Federal Ready Return, Part Fourteen: Conclusion

The nation is not ready for federal Ready Return. Nor will it ever be, until and unless the federal income tax law is overhauled. Ready Return rests on the idea of government-computed tax bills, which works for taxes such as the real property tax or the sales tax. Those taxes, though not simple by any stretch of the imagination, are child’s play compared to the federal income tax.

There are all sorts of reasons to reject Ready Return. In its 2011 Report, the Electronic Tax Administration Advisory Committee provided its list:

little relief for taxpayers with complicated returns or business income, or low-income filers in complicated living arrangements; lack of an IRS computing infrastructure; absence of timely third-party information reports needed to pre-fill a return; need for considerable investment in technology and manpower; potential that a pre-filled return that omitted income, or misstated the return in a taxpayer’s favor could reduce tax compliance and collections; difficulty or impossibility of adapting Simple Return to address all the special credits for low-income households; and, finally, even with technological improvements, the inability for many taxpayers to prepare returns as soon after the close of the year as they currently file their returns in order to obtain their tax refunds.

To that list, I add the loss of civic virtue nourished by the self-compliance aspect of the income tax, ineffectiveness in reducing the tax gap, expanded risk of privacy loss and identity theft, increased burden on businesses, adverse impact on the economy, creation of conflict of interest problems for the IRS, and taxpayer rejection of the idea.

Ready Return is a classic example of a theory that cannot survive in a practical world. Like most theories, it deserved an experiment. It had that chance, not in a small laboratory, but in the nation’s most populous state. It failed. How many times has someone said, “I have a good idea,” no one had the courage to offend the person by explaining it was not a good idea, and the implementation led to all sorts of problems for unsuspecting “beneficiaries” of the outcome? Though in many instances the worst effect is inconvenience, sometimes the results can be far more serious. Fooling around with the nation’s primary source of revenue in this manner is unwise, unwarranted, and dangerous.

Federal Ready Return, Part Thirteen: IRS Authority

Ready Return is something that the IRS has authority to implement. Section 2004 of the Internal Revenue Service Restructuring and Reform Act of 1998 provides:

The Secretary of the Treasury or the Secretary’s delegate shall develop procedures for the implementation of a return-free tax system under which appropriate individuals would be permitted to comply with the Internal Revenue Code of 1986 without making the return required under section 6012 of such Code for taxable years beginning after 2007.

Nonetheless, as the debate about Ready Return has heated up, one member of Congress decided it was necessary to introduce a bill, H.R. 1069, expressly permitting the IRS to implement a limited Ready Return system. Another member of Congress, joined by several dozen other legislators, introduced a competing bill, H.R. 2528, which prohibits the IRS from doing so and repeals section 2004 of the 1998 legislation.

Few people pay attention to Ready Return. The 1998 legislative provision received very little attention when it was enacted and not much since. Outside of a small circle of Ready Return advocates and opponents, the idea of government-prepared tax returns has a flickering moment in the spotlight on rare occasions. Even then, it’s a handful of survey respondents, a tiny fraction of California taxpayers, and several bloggers, journalists, and lobbyists who take notice. Of these, a still smaller subset pays close attention. If and when the IRS launches Ready Return, it will come as a surprise. All sorts of people will exclaim, “They can’t do this,” but under present law, “they” can.

Federal Ready Return, Part Twelve: Taxpayer Acceptance

Ready Return will not work if taxpayers do not accept it. All indications are that Ready Return will fall flat.

As I pointed out in First Ready Return, Next Ready Vote?, “Only three percent of taxpayers eligible to have the state of California prepare their return took advantage of the opportunity. Only 60,000 people out of 2,000,000 were willing to put their tax fortunes in the hands of an anonymous revenue department bureaucrat or its computer.”

According to New Poll Shows Voters Overwhelmingly Reject Proposal To Have IRS Prepare Individuals' Tax Returns, a Computer and Communications Industry Association poll discovered that 71 percent would not “trust the IRS to prepare their returns, determine their refund and/or how much they owe in taxes.” Of those polled, 73 percent agreed that Ready Return would create a conflict of interest. These results crossed party affiliation, with 80 percent of voters claiming to be “less likely to vote for a candidate who backed an IRS expansion that involved the agency taking over tax return preparation.”

Respondents to the poll expressed other positions consistent with those taken by opponents of Ready Return. Of those polled, 63 percent “said they did not trust the IRS to keep their personal information safe and secure from hackers and identity thieves.” And 75 percent “believe the IRS would be most concerned with getting the maximum tax revenue possible from individuals.”

Federal Ready Return, Part Eleven: Conflict of Interest

Ready Return creates a conflict of interest, not, as some claim, because it gives the IRS the dual roles of tax return preparer and tax collector, but because it cause the IRS to function both as preparer and as auditor. As I explained in Ready Return Not a Ready Answer:

ReadyReturn removes third-party protection from taxpayer-revenue department relationships. Will one branch of the FTB audit the work of another branch? Isn't there a conflict of interest when the auditor is preparing the return to be audited? Absolutely. Has not a lesson been learned from Enron about the importance of independence? Apparently not.

In Policy Analysis of “Return-Free” Tax System, Robert A. Boisture, Albert G. Lauber, and Holly O. Paz reach the same conclusion:

A third possible source of increased tax collections under a tax agency reconciliation system could be over-reaching by tax-collection authorities. In a very real sense, this type of system would create a conflict of interest on the part of the IRS. On the one hand, the IRS has an obligation to maximize tax collections in order to protect the federal fisc. On the other hand, a tax agency reconciliation system would require the IRS to act in effect as a fiduciary for taxpayers – analogous to an accountant or return preparer – with an obligation to prepare tax returns accurately, but also in the taxpayer’s best interest. Such a system is inherently subject to abuse.

Similar concerns were expressed by Joseph Cordes and Arlene Holen in Should the Government Prepare Individual Income Tax Returns?.

Federal Ready Return, Part Ten: IRS Capacity

Ready Return would impose significant demands on IRS resources. Imposing Ready Return on an IRS saddled with computer system problems is unwise. Launching a Ready Return program while the IRS core customer account database system is being implemented, a system still not ready despite several years of work, also is unwise.

