How Not to Argue for Repeal of a Deduction

Thanks to Paul Caron and his TaxProf blog for pointing out the Washington Post [free registration site] story about the emergence of economic theory as the principal rationale for anticipated Administration plans for tax law changes. I am particularly fascinated by the discussion with respect to the income tax deduction allowed to employers for employer-provided health care insurance. The rumor mill suggests that this deduction is one of those that the Administration will suggest repealing in order to pay for additional tax savings benefitting those who save rather than spend. Generally, those who save rather than spend are of two types: those who have run out of things to buy and invest the remainder of their income, and those who sacrifice and do without so that they adhere to the discipline of setting aside something for the future even though there are pressing present needs and wants.

To justify repeal of the deduction, the Administration is introducing us to economists who argue that the deduction favors employees of companies that pay for health care, and that the deduction encourages payment of premiums for health care insurance covering expenses for routine care rather than only catastrophic problems. The chair of the White House Council of Economic Advisors refers to "standard economic theory," "textbook economic theory" and "scholarly literature in economics" when advocating this and other changes.

People who know me know what I think of theory: it is useful as an incentive to creativity, so that people are encouraged to try things. If it works, fine. If it doesn't, hopefully no one has been killed or maimed. The difficulty is that some theories, such as those affecting tax and the economy, are a wee bit trickier to test than is, for example, the theory that traffic circles are safer than four-way-stop-sign intersections. The latter can be tested by fooling with one intersection. Tax law doesn't permit disallowing the deduction for a few random companies, and the closest one comes to a tax laboratory is the experience of a state with a comparable tax system that tries out someone's idea.

Let's think about the theoretical arguments raised in favor of repealing the employer deduction for providing health insurance to employees. Does it favor employees of companies that pay health insurance premiums? Yes, it does. The deduction reduces the net cost to the employer of the health insurance premium. To offset this advantage, however, the tax law contains deductions for individuals who are not covered by employer health care insurance. One question thus becomes one of determining, through empirical analysis, whether the savings achieved by the employer who pays for health insurance premiums passes those along to the employees in the form of higher salaries or other benefits. Another question requires empirical analysis of salary and other benefits earned by employees of companies paying for health insurance and employees of companies not paying for health insurance. Has any such study been conducted? Are its results being publicized to support the claims made by the advocates of repeal and the advocates of retention?

Does the deduction encourage the payment of higher premiums? It depends on what sort of theory one applies. The theory that is advanced answers in the affirmative. But another theory says that employers seek to reduce costs. That theory, by the way, has been proven. A deduction saves an employer a fraction of the cost. Thus, if the premium is $100, the employer continues to seek identical coverage for $90. Why? Because even with a deduction, the net cost of the $90 premium is less than the net cost of the $100 premium. The "employers spend more because of the deduction" theory makes sense if the government were fully reimbursing the employer, directly or through an unlimited and refundable tax credit, because then, and only then, would the employer (at least in theory) conclude that price is no object because someone else is paying.

The theory advanced in support of repeal suggests that deductions for the cost of routine medical care are somehow less beneficial to the economy than deductions for the cost of catastrophic illness. The Economic Report of the President states:

If automobile insurance were structured like the typical health policy, it would cover annual maintenance, tire replacement, and possibly even car washes....health insurance markets can be improved . . . [to] focus on large expenditures that are truly the result of unforeseen circumstance [and] to provide a more standardized tax treatment of all health care markets.

What nonsense.

Automobile insurance covers theft and collision. If automobile insurance were structured like health insurance it would pay for the cost of the annual safety inspection, medical examinations for drivers similar to those given to airline pilots, and anti-theft devices. Well, guess what? Although automobile insurance companies don't pay for the annual safety inspection (perhaps because the cost is so low it can be considered comparable to a co-pay or deductible), automobile insurance companies invest in the development of safe vehicles, road improvements and hazard removal, anti-theft device research and development, and a wide array of programs designed to reduce the frequency and severity of automobile accidents. Of course they don't pay for car washes, and health insurance companies don't pay for nail clippers. Likewise, automobile insurance companies don't pay for auto maintenance, such as changing engine oil and transmission fluid, because automobile insurance companies don't pay for the replacement of engines or transmissions that fail because of lack of care. In other words, the comparison made by these theoreticians sounds nice and makes a nice sound bite but it is so flawed that I wonder where they learned to develop analogies. Surely not in one of my law courses, where the ability to make good analogies enhances teaching and learning and bad analogies do so much damage that one quickly learns the difference and avoids the latter.

From the perspective of doing what is best for the economy and for people, the ideal approach is to minimize the need for, and the cost of, medical care. The best way of doing this is to consider that "an ounce of prevention is worth a pound of cure" and to understand that the dollars expended on annual physicals are cheaper dollars than those spent on surgery. If health insurance pays for some or all of the cost of preventive care, people are more likely to get that care than they are if they must pay the entire cost. This isn't theory, it's been empirically demonstrated. Of course there are people who don't get preventive care even when it is covered by insurance, but their reasons for avoiding the doctor visit aren't economic and require some other incentive.

Any argument or theory that considers payment for preventive care to be less deserving of subsidy than payment for catastrophic injury is an argument or theory destined to saddle the economy with even more health care costs. Discouraging preventive care will increase health care costs because health problems will be discovered at later stages, when cures are more expensive, care is more expensive, and adverse impact on life is more expensive.

This, too, is empirically clear. Repeal of the deduction would cause employers operating on the margin to terminate health care coverage for employees, unless the subject of collective bargaining. And in that case, the next round of negotiations would be even more combative than they've become recently as employers try to balance health care cost allocation.

Perhaps the theoreticians believe that people will seek preventive care simply because it makes sense to do so no matter who is paying. That's true. People will seek preventive care but some won't get it because they won't have the economic resources. Unlike those who would simply dip into the "leftover" income that otherwise would be invested, these folks would need to cut back on something. Perhaps they would cut back on the dollars spent for DVDs and X-box cartridges for the children. Perhaps they would cut back on food for the children.

Critics of the crtics claim that the critics tend to dismiss the intellectual merit of the Administration economic policies, and that the criticism ignores how well the economy is doing. The health care segment of the economy is not doing well, and anyone who sees intellectual merit in the horrendously flawed analogy between health care insurance and automobile insurance is....well, I'll let readers of this blog finish the sentence.

The Problem That Will Not Die Gets a Biopsy

And someday, when all is done, an autopsy will follow.

According to a report released this morning, the person who inserted into the appropriations bill the now infamous and highly spotlighted provision giving staff of the appropriations committees the right to see tax returns without being subject to the privacy restrictions that apply to members and staff of the revenue committees has stepped forward and identified himself. Richard Efford, who has been on the staff of the House Appropriations Committee for almost two decades, explained what happened.

Efford is the senior staff member of the House Appropriations subcommittee with oversight responsibility for the IRS budget. Congress has appropriated more than $1 billion for IRS computer system upgrades. Efford claimed that his responsibility included the need to inspect the IRS use of its upgraded computer systems, and that to do so he had to visit IRS facilities to see how computer systems were being used and whether there was a need for continued increases in funding of tax collection efforts.

But when Efford tried to visit IRS facilities, the IRS objected. IRS officials explained to Efford that if a taxpayer's return information was on a computer monitor when he was in the room there would be a violation of privacy safeguards. The officials suggested that Efford get authorization from one of the revenue committees that has regulated access.

Efford explained that he thought there was no reason for a member of Appropriations Committee staff to "have to go beg" a revenue committee for permission to visit a facility where taxpayer returns were visible. When Efford told his story to other members of the staff, from both parties, one replied that he had encountered the same IRS objections.

Efford's solution? He wrote an amendment that would give him and the other staffers the same IRS inspection rights as the staffers on the revenue committees. Except that it left out the privacy protection provisions. That proposal went nowhere because of the risk that the chair of the Ways and Means Committee would react adversely to intrusions into his areas of responsibility.

Efford then turned to the IRS and asked for a statutory amendment that would resolve the objections that the IRS had to visits by Appropriations Committee staffers. The IRS changed "one or two words" in the language that Efford had drafted. The IRS did not add any privacy protection provisions.

Efford then inserted the language into the appropriations bill. It gave the chairs of the appropriations committees the power to designate committee staff who could "access ... Internal Revenue Service facilities and any tax returns or return information contained therein."

No one noticed the insertion because members and staff were busy negotiating and drafting other parts of the appropriations bill, one of the few pieces of legislation to challenge tax legislation for the "humongous" award, as it contains more than 3,000 pages. When asked about the provision, Efford and other staffers simply said that it was good because the IRS provided it. Apparently nothing was said about the fact it was Efford's language that had been run past the IRS with almost no changes.

Because of lack of sleep brought about by the need to work until the wee hours of the morning, no one noticed any problems. They thought it would be covered by standard language in the bill that states "the Internal Revenue Service shall institute and enforce policies and procedures that will safeguard the confidentiality of taxpayer information."

Yet at least one staffer saw a problem and sent an e-mail suggesting that a clarification made sense because otherwise someone would read the provision as letting staffers go look at other people's returns just "for grins." So they put into a separate report an explanation that the provision was intened to "streamline oversight" of the IRS.

Efford did not inform any member of Congress before he put the provision into the bill. He told Representative Istook, to whom he reported, about the provision, but after it was too late to change anything. Efford explained that the staffers saw the provision as "housekeeping" that would help members of Congress but that did not need to be brought to their attention. Efford also claimed to be "dumbfounded" by the controversy.

The story has several salient features that deserve highlighting and that corroborate accusations that the legislative process in the Congress is a mess.

