Law Grads: Time to Start Reading Lots of Tax and Law Books

On Wednesday, in Tax Books for the School to Practice Transition, I considered a question posed by Larry Staton, Jr. He is looking for books that will set him "on the path to learning how to practice tax law through research and problem-solving."

From a reader comes a very instructive response. It not only addresses the book search question but also highlights another aspect of the student-to-practitioner transition at the root of Larry's inquiry.

The reader shared these thoughts:

I’ll offer my experiences with respect one area of tax law, partnership tax. A bit unexpectedly, I found myself practicing tax law after law school (long story). I had taken basic tax and corporate tax in law school, but soon found myself deeply immersed in partnership tax, including drafting and reviewing the tax provisions of partnership agreements. Of course I did so under the guidance of more senior folks, and so was not completely on my own. Still, I wished not to look like a complete idiot. My strategy to get up to speed on partnership tax in a practice-oriented way was as follows:

• Read "The Logic of Subchapter K" by Laura and Noel Cunningham. Rinse, lather, repeat. I read this book cover-to-cover at least 4 times. It is only a basic substantive introduction, but it manages to place partnership tax in a conceptual framework so that you can actually digest more detailed substantive research.
• Terry Cuff has written a series of articles on partnership tax, including many that focus on drafting partnership agreements. Read them all.
• Howard Abrams likewise has a series of practical articles on partnership debt, allocations, tax aspects of real estate partnerships, etc. I found them incredibly clear. Read them all.
• PLI does a seminar every year called “Planning for Domestic & Foreign Partnerships, LLCs, Joint Ventures, & Other Strategic Alliances” and publishes the associated articles in red books. These books often have practical, in-depth examinations of particular partnership tax questions.
• Liberally consult the McKee treatise, BNA portfolios, and of course the primary sources for answers to specific, substantive questions.
• Find a partnership agreement that you are pretty sure is not completely messed up from a tax perspective. If you are on your own, check out one of the forms in the McKee treatise at your local law library, or look in the SEC filings on Edgar for a partnership agreement done by a well-known firm. Try to understand the deal, and try to think about all possible ways in which money could come in and out of the partnership (debt, income, sale of a capital asset, payments to partners, payments to non-partners, etc.), and in what order the money could come in or out. Try to figure out how the agreement accounts for these things.

None of these sources advises on how to get and talk to clients, or other essential skills for tax practice. However, they may provide a useful bridge between simply reading the primary sources and trying to do something like draft a complicated partnership agreement.

Students in my Graduate Tax Program Partnership Taxation course would rebel at the thought of digging through that much material, but there's really no substitute for digging in (or, as is so nicely phrased, rinsing, lathering, and repeating). What the reader did was to structure a Partnership Taxation course that was surely more challenging because it wasn't arranged or structured as a partnership course would be. Yes, it works. But it takes a serious and time-intensive focus. Note that the reader did have senior practitioners giving advice and guidance. That matters so much, and yet the shift of law practice from profession to business makes finding that sort of mentoring ever more difficult.

Yet all of this effort is for one area of taxation. Even when someone focuses his or her practice on a particular area of tax, it is impossible to avoid other areas. The reader surely had to deal with C Corporations and S Corporations. Needing to understand and recognize estate, gift, and generation-skipping tax issues when structuring partnerships is not unusual. Lurking in the wings are subjects such as income taxation of trusts and estates, tax procedure, taxation of real estate transactions, and international taxation (which, to be fair, is far more than one topic or one course). If I continue I might find myself getting sidetracked into my "12 2-credit courses are insufficient for an LL.M. (Taxation) degree" argument, so I'll stop the litany of tax subjects.

One can compile a similar list of materials to consult for each of the many tax subjects a practitioner will encounter. When put together, the reading load will be immense. Given time, it could be handled by a diligent, focused, determined, and bright recent graduate. Unfortunately, rarely is time given. Note that the reader ended up practicing tax law and being assigned partnership tax matters after law school. It would not be unusual for someone in the reader's position to be assigned a partnership matter, a real estate investment matter, an S corporation stock sale, and several other tax issues within a few months of graduation. An LL.M. (Taxation) program takes one year if pursued full-time, and two to five years if done as a part-time arrangement. Even the most devoted tax devotee cannot read an entire tax program's worth of assignments within several months of law school, whether or not the assigned workload was removed. I wonder how many law students know that within weeks after taking the bar examination they will be immersed, and perhaps in areas of law, such as tax law, that weren't on their radars.

The more I think about Larry's question and the reader's experience, the more I wonder what is happening in the law schools. To those who claim that there is no way three years of law school can prepare a person for the sort of situation in which the reader, and many other law graduates, were put, I suggest that law school be expanded so that sufficient years are available to provide time to do the course work required for the underlying LL.B. and the J.D. To those who claim that most law students do not know what area of law, or area of tax, they will be practicing when they graduate, I suggest that law students be encouraged to enroll in courses that prepare students to "practice tax law through research and problem-solving." That's what lawyers do. They research and analyze materials so that their clients can avoid problems or if, unfortunately, a problem arises, it can be solved.

Here's a suggestion that is in the form of a request. Is it possible for practitioners, collectively or through a committee, to examine law school courses and to make two lists. One list would begin, "If we see these courses on your transcript, we are confident that the time you invested in academic pursuits have equipped you for a career in which you identify, prevent, and solve problems through legal research, skillful analysis, and proficient writing:" The other list would begin, "If we see too many of these courses on your transcript, we suspect either you looked for a law school experience lacking in rigor or were ineptly advised to focus on concerns of little relevance to law practice." In an environment resonating with the stress of loan-saddled law students looking for employment and anguishing about that search, lists such as the ones I propose, coming not from me but from practitioners, would have a most interesting effect on the academy.

Tax Books for the School to Practice Transition

Larry Staton, Jr., who has been following MauledAgain for most of its existence (see More on Gasoline and Free Markets), presented me with a very thoughtful and important question. Larry wrote:

I've enjoyed your recent posts on tax books. * * * I noticed, however, that none of your book recommendations aim towards new law school graduates and soon-to-be practitioners. I searched your blog for relevant posts, but I did not find anything.

That said, I would appreciate if you would recommend some essential books for new tax law practitioners. I took a course in basic federal income tax and I learned a little bit about researching tax law, but I could not advise a client based on this experience. I'm looking for books that will set me on the path to learning how to practice tax law through research and problem-solving. I see many books at Thomson and Lexis, but I really don't know if any of these books will suffice.

I responded to Larry, and I want to share that response, though I am editing it in an attempt to make it better.

It's difficult to identify books that are aimed directly at the law school graduate who wants to develop his or her skills as a tax practitioner. The books I've reviewed in MauledAgain are directed toward people who are not tax professionals, generally to give them a general overview of relevant income tax law and to provide them with ideas on how they can keep records and structure their financial affairs in ways that make life easier for their tax advisors and preparers.

I'm unaware of any book that takes the approach, "ok, so you graduated with basic tax and want to do more tax work." Perhaps it's because going that route takes either practice experience under someone's tutelage, or an LL.M. (Taxation), or both. Tax law is so voluminous and so intricate that someone wanting to practice tax law and advise paying clients on what they should and shouldn't do needs more than just a book.

I shared with Larry what I did, long before I enrolled in law school tax classes. When I was in college I took a job with an accounting firm, because accounting was one of my areas of concentration within my academic discipline. The partners at the firm had me do a variety of tasks, and when the tax assignments came along, I took to them well. Thereafter, the partners funneled a variety of tax return preparation, tax return review, and tax research tasks in my direction. Naturally, I was somewhat apprehensive, because I did not have much in the way of formal tax education or tax practice experience.

My solution was to read the CCH Master Tax Guide. I read it from cover to cover. Some parts made sense. Others required a second or third review. Eventually, I acquired enough of a background that it became possible to understand most of the rules that I subsequently encountered.

When it came time to enroll in law school tax courses, I started to read some BNA Tax Portfolios and student treatises in areas that interested me. I entered law school planning to practice tax, and by the time I was enrolled in my first tax course I had decided I wanted to teach. Along the path of preparing for that goal, I learned that the supplemental materials I had been reading were, and continue to be, among those assigned in LL.M. (Taxation) courses. So in a way I self-taught. Yet what I learned was primarily substantive law.

What Larry describes is a different skill, one that can be described as "how to practice." Success as a tax practitioner requires not only a deep understanding of the substantive law, but also responsibilities such as finding clients, managing cases, matters and an office. It also requires a facility for explaining things to clients and other attorneys, a gift for exercising sound judgment, and a knack for using discretion appropriately. For these talents, I know of no book. Life, in all its fullness, is the teacher. Tax folks will appreciate that feeble twist on words.

Even those of us who think earning an LL.M. (Taxation) is the better path to a tax practice career, it does not provide the intellectual and professional development fostered by time in an office, with clients, and with guidance from more experienced practitioners. Books can bring familiarity with substantive tax law. But they can no more bridge the gap between the academy and the practice world does the academy itself. Perhaps, when and if legal education adapts itself to law practice and loosens its attachment to theory, fewer and fewer law graduates will need to ask the sort of question that Larry posed.