Assuming Ready Return is operational, what happens if a taxpayer finds a discrepancy between what the IRS puts on the return and what the taxpayer knows is correct? Would the error be fixed in time for the taxpayer to have a final return in place by the due date? Would the taxpayer file a return inconsistent with the Ready Return, and would doing so increase the risk of a subsequent audit? What happens when the person or entity originally filing the W-2 or 1099 form amends it? Would the IRS have the resources to change the inaccurate data on information returns imbedded into the system? Under current procedures, the IRS sends notices after returns are filed if there are mismatches with information returns, and yet far too many of these automated notices do not match the information returns or otherwise contain erroneous information.

Ryan Young, in A Backdoor Tax on the Poor (Nov. 8, 2011), argues that if the IRS contracts out the software design for Ready Return, there is no guarantee that what the contractor provides will work correctly. He suggests that additional expenses will be incurred by the IRS to pay for software updates and corrections.

To these concerns, I add several more. What happens if a web-based Ready Return system goes down? What happens if mobile Ready Return apps fail to work because of overloads on phone networks? What is the likelihood that malevolent individuals or thrill-seeking youngsters initiate a denial of service attack against the Ready Return web site? What happens if they launch it on April 14 and succeed?

Federal Ready Return, Part Nine: Economic Impact

Ready Return proponents claim that it will save people several billion dollars in taxpayer return preparation fees. If that’s true, that puts a lot of preparers out of work. But it’s not true, and tax return preparers would continue to make money. As I noted in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable:

Let’s face it, if the IRS adopts a federal Ready Return, tax return software companies would have a ready advertising opportunity, namely, offering its products as tools to check on the accuracy of returns prepared by an agency so long underfunded that it’s not surprising it makes so many errors processing returns. . . . Taxpayers would end up taking these “tentative” returns to tax return preparers or using software to see what results it generated, so the alleged efficiencies of a federal “Ready Return” is another theoretical construct that falls apart when put to the test in the practical world.

On the other hand, if Ready Return puts preparers out of work, it is unlikely that the jobs created by contractors preparing the IRS software would make up for these losses. But where is funding acquired to pay for the development of Ready Return software? The IRS continues to be underfunded. Can the nation afford an expensive experiment that does not provide the claimed savings and requires infusions of cash? Should taxpayers be financing a government tax return preparation department in the IRS? I think not.

Federal Ready Return, Part Eight: Burden on Business

In order for Ready Return to work, even putting aside all of its other flaws, the IRS would need W-2 and 1099 2 forms to be submitted earlier. Advocates of Ready Return admit this, as I explained in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable:

The current Administration, supporters during the campaign of pre-filled tax forms, discovered that the sound-bite didn’t fly when put to the test. Information doesn’t reach the IRS in time to get pre-filled or tentative returns out to taxpayers in time to give them ample opportunity to review the proposed return and then file by April 15. [Randall] Stross [in Why Can’t the I.R.S. Help Fill in the Blanks] deals with this issue by suggesting that the deadlines for filing information returns with the IRS be advanced to earlier in the year. I wonder how many employers, corporate payroll departments, and bookkeepers at small business operations were interviewed to determine if it is feasible to shut down for several weeks at the beginning of the year in order to process this information. Perhaps it is. But I doubt it.

My conjecture has been corroborated by business owners and by the Electronic Tax Administration Advisory Committee. In its 2011 Report, the Committee reported:

Shortening the processing period from three months to one month is a significant workload increase, especially for small businesses. ETAAC’s concerns about the practical business impact of such a change are heightened by Congress’ recent statutory repeal of expanded 1099 reporting by businesses, which had been enacted just last year as part of the healthcare legislation. The legislative reversal resulted from the substantial concerns expressed by the small business community about the additional associated costs and burdens, which the President described as “an undue barrier to small business growth.” Policy makers must avoid creating the same kind of costly business burden again, particularly on small business, without adequate study of its practical impact including a consideration of other potential opportunities.

Ryan Young, in A Backdoor Tax on the Poor (Nov. 8, 2011), estimates the cost of complying with the accelerated reporting schedules necessary for federal Ready Return as somewhere between $500 million and $5 billion. And that is to deal with W-2 and 1099 forms. It doesn’t even take into account forms such as the K-1.

Federal Ready Return, Part Seven: Taxpayer Acquiescence

Another danger of the Ready Return method is that it can induce taxpayers to accept IRS positions to which they would object if raised during an audit of a return initiated by the taxpayer. As I explained in First Ready Return, Next Ready Vote?:

There’s a reason that a cash-strapped government like California is so eager to prepare tax returns for taxpayers. It certainly isn’t a case of doing penance for the state having inflicted taxpayers with a patchwork income tax system that begs for true reform. Nor is it a desire to have taxpayers save money, because the response of California and the advocates of Ready Return to concerns about errors is that taxpayers are free to consult with independent tax return preparers. In other words, taxpayers would still face expenses, and even though they would be called tax return review fees rather than tax return preparation fees they still would require the taxpayer to reach into his or her pocket. So if taxpayers would be going to independent professionals, why is the state bothering to divert resources into preparing Ready Returns? The answer must be that the state is banking on taxpayers who receive a Ready Return, consider it official because it came from the government, sign it, and do nothing more. Unfortunately, there are taxpayers who will react in that manner. Whether from ignorance, laziness, unjustified trust in government, fear, confusion, or some other distraction, if enough mistakes are made on their returns and go undiscovered, the revenue flow to the state increases. The people who profess that they “love” Ready Return are saving time only because they are putting themselves at the mercy of the California state government, blindly accepting whatever they’re being told, and exposing themselves to risk if California later decides that the returns filed by the state on behalf of these folks are, in fact, erroneous. I wonder when that love will become love lost.

Ready Return makes it too easy for an erroneous IRS position to sneak by the taxpayer.

Federal Ready Return, Part Six: Security Risks

Ready Return poses serious security risks for taxpayers, particularly if the system is set up in a manner that requires taxpayers to access their Ready Returns by visiting a web site or using some equivalent electronic connection. The reason is simple. The world is overflowing with individuals who would delight in the opportunity to access someone else’s financial and personal information by hacking into their IRS account. A malevolent person who succeeds in breaking into a taxpayer’s IRS account obtains a free pass to identity theft. It’s one thing for the Treasury to operate an electronic funds payment system used by sophisticated business owners and holding limited amounts of data, but it’s another thing entirely to create a system used by almost the entire population and holding enormous amounts of data.

Daniel Horowitz, in The IRS as Tax Preparers? (Nov. 14, 2011) notes that the Government Accountability Office has cited “information security deficiencies” at the IRS that “increase the risk of inappropriate access, alteration, or abuse of proprietary IRS programs and electronic data and taxpayer information.” Lest anyone think that the specter of privacy breach and identity theft epidemics is an exaggerated concern, recall this flap, and the one about the IRS contracting taxpayer information out to a company whose databases had been compromised?

