Posts tagged as:

taxes

“Detroit had the highest property tax rates of all 50 [largest U.S.] cities” [Chris Edwards/Cato, Alex Tabarrok] Some of the city’s weaknesses go back far enough that Jane Jacobs was pointing them out in 1961 [Urbanophile] How other cities avoided Detroit’s fate, and why, as Boeing shrank, “Will the last person to leave Seattle please turn out the lights?” turned out to be such a misplaced joke [Ed Glaeser, 2011 via Amy Alkon] And in two Cato podcasts on the city’s plight, Caleb Brown interviews Megan McArdle (Daily Beast, Bloomberg) and Emily Washington (Mercatus Center). Plus: Some reasons Baltimore is not Detroit [Frank DeFilippo, Splice Today] And Stephen Eide on the pension-negotiating strategies of emergency manager Kevyn Orr [Public Sector Inc.]

July 27 roundup

by Walter Olson on July 27, 2013

  • Authorities arrest woman they say obtained $480,000 by falsely claiming injury from Boston Marathon bombing [CNN]
  • More on the buddy system by which Louisiana officials pick private-practice pals for contingency contracts [WWL, The Hayride, Melissa Landry/La. Record; earlier on levee district's new megasuit against oil industry]
  • “Why would the President meet with the IRS chief counsel rather than his own counsel at OLC, and without the IRS commissioner present?” [Paul Caron, TaxProf] “The IRS as microcosm”: government lawyers lean left politically [Anderson, Witnesseth]
  • California county lead paint recoupment case finally reaches trial, judge jawbones defendants to settle [Mercury-News, Chamber-backed Legal NewsLine]
  • The insanity of film production local incentives, Georgia edition [Coyote]
  • Questioning NYT’s underexplained “Goldman aluminum warehouse scam” tale [Yglesias, Stoll, Biz Insider]
  • Yes, government in the U.S. does do some things to accommodate Islam, now don’t get bent out of shape about it [Volokh]

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All 50 states have escheat laws awarding to state governments ownership of unclaimed property in business hands, which can range from bank, insurance, and stock holdings whose proper owners cannot be found to retail gift cards never cashed in. The revenue looms peculiarly large for the state of Delaware, because it is the state of incorporation for so many businesses. In recent years friction has been growing between the state and its corporate citizens as the state government has taken an increasingly aggressive stance in auditing corporations for unreported escheatable property. [WSJ] So far, perhaps, so routine (except for the parties to the dispute), but some accounts omit one of the most salient angles, summed up by one critic [Douglas Lindholm, IBD via Volokh] as follows:

Last year alone, Delaware seized $319.5 million from liquidated property while returning only $18.9 million of unclaimed property to its rightful owners.

Delaware does this through an unfair, onerous and expensive audit system that “looks back” to 1981, and contrives unclaimed property if the company doesn’t have records for all those years. This process often costs companies millions of dollars, mires them in years of audits, and forces them to deal with third-party auditors who are motivated by contingent fees to invent unclaimed property where none exists.

Kelmar, which conducts most of the audits for the Delaware Department of Finance and works on a contingent fee, was paid more than $30 million in the second half of 2012 alone.

Again and again — whether in forfeiture laws entitling law enforcers to a share of the booty seized, or percentage awards for informants under whistleblower laws, or traffic camera systems in which the operators of the cameras get a share of ticket revenue, contingency fees for participants in law enforcement prove deeply problematic. In my chapter on contingency fees in The Litigation Explosion, I summed things up this way:

Contingency fees tend to be disfavored in professions to whom the interests of others are helplessly entrusted, where misconduct is hard to monitor…. Giving traffic cops contingency fees by hinging their bonuses on whether they make a ticket quota arouses widespread anger because it so obviously tempts the officer running under quota to be unfair to the motorist. The same is true of giving tax collectors contingency fees by hinging their bonuses on how many deductions they disallow or how many assets they seize. (“Tax farming,” the old system where private parties were deputized to collect taxes and keep some of the haul for themselves, was abolished long ago in well-run countries, not because it was the least bit inefficient — it was a favorite way for Roman emperors to extract revenue from conquered provinces — but because it encouraged brutality and trampling of due process in tax collection.)

Delaware seems to have gotten its image in trouble through a variant on tax farming. Let’s hope a lesson is being learned.

