Happy New Tax Year!

If this evening's agreement gains approval by the Senate and House, estates of $5 million or less will continue to avoid federal estate tax, though larger estates will face a 40% tax rate.

More good news: the annually-threatened imposition of the Alternative Minimum Tax on ordinary taxpayers will be fixed "permanently."

Not so good news for high-income taxpayers: a higher tax rate for couples with incomes over $450,000, a phase-out of deductions for those with incomes over $300,000.

Meanwhile, pending Congressional action, off the fiscal cliff we fall. The New York Times came up with this icon for the occasion.

Estate Tax Debate Goes Down to the Wire

Representative Lynn Jenkins (R), December 20:

Growing up on a Kansas dairy farm, I know the estate tax is a threat to family farms. This tax makes bailing hay and shoveling manure sound like a get-rich-quick scheme, when most family farms make an average of $45,000 a year. Raising the estate tax to 55 percent and dropping the exemption to $1 million might be feasible for a hedge fund manager, but it will jeopardize the future of farmers and their families….

Senator Richard Durbin (D), December 30:

I am troubled by the notion we are somehow going to give [an estate tax] break to some 6,000 very fortunate Americans and incur a new [sic] expense for our Federal Government of some $130 billion or $140 billion in the process. What are we thinking? *** I hope we aren't forced into any agreement that includes it, although I stand here knowing full well if there is an ultimate compromise, there will be parts of it I find disgusting and reprehensible which I may have to swallow….

Care to pick a winner?

We're going over the cliff!

Earlier I mentioned that the only possible way to avoid the fiscal cliff over a very short time frame was for the House to pass S. 3412, which already passed the Senate last July. It provides a one-year extension of the status quo, plus an AMT adjustment for 2012.

Today I learned from Tax Notes that such a path is technically impossible, because Majority Leader Reid never sent the paperwork to the House!  Plus, there's that irritating constitutional requirement that tax legislation originate in the House.  Usually some shell legislation is used to get around that, but that apparently wasn't done for S. 3412.

So, the only remaining path is identical legislation that has been brought to the House Ways and Means Committee.  Evidently, if the House will pass that, the Senate will be available to re-pass it.

It would be another kick of the can down the road.  My feeling is that both sides want to go over the cliff, if only they can be confident that the other side gets the blame.

Is it "Throw Grandma From the Train" time again?

There was much speculation in 2010 that, in the absence of estate tax reform, there would be an uptick in deaths among the wealthy elderly simply to avoid estate taxes. 

Absurd? CNBC has collected some relevant facts on elasticity in dates of birth and death.

By keeping hope for estate tax reform alive until the end of the year, I suspect the problem has been avoided. Had Congress reached an agreement in November to, for example, reduce the federal estate tax exemption dramatically on January 1, perhaps the decisions to withdraw life support might have been accelerated for some families. 

We've known the cliff was coming for two years, but I never believed we'd actually go over it.

State death taxes are about to be resurrected

Fewer than half the states impose death taxes this year.  The decline of state death taxes began with the elimination of the federal estate tax credit for payment of state death taxes, phasing out after 2001.

Please note that I am not making a political statement when I use the politically charged term "state death taxes."  That was what the tax code called the credit, it didn't come from an anti-tax focus group.

When the credit was converted to a deduction, the impact on taxable estates was nominal. But the impact on states was huge, because they could no longer impose the "mop-up" version of a state estate tax, linking their death tax measurement to the federal credit.  Some states thus lost the ability to impose a death tax, based upon state constitutions, and others gave it up voluntarily.  In the larger scheme, this was a revenue grab by the feds from the states, and it worked.

When the Bush tax cuts expire, as they surely will, the deduction for state death taxes will go back to being a credit.  Most states may be expected to restore their death taxes.   Conveniently, the federal exemption of $1 million matches the exemption of many of the states that had decoupled from the federal system to preserve their own death taxes.

Apparently, California is already counting on this new revenue source.  Makes me suspicious.  I wonder if anyone was ever really serious about avoiding the fiscal cliff? Maybe both sides really wanted to go over it, which is why all the jockeying is about who gets the blame?

The Hardest Time to Invest

Disaster struck at 6:11 p.m. EST today – the world did not end. Skittish investors were left to face a looming fiscal cliff, a dysfunctional federal government. Surely this must be the hardest time to invest.

