TypePad HTML Email RyanBefore internet sales took off in the last decade, the states got the revenue from sales tax easily. They are cash strapped now due to a lot of factors, but in no small part due to the fact that they have lost sales tax revenues that they should have been receiving. Public education has been cut to the bone--from K-12 through public universities. That’s one reasons students are so in debt--even public universities had to raise tuition to cover fixed costs. While it’s reasonable to ask for transparency (all government should be more transparent, including having representatives reveal exactly who they meet and talk with on a daily basis), it seems unreasonable to talk about this revenue as “extra” revenue. It is just restoring the revenue that they have historically used to run important state operations like education, police and fire safety, disease control, etc. Linda

TypePad HTML Email Yes, Smith Lydgate. The Code discusses partnership interests received upon a transfer of property to a partnership, which results in a nonrecognition transaction similar to corporate formation under section 351. The Code itself doesn’t explicitly provide for the carried interest exception—it is supported by a combination of Wall Street Rule, regulatory inclusion of a notion of a “profits” partner, and some scattered caselaw. Even with the scattered caselaw, I think that Treasury and the Service could reinterpret their administrative pronouncements that permit profits partners, which allow them to be taxed, in most cases, only upon receiving a distributive share of partnership profits. The new interpretation would rest on the fact that the so-called ‘partner’ is actually a manager working for a salary. Since the purported distributive share is actually ordinary compensation for labor, it should neither be deferred until the partnership has sold its assets at a gain nor subject to a preferential capital gains rate. Of course, there is a considerable degree of capture of tax administration. I think that a cooperative and open relationship between tax practitioner organizations like the ABA tax section and the NYSBA tax section is good, but sometimes (and in particular, in some areas) that relationship may be too cozy, with people moving out of government service into partner positions and then appearing at meetings on the same panels with their former government colleagues. The Bush Treasury and Service seemed particularly big-taxpayer-friendly, and much of that continues under Obama. It is highly unlikely that government tax administrators would have the courage to develop a position treating carried interest as compensation rather than a distributive share of partnership profits. Congress should act. But again, it seems to be captured by the huge flocks of financial sector lobbyists that throng the hallways and sip cocktails across from the important staffers of important Senators and Representatives. There is a too-cozy relationship overall between the ones who set the rules and the ones who benefit from them.

TypePad HTML Email wholeheartedly agree, Vanessa…just as we should not be talking about cutting benefits of Medicare and Medicaid, but about expanding to a “single-payer” Medicare for all system, and about WHY health care costs are so expensive in this country compared to other advanced nations (too many providers getting too much profit, including overpaid doctors, overpaid hospital administrators, even in non-profits, and of course the profit stream taken out by private insurers). Time actually has a good report on this latter issue in this week’s magazine, worth reading.

TypePad HTML Email Sorry you don’t like the blog, Ezra. Why do you bother to read and comment, thus “rotting your brain”—especially when your comment adds nothing to the discussion, which asked for potential myths to be considered for (future) debunking? I.e., this first “right-wing mythology” post indicates that I plan to do a series of posts addressing specific right-wing myths. This post is merely a list of prime candidates for myths to be debunked, and I invited comments that have noted other “myths” that I’ve missed. The coming posts are intended to “debunk” at least some of those myths, including links to studies and other discussions of the issue. So what’s your real beef?

TypePad HTML Email there are always a few outliers J

TypePad HTML Email Good point. Maybe that should be listed as one of the MYTHs—the claim that right-wing rhetoric is logical and not based on ideology and dogma.

TypePad HTML Email Drydiggins: Thanks for adding that note. I included Texas precisely because I think it provides both a good illustration about what states without an income tax must do to pay for needed services (both the regressivity in taxation and the inequality in the provision of those services in Texas are noteworthy) and how the rhetoric of “low taxes” really doesn’t even pan out. Thanks for providing the additional info on Texas taxation.

TypePad HTML Email Joe Both parties have problems, absolutely right. The question is how to bring about change. We’ve seen that supporting a third party candidate that is seen as a fringe candidate does not work and in fact emboldens the right. I think the pressure has to start coming from people—more and more vocal complaints and protests unconstitutional tactics like the use of assassination drones and permanent imprisonment of people who haven’t had due process of law, the constant expansion of military and CIA power, the continued bailing out of big business of all kinds at the expense of little folk.

