Monday, December 06, 2010

Unilateral Presidentially declared payroll tax holiday??

Jack Balkin has a very interesting post today (h/t to Tax Prof Blog for bringing it to my attention) in which he offers Obama the following advice:

"1. Let the Bush tax cuts expire.

"2. Declare a payroll tax holiday for Tax Years 2011 and 2012, featuring cuts in the amount of payroll tax the federal government will correct.

"Instruct the Treasury Department to collect less than the current amount of the payroll tax and/or give everyone who pays the payroll tax a tax refund.

"Instruct the Treasury Department to issue new regulations justifying the payroll tax holiday.

"Instruct the IRS not to prosecute employers who deduct only the amount required under the terms of the payroll tax holiday.

"3. Tell the Congress that the payroll tax holiday will continue until Congress passes a tax reform bill to the President's liking.

"4. Tell the Republicans that he is sick and tired of their misusing the political process to benefit rich people and that the best way out of the current economic mess is to put money in the hands of hard working Americans who need tax relief and are most likely to spend it. Note that the payroll tax holiday is as necessary to the country's economic recovery as FDR's bank holiday was during the Great Depression.

"5. Insist that it is the President's duty to take bold action in times of economic emergency and berate the Republicans for playing games with the lives of ordinary citizens.

"6. When members of Congress sue to declare the tax holiday unconstitutional:

(a) argue that they lack standing.
(b) argue that the holiday is justified by the new Treasury Department regulations.
(c) argue that the interpretation of the tax laws in the new regulations is committed to the President under Chevron.
(d) argue that the President, as chief executive officer, has the discretion to refuse to prosecute individuals in the interests of public policy. To interfere with the President's (non)prosecution power violates the Unitary Executive.
(e) Drag out the litigation until 2012, when it will be clear that the payroll tax holiday has helped improve the economy.

"6. Rinse and Repeat."

Obviously, we know (and Jack knows) that Obama isn't going to do this, and that no one in his right mind would even consider it without at least initial ambivalence and unease, because it is so clearly contrary to the way the rule of law is supposed to work in the U.S. What makes it especially interesting is the fact that there plausibly is no legal remedy preventing Obama from doing this, given how standing issues historically have been resolved.

Jack then continues the blog entry as follows:

"The danger of Obama declaring a tax holiday (akin to FDR's bank holiday) is that some future Republican President will declare a tax holiday for corporations. Make no mistake: giving the President the power unilaterally to lower particular people's taxes gives the Chief Executive possibilities for all sorts of mischief.

"The interesting question, however, is why under Republican Reagan and Bush era theories of the Unitary Executive, the President cannot declare a tax holiday.

"And the second interesting question is why the President should not at the very least make a credible threat to adopt this approach in order to break the Republican Party's current stranglehold over tax and fiscal policy....

"What is this blog post about? In one respect it is a proposal for what Barack Obama should do about tax and fiscal policy. In another respect, however, it is a post about how constitutional conventions work and how actors in constitutional systems try to alter existing conventions for their electoral benefit, a practice that Mark Tushnet has called 'constitutional hardball.'

"This post is about how actors in a constitutional system should respond when they feel that other actors have violated unspoken norms in a constitutional system and are playing constitutional hardball. In this case, the Republicans are acting like a European style parliamentary party in a presidential system, and they have manipulated the rules of the Senate to gain an unfair advantage, at least in the view of the Democrats.

"The lesson of this post is that when your opponents engage in constitutional hardball in order to get their way, the correct response is not to wring your hands and urge them to play fair by the old rules. They are trying to change the rules; they are doing so because they believe it gives them an electoral or political advantage.

"Rather, the correct response to constitutional hardball of this sort is to engage in constitutional hardball of your own, in order to make the other side come to the bargaining table and agree to a new set of understandings about how the game of politics is to be played.

"The threat of a payroll tax holiday is designed to say to the Republicans: if you want to play constitutional hardball in order to ensure that you gain seats in 2012, I will play constitutional hardball in order to prevent you from taking advantage of me. If you want me to stop, then meet me at the bargaining table. Otherwise, the rules of politics have changed, and you'd better get used to it, just as you changed the rules, and told me to get used to it. If you don't like these new rules, then back down from the new rules you are trying to impose on me and the rest of the country.