Ready Return can pose even greater risks to taxpayers. To deal with the inadequacy of returns based on the information currently available to the IRS, Ready Return’s advocates suggest that the IRS be given even more information. To do a better job with Ready Returns for taxpayers who sell their homes, marry, have children, enroll in educational programs justifying credits or deductions, or engage in any other activity that affects deductions and credits, the IRS would collect information that it currently does not collect, such as the details of taxpayers’ financial accounts, cleared checks, credit card statements, organization membership information, and all sorts of similar records. That information would be added to the database that the hackers are eager to attack and mine.

Though it is true that taxpayers’ tax returns currently reside in electronic databases, access is much more difficult than it would be if web-based and smart-phone-based gateways are opened by the IRS. In a world rampant with all sorts of digital security breaches, unnecessary additions to the data at risk must be avoided.

Federal Ready Return, Part Five: Efficiency

Advocates of Ready Return claim that it saves people time. After I shared my opinions about Ready Return on public radio, as described in First Ready Return, Next Ready Vote?, Professor Alice Abreu disagreed with my contention that Ready Return is not a time saver:

Jim Maule is just flat wrong in saying that ReadyReturn doesn't save people time, and the taxpayers in CA who love it are proof of that. Even if the return wasn't completely done, just having the form filled in with all of the W-2 information the government already has would be a tremendous time saver. Indeed, that is where the attention on the federal level has moved. If that information was filled in, returns could be done more quickly, and that would be a time and moneysave. Think about it: checking the information against what you have on your W-2 has to be faster than typing it in and then checking it.

I continue to disagree with the proposition that Ready Return reduces the amount of time that a taxpayer must invest. As I stated in First Ready Return, Next Ready Vote?:

Unfortunately, I must disagree with Alice. Checking to see if someone else has done something properly is never a time saver. There's a reason "it's faster if I do it myself," "it would have been faster had I done it myself," or some variant is heard so often, not only in tax return preparation but in other areas of law and life. Banking on a state or federal computer system getting it right is risky, especially when one takes into account all the information that has been released concerning the antiquated state of most government tax computing systems, programming errors, data entry errors, data transfer errors, and a variety of other glitches. Think about the error rates in advice obtained from telephone calls to the IRS. Think about all the mistakes on the information return reporting letters, which are based on the same systems that would be generating these "government prepared" tax returns.

To use an example from teaching, it takes less time to write a paper about a tax topic than it is to work through a student’s draft of a paper about the same topic. Though it may appear that writing or typing comments takes less time than writing the paper, what needs to be taken into account is the time needed to analyze what the student has written, determine if it is correct, and if it is incorrect, to figure out why that is so.

The IRS Commissioner, echoes an argument made by Randall Stross in Why Can’t the I.R.S. Help Fill in the Blanks. As I explained in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable:

Stross claims that the current system is the equivalent of credit card companies asking customers to fill out their own monthly invoices using receipts. He does not address the fact that checking a credit card invoice is very easy, because it requires only that the customer compare receipts to what’s on the invoice. Unlike the federal income tax system, the receipts aren’t separated into various categories, subject to varying floors and ceilings, discounted if a particular number of exceptions to exceptions to a general rule apply, and held up against an ever-changing set of rules. When the federal income tax system is converted into something as simple as adding up credit card receipts, then a federal Ready Return might deserve serious attention.

Trying to compare auditing a Ready Return prepared by the IRS with reviewing a simple credit card statement is careless at best.

Federal Ready Return, Part Four: The Persistence of the Tax Gap

The IRS claims that this system would eliminate the tax gap, estimated between an $300 and $400 billion annually. See Daniel Horowitz, The IRS as Tax Preparers? (Nov. 14, 2011). Yet most of the tax gap does not arise from the sorts of things that are reported on W-2 and 1099 forms. The proposed system does not close the tax gap when the tax liability is avoided through use of an off-shore entity whose existence is unknown to the IRS. Ready Return does not reduce the tax gap when the lost revenue occurs because an S corporation does not issue a W-2 to an employee-shareholder. It does not close the tax gap when tax liability is evaded by taxpayers claiming deductions or credits to which they are not entitled. Ready Return does nothing to solve the portion of the tax gap arising from unreported cash income.

The tax gap is attributable to two major causes. One is the deliberate attempt to evade tax liability and the other is unwitting noncompliance. The first cause is not resolved by Ready Return, because sophisticated tax cheaters aren’t going to be deterred or obstructed by an IRS ignorant of what the tax cheaters are doing. The second cause is not resolved by Ready Return, because very few of the unwitting errors made by taxpayers are within the scope of the information reporting currently in use. Trying to overcome that flaw by increasing information reporting to the IRS surely will meet resistance, because most citizens do not want to be sending notifications to the IRS each time they do something that might have an impact on their tax liability. Once again, it is necessary to point out that the solution is simplification of the tax law, by removing all of the elements not part of a simple revenue collection system.

Federal Ready Return, Part Three: Income Tax Return Accuracy

Though Ready Return advocates praise their proposal as a generator of increased tax return accuracy, the reality is quite different. To assume that a government-prepared tax return is of a higher quality and has fewer errors is to overlook the deficiencies in systems that give the government the initiative. According to Ryan Young, A Backdoor Tax on the Poor (Nov. 8, 2011), a system similar to Ready Return is in place in the United Kingdom and the government’s error rate in its own favor is 15 percent. If the government makes an error in favor of the taxpayer, the taxpayer nonetheless is liable. The political fallout in Britain, which rose to the level of a major political scandal, demonstrates the dangers of relying on a tax system that is disconnected from taxpayers and that is one in which taxpayers are not engaged.

Ready Return not only fails to guarantee that preparation of the return will be any more accurate than it is when initiated by the private sector, it also opens up opportunities for errors that would not otherwise exist. Consider, for example, a taxpayer who, for several years in a row, looks at the return prepared by the IRS, decides it seems correct, and then decides it’s not worth checking what the IRS prepares. A few years later, the taxpayer sells her house, or perhaps has a child, or maybe gets divorced, or perhaps makes a significant donation to her church. What are the odds that the IRS will reflect these changes in the Ready Return that it prepares? Zero. What are the odds that the taxpayer will resume checking the Ready Return? Very low. What are the odds that the taxpayer’s return will be erroneous in favor of the government? Rather high.

