It could happen to you

This post has been updated. See below.

Digby’s blog has published my insane tale of tax-related woe. Read it and weep (for me, and maybe for yourself if you’ve ever lived in a state that charges income tax.)

My pregnant wife just called me a few hours ago from SFO as she was boarding an airplane to Austin, TX. “I got an email from Chase saying that our checking account is overdrawn, and all our assets are frozen. None of our cards work. They gave me some number to call.”

Of course, I flipped out. But I also knew immediately what had happened. I’m currently disputing a laughably bogus 2007 income tax bill with the MA Department of Revenue, a state in which I have not lived or earned income in since 2003. I live in CA, and the Chase account in question was opened in Chicago. But I had a sinking feeling that, in the world of the multinational megabank, niceties like state borders don’t matter anymore. My guess was that MA had called Chase (they have not sued me or sent me any sort of court order) and Chase just handed over all our assets there to MA.

A call to the number provided, a visit to my local branch, and ultimately an on-the-record discussion with someone from Chase’s executive office confirmed that I was mostly right. The MA Department of Revenue had filed a levy against me in MA, and when the state notified Chase of the levy, Chase dutifully froze everything but (lucky me!) has not yet transfered any money out. The perky Chase lady on the phone told me that on March 4, unless MA has lifted the levy, Chase will clean out my accounts and hand everything over to MA. Again, I have not lived in MA or earned income in that state since 2003, and I worked with a CPA to pay all of my state and federal 2007 taxes in full and on time. I did everything 100% by the book, and yet here I am in 2013, with a negative bank balance and frozen assets.

Welcome to America, 2013, where bankrupt states aggressively pursue long-gone former residents with insane tax bills and levies, and where the banks, as a matter of official policy, will hand over every last dime in your account without even knowing or caring whether the request is valid and enforceable.

Here’s a bit more background, so you can understand how crazy this all is.

I moved from Massachusetts to Illinois in 2003, and I opened my Chase account there in 2005. I also hired a CPA and dutifully paid all of my state and local tax, in full, every year including 2007. I moved further west to California in 2008, so imagine my shock when in January of last year, I got a letter from the MA Department of Revenue claiming that I owed them a jaw-dropping sum for 2007. Again, I hadn’t lived there or worked there since 2003, but I did own part of a business that was headquartered in MA, and the state was using this fact to harass me for income tax money. How much money? At least 10X what I’d actually owe them if I really did owe them income tax for 2007; or, to put it another way, roughly 10X what I paid Illinois in 2007 on the advice of my Illinois CPA.

I didn’t just let this nasty MA tax claim ride, thinking it would go away. I put my California CPA to work on it, I hired a tax attorney in MA, and I even hired a CPA malpractice attorney to go after my Illinois CPA on the slim chance that Massachusetts is actually right and I do owe them something. I filed appeals, submitted papers, and generally stayed on top of it. So I wasn’t overly alarmed when a few weeks ago, the MA Dept. of Revenue sent me a notice that they were filing a tax lien against me with the MA Secretary of State’s office. But I didn’t freak out, because hey, this is part of an ongoing dispute where they’re clearly way out of line, and I have some very good people working with me on this… and besides, I don’t own any property in MA, so what are they going to do?

And then, without even sending me a copy of any kind of court order or document, they’ve suddenly frozen and are on the verge of confiscating all of the funds in my out-of-state bank account.

After talking to Chase, my next call was to the MA tax attorney that I’d hired to fight with MA over their insane tax bill.

“I’ve dealt with this once before, with Bank of America. And the guy was in California, just like you. Chase Manhattan is not supposed to freeze an out-of-state account like this, and MA knows it. But MA does this because they know they can get away with it.”

I then headed down to my local Chase branch, and where I talked to their legal department and got them to confirm that this is their policy. I also played the journalist card and got them to put me in touch with someone from their executive office who could speak on the record.