"The President will not get Congressional Republicans to negotiate until he gives them a strong reason to negotiate."

My own sense (and no doubt Jack's) is that, as things stand, constitutional hardball is being played asymmetrically, and that this will continue. If the Republicans win all 3 branches in 2012, I would not be at all surprised to see the Senate end the filibuster, and if they don't it will be solely because the Democrats have made clear that they do not plan to use it anything like the way the Republicans have since 2008. I have also been wondering about the extent to which the ordinary rule of law will continue the next time the Republicans take the White House.

Under Palin literally all bets would be off. Someone like Romney, by contrast, would, I presume, talk to his White House lawyers first, and I would hope they'd have more integrity than some of those in the Bush Administration. But they might very plausibly tell him, under the circumstances of a continued severe economic downturn, to do the Republican (say, corporate tax) version of the unilateral payroll tax holiday. It's both effectively unreviewable (hence legal by definition under a Holmesean "bad man" theory of the law), and plausibly within executive discretion under Republican theories of the unitary executive. I suppose one could even swallow a couple of times and call zeroing out the corporate tax an exercise of "foreign policy" discretion (since it relates to global tax competition and might be a subject of negotiation with other countries). Not that I'd want to be the one making such an argument in public.

BTW, there was more than a bit of this under the G.W. Bush Administration. Let's ignore some of the really bad stuff because of the surrounding controversiality. Something relatively trivial that looked to me like unilateral presidential nullification of existing statutory law, reflecting that there would be no penalty, concerned legal obligations to preserve records (e-mails, etcetera) of everything that was going on. The Bush Administration simply did not comply with this stuff because they didn't have to, in the sense that there would be no consequences. To be sure, under their view of executive powers they probably felt legally entitled to violate these rules, but obviously they made the tactical choice to do it unilaterally rather than, say, finding a mechanism to seek a court judgment in their favor.

Back to Obama and the payroll tax holiday. The proposal is clearly in tension (to put it mildly) with the president's constitutional duty to "take care that the laws be faithfully executed." Hence White House lawyers really could not in good faith endorse it other than under the "bad man" view of no legal recourse or some sort of very broadly conceived notion of presidential emergency powers. (Highly dubious as applied to the payroll tax given that, however horrendous the U.S. economic situation, it's a slow motion disaster rather than one requiring rapid response in the middle of the night.)

Clearly, then, Obama would be acting improperly under constitutional norms if he did this. How does the Constitution purport to stop such things from happening? Mainly through the unenforceable hope that political actors will internalize and heed constitutional norms on their own. With the ultimate fallback threat of impeachment for deliberately failing to see that the laws are faithfully executed. (Subject to Congress's exercising its own discretion as a good faith constitutional actor regarding whether this would count as "high crimes and misdemeanors.")

Obviously, if Obama were playing constitutional hardball, he would say (a) the Republicans don't have the votes to impeach and remove me for this, and (b) just let them try to impeach me for cutting people's taxes and trying to save the economy from a prolonged severe recession.

As an aside, suppose the Republicans said great, we're with you on this one but we also need to extend all the tax cuts and will shut down the government otherwise.

But returning to the issue directly at hand, the Obama Administration's doing this would clearly undermine the rule of law and raise the likelihood (perhaps to near certainty) of Republican presidents' unilaterally imposing their own favored tax cuts the next time around. But we may be headed in that direction anyway. And even if it's best for no one to play constitutional hardball, I'd have to agree with Balkin and Tushnet that one has to think about whether asymmetric hardball might be worse than sharply intensifying the process but making it more symmetric.

I am starting to think I need a computer keystroke short cut for the term "chicken game," which I haven't used yet here but obviously is once again what we're talking about.


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'G said...

Jack Balkin would "cut down all the laws to get at the Devil", but has not thought as to where he would hide if the Devil turned on him.

Unknown said...
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