Basics of Good Government

What’s good government?:  Responsible elected officials who do what they say.

Members of the Miller County Quorum Court, our local legislative body,
asked for a tax increase to fund a project, and ended the increase when the work was completed.

In today’s whirlwind of political complexity, this simple act defines what good government is all about.

Source: Texarkana Gazette 5/13/2012

Supreme Court Health Care Reform Case

The Supreme Court of the United States agreed to hear legal challenges to the Patient Protection and Affordable Care Act, signed into law in 2010.  The case has enormous implications for many aspects American society -- government, politics, public policy, constitutional law, contract law, limits of federal power, states’ rights, individual freedoms.  The Court agreed to consider four questions associated with health care reform legislation:

1.  Individual mandate.  Nearly all U.S. residents must acquire health insurance by January 1, 2014 or pay a financial penalty.  Does this requirement exceed powers granted to Congress by the United States constitution?

2.  Medicaid.  The federal government provides some of the money states spend to provide medicaid health care to the needy.  The new health care law requires states to cover more people, and all medicaid funding will be withheld from states that don’t comply.  Can Congress use conditional funding to coerce states into implementing federal legislation, or does this exceed powers granted to the federal government by the United States constitution?

3.  Jurisdiction.  Under the Tax Anti-Injunction Act of 1867, federal courts cannot consider a tax case until after the tax has been assessed and collected.  Does a financial penalty levied on people who don’t buy health insurance constitute a tax?  If so, the court cannot rule on the legality of the individual mandate until it has been imposed sometime after 2014.

4.  Severability.  Requiring everyone to acquire health insurance provides funding needed to implement the Patient Protection and Affordable Care Act.  If the individual mandate is ruled to be unconstitutional, does this mean other provisions of the health care law are also unenforceable because they are linked to the individual mandate?

The Court is expected to render decisions on these issues in June 2012.

Source:  Preview of United States Supreme Court Cases.  Special Edition Issue #6: Health Care and the High Court.  American Bar Association, 2012.

Life’s Uncertainties

I read an article where the writer said she respected 18th century residents of rural Arkansas because they had “an honest approach to the uncertainties of life”.  I thought to myself, “There’s a virtue we can use more of in modern times”.

Many today take an “I’m entitled to be compensated” approach to the uncertainties of life.  Or a “somebody owes me” approach to uncertainties of life.  Or an “I’ll sue you”, “give me a bail-out” or “I’m a victim” approach to the uncertainties of life.

Generations ago, people turned to their family or community for help when things went bad.  Now some folks look regularly to the government or the courts or the affluent for relief, not just for assistance to get over a bad experience, but in some cases for help with daily subsistence as well.

The spirits of pioneers who settled the country in centuries past still teach important lessons today:  Take the bad with the good, leave unpleasant or tragic experiences behind, have “an honest approach to life’s uncertainties”.

I can’t recall the source, but I remember a story about a father giving advice to his unhappy daughter.  “My dear,” said the father, “life would be so much easier for you if you could just come to accept the realization that life is meant to be hard”.  That’s good advice for all.

Death and Taxes

Most people don’t pay estate taxes when they die -- one has to be worth $5 million before federal taxes kick in.  But I was working on a will, tax laws can change, and I wanted to learn more about how death taxes operate.  Here’s what I found.  Details may be incomplete but the information is generally correct.

The federal government imposes an estate tax on the right people have to transfer wealth after they die.  The tax is levied on the executor of the deceased’s estate, who files a tax return and pays it from estate funds.  If there’s not enough money, property is sold to raise cash for the tax (heirs are not responsible for taxes unless the executor fails to pay them).  Estate taxes reduce the pool of assets that are passed on to inheritors.  Some states charge an estate tax too by piggy-backing onto federal estate tax returns.

In addition to this, some states impose a separate inheritance tax on the right a person has to receive wealth from deceased person.  A single state tax return is prepared and each beneficiary is individually responsible for paying the tax.  Normally an executor will pay state inheritance taxes on behalf of beneficiaries, deducting the amounts from each person’s gift, before distributing assets to them.  If there is no executor, beneficiaries must deal with the tax themselves.  The federal government does not impose inheritance taxes.