“The management stands behind the decision to freeze your account,” she said. She argued that because Chase has a minor presence in MA (a few non-branch offices), they’re subject to MA jurisdiction and have to comply with the order to freeze my account, regardless of where the account was opened or is currently located. She also said that I had agreed to all of this madness when signing up for the account, as part of Chase’s terms of service.

Apparently, my contract with Chase stipulates that Chase will turn over any of my assets to anyone who comes knocking with any kind of official-looking levy or lien, and Chase “does not have to determine whether the legal process [behind the request] is valid or enforceable.” They just hand over all your money, and if the request was bogus then that’s not their problem, it’s yours.

There is nothing I can do at this point but file an appeal with MA, and hope the freeze gets lifted before Chase turns over our frozen assets on March 4th.

And I’m one of the lucky ones. We use a foreign bank for the vast majority of our assets, and keep only a small amount in Chase for bills and such. Even if Chase hands over all of the money in our accounts to MA, the worst thing that wil happen is that my wife will be stuck in Austin for three days with only an American Express card (which hopefully still works) and/or that I’ll have to send her some of the cash we keep on-hand for emergencies via Western Union. Oh, and I’ll have to pay a ton of legal fees to recover the money, which would probably end up costing me more than MA took. So I may just have to let MA rob my bank account, with the bank’s help, of course.

Signs of the times, I guess. I’ve already talked to one other person who’s had this same problem.

Update: This got linked at Hacker News, so I posted an update in the comments. Here it is:

This is resolved, so here are the bullet points of what happened and what I learned:

– All of our assets were not frozen. 99% of our assets are with Barclays, and we just use Chase so that we can have a local checking account. (Barclays doesn’t do that in the US.) So everything tied to Chase and our credit cards were frozen because of the tax lien. Of course, if MA had found the Barclays stuff, they’d have frozen everything, so that was just luck that they didn’t.

– The source of the problem was my former CPA. He just screwed up. He’s a nice guy who does a solid business in the decent-sized midwestern city where he’s located, but for whatever reason of inattenion and/or lack of good enough training/information, he had me file in the wrong state. He also doesn’t have any insurance (not required where he practices), so if MA hadn’t been cool about waiving penalties and interest it may not have been possible for me to recover that from him by the time I paid legal fees, etc.

– I got a great MA tax lawyer (Philip S. Olsen, now of Pierce Atwood), and he worked with the Mass. tax authorities to help them understand that I wasn’t some seedy tax dodger and that this was the fault of my CPA.

Now, here’s what I learned:

– Ask your CPA if he or she has insurance, and for how much. Don’t be shy, because this kind of thing could happen to you. And don’t think that just because various professionals and bigwigs in town use them, that they’re either not going to make a mistake or that they have insurance.

– There is no bank or credit union, no matter how foreign or local, that would not have frozen my assets in response to the merest hint of a request from MA. Every financial institution in the world is going to roll over for a state government like that, and leave you to sort out of if the request was legit or not. There’s no place to hide. So Chase isn’t actually the bad guy here.

– MA isn’t really the bad guy either. The states are strapped for cash, and they’re turning over every stone for revenue. What caught my CPA was a wrinkle in the tax law about where to file that for decades many CPAs ignored because the states didn’t have the ability to find and go after such things. (MA was claiming that I owed “Massachusetts-sourced income” because Ars Technica LLC was technically headquartered in Malden.) But in today’s world of desperate state governments and networked databases, no CPA can afford to be lazy about anything. To their credit, MA let me re-file and did not penalize. I had to pay state taxes twice for that year, though, because IL’s books were closed for 2007 and they refused to even consider giving me back the money I erroneously paid them.

– This stuff drags out. While our assets were unfrozen pretty quickly, it was the first week of this month that I finally got a letter from MA telling me that the tax lien was officially lifted and that I’m in the clear.