1. What is so wrong with a staff member of the Appropriations Committee having to ask for permission from the Ways and Means committee chair to inspect IRS facilities? The point of asking permission is to bring the staff member within the privacy provisions. Why is asking permission such a problem? Concern that it would be denied for a good reason? Even more proof that asking permission makes sense. Concern that it would be denied for a wrong reason? At that point the member of the Appropriations staff could approach the chair of the Committee and let the matter be decided as it ought, in a dialogue between the elected representatives chairing the respective committees. Could it be that the problem is one of ego or convenience? Certainly. It is inconvenient to ask permission, but we learn as children (or should learn) that when it is necessary to ask for permission we do so, and we give the person being asked sufficient time to consider the request so that the response is timely. In an e-mail world, it really isn't inconvenient to ask permission. What it comes down to is ego, and that is a huge problem in the operations of Congress and much of the rest of the government. Concern over "saving face" or protecting ego too often ends up trumping doing the right thing. I speak from experience when I make the assertion that personality intrudes way too much into the decision making processes in the government. Public servants are supposed to serve the public.

2. The wickedly bad habit of leaving things go until the last minute, a trait shared by too many people inside and outside of government, generates mistakes, carelessness, and bad judgment fueled by stress, time shortages, and lack of sleep. The need for an Appropriations bill isn't a surprise. Legitimate emergencies happen, and those who need to deal with them do the best that they can even if there is a time shortage, a ton of stress, and sleep deprivation. The blame here lies with the Congress. Perhaps because a majority of the members of Congress are lawyers they bring with them the bad procrastination habit that law students demonstrate and that I find the most challenging to break. The "cram at the end" syndrome, encouraged by faculty who don't shift grade-contributing work into and throughout the semester, fails to teach the lesson that procrastination is bad far more often than it lucks out as a good choice. Cramming at the end fails to teach the lesson because most examinations aren't designed to exact a grade price from the procrastinators. Toss in the manipulators, those who delay the process in the hope that the time shortage late in the year will get others to cave in to the demands of the manipulators, and it's easy to see why something everyone knew needed to be done suddenly needs to be done yesterday. So by the time they get to the Congress, the procrastinators, joined by the manipulators, overwhelm the few members that want to approach government the way successful business entrepreneurs approach business, and turn the legislative process into an inefficient, and in this instance, dangerous process.

3. The Congress, not the staff, is responsible for its legislation. The Congress is so involved in so many things, an effect of 60 years of expansion of federal roles in more and more areas of life, that members cannot keep track of everything that is moving through the legislative pipeline. Most members of Congress do not read most of the legislation on which they vote. Only the high profile stuff gets some attention, and even then, it's a few provisions and not the entire package. Members of Congress have been known to write to the Treasury Department for copies of tax legislation. In this sort of environment, who's managing the legislation? Again, unless it is a high profile provision, it usually falls to the staff of the committee responsible for the bill. Who safeguards the bill from the staff? Apparently, the staff. That's a system that opens the door to the sort of fiasco that happened with the tax return access provision under discussion. There's a reason that lobbyists not only try to buttonhole members of Congress but develop relationships with members of the staff. The lobbyists know that there's hope in trying to get a staff member to tweak the language of a provision to which a member of the Congress has agreed in general principle. The devil is in the details, and the details are under the supervision of the staff.

At least some members of Congress are aware of the problem. Whether they can get this in front of the public and bring about pressure to have the system repaired remains to be seen. Senator Kent Conrad, a Democrat has stated, "Something really seriously bad is going to happen if we let this continue." Sen. John McCain, a Republican has added, "This process is broken."

Indeed it is. Perhaps now all the folks who thought I was hyperbolizing when I predicted this (and worse) would happen can begin to understand the reality. There is a huge chasm between the theory of the Civics classes that once populated every high school and the practices in the halls of government. Chasms of that sort invite disruption and unrest.

So let's hope Congress fixes this, takes a bipartisan approach, and does a better job than it did with the campaign funding issue.

Tax=Science? In this Respect, Maybe Yes

A story in the Chronicle of Higher Education, Weakened Role of Science Advisers Creates 'Crisis' From White House to Capitol Hill, Report Says [subscription site] begins with this lead paragraph:

The process through which Congress and the executive branch receive scientific advice to make critical decisions is in a "state of crisis" that could result in poorly designed programs and costly mistakes, according to a report released on Thursday by the Federation of American Scientists.

All one needs to do is substitute the word "tax" for "scientific" and the phrase "just about everyone who understands the tax legislative and administrative processes" for "a report released Thursday by the Federation of American Scientists." It would read as follows:

The process through which Congress and the executive branch receive tax advice to make critical decisions is in a "state of crisis" that could result in poorly designed programs and costly mistakes, according to just about everyone who understands the tax legislative and administrative processes.

Inquiries from foundations willing to fund a study to prove this proposition are welcome.

No IRS? Really? Uh, Guess Again.

Here we go. According to this report, White House officials attending a Richmond, Va., meeting of Congressional Republican leaders setting the agenda for the next Congress are floating the "national sales tax" idea. Perhaps it's like any trial balloon, see if anyone pays attention before getting too deep into the project.

But here's the weird part. The report states: "President Bush and House Speaker Dennis Hastert have both said the idea of a national sales tax deserves a serious look. For many, the idea of a world without the Internal Revenue Service is very seductive."

Who said, "For many, the idea of a world without the Internal Revenue Service is very seductive." I would like to contact that person and ask the following question:

Can you identify a state sales tax that is imposed without the authority, regulation, and administration of a government tax/revenue agency or department (no matter its name)?

The answer, I already know, is "Uh, well, um, ...." That's because a national sales tax would still be generating REVENUE, and it would be INTERNAL, so the agency administering or servicing it at the federal level would be...ta da... the INTERNAL REVENUE SERVICE. Oh, they could come up with some other name, but a federal tax agency is a federal tax agency, and you can't have a national sales tax without one.

So, listen, advocates of a tax that has disadvantages and flaws worthy of discussion in the future if this thing actually gets off the starting blocks, try advocating your project by selling its strengths. Don't mislead people into thinking that the IRS (whether or not renamed) would disappear.

Perhaps the person intended to say "For many, the idea of a world without the Internal Revenue CODEis very seductive." Well, where would the statutes enacting the national sales tax go? Duh, where ALL the taxes go: the Internal Revenue Code. So, nah, even if they meant "Code" and not "Service" they still wouldn't get it.

Right, that is.

Gee, I'm picky, aren't I? No wonder my students think I'm demanding. Yes, I'm demanding accuracy and honesty. After all, life, clients, good science, common sense, they're all demanding. We, the citizens, deserve accuracy and honesty. Ask for it.

Blogging as Scholarship? Yes, Indeed

Tyler Cowen's musings on the scholarly content of blogging are definitely deserving of the two minutes it takes to read through them. It is the best compilation I've seen to date of the reasons law blogs can, and in certain instances, ought to be treated as legal scholarship. The days of the student-controlled, student-edited, untimely, narrowly circulated, limited production, paper academic law journals hopefully are limited. And if blogging contributes to their demise, I will shed no tears.

Tyler Cowen also makes some good points about how to read a blog, especially the benefits of treating a blog holistically rather than as a collection of separate postings. Readers of MauledAgain surely recognize that recurring themes illuminate my postings, even though I try to juggle about two dozen topics in a typically Maule pattern of multi-tasking (or is it multi-threading?). Someday I'll collect the posts on a selected topic, stitch them together, and publish it in what hopefully will be a digital journal that is timely, reaches tens of thousands of tax practitioners and others, and benefits from the comments readers of the blog have shared.

Partnership Taxation: The Quantum Physics of Law?

Someone on a tax listserv asked for help finding a quotation from a court opinion about the challenges of partnership taxation. It was one of those "I remember having seen it but can't find it" situations. Another subscriber came through. It's worth sharing.

From Foxman v. Comr., 41 TC 535,551 (1964), Judge Raum, one of the most brilliant Tax Court judges and tax lawyers I've met, wrote in footnote 9 (long before I met him and long before tax was in my brain) the following paen to partnership taxation, the statutory provisions for which are in subchapter K of the Internal Revenue Code:

The distressingly complex and confusing nature of the provisions of subchapter K present a formidable obstacle to the comprehension of these provisions without the expenditure of a disproportionate amount of time and effort even by one who is sophisticated in tax matters with many years of experience in the tax field.

That was 40 years ago. I wonder what Judge Raum would write if he were alive and writing today. During those 40 years subchapter K has almost doubled in size and quintupled in complexity. In 1964 there was no substantial economic effect rule (nor its regulations) (section 704(b)], a much simpler and optional contributed property allocation rule (section 704(c)), no disguised sale rule (section 707(a)(2)), no rules for the characterization of gain on the disposition by the partnership of contributed property (section 724), no exception to the exception to the exception to the liquidating distribution sorting rules (section 736(b)(3)), no "marketable securities as cash" rule (section 731(c)), no mixing bowl transaction prohibition rules (sections 704(c)(1)(B), 737), and no large partnership rules (sections 771 et seq). I probably forgot something. And of course, the regulations have quintupled in size and whatevered in complexity, in part because of the additions to the statute, and in part because of IRS attempts to deal with issues Congress hasn't addressed (yet), such as the anti-abuse regulations and the check-the-box regulations.

No wonder even LL.M. (Taxation) and M.T. students in the Graduate Tax Program consider Partnership Taxation to be the most challenging course, and one that some fear and that for others generates intensive anxiety. And the J.D. students who have the courage to enroll in Introduction to the Taxation of Business Entities? They rate it the most difficult course in the J.D. curriculum.