If I am wrong, and there exists a book that addresses the matters Larry described, let me know. I would be eager to give it some time in the small spotlight of this blog.

A Nontechnical Tax Guide for Self-Employed Individuals

Tax season is well underway, and surely there are people who are discovering that starting a business without keeping good records and understanding the applicable tax rules makes for a very time-consuming, aggravating, and expensive visit to the tax return preparer. Self-employed individuals often bring a variety of talents and gifts to their enterprises but all too often organization, record keeping, and attention to detail are not among them. Now, to help these folks make their tax return preparation a far less horrible a time is June Walker's 220-page "Self Employed Tax Solutions."

This is more than a tax book. Although its primary focus is on the federal income and self-employment taxes, among its pages are paragraphs and a chapter addressing business decisions, entity selection, record keeping, and the relationship of various types of expenditures to business activities.

The book begins, not surprisingly, with a chapter that differentiates employment from self-employment. It then turns to a general chapter on business expenses, followed by chapters dealing with start-up costs, advertising and similar expenses, communication costs, travel expenses, business education, rent and office-in-home deductions, inventory and supplies, and a "write-off wrap-up" focus on deductible and non-deductible expenses. Then, because as the author explains, people starting business meet expenses before they receive income, comes the income chapter. The book closes with two chapters on record keeping and one on the tax system generally.

June Walker has designed a variety of charts, side boxes, paragraph icons, examples, and stories to help the reader get a grip on the subject matter. The appendices include a glossary, and forms and worksheets appear throughout. Many of the stories are based on real-life, yes-this-happened-to-someone stories, some of which fall into the and-be-glad-it-wasn't-you category.

"Self Employed Tax Solutions" is not aimed at tax professionals. Tax professionals will find the book too simple. There are no footnotes, no Code cites, no long quotations from regulations, no case synopses. But that doesn't mean the book isn't useful for tax professionals. The book makes a fine gift for clients, particularly those who mention that they plan to start a business and those who somehow can't understand the professional's annual warnings about record keeping. The book, in other words, is not a substitute for a tax return preparer, but a recipe for making his or her job easier and the client's wallet or purse not as lighter as it otherwise would be.

June Walker is a financial and tax consultant to entrepreneurs in the United States and Europe, with a clientele that is exclusively self-employed individuals. She has been featured in Business Week, has been interviewed on national and local radio, has participated in webcasts, and has offered seminars for the self-employed.

To learn more about "Self Employed Tax Solutions" visit http://www.junewalkeronline.com and http://junewalkeronline.blogspot.com/. To order, go to this specific page or call 1-800-243-2329.

Using Tax Revenues for A Welfare Program Benefitting the Wealthy?

Last evening, returning home, I heard a 30-second news story on KYW, the region's news station, but my search for the story on-line was fruitless. According to the report, a California legislator is proposing that the state of California provide a $500 bond to each child born in the state. The story didn't touch on whether "each child" meant each and every child or simply children in need.

As I hunted for the story, I discovered what appears to be the original California proposal. Though it suggested a $300 bond, it appears to be the basis for the plan described in last evening's news story. Here is the explanation from the original California provides the rationale:

How, exactly, would this work in California? The state could launch every California Kids Account with a onetime, $300 deposit, while encouraging after-tax contributions (not to exceed $1,000 per year) into the accounts of children in households below the state's median income. The accounts would build up tax-free. Assuming low-income families managed to save or leverage just $50 per month, this small investment would grow to nearly $19,000 when the child turns 18 -- enough to comfortably cover the first three years of tuition and fees at a public university in California. If the child does not use the account for college, it grows to $34,000 by age 30 and $185,000 by age 65. Besides post-secondary education and training, California Kids Accounts could only be used for a down payment on a first home or rolled over into a retirement savings account; if the account is used any other way, the at-birth deposit must be returned to the state, along with penalties and taxes. The accounts also provide a perfect catalyst and centerpiece to build the financial literacy of all young Californians. At $160 million a year, this relatively small investment -- it's less than three-tenths of one percent of the state's $100 billion budget -- would be transformative.

California could learn from other pioneers on this front. Beginning next year, each of the 700,000 kids born in the U.K. annually will receive about $400 each in a "Child Trust Fund," with the poorest one-third of kids getting about $800. The idea is to create a "stakeholder" society and help ensure that children have opportunities that their parents may not have had. In Canada, "Learning Bonds" will soon be established at birth to help low-income students save for college. In Kentucky, the Republican secretary of state and the Democratic state treasurer plan to launch a "Cradle to College" initiative, which would establish a 529-type college savings account for every newborn in Kentucky so that no residents would need to forgo college because they cannot afford it. Finally, bipartisan legislation called the ASPIRE Act -- led by unlikely U.S. Senate bedfellows Rick Santorum (R-Pennsylvania) and Jon Corzine (D-New Jersey) -- was introduced in Congress last July to create a savings account at birth for each of the million kids born in the U.S. Clearly, the idea is catching on, and California has a great opportunity to lead the nation on this path-breaking idea.

It appears from this Corporation for Enterprise Development reportthat four countries (Singapore, Great Britain, Canada, and Hungary) have implemented similar plans.

The plans are not identical. The differences are critical. The United Kingdom presents money to all newborns, though it doubles the amount for children from the poorest 1/3 of families. Canada limits the program to children from low-income families. Hungary provides additional payments to the children of low-income families. Singapore makes payments for all children, but the amount increases as the number of children in the family increase.

Does it make sense to use tax revenues in this manner? It depends. Putting money into funds to benefit poor children makes sense when the alternative is transferring money to the parents of those children, who don't have the discipline, foresight, or ability to set money aside for the education of their offspring. On the other hand, I just don't understand the rationale for transferring tax revenues into accounts for the benefit of wealthy children or the children of wealthy individuals. It is not the role of government to provide tax revenues to the wealthy. It is tempting to think that even those who advocate government transfer payments for the benefit of the poor would join with those who object to government transfer payment programs generally and oppose plans that fund wealthy families in this manner.

Yet that did not happen in Hungary. Perhaps Hungary, emerging from years of living under communism, has too few wealthy individuals to warrant concern. Singapore seems intent on encouraging population growth, as the economic incentive increases as the size of the family increases. At least the United Kingdom's program does more for the poor, but why transfer public funds to rich children? Canada seems to have it right.

Because I don't have access to the technical language of the newest California proposal, I don't know if it is more like the program in Canada or the one in Hungary. So it's impossible to critique the proposal or predict what will happen. I'm sure this is not the last we will hear about these types of proposals.

Tax Charts and Graphs of An Entirely Different Sort

As strange as it may seem, today I am going to draw attention to web sites that illustrate tax issues with charts and graphs that are not of Andrew Mitchel's making. Andrew, whose latest batch of charts were highlighted in It's Raining Charts, remains king of the tax chart world because his charts are practical, informative, easy to understand, and numerous. The It's Raining Charts post has links to all the previous posts in which I've highlighted his skills, along with links to his web pages.

Two weeks ago, a recent graduate of the law school, who focused on tax and is practicing in the tax field, passed along the URL for a blog called Indexed. According to the blog author, Jessica Hagy, the blog "is a little project that lets me make fun of some things and sense of others. I use it to think a little more relationally without resorting to doing actual math." The graphs and charts that she uses are clever because of the way in which they are used. Most of her drawings, and yes, they are drawings and thus artistic, are wacky, sarcastic and cynical. That's why I like Indexed. Yes, there are some tax observations among the hundreds of visualizations, such as Write It All Off, with the legend "when they walk into a bar, the tab is tax-deductible," Lattes = Higher Property Taxes, What Do You Make? A Mess, and It's Tax Deductible. Most of them don't deal with tax, at least not directly, but some do touch on questions of law, politics, economics, retirement, and money. Give yourself 20 minutes and go visit.

Yesterday, Paul Caron of the TaxProf blog passed along his take on a new blog, Visual Tax. Written by Orval, the blog's objective is "visualizing how tax works by applying engineering methods." What inspired Visual Tax is Orval's re-entry into the world of preparing his or her annual tax return. Orval was very unimpressed with IRS instructions, particularly with their "wordiness" and "almost total absence of explanation for the rationale behind some of the tax rules." Orval is "appalled" to see pages of tables that are "nothing more than a tabulation of simple linear equations." So Orval treats us to graphs and equations.

Orval has tackled the question of tax rates. It is interesting to see what most tax practitioners take for granted undergo an examination by someone with a different educational and experiential background. I don't see, though, how the equations that Orval derives would be a better substitute for IRS instructions. Take a look and try to imagine one hundred million tax booklets being mailed out by the IRS with equations of this sort peppering the pages.