Several advocates claim that the answer is to have the IRS mail the Ready Return to the taxpayer each year. There are all sorts of problems with this remedy. First, who pays for the cost of printing, of envelopes, of putting the return into the envelope, and for the delivery? Second, in an era when the IRS uses increasing less postal and other hard copy delivery, it is a step backwards to go this route, Third, what happens to taxpayers who move and thus do not receive their Ready Return? From time to time the IRS announces that it is looking for tens of thousands of taxpayers for whom it has a refund check. What more incentive can there be to step up than a refund check? Again, the theory breaks down.

In Hi, I'm from the Government and I'm Here to Help You ..... Do Your Tax Return, I described yet another opportunity for error to enter the system:

On the other side of the spectrum, what about taxpayers who deliberately or negligently accept the Ready Return even though it does not reflect additional income that the government does not know exists? After all, the government selects taxpayers for ReadyReturn because it assumes that a person with only wage and interest income in one year will be in the same position the following year. But certainly some not insignificant number of those taxpayers will start a business, or otherwise take in other types of income. Yes, instructions could be added to the ReadyReturn (as it inches closer to looking like the existing process), but will this matter to the folks who cannot read and who might be among those who are taking in cash income for which no W-2 or 1099 is issued? Of course, the underlying problem is not caused by Ready Return. But will Ready Return exacerbate it?

Of course it will.

Federal Ready Return, Part Two: The Value of Self-Compliance

Federal Ready Return will erode the value of the self-compliance principle of the federal income tax system. There is a very good reason that taxpayers have the obligation to step forward, file a return, report their income, and compute tax liability. As Tom Giovanetti points out in Trust Us: IRS Wants to File Your Taxes for You (Jan. 25, 2012), “Our voluntary tax compliance system is a feature, not a bug. It’s a key indicator of self-government, one of the hallmarks of American freedom.”

By taking ownership of their civic duty to pay taxes, citizens participate in the process of government. By focusing on the details of the return, they become aware of what the Congress has been doing with the tax law. As I explained in Hi, I'm from the Government and I'm Here to Help You ..... Do Your Tax Return:

[D]emocracy requires transparency in taxation. That is why I suggested that, instead, all taxpayers should be required to plow through, or pay someone to plow through for them while they watch, their tax return preparation, not as numbers being entered into a computer program, but with a running commentary from the preparer. For example, "The reason it is taking so long to put in all these numbers is that there are many, many steps to be computed. Notice that I am taking information from 12 different pieces of paper, and I asked you 25 questions." "OK, so why does the government need to know all of this?" "Because ......." This would permit them to see how dangerously convoluted the government revenue generator has become, and it is probably the only way that a strong chorus of cries for tax reform can be orchestrated. Yes, being required to watch a tax return being prepared may be cruel, but considering that taxpayers are among those who voted into office the people who created the mess, it's a deserved consequence. After all, we do too much "hide the problem" papering over in this country, be it energy shortages, military mistakes, international embarrassments, economic ignorance, or tax nonsense. Instead, it is better to remember that an educated citizenry is far more valuable to democracy than a pacified (or numbed) citizenry. Or perhaps it should be stated an educated electorate is far more valuable to democracy than a pacified electorate.

This approach also makes it more likely that taxpayers will become aware of what Congress does with the tax law. When sitting down to prepare their tax returns or sit down with a preparer to go over the tax return, the taxpayer might think or say, “What? No more deduction for that?” “Oh, a credit? I didn’t know about that.”

In other aspects of life, people are being encouraged to take ownership. We are advised to question our health care providers, read the labels on the food we purchase, learn how things work, and do research before entrusting our children to a school or our money to a financial institution. Citizens should do no less with their income tax responsibilities.

Federal Ready Return, Part One: Introduction

For quite some time, I have been an outspoken critic of the Ready Return concept, which was adopted in California but which has not taken off the way its advocates promised and hoped. In recent months there have been increasing signs that the IRS is moving forward with plans to implement a similar system, not in one fell swoop, but gradually, beginning with changes to when and how it matches information returns. Today I begin a series, in which I look more closely at the risks that a Federal Ready Return system, or its equivalent, poses to taxpayers and the nation.

The analysis begins with a history of my commentary on the California Ready Return experiment. When California adopted its version of Ready Return, I criticized it, in in Hi, I'm from the Government and I'm Here to Help You ..... Do Your Tax Return and in Ready Return Not a Ready Answer. Several months later, when California dropped the program, I reacted in Ready It Was Not: The Demise of California's Government-Prepared Tax Return Experiment, and subsequently I noted the persistence of Ready Return advocacy in As Halloween Looms, Making Sure Dead Tax Ideas Stay Dead. When California resurrected Ready Return shortly thereafter, I pointed out, in Oh, No! This Tax Idea Isn't Ready for Its Coffin, the disturbing decision of state administrators to restore the program even though the legislature had cut off funding and authorization.

When the New York Times advanced the idea of a federal Ready Return, I voiced my concerns in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable. Later that year, I had an opportunity to share my thoughts on public radio, which I described in First Ready Return, Next Ready Vote?.

The IRS is planning to implement Real-Time Tax System (RTTS), ostensibly designed to permit it to match information returns with tax returns before returns are filed rather than during audits after the return has been filed. The proposal is a reaction to one of the major criticism of Ready Return, namely, as I explained in Federal Ready Return: Theoretically Attractive, Pragmatically Unworkable, “Information doesn’t reach the IRS in time to get pre-filled or tentative returns out to taxpayers in time to give them ample opportunity to review the proposed return and then file by April 15.” Advocates of the Ready Return system suggested that the deadlines for filing information returns with the IRS be advanced to earlier in the year. And that is precisely the point of adopting RTTS. Originally and still occasionally described as “Simple Return” and “Return Free,” the larger initiative is a plan to bring Ready Return, despite its California failure, to the entire nation.

As with so many ideas, this is not a new proposal. In How to Really Simplify the Tax Code (Apr. 10, 2012), Bruce Bartlett notes that the idea surfaced in 2003, when the Treasury Department floated a proposal for a return-free system. The proposal collected dust because it would require significant increases in the reporting of income and in withholding, and because it won’t work with an income tax system as complicated as what now exists. Making taxpayers’ lives easier during tax filing season is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS.