Who Bears Death Taxes

By statute, people give up a share of the assets they inherit to pay death taxes.  Someone inheriting 30% of an estate bears 30% of the taxes.  These are not income taxes; people don’t report them on their income tax returns.  Rather a person’s inheritance is reduced by this amount before property is distributed to them.  Some inheritors are automatically exempted -- death taxes are not assigned to spouses nor to charities, for example.  Having each beneficiary bear their fair share of taxes sounds equitable, but it can cause some problems.  If someone inherits property like a car or jewelry, they may have to give some of their own money back to the estate so the executor can properly remit taxes attributable to those assets.  

To avoid this situation, many people write their wills with a tax exoneration clause, or apportionment clause, that waives the statutory apportionment of death taxes.  They want taxes paid up-front directly from the estate so inheritors receive gifts that are not reduced by taxes.  This is a nice gesture, but it can cause problems too.  Here a few definitions are needed.

A specific beneficiary inherits something specific from a will, for example a $10,000 gift or a stamp collection.  A residuary beneficiary receives everything left from an estate after specific gifts and expenses and taxes have been satisfied (the residual).  A residuary estate is the amount of a person’s estate that remains after the deductions above have been made.  A taxable estate is everything a deceased person owned that is subject to death taxes, including wealth that passes to people outside the provisions of a will.  A testamentary estate includes only those assets that are distributed through a will. Properties distributed through a will after a person’s death are testamentary assets or probate assets.  Properties distributed to people outside of a will after someone dies are non-testamentary assets or non-probate assets.  Non-probate assets include wealth that passes to designated beneficiaries named in life insurance policies, retirement accounts like IRAs and 401K plans, bank accounts with POD payable on death provisions, brokerage accounts with TOD transfer on death provisions, and assets like cars and homes that have a survivorship interest specified in their titles.

If apportionment is waived, taxes are normally paid from the residuary estate, which becomes that much smaller.  This means residuary beneficiaries bear the entire tax burden -- specific beneficiaries are off the hook entirely.  And so are designated beneficiaries that receive non-probate assets -- since many people have a majority of their wealth invested in IRAs and other retirement accounts, these assets can be substantial.  People may not want estate taxes payable, say, on a bank account that passes to a designated beneficiary to be paid out of property that passes to residuary beneficiaries.  So that can be a problem.

One Approach to Consider

One idea is to not put a standard boilerplate clause in a will waiving apportionment and to not add complicated language about who bears what.  Rather, exonerate taxes specifically on those particular gifts where it makes sense.  If you want to leave an expensive heirloom to your grandchild tax-free, just say it is your intention to exonerate that bequest from contributing to the payment of any death, inheritance or estate taxes.  Then let statutory apportionment work as designed so all other inheritors pay taxes in proportion to what they receive, including an extra little portion to cover taxes on exonerated gifts.

Quotation: Funny or True?

“Give someone a gun and they can rob a bank.  Teach someone to be a banker and they can rob the world.”

        --  Phil Proctor, member of The Firesign Theatre (http://www.planetproctor.com)

P.S.  I changed the wording around a little myself . . .  - B.D.

Education Exhortation

There’s an entire library of information available concerning the effectiveness of public education in America today.  There are shelves of studies and statistics about schools that work, schools that don’t, funding, spending, standards, testing, drop-out rates, graduation rates, teacher performance and student achievement.   Different studies express conflicting conclusions -- it’s not possible to comprehend it all.  So here simply are some facts, with a few factoids I presume, that I find meaningful.

Public education in the U.S. costs more than $500 billion per year.  (NCES National Center for Education Statistics)

Around 50 million students attend public schools in the U.S. , in kindergarten through grade 12.  (U.S. Dept. of Education)

Education spending increased about 2% per year over the past 15 years (from $350 billion in 1996 to more than $500+ billion today).   Spending per pupil increased about 5% per year over this period (from $4,900 per student to $10,300 per student).  (NCES National Center for Education Statistics)

State & local governments provide about 90% of school funding; the federal government provides about 10%.  (U.S. Dept. of Education)

There are large disparities in education spending between states and between school districts within a state.  Two examples:  New Jersey spends $16,100 per year pupil per year, Utah spends $5,700; Ohio spends $13,100 per student per year in some large, urban districts and $8,700 in other small, rural districts.   (Center for American Progress)

About 60% of education dollars are spent on instruction in the classroom, and 40% on administration, operations and infrastructure.   (NCES National Center for Education Statistics)

Because different school districts define spending categories in unexpected ways, there is no clear accounting that distinguishes instructional spending from all other spending outside the classroom.   (NCPA National Center for Policy Analysis)