I do take issue with several of Orval's points. First, the instructions are not the place to include the rationale behind the tax law. The traffic sign with the instruction "NO TURN ON RED" would be much less effective if it included the rationale for placing the sign at that particular intersection. Second, Orval lives up to the stereotype of engineers as people who struggle with words. Somehow, from reading instructions and perhaps the Code itself, Orval concludes:

The income used in the tax equation is known as the adjusted gross income, it is essentially calculated as follows for your workpay:
* start with your nominal salary
* remove a number of special items: social security, 401k contributions, ... and you get your taxable income
* remove the exemptions, these are usually amounts that are not directly related to any real expenses
* remove deductions, these are usually amounts that correspond to specific expenses that are considered useful for the society, at least as seen by Congress
* presto, you have your adjusted gross income.

If one of my students did this on a basic tax exam, he or she would earn an F in the twinkling of an eye. The removal of certain items from nominal salary generates the portion of gross income attributable to compensation. Then certain deductions are subtracted to arrive at adjusted gross income. Then other deductions, either itemized deductions or the standard deduction, along with personal and dependency exemptions, are subtracted, and the result is taxable income. I wonder if Orval looked closely at the charts in the instructions, or tracked through a Form 1040 with an engineer's careful scrutiny.

Oral is correct, that the tax law is complex, and thus the equations derived from it are complex, because of special interests that persuade the Congress to enact provisions applicable to tiny segments of the population. Perhaps with a bit of a push, Orval can be moved into the slowly growing group of citizens that understands the true source of tax agony, tax complexity, and tax nonsense: the Congress and not the IRS.

Yet Orval has done me several favors. When the legal philosophers challenge my approach to the law by claiming I'm treating law as an engineering device, I can send them to Visual Tax and say, "No, here is what an engineer would be doing." I do want to be around when they access Visual Tax so I can see their faces. What Orval has demonstrated is the falsity of the propositions that "tax is all numbers," "tax is full of math," and "practicing tax doesn't require subjective reasoning as do other areas of the law."

Orval also gives me an object lesson to share with the students in my courses who bristle at my insistence on accuracy, diligence, and precision. When they continue to complain about the ineffectiveness of generalities as grade-earning expressions, in contrast to some other law courses, I can point them to Visual Tax and explain that if I really wanted to do what they claim I am doing, this is what the powerpoint slides and their notes would resemble. Ouch.

Finally, Orval has inspired me to ponder the possible advantages of a joint law and engineering degree. Surely engineers would benefit from learning to work with words. And lawyers can benefit from approaching problems with an engineer's constructive inspections. Just what the Dean wants: another proposal from me.

Selling Off Government Revenue Streams: Good Idea or Bad?

It's the latest rage in reducing state budget deficits and fending off tax increases. Toll roads lead the parade of state assets that politicians propose to sell to private owners, so that the proceeds can be put to other uses. Even though the sales proceeds dwarf the annual revenue, is it a good idea or a bad one to put these assets into private hands?

As noted in this Philadelphia Inquirer article, no one is certain how much a toll road or turnpike is worth. That makes sense, considering that there isn't a ready market for these items. "I'll be back in a minute, folks, I'm going to run out an buy a parkway." Alarmingly, if some have their way, the idea of buying and selling toll roads on a private market won't seem so bizarre.

An alternative is leasing the toll road to a private concern. Where this has already been done, the leases are for such long periods that they are equivalent to sales.

In New Jersey, where discussion of leasing the toll roads to private enterprises or turning over operations to them is just that, concerned legislators, as reported in this story, have introduced legislation blocking such action. This is an issue that will get attention, and generate loud debate.

Advocates of the sale or lease approach claim that private enterprise could raise tolls without incurring political risks as state officials do when they propose toll increases. Though there is some truth to that contention, isn't the point only part of the story? What happens if the private company wants to raise tolls more often and more steeply? Yes, the sale or lease contract can contain restrictions, but how effective would they be? Private businesses don't operate roads other than to make money. Period.

Does the length of a lease matter? It surely does if it's not revocable. What happens if the private company fails to maintain the road properly? I'd like to quip that most private companies would be hard-pressed to come up short as did the Pennsylvania government last week when Interstates 78, 80, and 81 became ice-bound Arctic parking lots, but I've seen too many critical failures in private industry to have much confidence in it. The mentality that brings consumers the blue screen of death, rats partying in fast-food restaurants, foreign objects in restaurant food, and a long list of other slip-shod product and service deliveries easily can bring us toll roads that more resemble Philadelphia streets than the current decently maintained Pennsylvania Turnpike.

Selling or leasing the toll roads is a short-term fix that deceives the public. It infuses a bundle of money into the state budget, but it comes at the cost of losing the revenue. Wait, say the advocates, the state also loses the expenditures. Au contraire. If the private company slips up or goes under, the taxpayers still pay the bill for the repairs. And what happens when the road, if leased, is returned to the state at lease end, or earlier, in poor condition. Who pays?

The major concern is this. If the toll roads are such wonderful sources of income for private industry, why can't they be wonderful sources of income for state governments without selling or leasing them? Is it simply a matter of toll increases being easier for private industry than for government? Nonsense. The cost of using a toll road can be calculated, and the government (or, technically, turnpike or toll road authority) ought to be charging fair market value. Anything less is simply an unauthorized shift of government costs to the general taxpayer, who is funding items that should be funded by the toll road. In saying that, I'm accepting premise of the sale or lease advocates that it is permissible to use toll roads to generate a surplus for use in other budget areas. Personally, I disagree with that concept, however it is applied.

Rather than sell off public assets, why not impose tolls on other limited access roads that require government expenditure? Technology exists that reduces the cost of toll collection to a fraction of what it has been. The idea of mileage charges generally, regardless of the nature of the road, is an idea getting growing support. I dissected this concept in Tax Meets Technology on the Road back in November of 2004.

I am fully aware that private enterprises have bid for, and received, the right to build new highways and to charge tolls for their use. I've been on several, one outside Denver and several in southern California. Despite their locations, there wasn't much traffic on them. There's no surprise there, because the alternatives, though crowded are much cheaper, as in free. Except that free really isn't free, because the true cost of toll-free highways is passed along in other ways. Taxes are being collected through some other channel, including the federal income tax, and funneled into the freeways.

The question of whether to sell an income-producing asset is one that confronts people everyday. Lottery winners sometimes cash in the annuity for a lump-sum. Business owners running profitable undertakings decide to let go, and sell their income-producing enterprise for a lump-sum or a short series of payments. In most cases where an income-producing stream is sold for a lump-sum, the income stream is relatively predictable and stable. Because tolls are predictable and stable, the idea of selling or leasing toll roads attracts the wheeler-dealers. But is it a good idea? What makes it different? What makes it different is that it's a matter of public trust. Once the toll roads, and other highways, enter the private market place, how long until Bill Gates or Walmart ends up owing them? Should citizens be swayed by the promises of quick riches? Will they?

The answer might lie in the story of the fellow who killed the golden goose. I wonder if he'd do it again if he had the chance. I wonder if a public that might decide to support sale of the toll roads would do it again had it the choice. Sometimes the child's do-over isn't very realistic. There's an issue here that needs a wide-open, highly publicized debate. Let's have it.

A Dark Side of Teaching Law

Fortunately, most of the experiences I've had teaching law have been uplifting, rewarding, constructive, educational, and affirmative. Sometimes, though, shadows pass over the pedagogical efforts. Despite more than two decades of teaching law, in both J.D. and LL.M. programs, I continue to be puzzled by the disconnect that occasionally appears between a student's presence in one of my courses and the student's involvement in the course.

At the end of every semester, in both the J.D. and LL.M. courses, the school administers course evaluations. Students are asked to provide numerical responses to a series of questions about the course, the instructor, the materials, and several other items. They also are invited to provide comments. The evaluations for each program differ, even though both would be improved if questions asked solely on one were asked on both. Even the numerical range differs, with the J.D. evaluation using a 1 to 4 scale and the Graduate Tax Program evaluation using a 1 to 5 scale.

Some faculty claim not to look at or read the evaluations. I do. I make it a point to read each comment. Over the years, there have been helpful suggestions that I incorporated into my teaching. Every year, there are encouraging comments. Every year, there are not so encouraging comments. And sometimes, there are the comments that make me wonder.

It is not unusual to find students in the same course providing totally different opinions. One of my colleagues photocopied and framed two comments from students in a course that he taught some years ago. One comment pretty much described him as a magnificent teacher, the best that the student had ever encountered. The other urged the immediate dismissal of a professor that the student thought was the most horrific instructor ever experienced. Early this month, as I read through the evaluations for one of my fall semester courses, I discovered a similar dichotomy. One student described me as the best of the professors with whom he or she had taken a law course. Another student requested the administration to remove me immediately from the faculty. An examination of the numerical responses indicated that the latter student was pretty much alone in his or her response.

How can two students in the same course at the same time have such totally different perspectives? One explanation is simply a matter of personality preference. Students who dislike my law-practice-based rigorous approach and teaching style often develop an intense dislike that manifests itself on evaluations. Many students who dislike the approach change their minds as the semester progresses, noting the beneficial impact on their educational development of the assignments I give them to do, but others don't figure it out until long after graduation, when they send me the classic "I thought you were a jerk but now that I've been in practice I understand what you were trying to do" message.

