because I liked puzzles, because my father also liked puzzles but apparently did not consider tax return preparation to be anywhere near the delightful experience of doing crossword puzzles which he did every day.

Of course, in those days everything was done on paper and generally delivered through the U.S. Postal Service. By the time I started working at an accounting firm when I was in college, and given the task of preparing and reviewing tax returns, I learned that some of the returns were prepared by filling out forms that were delivered to a company called Computax, which then sent back returns that had been printed out on one of those early printers that created characters clearly identifiable as computer generated. That was a long time ago.

To this day there still are people who sit down, do their tax returns using paper and pencil, and file their tax returns on paper. The IRS is attempting to encourage those individuals to shift to electronic filing. That does not necessarily mean these folks would stop using pencil and paper to figure out what to put on the return. I knew someone who would use commercial preparation software to prepare their returns but who insisted on printing out the return and mailing it to the IRS. The reason? Distrust of digital technology when it came to sending information. I tried to explain that when the paper return reached the IRS, someone then keyboarded (and eventually scanned) the information on the return into IRS computers, and that sending the return electronically would bypass that process and eliminate the chance of any keyboarding or scanning errors. My efforts were futile.

So when did the use of paid preparers become much more common? Back in the 1950s and 1960s, perhaps 20 percent of taxpayers, at most, used paid preparers. The tax law was not as complicated back then. According to the Tax Policy Center, by 1981 41 percent of individual taxpayers were using paid preparers, and that percentage increased to almost 56 percent by 2002. The Tax Policy Center reports that the percentage of taxpayers using paid preparers fell from about 60 percent in 2008 to just under 52 percent in 2018. Surely that is a consequence of the rapid growth in the use of commercial tax preparation software.

If one considers commercial tax return preparation software to be a type of paid preparer, perhaps evolving into some sort of digital robot preparer, then the percentage of taxpayers using paid assistance rises to more than 90 percent. That, of course, is an indictment of the complexity of the federal (and most state) income tax systems.

It won’t be long before artificial “intelligence” provides systems that completely take over the tax return filing process. These systems will want access to a person’s entire financial situation, including bank accounts, credit card transactions, digital payment accounts, medical expense payments, etc. What will these systems do with this information aside from filing tax returns? There is no question there are people and corporations who want to get their hands on this data even though many corporations already have much of this information. Will the returns filed by these systems be correct? My guess is many returns will be correct but some will not, not dissimilar to what we see when humans use paid preparers or commercial preparation software to file returns, and not dissimilar to how artificial “intelligence” generally performs. I’ll leave to another day the experiences I’ve had “testing” various AI platforms. Suffice it to say the outcomes were far from encouraging and frankly, frightening. There’s a word many taxpayers use when discussing taxation, and it surely was a word used by students about to enter the basic income tax law course when I was teaching.

So as we enter another tax filing season, one that promises to be, shall we say, interesting, taxpayers need to decide how they will get their returns filed. Most, I think, will stay the course and do what they did last year. Some may find it easier and cheaper to shift from using paid preparers to using commercial software. A few may finally say goodbye to sending their returns to the IRS on paper. What will you be doing?

Reader Morris directed me to a recent article about China’s attempts to raise its birth rate. He then asked a question and answered it.

First, the article. According to this article, one of the ways China is trying to encourage people to have more children is to impose its 13 percent value-added tax (VAT) on condoms and other contraceptives. For those unfamiliar with a VAT, it is similar to a sales tax, computed not on the total sales price but on the portion of the sales price that represents the value added by the seller (whose seller paid a VAT on what that seller added, and whose customer, if selling the item, would be pay a VAT on what the customer-turned-seller added in value). The article notes that China has raised the “limit on the number of children permitted per couple to three.” It also offers a variety of subsidies, leave days, and other incentives such as tax breaks for childcare.

Second, the question posed by reader Morris, and his answer. He asks, “Will China's new tax increase raise birth rates?” He suggests, “No. If you cannot afford a condom tax then you sure cannot afford the cost of a new child.” The article suggests that the tax is “largely a symbolic move,” pointing out that the equivalent US dollar cost of condom packets and contraceptive pills run in the average of $6 to $17. The 13 percent VAT would run from the US equivalent of 78 cents to $2.21. So though it’s true that someone who cannot afford to pay another 78 cents to $2.21 is almost certainly lacking the finances to support a child. To the extent that two people pass up purchasing a contraceptive because of that slight increased cost, there is a chance, perhaps small, perhaps greater, that those two people will become the parents of a child they cannot afford to raise.

