Tuesday, May 30, 2006

Temperature Update

Nell called maintenance (sp?) today and they came out and ostensibly fixed the AC. But we've been home now for about four hours and the temp inside is 87 degrees. The temp outside, by the way is 80 degrees.

Monday, May 29, 2006

It's Hot Inside

The temperature in our apartment right now is, and I'm not kidding, 90.9 degrees. Inside. Our AC is broken and has been since Friday. The landlord's office is closed for the holiday. Our two furry pets are very uncomfortable. I can't stop sweating.

Friday, May 26, 2006

Stone on Punishing Good Journalism

Textbook writer Geoff Stone discusses why passing a federal law punishing the press for publishing confidential information is not a good idea.

Stone came to our school this semester a gave a talk that was ostensibly about a current issue in free speech jurisprudence but that turned into a somewhat dry discussion of the historical development on the jurisprudence. Good guy, but the lecture wasn't great (I liked his textbook, though).

P.S. He cites Chaplinski early on and I didn't even have to look at the footnote!

Prof Kim Cited on Concurring Opinions

Concurring Opinions, a law blog, cited Pof. Kim in a post. Her Employment Law class wasn't the greatest, but it was ok. Also, she always says hi to me in the halls. Prof. Kim is good people.

Thursday, May 25, 2006

Bribery and Separation of Powers

When the Republican leadership in the House of Representatives object to an FBI search of a Democratic congressman's office, I tend to be a little skeptical. So William Jefferson, a congressman from Louisiana, had his office searched and documents taken over the weekend. The FBI had issued a subpoena from the documents in August of 2005. Jefferson had refused to comply with a large part of the subpoena. It's worth noting that the subpoena was issued after the FBI recorded on videotape Jefferson taking a $100k bribe, searching his apartment, and finding $90k in the freezer.

Now what exactly would happen if I ignored, for more than eight months, a subpeona from the FBI. Hmmm. Maybe, just maybe, I would have my ass thrown in jail for contempt.

Earlier in the week, I was a little sympathetic to the argument advanced by members of Congress that the separation of powers should prevent the executive branch from searching the offices of the legislative branch. It makes some sense. Especially given that the executive branch is occupied by very partisan Republicans, and the search was carried out against a Democratic congressman from New Orleans, an area where the administration has recently suffered some embarassment, the potential for abuse here seems high. We don't want the congress constantly being intimidated by the President under threat of FBI harassment.

On the other hand, Congress's law enforcement, the Capital Police, seem to bungle a lot of stuff and even recently seemed to help cover up a potential drunk driving incident by a congressman. Furthermore, corruption in government is one of the leading causes of disillusionment with the system. People don't vote because they the one person/one vote ideal has been replaced by pay-as-you-go lobbying. Fighting corruption in government, in my mind, outweighs the separation of powers fear.

But the real question, I think, is, "Why is the Republican leadership in congress jumping all over this issue?" There are a couple possible answers that don't suggest corruption: distancing themselves from the president in an election year, for one. Maybe I'm a cynic, but my gut says there are a lot of filipino sex slaves hidden in the offices of congressmen.

Wednesday, May 24, 2006

Went for a Walk

I just got back from a little book-inspired walk. The walk was not actually inspired by a book, but I did walk to the library and then the used book store. It is quite nice out. When I stepped outside after being in the book store for about forty-five minutes, I was engulfed in a pleasant warmth. People sometimes complain about the humidity, but to me it is lovely. It's like stepping out onto a beach in Hawaii, but without the pesky sand. Just a lovely day.

Anyway, while browsing through the book store, I stumbled across a series of small paperbacks (I forget the publisher). There were about twelve to twenty on the shelf and each one was about a specific music album, telling the story behind how the album was made, what influenced the artists and what artists the album influenced. Like liner notes, but in much greater depth. Very cool. The one that sprang to my attention was one entitled "In the aeroplane over the sea," about the Neutral Milk Hotel album of the same name. I'm not a huge fan of NMH, but I do enjoy that album. More importantly, my good friend Matt of Superelectric fame is a huge fan of NMH and Jeff Mangum.