Yes, it is. It always is.

In this classic U.S. Trust ad from the December 29, 1962 issue of The New Yorker, the founder of the Merrill Anderson Company stated an eternal truth:

Investment decisions are always difficult, but always necessary.

Whither the Estate Tax?

The President and the Republicans may be nearing a deal to avert a plunge off the fiscal cliff. Any guesses about what next year's federal estate tax will look like? The President has proposed a $3.5 million exemption and a 45 percent tax rate.

Republicans, if they can't have no death tax at all, want a higher exemption and a lower tax rate. So do some Democrats, especially from farm states. Although housing prices slumped and in some places crashed during the Great Recession, agricultural land prices have kept rising. "Land selling for $1,000 an acre five years ago may now be worth five or 10 times that amount," notes The Modesto Bee.

Most recent support for a much harsher estate tax comes from a group of rich business notables. They see our nation's fiscal instability as a greater threat to wealth than taxation.

Actually, billionaires don't have to worry much about estate tax, unless they own one of the very largest family businesses. Usually a $4-billion family can get along just fine on $2 billion.

For background, see this history of the federal estate tax. One table, reproduced below, shows the remarkable ups and downs in both rates and exemption level from 1915 to 2007. (In 2010, of course, rates and exemptions reached their irreducible minimum: zero.)

Click for larger image.

Santa Money

Once upon a time, Americans used more than 8,000 kinds of money. Any bank could issue notes. One $5 example from the 1880s just sold at auction for over $100,000. 

This Huff Post item links to a wild and crazy slide show of old currency, including the Confederate variety. Check out this Howard Bank note with a vignette of Santa Claus. 

The Muni Bond Loophole

You know that a tax preference is in trouble when it begins to be labeled a "loophole" in the popular press.  The tax freedom for municipal bond interest is starting to get that treatment.  See this, for example.

Personally, I think that eliminating the tax freedom for all future muni bonds is a great idea.  Of course, the value of existing tax-free bonds will then zoom, so there would be some windfall profits. That's the transition price to pay.

Meet the IMWIs

The Telegraph calls attention to a survey of "Internationally Mobile Wealthy Individuals." Real estate is a favored investment, especially among those based in the Asia-Pacific region. U.S. and Canadian millionaires who spend more than half their time outside their home country are more likely to favor stocks, less likely to own three or more homes.

More data from the survey here.

Quality is recognized

Professor Gerry Beyer's estate planning blog is having stunning success.  Visitors and page views are up over 20% in the last quarter, and his is the 20th most popular law professor blog in the country.  (Only those who have site meters are included in the survey.) 

Professor Beyer's blog is well worth your time, which is why we keep a permanent link to it in our template. He's also an occasional contributor to our Estate Planning Studies. 

S. 3412

Following up on this post, the bill the Senate approved is S. 3412.  It passed the Senate 51-48.  Interesting that the Republicans neglected to filibuster it.  To correct my earlier post, it won't need to be taken up by the Senate if the House doesn't change it, it will go straight to the President.

That's the outcome I now expect.

To answer the lingering question in that earlier post, S. 3412 does include the AMT patch.  That bolsters the odds that this is the legislation that will be enacted.  I've read that a retroactive AMT fix, after the new year begins, is theoretically possible but inevitably would delay refunds even more.  It's a bad, bad idea.

More info on S. 3412 is found here.

I've read the entire bill, which is quite short.  But it's written in legislative bafflegab, as amendments to prior legislation, so the meaning is hard to ferret out.  Specifically, I'm unclear on what happens to the estate tax, which is not directly mentioned.

In any event, passage of this bill would mean we get to do this all over again next year, as it is for 2013 only. Theoretically, the idea seems to be that tax reform will really, really, finally, be attended to next year.

Want to restore economic growth? Go back to the bipartisan 1986 tax reform act, and you'll get your economic growth back.

Brubeck and Desmond: the "Take Five" Bequest

Dave Brubeck and Paul Desmond,
October 8, 1954

Dave Brubeck's most memorable hit was"Take Five." Taylor Ho Bynum reminds us that the tune became a significant charitable bequest.