TypePad HTML Email I have often noted Democratic failures. But it would be ludicrous to spare the GOP just because the Dems are not as good a progressive party as they should be. The GOP is demonstrably much worse.

TypePad HTML Email You seem to be forgetting the special problems in the Senate (supermajority requirement gives minority a veto power and Max Baucus (Senate Finance) is NOT a progressive). And when you have radically right Republicans and “centrist” Democrats, the right tends to be able to resist almost any progressive movement in the laws. Yes, Clinton was ridiculously centrist and ridiculously protective of Wall Street. Obama is also much too protective of Wall Street. It isn’t all the GOP’s fault. The fact that Republicans are way too far right has, however, been an almost unsurmountable hurdle.

TypePad HTML Email Thanks Papicek. We can only hope that if we keep pounding away on this, eventually the Dems will start listening to what the majority of the people in this country care about.

TypePad HTML Email Claudia –oops, shows how tired I was. I was thinking (generously) average of 50k but computed as 100k! I should have said “about 20 times” the average annual income!

TypePad HTML Email to make what could be a long answer short, yes, failure to recognize the evolving nature of representation before the IRS is an example of hyper-literalism.

TypePad HTML Email The “genius of language” reference is critical to every linguist’s understanding of how language works. Chomsky’s famous sentence (from the 1950s) illustrating this idea is “colorless green ideas sleep furiously”. It may be hard to compute on first hearing, but it makes perfect sense with appropriate context. Your opinion of how language works and what text means is apparently a rigid one that could not account for the malleability of language and how language actually works. And there is a difference between opinion and theory. Regrettably, much of the purported theory or “method” of statutory interpretation used by judges, especially district court judges, is limited in depth and –in tax in particular—lacking in understanding of how the various Code provisions fit together (or don’t). Strangely, the ideas that often sound like “common sense” approaches—Scalia’s “original interpretation” or “ordinary meaning” “methods”, for example—are often the ones that have almost no reasonable foundation in the way language works or the way we can account for how interpretation works. Much of the ordinary meaning or original interpretation “theory” depends on an a priori determination of what the result should be. Quelle surprise.

TypePad HTML Email Dear king: I am a linguist by training, having received a PhD in linguistics from Cornell University before I became a lawyer (with a Cornell JD and then an NYU LLM in Tax). As a linguist, I certainly do not think text is irrelevant. But as a linguist, I also known that an unambivalent meaning cannot be easily attached to ANY text—maybe never, if one concedes as one should that the genius of language is the ability of speakers to apply old texts to new contexts with understanding. Certainly not for something like the language of a still-valid 1884 statute passed in an extraordinarily different time from our own. Laws (and constitutions)are necessarily invested with expanded (or diminished) meanings as contexts change and the law is understood in new ways, else every single legislative body would need to (re)enact an entire new code in every sitting! The district court’s analysis of “case” in the 1884 statute is hyper-literalist and depends on an archaic view of tax administration. As a result, it leaves the congressional enactment of the much more recent registration statute (the one that permits the issuance of PTINs)-- THAT WAS ENACTED IN A CONTEXT IN WHICH CIRCULAR 230’s DEFINITION OF PRACTICE BEFORE THE IRS WAS ALREADY UNDERSTOOD MUCH MORE BROADLY THAN THE COURT’S INTERPRETATION WOULD ADMIT--hanging meaningless or even as an abuse-enabler by allowing only number issuance without any conditions on the ability of a person to get such a number, including competency to do tax returns, and thus suggesting that the IRS Has ‘endorsed’ a person with the meaningless PTIN.

TypePad HTML Email Drydiggins: Personally, I seriously doubt that this suit is in retaliation for the US’s credit downgrade: Justice is not a “hack” agency that picks targets based on other agencies’ likes and dislikes. As for why S&P and not Moody’s, I suspect the investigation has shown that there were particular weaknesses in these CDO deals rated by S&P that appropriate diligence—which S&P claimed to do—should have revealed at the time to result in lower ratings. That, coupled with a “trove” of emails that may show S&P employees aware of the inferior quality of the mortgages in the CDOs and thus a high likelihood of defaults, would be a strong basis for a civil suit, I’d think.