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IRS scandal update

by Walter Olson on June 28, 2013

Despite vigorous efforts from some quarters to establish a “progressives were targeted too” narrative, Jonathan Adler explains why the IRS scandal is “still a scandal (but still not ‘Watergate’).” More: “The Internal Revenue Service scrutinized ‘progressive’ groups less harshly than conservative groups, the Treasury Inspector General said in a letter to Congress this week.” [ABC] Earlier here, here, etc.

  • Next big church-employee bias case? Teacher signed “abide by Catholic teachings” contract, wins $170K anyway [AP] ACLU, which cheers that ruling, upset that new ENDA version would give more liberty to religious entities [BuzzFeed]
  • “Employee Who Changed Word Secretly in Severance Agreement Allowed to Proceed With Discrimination Claim” [Daniel Schwartz]
  • Sleeper Supreme Court case, University of Texas Southwestern Medical Center v. Nassar, tackles mixed-motive retaliation, oft-recurring fact pattern [podcast with Emory lawprof Charles Shanor, Fed Soc Blog]
  • You needn’t be anti-gay to oppose ENDA [Coyote, Scott Shackford] Case for public-accommodations version in state of Washington must be symbolic since it’s light on substance [Shackford]
  • English-only policies at workplace an “interesting and seldom litigated issue.” [Jon Hyman]
  • Bad, unfair move: “California Senate Passes Law to Revoke Status of Nonprofits With Anti-Gay Policies” [Philanthropy News Digest; Scott Walter, Philanthropy Daily]
  • Among those seeking broad religious exemptions from anti-bias laws, prohibition of discrimination on grounds of religion ought to be more controversial [BTB] Arizona bill carving out religious exception to bias laws also authorizes new suits against business [AZCentral]
  • “Across the country, human rights commissions cause more harm than they prevent.” [Scott Beyer, City Journal; Mark Hemingway, Weekly Standard]
  • New Colorado law allows workers to collect from small businesses in discrimination lawsuits [Judy Greenwald, Business Insurance]

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June 8 roundup

by Walter Olson on June 8, 2013

  • “They want us to run government more like a business? OK then, we’ll start dropping $10K fees each on ludicrous motivational speakers.” [me on Twitter, background on IRS]
  • Responding to scurrilous attacks on Fifth Circuit Judge Edith Jones [Ann Althouse and more, Tamara Tabo, Gerard Bradley, Bart Torvik]
  • As Hasan cites Taliban, Obama Administration’s claim that Fort Hood attack was “workplace violence” is looking brittle [Christian Science Monitor]
  • “The Good Wife’s bad politics and awful law” [Bainbridge]
  • Hey, it worked for Sheldon Silver: “Giving Albany bosses the power to block probes of themself in secret is laughably unworkable” [Bill Hammond, New York Daily News]
  • Per Mickey Kaus, immigration bill would allow retroactive EITC refunds for past years of unlawful residence [Daily Caller]
  • Someone’s getting rich off the federal cellphone program, but it’s not Mrs. Hale of Bethalto [KMOV]
  • “Goodnight stars. Goodnight moon. Goodnight spooks on iChat, peeking into my room. Goodnight PRISM. Goodnight cell. Goodnight Verizon. Goodnight, Orwell.” [Radley Balko]

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Did you know the IRS has asserted, and apparently exercised, a right to read your emails without a warrant? I didn’t, until now. [ACLU; more from ProPublica]

Regarding yesterday’s revelation that the National Security Agency has been collecting the phone records of millions of Americans, Glenn Greenwald at the U.K. Guardian has the original scoop, quoting my Cato colleague Julian Sanchez about one of the most salient aspects of the program: it scoops up everyone’s phone data in a dragnet, rather than proceeding against some narrower category of phone records for which there is individualized suspicion. More coverage: Guardian sidebar on what telephone metadata can reveal; Timothy Lee/Washington Post; Orin Kerr/Volokh (“This is potentially a huge story. If the NSA is getting all call records from every domestic call from Verizon, then that’s a very big deal”); Adam Serwer/MSNBC; Electronic Frontier Foundation (“There is no indication that this order to Verizon was unique or novel. It is very likely that business records orders like this exist for every major American telecommunication company, meaning that, if you make calls in the United States, the NSA has those records. And this has been going on for at least 7 years, and probably longer.”) And from a slightly different perspective, Joshua Foust, who cites Congress for having repeatedly voted to give the Executive ultra-broad surveillance powers, and writes: “The information the NSA is collecting is metadata, not content (like a wiretap), and not account names. Uncovering personally identifiable information would require separate warrants to do so. This was a pattern analysis, not really mass surveillance as we traditionally understand it.”