...like the partnership between Duke Ellington and Billy Strayhorn, [the collaboration between Dave Brubeck and Paul Desmond] was a relationship of matched brilliance. And like Ellington’s “Take the A Train,” actually penned by Strayhorn, Brubeck’s signature tune “Take Five” was composed by Desmond.

In the month post-Sandy, we should also remember that when Desmond died, in 1977, he bequeathed the royalties to “Take Five” to the American Red Cross, bringing the organization close to six million dollars. With that composition sure to receive a flurry of performances after Brubeck’s death, it will likely bring in tens of thousands of dollars more to disaster relief at a time when it is sorely needed.

"Have I Got a Hedge Fund For You!"

At Dealbook Jesse Eisinger takes a few playful pokes at the proposed lifting of restrictions on advertising hedge funds.

The rules haven’t been completed, but we can look forward to an ad featuring a wizened couple in matching tubs overlooking a sunset, holding hands and talking about how they just put money with the next George Soros.

Once deluxe investments for university endowments and wealthy individuals, hedge funds have found their way into the portfolios of less sophisticated institutional investors. Now they're poised to target the millionaire next door.

Will the effort further dim their cachet in the high-net-worth market? Eisinger thinks so: 

"If Groucho Marx were alive today, he'd say that he would never want to invest in a hedge fund that would have him as a limited partner."

End game

I don't think that the tax negotiations will end well this year.

Two years ago, the historic compromise was reached by December 6, and we started to blog about it here.    The legislative process was completed in just 11 days, by December 17, showing just how fast Congress can act when Christmas is coming.

No signs of compromise at all this year.  I just don't see how anything can be drafted by year end.

However, apparently the Senate produced legislation last summer to implement an extension of the Bush tax cuts to the bottom 98%.  It didn't have anything on the payroll tax holiday, the debt ceiling, or unemployment benefits.

ABC News reports on a "doomsday plan" by the House Republicans to bring that Senate legislation to the floor.  It does what Obama and the Democrats claim that they want.  Bringing it to the floor "releases the hostage" of the middle class tax cuts.  All Republicans would vote "present," so the bill would pass.  In the minds of Republicans, failing to stop a tax increase is different from voting for one.  I don't see the practical distinction myself.  But at least they could no longer be blamed for allowing the tax increases on the middle class, which is the corner that the Democrats backed them into.

Would the Senate bring it up? Would the President sign it?  It looks to me as if a surprising number of Democrats prefer to go over the cliff instead.

I haven't found the bill yet.  My question, did it include the inflation adjustment for the 2012 AMT?

Tax Notes reports that the IRS has already programmed their computers for another inflation patch to the AMT, assuming that Congress would never let that expire.  Some tax failures can be retroactively fixed, like the lapsed estate tax, but not this.  Per Tax Notes, failure to patch the AMT now will do much more than impose the tax on many more taxpayers, it will also delay tax refunds for everyone else by six weeks or so.  That delayed cash flow alone could have negative economic fallout.

If that Senate bill includes the 2012 AMT patch, I believe that the Senate would act and President Obama would sign it.  But that has to be concluded by December 17, when he leaves for Hawaii for the holidays.  I suppose that they could have a signing ceremony out there.

Final note.  This has been a titanic struggle just to leave the tax code unchanged.  Tax cuts have contributed to an economic bounce in the past.  Leaving the tax code unchanged has not.  Although the media talks about middle class tax cuts, no one will see lower taxes next year under any scenario.  Dodging a scheduled tax increase just doesn't excite the animal spirits the way ERTA did back in 1981.

Estate Planning Boom Ahead?

The President's proposal to cut the amount exempted from federal estate tax from about $5 million to $3.5 million could double the number of estates exposed to tax. Result, a surge in the number of families needing tax-effecient estate plans.

A few Democrats, including Senate Finance Committee Chairman Max Baucus, favor keeping the higher exemption. Which way do you think Congress will lean?

Jeremy Siegel, Stock Market Pessimist

Happened on Jim Gust's July, 2010 post. He noted that Jeremy Siegel believed stocks were undervalued by 25-30%. Jim seemed dubious, and rightly so. The S&P 500 is not up 25-30% since the start of July, 2010.

 As of November 30, it's up 37%.

Getting a Man's Nest Egg With a Gun

Chase Manhattan's legendary nest-egg ads of the 1950's and 1960's usually featured manly pursuits – sailing, fishing…and, of course, shooting. See examples picturing men with guns here, here and here.