Ultimately, the basic idea is that the IRS would prepare returns based on information submitted by employers and payors through W-2 and 1099 forms. Under one variation, what the IRS prepares would be the return unless the taxpayer went online to make changes. Under another variation, taxpayers would go online to retrieve what the IRS had prepared and use it as the starting point for preparing the return. The chief difference is that under the first variation, taxpayers would decide whether or not to check what the IRS had done, whereas under the second variation, taxpayers would be required to do so. See Michael Cohn, IRS Commissioner Proposes Tax Technology Overhaul (Apr. 6, 2011).

Despite the advantages cited by Ready Return advocates, there are so many disadvantages that this sort of approach will not work. Even though there are some benefits to the plan, the drawbacks are so pervasive that they overwhelmingly outweigh whatever advantages exist.

Some Tax Things Cannot Be Forced

A recent Nebraska case, Bock v. Dalbey addressed the interesting question of whether a spouse can be forced to file a joint return. The court’s response was a resounding no. It rested its conclusion on the rationale that “a trial court can equitably adjust its division of the marital estate to account for a spouse’s unreasonable refusal to file a joint return.” The court noted that in the few instances other courts have considered the question, several have reached similar conclusions because of “the possible exposure to liability” for the other spouse’s unreported income or wrongly claimed deductions and credits. The court agreed with decisions of courts in the District of Columbia, Iowa, Florida, Oklahoma, New York, and Oregon. The court chose not to follow contrary decisions in Illinois, Minnesota, New Jersey, Ohio, and North Dakota. At least one of these courts, though refusing to deny the trial court discretion to compel the filing of a joint return, advises trial courts, where possible, to go the route of letting the spouses file separately and making adjustments in the equitable distribution.

The Nebraska court specified four reasons it considers its conclusion the better alternative. First, the return may end up not being treated as a joint return for federal income tax purposes if the compelled spouse demonstrates there was no intent to file a joint return and it was done under compulsion. Second, an order to compel the filing of a joint return is a mandatory injunction, something that is “an extreme or harsh remedy that should be exercised sparingly and cautiously.” Third, predicting the compelled spouse’s liability exposure is difficult to predict, and the compelled spouse could end up with more tax liability than predicted or expected. Fourth, if the spouses are compelled to file a joint return, they usually will have very little time to do so within the federal tax law deadlines and thus risk being held in contempt. Buried in this reason was a fifth one, namely, if the compelled spouse appeals but the joint return was filed, the joint return cannot be revoked, and if the compelled spouse waits until an appeal is processed, the deadline will be missed.

As I tell my students in the basic federal income tax class, there are few, if any, areas of law practice unaffected by tax. To practice domestic relations law without understanding all of the nuances, is more than simply risky. It’s not enough to understand the black letter law of alimony gross income and deductions and the rules dealing with allocating dependency exemption deductions. Domestic relations lawyers ought to read this case, and prepare themselves to help educate their clients who are negotiating divorce and separation terms.

Of course, the issue considered in this case presents yet another reason for the abolition of the joint return and the taxation of individuals as persons independent of their marital, living, relational, or other arrangements or status. But additional discussion of that topic must await another day.

Taxes as an Element in Damages

It is not uncommon for taxes to be an element in the computation of damages. For example, someone who must purchase goods from an alternative source because of a supplier’s contract breach can recover not only the increased cost of the goods but also the sales taxes paid with respect to that increased cost. Taxes also enter into damage computations when the defendant can demonstrate that the defendant’s breach prevented the plaintiff from engaging in activities that would have generated tax liability for the plaintiff. Recently, the Appellate Division of the Superior Court of New Jersey, in Beim v. Hulfish, No. A-5947-10T4 (May 29, 2012), took taxes into account in computing a damage award in a manner that might be a first.

The facts of the case are fairly basic. On January 25, 2008, a car owned by the first defendant and driven by the second defendant collided with another car owned by a third defendant and driven by the fourth defendant. On February 7, 2008, a 97-year-old passenger in the first car died as a result of the crash. His estate sued the defendants in a wrongful death action. The estate argued that had the decedent lived until 2009, his estate’s federal estate tax liability would have been $626,083 less than what the estate paid in 2008, and that had the decedent lived until 2010, the entire $1,196,084 of estate taxes paid in 2008 would have been avoided.

As the court nicely put it, “The novel issue presented is whether an heir's loss of a prospective inheritance resulting from the imposition of increased estate taxes — incurred due to the premature death of a decedent — is recoverable in a wrongful death action.” The court concluded that “[b]ecause such a tangible, readily-calculable diminishment in an heir's expectancy is in the nature of "pecuniary injuries resulting from such death," N.J.S.A. 2A:31-5, we conclude that it is an element of damages for the jury to consider in this case, subject to appropriate expert evidence.” The court reversed and remanded the case.

The trial court had dismissed the estate’s claim for damages reflecting the estate taxes because they were “too speculative in nature.” It based its conclusion on the uncertainty, at the time, about whether the estate tax would resurface in 2010, and on the actuarial probability that the decedent would have lived beyond 2010. Nine days later, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 went into effect, prompting the estate to move for reconsideration. It argued that with the estate tax structure for 2008 through 2012 having been established, speculation was no longer a concern in the computation of damages, because the actuarial tables “suggested that [the decedent] would pass away during this time period.” The trial court denied the motion for reconsideration, concluding that the 2010 Act “did not cure the speculative nature of the impact of estate taxes because ‘the rights and liabilities of the parties are fixed as of the date of the tort or wrongful death.’ ”

The court noted that its research turned up only three reported state court decisions that addressed the status of estate taxes under wrongful death statutes. In Elliott v. Willis, 442 N.E.2d 163 (Ill. 1982), the court held that premature payment of estate taxes was not a recoverable loss in a wrongful death action because “[t]he test is a measurement of benefits of pecuniary value that the decedent might have been expected to contribute to the surviving spouse and children had the decedent lived.” In Farrar v. Brooklyn Union Gas Co., 537 N.Y.S.2d 26 (N.Y. 1988), the court held that federal estate tax credits that the decedent would have received had he lived longer could not be recovered in a wrongful death action absent express legislative authority.” In Lindsay v. Allstate, 561 So.2d 427 (Fla. Dist. Ct. App. 1990), the court held that the loss of prospective federal estate tax credits as a consequence of an insured's premature death was not an element of damages under the Florida Wrongful Death Act. Despite these decisions, the New Jersey court concluded that “they reflect neither the view of our Legislature nor the expansive scope of our wrongful death jurisprudence.”