A demographer in China opined, “However, this measure is unlikely to have a significant effect on increasing the fertility rate.” Concomitantly, the VAT in question is highly unlikely to raise much revenue, and thus unlikely to make a dent in the revenue shortages that are making it difficult for childcare subsidies to be paid. Some are suggesting that the “primary motivation” behind the tax is not revenue generation.

The question of whether, and if so, how, tax rates, exemptions, and credits should be used to encourage or discourage births has been around for a long time, has been debated during that long time, and has been the subject of arguments supporting and opposing the use of tax systems to affect decisions made by individuals who are considering having or not having children.

This larger question is not one I am ready to discuss. I am not a demographer. I am not a sociologist. I do wonder, though, if China was higher birth rates, why limit people to three children? Why not permit someone who can afford to have six children do so? Surely there are underlying reasons but I leave that discussion to others who are more qualified to explain and critique birth limits.

I have written many times about the non-ending stream of tax return preparers who disregard the law and end up being caught. I’ve done so in posts such as Tax Fraud Is Not Sacred, More Tax Return Preparation Gone Bad, Another Tax Return Preparation Enterprise Gone Bad, Are They Turning Up the Heat on Tax Return Preparers?, Surely There Is More to This Tax Fraud Indictment, Need a Tax Return Preparer? Don’t Use a Current IRS Employee, Is This How Tax Return Preparation Fraud Can Proliferate?, When Tax Return Preparers Go Bad, Their Customers Can Pay the Price, Tax Return Preparer Fails to Evade the IRS, Fraudulent Tax Return Preparation for Clients and the Preparer, Prison for Tax Return Preparer Who Does Almost Everything Wrong, Tax Return Preparation Indictment: From 44 To Three, When Fraudulent Tax Return Filing Is Part of A Bigger Fraudulent Scheme, Preparers Preparing Fraudulent Returns Need Prepare Not Only for Fines and Prison But Also Injunctions, Sins of the Tax Return Preparer Father Passed on to the Tax Return Preparer Son, Tax Return Preparer Fraud Extends Beyond Tax Returns, When A Tax Return Preparer’s Bad Behavior Extends Beyond Fraud, More Thoughts About Avoiding Tax Return Preparers Gone Bad, Another Tax Return Preparer Fraudulent Loan Application Indictment, Yet Another Way Tax Return Preparers Can Harm Their Clients (and Employees), When Unscrupulous Tax Return Preparers Make It Easy for theblo IRS and DOJ to Find Them, Tax Return Preparers Putting Red Flags on Clients’ Returns, When Language Describing the Impact of Tax Fraud Matters, Injunctions Against Fraudulent Tax Return Preparers Help, But Taxpayers Still Need to Be Vigilant, Will the Re-Introduced Legislation Permitting Tax Return Preparer Regulation Be Enacted, and If So, Would It Make a Difference?, Can Fraudulent Tax Return Preparation Become An Addiction?, Tax Return Preparers Who Fail to File Their Own Returns Beg For IRS Attention, Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf, When Dishonest Tax Return Preparers Are Married, There Was Nothing Magical About This Tax Return Preparation Business, Don’t Get Burned By a Tax Return Preparer, Tax Fraud School: When It’s Not Enough to Be a Fraudulent Tax Return Preparer, It’s Not Just Tax Return Preparers Assisting in the Preparation of Fraudulent Tax Returns, Overused Fraudulent Tax Return Preparation Ploys, It’s Not Just Law Enforcement That Confronts Misbehaving Tax Return Preparers, When An Injunction Doesn’t Stop a Tax Return Preparer from Filing False Returns, Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad, When It Comes to Fraudulent Tax Returns, It's Not Always the Preparers, A Procedural Twist on Dealing with Fraudulent Tax Return Preparers, Can Tax Return Preparers Learn from the Misdeeds of Other Preparers?, Should Tax Return Preparers Use Their Full Legal Names?, Is There Ever a Free Lunch, Even in the Tax Return Preparation Business?, Is the Tax Return Preparer or the Client Responsible For Unjustified Deductions?, When Preparing False Tax Returns Seems to Lack a Financial Motive, Was This Convicted Tax Return Preparer Courageous or Foolish?, and One-Stop Shopping for Tax Return Preparation and Unrelated Merchandise?