Another explanation, though, for the starkly opposite opinions is alarming. Understanding it is enhanced by understanding how negative student comments fall into three categories.

The first category includes a variety of gripes and complaints that are to be expected and that usually manifest themselves in numerical scores one or two steps below the highest possible choice. Students express dismay at the volume of work and at the speed with which some topics are covered. Some detest the idea of graded assignments administered during the semester, having become comfortably and dangerously acclimated to the "all at the end one shot" examination testing process that infects so much of higher education and law school. Some students don't like the course book. In any group of students of significant numbers, it isn't surprising to find a few who don't like the course or how it is taught but who are enrolled because one or another reason persuades them that they need to be in the course even though they'd prefer to be elsewhere. For the most part, these expressions of dissatisfaction are debatable questions, on which people who have not yet lived in the practice world honestly can hold opinions different from those of us who have.

The second category of comments are troublesome but understandable. When students decry the reading load, which is much less than what law school reading loads were 10, 20, or 30 years ago, they are making judgments based on their unfamiliarity with courses in which significant amounts of technical material must be absorbed. Some students go so far as to explain that they have other, more important things to do. By the time students reach my courses, I'd hope they'd been disabused of the notion that legal studies should be tenth or eleventh on their list of priorities. A common gripe is the allegation that my teaching takes them on tangents or includes irrelevant comments, which suggests to me that these students, despite having been through at least one year of law school or five Graduate Tax courses, have not yet grasped the concept of reasoning by analogy. Too many students, especially in the Graduate Tax Program, continue to demand "just the rules and answers" and resist acquisition or development of the analytical process essential to learning law, tax, and most other subjects. In fairness, for students who have journeyed through an array of non-demanding courses, it's not their fault that they recoil when reality confronts them in course replicating the demands of practice. I'm told that many students have the same adjustment problems when they start out in a clinical course. Nonetheless, I do think someone with so many other things to do that they cannot invest the 70 hours a week that law school requires of the average student, or the 6 to 8 hours a week that a Graduate Tax Program course demands, should reconsider and perhaps postpone their law school or Graduate Tax enrollment. Nor do I have much sympathy for students who don't want to do as much work as is demanded by a dedication to future practice success in meeting client needs.

The third category of comments are the frightening ones. What should one think of a student who claims that I am a bad teacher because there is no syllabus for the course? Yes, of course there is a syllabus. What should one think of a student who claims that postings to the course web page are secretive? I can't even begin to figure out that claim. All students have access and what gets posted can be seen by all. I suspect the complaint is a feeble articulation of someone's annoyance at having to make the effort to visit the course web page, even though frequent visits to course web pages is a requirement not of my courses but of both academic programs. Every now and then a student writes that I glossed over some topics because I must not know that area of the law. I wonder how those students' classmates would have reacted to a decision to squeeze even more coverage into an already packed course. Oh, they'd probably write their own negative commentary. By the way, it ought not be a surprise that I surely know the areas of the law that I treat in summary fashion. On what basis a student could justify the claim of inadequate professorial knowledge continues to bewilder me. Every so often, students list the bad experiences they've had being called on in class, even though I don't call on students in class. It's these counterfactual allegations and premises that concern me. Do people who have distorted perceptions of the facts make good lawyers and tax practitioners?

It is accepted among many of my colleagues that students use course evaluations to vent their frustrations, without taking the time to engage in careful analysis of the situation. Those of my colleagues who choose to ignore course evaluations figure that they're not going to learn much from student rants. I disagree. Not only do I sometimes acquire useful and constructive commentary that improves the courses, I also learn some things about the dark shadows that trouble some students. For someone to write negative comments based on factual impossibilities suggests that there is a serious problem, and that revelation matters. It is one of several factors that influence my proposals and my support for others' proposals to faculty and administration that attention be paid to more than mere intellectual endeavors of students. I'm glad to report that my law school makes all sorts of efforts to reach out to and help students who are struggling. I'm not glad to report that some students who could use assistance aren't identified and don't try to deal with the frustration, anger, and negativity that afflicts them. I suppose I should mention that the course evaluations are anonymous, so these indications of problems don't provide opportunities to offer help.

These concerns don't arise from the silly comments. When I read commentary on my admitted inability to choose suits and ties that impress students, I laugh and wonder whether a different tie would make me or them more adept at working through the law. Students notice things that aren't relevant to the course, so I simply find more incentive to persuade them to focus more of their brain's processing power on the matter at hand rather than my wardrobe, or, for that matter, the attributes of their classmates. Some things never change. When I was in my second year, sitting in Family Law, someone passed me a note to relay to another student. It was open, and said, "Check out the ring on NNN's finger." Hopefully, nothing important was missed while this distraction took hold.

Another source of consternation is provided by the responses to a question on the Graduate Tax Program course evaluations. It's a question that does not appear, but should be provided, on the J.D. evaluations. We ask students how many hours they invest each week in the course. The common expectation is that at least 6 to 8 hours are required if a student properly prepares for class and does assimilation after class. Of the students who filled out evaluations in last semester's Partnership Taxation course, only 20 percent put in as many as 8 hours. Almost a quarter claimed they put in one to two hours. These are typical responses, and motivated my decision to elaborate, during the first evening of class, my expectations of time investment and the status of the course as one in a graduate program offered to tax professionals earning a post-doctoral degree. Some students translate that early warning as arrogance, disrespect, and unprofessionality. Sometimes I almost convince myself that at least some Graduate Tax students view the program as an extended, expensive CLE or CPE session, one that is tantamount to the purchase of a degree. "You talk, I'll listen and write, and then you ask me to repeat it, giving me a high grade if I recycle enough data." Sorry, that's not what it's about. I guess I do aggravate students who don't like my bubble bursting messages.

The appropriate administrators do read the course evaluations. They're quite adept at separating negative comments raising red flags from the negative ones that are counterfactual or expressions of frustration and anger. There have been times when well-written, corroborated student comments have triggered action by a dean or director. The senseless ones are discounted. The only annoyance is that the low scores attached to the evaluations containing ludicrous comments are not removed from the numerical ratings. Truthfully, it's more than an annoyance, because some of those numerical ratings are used for other purposes, and so the fear of low or mediocre ratings inspires some teachers to placate students, in what turns out to be, for the students, short-term delight and long-term catastrophe.

If at this point you wonder why I continue to teach, the answer is that most of my students do work diligently, do try, do seek dialogue when they are frustrated so that they can make adjustments, and eventually do figure out by the end of the semester what I'm trying to encourage them to do. The messages from graduates, both those who enjoyed the courses and those who put aside their dislike and have their epiphanies after a year or two in the practice world, are wonderful. Ultimately, the ones who get it, whether sooner or later, bring to their clients the excellent legal advice and guidance that those clients deserve. The others? I shudder to think.

Is the J.D. Degree Merely a Ticket to More Training?

Over at the Money Law blog, interesting comments are being shared in A great debate at WSJ's Law Blog. The discussion began with a Wall Street Journal op-ed in which Cam Stracher ponders how a paralegal arrested for practicing law without a license had succeeded in doing so for as long as he did without making a mess of things. Stracher, who teaches at New York Law School, observed that there is no reason to conclude the paralegal would have done a better job had he attended law school.

Yes, once again, not surprisingly, legal education is being criticized. Certainly I have contributed more than a few barbs, in pieces such as "So What's the Problem with the Problem Method?", "Bar Exam Pass Rates, Legal Education, and a Plea for More Law School Clinics", "Beer, Softball, 4-Day Weekends: Is This Any Way to Learn Law?", "The Law School Curriculum: Ready for a Change?", "So What Do You Buy When You Pay Tuition?", and "Law Schools: Preparing Students for Practice?". It would appear that there's not much to be added. But appearances can be deceiving.

Despite being convinced of the need for serious reform of the legal academy, for the reasons I share in "Want to Be a Lawyer? Just Say That You Are!",I have not been persuaded that law school and the bar examination should be tossed aside. The proposal to open up alternatives to law school reflected a response to the growing emphasis at most law schools on faculty scholarship, a trend that fuels my commitment to persuade law schools to hire those difficult-to-find faculty who can produce useful publications while bringing law practice into the classroom.

What got my attention was the response [subscription site] to Stacher's op-ed piece that was penned by two Boston University law professors, Tamar Frankel and Wendy J. Gordon. Objecting to practice-oriented legal education, they argue, "Legal education may need revamping, especially as our economy and technology develop, but going back to an 18th century apprenticeship model is not the solution. We teach future professionals, not tradesmen." After correctly pointing out that law schools do offer clinical courses, trial practice courses, and writing courses, Frankel and Gordon claim, "But the best practice will come after law school, with maturity, with watching the senior partners and with learning from mentors."