– There is no statute of limitations on taxes. If they find something from literally 20 years ago, they can load it up with penalties and interest and absolutely crush you. So see the point above about making sure your CPA has a platinum-plated insurance policy.

Nazism’s war on the reality-based community

More from Milton Mayer’s They Thought They Were Free: the Germans 1933-45:

Because the mass movement of Nazism was nonintellectual in the beginning, when it was only practice, it had to be anti-intellectual before it could be theoretical… Expertness in thinking, exemplified by the professor, by the high-school teacher, and even by the grammar-school teacher in the village, had to deny the Nazi views of history, economics, literature, art philosophy, politics, biology, and education itself.

Thus Nazism, because it proceeded from practice to theory, had to deny expertness in thinking and then (this second process was never completed), in order to full that vacuum, had to establish expert thinking of its own–that is, to find men of inferior or irresponsible caliber whose views conformed dishonestly or, worse yet, honestly, to the Party line… The nonpolitical schoolmaster was, by the very virtue of being nonpolitical, a dangerous man from the first. He himself would not rebel, nor would he, if he could help it, teach rebellion; but he could not help being dangerous–not if he went on teaching what was true. In order to be a theory and not just a practice, National Socialism required the destruction of academic independence.

In the years of its rise the movement little by little brought the community’s attitude toward the teacher around from respect and any to resentment, from trust and fear to suspicion. The development seems to have been inherent; it needed no planning and had none. As the Nazi emphasis on nonintellectual virtues (patriotism, loyalty, duty, purity, labor, simplicity, “blood,” “folk-ishness”) seeped through Germany, elevating the self-esteem of the “little man,” the academic profession was pushed from the center to the very periphery of society. Germany was preparing to cut its own head off. By 1933 at least five of my ten friends (and I think six or seven) looked upon “intellectuals” as unreliable and, among these unreliables, upon academics as the most insidiously situated.

Throw the bums out, 1930’s edition

More from Milton Mayer’s They Thought They Were Free: the Germans 1933-45, which I can’t put down:

National Socialism was a revulsion by my friends against parliamentary politics, parliamentary debate, parliamentary government–against all the higgling and haggling of the parties and the splinter parties, their coalitions, their confusions, and their conniving. It was the final fruit of the common man’s repudiation of “the rascals.” Its motif was, “Throw them all out.” My friends, in the 1920’s, were like spectators at a wrestling match who suspect that beneath all the grunts and groans, the struggle and the sweat, the match is “fixed,” that the performers are only pretending to put up a fight. The scandals that rocked the country, where one party or cabal “exposed” another, dismayed and then disgusted my friends…

While the ship of the German State was being shivered, the officers, who alone had life preservers, disputed their prerogatives on the bridge…

My friends wanted Germany purified. They wanted it purified of the politicians, of all the politicians. They wanted a representative leader in place of unrepresentative representatives. And Hitler, the pure man, the anti politician, was the man, untainted by “politics,” which was only a cloak for corruption… Against the “the whole pack,” “the whole kaboodle,” “the whole business,” against all parliamentary politicians and all the parliamentary parties, my friends evoked Hitlerism, and Hitlerism overthrew them all.

“There was no open trial for enemies of the State. It was said it wasn’t necessary; they had forfeited their right to it.”

More from Milton Mayer’s They Thought They Were Free: the Germans 1933-45:

“Very early,” he went on, “still in spring, one of our SA leaders protested against the dismissal of the Oberburgermeister, a Social Democrat, a good, really nonpolitical man. The SA leader was arrested and taken away. And this, mind you, was when the SA still had great power in the regime. He never came back. His family is still here. We heard he was convicted, but we never heard fro what. There was no open trial for enemies of the State. It was said it wasn’t necessary; they had forfeited their right to it.” [emphasis added]

See Romney’s explanation of why he would have signed the National Defense Authorization Act, which enables the US military to abduct US citizens on US soil and imprison them indefinitely without trial; and if they get a trial, it will be in a closed military tribunal, and not in open court.