This ad from December, 1962 also shows a man with a gun – except that a Purdey shotgun or rifle is a gun only in the sense that a $60,000 Swiss chronometer is a wristwatch. Purdey provides sporting weaponry to The Queen, The Duke of Edinburgh and The Prince of Wales. One of their shotguns could set you back $100,000 or more.

James Purdey and Sons is now owned by Richemont, a Swiss luxury goods holding company. Richemont also owns several watchmakers.

Should a Bank Join the Occupy Wall Street Movement?

Probably not. See Danske Bank pulls #occupy image from ad campaign.

Full Frontal Inheritance?

From a post on Wills, Trusts & Estates Prof Blog:

The collaborative process is less time-consuming, less expensive and less confrontational than a traditional adversarial case. It is especially effective in disputes where monty is not the sole issue.

Apologies to Gerry Beyer. Couldn't resist chuckling at the typo because earlier this year I attended an excellent production of the musical. One of our daughters played in the pit band.

Drought Hits Christmas Price Index

The West Coast may be awash now, but soaring feed costs caused by this year's lack of rain have made Christmas birds expensive. Swans: up 11%. Geese: up almost 30%.

For the price performance of other gifts listed in The Twelve Days of Christmas, see PNC's Christmas Price Index.

If a $65-million Painting Cannot be Sold . . .

. . . what is the painting's taxable value in an art dealer's estate?

In the case of Robert Rauschenberg's "Canyon,"zero.

However, the newly announced settlement with the IRS requires the art dealer's heirs to "donate 'Canyon' to a museum where it would be publicly exhibited and claim no tax deduction."

The lucky museum? The Museum of Modern Art, which agreed to add the name of dealer, Ileana Sonnabend, to the list of the museum's founders. 

Her heirs had been threatened with an IRS claim of $29.2 million in estate tax plus $11.7 million in penalties.

What Each Generation of Investors Needs to Learn

Cleaned out an old file drawer and found this 1988 postcard, produced by The Merrill Anderson Company for a marketing campaign. The point of the campaign is long forgotten. The message rings true as ever. 

A new tax bubble?

One idea reportedly being floated in DC is to hold the top rate at 35%, but tax the "rich" at a flat rate of 35%, so they don't get the benefit of the lower tax brackets.  Sound like a win for both sides?

Personally, I hate the idea.  It makes the tax code less transparent, or as I would put it, more dishonest. To implement this idea you have to add hidden, temporary tax brackets above the 35% tax rate.  These are known as "tax bubbles."

Nate Silver does a good job of explaining the mechanics, and if you read it, I think you'll agree with me. 

The more I think about it, the more I like the new Buffett proposal.  It actually applies to those who are making the most money, unlike the tax bubbles.  I don't think it would raise much money, or close the deficit, but it could allow the political focus to shift to getting spending under control.

Here's another great idea: a lifetime cap on the charitable deduction of $1 million.  I resent how Buffett has all these recommendation for everyone else's taxes, while he's sheltered his huge fortune from participation.  His philanthropy ought to be as nondeductible as my purchases of food and fuel.

Even better, eliminate the charitable deduction entirely, and end the nonprofit status of rich foundations and endowments.  I'll know that the politicians are serious about taxing the truly rich when they move in this direction.

Taxing Those Who Like to Pay Tax

Jim Gust calls the proposed AMT for the rich "sensible-seeming" but fails to mention the sheer genius of Warren Buffet's idea.

Most of us don't like to pay income tax. Most of us sure don't want to pay more income tax. Most, but not all.

Among those labelled "rich," more and more wealth holders have gone to considerable trouble to pay significantly more income tax than required. You know them as creators of I Dig It Trusts. (With these trusts, basically Dad moves income-producing assets into a trust for the kids but continues to pay tax on the income flow.)

Raising taxes on those who already volunteer to pay more! How can you improve on that?

The reality, of course, would be more complicated. As Jim notes, those harvesting millions in interest from tax-exempt bonds might escape such an AMT, although adjustments could be made. Buffet's proposal would hit heavily the top 400, generally taxpayers who realize once-in-a-lifetime capital gains. Do they deserve the same tax treatment as corporate big-shots who, year after year, "earn" fifty times as much as their rank-and-file employees?

An actual AMT for the rich?