Most difficult. To take as a student? How about to teach? My offer to swap either course for Property, Contracts, Family Law, etc., etc., remains unaccepted. That's no surprise. To be fair, I wouldn't swap for Constitutional Law, because I happen to think that course is most challenging, because it is so different from the structured arrangement of tax. Slippery slopes are dangerous, whether on skis, in a car, or in a Con Law classroom (on either side of the podium). One never knows what's at the bottom.

More on Per-Mile Road User Fees

This from a reader on the per-mile road user fees being proposed as replacements for state gasoline taxes:

Great post on user fees:
[referring to previous post]

While generally sympathetic to user fees, I am concerned about the
impact on less wealthy persons. My concern is not that user fees are
regressive per se, but rather that less wealthy persons will bear the
burden of user fees because of other, structural, reasons including
distance traveled. As an example, my employer lives 2 miles from the
office. I live 20 miles from the office. I would have to pay 10 times
the user fee that he does, yet I do not make anywhere near 10 times the
income that he does. Indeed, he makes about 5 times my income!

What is the solution to this problem? I cannot move any closer because
I simply cannot afford housing near my job site (or any location in
between). This is also true of my 3 similarly-paid co-workers. I
suppose I could get a new job, but that's not feasible. It's not that I
*want* to drive on the roads - I'm about to purchase a road bike to
ride to and from work on the nights that I don't have law school - but
rather that I cannot afford to live close to where I work and thus have
to drive to get there! This problem seems to be a large hurdle to
implementing user fees. Why should I have to pay for the roads when
there is practically nothing I can do to avoid using them? Perhaps
there is some way to distinguish driving to work and driving for other
tasks?

Your thoughts are appreciated.

My reply:

Thanks for your comments.

The gasoline tax generates the same discrepancy.... with the variable being fuel efficiency. If you and your boss get the same MPG you are paying five times the gasoline tax than he is. If he can afford a newer, more efficient vehicle then you may be paying 8, 12 , 20 times the gasoline tax than he is. Of course, if your vehicle is more fuel efficient, you pay disproportionately less gasoline tax. Studies show, though, that the lower the income, the older and less fuel efficient the vehicle. So as a general proposition it could well be that the per-mile user fee, though regressive, is less regressive than the gasoline tax. Of course, there will be individual cases where it plays out differently, but the comparison is best made in toto rather than by singling out the exceptions.

One other variable: your boss may use his car for other activities more than you use yours. He may need to drive more miles going to some place in the other direction. You may be closer to the stores than he is, or closer to you gym. How it plays out in an individual situation doesn't necessarily tell us how it plays out in toto.

I guess it was a good reply, for this shortly followed:

Yes, of course, the variable of fuel efficiency! I completely missed that step. I am now sold.

This could be an idea that catches on. I'll keep you posted.

Tax Meets Technology on the Road

So what does it mean when a person who favors GPS-based highway per-mile taxes (user fees?) is appointed as Director of the Department of Motor Vehicles in the country's most car-dependent and perhaps car-loving state? Well, if the appointing governor hasn't yet backed the idea, which is the case, it means that even if the idea isn't a certainty, there is a good possibility that it could become reality if the legislature and the governor can be persuaded of its advantages. And yet already the disadvantages are being hung out for viewing.

Similar proposals have been made in the United Kingdom and in Oregon. Read on, because this is an idea that could get hot quickly, in a lot of places.

How does it work?

It simply involves a GPS tracking device in every vehicle. The miles that are driven are reported to a state agency, and a tax, or fee, is imposed for each mile driven. The existing state gasoline tax would be repealed.

Advantages? It provides a steadier revenue stream than the gasoline tax, proceeds from which are expected to decline as drivers invest in fuel-efficient and alternative fuel vehicles. The technology can distinguish among the types of roads used, so it's possible to charge higher per-mile rates for more congested highways, thus giving drivers an economic incentive to use alternative routes. Rates could vary by time, thus providing economic incentives to travel at off-peak hours, though my during my California driving back in 2003 I found it difficult to identify "off-peak" times. I'm told 3 in the morning in some areas is "off-peak." It charges energy-efficient and alternative fuels vehicles an amount that reflects the burden they impose on roads, something not happening under the gasoline tax.

Disadvantages? It removes the "gasoline tax avoided" benefit enjoyed by those now using alternative fuels vehicles. It doesn't distinguish among types of vehicles, and differences in road damage that they cause, although arguably that could be adjusted by setting the per-mile rate at different amounts depending on the weight of the vehicle (and if you think that's not a difference, think again: a large truck does the same damage to a highway as does 10,000 cars). Within days of implementation, the market for devices thwarting the tracking system would be booming (just imagine the new flurry of spam in our email inboxes: "AVOID CALIFORNIA ROAD TAX WITH GIZMO FROM NIGERIAN BANK DEPOSIT BOX HEIR" or something like that). The tracking system would provide details on the location of, and routes taken by, every vehicle in the system, something that worries privacy advocates.

What happens when a person drives into California with an out-of-state vehicle? They no longer would be taxed for their road use when they fill up at the pump. Would California tax California vehicles when they are driven out of state? The technology would permit that to occur. Would the legislature do that in order to offset revenue losses caused by nonresident tourists no longer paying a gasoline tax?

One variant of the system has the tracking device send information to the gasoline pump or other fuel dispenser, which adds the tax to the product cost, thus eliminating the need for the information to be sent to a state agency. But, digital data is digital data. It exists, and surely the government would have access if it wanted to have access.

It's technology makes it possible. And technology scares many people. That which is not understood is far more likely to generate fear than that which is understood. Because so few people truly understand what GPS can and cannot do, all sorts of evil and horrible scenarios can come to mind. Of course, what constitutes evil and horrible depends on who's imagining the possibilities.

EZ-Pass has been in use for several years, and it tracks the passing of vehicles through toll booths. In theory, the system can be used to calculate average speed, and absent a rest stop, the 40-minute 80-mile run could be detected, and speeding tickets issued. So far, that hasn't happened and EZ-Pass officials claim there is no such intent.

Personally, I don't care that my vehicle would be tracked. I don't go anywhere that would interest anyone. I don't do 80-mile runs in 40-minutes. Being tracked could be just as advantageous (proving I wasn't somewhere at a specific time) as disadvantageous (proving where I was at a given time). But I understand that some people are very nervous, just as they are about traffic cameras, pedestrian cameras, security cameras, and all the other "big brother is watching you" stuff that exists and that is on the drawing board. Did I mention implanted RFIDs? (Those are radio frequency identification devices, which can be used to track people and not just vehicles).

But I like the idea of charging a user fee (to use the correct term) that shifts the costs to those using the resource. Will implementation be challenging? Yes. So, too, will be the legislative drafting. Exceptions? Probably the same vehicles that presently get gasoline tax exceptions. What's the point, after all, of the state charging itself for fire engine use of the highways? I'll argue with myself: The true cost of operating the fire engine or other state vehicle includes the road damage it causes and road maintenance it requires (think snow plowing), and thus the per-mile user fee should be charged to state vehicles so that their costs can be in turn shifted to those who should pay (such as folks charged for false fire alarm calls).

Such a fee is regressive. It is imposed without regard to income. The short answer is that the gasoline tax is regressive. So replacing the gasoline tax with a per-mile user fee doesn't make things worse. But would it provide a chance to make things better? Perhaps, but is this the place to take that chance? In theory, folks with lower income purchase cheaper (and lighter) cars, and thus would benefit if the per-mile user fee also included a weight factor. This is an interesting contrast to the clean air problem that surfaced when officials realized that lower income people often purchased used vehicles that lacked proper emissions controls, and that they would face remediation costs not borne by those purchasing newer models. Imposing clean air fees on polluting vehicles fell disproportionately on the poor, making it an even more regressive fee.

Keep in mind that rejecting all fees and taxes that are regressive is counter-sensical. Anything purchased by or paid by a person with less income will consume more of that person's income than will the same item purchased by a person with higher income. The fact that a person with lower income pays more of the income for food, clothing, per-mile user fees or gasoline taxes, and similar items doesn't make the price of those items per se wrong. There are other, better ways, to fix the income deficiency problem.

Thanks to Declan McCullagh of Politech for passing along this story.

College and Graduate Students Beware

The recent changes made by the Congress to establish a uniform definition of "child" for federal income tax purposes included a revision of the statutory provisions defining dependent for purposes of the dependency exemption deduction. I outlined these changes in my "Redefining Children" posting about a month ago.

A closer scrutiny of the new statutory language, encouraged by a question from a perceptive student in the basic tax course I teach, raised an interesting question. Did Congress inadvertently, or intentionally, change the substantive dependency exemption rules when it was ostensibly conforming the language to reflect the new uniform definition of child?

About the same time that the question was posed to me, a similar question popped up on one of the listservs to which I subscribe. The consensus response was "probably not." I think that's right, but in some situations the facts may be such that the outcome differs.

The problem arises for college and graduate students (and in theory, preparatory school students) who live at or near the school rather than with their parents or other support-providing taxpayer. I will refer to the parents as the support-providing taxpayers since in most cases it is the parents who provide the support. The problem exists when the child has more gross income than the exemption amount, which for 2004 is $3,100.

Under the old law as applied to 2004, parents who provided more than one-half of the support of a child were entitled to claim a dependency exemption for the child if the child's gross income was less than $3,100 OR, if the child had gross income of $3,100 or more, had not yet attained age 19, but if the child had attained the age of 19 the dependency exemption was available if the child was a full-time student who had not yet attained the age of 24. So a 19-to-24-year-old child who went off to school, whose parents provided more than one-half of the support, and who earned $3,100 or more would generate a dependency exemption deduction for the parents.