The logic here, as it is in every totalitarian regime, is that the moment you become an “enemy of the state” you lose your right to demand that the state actually prove that you’re its enemy in open court. We’re just to take the State’s word for it—just trust your government, is the answer. Or, actually, let’s roll the tape and quote Romney from the video above:

Romney: “I recognize that when you’re in a setting where there are enemy combatants, and some of them on our own soil, that could possibly be abused. There are a lot of things that I think this president does wrong—lots of them—but I don’t think he’s gonna abuse this power, and I know that if I were president I would not abuse this power. And I can also tell you that in my view, you have to chose people who you believe have sufficient character not to abuse the power of the presidency and to make sure that we do not violate our constitutional principles.”

How ordinary people come to support a Monster-in-Chief

Shortly after WWII, journalist Milton Mayer went to Germany and lived in Kronenberg for a year, in order to understand the lives and mindsets of ordinary Germans under Nazism. He wanted to know how it was that ordinary people could come to participate in such atrocities, so he befriended ten Germans who had the following occupations as Nazis under Hitler: a tailor, an unemployed tailor’s apprentice, a cabinetmaker, an unemployed salesman, a high school student, a baker, a bill-collector, an unemployed bank clerk, a teacher, and a policeman.

The resulting book, They Thought They Were Free: the Germans 1933-45, is a remarkable chronicle of an advanced civilization’s slide into tyranny. The following excerpt, from Chapter 3, is probably the best ~500 words I’ve ever read on this frighteningly relevant topic:

None of these ordinary Germans… thought then or thinks now that the rights of man, in his own case, were violated or even more than mildly inhibited for reasons of what they then accepted (and still accept) as the national emergency proclaimed four weeks after Hitler took office as Chancellor…

None of my friends, even today, ascribes moral evil to Hitler although most of them think (after the fact) that he made fatal strategic mistakes that they themselves might have made at the time. His worst mistake was his selection of advisors—a backhanded tribute to the Leader’s virtues of trustfulness and loyalty, to his very innocence of the knowledge of evil, fully familiar to those who have heard partisans of F.D.R. or Ike explain how things went wrong.

Having fixed our faith in a father figure—or in a father, or in a mother or a wife—we must keep it fixed until inexcusable fault (and what fault of a father, a mother, a wife is inexcusable?) crushes it at once and completely. This figure represents our own best selves; it is what we ourselves want to be and, through identification, are. To abandon it for anything less than crushing evidence of inexcusable fault is self-incrimination, and of one’s best, unrealized self. Thus Hitler was betrayed by his subordinates, and the [ordinary, rank-and-file] Nazis with him. They may hate Bormann and Goebbels—Bormann because he rose to power at the end, and they are ashamed of the end; Goebbels because he was a runt with a “Jewish mind,” that is, a facile and cunning mind unlike theirs. They may hate Himmler, the Bluthund, above all, because he killed in cold blood, and they wouldn’t do that. But they may not hate Hitler or themselves.

“You see,” said Tailor Schwenke, the littlest of my ten little men, “there was always a secret war against Hitler in the regime. They fought him with unfair means. Himmler I detested. Goebbels, too. If Hitler had been told the truth, things would have been different.” For “Hitler” read “I.”

“The killing of the Jews?” said the “democratic” bill-collector, Simon. “Yes, that was wrong, unless they committed treason in wartime. And of course they did. If I had been a Jew, I would have myself. Still, it was wrong, but some say it happened and some say it didn’t. You can show me pictures of skulls or shoes, but that doesn’t prove it. But I’ll tell you this—it was Himmler. Hitler had nothing to do with it.”

“Do you think he knew about it?”

“I don’t know. We’ll never know now.”

Hitler died to save my friend’s best self.