TypePad HTML Email good point, George. Most won’t admit that their claim that an exemption for a few items solves problems is first, simply untrue (since inequality will increase and revenues will decrease) and second, extraordinarily paternalistic.

TypePad HTML Email Section 1031 might have made some sense originally. What it has become, however, is just another way for those with considerable wealth to avoid all taxation. And the fact that they can actually sell for cash, held in escrow by a QI, gets it so far from a “real” like-kind exchange as to make it somewhat ludicrous. I realize there is quite an investment in like kind exchanges for real estate, but I cannot support it as good policy. I don’t think it functions as any kind of useful incentive that should be subsidized by the government. People who make their living by investing in Real Estate will invest in real estate even if they actually have to be a few dollars in real taxes every once in a while. What getting rid of 1031 would do is redress the balance beam, by getting rid of one of the advantages for those businesses that are in effect subsidized by everybody else because of their being able to take advantage of it. And of course, that’s not even to mention all the abuses…..

TypePad HTML Email Great—keep reading, and let me know what you think.

TypePad HTML Email Yes, the banks’ ability to make bets via derivatives started even before that. We’d been deregulating since Nixon, really. So?

TypePad HTML Email Quite right, George. They are essentially proudly proclaiming their desire to hold the US economy hostage so that they can do what no right-thinking democracy would do—cut the very programs that protect the most vulnerable amongst us, and do it “their way”, while letting the military-industrial complex continue to rip us off with huge waste and militarization of activities

TypePad HTML Email RobbieHaven’t done the math, but seems clear that the public goods provision that helps individuals maintain a decent quality of life is a government responsibility—we are about the only OECD country that leaves any of that to (more expensive) private enterprise, and we probably should reconsider that as making a profit on health care makes little sense. In contrast to the public good of providing health care and unemployment protection and retirement pensions for people, corporate welfare just lets SOME corporations (mostly the great big ones from industries that pay a lot to lobbyists to push their views) make even more profits that are distributed to their owners/managers and—over the last few decades—NOT shared with their workers or communities. Any dollar spent on corporate welfare is wasted in terms of its primary use and often in terms of its secondary use, as corporations shuttle more and more of their consumption abroad. Most dollars spent on a primary use for individual welfare are well spent—and then go right back into the economy to build the economy.

TypePad HTML Email Drydiggins: Yes, the media’s constant striving for “balance” (as though quoting equally from the two sides is balance and is thus meaningful journalism, without checking for facts and for consistency with prior statements) is a big piece of the problem today. How can average Americans removed from disciplines that routinely follow this material understand what is going on if the media don’t do real journalism but instead merely report things in “he said, she said” fashion or rely on releases from biased sources for their “news” stories. I think maybe Americans are wising up nonetheless. There is at least some suggestion that they aren’t buying the GOP party line—which is that they want to decimate Medicare and Medicaid because they care so much about saving the programs!

TypePad HTML Email Mike You’re disregarding a number of important statistics, including what AMOUNT of LTCGs is reported on those lower income returns. I haven’t had a chance to look at the 2010 statistics yet but I’d expect that of those few returns with AGI between 75 and 100 thousand with LTCGs the AMOUNT of capital gains on the return is low. Whereas for those in the higher brackets, capital gains comprise a substantial portion of the income. Same for dividends. Simply because most of those financial assets are held either in pension plans or by wealthier taxpayers. So the impact of eliminating the preferential rate for capital gains will be rather minimal: the fact that those not in the upper middle and upper income have a couple of hundreds of dollars of net capital gains (other than excluded gains from sales of homes) that is subject to tax will result in a relatively minor impact on those middle income taxpayers. Meanwhile, removing the preferential rate on capital gains will predominately impact the upper classes and will provide a significant amount of income for the fisc. Also, it will remove the arbitrage gambits engaged in by the wealthy to transmute their labor income into capital gains income. Carried interest is just the most obvious one of these. Whenever there is such an arbitrary distinction that cannot be upheld on basic policy principles or economic concepts, the wealthy will manipulate the category distinction to their advantage and Americans generally will be the losers. Linda

TypePad HTML Email they do seem to think that is a “fair” interpretation of an election that lost at the Presidential level, at many Senate races, and even at House races that they thought they had sewn in the bag…..Maybe I’ve just discovered why the right has such trouble understanding the word “fair” when it comes to taxation! J