Anyway, I just thought I'd share.

Wednesday, May 17, 2006

Satan's Laundromat

I was cruising around, killing time, and I visited Superelectric for the umpteenth time today. One of the things I really enjoy about Matt's blog is his pictures. 95% of them are fantastic. The remaining 5% and simply great. But it reminded me just now of a photo-blog I ran across a long time ago called Satan's Laudromat. It has a similar aesthetic to some of Matt's work. I really like it, and everyone should check it out. And then read some Charles Bukowski.

If you've ever been attracted to a chimp...

this may be why. As my tag line suggests that I post about more than just tax stuff, I feel obligated to link to the article, and also to note this as an example of how scientists are able to adapt to new empirical evidence that doesn't necessarily gel with earlier theories, contrary to frequent cries by the Pat Robertsons of the world that "Darwinists" are zealots who accept evolution as a matter of faith, disregarding any evidence that potentially conflicts with their "religion of Darwinism." In fact, scientists are beholden to only empirical evidence and rational explanations that don't resort to supernatural phenomena.

Turkish Gunman Shoots 5 Judges, Killing 1

From the NY Times:

"A gunman stormed a court in Turkey's capital today, shooting five judges, in apparent anger at its ruling enforcing a strict ban on the wearing of headscarves."

Perfectly reasonable reaction. If someone said I couldn't wear argyle socks (the wearing of argyle socks is a fundamental tenet of Fishfrogism, my own hybrid of Buddhism and any politically expedient beliefs I may choose to adopt), I might do the same thing.

Link: http://www.nytimes.com/2006/05/17/world/europe/17cnd-turkey.html

The Parable of the Talents

I just ran across a reference to a passage from the bible in an article on the battle between progressive tax rates and capital gains preferences. The passage quoted was Matthew 25:29 and sayeth thus: "For to everyone who has, more will be given and he will grow rich; but from the one who has not, even what he has will be taken away." This in reference to the tax rate wars between 1986 and 2005 and the effect of the Bush tax cuts in 2001 on the middle class (in the law review article, not the bible; the bible, suprisingly, makes no reference to the preferential capital gains and dividend rates in the Bush tax cuts).

The article is "Class Warfare 1988-2005 Over Top Individual Income Tax Rates: Teeter-Totter from Soak-the-Rich to Robin-hood-in-Reverse" by John Lee, a professor at UC Hastings College of Law. This is actually the third of his articles I've read recently, and I must say, I like the cut of his jib. Prior to reading his work, I had an inarticulate dislike for perential capital gains rates. Now I have an articulable dislike for perential capital gains rates.

Anyway, I read the text in the bible surrounding Matt 25:29, and it tells the parable of the Talent, which I may have heard before. It contains the phrase, "to each according to his ability," which seems like it can be used to justify either progressive tax rates or laissez-faire economics and absurdly high pay for business executives. I choose to read it to justify (no, mandate!) the former. (of course, my reading is a little harder to gel with the rest of the story, but that's what I want it to say and so that's what it says)

Tuesday, May 16, 2006

Tony Snow's Debut

I've got to say, I much prefer Tony Snow to either McClellan or Fleischer. He talks a little fast, but he says a decent amount. And he doesn't just repeat the same administration-approved phrase over and over like McClellan. Also, he doesn't seem to despise the press like Fleischer. Bush's first good decision in six years.

Mac Blogging

This may bother quite a few of my readers, but I am posting from an Apple iBook G4 notebook computer. My apologies to those whom I have offended. But I must say, it is quite a fun little computer. There's really not a whole lot of difference between my PC laptop and my iBook. Functionally, they do about the same things: they browse the internet, receive email, and process words via word processors. But the mac has a number of small differences, each one of which is very stylized and fun. So it's not a whole new paradigm of computing, but it is cuter. Good times.

