NIMBY and Home Prices

Posted on June 16, 2005 by Russ

In a comment to my post on real estate prices, Andrew asked if I had any backup for my statement that restrictions (environmental and otherwise) are increasing the costs of new homes. And there’s plenty available in the literature.

This study shows that for a new home in Vancouver, WA, about 18% of the home’s price is caused by regulations. This article talks about NIMBYism & Boston’s housing market. This paper describes regulatory barriers and housing prices. Finally, this paper looks at environmental regulations and urges more academic looks at this issue.

However, I don’t think you have to be an academic to come to the conclusion that NIMBY is impacting housing prices. Take Houston, TX. There is (famously) no zoning in Houston. Houston remains one of the most affordable cities in the United States. Contrast this with the Bay Area, where there’s a lack of land to build (it’s largely built out), numerous environmental regulations, strict zoning, and a large amount of land that can’t be built on (mountains, earthquake faults, etc.).

Posted in California | 3 Comments

Indepndent Contractors

Posted on June 16, 2005 by Russ

The Franchise Tax Board and the Employment Development Department don’t believe there is such a thing as an independent contractor. Indeed, California’s rules and regulations on independent contractors are much stricter than the IRS’s rules. So it should come as no surprise that the EDD is continuing its’ war on contractors.

The latest battle is against “temporary” doctors. According to this article in the San Francisco Chronicle, the EDD is challenging Staff Care Inc.’s use of independent contractor doctors.

Registry of Physician Services, another temporary doctor staffing company, also received a bill from the EDD. Oh, who is Registry’s client? The State of California (Department of Corrections).

Legislation is pending to correct this, at least for doctors. SB279, by Gil Cedillo, is pending and would make “locum tenens” doctors independent contractors by statute.

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A Bubble? Or Taxes? Or Supply and Demand?

Posted on June 13, 2005 by Russ

Real estate prices in Southern California (where I reside) continue on an upwards trajectory. The Los Angeles Times (one-time registration required) has an interesting article that speculates on why people are not selling their homes. The article notes property taxes and transaction costs as two of the main reasons why.

However, the article doesn’t address the main “culprit.” (I’m not even sure that culprit is the right word. On paper, this boom has made me a lot of money.) It’s NIMBY.

Basic economics state that if supply is constant but demand increases, price increases. There is almost no land available to build new homes. What land there is has environmental restrictions, traffic restrictions, and other restrictions placed on it, decreasing the number of new homes built and increasing their cost.

Posted in California | 1 Comment

Bureaucrateze

Posted on June 8, 2005 by Russ

You’ll be happy to know that the IRS is closing 68 Taxpayer Assistance Centers (TACs) as “…part of the agency’s continuing efforts to create efficiencies, modernize operations, and reduce costs while maintaining [our] commitment to public service.”

Of course, as mentioned previously, the real reason is a 1% budget cutback. The IRS’s criteria used to choose the 68 TACs to be closed can be found here.

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I Don’t Think It’s Close…

Posted on June 7, 2005 by Russ

…But the Tax Court does.

In a case released today, a man thinks he has some additional 1099s. He has not received copies of his statements on these accounts (they are education accounts for his children). He calls and writes his bank, and asks for copies. He calls and write his ex-spouse, asking for copies. His bank acknowledges the request, but never sends any 1099s (or statements). His ex won’t give him the time of day. He assumes there aren’t any additional 1099s and files his return.

However, the IRS examines his return and finds the “missing” 1099s. He immediately pays the additional tax, but he’s also assessed an accuracy-related penalty because the amounts were large. He goes to Tax Court and challenges the penalty.

I don’t think it’s a close case. As the Court notes,

We note at the outset that we found petitioner to be a very conscientious taxpayer. In preparing to file his 2000 return, petitioner made concerted efforts to obtain any statements and Forms 1099 pertaining to the education accounts….Moreover, petitioner specifically requested that First Albany mail him copies of the Forms 1099 pertaining to the education accounts….Petitioner never received any Forms 1099 for 2000 from First Albany pertaining to the education accounts. It was not unreasonable for petitioner to assume that there were no Forms 1099 issued….

Upon a review of the record, we find that petitioner had reasonable cause to believe that there were no Forms 1099 pertaining to him, and that he acted in good faith with respect to the understatement attributable to the income reported on those forms.

One should note, though, that the Court notes, “Although this is a close case….” The taxpayer does all that he can do and it’s close? Just a reminder of where the bar is in Tax Court.

Cite: Monte v. Commissioner, 7388-04S

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You Too Can Live Tax Free…

Posted on June 7, 2005 by Russ

…in jail.