The percentage of students who graduate from high school within four years of entering ninth grade is 70%-75% percent nationwide.   (U.S. News and World Report)

There is no single methodology universally accepted for measuring high school graduation rates.  (The Urban Institute, Education Policy Center)

The educational achievement of 15-year-old students in the United States lags behind that of their peers who attend public schools in other nations.  (PISA Programme for International Student Assessment)

Today only 40 percent of fourth-grade children in the U.S. are proficient in math, along with 34 percent of eighth-graders. In 2011, just 32 percent of fourth- and eighth-graders can read proficiently.  (NAEP National Assessment of Educational Progress)

Most parents approve of the performance of their own, local public schools, but think the education system in the U.S. in general needs significant improvement.   (Phi Delta Kappa International Gallup poll 2010)

The factor that correlates most strongly with student performance is parental involvement.  (The Mackinac Center for Public Policy)

The quality of the teacher in the classroom is the single most important factor in determining how well a child learns.   (EPI The Economic Policy Institute)

A teacher's effectiveness is not measured, recorded, or used to inform decision-making in any meaningful way.  (TNTP The New Teacher Project)

The overwhelming majority of teachers receive top performance ratings, even in failing schools.  (TNTP The New Teacher Project)

Today's teachers make about $11,000 less in annual earnings than other professionals with similar backgrounds. (Brookings Foundation)

When salary and benefits are combined, a typical public school teacher earns 52% more than a private-sector employee with similar skills.  (Heritage Foundation)

When it comes to the cost of public education, nothing is more expensive than a child not learning.  (Nathan Levenson, former superintendent of pubic schools, Arlington, Mass.)

There are no easy answers to problems facing the U.S. public school system.  (BD Brian Dalziel Rants)

Military Service Awards

My father served in the Marine Corps Reserves during World War II.  In December 1942 he was assigned to Marine Air Base Squadron One and deployed to the Pacific Theater of Operations where he participated in two important military campaigns:

• Capture and Defense of Guadalcanal (10 Aug 1942 - 9 Feb 1943)
• Consolidation of Southern Solomons (8 Feb - 20 Jun 1943)

The units he was attached to earned two Presidential Unit Citations for outstanding performance in action against an armed enemy.  In addition, he earned the Navy and Marine Corps Medal for individual heroism displayed during an emergency at Henderson Field on Guadalcanal Island on March 24, 1943.

Navy and Marine Corps Medal

Awarded to Sergeant Robert L. Dalziel

On 3 July 1943

The President of the United States of America takes pleasure in presenting the Navy and Marine Corps Medal to Sergeant Robert L. Dalziel, United States Marine Corps Reserves, for service as set forth in the following citation:  

“For heroic conduct as a member of Marine Air Base Squadron ONE during an aircraft accident at Henderson Field, Guadalcanal, Solomon Islands, March 24, 1943.  Witnessing a take-off crash of a Royal New Zealand Air Force plane, Sergeant Dalziel unhesitatingly rushed onto the field and with complete disregard for his own personal safety attempted to extinguish a raging fire in the damaged aircraft.  Cognizant of the impending hazard of exploding depth charges and bombs carried in the flaming plane, he continued his efforts until he was ordered away by his commanding officer but, before his could reach adequate cover the explosion occurred and he was struck in the shoulder by a piece of shrapnel, causing painful wounds necessitating his evacuation.  Sergeant Dalziel’s courageous zeal throughout was in keeping with the highest traditions of the United States Naval Service.”

For the President,

Frank Knox

Secretary of the Navy

Election Year - Required Reading

In a recent interview aired on Democracy Now! (an independent news program co-created by journalist Amy Goodman) Michael Copps, former chairman of the FCC, said:  "The future of our democracy hinges upon having an informed electorate."

In this election year, two documents should be required reading for all citizens:  The U.S. Constitution and People's Guide to the Federal Budget. 

Ex-FCC Commissioner Michael Copps on Media Consolidation, Broadband Expansion, Threats to Journalism

Democracy Now! (A daily independent global news hour)

http://www.democracynow.org/2012/1/12/ex_fcc_commissioner_michael_copps_on

Free Printable Pocket Constitution Booklet

http://constitutionbooklet.com/

People's Guide to the Federal Budget
National Priorities Project

http://nationalpriorities.org/en/resources/federal-budget-101/peoples-guide/