And that, folks, is the scary part. What Frankel and Gordon are suggesting is a continuation of the decades-long habit that sees law school graduates getting paid to observe, to do research applying first-year legal research skills, to do tasks that paralegal can handle, and even to do secretarial work. That arrangement, made possible by charging clients for the time invested by what can best be called trainees, no longer works well and is breaking down even as some in the legal academy hinge their arguments on it. Why is it breaking down? Clients have become smart. They do not want to pay the apprentice to watch and observe. Similar fee pressures make it more difficult for established associated and long-time partners to invest time in mentoring. Law firms cannot charge clients for the hours of conversation between mentor and trainee.

Yes, it is true that starting salaries at the elite law firms are sky-rocketing. The elite law firms get to hire the best graduates from the best law schools. These are students who have the ability to extract from their legal education and from their experience every bit of useful understanding that they can squeeze from the combination of what the faculty offer and what these usually self-starting individuals dig up for themselves. To the chagrin of my best students, I tell them that I don't try to teach the A students, because they're quite capable of teaching themselves. Others have more need of my guidance.

The pressure on those graduates lucky or unlucky enough, depending on one's perspective, to receive and accept an offer from a top-line high-paying law firm is enormous. If the salary is $165,000, these new employees must generate something on the order of $400,000 or more in legal fees. Is the work that they do truly worth $200 or more per hour? The clients will let us know.

But what happens to the other law school graduates? Some end up as judicial clerks, where they do have a magnificent opportunity to be mentored. Speaking from experience, nothing can substitute for a year or two (or two and a half in my case) of one-on-one examination of the law and legal analysis. But most law graduates do not have the opportunity to bridge the gap between law school and law practice in this manner. Many are tossed into law offices overloaded with work, public defenders' offices and prosecutors' departments operating at full steam almost twenty-four seven. They are, in many ways, dropped into the deep end of the pool and told to swim, no lifeguard on duty, thank you very much. Somehow the idea that the law practice world will step in and make up for the deficiencies of legal education is a bit too much to accept as appropriate or even honest.

Defenders of what legal education has become and is becoming insist that law school is not and should not be "trade school," much in the manner argued by Frankel and Gordon. Of course law school is not trade school. It is not a place where students, other than those in clinical courses, learn which document is filed with a particular county office, or as I heard during my student days, "how to find your way to the court house." That's not what advocates of practice-focused legal education want.

Law practice involves problem solving and problem prevention, on behalf of clients. To that end all legal education should be pointed. Problem solving and problem prevention requires problem recognition, and there is a place in law school for the emphasis that currently is placed on issue spotting. Problem solving often requires creative thinking or development of new public policy, and there is a place in law school for a bit of the public policy analysis and legal philosophy focus that is beginning to swamp the curriculum. When upperclass students tell me that I'm the only member of the faculty that reminds them to think about the client and to try to think as does the client before fashioning a response to the client, I shudder. Ought not an understanding of client psychology have a place in helping students learn what considerations shape the legal analysis they share with clients and how they package that analysis?

Teaching law in the abstract is something that is far too prevalent in America's law schools. Teaching law in the abstract fails to open the eyes of law students to the practical realities that shape the law when theory meets practice. The common defense, exemplified by Frankel and Gordon, that law schools offer clinical courses and trial practice experiences, is a canard. For many law faculty, clinics are a necessary distraction, and remnants of what was at one time open hostility to clinics and those teaching them still hover over many schools. Trial practice courses are fine, but most law graduates don't litigate cases. Certainly few, if any, litigate as soon as they enter practice, and many lawyers never enter a courtroom as a litigator during their entire professional careers.

Law schools do not need more courses. Goodness, the array of courses in the law school curriculum is overwhelming. During the past decade, all sorts of courses reflecting the scholarly interests of law faculty have been added because they are interesting, provocative, and often necessary to attract the "scholar who will assist in out-Harvarding Harvard in the U.S. News marathon" game.

What's needed is a change in the structure of the traditional doctrinal courses. It's not enough to learn that the law requires one thing or another. It's important to consider whether the parties will act in accordance with it, to understand what the options are when the theoretically correct legal answer does not match the actions of the client or some other person, and to appreciate how one's approach to the matter can influence how the client deals with the matter. It is more important to understand how the law came to be the way it is than it is to advocate some law reform that has little if any chance of seeing the light of day in a committee let alone a court or legislature. Professional responsibility issues need to be incorporated into substantive courses and not stashed in the corner in a separate course, because in practice those issues do not arise in a vacuum. Some of my students bristle when I raise professional responsibility questions in my tax and decedents' courses, because "that stuff is in another course." Well, it ought not be. The same problem exists with respect to digital technology. Most law faculty continue to omit discussion of cutting edge legal issues arising from the existence of legal technology, perhaps because they don't understand it and don't have the time to learn about it because they're under pressure to crank out ten more articles for tenure. It's only in my decedents' course, my students tell me, that they are challenged to consider the legal issues arising from the use of digital signatures on wills, revocation of digital documents, and the issues arising from the disposition of the decedents' email and email accounts. To put it bluntly, law faculty need to prepare students for practice in the twenty-first century.

There are an assortment of comments in the Money Law Blog posting on the Frankel and Gordon reaction to the Stracher op-ed. Take a look. You'll even find a short one from me:

It has to do with truth in advertising. There's something wrong with schools of law ending up as schools of (legal) philosophy, advanced political science and similar elements of the S.J.D. degree. My determination to speak out against the ongoing shift in legal education was triggered by a colleague's comment 15 years ago, "We aren't here to train lawyers, we're here to teach legal philosophers." Sorry, but legal philosophers is far, far down the list of what this nation needs from its educational system.

As much as I like my comment, I will also quote Bill Henderson, because he says it so elegantly: "It is time the legal academy began to focus on the problems and trends are affecting the legal profession today rather than an exclusive focus on the legal issues or scholarly debates that engage law faculty. If we do this, I am confident how and what we teach would change."

Law schools are on notice. It's time they turned their attention from defending the status quo to making a transformation that repairs the connection between legal education and law practice. It's time to reject the monopoly of theory in the same manner that monopoly of practice - the so-called trade school approach - has been consistently rejected. It's time for legal education to be rescued by the lawyers.

A Tax or a Ban: Which is Better?

Philadelphia's mayor, John Street, made a comment about the recently enacted ban on trans fat that goes into effect in Philadelphia later this year. He noted that he preferred not to pay for the consequences of other people's bad health decisions. I assume he was referring to the higher medical insurance premiums and other medical costs that medical care consumers face because of illness and disease caused by the ingestion of trans fats.

My attempts to find a link to Street's comments have been fruitless. Ouch. Even the web site of the radio station on which I heard Street speak does not have his comments. At least, not that could find after hunting around. Ouch again. The closest I could get was this report.

Street's comments brought several thoughts into my mind. I asked myself why a ban rather than a tax. And then I asked myself why stop at trans fats.

The principal difference between a ban and a tax is that, in theory, a taxed item is available to those who are able and willing to pay whereas a banned item isn't available, period. Of course, the theory ignores smuggling, black markets, and other avenues to avoiding bans. The disadvantage of a tax is that those unable to pay either do without the item or forego something else, presumably something more important, in order to obtain the desired item. If something is horrifically bad, such that no one should have it, then a ban is the ideal approach. Bubonic plague cultures should be banned, not simply taxed.

The tax approach is used for a variety of items that some people think should be banned. Tobacco products probably tops the list. Tobacco products are one of the few exceptions to the adage that one should partake of life in moderation, neither over-indulging or totally depriving one's self of a substance. That ties in with the adage that a well-balanced meal presents at least three food colors on the plate, but I digress.

Why are tobacco products taxed rather than banned? The tax on tobacco products arguably exists for two purposes. One is to discourage use. The other is to generate funds that, in theory, are or can be applied to defray the cost to society of tobacco use. Attempts to ban tobacco products would cause an uproar. Even attempts to ban the use of tobacco products in public have triggered spirited debates. Almost a year ago, in Proposed Philadelphia Tax Break to Manipulate Behavior, I commented on an interesting twist on the tax angle, namely, providing tax breaks for perceived good behavior rather than taxing undesirable behavior. The reason for the creative suggestion was the attempt to find a compromise between those trying to ban tobacco use in public places and those holding steadfast to their claimed right to smoke. People complain about taxes on tobacco and other items, but most end up paying them because they are so intent on acquiring the item in question.

Yet no matter how one slices it (yes, ouch again), the underlying objection to taxation or prohibition of harmful items and activities is that government has no right to control individuals' lives. Some who take this position accept the idea that taxing or prohibiting items or activities that are harmful to others is within the realm of appropriate governmental action because governments have a duty to protect its citizens from harm. Logically, this perspective would support a prohibition on smoking because second-hand smoke can kill, while at best it would favor a tax on trans fats because there is no indication that one person's ingestion of trans fat causes coronary artery disease in someone else.