Student loan debt and the housing market

My wife and I have been watching Parenthood, and we found ourselves in total agreement with Adam Braverman’s insistence that his daughter not take out student loans in order to finance a Cornell undergrad degree. Thanks to recent changes in bankruptcy laws that make it practically impossible to default on student loans, it would be insane to finance an undergraduate education this way — a professional or trade school degree might be another matter, but only just barely.

At any rate, in that light I read with interest the following part of a Yves Smith post on problems in the mortgage market:

Finally, the 30 year mortgage does not fit with job tenures that now (per a Yankelovich survey commissioned by McKinsey in the mid 2000s) of under 3 years. The traditional mortgage assumes that the borrower has a rising, or at least stable, income over his working years. We now have shorter jobs and longer periods of unemployment, which sap savings and make defaults more likely. And that’s before you factor in that the mortgage was normally a household’s top priority payment, but the inability to discharge student debt in bankruptcy effectively makes it “senior” to mortgage payments. All this suggests that it may be necessary to go against the pet wishes of the mortgage industrial complex and implement housing policies that do more to promote rentals. [emphasis added]

The idea that people may be defaulting on mortgage debt in favor of student loan debt makes a lot of sense, and it’s yet another reason why we need to radically overhaul the student loan industry.

The Partisans Will Never Find Us Here: Minneapolis Mayor R.T. Rybak and the Art of Getting Shit Done

The Partisans Will Never Find Us Here: Minneapolis Mayor R.T. Rybak and the Art of Getting Shit Done

To most Americans, Minneapolis is a stranger. There are exceptions, moments when the city percolates up—the first time a kid somewhere hears the Replacements, say, or when a bridge falls into the Mississippi. But to most people most of the time, Minneapolis is a place with no real shape or texture.

Perhaps the city is to blame for its anonymity. Maybe the people hard at work in this laboratory for progressive culture should worry more about outsiders taking notice. The attention, when it comes, is certainly appreciated.

Minneapolitans relish the steady drumbeat of “best city” rankings: No. 1 Bike City (Bicycling magazine, 2011), Gayest City in America (The Advocate, 2011), Most Literate City (America’s Most Literate Cities study, 2007-08). In 2008, Minneapolis was one of only two American cities to make the British Monocle magazine’s list of the most livable cities in the world.

Sure, these are sometimes frivolous and arbitrary contests. But for a city that lives in the imaginations of Americans as a culturally isolated outpost of extreme and permanent cold, they are small but significant triumphs—and evidence that something is going right in Minneapolis.

Civic achievement, banal as it sounds, can be found without following a flow chart during a public meeting at City Hall. It is a buzzing park, a painter turning a street corner utility box into art, block after block of thriving independent businesses, a festival for every obsession and persuasion—it’s growing, engaged immigrant communities. Minneapolis is all of these things. It is not a utopia, not by any stretch. It’s just a city that works.

via Tim O’Reilly

It’s the end of the world as we know it, and Americans feel fine

It’s the end of the world as we know it, and Americans feel fine:

When I was young, we would be assigned to read books like 1984 in high school.  These were viewed as dystopian novels, as cautionary tales.  We would have the usual earnest class discussions.  Some feared the outcome, some thought it unlikely.  But everyone agreed that it would be a really bad thing.

Robin Hanson points out that 1984 has arrived, albeit 27 years late.  And what’s interesting is that no one seems to care:

Soon the police will always be watching every public move you make:

“A vast system that tracks the comings and goings of anyone driving around the District. … More than 250 cameras in the District and its suburbs scan license plates in real time. ..