Only in a some instances have I mentioned the sentences handed down by judges on tax return preparers who plead guilty to, or are convicted of, tax fraud. In most of those instances the sentences were peripheral to the issues I addressed. In only a few instances did I comment on the adequacy of the sentence. That includes one commentary in which I discussed how plea bargaining can reduce what otherwise might be a tougher sentence, and in another I considered how injunctions should be added to the usual sentences of fines, restitution, prison, or some combination of those penalties.

Recently, the IRS issued a news release describing the sentencing of a tax return preparer who pleaded guilty to five counts and aiding and assisting in the preparation and presentation of false and fraudulent tax returns. Over a period of three years (“between 2021 and 2023,” which I interpret as three years and not the one year (2002) that is between 2001 and 2003), the preparer prepared and filed approximately 463 fraudulent returns, causing a tax loss to the U.S. Treasury of $1,575,250. One of the preparer’s schemes was to fabricate Schedules C (Profit or Loss from Business), showing “significant net losses” for taxpayers who had not operated a business. The preparer also put inflated itemized deductions on clients’ returns, particularly for the medical expense deduction.

The preparer was ordered to pay $1,954,673.30 in restitution, which appears to be the amount of taxes not paid by the clients increased by interest and penalties. The preparer was also sentenced to 18 months in prison, to be followed by two years of supervised release. 18 months is roughly 540 days. That’s roughly 1.17 of a day (or 30 hours) for each fraudulent return. It’s one day for each $2,917 in federal taxes unpaid by clients.

Is 30 hours in prison for a fraudulent return sufficient? I suppose it depends on the magnitude of the fraud. So the better question is whether one day in prison is sufficient for a monetary crime of $2,917. For purposes of comparison, consider someone who embezzles $1,575,250. In New York, as summarized in this explanation, embezzlement of more than $1,000,000 is a Class B felony, which carries a prison sentence of 5 to 25 years. A quick look suggests that in other states the sentences are at least as long, perhaps higher. So 18 months is quite the bargain.

A better question is whether 18 months is enough time to persuade this preparer to give up trying to make money through fraudulent means and to seek income in some other, legal manner. It depends on what happens during those 18 months in prison. Are attempts at reformation serious and effective? Only time will tell in the case of this particular preparer.

Almost all Thanksgiving messages that I read focus on gratitude for people and things that bring or have brought happiness into our lives. Certainly I have done that in my long string of Thanksgiving posts on this blog. But is it premature to thank those who intend to do things in the future that will bring happiness or at least dampen the sorrow, misery, grief, and anxiety that is now and very well may be in the future?

Last year I wrote, “This year Thanksgiving is, for me, strange and conflicted. Yes, I am thankful for many things, as I will describe in a subsequent paragraph. But I also am disappointed that there are things for which I could be thankful but am not because they did not happen, and things that did happen for which I am not thankful. But I will leave those aside because there are people who will be thankful I am leaving those things aside.” Sadly, the list of things that did happen that don’t inspire me to give thanks has grown.

As I have noted in each of the past twelve 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 on this one day I will look back at the past twelve months, and remember the people, events, and things for whom and for which I give thanks and have given thanks throughout the year. If some of these seem repetitive, they are, for there are gifts in life that keep on giving:

• I am thankful for a wonderful son, daughter, daughter-in-law, grandson, and granddaughter.
  
• I am thankful for my siblings, nephews, nieces, grandnephews, grandnieces, cousins of various degrees, and their families.
  
• I am thankful for my friends who listen to my stories, and tell me even better stories.
  
• I am thankful that I was able to transcribe into my Serino, Italy, genealogy the data that I brought back in 2024 from Italy, a task that took almost a year but that enlarged that town’s genealogy substantially (and added some ancestors to my mother’s maternal ancestry).
  
• I am thankful that I was put in contact with a researcher in Italy who has been able to provide additional information that I am currently transcribing.
  
• I am thankful for all the people who continue to help update the multiple family trees I develop, maintain, update, and publish.
  
• I am thankful for the additional cousins I have met through FTDNA, ancestry, 23andme, and myheritage who I did not know existed, and for the opportunity to get in touch with cousins who I knew existed but with whom I had no contact until they showed up on one or more of those genetic genealogy sites.
  