Under the new law, the parents are entitled to a dependency exemption deduction for a qualifying child. A qualifying child is a child who does four things:

(1) the child must satisfy a relationship test, and in the situations being discussed that’s not an issue, because the child by definition satisfies the relationship test.

(2) The child must have the same principal place of abode as the taxpayer for more than half the year, and we will return to this in a moment.

(3) The child must meet age requirements, which in the situations being discussed are unchanged.

(4) The child must not provide more than half of his or her own support for the calendar year in which the parents’ taxable year begins, and again, in the situations being discussed, this is not an issue, for if the parents are providing more than one-half of the child’s support the child, logically, is not providing more than one-half of his or her own support.

If the child does not have the same place of abode, the child can qualify as a dependent by being a qualified relative, but to do so the child’s gross income must be less than $3,100, and there are no age exceptions to that requirement. Thus, if the child has $3,100 or more of gross income, the parents lose the dependency exemption deduction unless the child meets the “principal place of abode” requirement.

So it’s that “same principal place of abode as the taxpayer” requirement that can be an issue. THAT REQUIREMENT DID NOT EXIST UNDER THE LAW AS IN EFFECT BEFORE THE WORKING FAMILY TAX RELIEF ACT OF 2004 CHANGED THE LAW.

Thus, the question is, “Does a college or graduate student who lives at or near school for the roughly 8 to 9 months of the school year “have the same principal place of abode” as the parents?

What is the principal place of abode? It’s not the domicile, though domicile is a factor in making the determination. So held the Tax Court in Prendergast v. Commissioner, 57 T.C. 475 (1972), and in other cases as well.

Abode requirements exist in other areas of the tax law. For example, a taxpayer cannot claim head of household status unless there is at least one qualified person for whom the taxpayer’s home is a household which constitutes the principal place of abode and of which the qualified person is a member. A similar test applies to unrelated persons who are claimed as dependents by virtue of being members of the taxpayer’s household. Being a member of a household requires occupancy. IRS regulations with respect to the head of household filing status track legislative history and provide that temporary absences for a variety of reasons, including education, are not considered when analyzing occupancy.

In legislative history for the head of household filing status abode requirement, the Congress stated,

As a general rule, for the taxpayer's household to be the dependent's principal place of abode, the dependent must physically occupy the household during the entire taxable year in question.

The Congress then described the temporary absence exceptions. This language though, suggests (1) the child can have an abode at the parents’ home without occupancy, and (2) lack of occupancy by a college student does not automatically fix the parents’ home as the child’s abode.

Thus, though the question of abode is a question wrapped into the question of occupancy, the question of “what is the abode?” remains critical because occupancy does not guarantee abode, and lack of occupancy may or may not prevent abode at the parents’ home.

The same legislative history contains this “clarification”:

Section 12(c) [an earlier version of the head of household filing status] is intended to apply only where the taxpayer and such other members of the household live together in such household during the entire taxable year (except for temporary absences due to special circumstances). The fact that a child may be at college during the college term does not prevent the home of the taxpayer from also constituting the principal place of abode of the child. However, such home will not be considered as the principal place of abode where the child establishes a separate habitation and only returns for periodic visits. Similarly, such home will not be considered as constituting the principal place of abode of a dependent of the taxpayer who is supported by the taxpayer for a substantial part of the year in lodgings other than those occupied by the taxpayer even though such person may at various periods live in the household, unless the residence of the dependent in other lodgings is not permanent and is due to necessity such as illness.

Thus, it is possible for a college or graduate student to establish an abode separate from that of the parents. And if the child does so, the parent loses the dependency exemption deduction under the new law even though under the old law the dependency exemption deduction would have remained intact.

Did Congress intend this result? Or is it an oversight, a consequence of reshuffling paragraphs and subparagraphs without thinking through the impact? Ask any computer programmer what happens when a few dozen lines of code are altered without full analysis of the interaction with the rest of the program. It isn’t pretty.

Perhaps Congress did intend the result. I say that even though at least one member of Congress has been quoted as saying that the “temporarily at college” exception solves the problem. I don’t think that it does. It solves the problem only insofar as the child WOULD have had an abode at the parents’ home but for the temporary absence. It does not solve the problem insofar as the child has moved his or her abode from the parents’ home.

How does a child move the abode? Certainly if domicile is shifted to the child’s school residence a very strong argument can be made that abode has shifted. Even if domicile hasn’t shifted, abode can shift. Suppose a child registers to vote in the locality where the child lives during the school year. Assume the child also changes his or her address for purposes of official and unofficial school correspondence, for utility bills at the rented apartment, etc. An extremely strong argument can be made that the child’s abode is at the school residence. Under the new law, the parents say goodbye to the dependency exemption deduction.

Why would Congress care and intend to change the outcome? Here’s a thought. Think back to the recent election. Reportedly, tens of thousands of college students, natives of states such as Connecticut and New York, registered to vote in states like Pennsylvania. Why? Well, their votes weren’t “needed” in Connecticut and New York because the outcomes were pretty well easy to predict. But at the time of these voter registrations, the outcome in Pennsylvania (and to a lesser extent, in New Jersey) was, at least to some, a close call.

Changing voter registration generally requires showing permanent residency established in the state. Were the students successful? Yes, they registered. Many of them also discovered that they no longer qualified for student financial aid from their “home” state assistance programs because they had moved their abodes to other states. And they also discovered that they did not qualify for “in-state” reduced tuition at Pennsylvania state schools because they had not been established in Pennsylvania for a sufficient period. What an expensive cost to voter registration. And, for many, all in vain.

So could it be that a Republican-controlled Congress has added salt to the wound? Could it be that the parents of these students (or at least the parents who provide more than half the support of children with gross income of $3,100 or more) will discover in March or April that they have lost a dependency exemption deduction? Of course, some of the students registered Republican, and some of the students who registered Democrat have Republican parents, but I’d venture an unempirical guess that most of the students and their parents are Democrats. Perhaps the Republicans are willing to zap a “few of their own” to put it to Democrats.

Perhaps I’m just seeing another conspiracy, a grand arrangement far beyond the simple imaginations of some Code drafters who accidentally changed the rules. Perhaps I’m turning an innocent mistake into a political hot potato. That never happens, does it? He asks that sarcastically, and to understand why, read this previous posting and this followup posting. Then decide if there’s even a shred of plausibility in my suggestions.

The "Mistake" That Will Not Die

Well, yes, indeed, as I noted in my Thanksgiving oration, Congress does provide so much grist for the MauledAgain blog mill.

Several days ago I shared some thoughts on the mess created when a provision was slipped into the appropriations bill permitting the Chairs of the House and Senate Appropriations Committees and their assistants to view tax returns without the privacy restrictions that apply to tax return examination by the House Ways and Means and Senate Finance Committees.

I noted that blame had been put on Representative Ernest Istook, and that perhaps he was being falsely accused. Istook took the cue, and denied having anything to do with the provision, though he knew enough to assert that the IRS had drafted the provision at the request of Appropriations Committee staff. The most the IRS can do is to generate proposed statutory language. It has no authority, or ability, legal or practical, to insert something into pending legislation. The IRS makes a convenient target, but to blame it for something it cannot do is more than too clever.

Late this afternoon, according to this report, the Congress has turned the issue into a hot potato. Recall that the provision was inserted into the appropriations bill, which needed to be signed into law by the President in order for the government to continue operating (because without the legislation it has no authority to spend money). Recall that House and Senate leaders promised to remove the offending provision, to do so quickly, and to get the appropriations bill to the President quickly.

Well, the Minority Leader of the House, Democrat Nancy Pelosi, decided that the Democrats would not permit the provision to be removed from the bill unless Republicans agreed to comply with the House rule that requires a three-day wait between the time a bill is reported out of Committee and the time the House votes on it. Republicans point out that when Democrats controlled the House they, too, honored the 3-day rule in the breach. Pushing legislation through the Congress without time to study it has been a mainstay of both parties for many years. Why?

The why is that Congress, like many people, lets things wait until the last minute. Exam in the course? Study the night before. Brief due tomorrow? Ask an associate to research it at 4 p.m. the previous day. School project due tomorrow? Ask mom for help at 9 p.m. And, of course, the more someone chooses or is compelled to accommodate the procrastinators, the more the procrastinators are enabled. People who know me are aware that I operate under a different mindset. I pretend that something unplanned will pop up at the last minute (and often it does). I require my students to do graded exercises throughout the semester. I not-so-quietly prod people to get on with it while there is time for measured study and analysis. Sometimes I succeed and sometimes I don't.

But I don't think that in this instance the "rush job" mentality of the Congress is the reason for the so-called "mistake." I explained that in my previous posting on the matter. If Pelosi held up the remedy in order to extract information on how this happened, it would be a worthwhile maneuver. But that's not the point. Maybe compliance with the three-day rule, a noble goal in and of itself, would have revealed the surreptitious appearance of the provision, but perhaps it would not have done so. Why not identify the culprit? Oh, wait, it's the IRS. Uh-huh. Some one or more persons in the legislative branch of the government, and not the executive branch IRS, did the insertion. On a computer. Who? Why?

It appears that members of the House and Senate Appropriations committees wanted the right to visit IRS facilities. So the bill contained language giving them that right, but it also included the language “any tax returns or return information contained therein” after the term "facilities." Nice. Some Republicans claim that it was merely "sloppy drafting" by the IRS and congressional staff, echoing and expanding Istook's claim. Sloppy indeed. Oops, my pen slipped and in went this extra language. They claim that they were trying to deal with committee members entering offices where tax return information is available. Well “any tax returns or return information contained therein” is NOT the way to get to that result. And one wonders why the Code is such a mess.