In response to one court’s concern that “Trial strategies and tactics in wrongful death actions should not be allowed to deteriorate into battles between a new wave of experts consisting of accountants and economists in the interest of mathematical purity and of rigid logic over less precise common sense,” the New Jersey court stated that “The New Jersey Supreme Court does not share the view that providing expert tax opinions to juries on the question of pecuniary injuries injects impermissible speculation and conjecture in wrongful death actions.” In reaching this conclusion, the court was not swayed by the rationale provided for prohibiting computation of tax liabilities caused by premature death. That rationale is interesting:

Countless numbers of unknown and unpredictable variables for tax purposes alone include, as mere examples, future marital and family status, changes in rates, exemption and deduction provisions of overlapping tax codes. All sides to this issue would no doubt agree at least that this could produce much guesswork. So, a majority of jurisdictions have wisely stayed with a rule precluding evidence of after-tax income on the earnings damage issue to avoid "turning every negligence case into a trial [at least] of the future federal income tax structure" involving "a parade of tax experts[.]

Putting aside the question of whether a “parade of tax experts” in a courtroom is something undesirable that should be avoided, as the rationale suggests, why is it such a problem to the legal system to take into account future events that are not definitively calculable but that can yield damage computations when probability is taken into account? Consider, for example, the premature death of a youngster who had been drafted by a professional team but had not yet signed a contract. Is it not speculative to come up with a fixed number to represent the future earnings of the youngster? Would there not be a parade of actuaries, sports agents, professional athletic organization executives, to mention just a few? Why would adding tax experts to the parade be so horrible? According to the New Jersey court, it would not be.

As I tell my tax students, tax is everywhere. Attorneys who focus on wrongful death and similar litigation need to read this case. So do tax attorneys, who probably will be getting telephone calls and emails from their personal injury litigator friends. As I also tell my tax students, keep in touch with your classmates who decided to practice tax.

Doing the Math: Ignoring the Long-Term While Focusing on the Short-Term

In The Valuation Effect of Real Estate Taxes,while criticizing a purported proof of how real estate tax changes affect values, I remarked, that, “It’s a classic example of the tendency in the current national debates about almost every issue to focus on the short-term and ignore the long-term.” Another example of that sort of incomplete analysis has popped up in connection with a Pennsylvania legislator’s attempt to compel the Southeastern Pennsylvania Transportation Authority (SEPTA) to purchase buses running on compressed natural gas instead of diesel-hybrid buses.

According to this Philadelphia Inquirer story, Representative Stan Saylor asserts that “bad management” and “politics” are the reason SEPTA decided to purchase additional diesel-hybrid buses rather than CNG buses. Saylor rests his argument on one fact, namely, that a CNG bus costs $410,000 whereas a diesel bus costs $550,000. SEPTA officials, however, pointed out that more goes into the decision that simply the up-front, short-term cost differential. According to SEPTA, the CNG buses are “more expensive to maintain and operate, even though CNG is cheaper than diesel.” The National Renewable Energy Laboratory has concluded that CNG vehicles cost $1.29 per mile to maintain whereas diesel-hybrids cost 75 cents per mile. Diesel-hybrids out-perform CNG vehicles when it comes to fuel mileage, by a ration of 3 miles per gallon to 1.7 miles per gallon-equivalent, which brings the operating difference to $2.31 per mile for CNG buses and $1.41 per mile for diesel-hybrid buses. On top of this, the CNG buses do not provide any emissions benefits compared to diesel-hybrid buses. Purchases of diesel-hybrid buses are subsidized in part by federal grants, and it is unclear if those grants would be available for the purchase of CNG buses.

The kicker, though, is the cost of installing natural gas refueling stations at SEPTA’s eight garages. At $20 million each, the $160 million outlay chews up most of the $196 million “savings” that seemingly are available if SEPTA replaced its entire 1,400-bus fleet with CNG buses. I put savings in quotes and used the word “seemingly” because replacing all of the fleet makes no sense considering that hundreds of the buses have been replaced within the past several years or are under contract for replacement during the next two or three years, and because it does not appear that federal grant monies would be available for a wholesale turnover. Because the garages are in residential areas, the use of CNG also presents safety concerns, which could add to the cost of each garage, to say nothing of SEPTA’s insurance premiums and self-insurance set-asides.

To placate the Governor and legislators who are hawking natural gas as the economic savior of the state, and who are trying to compel public and private vehicle fleet operators to convert to CNG fuel use, SEPTA suggested that it would take its power plants that generate electricity to power its train lines and convert them to run on natural gas. That, however, did not satisfy Saylor, who claims he “did not believe SEPTA officials” who explained why it would cost more to convert to CNG vehicles. He harped on the fact that the cost of a hybrid-diesel bus is more than the cost of a CNG bus. Like the analysis that I criticized in The Valuation Effect of Real Estate Taxes, Saylor is looking at the short-term, the up-front present moment aspect of the situation, and ignoring the long-term elements. This is a common error, and is exploited by sellers who emphasize the sale price of an item that comes with a long-term contract that saddles the buyer with a higher overall cost than would have been encountered with the purchase of a more expensive item tagged with a less expensive service contract.

Aside from the financial literacy issue that resurfaces in this story, it is also important to pose a question about the tactics of those who are trying to force CNG use on public and private fleet operators. The folks doing this subscribe to the power of free markets, using that mantra to cut down all sorts of what they perceive as government interference in the private sector. Yet, when it comes to natural gas use, instead of sitting back and letting the free market do its thing, they advocate government interference. It’s clear why that is happening. A glut of natural gas has driven down its price, which has cut into the profits of the natural gas industry. It’s ironic, to use a nice term, to realize that Saylor has proposed legislation to spend $6 million in the Clean Air Fund to provide a subsidy to corporate buyers of CNG vehicles. Why is it that subsidies for health and public education are being chopped because of resistance to the notion of subsidizing people perceived as resting on entitlements but it’s acceptable to funnel money into the corporate private sector, which isn’t hurting for cash or profits? The answer is in a much simpler math principal, called campaign contributions.

The Valuation Effect of Real Estate Taxes

A real estate broker has presented a Real Estate Taxation Mathematics 101 that demonstrates how seriously financial illiteracy is harming the nation. The basic point that is made in the broker’s article is that real estate tax increases drive down the value of real estate and real estate tax decreases increase the value of real estate. The analysis through which this conclusion is reached fails to take into account the other factors affecting value, and presumes that all real estate is fully encumbered by debt.