After having been gone for just under a week, I must thank Roth Tax Updates for the first of a few gems. It seems that Lynne Meredith received 121 months (10 years and a month) for conspiring to defraud the IRS. The Los Angeles Times details the story here (one-time registration required). In her book, How to Cook a Vulture, she stated that she could show people how to get the IRS to write you a letter that you didn’t have to pay taxes.

It didn’t work.

But Ms. Meredith won’t have to pay taxes in upcoming years. She’ll be making sub-minimum wage in a Federal penitentiary.

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Arthur Andersen: Not Guilty (Yet)

Posted on June 1, 2005 by Russ

Unless you’ve been hiding out, you’ve almost certainly heard the news that the US Supreme Court yesterday overturned the conviction of Arthur Andersen for destroying documents in the Enron fiasco. You can find news coverage here and here (one-time registration required). The opinion can be found here.

What does this mean? Arthur Andersen (the accounting firm) no longer exists; instead of a Big Five accounting firms we have a Big Four. Will Arthur Andersen rise from the dead? That’s just not going to happen. Will the US retry Andersen? I have no idea, but it’s irrelevant. Andersen is dead.

As the Wall Street Journal points out in an editorial today, going after the partners would have been a better idea. Most of the employees of Andersen had no idea of what was going on. Does anyone really believe that a tax partner in Seattle knew what the partners in Houston were doing? It was guilt by association. At least the US Justice Department has apparently learned from this. In recent white-collar cases, the Justice Department has gone after the principals.

Posted in Tax Evasion | 20 Comments

A Zero in More Ways than One

Posted on June 1, 2005 by Russ

Let’s assume you (erroneously) believe that the US has no write to levy an income tax on you. You are a believer in one of the many frivolous or groundless schemes that say, in short, that the US can’t levy an income tax. (For a good rejoinder on most of these, take a look at the Tax Protester FAQ.)

The Tax Court doesn’t appreciate such arguments. They’ve heard them all (or almost all) and have said,

“…arguments that this Court has repeatedly found to be frivolous and/or groundless, see, e.g., Copeland v. Commissioner, T.C. Memo. 2003-46; Smith v. Commissioner, T.C. Memo. 2003-45, and we find this also to be true in this case. See also Holliday v. Commissioner, T.C. Memo. 2002-67, affd. 57 Fed. Appx. 774 (9th Cir. 2003).”

In this case, the petitioner filed returns with $0 income and $0 tax. The IRS filed substitute returns and then started action to place tax liens on various assets.

The conclusion? The Tax Court put it well,

“Petitioner’s meritless arguments support the conclusion that remanding this matter to respondent’s Appeals Office for recording would be neither necessary nor productive, and we so hold.

“We have considered all of petitioner’s contentions and arguments that we have not discussed, and we find them to be without merit and irrelevant.

“Further, we hold that respondent correctly determined that
collection efforts should proceed.”

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“I Haven’t Done Any Drugs or Alcohol in Eight Months.”

Posted on June 1, 2005 by Russ

Ok, what does that have to do with tax?

That’s what I was thinking when I read this article (one-time registration required). Restaurateur Neil Stein plead guilty yesterday to federal tax fraud charges and will likely receive a term of 12 to 30 months in prison.

Mr. Stein apparently skimmed upwards of $450,000 from his restaurants (including Rouge and Bleu) while reporting just over $100,000 in salary. Unfortunately, spending $65,000 on his daughter’s wedding while earning just over $100,000 made his conspicuous consumption just a bit too visible.

As to the quote, that’s right from the article. While Mr. Stein may now be clean from drugs and alcohol, he’ll apparently have some free time on his hands to contemplate the past.

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SB757: Let’s Drive Out Business (Again)

Posted on May 30, 2005 by Russ

Lurching its’ way through the Legislature is SB757, introduced by Christine Kehoe (D-San Diego). The bill has an innocuous title, “The Oil Conservation, Efficiency, and Alternative Fuels Act.” It is an efficient bill—if passed, this analysis indicates that 80,000 jobs would leave California. Luckily, the Governator is likely to veto this legislation.

As the analysis (an article in the San Jose Business Journal) notes, just a few years ago a similar piece of legislation passed the Legislature. The one difference between the two bills is that the prior bill required a study. Both want a 15% reduction in fuel consumption. The study showed that any of the following could cause such a reduction:

– A $0.50/gallon increase in the gasoline tax
– Pay at the pump auto insurance, at $0.48/gallon
– A $0.02/mile driven tax
– A $3500/purchase tax on SUVs, mini-vans, and trucks

The bill is about to reach the Senate floor. If you’re a Californian, tell your State Senator how you feel about the bill. Indeed, a look at the analysis provided by the Office of Senate Floor Analysis, including the list of supporting organizations (8), and the list of organizations in opposition (22), show that the usual suspects (Sierra Club, etc.) support the bill while business, agricultural, and taxpayer groups are against the bill.

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