P.S. On the IRS’s claims of a right to read email without a warrant, Justin Horton: “Not limited to IRS; this is basically government’s position and only 6th Circuit seems to disagree.”

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Did you know that the Affordable Care Act creates an enormous, multi-billion-dollar slush fund — in the out years, it will raise $2 billion a year in perpetuity — for the federal government to spend on more or less anything that might “improve health and help restrain the rate of growth” of health-care costs? That the spending can bypass the Congressional appropriations process, and is rife with expenditures for the purposes of lobbying government itself, which is supposed to be an unlawful use of federal funds?

Somehow it didn’t sink in until I read this excellent investigation in Forbes by Stuart Taylor, Jr., the distinguished commentator and journalist now associated with the Brookings Institution. Because almost any cause arguably advances health, the administrators end up with close to unlimited discretion as to how to spend the money, which results in the usual array of goofy-sounding grant activities ranging “from ‘pickleball’ (a racquet sport) in Carteret County, N.C. to Zumba (a dance fitness program), kayaking and kickboxing in Waco, TX.”

It’s tailor-made for log-rolling and rewarding local friends, but the dangers go beyond that. In particular, as outraged Republicans from Fred Upton (R-Mich.) in the House to Susan Collins (R-Me.) in the Senate have been documenting, large sums from the program have been devoted to the purpose of lobbying for the passage of legislation at the local and state level — notwithstanding specific statutory language making that an unlawful way of spending money raised from federal taxpayers.

To quote Taylor:

* In Washington state, the Prevention Alliance, a coalition of health-focused groups, reported in notes of a June 22, 2012 meeting that the funding for its initial work came from a $3.3 million Obamacare grant to the state Department of Health. It listed a tax on sugar-sweetened beverages (SSB), “tobacco taxes,” and increasing “types of outdoor venues where tobacco use is prohibited” as among “the areas of greatest interest and potential for progress.”

* The Sierra Health Foundation, in Sacramento, which received a $500,000 grant. in March 2013, described its plans to “seek local zoning changes to disallow fast food establishments within 1,000 feet of a school and to limit the number of fast food outlets,” along with restrictions on fast food advertising. A $3 million grant to New York City was used to “educate leaders and decision makers about, and promote the effective implementation of. . . a tax to substantially increase the price of beverages containing caloric sweetener.”

* A Cook County, Ill. report says that part of a $16 million grant “educated policymakers on link between SSBs [sugar-sweetened beverages] and obesity, economic impact of an SSB tax, and importance of investing revenue into prevention.” More than $12 million in similar grants went to groups in King County, Wash. to push for changes in “zoning policies to locate fast-food retailers farther from . . . schools.” And Jefferson County, Ala., spent part of a $7 million federal grant promoting the passage of a tobacco excise tax by the state legislature.

These aren’t isolated flukes: they look very much like the normal and planned operation of the program. A $7 million grant to activists in the St. Louis area went in part toward lobbying for the repeal of a state law barring municipal tobacco taxes. The Pennsylvania Department of Health reported on how it used a $1.5 million federal grant: “210 policy makers were contacted . . . 31 ordinances were passed . . . there were 26 community presentations made to local governments .. . and 16 additional ordinances were passed this quarter, for a cumulative total of 47.”

This is outrageous. Congress has enacted and reiterated the ban on lobbying with federal funds because of the obvious unfairness of requiring taxpaying citizens to support political efforts of which they disapprove. Now a combination of the most politicized sector of public health activism (which likes to dictate how people live) and a cross-section of the local political class (which likes to find new ways of raising taxes) is getting massive federal subsidies to pursue such lobbying, often on a scale that can bulldoze disorganized local opposition. If you were wondering why some bad new ideas for local legislation (e.g., zoning to keep fast-food restaurants out of big-city neighborhoods) seem to be everywhere despite a tepid level of voter enthusiasm, now you know. You’re paying for them to be everywhere.

I joined host Ray Dunaway on Hartford’s WTIC this morning to talk about the issue.