Consider this proposition from the analysis. The broker writes:

First, you need to understand that residential real estate values are based upon what it will cost an average consumer per month to own a home. This number is called P.I.T.I, which represents – principle [sic], interest, taxes and insurance. Most real estate consumers are limited by the PITI limits set by the mortgage lenders. You cannot exceed your maximum PITI amount when buying a home. The PI (principle [sic] and interest) part of this number fluctuates with home mortgage
interest rates. The T – (taxes) fluctuates with the tax increases by the taxing authorities. The I – (insurance) is the most stable part of the PITI and is controlled by insurance rates. The combination of these three factors determines what a buyer can pay a seller for a home.

Has this broker never met someone who paid cash for a home? Has this broker never met someone who rolled over equity from a previous home? Has this broker never met someone who made a down payment on the home using cash from investments, gifts, inheritances, or other sources? The value of real estate reflects location, condition of the property, amenities, number of rooms, and the property’s energy efficiency, to mention just a some of the factors. The idea that “real estate values are based upon what it will cost an average consumer per month to own a home” is nonsense, for taken to its logical limit, all properties would be worth the same amount, reflecting a computation of an average consumer’s financial position.

The broker continues:

The big “T” in the middle of PITI represents our taxes. When this number goes up, the amount that we can spend of PI (principle [sic] and interest) automatically goes down. Since a buyer is limited by the PITI, a tax increase will decrease the amount of money that a buyer can pay to a home seller. When buyers can pay less, sellers will get less. A tax increase will decrease the value of real estate by decreasing what a buyer can pay for that real estate because of the PITI set by mortgage companies.

The first problem with this analysis is that it conflates examining a buyer’s position when acquiring a residence and examining the impact of real estate tax increases on existing owners. It is true that, all other things being equal, a prospective buyer considering two identical houses located in two different taxing jurisdictions, could conclude that the higher taxes in one jurisdiction makes the house located there more expensive than the other house, and perhaps, depending on the numbers, beyond the buyer’s purchasing capacity. The second problem with this analysis is the assertion that a tax increase reduces the amount available for principal and interest. That is not true for owners whose incomes have increased since the purchase.

The broker gives an example of how real estate tax increases allegedly reduce the value of properties:

The school district adds an additional $1,000,000 to the budget. This number is quickly divided by the average value of a home in the school district. Then that number is divided by twelve to get the cost per household per month. Before you know it, parents and teachers are asking if you really want to do away with sports program, music, after school programs for a measly $24 per household per month. The spontaneous answer is “no”. . . . Remember the measly $24 per month, per household tax hike we looked at in the beginning? If you take this little number and divide it by another little number, it leads to a much bigger number. In this case, we divide the $24 per month, by the $6 per month that was discussed above and that equals 4. That four represents $4,000 of purchasing power lost by a buyer and $4,000 of lost potential income for a seller. The question is now whether a buyer or seller is willing to throw $4,000 of home value into the pot to pay for the school programs. It looks a little different at this scale.

The flaw in this analysis is that it fails to take into account the property value increases that benefit a school district that, in contrast to others, institutes or retains an educational or extracurricular program. It also fails to take into account the economic value of education. When the broker’s hypothetical owner, who has supposedly maintained home value by successfully resisting real estate tax increases, decides to sell, that owner faces a greater risk that the pool of available buyers has vaporized because their increasingly watered-down education left them with little or no skills to offer the job market. It’s a classic example of the tendency in the current national debates about almost every issue to focus on the short-term and ignore the long-term. So when the broker announces, “That’s right; a $10 million dollar tax increase will decrease the value of real estate in the school district by $138 million dollars using basic real estate taxation mathematics,” he is leaving out the externalities, the positive impact of quality school districts on real estate values, and the long-term impact of improved education.

The broker then concludes that “The only other viable solution is the elimination of real estate property taxes.” Of course, he makes no suggestion as to what funding source would replace the real property tax. Perhaps he would do away with them entirely, leaving people without schools, local police, road maintenance, county courts, and all the other things funded by real property taxes. It is mind boggling to think that real estate values would soar in a township that eliminates all public services. If pressed, perhaps the broker would argue for some other sort of tax, and my guess is that it would be a tax that disproportionately afflicts those not in the real estate business. These considerations surely were a factor in Tuesday's decision by North Dakota voters to reject, by 76 to 24 percent,a proposal to abolish the real property tax.

Can the Philadelphia Real Property Tax System Be Saved?

The litany of posts that I have written about the Philadelphia real property tax is long. It began with An Unconstitutional Tax Assessment System, and continued with Property Tax Assessments: Really That Difficult?, Real Property Tax Assessment System: Broken and Begging for Repair, Philadelphia Real Property Taxes: Pay Up or Lose It, How to Fix a Broken Tax System: Speed It Up? , Revising the Board of Revision of Taxes, How Can Asking Questions Improve Tax and Spending Policies?, This Just Taxes My Brain, Tax Bureaucrats Lose Work, Keep Pay, Testing Tax Bureaucrats Just Part of the Solution, A Citizen Vote on Taxes, Freezing Real Property Tax Reassessments: A Nice Idea, The Tax Price of a Flawed Tax System, Can Bad Tax Administration Doom the Tax?, Taxes and Priorities, R.I.P., BRT, A Tax Agency Rises from the Dead, and Tax Law as Subterfuge: Best Use Valuation v. Current Market Valuation, How to Kill a Bad Tax System That Will Not Die?, The Bad Tax System That Will Not Die Might Get Another Lease on Life , Robbing Peter to Pay Paul, Tax Style, Don’t Rob Peter to Pay Paul: Collect Unpaid Taxes, The Philadelphia Real Property Tax: Eternal Circles , and most recently ended with A Tax Problem, A Solution, So Why No Repair?. But that is not the latest chapter in the everlasting story about tax administration gone awry.

Last week, as reported in this story, Philadelphia City Council approved two pieces of legislation that would deal with the real property tax problem. The catch is that the two bills are totally inconsistent. Council approved, by a vote of 11 to 6, the Actual Value Initiative that has been discussed in many of my previous posts on this issue. Council also approved, 13 to 4, a bill that delays implementation of AVI. So what’s it going to be? AVI or no AVI? At least the Council president admitted that the passage of both bills means nothing, except that the debate continues. Some members of Council admitted that they haven’t decided what they want to do.

While those initiatives were wallowing in the morass of legislative maneuvering, Council also amended the first bill to create an exemption of $30,000 so that the tax would apply only to the excess of value over $30,000. A first reading was given to another bill that caps market value increases in neighborhoods where values have soared. Though one member of Council tried to share some calculations showing that the tax rate would be $1,810 for each $100,000 of value, others pointed out that the computation cannot be final until the total value of property in the city is taken into account. The snag is that no one knows that number because the reassessment process is not finished.