Thursday, May 11, 2006

Some Thoughts on a Tax Hypo

So here's the setup:

TP buys a house in 1977 for $40k. At some point between 1977 and 2006, TP buys a second house, ceases to live in the first house, and begins renting it to tenants. In 2006 TP sells house 1 for $225k, realizing a $185k ($225k sale price minus $40k cost basis) long term capital gain on which TP pays tax of $27,750 (figured at the current LTCG rate of 15%).

That's the setup. Here's the problem. TP paid $40k for the house in 1977 dollars, but only got a return of $40k in 2006 dollars for his investment. $1 in 1977 is worth $3.30 in 2006 (calculated using the inflation calculator at the Bureau of Labor Statistics). That means that $92k of the gain realized on the sale of the house is due to inflation. In other words, it's not real economic gain. TP's real economic gain on the sale is $93k ($185k amount realized minus $92k inflationary gain) which would have yielded a tax liability of $13,950. It seems as though TP is being taxed $13,800 too much.

The problem seems to stem from the fact that TP's cost basis is not indexed to inflation. If it were, TP's basis in house 1 would have been $132k in 2006. So the proper result would seem to be to index the basis of capital assets (or any asset held for more than a couple of years) to inflation. So why don't we?

It would be hard, for one. Since the Internal Revenue Code of 1954 was enacted, Congress has elected to provide a reduced rate of taxation for capital gains instead of the inflation index. In the Contract with America Tax Reduction Act of 1995 (or maybe 1993 or maybe 1997, I'm not entirely sure) inflation indexing was suggested. Some (mainly Democrats) proposed the indexing in lieu of the favorable rates. With their backs against the wall, the Republicans picked the favorable rates with no indexing.

This was not the first time the same choice had been made. For the past few decades, inflationary indexing has surfaced again and again. After all, it is the conceptually correct approach for an economically neutral income tax that is targeted on actual economic enrichment. However, for reasons I might talk about in a later post, Congress has consistently chosen a favorable rate over indexing for long term capital gains as a sort of rough compensation for inflation.

So the point of this very abreviated tour through Congressional decision-making is that TP is comparing apples and oranges when he looks at the difference between the gain realized under current tax law and the gain he "should have" realized under a non-existent inflation-indexing law coupled with favorable rates. What TP should look at are these numbers:

$27,750 tax liability under the current non-indexed but favorabled-taxed regime on the one hand,

versus

$32,550 tax liability under an inflation-indexed regime taxed at the TP's highest marginal rate.*

So it seems like under the conceptually flawed lazy approach of the current code, TP is still better off than he would be under a more conceptually correct approach that recognized only real economic gain and taxed it properly.

*I assumed that TP was in the highest bracket mainly because he was able to buy a new house without selling his old one. In the second-highest marginal rate, the results would be similar. Under the third-lowest marginal rate, 28%, TP would be better off with the indexing.

Ponder the Thought

I'm spending the latter half of my day reading through the Treasury Report prepared at the behest of Reagan in 1984 (known as Treasury I). I ran across this line:

First, the smaller the tax base, the higher tax rates must be to raise a given amount of revenue.

It's a simple statement that hits you over the face with its obviousness, but I had never really thought of it before. Think of the implications of the line. If we stop allowing deductions, exclusions, and credits for everything under the sun, the tax base will increase. By how much? I don't know, I'm not an economist. But maybe it's the case that effective rate of taxation on an individual would be less with no deductions or exclusions and a lower rate. I don't know what the rates would have to be for that to be true, but it's a compelling idea for those who think an income tax should be economically neutral.

Tuesday, May 09, 2006

Old News: Done with finals

So I've been done with finals since Friday morning (actually 12:30pm) when I finished my Partnership Tax final. For the past couple days I keep thinking of little things that I didn't get exactly right. It's really been bugging me and I'm fairly anxious about getting the grade. I really enjoy tax but if I don't get a good grade in the class, I'm worried my enthusiasm will wane.

Otherwise, I spent about 11 out of the past 48 hours sitting in the Honda dealership waiting for the mechanics to fix my car. Quite boring, but necessary, and the car seems to be running well for the first time in almost a year.