Perhaps John Street is right, that there is a harm in anyone's use of trans fats because the ultimate consequence is a burden on the health care system that increases costs to others. But that reasoning leads to the next question. All sorts of items and activities impose additional costs on others. People who refuse to wear motorcycle helmets incur higher medical care costs when they are in accidents than do those who wear motorcycle helmets. Should riding motorcycles without helmets be banned? Or taxed? Or should a society that claims to be compassionate simply leave helmetless injured motorcycle riders to their own resources? Again, those with more wealth would have more choices available to them.

Should the concept of taxing harmful items and activities be extended to taxation of non-activity? One cannot ban failure to exercise, for doing so would raise arguments that the government was forcing people to exert themselves, something that many think a government does not have the right to do. Interestingly, governments do require people to shovel snow from sidewalks and to keep properties in good repair, but they don't require that it be done by a specific individual. Again, those with money can pay others to do the work, while those without adequate financial resources end up doing it themselves or facing a tax that is called a fine. This analysis, however, isn't all that helpful when it is applied to something like physical exercise. How we wish we could pay someone else to do our push-ups for us. Fat chance that would do us any good. OK, a big OUCH for that one. Sorry. As I tell my students, I cannot study for them or do the intellectual work they need to do anymore than I can burn calories for them by riding a bicycle. Failure to exercise is no less a problem than trans fats. Should governments ban failure to exercise? Is that possible? Perhaps, though, the advocates of taxes on cigarettes would argue for a tax on failure to exercise. Interesting idea, but probably unworkable and likely to cause a furor that would dwarf that triggered by the public smoking ban.

Some health insurance companies provide premium discounts for insureds who regularly exercise. However one wants to characterize the higher premiums paid by those who don't exercise enough, it is not a tax. It isn't imposed by a government. So why not rely on health insurance companies to provide discounts to those who consume little or no trans fat or to impose surcharges on those who take in too much? The problem is that most of us don't know how much trans fat we eat, most of us cannot figure it out, and too many of us would not report accurately what we were doing. Even those who meticulously read food labels are stymied, in part because the labels aren't always correct or complete, and in part because only the few recluses among us avoid eating food offered by others or served by restaurants. If we rejected all restaurant offerings that included trans fats, we'd be left with a much shorter menu from which to pick.

A tax on trans fats provides another practical challenge. Restaurants and food manufacturers trying to maximize market would need to offer two versions of their menu items or food products. In the case of restaurants, the logistics of preparing and serving two versions of the same item for two different prices, unlike the cost-free "hold the onions" approach, would make eating out too much like doing a tax return. Talk about indigestion.

The libertarian in me wants to say, "Hey, let people do what they want, just don't blow smoke in my face, and if you become ill or die, too bad for you." The practical realist in me responds, "Sure, it may be easy for me to avoid tobacco use but how do I know what's in the food I buy and the food I order at restaurants? Can I protect myself from unhealthy substances without the assistance of a government?" What it comes down to is this: if I'm willing to let the government ban the use of arsenic in food, why should I be uncomfortable with a ban on trans fats? Could it be that I cannot square that with the absence of a ban on tobacco product use?

I wonder if people even will notice that trans fats have disappeared from foods sold in Philadelphia restaurants, other than the asserted increase in price that is required by the use of replacement ingredients. I wonder if people will flock to restaurants in towns that welcome the use of trans fats because the food tastes better. I wonder if medical studies five or ten years from now will show measurable decreases in the rates of disease and death attributable to the ingestion of trans fats.

Of course, my entire philosophy could change if someone proposed a ban on chocolate. As best I can determine, the fat in chocolate is not trans fat.

War Taxes: Even A Discussion Can Teach Lessons

About a week ago, Senator Joe Lieberman proposed that a special tax should be enacted to pay for the war against terrorism. Lieberman made several arguments. First, he noted that it would make it less likely that military and security costs would continue to hamper domestic spending. Second, he commented that aside from the military and a few civilians involved in the campaigns, no one else is being asked to make sacrifices. Third, he explained that taxpayers would know the purposes to which the tax proceeds would be put.

Lieberman's suggestion is not new. In April 2004, Allan Sloane of Newsweek proposed Six Fixes for the Tax Mess, which I discussed in Fixing the Tax Mess: Reaction to a Journalist's Proposals. Of relevance to Lieberman's idea is this portion of the post:

5. A War Surcharge

Mr. Sloane suggests a 10% temporary war tax to pay for the war on terror, rather than financing it with borrowings from foreign central banks. Families with relatives stationed in Iraq and Afghanistan would be exempt. He points out that "Civilians are supposed to sacrifice during a war. ... Instead of sacrificing, civilians are partying with tax cuts."

An interesting idea. Close to a user fee, which I've always supported. Two quibbles: some people who have received tax cuts aren't partying, but he's right: many people are living their lives as though there is no war. There is. The other quibble is that I'd extend the exemption to all military (definitions already in the Code) because Iraq and Afghanistan are not the only places where the military is fighting the war on terror.

Fifteen months later, I revisited the topic, in Taxes and Sustaining a Civilized Society, where I opined

The nation allegedly is at war. We are allegedly at war with terrorism, or terrorists, or terrorist-sponsoring states, or insurgents, or well, bad people, I suppose. Whether or not one supports none, one, or all of the various military actions undertaken in connection with this war, it is inconceivable to me how one can disagree with the notion that if there is a war the war must be funded because wars cost money. Would opposition to specific military campaigns been stronger, or developed sooner, had taxes been increased to fund the campaign, as good fiscal management demands? Maybe. My guess is that those who supported a campaign, or at least most of them, would have acquiesced, reluctantly or otherwise, to a tax increase. The failure to seek a tax increase, or at least to put the brakes on the tax cutting, probably reflected a policy of trying to make everyone happy even though the long-term cost is far higher than would be the cost of an immediate, and thus smaller, tax increase. I've been told, and I've read, that when the nation went to war in 1941, and even as it was preparing to do so in 1939 and 1940, taxes were increased. I don't know if there was much griping, or how extensive it was, but people knew that war means war. It requires sacrifice. My parents have described what life was like under a rationing program for a long list of items. The nation allegedly is at war. A few individuals and their families, constituting a very tiny percentage of the population, have made and are making sacrifices. The rest of us, it seems, are living lives that somehow don't seem consistent with what life is like during war. Perhaps I am wrong, but for me, war is like pregnancy. Either a woman is pregnant or she isn't. Women cannot be partially pregnant or have limited pregnancies. Concepts of limited war or partial war get used not only to create the sorts of conditions that preclude victory, as happened in Vietnam and Korea and as is beginning to happen in Iraq, but also to deflect the effects of war-waging decisions so that war seems, somehow, more palatable. War, at times, unfortunately, is necessary. War, though, should never be palatable.

Last May, in A Memorial Day Essay on War and Taxation, I made so many points that I'm going to quote myself in its entirety:

Thinking about Memorial Day has me thinking about war, helped along by a steady dose of war movies on some of the cable channels this weekend. More specifically, after seeing a few scenes in which decision makers debate the allocation of scarce resources (e.g., aircraft carriers or battleships?), and knowing the bits and pieces I know about the impact of war on taxation, I began to think about the relationship between war and taxation.

Wars consume resources. Wars divert resources. In other words, wars cost money. Wars destroy lives. A life lost is immeasurable, yet economists, lawyers, and juries put price tags on lives, however lost. It is not good for an economy, or for taxation, for lives to end prematurely.

Wars often are fought about resources. Oh, supposedly the Greeks and Trojans had at it because of a woman's beauty, but I suppose in their culture a woman's beauty (or perhaps a woman) was a resource. Here and there wars are fought because of pride. But most wars are about resources. England and Spain, in the sixteenth and seventeenth century, fought over gold and other valuables from the Western Hemisphere. Wars have been fought over fishing rights, water, and trade routes. In the 1930s, Germany wanted "living space," Japan wanted oil and rubber, and the world ended up with war. The Revolutionary War was fought over control of resources and trafficking in resources, some of it manifesting itself in complaints about taxation. The many wars fought over religion almost always disguise a battle for resources, especially when the souls of people are considered a resource, something that a few folks think they can own and control.

The irony, and stupidity, of war is that it often destroys the very resource over which it is being fought. How many barrels of oil, pounds of rubber, or piles of gold have ended up burned, ruined, or at the bottom of the ocean because of war? How many tax revenue dollars end up in materiel that is destroyed, deliberately exploded, or consigned to the scrap heap?

War, though stupid, tragic, and an indictment of a species that dares call itself "sapiens sapiens," unfortunately is necessary when there is no other recourse and the cost of no war, particularly in lives, is greater. War is the consequence of decisions, decisions that require the utmost care and consideration. One of the most important questions, aside from "should it be done?" and "can it be done?" is "how will it be done?" All three questions are tangled together, for if it cannot or ought not be done, there's no point in asking how, yet seeking the answer to "how will it be done?" might answer the question of "can it be done?" and "should it be done?"

War is such a collective expression of the ultimate essence of life and death that it ought not be undertaken half-heartedly, experimentally, impetuously, or foolishly. War requires commitment, and without it there ought not be war. War requires resources, and without a commitment to expend those resources, it ought not be undertaken.

