Category: Tax

Is Harry Reid Engaging in Libel by Implication?

Harry Reid has sparked an uproar by suggesting that Mitt Romney paid no taxes. On the floor of the Senate, Reid stated, “The word’s out that he [Romney] hasn’t paid any taxes for 10 years.” Glenn Kessler summarizes Reid’s follow-up on the claim:

He originally told the Huffington Post that a person who had invested with Bain Capital had called his office and told him this. Then, he told reporters in Nevada that “I have had a number of people tell me that.” Reid has refused to identify his source (or sources).

Kessler notes that, “Without seeing Romney’s taxes, we cannot definitively prove Reid incorrect.” He still faults Reid for making the accusation. Others praise Reid because “his allegations are easy to disprove with evidence that Mitt Romney himself has, viz., Romney’s tax returns,” and “every party nominee for 40 years” has been more forthcoming than Romney about their taxes.

The controversy reminded me of an article on “Libel by Implication,” and a decade-old defamation case, Howard v. Antilla. That case concerned a New York Times article, which asked, “Is Robert Howard really [the felon] Howard Finkelstein? A lot of investors in Mr. Howard’s Presstek Inc., would like to know. But not even the Securities and Exchange Commission can say for sure. And the lingering mystery has roiled a hot stock and left the S.E.C. blushing.” The article reported rumors that turned out to be false, though the defendant said it was based on “1500 pages of notes and documents in her investigative file.” A jury found for Antilla on the defamation claim, but awarded Howard $480,000 on a false light claim. The First Circuit eventually vacated the verdict, engaging in some fine distinctions between claims that someone “might be” and “is” some suspect identity:
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Renouncing Citizenship to Avoid Taxes

There was news in recent days that one of the co-founders of Facebook (Eduardo Savarin) has renounced his U.S. citizenship to avoid paying a hefty tax bill (approximately $600 million) when the company goes public this week.  I’m ignorant of the law on this point, but are there really no restrictions on the right to relinquish citizenship on a date of your choosing?  If there are equitable limitations, this would seem like a good time to invoke them and say that he cannot opportunistically avoid taxes in this way. If there are no such limits, I wonder if the Government will consider exercising its discretion to deny him entry into the United States from now on.


The Yale Law Journal Online: “Early-Bird Special” Indeed!: Why the Tax Anti-Injunction Act Permits the Present Challenges to the Minimum Coverage Provision

The Yale Law Journal Online recently published an essay by Michael C. Dorf and Neil Siegel entitled “Early-Bird Special” Indeed!: Why the Tax Anti-Injunction Act Permits the Present Challenges to the Minimum Coverage Provision. In the Essay, Dorf and Siegel examine whether the Tax Anti-Injunction Act (TAIA) bars the Supreme Court from reviewing the current challenges to the Patient Protection and Affordable Care Act (ACA). While most of the commentary on the TAIA issue has focused on the question of whether the ACA’s penalty provisions fall within the TAIA’s definition of “tax,” Dorf and Siegel adopt an alternative and original approach. They argue that the TAIA does not bar the review because “the present challenges to the ACA do not have ‘the purpose’ of restraining tax assessment or collection.” For a purpose to bar review, it must be immediate because if the TAIA extended to challenges with the indirect purpose of restraining tax assessment or collection, it would also bar tax refund suits. ACA challenges cannot have the direct purpose of barring review because “the very authority to assess or collect will not exist until long after the litigation is concluded.”


Stanford Law Review Online: How to Reach the Constitutional Question in the Health Care Cases

Stanford Law Review

In a Note just published by the Stanford Law Review Online, Daniel J. Hemel discusses a jurisdictional issue that might delay a ruling by the Supreme Court on the constitutionality of the Patient Protection and Affordable Care Act, and a novel way in which the Solicitor General could bypass that hurdle. In How to Reach the Constitutional Question in the Health Care Cases, he writes:

Although the Supreme Court has agreed to hear three suits challenging the 2010 health care reform legislation, it is not at all clear that the Court will resolve the constitutional questions at stake in those cases. Rather, the Justices may decide that a Reconstruction-era statute, the Tax Anti-Injunction Act (TA-IA), requires them to defer a ruling on the merits of the constitutional challenges until 2015 at the earliest. . . . Fortunately (at least for those who favor a quick resolution to the constitutional questions at stake in the health care litigation), there is a way for the Solicitor General to bypass the TA-IA bar—even if one agrees with the interpretation of the TA-IA adopted by the Fourth Circuit and Judge Kavanaugh. Specifically, the Solicitor General can initiate an action against one or more of the fourteen states that have announced their intention to resist enforcement of the health care law, and he can bring this action directly in the Supreme Court under the Court’s original jurisdiction. Such an action would be a suit for the purpose of facilitating—not restraining—the enforcement of the health care law. Thus, it would open up an avenue to an immediate adjudication of the constitutional challenges.

