A shocking tax deduction

The top, banner headline in the Berkshire Record for Feb. 12-18 screamed, “State lawmakers avoid federal income taxes, thanks to loophole.â€

Intrigued, I read editor David Scribner’s article. He reports that a 1980 law made it possible for state legislators living more than 50 miles from their state capitol to take a $311 per diem deduction on their federal taxes for every day their legislature is in session. The article further asserts that the Massachusetts Legislature has been in perpetual session since 1988, and that several Berkshire legislators — questioned directly by the newspaper — do take this deduction (and don’t apologize for doing so), while at least one does not, considering it a matter of principle.

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Intrigued, I did a little sleuthing on the Internet. And with a calculator.

The notion of state legislators cutting down their federal tax liability has also intrigued reporters elsewhere. A Tennessee headline lambasted Lt. Gov. Ron Ramsay for taking such deductions even for days when the Legislature was not technically in session.

I had to find the federal statute and see exactly what it said. You can look it up, too, at law.cornell.edu/uscode/26/usc_sec_26_00000162----000-.html. Scroll down to section H. An interesting document, a bit opaque as far as the details are concerned, but a lot clearer on what is permitted to happen. The legislator can deduct some money, but if he or she is being reimbursed by the state for their away-from-home expenses, those reimbursements need to be offset first. Also, the IRS appears aware that some state legislatures are quite generous with their own per diem benefits, and therefore the IRS only allows a state representative or senator to claim 110 percent of the federal reimbursement allowance as a deduction.

Now I went into the weeds of state-by-state details, an enlightening journey. While some states reimburse legislators for away-from-home expenses — these range from several hundred dollars a day to more modest amounts — others do not. Connecticut is one of a half-dozen that pay nothing in per diems to legislators. New York pays well over $200 per day, but legislators from New York City, Buffalo or Rochester who need to be in Albany are likely to have to spend the nights there and incur other legitimate expenses. Hartford is considered within commuting distance for all legislators.

How many state legislators are there, countrywide, and how many days are their legislatures in session? Eight states have fewer than 100 legislators apiece; 36 have between 100 and 200; and another six have more than 200. The largest number per state is not in California or New York, but in New Hampshire. New York has 212, California a measly 120.

Averaging yields a total of around 7,000 state legislators in the country. How many live more than 50 miles from state capitols? Legislators representing city-dwellers in metropolitan New York, Rochester, Buffalo, Birmingham, Anchorage, Los Angeles, San Francisco, San Diego, Dallas, Houston, Chicago, New Orleans, Des Moines, Cleveland, Cincinnati, Philadelphia and Pittsburgh all do. I estimate that around 5,000 legislators live farther than 50 miles from their state capitols.

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How long the sessions last is less easy to answer. Why, for instance, can the Legislature in New Mexico do its annual business in 30 to 60 days, while Nevada’s requires 120 days? Texas, with a population of 20 million, surely can use the 140 days allotted; yet Massachusetts, with a population of fewer than 7 million, is in perpetual session.

Multiplying the average number of legislators who are eligible to take the deduction first by the average number of days a legislature is in session, and then once more by the $311 per day figure, could yield a net loss to the U.S. Treasury of $100 million per year.

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Quite shocking! But not the whole story. When the deduction was first put in place, the IRS estimated that not all who were eligible took it, and that losses in revenue were around $5 to 8 million a year. Allowing for inflation, they consider that amount is perhaps now $25 million per year.

That is a not a lot of money for the federal government, which spent, for example, $142.6 million on each F-22 Raptor fighter plane before determining that the Raptors were not very useful in fighting wars in Iraq and Afghanistan. One hundred forty-five such planes were built before the program was shut down late last year. Where is the media outrage over that deduction from the Treasury?

Salisbury resident Tom Shachtman has written more than two dozen books and many television documentaries. He will be speaking about his newest book, “The Forty Years War,†at the Scoville Library in Salisbury on Feb. 27.