With the just concluded World Series on the mind of many Americans, its time to examine what’s fair or foul.

All major league baseball parks have erected a foul pole at the terminus of each foul line. That is an interesting choice of names.

If a batter hits a ball that strikes the “foul pole” it is ruled fair and the batter is rewarded with a home run. In his book about America's favorite pastime, Vince Staten asks, “Why Is The Foul Pole Fair?” A very good question.

This naming convention is not the only confusing moniker in the American lexicon. Naming our tax laws is often an exercise in verbal conundrums, oxymorons, obfuscations and verbal conflicts. Simple confusion would be a relief.

Starting with the Revenue Act of 1913, the law that mandated the first modern income tax, Congress began distorting the truth. This law was also known as the Tariff Act, Underwood Tariff, and Underwood Tariff Act. Surprising, given that the law established a new income tax while reducing tariffs some 40%.

The Revenue Act of 1916 seems innocuous enough. It simply raised income tax rates in anticipation of entering World War 1. But if the Act of 1913 could be called by a name based on a minor provision of the law, perhaps the 1916 Act might also have been named the Estate Tax Act as it created the first tax on estates.

It seems the Revenue Acts of 1917, 1918 and 1921 were appropriately named. They simply raised rates, hence, revenues.

Naming the Revenue Act of 1924 once again employed a cloak of secrecy. Yes, the Act did tinker with tax rates and brackets. Who among us does not like to tinker? But, it established the U.S Tax Court which comprised a significant step in the concentration of power within the tax bureaucracy. It also appropriately changed the citizenship status of Native Americans (referred to as “Indians” in the law). This law was also known as the Mellon tax bill, possibly for the melon headed congressman who chose its name.

It seems the Revenue Act of 1926 was appropriately named.

The Revenue Act of 1928 was more about tax policy than revenue. One key section, Section 605 stated, "In case a regulation or Treasury decision relating to the internal revenue laws is amended by a subsequent regulation or Treasury decision, made by the Secretary or by the Commissioner with the approval of the Secretary, such subsequent regulation or Treasury decision may, with the approval of the Secretary, be applied without retroactive effect."

What? In English, forgetting that Congress' intent is to obfuscate, this law meant that the IRS can change how something is treated and not make it retroactive.

That seems reasonable, on its surface. But note the word “may.” If retroactive application increases the tax burden, did this language mean the IRS ‘may’ retroactively assess taxes. If it produces a lower tax burden, does this mean the IRS ‘may’ elect to forego retroactivity?

Maybe this law might have been better named the “Maybe, Maybe Not Act of 1928." I leave it to the umpires among my readers to call ‘fair’ or ‘foul.’

It seems the Revenue Acts of 1932, 1934, 1936 and 1938 were reasonably named. Essentially, these measures raised rates, hence, revenues. 

During World War II, a Revenue Act was passed in 1940, 1941, 1942, 1944 and 1945. Each modified rates, deductions and brackets in order to raise revenues needed to support the war effort. In 1943, the Current Tax Payment Act of 1943 was also passed. Not sure what that name meant, but I know what it did. It mandated an employer withholding requirement when wages were paid. Not sure why it was not simply called the Withholding Tax Payment Act of 1943. Fair? Or foul? You decide.

The Revenue Act of 1948 lowered many rates. The need for revenue driven by the war had dropped while the economy boomed. Great name. But one of the most important features of  this law was a provision that allowed married  couples  to split income (Married Filing Separately). Nothing about that was apparent in its name.

The Revenue Acts of 1950 and 1951 raised rates, hence, revenues. They also made a number of other changes to various sections of the tax code.

The Revenue Act of 1954 might have been properly named the Methuselah Revenue Act. Provisions of this law remained essentially unchanged for almost a decade. That did not occur before and has not happened since. Kind of makes it hard to plan, doesn't it?