Read the full Note, How to Reach the Constitutional Question in the Health Care Cases by Daniel J. Hemel, at the Stanford Law Review Online.

Pascal on Power and Justice (A Thought for the New Year)

The past few years I’ve tried to find an inspiring quote for the New Year for the blog. There’s a rich vein of insight to be mined from the Carnegie Council podcasts, which I recently discovered on iTunes. One speaker I particularly enjoyed was Krishen Mehta, a former partner with PricewaterhouseCoopers who is now the co-chairman of Global Financial Integrity’s advisory board. Asked about what motivated him to try to stop the shocking abuse of tax havens and mispriced trade by oligarchs, he said the following:

It really is a war against the poor. The inequity that has existed in the past is going to continue unless civil society is informed, asks the right questions of its government, of its business leadership, and asks for more responsibility. One of my favorite writers is Blaise Pascal, who said that “justice and power must be brought together so that whatever is just may be powerful and whatever is powerful may be just.”

A recent study concluded that, “For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate.” Mehta, by contrast, is not only creating value, but doing so for the most vulnerable people. How appropriate that a thinker admired by both mathematicians and philosophers would inspire him.

Image Credit: Augustin Pajou. As described on Wikimedia Commons: “Blaise Pascal (1623–1662) studying the cycloid, engraved on the tablet he is holding in his left hand; the scattered papers at his feet are his Pensées, the open book his Lettres provinciales.”

The Poor Get One Strike; Banks Get Thousands

Most readers of this blog are already familiar with draconian treatment of the poor by various law enforcers and state bureaucracies. Here’s yet another example:

[A] one-strike clause . . . allows the public housing authority to evict [the tenant] if any member of her household or any guest engages in certain kinds of criminal activity. . . . Stories abound about the one-strike policy being wielded in seemingly egregious ways to evict “innocent tenants,” such as a disabled elderly man in California whose caretaker was caught with crack. . . .The Chicago Reporter wrote in September that 86 percent of Chicago’s one-strike evictions last year did not arise from criminal activity by the person named on the lease.

“These policies, the effect of them on children, families, women, families of color, were not thought through. And I think now a national conversation is beginning to rethink that,” said Ariela Migdal, a senior staff attorney with the Women’s Rights Project of the American Civil Liberties Union. Migdal pointed to a June 2011 letter from HUD Secretary Shaun Donovan to public housing directors, encouraging the directors to use their “broad discretion” to create a flexible set of standards for who will be admitted to and allowed to stay in public housing.

Certainly the Obama administration has ample experience deploying “discretion” and “mercy” in other areas.  For example, consider Barry Ritholtz’s summary of a shocking Reuters report by Scott Paltrow on foreclosure fraud:
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Pope Benedict’s Message on Peace, Justice, and Wealth Redistribution

Pope Benedict’s interpretations of Catholic Social Thought have been consistently inspiring. His recent message on the World Day of Justice and Peace focused on the material foundations of a just and well-ordered society.

“Blessed are the peacemakers, for they shall be called sons of God”, as Jesus says in the Sermon on the Mount (Mt 5:9). Peace for all is the fruit of justice for all, and no one can shirk this essential task of promoting justice, according to one’s particular areas of competence and responsibility. . . .

Peace . . . is not merely a gift to be received: it is also a task to be undertaken. In order to be true peacemakers, we must educate ourselves in compassion, solidarity, working together, fraternity, in being active within the community and concerned to raise awareness about national and international issues and the importance of seeking adequate mechanisms for the redistribution of wealth, the promotion of growth, cooperation for development and conflict resolution.

This position confirms a long line of encyclicals urging the fair distribution of global resources. As Pope Benedict earlier stated in Caritas in Veritate, “Without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function.”
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Understanding Wealth Defense: Direct Action from the 0.1%

The OWS protests have provoked reflection on the morality of direct action and civil disobedience. How far should the police go to spy on, disrupt, or punish peaceful protesters? Is pepper spray a dangerous chemical agent or “a food product, essentially?” Does current American inequality merit a direct action follow-up to the Civil Rights Movement, whose mass-arrestees and water-cannoned marchers are now viewed as heroes?