• I am thankful that my congregation’s choir has been able to continue singing.
  
• I am thankful that we continue to gather in the sanctuary for worship, and, yes, that I continue to ring the narthex bell.
  
• I am thankful for all the people in the world who continue to fight ignorance, crime, terror, evil, and corruption, and who plan to continue doing so.
  
• I am thankful that awareness of what needs to be done to fight ignorance and corruption has not diminished.
  
• I am thankful for the medical professionals who have provided me with excellent care, including the cardiologists who alerted me quickly to the need for me to pay attention to what otherwise could have been a serious problem and to have the necessary procedure, and whose attention and advice has me doing thigs that will hopefully prevent a recurrence in the future.
  
• I am thankful for the people who gave me rides when I was unable to drive.
  
• I am thankful that the Pope, while a student at Villanova University, was the one whose summer jobs included caring for the maintenance of the cemetery in which my paternal grandparents, my father’s paternal grandparents, my father’s brother and sister who died as infants, and my father’s uncle who died in his teens are buried.
  
• I am thankful for people being willing to read the things I write.

Eighteen 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 2016 in Thankfully Repetitive, yet once more in 2017 in Never-Ending Thanks, yet even once more in 2018 in Particularly Thankful This Time Around, again in 2019 in Quest'anno è il Ringraziamento, once more in 2020 in Different, But Thanksgiving Nonetheless, again in 2021 in Still Different, But Thanksgiving Nonetheless, again in 2022 in One Day of Thanksgiving, A Year of Thanks, once again in 2023 in A Different Thanksgiving, and yet again last year in On Thanksgiving, There Always Are Reasons to Be Thankful. 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. And I am thankful that it is possible for even more of us to do all of those things, and for others of us to most of those things.

Recently, reader Morris sent me a link to a story about chocolate being grown in a laboratory in Switzerland. The article is worth reading if you like chocolate, wonder about the impact of increasing world population and ecological pressure on cocoa bean output, and worry about the health impact of artificially generated food. Nothing in the article mentions taxes or candy, but reader Morris remembered that I have often written about chocolate, candy, and taxes. From that memory he constructed his question that, with a bit of tweaking, is the caption of today’s commentary.

This isn’t the first time that variations in chocolate have been the subject of my musings. In Should the Tax Law Provide a Fix for This Looming Catastrophe?, I asked whether the tax law should provide incentives to offset increases in the price of cocoa in order to dissuade the manufacture of something called mockolate, a chocolate substitute filled with trans fats, artificial sweeteners, milk substitutes, and hydrogenated vegetable fats. Of course, I replied, “Of course not.”

To answer the question posed by reader Morris, I looked again at 61 Pa. Code section 60.7, which holds the definitions of terms relevant to the food and beverages component of the sales tax. It provides:

§ 60.7. Sale and preparation of food and beverages.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

Candy and gum—The term candy refers to all types of preparations commonly referred to as candy, including hard candy, caramel, chocolate candy, licorice, fudge, cotton candy, caramel coated popcorn, chocolate coated granola bars and similar items. The term gum refers to preparations commonly referred to as gum, including chewing gum, bubble gum and similar items.

So the answer is, chocolate standing alone is not candy, but can be used as a component of candy. Chocolate is used in other food items, such as cakes, donuts, cookies, ice cream, brownies, muffins, scones, fondue, pies, chocolate-covered nuts, chocolate-covered strawberries, and other sorts of food items limited only by the creativity of chefs and amateur cooks. The definition in section 60.7 does not address the source of the chocolate. The question is whether laboratory-grown chocolate is chocolate or something else that resembles chocolate. From what I gather reading the article, the laboratory uses different methods to produce cocoa, which appears to have the same chemical composition as cocoa extracted from the bean. I say “appears” because the company working on producing this laboratory-grown chocolate has not, to the best of my knowledge, released data showing the chemical composition of its product. It may need to do that in the future. If it’s not chocolate but something similar, then perhaps section 60.7 will need an amendment that defines chocolate to include the new substance. If it is indeed chemically chocolate, then it’s not candy but sometimes a component of candy.

Isn’t it fun what tax professionals need to learn in order to work their craft? When I was a first-year law student, my property law course began with the professor asking, “What is property?” Someday perhaps a tax law professor will ask students, “What is chocolate?”