The Revenue Act of 1964 may be the last tax law that accomplished its purpose. Also known as the Tax Reduction Act, it was a bipartisan tax bill that cut individual and corporate tax rates. Unemployment fell from 5.2% in 1964 to 3.8% in 1966. Despite initial estimates predicting a loss of revenue, tax revenue actually increased in both 1964 and 1965. We might rewrite history and rename this law the Atta Boy Act. Congress definitely hit the foul pole with a fair ball on this one.

At this point, Congress began a series of tax law misnomers. Serious ones. The Revenue Act of 1969 created the predecessor to the Alternative Minimum Tax. It might have been better named the Roll the Dice Tax Act. Definitely foul.

And so it began. With passage of the Tax Reform Act of 1976, Congress began singing a lullaby to the American people. They attempted to lull us to sleep with use of the word “reform” in the name of the tax law. Yes, this law raised some taxes; it lowered others. It delayed some provisions. It increased or extended certain credits. But reform?

Merriam-Webster on-line dictionary offers several definitions of the word reform

to put or change into an improved form or condition

to amend or improve by change of form or removal of faults or abuses

to put an end to an evil by enforcing or introducing a better method or course of action

Make no mistake. The Tax Reform Act of 1976 did not put the code into a better condition. Neither did it improve by removing faults or abuses. Finally, no one can argue that it ended an evil by introducing a better course of action. Bottom line, this law should have been named the Tax Tinkering Act of 1976. Foul ball. Foul tip. Fouled off. Fouled up.

Realizing its error, Congress was quick to rectify the problem. By mid-year, Congress enacted the Tax Reduction and Simplification Act of 1977. Surely the law would now be much less complex. Taxes would be lower and determining the correct tax burden would be simpler.

Don’t be fooled for a minute. I challenge anyone to compare Form 1040 before and after this law was passed and determine if you think any real simplification occurred. Cry FOUL!

Truth be told, it is as if Congress had asked Lewis Carroll to name our tax laws. Remember the line from Alice in Wonderland,

“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be.”

In the middle of this sense and nonsense, Congress passed the Revenue Act of 1978. Let’s just call that effort a swing and a miss. After all, newly elected members of Congress want their trip to the plate.

Early in President Reagan’s administration, Congress passed the Economic Recovery Tax Act of 1981, also known as ERTA or "Kemp-Roth Tax Cut". It was with this law that Congress began politicizing the naming of tax laws. Forget revenue! Congress was going to DO something. In this case, it would bring about economic recovery. It would accomplish this by significantly lowering rates.

Bah! Humbug!

The euphoria was short lived. After just 4 years, Congress passed the Tax Equity and Fiscal Responsibility Act of 1982 also known as TEFRA. Essentially this act raised rates, that libertarian writer Sheldon Richman described as "the largest tax increase in American history.” Hard to imagine passing a law to stimulate economic recovery, only to determine it was irresponsible and unfair less than a year later. Fair or foul? You be the judge. Or rather umpire.

I always thought baseball rules should be changed to limit the number of foul balls a batter can have. Maybe we should apply that principle to Congress. Congress keeps fouling off the pitches. By this time, Congress was so confused it did not know which end was up.

Question: what does Congress do when it becomes confused? Answer: it passes a tax law.

In mid-year 1984, Congress passed the Deficit Reduction Act of 1984 also known as DEFRA. This measure was essentially an adjusted version of the Tax Reform Act of 1983, reintroduced as the Tax Reform Act of 1984. After House passage, it was merged with the Senate version into its final form, collectively known as the Deficit Reduction Act of 1984. Although you can’t tell the players without a program, you don’t need a set of field glasses to see this one missed the foul pole.

And yet, despite the reforms, the improved equity, and the economic recovery attributable to previous measures, Congress felt even more reform was necessary. Thus begat The Tax Reform Act of 1986.

I am going to take a break. I have a foul taste in my mouth and here comes my relief pitcher.

I’ll be back after the seventh inning stretch to finish this narrative on naming conventions.

AuthorDoug Spiker