It’s difficult to answer these questions without understanding the past and present tactics of the groups OWS is protesting. We can learn something about those tactics from Jeffrey A. Winters’ book Oligarchy and his recent articles. In Winters’ treatment of America’s politics of wealth defense, we can discern a transition from high-stakes defiance of government tax authority to an established position “inside the system.”

Winters recounts how Congress passed a tax on the top 0.1% in 1894, only to be slapped down by a Supreme Court “which struck it down in a 5-4 decision.” After the 16th Amendment effectively repealed that Supreme Court decision, Congress had the novel idea of actually helping pay for a war (WWI) with revenue from those best able to fund it. As Winters notes, “the highest rate [leapt] from 7 percent in 1915 to 77 percent in 1918,” and “the number of brackets went from seven to 56 over the same period.” This provoked direct action from the wealthiest “through tax avoidance and outright evasion.” At this point, Winters writes,
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Come With Me and Escape

“If you like Pina Coladas, and getting caught in the rain.
If you’re not into yoga, if you have half-a-brain.”

Bay Area radio struggles to have decent music. I tend to cycle through the few stations that may have something of interest. A recent addition to the dial focuses on 60s. 70s, and 80s. As a competitor points out, the new comer tends to repeat the same track several times a day. Recently the song Escape (The Pina Colada Song) has been playing quite a bit. The funny thing to me is that yoga and health food seem to have been dating and compatibility differentiators for more than 30 years. The style of the song and especially the attire, however, may not be as timeless; just reminders of the end of the seventies and the start of eighties (It was the last number 1 of the seventies and first of the eighties). Oddly that decade seems a bit more sane regarding taxes.

It took more than two years to produce that tax code overhaul. During that time, Reagan went on the road to plead his case for the plan. At a high school in Atlanta, Ga., in 1985, Reagan said they were going to “close the unproductive loopholes that allow some of the truly wealthy to avoid paying their fair share.”
Meanwhile in Congress, Democrats and Republicans worked together to merge competing proposals for tax reform. Still in office today, Democratic Sen. Patrick Leahy of Vermont was there during the passage of the bill. He says it was a different era.
“We had a lot of grownups in both parties, people who actually wanted the government to work,” Leahy says.

All of which makes me wish there was a world where I could write a personal ad seeking a new politician and find that the one who turned up was already in place. Now that is a fantasy.

Anyway, enjoy the song. Oh as moment of who knew: The song was released on September 21, 1979. The movie “10” which is a rather similar story and also a huge hit of the era was released October 5, 1979. As far I know they were not connected directly; yet they stuck together in my head because of the story lines.

Jost on a Drafting Error in the Affordable Care Act

A few days ago, Timothy Jost offered insights on the Fourth Circuit’s jurisdictional rulings on constitutional challenges to the Affordable Care Act. (That post was part of a terrific series he has done for the Health Affairs Blog.) Today, Jost offers a fascinating perspective on “an ACA drafting error that would seem to deprive millions of uninsured Americans of tax credits to purchase health insurance and invalidate regulations recently proposed by HHS and the Treasury Department:”

The mistake is found in section 1401 of the ACA, which creates a new section 36B of the IRC. Two subsections of 36B ((b)(2)(A) and (c)(2)(A)(i)) suggest that premium tax credit eligibility under the ACA depends on the applicant being enrolled in a qualified health plan “through an Exchange established by the State under section 1311.” This would in turn suggest that individuals enrolled in a qualified health plan through a federal exchange established under section 1321(c) would not be eligible for premium tax credits, contrary to the recent proposed regulations.

That this is a drafting error is obvious to anyone who understands the ACA. Section 1311 of the ACA requests the states to establish American Health Benefit Exchanges and sets out the duties of the exchanges. Section 1321 of the ACA, however, provides that if a state elects not to establish and exchange or fails to do so, HHS must “establish and operate” an exchange in such a state and “take such actions as are necessary to implement” the other requirements of title I of the ACA, which includes section 1401. There is no coherent policy reason why Congress would have refused premium tax credits to the citizens of states that ended up with a federal exchange. None of the CBO reports scoring the ACA suggest that premium tax credits would only be available though 1311 state exchanges and not through 1321 federal exchanges. It is, finally, highly unlikely that the House, whose bill included only a federal exchange, would have approved a bill that only provided tax credits through state exchanges but not through the federal exchange.

For the full argument, check out his post at the Health Reform Watch blog.