A new wrinkle has pooped up in the world of tax return preparers who run afoul of the tax law. Readers of MauledAgain know that I have written about tax return preparers many times, including posts such as Tax Fraud Is Not Sacred, More Tax Return Preparation Gone Bad, Another Tax Return Preparation Enterprise Gone Bad, Are They Turning Up the Heat on Tax Return Preparers?, Surely There Is More to This Tax Fraud Indictment, Need a Tax Return Preparer? Don’t Use a Current IRS Employee, Is This How Tax Return Preparation Fraud Can Proliferate?, When Tax Return Preparers Go Bad, Their Customers Can Pay the Price, Tax Return Preparer Fails to Evade the IRS, Fraudulent Tax Return Preparation for Clients and the Preparer, Prison for Tax Return Preparer Who Does Almost Everything Wrong, Tax Return Preparation Indictment: From 44 To Three, When Fraudulent Tax Return Filing Is Part of A Bigger Fraudulent Scheme, Preparers Preparing Fraudulent Returns Need Prepare Not Only for Fines and Prison But Also Injunctions, Sins of the Tax Return Preparer Father Passed on to the Tax Return Preparer Son, Tax Return Preparer Fraud Extends Beyond Tax Returns, When A Tax Return Preparer’s Bad Behavior Extends Beyond Fraud, More Thoughts About Avoiding Tax Return Preparers Gone Bad, Another Tax Return Preparer Fraudulent Loan Application Indictment, Yet Another Way Tax Return Preparers Can Harm Their Clients (and Employees), When Unscrupulous Tax Return Preparers Make It Easy for theblo IRS and DOJ to Find Them, Tax Return Preparers Putting Red Flags on Clients’ Returns, When Language Describing the Impact of Tax Fraud Matters, Injunctions Against Fraudulent Tax Return Preparers Help, But Taxpayers Still Need to Be Vigilant, Will the Re-Introduced Legislation Permitting Tax Return Preparer Regulation Be Enacted, and If So, Would It Make a Difference?, Can Fraudulent Tax Return Preparation Become An Addiction?, Tax Return Preparers Who Fail to File Their Own Returns Beg For IRS Attention, Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf, When Dishonest Tax Return Preparers Are Married, There Was Nothing Magical About This Tax Return Preparation Business, Don’t Get Burned By a Tax Return Preparer, Tax Fraud School: When It’s Not Enough to Be a Fraudulent Tax Return Preparer, It’s Not Just Tax Return Preparers Assisting in the Preparation of Fraudulent Tax Returns, Overused Fraudulent Tax Return Preparation Ploys, It’s Not Just Law Enforcement That Confronts Misbehaving Tax Return Preparers, When An Injunction Doesn’t Stop a Tax Return Preparer from Filing False Returns, Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad, When It Comes to Fraudulent Tax Returns, It's Not Always the Preparers, A Procedural Twist on Dealing with Fraudulent Tax Return Preparers, Can Tax Return Preparers Learn from the Misdeeds of Other Preparers?, Should Tax Return Preparers Use Their Full Legal Names?, Is There Ever a Free Lunch, Even in the Tax Return Preparation Business?, Is the Tax Return Preparer or the Client Responsible For Unjustified Deductions?, When Preparing False Tax Returns Seems to Lack a Financial Motive, and Was This Convicted Tax Return Preparer Courageous or Foolish?

Recently, reader Morris directed my attention to a news story out of San Antonio, Texas that described the sentencing of a tax return preparer who pleaded guilty to one of 15 counts of aiding and assisting the filing of false tax returns. The other 14 counts were dropped as part of the plea deal. The preparer was sentenced to five years of probation and ordered to pay restitution of almost $137,000. The IRS estimated the preparer prepared between 1,000 and 1,500 returns each year and that the tax loss from her placing false items on customers’ returns caused the Treasury to lose, at a minimum, almost $1.4 million.

Reader Morris asked. “How did this tax preparer avoid prison?” The answer requires an understanding of how the plea bargain system works. There is a lot of subjectivity in the disposition of criminal cases, most of which don’t go to trial but are settled by plea deals. Prosecutors are willing to agree to let defendants get lighter sentences in exchange for avoiding the costs and risks of going to trial. Ultimately it is up to the judge to determine whether the plea deal should be accepted though almost all of them are. If a plea deal includes prison rather than probation, a defendant is more likely to reject it. The question of whether probation should be imposed rather than a prison term arises in all sorts of criminal cases, not just tax fraud situations. Probation is more likely to be part of a deal when the crime is considered a “white collar” crime rather than one of violence. I don’t know what sort of negotiations took place in working out the plea deal in the San Antonio case. So I cannot answer the specific question posed by reader Morris.