The last half-century has brought a concept of "limited war," a buzz phrase that I think is more about the commitment side than the implementation side. True, in a world with nuclear weapons, a war fought without their use is in some way "limited," but I doubt that the victims of every other sort of weapon, including those that cause entire cities to burn, find much comfort in the notion of "limited" war. The concept of "limited war" is like the concept of "limited pregnancy," whatever that means.

The resource commitment problem with "limited war" is significant. The notion that a country can fight a war without general sacrifice of resources is mind-boggling. Our nation is at war. War has been declared on our nation, not by some relatively harmless but disturbed individual, but by an organization and movement that presents a genuine threat while changing the rules of war. Yet too many of us continue to think that war is something going on somewhere else, fought by others, and beamed into our homes by all sorts of spontaneous communications technology. But for that technology, the funerals of fallen heroes, and the fact today is a day we are reminded to stop and meditate on these matters, one might not know that a war, a global war, is underway. Televisions can be turned off, few visit the maimed veterans undergoing treatment at military hospitals here and abroad, and life pretty much goes on as it otherwise would.

I wasn't around during the last full-fledged, unlimited global conflict. Yet I've listened to as many tales as were shared with me by those alive at the time as I could find, and I've read and watched a lot. So I've heard and read about rationing, double shifts, postponed plans, substituted products, and sacrifice. Every tax practitioner, and every citizen, should understand that during World War Two income tax rates skyrocketed, wage withholding was introduced, and the entire revenue-expenditure structure was altered. War hung as a cloud over every life, and over every dollar. Is that good? I think so. Why? Because war is so serious and so terminal a course of action that it should not be permitted to recede to the background.

Yet the current global war has not been managed in the same manner. Politicians have chosen to fight without increasing revenue, imposing rationing, or deferring projects and activities. In their defense, they argue that none of these things are necessary, that a nation can have its guns without giving up its butter. I disagree, and I happen to think that politicians are reluctant to do what needs to be done because they are more concerned about maintaining their position in office than in making the tough decisions that war requires. So our national leaders have chosen to put the cost of the current war on our children and grandchildren. Those who decry the huge deficits, triggered in part by war and in part by the almost insane concept of decreasing tax revenues (mostly for the wealthy) during wartime, pretty much focus on the economic impact. They ask if, or suggest that, our grandchildren will be facing income tax rates of 80 percent in order to reduce an unmanageable deficit. I think it will be worse. I think our children and their children and grandchildren will become subservient to our nation's creditors. The sovereignty of the United States of America is far from guaranteed, and is at risk. Were these considerations discussed when those in power decided that war can be done on the cheap?

War cannot be done on the cheap. War is not free. War ought not be purchased on a credit card. War is a national commitment. Hiding the true cost of war in order to influence a nation's willingness to engage in war is wrong. Ultimately, the price to be paid will be dangerously high.

Let us not forget those who have paid the price, with their lives. Some have died. Others have been maimed and their lives will not be what they once were or what they would have been. Many have been psychologically scarred. Some are disillusioned. Bitterness, anger, and resentment percolate among those who fight and those who continue with their lives as though there were no war. It is tragic that some of the deaths and injuries have occurred because of insufficient resources for the appropriate armor and equipment. War should not be managed by the corporate cost-cutter types.

To all those who have served, and who serve, I and every other citizen owe thanks. Here it is. Thank you. Now let us go and do what needs to be done to put meaning into those words. Let us make a collective investment in our appreciation, and provide the full revenue support that is required for whatever it is the nation decides to do.

So it is not surprising to me, or to anyone who understands my taxation philosophy, that I encourage the Congress to consider most seriously the Senator's suggestion.

My revenue-raising preference is for user fees. I understand that in some instances they aren't feasible, or impose too much of a financial burden on individuals who are unable to pay. Yet I like the psychological impact of user fees because it compels the payor to associate the cost with the alleged or actual benefit. It increases the chances of the payor's involvement in genuine participatory democracy if the payor has issues with the user fee. The user fee is much easier to understand, and thus less likely to provide opportunities for politically ground subterfuge.

Even if Lieberman's proposal isn't crafted as a user fee, it provides the opportunity for a similar transparency in decision making. By putting the cost of war and defense into a revenue-raising spotlight, the proposal provides an opportunity to debate benefits and burdens. The reality that war is not free can be brought home to more than just the brave few who return maimed or the relatives and friends of the heroes and heroines who have died.

There is one aspect of the Senator's idea that troubles me. I don't think that all wars and defense activities should be lumped together. Though there are some who make no distinctions among them, whether in support or opposition, many, perhaps most, Americans hold positions that require the recognition of critical distinctions among the campaigns in which the nation's military currently are serving. Putting a "war and defense" tax as an "all or nothing" proposition could be counterproductive. I am sure many join me in wanting to see the cost of transportation security separately stated and not lumped in with the cost of the foray into Iraq, the cost of border security separated from the cost of domestic intelligence efforts, the cost of public facility protection identified separately from the cost of tracking terrorists in Afghanistan, and the cost of training and equipping first responders listed separately from the cost of tracking overseas banking transactions. Support for a tax funding one of those endeavors might be very different from that forthcoming for another of those engagements.

By proposing a war and security tax, or perhaps a series of war and security taxes, Lieberman brings a group of critical issues to the table in a manner that pushes the discussion past the rhetoric and into a reality zone. As I've written, war should not be fought on a credit card with the costs left to future generations. With the tax proposal putting the economic costs into full focus, the wisdom and folly of the nation's many current military engagements can be recognized, and decision making can proceed sensibly and rationally rather than emotionally.

Extreme Makeover: Extreme Tax Increases

Several weeks ago Joel Majka, a regular reader, sent me a link to an article about the tax consequences of home makeovers. Joel commented that he recalled having seen a post on MauledAgain about the topic. Indeed he did. He may have been referring to Extreme Makeover, Extreme Tax, to Extreme Makeover, Extreme Tax, to Tax Consequences of Home Makeovers: Does the IRS Read MauledAgain?, to two of them, or to all three of them.

The topic resurfaced recently when a tax-teaching colleague at another school inquired about a comment in a newspaper article he had read. The article referred to contestants being told that there was a tax law provision that let them receive the makeover free of income taxes. I responded that the reference probably was to section 280A(g). I neglected, until tonight, to point out the IRS letter on which I commented in Tax Consequences of Home Makeovers: Does the IRS Read MauledAgain?. In that letter, the IRS took the position I had described a year earlier. No matter, the debate over the appropriate income tax treatment continues.

The article referenced by Joel, Dream home brings a big tax hike, primarily addresses the state and local real property tax quandary in which these contest winners find themselves. Their new or remodeled homes are worth much more than their old homes. So their property tax bills soar. The article discussed attempts to have legislation enacted that specifically exempts these specific prize winners from the property tax increases. In one instance, the exemption would apply only if the prize winner or someone in the family living in the home was disabled.

A spokesperson for one producer explained that "contestants are made well aware of the potential tax increase and sign a contract before agreeing to the makeover." The production company, according to the article, "was widely criticized, however, for putting contestants in a precarious situation with the IRS."

Here's my prediction. As increasing numbers of taxpayers receive home makeovers, there will be more of these tax questions. The Dream home brings a big tax hikearticle explains that from "coast to coast" reports are coming in about people having tax and financial difficulties after winning the home makeovers. This trend will continue. These taxpayers will want property tax relief. They will face IRS audits. Who is going to pay for the costs of these proceedings? The answer is obvious. Because America likes reality shows, create a new one. Call it "IRS AUDIT!" and let television production companies select among previous home makeover and other television contest winners for those whose legal bills it will pay if it permits the audit to be televised. Oh, yes, I know the IRS will balk, but perhaps tossing in a voluntary contribution to the Treasury might bring a reversal of IRS policy. Or perhaps those with experience lobbying state legislatures for property tax relief can lobby the Congress for legislation requiring the IRS, with the consent of the "IRS AUDIT!" prize winners, to permit broadcast of the audit. Imagine how educational that will be. Just imagine. Yes, just imagine.

For Some, Life is Just One Big Charade

Sometimes I really wonder. There are some questions answers to which continue to be elusive. They invite speculation, discussion, disagreement, and even argument. But they also open a window on human imperfection.

What triggered my most recent bewilderment is a story about a cheater. On Friday morning, while driving to the gym, I heard this KYW news radio story. I heard it again on the way home. So whatever doubts about my hearing that might have entered my mind the first time dissipated.

A young man, perhaps on his own, perhaps at the behest of parents or others, decides to attend law school. The first formal step in the process is to sit for the Law School Admissions Test (LSAT). The test measures a person's aptitude for legal studies. The results are an important factor used by almost all law schools in making admissions decisions. As one might expect, higher scores suggest higher likelihoods of being admitted, and higher scores suggest higher success at the more highly ranked law schools.

This young man took the LSAT twice. According to the story, he failed twice. Technically, one does not pass or fail the LSAT, just as one does not pass or fail an eye color examination. It is possible, though, to attain a score so low that no law school in the country would open its arms in welcome to the test taker. My guess is that the young man earned very low scores.