In today's NYTimes Warren Buffett proposes a sensible-seeming idea, a minimum income tax on income in excess of $1 million. See here.  He wants a 30% tax on $1 million to $10 million, and a 35% flat tax on all income over $10 million.  Buffett claims that such a tax will have zero impact on the investment decisions of the rich.  In today's ultra-low interest rate environment, he may have a point.

As background, keep in mind that the current AMT is not, in general, paid by the rich, because for the most part their ordinary tax rates come in higher than the AMT rates.  The real AMT target is the merely affluent, mostly those families who live in the high-cost, high-tax blue states.  It's their above-average use of deductions that push them into the arms of the AMT.

Buffett's proposal would be a meaningful tax hike at the high end, but there is a dog not barking in his op-ed.  He implies that the highest-income taxpayers enjoy low rates because they don't top out at 39.6% instead of 35%, and because they take advantage of the 15% rate on long-term capital gains.

Warren completely ignores the role of tax-free muni bond income in this equation.   For his 35% minimum tax to have any meaning at all, muni bond income needs to be fully taxed, at that 35% rate.  Otherwise, this is just a lot of smoke.

I, for one, welcome the full taxation of muni bonds, even though I own some and would be hurt by the change.

A Thanksgiving Thought

Six years ago we posted a Thanksgiving commentary from Ben Pease of TD Bank. This excerpt bears repeating:

We have a meaningful - if not somewhat tormenting - tradition at my home on Thanksgiving Day. As the food hits the table and our stomachs are growling in anticipation, we pause for a few moments to allow each person to declare what they have been thankful for over the past year. Generally, it includes things such as appreciation for family, new children, a promotion or a newfound relationship. I can't remember a time when I've heard someone say they were thankful for the recent bond rally, the FOMC decision, or XYZ finally beating analyst estimates. It is interesting, in this age of long hours and long days; the most valuable things in life are still free. Have a wonderful Thanksgiving. . . .

Happy Thanksgiving to All!

Capital Gains: A Great Unlocking

Fifty years ago, when The Merrill Anderson Company created this ad, federal income tax on long-term capital gain was levied at the rate of 25 percent. Coaxing investors to sell was difficult.

This year could be the last for paying tax on stock profits at 15 percent. (That's 15 percent at the Mitt-Romney income level. Lesser mortals have paid much more.) As a result, The New York Times reports, we're experiencing a Great Unlocking – a stampede to take profits that's reminiscent of the Reagan years:

[S]ome experts expect a substantial bump in tax collections in the short term as investors take a multitude of steps now that they would have taken in future years. After the top tax rate on capital gains rose to 28 percent from 20 percent at the end of 1986, federal receipts from such gains doubled to $52.9 billion in 1987, as sales surged at the end of the previous tax year.

Maybe our much-maligned U.S. Congress deserves a little respect for cutting the deficit by cliff-hanging.

Is Art the New Gold?

Christie's auction of contemporary art drew spirited bidding, much of it from foreign buyers said to be seeking a safe haven for their surplus wealth.

Buyers will be happy indeed if they fare as well as the seller of this Warhol:

Six people fought for the Pop artist’s 1966 image of a sexy Marlon Brando leaning on his motorcycle’s handlebars, which was being sold by Donald L. Bryant Jr., a New York businessman. Mr. Bryant had bought the painting at Christie’s in 2003 for $5 million. On Wednesday it…ended up making $20.1 million or $23.7 million with fees.

Wealth and Worry

From The WSJ's Total Return blog:

Raising the bar. The threshold for "high net worth" is now $5 million.

Worry, worry, worry. A State Street Center for Applied Research survey finds, "investors don’t trust advisers, money managers don’t trust brokers and exchanges, regulators doubt their ability to police the markets, everyone thinks policymakers are incorrigible bumblers…."

Investment Ads From 1962

James Bond isn't what he was when Sean Connery debuted in "Doctor No." Neither is the world of investing. From the same 1962 issue of The New Yorker in which Geoffrey Hellman reported on his two-martini lunch with Ian Fleming, here are three ads.

Forecasting is tricky. Fifty years ago growth stocks had become the way to go. Even bond-heavy pension funds started buying them. But, then and now, picking stocks that actually grow isn't easy. Here, Shearson suggests it's like weather forecasting.