Reader Morris also offered a comment that reflected a fact noted in the news story. He offered, “I would avoid a tax preparer who works out of a adult bookstore.” His comment was inspired by the fact that in 2019 the preparer operated the business in an adult bookstore. The preparer had been in a different location from 2017 to 2019 and later moved from the adult bookstore to another location. Who knows why the preparer rented space in an adult bookstore? Was it the only available and affordable location? Was it an attempt to expand clientele? Was it part of a marketing arrangement with the adult book store? How many people would be comfortable going into an adult bookstore to have their tax returns prepared? My guess is that most people would agree with the comment from reader Morris. Imagine being seen going into an adult bookstore by a spouse, family member, relative, or some other person whose reaction would not be ideal, and then claiming, “Oh, I went in to get my tax return prepared.” How believable is that? But since it can be proven to be true by those who did have their tax returns prepared at the store, perhaps the store owner decided to created an easy-to-prove excuse for regular customers. The details of the arrangement between the store and the preparer are unknown.

So would you go into an adult bookstore to have your tax returns prepared? I don’t face that question because I prepare my own returns, but if I did need a preparer I would not be looking for one in an adult bookstore, or a casino, or a grocery store, or an auto repair shop, to name a few places where I would not search.

Every year since the start of MauledAgain, I have shared a commentary on Halloween that shared something silly or goofy but occasionally more serious, looking for a connection between Halloween and taxes. The posts began with Taxing "Snack" or "Junk" Food (2004), and have continued through Halloween and Tax: Scared Yet? (2005), Happy Halloween: Chocolate Math and Tax Arithmetic (2006), Tricky Treating: Teaching Tax Trumps Tasty Tidbit Transfers (2007), Halloween Brings Out the Lunacy (2007), A Truly Frightening Halloween Candy Bar (2008), Unmasking the Deductibility of Halloween Costumes (2009), Happy Halloween: Revenue Department Scares Kids Into Abandoning Pumpkin Sales (2010), The Scary Part of Halloween Costume Sales Taxation (2011), Halloween Takes on a New Meaning and It Isn’t Happy (2012), Some Scary Halloween Thoughts (2013), The Inequality of Halloween? (2014), When Candy Isn’t Candy (2015), Beyond Scary: Tax-Based Halloween Costumes (2016), Another Halloween Treat? I Think Not (2017), If Halloween Candy Isn’t Food, Is it Medicine? (2018), The Halloween Parent Tax: Seriously? (2019), Halloween Chocolate Construction Project (2020), The Tax Consequences of Halloween Candy Buy Back Programs (2021), Two Not Very Amusing, But Scary, Halloween Tax Challenges (2022), Does This Halloween Practice Foretell a Scary Future? (2023), and A Sad Task: Computing the Halloween “Parent Tax” (2024).

This year, I discovered something of which I had been unaware. People are exchanging Halloween costumes rather than buying new ones. In some instances, local municipalities are sponsoring these exchange events, for example, Little Falls, New Jersey, and Norton, Massachusetts. Obtaining a different Halloween costume by swapping a previous year’s outfit rather than making a purchase makes sense for the very many people facing a combination of income reduction and higher costs for Halloween (and other) items thanks to inflation, tariffs, and supply chain problems. Local governments that sponsor these events provide a safer environment for the transactions than might exist elsewhere, though apparently there are commercial enterprises that include costume exchanges within their business model.

Of course, a question immediately pops into my head. What are the tax consequences, if any, of this barter transaction? In other words, how are these transactions treated for tax purposes? (I see what I did there.)

First, let’s look at income taxes. The answer depends on the facts. If the costume being given up in the exchange has a value less than what was paid for it, and the costume being received is presumed to have the same value, then a loss is realized on the transaction. It is not deductible because it is a personal transaction and not a trade or business or for-profit activity. What if the costume being received is worth more than the costume being surrendered? There still is a nondeductible loss if the value of the costume being received is less than what was paid for the costume being surrendered. What if the costume being received is worth more than what was paid for the costume being surrendered? There would be a realized gain, which would be recognized because there is no applicable gross income exclusion. As a practical matter though, not only is such a situation extremely rare, but the amount involved is so small that it is very unlikely to be reported and even more unlikely to trigger an IRS investigation or audit.