Why the desire for this right to visit IRS facilities? We're told it's because members of the Appropriations committee and aides to the subcommittees of the Appropriations Committee don't like having to ask the House Ways and Means, Senate Finance, or Joint Tax Committees for permission to visit IRS facilities that have tax returns or tax return information available. Well, excuse me. Isn't there a reason that tax issues, and the IRS, are within the purview of a specific committee? Those committees, as I noted in the previous posting, operate under a set of rules protecting privacy and imposing civil and even criminal sanctions when the privacy is violated. But those provisions weren't included in the language giving members of the Appropriations Committees the right to visit IRS facilities.

The AIDES don't like asking permission? Excuse me again, but aren't the aides hired servants of the people? Oh, wait, I'm special. Enough already with the Washington egos. I left decades ago, as mine was too small.

It also was reported that much of the drafting on the spending bill was done by aides who had not slept for days. Do I believe that? Yes. That's another aspect of the "last minute" chaos of how the Congress operates. Congress has also been known to stop its clocks so it could meet deadlines. Do that on a law school exam and it's bye, bye (I hope). "Let's pretend it's still 11:59." OK. Let's pretend it's still 1971 and we don't need to file tax returns for 1972 through 2000 and infinity.

So the Congress lets its aides work without sleep. This is compassionate what? This is the same Congress that would be fighting for the media spotlight to criticize any employer who required an employee to so function. Would a member of Congress want surgery from a resident who hadn't slept for days? Or to fly on an airplane piloted by a captain who hadn't slept for days? But, sure, go ahead, let the drafting of legislation be done by sleepless zombies. Nice. Very nice.

So, the bill can't go forward because the Democrats won't let the Republicans fix the "mistake" and the Republicans won't send the bill to the White House as it is because they'd be painting even bigger bulls-eyes on their political backs. So the government shuts down? Oh, no. A handful of Representatives and Senators still in town, perhaps the ones waiting to go home after the evening traffic snarls, passed a bill letting federal agencies spend money until December 8. So that keeps this entire issue on the front burner, because Congress will return to Washington and will need to deal with the mess. In the spotlight.

Oh, happy Thanksgiving.

Giving Thanks

I doubt I will be posting tomorrow, so here's an advance oration.

I am thankful that I was born with a brain that understands tax and a few other things (though the ability to slam dunk in the NBA or hit a major league curve ball would have been nice).

I am thankful that I had two parents who challenged me to use well my talents, to be truthful, and to think beyond myself, and that I had many teachers who pushed me as I now push my students to reach for more than mere acquisition of knowledge.

I am thankful for a Congress without which I'd have half as much stuff about which to blog and far less about which to complain.

I am thankful for the folks on the ABA-TAX and taxprof listserves, who keep my tax brain working and who provide raw material for examination questions and semester exercises, for which my students may or may not be thankful.

I am thankful that the Congress passed an extension to the Internet Tax Moratorium Act so that there is time for careful planning to deal with the problem without 50-plus jurisdictions doing a bunch of uncoordinated things.

I am thankful that the Pennsylvania legislature killed the tax breaks for the (impoverished?) Comcast Corporation because it gives me hope that when it comes to taxation common sense and equity have a chance.

I am thankful that my mother said to me, when I was young (true story), "I don't believe that parents should tell their children what to be when they grow up. Make your choices after thinking about it. I just want you to do well, it can be anything, but make sure it's legal."

I am thankful that I was introduced to clickers (or student response pads to use the technical term) and to the people who pioneered their use in law courses and who let me know they exist, because clicker use has invigorated the students in my courses and has added some new fun to teaching.

I am thankful for all the researchers who continue to share the results of their research that demonstrates chocolate is, indeed, medicinal.

I am thankful that trees have leaves that end up falling and blowing onto my property, again and again and again, because by raking them, again and again and again, I can get exercise that counteracts the caloric effects of the aforementioned medicine.

I am thankful that blogs were invented, because now I have one (though I wish they had existed when I was a child because, oh, never mind, the thought alone is scary but it would have been fun, I guarantee it).

I am thankful that I am healthy, that I have two wonderful children (even though BOTH of them are now announced a desire to attend law school), that I have family and friends who put up with me, and that I have not a mere job but a professional position with opportunity.

I am thankful that people come and visit this blog and read my postings.

Have a Happy Thanksgiving.

Rejoice, Chocolate Fans!

Just in time for Thanksgiving, a news story from Reuters that doesn't seem to have yet swept the print and web media, tells us in a marvelous headline: Chocolate ingredient can help cure persistent coughs.

It has been demonstrated that theobromine, which is found in chocolate (or more specifically, in cocoa), was almost a third more effective in stopping persistent coughs than is codeine. Codeine currently is the best cough medicine.

Taking codeine sounds like taking a drug. Taking chocolate doesn't. So on Thanksgiving, be thankful for chocolate.

A Mistake? Really. Hah hah. But It's No Laughing Matter

Well, the Congress has itself in a fine mess of hot water this time around. Readers of this blog know that I'm no fan of how Congress does business nor of most of what it generates.

According to reports proliferating throughout web and print press (CNN, New York Times, Tax Analysts, and Tax Guru, to name a few), the spending legislation that Congress passed on Saturday contains a provision that permits the chair of the Senate Appropriations Committee and the chair of the House Appropriations Committee and their assistants access to income tax returns unrestricted by privacy protection. Members of the Senate Finance and House Ways and Means Committees, which have primary responsibility for drafting tax legislation, have limited access to tax returns, so that they can evaluate IRS and other assertions that existing law is being abused or fails to accomplish legislative intent, but their access is subject to serious civil and criminal penalties if they disclose or misuse the information. The provision slipped into the spending bill lacks those restraints.

After people reading the text of the spending bill raised questions about the provision, spokespersons for House and Senate leaders said that the provision was a "mistake" and an "error." They promised to remove it, and the Senate quickly passed a resolution stating that the provision "shall have no effect." The House is scheduled to take up the resolution on Wednesday, and House leaders promise it will pass. Until it does, the spending bill will not be sent to the White House for the President's signature.

Congressional aides claim that the provision was inserted at the request of Representative Ernest Istook, Jr., who chairs the transportation subcommittee of the House Appropriations Committee. Istook is no stranger to controversy, as this 1995 chronology of the "Istook Amendment" demonstrates. The bit about subcommittee staff admitted to the falsification of documents surely hasn't inspired me to rethink my disdain for how Congress operates.

The two chairs of the Appropriations Committees claim that they were unaware that the provision had been inserted into the legislation. Senator Kent Conrad of North Dakota fumed that the incident reflected a bigger problem, that is, the pattern of Congress having mere hours to review legislation that runs on for hundreds (or in this case, 3300) pages. (And people think I am wordy, ha ha). Yet Senator Stevens reacted negatively to Conrad's complaint, claiming that the incident was a unique event in his "more than 30 years" on the committee.

What's going on here?

Is it just a matter of the typical chaos and confusion? I've been on the Hill while legislation was being drafted. It's only a tad less frenetic than the pit at a commodities exchange. It is easy to see how mistakes can be made. But even if this incident is simply a consequence of how Congress does business, it is a sharp reminder that, as Senator Conrad reminds us, Congress doesn't do a good job handing the way it does business. If a business did business the way Congress does business, the business would soon be out of business.

Was it a mistake? Some members of Congress think not. They think it was deliberate. I think they're right. That's not to say I disbelieve the chairs of the two Appropriations Committees. I think that because of how Congress does business, someone very easily could have slipped the provision into the legislation without either one of them knowing it.

If "mistake" means "something that should not have been done" then, yes, this was a mistake. Accidents are mistakes. But if "mistake" means "it wasn't deliberate" then this incident was NOT a mistake. It's one thing to have something fall out of the legislative text. Or to have a page disappear (which almost always generates truly incoherent language). Or to have a typographical reversal of two numbers, or to use the wrong punctuation. Or to let an earlier version of a proposed statutory section supplant its replacement. But it's a totally different thing for a tax-related provision, an administrative provision, a provision having nothing to do with appropriations, to appear whole-cloth in a spending bill. One minute, not there, the next minute it's there.

How can this happen?

Why would something be inserted because Representative Istook wants it? Who's he? Oh, a subcommittee chair? With what, pre-emptive rights to single-handedly rewrite legislation outside a public hearing process? Perhaps he is being falsely accused of requesting the provision's insertion. Perhaps it was some other member of Congress.

Could it have been done by congressional staff without the knowledge of ANY member of Congress? Perhaps. Aside from the abdication of responsibility demonstrated by members of Congress if it were possible for legislation to be the subject of tampering without their knowledge, it amazes me that any person belonging to a congressional staff would take it upon himself or herself (or themselves?) to alter legislation. But after reading about the admissions of document falsification in the 1995 chronology of the Istook amendment, I suppose I ought not be amazed. Disappointed? Yes. Disgusted? Yes. Surprised? I should know better.

The staff should be drafting what Congress wants. I understand that the Congress does not and will not (and perhaps cannot) write the precise words. But if Congress requests a provision to do A and B, then the staff ought not insert something that does A, something that does B, and something that does C. Nor should any member of Congress, behind closed doors, instruct the staff to do so.