To our knowledge this Merrill Lynch column is the only brokerage ad extant that begins with Xerxes crossing the Hellespont.

"The stock market is a little like the Hellespont. Cursing and cajoling has no effect on it at all. Neither does propitiation. But the practical man who accepts its changeable nature and plans accordingly can be its master. Just as a general should read weather reports, an investor should read the financial pages of his newspaper, which are the weather reports of the stock market. *** The stock market is always subject to change without notice. That is its nature – and its fascination."                                                            

Over the past half century weather forecasting has improved by leaps and bounds. Stock-market forecasting, not so much.

The woman investor. Not a call center in sight when City ran this ad set in India.  The ad was cutting edge in one respect: The American couple have his and hers investment accounts.

" His is a portfolio earmarked for growth – composed chiefly of aggressive, common stocks with promise of a dynamic future. Hers is a more conservative program, planned for stability and made up of both stocks and bonds."

In reality, both probably shared the same investment goals. But in 1962, only the man was expected to have enough earning power to make up for serious investment losses.  The woman would have to type her way back up. 

These days? Thanks to strategic asset allocation, we all invest like women. 

Ian Fleming, Wealth Manager

1933: You're a well-schooled young Brit (Eton, Sandhurst), covering the Soviet Union for Reuters. The family wants you to get a real job.

Despite the Great Depression, Ian Fleming chose what we call wealth management:

I decided I ought to make some money, and went into the banking and stock-brokerage business– first with Cull & Company and then with Rowe & Pitman. Six years altogether, until the war came along. Those financial firms are tremendous clubs, and great fun, but I never could figure out what a sixty-fourth of a point was.

Geoffrey Hellman of The New Yorker gathered that quote in 1962, at a two-martini lunch with Fleming. The interview is summarized here, in honor of the fiftieth anniversary of the first James Bond movie.

Like most English-speaking persons of note, Fleming was a Scot, grandson of Robert Fleming, founder of Flemings. A few years before its decline and acquisition by Chase in 2000, Robert Fleming & Co. operated in 44 countries in Asia, Eastern Europe, the Americas and Africa.

Where Most Pentamillionaires Don't Go . . . Yet

Most pentamillionaires – more than two out of three – never use YouTube, according to the Spectrem survey mentioned in this WSJ story. Those with $5 million or more who do use the video site are likely to be under age 44.

Nevertheless, plenty of mere millionaires and mass-affluents must be users. So some advisers and planners have started prospecting on YouTube. Good idea?

That depends. A cursory survey suggests that YouTube's wealth-management videos range from surprisingly good to painfully embarrassing.

Best are the few that are professionally produced and content rich. Far more common are routine promotional videos, many virtually interchangeable and lacking the tone likely to appeal to the $5-million-and-up market A few are so amateurish they remind you of SNL parodies. You feel sorry for the poor souls who exposed themselves to public view.

Bottom line: Aim high and seek professional help if you seek to market yourself on YouTube. You probably can't produce something comparable to a Warren Buffett monologue or a TED lecture, but you'll be competing on the same playing field.

The Great Middle-Class Tax Hike

From today's Washington Post:

Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year. Because those people have never paid the AMT, they have no idea they are in its crosshairs . . . . 

Birth of the Estate Tax

Gotta love the Internet. Media Decoder at The New York Times asked which deceased magazines people missed, which led an old timer to mention The Saturday Evening Post, which led to another comment asserting that the Post was still alive, sort of. 

Sure enough, besides  a smattering of current articles, the Post web site offers selections from the magazine's archives. And not just the Norman-Rockwell-era archives. Remember, the publication was founded by Ben Franklin. From 1906 comes Swollen Fortunes, an appreciation of Teddy Roosevelt's eagerness to tax the One Percent. The article's author, David Graham Phillips, sums up Teddy's crusade:

What is our problem of concentrated wealth? Mr. Roosevelt has compacted the whole of it . . .

First – Enormous, swollen fortunes.

Second – The use of those fortunes to narrow independent opportunity, to monopolize industry, to raise prices and lower income, to manufacture a few thousand millions out of millions of men and a few billionaires out of the millionaires.

Third – The use of those fortunes to control political machinery and, so, both the making and the administration of the law. . . .

Any resemblance between the early 20th and early 21st centuries is, of course, purely coincidental.