Second, let’s look at sales taxes. The answer varies by state, because each state’s sales tax laws are different. As a general proposition, sales taxes apply to sales by commercial retailers. This would exclude a simple swap of items between individuals. In Pennsylvania, section 32.4 of title 61 excludes “isolated sales” from the sales tax. The definitions and examples in that provision make it easy to conclude that there would be no sales tax consequences to the costume swap. Some states exclude clothing, including costumes, from the sales tax, though Pennsylvania excludes costumes from the definition of clothing eligible for an exclusion. In a state that does not impose a sales tax or does not impose a sales tax on costumes, there is no need to determine if an exemption such as the "isolated sales” exemption would apply.

So the short answer is that people who are not in the trade or business of buying, selling, and swapping Halloween costumes need not trick themselves into agonizing about tax consequences. As some might say, “Sweet!”

It’s no secret that I do not support using tax breaks to finance construction of facilities for, or operations of, professional sports franchises owned by wealthy individuals. Even though these individuals claim that they deserve tax breaks because they are doing something that is “good for the public,” their reasoning would support tax breaks for almost everyone, thus destroying government and civilization. I have explained this tax break grab game in posts such as Tax Revenues and D.C. Baseball, Putting Tax Money Where the Tax Mouth Is, Taking Tax Money Without Giving Back: Another Reality, Public Financing of Private Sports Enterprises: Good for the Private, Bad for the Public, Taking and Giving Back, If You Want a Professional Sports Team, Pay For It Yourselves; Don’t Grab Tax Dollars, Is Tax and Spend Acceptable When It’s “Tax the Poor and Spend on the Wealthy”?, Tax Breaks for Broken Promises: Not A Good Exchange, Tax Breaks for Wealthy People Who Pretend to Be Poor, Tax Breaks for Starving Team Owners, and Are Taxpayers Figuring Out the Games Played by the Starving Oligarchs?

The wealthy professional sports franchise owners defend their claim that they are doing something “good for the public” by pointing out that their stadiums and team operations will bring people to the games, thus increasing economic activity that generates tax revenue for the state or local government forking over taxpayer money to fund what the wealthy owners apparently cannot fund on their own. This reasoning is questionable when the taxpayer funding is for facilities already in existence to which people already are showing up. But in every instance, it’s nothing more than a tax break for the wealthy team owners, for which the justification would support, as I’ve previously argued, tax breaks for everyone who does something “good for the public.” Already, as I pointed out in It’s Not Just Sports Franchise Owners Grasping at Tax Breaks and Grabbing Tax Breaks, Sports Franchises, Casinos, and Now, a Water Park, wealthy owners of casinos, resorts, and water parks have followed in the footsteps of the team owners. I'm sure there are more wealthy owners joining the parade.

Now comes a report that the Chicago Bears are planning to leave Chicago and move to Arlington Heights. The Bears had entered a deal with Chicago to renovate its stadium in Chicago. The team borrowed money to be paid by the city from its collections of a hotel-room tax placed on visitors. With the pandemic and other factors reducing the number of tourists, the city of Chicago has made up the difference on the annual payments due on the debt, paying at least $52 million of taxpayer money needed for other purposes. The team’s relocation out of Chicago will reduce the number of people coming to Chicago on account of games at the stadium in Chicago, which will further reduce revenue from the hotel-room tax. Estimates are that the city faces close to $30 million of payments in the current and upcoming fiscal year.

The governor of Illinois has proposed that the Bears should “help pay off the leftover debt before the state considers any additional help for the team.” If I were the governor I’d tell the Bears, “If you need money, use your own. Use your owners’ money. Use the money you would have been paying had your federal taxes had not been cut. You are running a business, so figure out how to run it without begging for handouts of taxpayer money. Do what the small business owner or farmer is doing at the moment trying to survive. If anyone should be getting help, it’s the people growing food, cleaning houses, selling appliances, and offering other goods and services to the public that are of much greater importance. Let’s help the people who truly need help.”