If a business executive or any other person asks a secretary to prepare a letter, it is conceivable that the secretary, trusted and experienced, could be left with the task of selecting precise language or inserting boilerplate. It is also the responsibility of the person signing the letter to read it, and woe to the secretary that inserts something not requested and not appropriate (sorry for the bad pun) for the message that the letter writer wishes to send. Procedures would be in place to prevent wilful and deliberate modification of the letter. Mistakes could happen, because typographical errors can be made, and words can be misspelled (even to the point of embarrassment). And, goodness, letters have been known to be put into envelopes addressed to persons other than the intended recipient. But if the secretary changes the letter, or inserts something when requested by some other person without authority to change the letter, all sorts of values are ill served. There is no justice, no fairness, no integrity, and no valor in such a surreptitious endeavor.

And there is no justice, no fairness, no integrity, and no valor in deliberate alteration of legislative material. There is no justice, no fairness, no integrity, and no valor in a Congressional process that lacks safeguards against such behavior. And there is no justice, no fairness, no integrity, and no valor in a Congress that won't change the way it does business.

The good news is that this incident was detected, and thwarted. The bad news is that the persons responsible may go unidentified, or if unidentified, unpunished. The even worse news is that there is no guarantee that it won't happen again. And that's just flat out outrageous.

Getting It Right: Questions and a Proposal

My posting the other day on Getting It Right brought this insightful response from none other than my sister. The one who is a teacher, not the one who is an attorney (and who sometimes teaches as an adjunct).

After quoting this from the post,

Anonymous auditors were sent to 44 sites, pretended to be taxpayers, and presented various fact patterns to the volunteers. Ultimately 35 returns were prepared. How many were properly prepared? None. That's right, NONE.

she asks:

Could it be possible that the anonymous auditors were either:

a.) wrong in their results (who double-checked their findings?) Given the difficulty of completing a tax return described in the rest of the article, how can one believe that even the auditors were accurate?

or

b.) "setting up" the volunteers with scenarios that were rare or poorly presented to the volunteer? I wonder what a typical tax return that is brought to a volunteer would entail - what degree of complexitity or simplicity would a volunteer normally receive from a taxpayer? If the auditors "fact patterns" were significantly unlike those the volunteers generally prepare, than a zero success rate is not surprising.

Then again, it may be interesting to compare the accuracy rate of tax preparation by Joe Taxpayer with the most recent national statistics from high school No Child Left Behind test results. What Math and Comprehension skills are required of high school students? How are they performing on those tests? What is the Math and Reading level of the IRS tax booklet and forms?

Maybe President Bush should consider an amendment to the No Child Left Behind legislation that funds tax preparation classes in the nation's high schools. Students who earn an A can qualify for a 10% reduction in their taxes their first four years out of college, to help offset those huge college tuition loans.

Then again, if the anonymous auditors are hired to assess student's performance in the course, no students will be properly prepared and all will fail the class. (...which may then entail more government funding of the tax course, with even more stringent No Child Left Behind requirements that would require the auditors and the teachers to be fired for failure to perform.with replacement by IRS employees...who will then be too busy and too tired to properly audit the nation's tax returns.which would then cause our Senators and Representatives to step up to the task to ensure there's enough money for their salaries.which may finally result in a simplification of tax law.)

Anyone reading this can tell she's my sister! But she raises some good questions.

I do not know for sure but I think that the test scenarios taken to the VITA centers by the anonymous auditors posing as clients were reviewed by several or more reviewers. The more people that examine the return, the less likely there will be a mistake. I am very confident that the auditors used scenarios identical or similar to those encountered by the VITA volunteers when helping taxpayers. I glean that from the report that was issued.

I like the idea of teaching tax (and some other useful skills) in high school. I've made that suggestion to my classes throughout my teaching career. The idea of giving people tax reductions if they do well in such a course interests me. The question is whether it would interest anyone else. After all, a well-structured tax course for high school students would necessarily involve discussion of tax policy (and politics), which might be something some folks would prefer high school students not hear or see (he says sarcastically).

Perhaps members of Congress would volunteer to teach those courses. In the fall semester. So that they could be VITA volunteers in the spring. So that they can experience what they've imposed on their constituents.

What do you think?

Getting It Right

In his Philadelphia Inquirer column on Sunday, Andy Cassel speculates about the future of federal tax law, and concludes that I am probably right in my prediction earlier this month that when the day is done, the tax law will be more, not less, complicated. In the column Andy points out that the complication arises from two major sources, namely, successful special interest lobbying and the attempt to create a fair and efficient tax system in a complex world. Andy wrote the column after visiting one of my Introduction to Federal Taxation classes, and his well-written account of the adventure will bring chuckles to those who read it. Andy's use of the word "arcane" to describe tax law fits well.

It was that word "arcane" that popped into my head several times today as I pondered three disconnected bits of news that came my way. A moment of stepping back led me to the realization that all three had something in common, and it's a big something. All three reflect adverse fallout from the complexity of tax law.

1. The U.S. Treasury Inspector General for Tax Administration, specifically in the person of the Acting Deputy Inspector General for Audit, released a memorandum prepared for the Commissioner of the Wage and Investment Division of the IRS. The title of the memo requires a deep breath: Final Audit Report - Improvements Are Needed to Ensure Tax Returns Are Prepared Correctly at Internal Revenue Service Volunteer Income Tax Assistance Sites (Audit # 200440039).

What's this about? Years ago the IRS set up the Volunteer Income Tax Assistance (VITA) program, through which volunteers assist taxpayers needing help doing their tax returns. Volunteers can be tax practitioners, but most aren't. Years ago I advised the VITA program at The Dickinson (now Penn State) School of Law, and here at Villanova, though not a formal advisor, I sometimes have the opportunity to answer a volunteer's question. In both programs law students serve as volunteers, getting the dual benefit of helping someone in need and learning through first-hand experience what the practice world is (for example, real-life clients). VITA volunteers undergo training sessions at the start of the tax filing season. I've taught such sessions. If you think I'm frustrated trying to teach basic tax in a 3-credit course (while other, less challenging and less voluminous, subjects are assigned more than 3 credits), then you'll understand the insanity of trying to train volunteers for tax return preparation in a few hours (rather than the 33 clock hours available in the basic tax course). Andy Cassel noted that I speak quickly. He's right. I've just shared one major reason.

The VITA program has grown. In 2003, almost 850,000 taxpayers received assistance, on returns generating almost a billion dollars of refunds. There are almost 4,000 VITA sites in the country. The report notes that the volunteers' desire to help was evident, and that volunteers demonstrated helpfulness, courtesy, and professionalism.

The Inspector General's report was the outcome of a study undertaken to determine the quality of assistance provided by VITA programs. Anonymous auditors were sent to 44 sites, pretended to be taxpayers, and presented various fact patterns to the volunteers. Ultimately 35 returns were prepared. How many were properly prepared? None. That's right, NONE. A quick note that no VITA site in Pennsylvania was audited so they missed their opportunity to let the Villanova law student volunteers show their talent. The errors on the 35 returns would have generated more than $26,000 of incorrect refunds and would have deprived 7 taxpayers of approximately $4,500 of refunds. What comes to mind are the MONEY magazine tests, in which several dozen tax practitioners are asked to prepare a return, and there are as many different results as there are practitioners in the study. When something is so complicated that no one can get it right, it's time to change the rules.

True, as the report describes in detail, some of the errors were caused by volunteer failure to do certain things. Interestingly, these are things I try to encourage my students to learn, even though they don't get as much emphasis in law school curricula as they need to get. Volunteers failed to ask the right questions, failed to pick up on red flags, failed to ask followup questions that cement or put in doubt previous answers, and failed to verify facts. Some volunteers did not use checklists provided by the IRS. Volunteers also did some other things that are alarming, such as changing the facts given by the taxpayer so that the taxpayer's tax situation was better than it would be under the actual facts.

2. On the ABA-TAX listserv, tax practitioners are discussing how they will cope with retroactive amendments in the recent tax legislation that permits taxpayers to amend earlier year returns. One of the amendments in question is a "technical" amendment, that is, an amendment fixing a mistake in the original legislation two or more years ago.

The problem is that the returns were prepared using commerical tax preparation software, and the companies selling the software generally do not revise the software for a specific year after the return filing season ends. In the absence of revised software, pratitioners must redo the returns manually. Talk about a time travel adventure! What a daunting prospect.

One practitioner noted that it is expensive to update tax preparation software, and that the companies selling the software aren't being paid by subscribers to do updates to prior year programs. That's quite true. It means that the cost of fixing an error by Congress shifts either to the software company or to the tax practitioner, and, ultimately, to the taxpayer. Imagine. The return, as filed, follows the law, including the error, and the taxpayer pays a return preparation charge. Then Congress gets around to fixing the mistake, and the taxpayer must pay AGAIN to have the return redone. And, if it has to be redone manually, it's going to be more expensive. In this respect, Congress is following the same pattern that businesses have pioneered: shift the cost of fixing the mistakes of the business to the consumer, as the consumer wastes time on hold to a help line, wastes time downloading "upgrades," spends money to hire a lawyer to get things done, etc., etc. Two practitioners reported that on two different software companies that had updated the software for use in filing amended returns, and in one case the practitioner already had the upgrade, tried it, and it worked. Kudos to these companies that are doing the right thing.

This problem would be much less of an issue if the tax law were less complicated. The more components of a machine, the more that can go wrong. Similarly, the more Code sections, the more that can be wrong. One reason is that time pressures imposed by the current legislative process prevent careful, thoughtful analysis of the provision before it is enacted. Another reason is that some of the drafting is being done outside of the tax offices on the Hill, and, having seen some tax legislation drafted by those not so expertised, it's a wonder the tax law doesn't have even more errors than it does.