P.S. Thanks to commenter gitarcarver for pointing out this April report on the problem by the investigative group Cause of Action. (& David Catron, American Spectator)

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The Colorado Supreme Court, wisely resisting a national campaign of school funding litigation, has turned down a lawsuit arguing that the state is obliged under its constitution to step up school spending. [Denver Post, KDVR, opinion in State v. Lobato]

I’ve got a post up at Cato at Liberty about the Colorado decision, noting that although school finance litigators make a lot of noise about educational quality, they are actually on a mission of “control —specifically, transferring control over spending from voters and their representatives to litigators whose loyalty is to a mix of ideologues and interest groups sharing a wish for higher spending.” I quote from a section on school finance litigation that I wound up cutting from my book Schools for Misrule about the enormous impact such suits have had in other states:

Vast sums have been redistributed as a result. Lawmakers in Kentucky enacted more than a billion dollars in tax hikes. New Jersey adopted its first income tax. Kansas lawmakers levied an additional $755 million in taxes after the state’s high court in peremptory fashion ordered them to double their spending on schools.

The results have been at best mixed: while some states to come under court order have improved their educational performance, many others have stagnated or fallen into new crisis. Colorado is fortunate not to join their ranks. (& reprint: Complete Colorado)

P.S. From a Colorado Springs Gazette report, Jul. 31, 2011:

“Putting more money into a broken system won’t get a better results. There are improvements that could be made without money,” says Deputy Attorney General Geoffrey Blue. …

He points to a Cato Institute study that showed spending on education across the country has skyrocketed but test scores didn’t improve.

“That would mean that potentially every cent of the state budget would be shifted over to K-12 education,” says Blue, who heads the office’s legal policy and government affairs.

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IRS scandal roundup

by Walter Olson on May 28, 2013

  • List of times IRS officials misled public [FactCheck.org] Ongoing link roundups by Paul Caron at TaxProf;
  • Four agencies piled onto Texas tea partier’s business. Happenstance? [Jillian Kay Melchior] Some Tea Party groups seeking (c)4 status pursued electioneering; unnamed former IRS officials defend agency’s practice [Confessore, NYT] IRS denial of non-profit status to Free State Project [Atlas]
  • “Maybe one side of an issue is considered more political than the other.” [Tim Carney] “To me, the real story is the low status of the Tea Party.” [Arnold Kling]
  • “Too Hard to Fire Misbehaving Bureaucrats?” [Conor Friedersdorf, Chris Edwards, Hans Bader]
  • President is lucky he’s not CEO of big company, or he’d need to seek legal advice re: “Responsible Corporate Officer Doctrine.” [Daniel Dew, Heritage]
  • IRS also drawing fire for flagging high share of families taking adoption tax credit; abuse rate proved low [USA Today]
  • Do federal agencies treat FOIA requests even-handedly? [Examiner/CEI on EPA, Daily Caller on FCC]

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Apple on the skewer

by Walter Olson on May 27, 2013

“Apple doesn’t have a political action committee to fund incumbents’ re-elections. Apple doesn’t hire many congressional staff or any former congressmen as lobbyists. Apple mostly minds its own business — and how does that help the political class?” [Tim Carney, Washington Examiner]

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May 20 roundup

by Walter Olson on May 20, 2013

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Maryland roundup

by Walter Olson on May 19, 2013

  • After Gov. Martin O’Malley signs one of nation’s most restrictive gun laws, Beretta says it intends to move out of state [Guns.com]
  • Unfortunately, high cigarette taxes promote this sort of thing: “Ocean City cigarette smuggling ring had ties to terror groups, police say” [Baltimore Sun, Tax Foundation]
  • Responding to critics (such as), legislature caps the vessel excise tax in hopes of reviving ailing boating industry [Annapolis Gazette]
  • New law backed by O’Malley will require educators to pay dues to teachers’ union whether members or not [Trey Kovacs, Open Market and Workplace Choice; Harford County Dagger]
  • State has among nation’s highest per capita medical malpractice outlays, behind only five Northeastern states (NY, PA, NJ, MA, CT) and D.C. [Diederich analysis of annual payouts via TortsProf]
  • Chronicle of Rogues: Maryland gets a D minus, ranking a dismal 40th among the 50 states, on corruption-rating State Integrity Report Card [Center for Public Integrity via Tom Coale]
  • It’ll be held in D.C. this year rather than Annapolis, but that’s no reason you shouldn’t join us for the acclaimed Cato University [Jul. 28-Aug. 2]
  • Politicos scramble to defend “correctional officers’ bill of rights” after FBI affidavit blasts measure for helping entrench corruption at Baltimore jail [AP, earlier]

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For all with eyes to see (except maybe some folks at The New Yorker) the IRS scandal has been hiding in plain sight for more than a year, I argue in a new Cato post. For example, this site briefly covered the Service’s ridiculously broad documentary demands on Tea Party groups — for things like transcripts of speeches and radio shows and the contents of Facebook and Twitter postings– in March and May of last year.