I am an advocate of user fees, to the extent user fees can best suited to the product or service being provided by a government. Not every government-provided product or service can be funded by a user fee. For example, the cost of national defense cannot be reasonably allocated among a nation’s people. Yet there are government-provided products and services that can easily be funded with user fees. For example, a local government that provides trash and recycling pickup and disposal can charge a fee based on weight, volume, or a combination of both.

Reader Morris passed along a story from Michigan reporting that Michigan’s governor has signed legislation that imposes a 24 percent wholesale tax on the sale of marijuana from growers and processors to retailers. The tax surely will be passed along to retail customers. What will be done with the proceeds of this tax? It will be used to fund part of the cost of improving Michigan’s roads.

Reader Morris asked, “Is the Michigan Marijuana tax to fund the roads a better tax policy than a vehicle mileage fee?” My answer is a resounding no. As I wrote to Reader Morris, “Some marijuana users use roads, others don’t. A lot of road users don’t use marijuana. What’s next? Taxing people who buy peanut butter to fund schools?”

Anyone who can show me a rational link between the sale of marijuana and the deterioration of roads is invited to educate me. Perhaps there are government expenses that can be rationally linked to the sale, or perhaps use, of marijuana. Perhaps something involving government funding of specified health care services. But why should people who may not be using roads bear the burden of financing those roads while far greater numbers of people who do use the roads aren’t subject to the marijuana wholesale tax? And anticipating reactions, for those who think I am defending, advocating, or involved in the sale, distribution, and use of marijuana, or am working on behalf of marijuana lobbies, I am not. I am simply pointing out the disconnect between the tax and the intended use of the revenues it produces, just as I would react the same way to a tax on candy, shoes, computers, clothing, or pet supplies to fund roads.

The answer, when it comes to financing the maintenance and repair of roads, bridges, and tunnels is the mileage-based road fee, which I has been the subject of my commentaries for almost 17 years, and which also is supported by a growing number of individuals and organizations. For those interested in the mileage-based road fee, including how it works and refutations of arguments offered against it, take a look at my commentaries, 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, Once Again, Rebutting Arguments Against Mileage-Based Road Fees, Getting to the Mileage-Based Road Fee in Tiny Steps, Proposal for a Tyre Tax to Replace Fuel Taxes Needs to be Deflated, A Much Bigger Forward-Moving Step for the Mileage-Based Road Fee, Another Example of a Problem That the Mileage-Based Road Fee Can Solve, Some Observations on Recent Articles Addressing the Mileage-Based Road Fee, Mileage-Based Road Fee Meets Interstate Travel, If Not a Gasoline Tax, and Not a Mileage-Based Road Fee, Then What?>, Try It, You Might Like It (The Mileage-Based Road Fee, That Is) , The Mileage-Based Road Fee Is Superior to This Proposed “Commercial Activity Surcharge”, The Mileage-Based Road Fee Is Also Superior to This Proposed “Package Tax” or “Package Fee”, Why Delay A Mileage-Based Road Fee Until Existing Fuel Tax Amounts Are Posted at Fuel Pumps?, Using General Funds to Finance Transportation Infrastructure Not a Viable Solution, In Praise of the Mileage-Base Road Fee, What Appears to Be Criticism of the Mileage-Based Road Fee Isn’t, Though It Is a Criticism of How Congress Functions, Ignorance and Propaganda, A New Twist to the Mileage-Based Road Fee, The Mileage-Based Road Fee: Simpler, Fairer, and More Efficient Than the Alternatives, Some Updates on the Mileage-Based Road Fee, How to Pay for Street Reconstruction, Stop the "Stop EV Freeloading Act" Because The Mileage-Based Road Fee Is a Much Better Way to Go, Why Is Road Repair and Maintenance Funding So Difficult for Public Officials to Figure Out?, Should (Will) Implementing the Mileage-Based Road Fee Cause Privatization of Highway Infrastructure?, The Freedom Caucus Doesn’t Understand that the Mileage-Based Road Fee is “PRO-Freedom,” Not the Opposite, A Mileage-Based Road Fee by Any Other Name?, Does the Mileage-Based Road Fee Work for Local Road Maintenance?, Washington State Mileage-Based Road Fee Proposal Changes: Is It Better?, The Mileage-Based Road Fee Is Much Better Than a Federal Fuel Tax Increase, and Ride-Share Drivers and the Mileage-Based Road Fee.