In the meantime, as Philadelphia’s politicians struggled to implement a system that numerous other jurisdictions have been using, another story reported that accumulated unpaid real property taxes had increased by $43.8 million to an aggregate total of $515.4 million. Those delinquencies are spread over 103,000 properties, which is about 18 percent of the total properties in the city. So in addition to not having in place a realistic assessment system, the city also struggles with flaws in the delinquent tax collection process. That the blame cannot be put solely to the pockets of impoverished neighborhoods in the city is demonstrated, at least in part, by the fact that cities with higher levels of poverty, such as Detroit and Cleveland, have lower delinquency rates. The blame is on a system that fails to set firm deadlines for collection, that lets unpaid tax bills collect dust in some file cabinet, and that tolerates 2,100 properties on which taxes have not been paid for 30 years or more.

Legislators in the state capital and in the city have proposed solutions that would require initiation of foreclosure actions once a tax bill become one year delinquent. Another idea is to establish a land bank that would take title to properties on which taxes are unpaid. The downside to the land bank concept is that the city would be responsible for maintenance and would be exposed to liability for injuries and other problems caused by derelict properties. The city has proposed some bureaucratic refinements, but none seem to address the problem head-on. Perhaps the city should be given the power to levy on the assets of property owners who fail to pay their taxes. Although in some instances those taxpayers have nothing much in the way of other assets, some of them have accumulated other properties and investments, perhaps in part because they are not paying their tax obligations.

If a workable solution is not designed and implemented quickly, the delinquency crisis will snowball into a catastrophe that will make the AVI issue a matter of deciding who closes the barn door after the horses have escaped. If doing the right thing means angering campaign funding contributors and ending up as a one-term legislator, so be it. Sometimes the price of putting public duty in first place is high.

Practical Impacts of Supreme Court Tax Decision

The facts are simple. For many years, when the city of Indianapolis wanted to build or reconstruct sewers, it divided the cost equally among all properties adjacent to the project. The city issued an assessment against each property, and the owners had a choice between paying in full or spreading the payment over time in installments. In 2001 the city started a project that affected 180 home owners. When assessed, 38 paid the full amount, and the others chose to pay in installments. In 2002, the city changed the manner in which it financed these projects by issuing bonds. The City’s Board of Public Works passed a resolution that wiped out the obligation of home owners to make any additional installment payments, including payments that were in default. No refunds were issued to the home owners who had paid in full at the outset. The 38 home owners who had paid in full asked for a refund and were rebuffed. Of the 38, 31 sued the city in state court, claiming that it had violated the equal protection clause of the U.S. Constitution.

The trial court granted summary judgment to the homeowners, and the Indiana Court of Appeals affirmed. However, the Supreme Court of Indiana reversed, holding that the distinction between those who had paid in full and those who had not paid in full was rationally related to its legitimate interest in reducing administrative costs, providing financial hardship relief to home owners, transitioning from the old financing system to the new one, and preserving its limited resources. The United States Supreme Court granted certiorari, and affirmed the decision of the Supreme Court of Indiana.

The Supreme Court held that denying the refunds to the taxpayers who had paid in full created a classification that does not involve a fundamental right or suspect classification, does not discriminate against interstate commerce or new residents. Accordingly, all that the city must show is “any reasonably conceivable state of facts that could provide a rational basis for the classification.” The Court concluded that the city’s decision to stop collecting unpaid assessments owed under the former financing arrangement was rational because trying to collect those debts might have turned out to be complicated and costly. Similarly, the Court concluded that issuing refunds would have burdened the city with the administrative cost of issuing refunds.

Constitutional law scholars have started to, and will continue to, debate the soundness of this decision from the perspective of Constitutional law issues. See, e.g., Taxation and Orwell’s Animal Farm (describing the decision as a “travesty”); How Convenient (characterizing outcome as “lamentable setback”); SCOTUS Likes “Moral Hazard” — Conscientious Property Owners Get Screwed Again; Armour v. Indianapolis: “Money Down the Sewer” (majority opinion “avoided the specifics and spoke in generalities”); SCOTUS: Property Owners Who Paid Sewer Assessements In Full Are Fools.

At the same time, practitioners who advise taxpayers, and taxpayers fending for themselves without the assistance of professional expertise, need to learn a lesson. As Paul Larkin pointed out in Armour v. Indianapolis: “Money Down the Sewer”, “The Armour case is a minnow in a sea where whales like the Obamacare and Arizona immigration cases are swimming. Few people will be affected by the decision; fewer will read it; fewer still will care. But even small cases can teach us a big lesson.” The big lesson, though, is not that the public treasury is a black hole, as Larkin suggests. Instead, it is a bifurcated guideline. First, anyone who pays taxes or any other government fee in full when the option exists to pay in installments is foolish, because one never knows when a government will imitate the politicians running the city of Indianapolis. Second, anyone negotiating for payment from a government for services rendered or materials to be supplied needs to push for as much payment up front as possible, because politicians who do what the city of Indianapolis did are just as likely to cancel future payments on contracts under which goods and services have been delivered.

There’s an even bigger lesson to be learned. It is a notion that could bring about the fall of the very governments that shelter politicians who think nothing of behaving as did those who run Indianapolis. When governments grant tax amnesty relief to delinquent taxpayers, they don’t make adjustments for the compliant taxpayers who paid in full, on time. Will increasing numbers of taxpayers gamble on the chance of future amnesty and conclude that paying on time, in full, is no less foolish than hindsight taught those 38 Indianapolis home owners that their decision was the unwise choice? Are increasing numbers of taxpayers already embarking on that path? Are short-sighted politicians inadvertently encouraging the nonpayment of taxes by rewarding those who don’t pay as did the brilliant public servants of Indianapolis?

And as for the nonsense about the cost of refunds and the cost of enforcing payment of the outstanding installments, I offer two propositions. First, the cost of enforcing payment of the outstanding installments was a cost to which the city committed to the installment payment option. Second, the cost of issuing refunds is minimal. This nation, from its capital down to its small towns, is rapidly becoming a place where public servants are putting the public second, or third, or last, and are making idiotic decision after idiotic decision. But if voters keep putting these folks back into office, or tolerating the judicial decisions that permit faceless, international corporations to purchase public office, voters will continue to get what they ask for in the voting booth.