The Treasury Inspector General’s report on the affair, released yesterday, is here. (Coverage roundup: Paul Caron, TaxProf.) It makes clear that many groups were singled out because of their controversial political stances and then subjected to both objectively unreasonable document demands (e.g., for thousands of pages of documentation) and objectively unreasonable delays (e.g., for two years) in resolving their applications. (The Service seldom if ever actually denied applications from the singled-out groups, perhaps because its actions would then have come under more rigorous court review). Meanwhile, other groups with controversial views of a different political valence were waved through. It is not a question of whether applications for tax exemption should somehow be “approved without question,” as some have contended, but whether they should come under review that is even-handed and with no more delay and regulatory burden than is inherent to the process. At Time, Michael Scherer collects past examples that suggest IRS retaliation against political adversaries is something of a tradition in America. (Similarly: Cato video podcast).

P.S. Defending itself against the Inspector General’s report, the IRS says the applicants flagged for special scrutiny “included organizations of all political views.” It points to three such left-leaning groups — out of 471 in all singled out for extra screening. [Bloomberg via Newser] Much more: Gregory Korte, USA Today (“As applications from conservative groups sat in limbo, groups with liberal-sounding names had their applications approved … the liberal groups applied for the same tax status and were engaged in the same kinds of activities as the conservative groups.”) Meanwhile, L.A. Times columnist Michael Hiltzik is unafraid of going way out on a limb to defend what the Service did: if you don’t want to be harassed for your dissidence, it seems, you shouldn’t have sought (c)(4) status in the first place.

Yet more: Reuters has illuminating coverage of how the Service tried to break one of the year’s biggest stories on a Friday afternoon via a friendly question before a room full of tax lawyers. (“They made a bet that this would be the quietest way to roll it out,” [Eric Dezenhall] said of the IRS strategy. “It didn’t work.”) “Did Citizens United Critics Push the Agency To Misbehave?” asks my Cato colleague John Samples, while Tim Lynch adduces “Some Empirical Evidence of IRS Political Manipulation”. The BBC has a lexicon of political scandal euphemisms (“tired and emotional,” “hiking the Appalachian Trail,” etc.)

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…such as harass our political enemies [Michael Cannon, Cato, more; Washington Post on revelations that the Internal Revenue Service applied extra tax scrutiny to groups that "criticize how the country is being run".]

Update: that “just a rogue field office in Cincinnati” story didn’t last long. AP is reporting that the agency’s acting head knew nearly a year ago that tea party groups were being targeted, a fact that might have been of interest to lawmakers pursuing constituent reports of overly onerous document demands from the IRS (see our earlier coverage of that here and here). Meanwhile, ProPublica, the generally liberal-leaning journalistic outfit, has disclosed that the IRS shared with it confidential data from nine conservative-leaning nonprofits.

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“Young New Yorkers would not be able to buy cigarettes until they were 21, up from the current 18, under a proposal advanced [last month] by Dr. Thomas A. Farley, the city’s health commissioner, and Christine C. Quinn, the City Council speaker.” [New York Times via J.D. Tuccille] Or at least would not be able to buy them legally: according to estimates from the Mackinac Institute, New York state already has the nation’s highest rate of smuggled cigarette consumption, at more than 60 percent of its total market. [Catherine Rampell, NYT; Mackinac; Tax Foundation; Christopher Snowdon, "The Wages of Sin Taxes" (CEI, PDF)]

More: As the legal drinking age has been pushed upward in recent years, the average age of first use of alcohol has fallen markedly [Tuccille]

Back to the gravel walk? A new environmental program pressures populous Maryland counties to levy assessments on property owners based on their square footage of impervious surfaces such as roofs, patios or driveways that prevent rainwater from sinking into the soil [Blair Lee, Gazette; Maryland Reporter; Frederick News-Post; Anne Arundel County]

P.S. While some of the Maryland commentary has treated the idea as new and experimental, thanks to commenters for pointing out that it’s already a familiar part of the scene elsewhere.

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