3. I received an email today from someone I don't know, and who didn't tell me how he "found" me. No matter, the person wanted to know if the IRS can be sued when it gives bad advice to a taxpayer. In this instance the taxpayer made transactional decisions based on bad advice given by an IRS employee. The IRS employee to whom the person spoke totally overlooked the impact of the alternative minimum tax.

I don't give legal advice, but I pointed the person in the direction of some cases. The courts continue to hold that the IRS is not responsible. Today is not the day to analyze those cases. Today is the day to point out, it's bad enough that the rules are so complicated that the players can't get it right, but it's horrible when even the referees don't understand it. The IRS has been trying to improve the quality of its taxpayer advice. The problem is that the rules change even as its employees are beginning to understand them. My students had that experience this semester with the impact of the change in the personal and dependency exemption rules; because they're going to be lawyers I made them read the amending act and get a little closer to the tax-law-manufacturing-facility. I doubt the experience will make the "top ten fun things about basic tax class" list.

So there we have it. In one day, three examples of the adverse consequences of complexity. Something must be done. I understand why tax law has become complex, and I also understand what must be done to simplify it. What must be done is, I am told, politically impossible, as I was reminded constantly during a discussion with a friend who is a former student, who teaches in Villanova's Graduate Tax Program, and who is a sharp, superb tax attorney. Maybe he's more of a realist or maybe he enjoys bantering with me. Both, probably.

What must be done? Enough with the "I'm special"/"My little group is special" approach. And enough with the "how can I wiggle around the spirit of the law" tactic. (which is another variant of the "I'm special" approach). Whether someone gets legislation allowing 1999 green Cadillacs to go straight from the right turn only lane, or whether someone claims they did not break the law because they departed from the right turn only lane by turning their wheel to the right for a short distance before veering back to go straight, that person is trying to get an edge on other people. A tax law cannot be fair and efficient, let alone simple, if some taxpayers prefer climbing on the backs of their fellow citizens to get an unwarranted edge rather than contributing to a societal well-being that will provide even more of a benefit to those taxpayers. (Oh, I don't own and have never owned a green 1999 Cadillac and I don't know anyone who does.)

Maybe my friend is right. Maybe, in the long run, self-interest trumps the benefits of civilization. Sad. When short-term gain precludes long-term advantage, all that results is a loss. I like my friend, but let's prove him wrong. It has to start with each citizen, for Congress will not act unless its members sense that their positions of power are being threatened. Make your voice known, not to me, but to your elected representative. Maybe the "value" in the next election can be tax fairness, efficiency, and simplicity. For without revenue, there won't be much left in the way of value to be protected.

Study Times and Grades

I think I may have discovered why it is so difficult for me (and some of my colleagues who share the same goal) to persuade law students that they really do need to invest an average of 3 hours of pre-class preparation and post-class assimilation time for each hour in class. My philosophy on this question, and the rationale for what I tell students needs to be done, was the subject of a column I wrote for the law school weekly newsletter in an attempt to invite students into the pedagogical side of legal education that they rarely get to see.

The discovery, of course, isn't anything more than information described in a Chronicle of Higher Education article about the latest results from the annual National Survey of Student Engagement. The site is a subscription site, so you may not be able to reach the article.

Among the items reported, only 11% of college students report investing more than 25 hours each week preparing for class. College faculty consider 25 weekly hours to be the minimum required for success in college. FORTY-FOUR PERCENT of the students reported spending 10 or fewer hours each week studying. Surprise? Not for me.

Now the amazing part. Roughly 40% of students report they earn mostly A grades, and 41% report report they earn mostly B grades. I suppose the other 19% are the average students earning the traditionally average C grade (or worse). Other information suggests that these numbers are not overstated or understated. And it fits the claim of the echo boomers on a Sixty Minutes report a few weeks ago: "We are all above average." Amazing.

So?

So how much credibility is there to the claim by college faculty that 25 hours each week is necessary for success if 81% of college students, most of whom study less than 25 hours each week and almost half of whom study less than 10 hours a week, are successful, at least in terms of grades? Where's the disconnect?

The disconnect exists because of two very deep flaws in the college evaluative process. The first is the use of curves, rather than absolute standards, for measuring accomplishment. The prevailing mentality on college campuses (and at most, if not all law schools) is that someone must receive an A, even if no one has done A work. I do not subscribe to that philosophy. After all, if I and my height-challenged, jump-restricted friends play basketball, should one of us claim the slam dunk award even though none of us can get to the rim? It's so easy to see the absurdity of such a pretense when the subject is apparent, but yet it seems so difficult to see the absurdity of labelling the best student's work as an A even if it fails to measure well against an absolute standard or against the work of students in previous years.

The second flaw is the reluctance to measure and evaluate across a wide and deep range. This might be the result of an inability to generate tests that differentiate among various levels of accomplishment. After all, a one-question True/False examination will generate only two grades. A 30-question examination, with questions designed to be of different levels of difficulty, will generate multiple grades (whether an array of letters in the A to F range, or an array of numbers in a 70 - 99 range). It also could be the case that the questions on college examinations are too easy (a product of trying to ensure that everyone does well, or a product of bad examination design skills on the part of faculty), or that the questions do not have correct or incorrect answers ("what do you feel about...." or "describe your experiences...." come to mind as interesting questions that do little to evaluate a person's future prospects of living and working in the world beyond academia).

So, however the problem comes to exist, it yields college graduates who arrive in law school (and other graduate schools?) with expectations of similar low-hour investments in their academic pursuits. True, a few students are natural geniuses who in fact do accomplish much in much less time. But most students cannot learn by holding a book to their foreheads. When I, or my colleagues, explain our study time expectations, it is not surprising that the unexpressed reaction passing through the students' minds is "Ha, we did well in college with ten or fifteen hours a week, and you want FORTY-FIVE? ha ha ha." Fortunately, many students do make the adjustment, with or without complaining. But unfortunately, some do not, and more unfortunately, the law school grading systems do not identify these students as often as they need to be identified.

Thus, when it comes time to take the bar examination, which to some extent (though not entirely) is measured against an absolute standard, students who have made it through law school without suffering the effects of insufficent study time, fail. My discussion of this phenomenon the other day meshes nicely with the implications of the report about the latest National Survey of Student Engagement results.

One last point. That survey also did an assessment of what is called deep learning, namely, intense self-reflection, integration of knowledge with skills and practical application, and activities demanding higher levels of mental activity than rote memorization. Students scoring higher on this assessment generally were the ones who invested not only more time in class preparation, but also more time working on campus and participating in co-curricular activities. Once again, energy beats inertia (which is good, because otherwise inertia would bring, the physicists tell us, a more rapid degeneration of the universe).

The message? To college students and faculty, get to work. Fix those examination, grade against absolute standards, open the books, read, prepare, and get immersed into the subject matter. Academic study is not a television show to be turned on for 50 minutes and then abandoned. Academic study is an experience to be lived, breathed, pondered, and embraced. Good luck to all of us, and to all whose lives depend on us doing our best and reaching for the highest levels as we continually prepare to bring our talents to the world.

Followup: Money, Good, and Evil

Back in June, I posted some thoughts on Money: The Root of All Evil?, among which was a story about the uproar over the refusal of McDonalds to pay life insurance benefits to an employee killed when an emotionally ill driver plowed his car into the restaurant. Those who read the post or saw the story elsewhere may recall that although McDonalds had the advantage of being legally correct, I questioned the wisdom of trying to skimp on what surely is petty cash to McDonalds. And I questioned the sense of having an employee benefits plan that, in effect, punishes employees who are in the probationary test period of a promotion. After all, the promotion suggests that the employee is someone who is doing good (or doing well).

It has now been reported that McDonalds has settled the suit, though the terms have not been announced. The victim's son reported a settlement equal to 62% of, or $15,000 less than, the amount sought in the litigation. This most recent newspaper report also discloses that after the previous story appeared, in which it was revealed that a fund set up by McDonalds to accept contributions by the public to help the victims' families had not yet been distributed, McDonalds added $50,000 to the $25,000 balance and then sent checks to the families.

In his column today about the ensuing boycott, John Grogan, whose reporting gave the situation much needed publicity, declared the boycott over. Grogan's column describes the scope and intensity of the adverse reaction triggered by McDonalds' position in the case, and it's worth taking the time to read his column. That's the only way to get a sense of how angry people have been.

Yes, it's nice that the matter is settled. But I must wonder why it took McDonalds more than a minute to write a check for $40,000 even though it was not legally required to do so. Worry about precedent? C'mon, how many employees die during the brief probationary period of a promotion. Worry about changing the policy? The actuarial present value cost of keeping promoted employees under benefits coverage is miniscule. Worry about negative public reaction? Apparently not. I guess McDonalds was willing to risk the hundreds of thousands of dollars of business losses so that it could hold fast to its legal rights.

I wish I knew how this had played out in the boardroom. Were the business folks adamant about protecting the bottom line? Were the lawyers giving advice that encouraged the resistance to paying the $40,000 benefit? Does the $15,000 that McDonalds saved (without taking into account lost sales) cover the attorneys' fees or the prorated salary of in-house counsel?

In my teaching, I take every opportunity that presents itself to encourage students to contrast the difference between the typical (and almost useless) question found on many (but not my) law school exams -- "who can sue whom for what and why?" -- with the more realistic law practice question -- "should there be litigation and why or why not?" -- that is intended to get students to consider the human and indirect economic costs of litigation. Something about winning the battle and losing the war comes to mind. In the wills and estates area, the concept arises frequently, because there are times when one can exercise a right at the expense of tearing apart a friendship or family connection.