Now comes the critical point in the story. To me, there are three choices. Choice one is to look in the mirror, look at the test scores, and reach the same conclusion that many of us do when we look in the mirror, look at our batting averages, and stop seeking invitations to spring training. Choice two is to seek assistance, from a tutor or other professional, to learn if the causes of the low scores are inadequacies that can be remedied with additional exercises, practices, and counseling. Choice three is to play the pretend game, in other words, to cheat.

So the young man in question allegedly chose the third option. He tried to buy a copy of the examination. How? He allegedly put envelopes, each containing $100, on the cars of people working for the company that administers the LSAT. Those employees contacted police, the police sent an undercover detective, and the young man handed over $5,000. Rather than getting a copy of the test, he acquired a first-hand experience of being handcuffed.

So now my wondering kicks into high gear. What would the fellow do with the test if he had obtained it? Would he take it to someone who could provide answers? How would he know if the answers were correct? Even if he obtained the correct answers, was he planning on memorizing them? Was he sufficiently confident that the test he received would be the one administered when he next sat for the LSAT?

Suppose he managed to make all of that work, and scored very well the third time he took the test. Does he think law school admissions deans and directors would not notice something strange when the reports show two low scores and then a very high score?

Suppose he gets past that point somehow. Perhaps he explains that he had two bad days and then life returned to normal. Perhaps he says he did poorly and then sought out a tutor. Then what would happen?

He would be admitted to a law school. What happens in law school? Professors ask questions. They administer exams. They assign tasks. What does the young man think he would do? Unlike the LSAT, rarely does someone get two, let alone, three opportunities to sit through the first year of law school. Again the three choices would appear: withdraw, seek assistance, or cheat. Once a cheat always a cheat?

And suppose he gets through law school with grades sufficient to earn the degree? What's next? Oh, no, the bar exam. Would not the same challenges arise that were presented by the LSAT? The two exams are not very dissimilar. After the bar exam, it's time to deliver the goods. Will it be possible to enter a courtroom and fool the judge? Will it require getting someone to ghost write memoranda? When does the charade end? And how many clients suffer on account of it?

At some point, does not the reality out the cheater? Of course. Do cheaters know that? Perhaps they do, deep down inside. Yet most, if not all, seem to think that somehow they will be the ones that beat the odds and succeed in fooling all of the people all of the time. Do cheaters know their long-term chances of success are very, very low? Yes. Then why do they persist? Perhaps because they see the folks who succeed for long periods of time before getting caught and figure that they need only add a few years to the run in order to extract more from life than they ought be taking. But perhaps they also are not getting the message. Perhaps the message isn't being sent. If cheating is tolerated in kindergarten, cheaters will try again in first grade. If it meets with inconsequential reaction when it is discovered, it will reappear again and again. If the "cheating is evil and unacceptable" message is hammered home from the outset, perhaps there would be fewer Enron episodes, fewer indictments of politicians, lower health insurance costs because fraud is eliminated, and much less of a tax gap. You knew I'd work in the tax angle, even if it took eleven paragraphs!

A final thought. It's not mine. It is something I hear often when I discuss cheating with other faculty or with students. "You think cheating in law school and in law is bad, what about cheating in medical school?" I'm told it exists. So who wants to seek care from a physician who cheated on the MCATs, cheated throughout medical school, cheated on the boards, cheated ...? Well, supposedly the screening and detection process in medicine is much better than it is in law. If that is so, that's too bad. After all, not every wanna-be cheating lawyer is, to use the District Attorney's word in this instance, so "stupid" as was this young man as to make detection simple.

Another Tax Book for Tax and Non-Tax People to Read

As much as I write and read, I continue to marvel at the accomplishments of those productive authors who can produce more books in a year than some generate in a decade or lifetime. Yes, Julian Block kicks off the New Year with his fourth book in twelve months. In February 2006, I reviewed his "MARRIAGE AND DIVORCE: Savvy Ways For Persons Marrying, Married Or Divorcing To Trim Their Taxes - And They’re Legal," in Tax and Relationships: A Book to Read and Give. August brought a review of Julian's "THE HOME SELLER’S GUIDE TO TAX SAVINGS: Simple Ways For Any Seller To Lower Taxes To The Legal Minimum," in A New Book on Taxation of Residence Sales: Don't Leave Home Without It. Julian's 2006 hat trick of books closed with my December review of "TAX TIPS FOR SMALL BUSINESSES: Savvy Ways For Writers, Photographers, Artists And Other Freelancers To Trim Taxes To The Legal Minimum," in A Tax Advice Book for People Who Write and Illustrate Books.

Julian's latest effort shakes us out of our single-minded focus on preparing 2006 tax returns. In "YEAR ROUND TAX SAVINGS," Julian reminds us that it's time to do tax planning for 2007. Many people think tax planning is something done at the end of the year, when the finality of December 31 is on the near horizon. Yet maximizing tax savings often requires that expenses be paid, retirement contributions be made, and other transactions be undertaken early in the year. Julian devotes several chapters to "timing payments of itemized deductions" and "timing receipt of income." Timing also gets important attention in his chapters on investment strategies. He asks if our "withholding is out of whack." If it is, it's best fixed by making adjustments in January or February, and not in November. The chapter entitled "Make Tax Planning a Year-Round Job" echoes the theme of the book.

This is a useful book. As are his earlier volumes, Julian's newest book is appropriate for people not expertised in tax law, but it also is a handy reference for tax practitioners who service individual clients. The anecdotes and stories sprinkled throughout the text are alone worth the read. My favorite is the widow who left cash in an armoire and jewels behind a loose board in a summer home closet. Law professors like myself can find themselves thinking "exam question, exam question" while they add more data to the "We don't need to make up this stuff" mantra.

To order a copy, contact Julian Block at 3 Washington Sq., #1-G, Larchmont, NY 10538 or go his website, julianblocktaxexpert.com. Or, as was the case with the previous books, email Julian at julianblock@yahoo.com.

A Tax Person Who Enjoys Reading Non-tax Books

Even though I do a significant amount of writing, not only on tax and other professional topics but also on family history, I make time to read. Several years ago I accepted an invitation that Paul Caron, of the TaxProf Blog, delivered to tax law professors to write reviews of the books they were reading. At first I wrote up one book at a time. Then I covered a few books in one piece. This time around, having let almost 15 months go by, I ended up with 44, yes, 44, books to review. So the reviews are short. If you're interested in what I read when I'm not writing, take a look at What Tax Profs Are Reading ... Jim Maule. Perhaps my comments will inspire you to pick up one or a few for the next time you want something to read.

I thank Paul for the opportunity to share my literary selections. Of course, a careful reading of my short reviews will reveal that some of my choices are influenced by a friend who has a gift for figuring out before I do what books I will enjoy. It is fortunate that two people who like to spend lots of time reading find moments in which to swap books and book suggestions.

Yes, I Missed Something in Analyzing the Proposed Health Care Standard Deduction

Last Friday, in Health Care Standard Deduction: Solves Uninsured Problem?, I expressed my bewilderment at the prospect of a health care standard deduction that would be available even if no health insurance was purchased. I asked if I was missing something. Indeed I was.

Joe Kristan, who has been sharing Joe Kristan's Tax Updates for more than five years, provided some answers. In his explanation, he points out that according to the White House fact sheet on the plan, the deduction would be available only to those who purchase health care insurance. It is the amount that would be standard. Aside from not having dug up the White House fact sheet, I also made the error of thinking that the word "standard" meant that nothing need be done to get the deduction, in a manner similar to the section 63 standard deduction that is available without proof of any expenditures.

To my question of whether anything prevents someone from using the tax savings from the health care standard deduction for something other than health care premiums, Joe answered in the negative. On this issue he and I have reached the same conclusion. Joe, however, characterizes this possibility as a feature rather than a flaw. It encourages taxpayers to seek low-cost health insurance. That, of course, usually means higher deductibles and co-pays. In my email to Joe thanking him for his response, I asked, "Do you think companies will drag out 'no frills' insurance with very low premiums, very high deductibles and limited coverage to sell to (self-perceived) healthy young folks? Will it become a tax shelter? Then when one of those "almost self-insured" young folks has an accident or develops a health issue, what happens?"

In what Joe calls an oversimplified description of Arnold Kling's thesis, he notes that people tend to use more health care if someone else is paying for it. I wonder if that is true, though it takes us again to the world of tax rules being used to regulate social behavior. Do people use health care because it's there, or because a medical professional urges them to get a particular test or treatment? So, for me, the next question is whether medical professionals will suggest fewer or cheaper (read: less thorough) tests and treatments if the patient carries cheaper health care insurance that provides fewer benefits? Or will tests and treatments be recommended and prescribed because they exist and can assist the medical profession in providing the best possible health care?

As Joe notes, there's no chance of the plan being enacted in the near future. As people continue to dissect the proposal, the likelihood of it ever being enacted probably continues to decrease.