Thinking about backpacking a lot. Started reading Kerouac's "Darmha Bums" in the dealership. Although I find the characters a little self-centered and immature, it has really got my mind on backpacking. The plan is to go the weekend after this weekend. I'm quite excited to give my new (and my brother's old) backpack a try.

That's all.

Wednesday, May 03, 2006

Wednesday, May 3

I spent most of today in the library studying partnership taxation. I got through special allocations and the test for economic effect. I got to distributions, liquidations, and sale or exchange of partnership interest, the most complicated aspects of subchapter K. But at about 9:00pm I came home (for somewhat complicated and disturbing reasons) and spent the evening with Nell. It was the first evening we've spent together since finals started a week ago. Sitting on the couch, watching TV, chatting about this and that, and having a glass of wine/Bud Light was sublime. I can't wait until Friday afternoon, at which time I will be 2/3 done with law school.

On a separate note, I just watched the Colbert Report, as I have been known to do, and the guest tonight was Paul Rieckhoff, a guy who served in the Army on the ground in Iraq and has written a book. And he reminded me of my brother. It got me thinking about the fact that the commander in chief and the secretary of defense are both civilians, neither having ever come close to actual military service. These are the guys who are making policy decisions that are affecting the lives of men and women with exponentially more character than Bush or Rumsfeld could even imagine.

Normally when someone writes a book about the United States' Iraq policy, you can be fairly sure that they are a hippie liberal with a bone to pick with the administration. But I got a different vibe from this guy. He was a soldier and he sounded like a soldier. He was pissed off that people in Washington, be they Republican or Democrat, consider the Iraq war a political matter. He seemed especially pissed off at the talking heads on the cable news shows who tow the party line and pontificate while actual human beings are doing things.

Anyway, it made me think of big brother (who recently sent me an internal frame pack, with, among other things, a genuine military helmet liner inside). with whom I have had some extended discussions about military policy and political hodge-podge. Kind of seemed like the same sort of bullshit he'd be pissed about. The clip is not on comedy central's website yet, but probably will be in the next few days. Check it out. Aside from (and including) the interview, Colbert rules.

Monday, May 01, 2006

Oh the Stress

After a long day (and I mean 16 hours of studying long), I sit back and realize that I have all of Monday and Tuesday morning before my Corporations final. This is way more tome than I need. In fact, after a little touching up tomorrow morning, I could be ready to take the final tomorrow afternoon. But alas, the final is prescheduled and I am forced to take it Tuesday afternoon. This may seem to the untrained observer like a gift of and extra day to get everything down absolutely. But the problem is, I have to take my Pass-through Business Taxation final by Friday morning. But I can't start studying for it until after I take the corporations final (because of the new informaiton displacing the old information phenomenon).

This means that I have a full three and a half days to study for corporations, but a mere two days to study for Pass-Through. And, for the record, Pass-Through Business taxation is, according to my professor who knows a thing or two about this, the single most complicated area of federal income taxation. Corporations on the other hand (no offense to Lenny) is an introductory type course with no really conceptually difficult aspects (maybe with the exceptions of insider trading liability and poison pill takeover defenses). Don't get me wrong, there's a decent amount of info, but the challenge isn't in understanding, it's in memorizing.

So here I am, a day and a half before my corporations exam, worrying about my pass-thru exam on Friday. I never really understood how people could get stressed about school before I got to law school. And even in my first year, when maybe I didn't take it that seriously, it didn't ever seem overwhelming. In college, I never studied for more than an hour and a half in a sitting. Now I study as much as sixteen hours in twenty-four hour period. And the thing is, even if I could study for the full sixty-two hours between my corporations exam and my pass-thru exam, I don't know if I would consider myself prepared for the exam. Scary.

I should point out though, that even though it's a lot of work and at times the stress can be high, law school is great. If I were to compare how I feel the morning of a day-long study session for any law class (maybe not evidence) with how I would feel if confronted with a day-long study session for ancient greek, the law studying would win, and it wouldn't even be close. If you want to feel vital and smart, I recommend getting a bachelor's degree in Classics and then going to law school. It really puts things in perspective.