Because I don't know how this played out, I don't know if it was a manifestation of a symptom of legal education failure, or business school education failure, a combination of the two, or some other factor (such as a stubborn employee out of sync with the common sense of handling these sorts of situations). No one knows how far up the chain of corporate command the issue went. Nonetheless, the case provides a wonderful object lesson for those who try to humanize the law or business subject that they are teaching. That's what I try to do, and though I have no evidence that I have succeeded or failed, I will continue my efforts.

Bar Exam Pass Rates, Legal Education, and a Plea for More Law School Clinics

A report this morning describes the Florida Supreme Court's plans to make it more difficult for applicants to pass the state bar exam by raising the minimum passing score. Other states are considering similar changes.

Why?

The Florida argument is that the existing minimum passing score does not ensure minimal competence on the part of Florida lawyers. The author of this morning's report questions whether bar examination are an "adequate measure of attorney competence." He suggests that the actual motive is protection of existing lawyers' income streams by curtailing challenges from new attorneys.

The author of the report attacks the Florida plan by pointing out that the failure rate in Florida has more than doubled since 1994, and that no studies have been undertaken to examine correlations between bar examination scores and malpractice claims. He contends that many bar examinations are "badly flawed," in part because essay questions cover too many topics, often focus on esoteric points of law, and sometimes are wrong. He argues that the bar examiners should not expect of new applicants what most licensed practitioners could not do, which is to pass a competency test covering a dozen and a half or more subjects, without "substantial preparation." He points out that bar exam grading, using the same multistate portion of the exams, generates failure rates that vary by more than 50 percent in 46 states and by more than 100 percent in 27 states.

The author of the report alleges that "most law schools have modified curricula, strengthened clinical programs, reduced class sizes and student-faculty ratios, and placed greater emphasis on writing skills" and that most law deans would characterize current legal education as having a higher quality than legal education of yesteryear. He continues, "Law schools across the country can demonstrate many ways in which the training of law students is increasingly tied to practice -- through supervised internships, the effective use of practicing attorneys and judges as adjunct professors and the enhanced use of clinical programs and simulation courses."

The author of the report states without reservation: "Legal education prepares students for the practice of law; it is the bar examinations that are out of touch."

I agree with the author's concerns, but I disagree with the premises and the analysis underlying his identification of the problem as fully the result of flawed bar examinations. Yes, there is a problem when pass/fail percentages on the same multistate examination differ so much from state to state. Yes, a state can decide that only applicants answering at least n questions correctly on the multistate portion can be admitted (assuming they do sufficiently well on the rest of the examination), while another state can set the minimum at n + m. In a federal republic, one state can decide that competence requires something more than another state does. This happens not only in law, but in all sorts of other licensed professions and activities.

Would it make sense to impose a national standard of competence on the multistate portion of the bar exam? One can make a good argument to do so. But one can also ask, "What is the point of measuring something by a national standard when bar admissions are state-by-state?" Practicing law in some states is more challenging than practicing in other states because the complexity of state law varies from state to state. Why should State A be required to accept as competent someone who is so characterized by State B if State B has a lower expectation of what attorneys should be capable of doing? Although one can imagine states negotiating some common passing level (of x correct questions), reality tells us that they would end up reduced to the lowest common denominator. Whenever that happens, and it happens so much in post-modern society that it has become a hallmark of early 21st century American culture, everyone, including the pretensively qualified individual, suffers.

I agree that bar examinations need to do something other than test memorization skills, the ability to handle multiple choice questions deftly, and the talent for applying the useless IRAC approach (issue, rules, application, conclusion) to essay questions. Some state bar examiners have already introduced other ways of testing skills, by shifting from law-school-imitative devices to practice world simulations. Applicants in these states are given case files, replicating the information that a junior associate would be handed in practice, and asked to work through the matter.

Are the suggestions to make bar admission more difficult driven by profit concerns rather than a genuine concern for protection of the public? On this question the author of the report raises a point that I am unable to rebut. He very well may be right. If he is, it makes the rest of the analysis academic.

The author's concern that bar passing rates are already dropping, even before the raising of the required "correct answer number," may not be, though, a reflection of a guild limiting its membership, but an indication that measured against absolute standards, law school graduates are less capable of doing what the bar examination requires. Why? Most law schools now grade on a relative basis rather than against a standard. Course content has been reduced, the number of required pages of reading has shrunk, grade inflation runs rampant, and few law students are permitted to flunk out.

It is when the author states without reservation that legal education prepares students for the practice of law that I must disagree. I wish that were the case. I think legal education SHOULD prepare students for the practice of law. Most academics, however, resist the notion of creating "trade schools," and insist that they are teaching students to "think like lawyers" (one, but only one, of the skills needed for legal practice). Some academics and schools support clinics and externships, but unfortunately those experiences are limited and too many students do not get the opportunity. There are drafting courses, some of which are very useful and some of which are so theoretical that they would cause practitioners to cringe. Adjuncts who teach specialty course or litigation courses generally bring practice world experience into the classroom, but sometimes adjuncts try to emulate full-time faculty because their ultimate objective is to become a full-time member of a law faculty.

Why do I think that it is incorrect to state without reservation that legal education is preparing students for the practice of law? First, more and more practitioners are expressing and demonstrating a reluctance to hire graduates because they don't want to invest the resources required to train the person. They prefer to hire laterals, thus taking advantage of someone else's investment in the employee. That is why taking a judicial clerkship, for example, is a wise move for a law graduate, but unfortunately there are not as many judicial clerkships available as there are law graduates. Second, I continue to hear from students that I am the first, and from graduates, the only, member of the faculty outside of a clinic or the legal profession course to use the word "client." That doesn't mean no one else is discussing the client or that the situation is the same at other law schools, but that law students can work their way through law school in a client vacuum. Third, although clinics and externships have increased in number, so, too, have the courses that cover subjects not examined on the bar exam, not present in the consciousness of practitioners, and useful only in indirect ways to a student's ability to practice law. Fourth, I have been told, by law faculty, that law faculty are not training practitioners but people who use the law, such as lobbyists, academics, and public policy wonks. Teaching with those goals changes what the graduate takes into the bar exam. Fifth, the existence of bar review courses and the content that they provide, though perhaps proving the author's point that the bar examinations are testing a different set of legal information, demonstrates, at least to me, that law graduates are doing more than review, and are catching up on topics not visited in law school, perhaps for reasons related to my third point.

States have eliminated the preceptorship programs that at one time were integral parts of bar admission. A law graduate would go under the tutelage of an experienced attorney for a period of time. It makes sense, and where traces of those programs exist, such as judicial clerkships or the rare instance of a one-on-one relationship between a small town practitioner and a promising law graduate, they prove the value of such programs.

These programs don't exist because they cost too much. Law, unfortunately, has become a business, and that has tarnished its professional stature. I leave for another day an exploration of that phenomenon, but suffice it to say that one of the many disadvantages to the painting of law with a business brush is the lack of pervasive preceptorship and similar mentoring. Yes, a few lawyers are trying to create mentoring programs, but they're swimming upstream.

The practice of law requires much more than what bar examinations test. Some requirements, such as good character, are handled through other means, such as investigations, and because the author of the report focuses on the competence issue rather than the character issue, I leave for another day the discussion of whether the bar's character screening process is sufficient and efficient.

The only way to know if someone can do something well is to give the person a chance. When the thing in question affects other people, the chance needs to be given under supervised conditions. It is time for a two-stage bar examination process. The first would be a fundamental competency examination that tested many subjects, because, unlike the author, I think that the woven fabric of law is more than a series of isolated topics or subjects, and that a good practitioner knows that a client's problem is one that almost always slices across numerous areas of the law, especially the "forgotten" or "undesired" ones. How many times does a practitioner miss a negotiable instruments issue because he or she didn't take a course in law school and wasn't tested on the matter in the bar exam? Thus, unlike the author, I would test several dozen subjects, not simply a few. The second stage would be a thorough "dumped into a simulated practice situation" experience undertaken after two or three years of preceptored or mentored tutelage. This will require far more investment of time and money than state bars currently invest in the bar admission process. But in the long run, it is better to do the culling this way than to wait until a lawyer needs to be removed after having done damage to clients' lives.

As for the correlation with malpractice, I simply note that too much malpractice is on account of things other than competence. As my mother still reminds me, intelligence isn't everything. Laziness, substance abuse, greed, carelessness, inadequate language skills, and all sorts of other bad traits are responsible for at least as much, if not more, malpractice, than is simple lack of knowledge of black letter law. That is why bar examinations simply testing memorized black letter law and certain test-taking techniques are insufficient. But I do agree with the author that studies are needed. I would like to see an analysis of malpractice cases. What was the malpractice? What caused the malpractice? What courses did the attorney take? How rigorous were the tests faced by the attorney? Were the types of skills required to avoid the malpractice (time management, responsibility, legal knowledge, comprehension of law) available to the attorney while in law school? The results of such a study would be most interesting.

However, if bar examinations were turned into what I want them to be, far fewer applicants would pass, because legal education would be even further afield, except for those students fortunate to be in clinics or other practice world courses. That is why I have proposed that law schools offer sufficient clinics so that all students have the opportunity, and are required, to enroll in a clinic. Well, at least the faculty teaching in clinics like my idea. So do some others. The downside? It costs money. That makes deans frown, though many of them are doing all sorts of creative fundraising to get closer to the goal. Perhaps the practicing bar can step in and fund clinics at law schools so that not only are the disadvantaged provided with legal services they otherwise would not get, but law students can get an education that forces them beyond the bounds of institutions built of walls covered with ivy.