With virtually no public debate, police agencies have begun storing the information from the cameras, building databases that document the travels of millions of vehicles. … The District [of Columbia] … has more than one plate-reader per square mile, the highest concentration in the nation. Police in the Washington suburbs have dozens of them as well … creating a comprehensive dragnet that will include all the approaches into the District. … The data are kept for three years in the District. … Police can also plug any license plate number into the database and, as long as it passed a camera, determine where that vehicle has been and when. …”

As prices rapidly fall, this will be widely deployed. Unless there is a public outcry, which seems unlikely at the moment, within twenty years most traffic intersections will probably have tag readers, neighboring jurisdictions will share databases, and so police will basically track all cars all the time. With this precedent, cameras that track pedestrians and people in cars via their faces and gaits will follow within another decade or two…

(Via TheMoneyIllusion)

#OWS may not have leaders, but it has people who think they are

This Daily Show piece (via Tim Lee via here) picks up on a theme I’ve seen elsewhere, namely, that there is a sort of “professional activist class” that at least feels as if it’s running #OWS. These are probably folks who’ve been involved in the anti-globalization movement for years; I knew some of these types of people in grad school.

In respect of this, a link that Matt Stoller tweeted some time ago shows much the same thing:

A Chill Descends On Occupy Wall Street; “The Leaders of the allegedly Leaderless Movement” By Fritz Tucker

On Sunday, October 23, a meeting was held at 60 Wall Street. Six leaders discussed what to do with the half-million dollars that had been donated to their organization, since, in their estimation, the organization was incapable of making sound financial decisions. The proposed solution was not to spend the money educating their co-workers or stimulating more active participation by improving the organization’s structures and tactics. Instead, those present discussed how they could commandeer the $500,000 for their new, more exclusive organization. No, this was not the meeting of any traditional influence on Wall Street. These were six of the leaders of Occupy Wall Street (OWS).

Occupy Wall Street’s Structure Working Group (WG) has created a new organization called the Spokes Council. ‘Teach-ins’ were held to workshop and promote the Spokes Council throughout the week of October 22-28. I attended the teach-in on Sunday the 23rd.

According to Marisa Holmes, one of the most outspoken and influential leaders of OWS, the NYC-GA started receiving donations from around the world when OWS began on September 17. Because the NYC-GA was not an official organization, and therefore could not legally receive thousands of dollars in donations, the nonprofit Alliance for Global Justice helped OWS create Friends of Liberty Plaza, which receives tax-free donations for OWS. Since then, Friends of Liberty Plaza has received over $500,000. Until October 28, anybody who wanted to receive more than $100 from Friends of Liberty Plaza had to go through the often arduous modified consensus process (90% majority) of the NYC-GA—which, despite its well-documented inefficiencies, granted $25,740 to the Media WG for live-stream equipment on October 12, and $1,400 to the Food and Medical WGs for herbal tonics on October 18.

At the teach-in, Ms. Holmes maintained that while the NYC-GA is the ‘de facto’ mechanism for distributing funds, it has no right to do so, even though she acknowledged that most donors were likely under the impression that the NYC-GA was the only organization with access to these funds. Two other leaders of the teach-in, Daniel and Adash, concurred with Holmes…

One take on this would be that no popular movement can sustain itself for long without a class of people like this providing some coherence and direction. Another would be that intellectuals are always the last to spot a parade, and then they try to get out in front and claim that they’re leading it. I’m not sure which of these takes is my own. Maybe both are.

Who is against individual responsibility?

Good points from Tyler Cowen:

Who is against individual responsibility?:

I agree with most of Matt’s recent post, but one sentence struck me as noteworthy.  Matt writes:

I suppose I agree with Will Wilkinson about the importance of “an ethos of initiative, hard work, and individual responsibility” though I have no real idea why he thinks most progressives are against such an ethos.

I could write that sentence without the “I suppose”!  The final clause of the sentence I see as showing just how broad the perceptual gulf between progressives and conservatives/libertarians can be.

I would not quite say that progressives are “against such an ethos,” but where does it stand in their pecking order?  Look at fiction, such as famous left-wing or progressive novels, or for that matter famous left-wing and progressive movies.  How many of them celebrate “an ethos of initiative, hard work, and individual responsibility”?

(Via Marginal Revolution)