So Chief Justice Roberts decided not to strike it down (the other 4 Republicans would have invalidated the healthcare act in full).
He's really threaded the needle here, by finding the mandate to be a tax for purposes of assessing its constitutionality but not for purposes of the Anti-Injunction Act, which would have required that the entire issue be put over. Roberts argues that labeling (whether or not Congress calls it a tax) controls for statutory interpretation purposes but not for constitutional purposes.
At a first glance, Scalia's 65-page dissent is less hysterical and intemperate than we have come to expect from him. I wonder if he thought it had a chance to be the opinion of the Court when he wrote it.
I must say, I still think Roberts' agreement with the other 4 Republicans that the action / inaction line makes the mandate impermissible under the Commerce Clause is just silly. Here is the key Roberts sentence on this issue: "The power to regulate commerce presupposes the existence of commercial activity to be regulated." If you recognize that health insurance is prepayment for future healthcare services, that is a complete non sequitur.
Whether or not the 5-4 Commerce Clause vote against the mandate will prove more broadly consequential in future policy battles, who knows. It may depend on whether there is a political price to pay for relying on the taxing power as a constitutional matter (even though you don't have to expressly label it as a tax for this purpose).
Note, by the way, the implication that Social Security privatization (such as the 2005 Bush proposal) is potentially unconstitutional under the Commerce Clause, and would need the taxing power to be upheld. Likewise, one could probably structure the substance of the Paul Ryan Medicare plan in such a manner as to be beyond Congressional powers under the Commerce Clause challenge, although again this doesn't matter given the taxing power.
Bottom line, evidently Chief Justice Roberts didn't want the Court that bears his name to go out as far and as visibly on a hyper-partisan limb as striking down the Act would have necessitated. I find this cause for relief, although he may continue to act more aggressively, in full cahoots with the other four, when the level of public scrutiny is lower.
Thursday, June 28, 2012
Wednesday, June 27, 2012
Offshoring and international taxation
The Obama campaign has recently been running ads in battleground states dubbing Romney the "Outsourcer in Chief," based on a recent Washington Post article that associated Bain with the strategy of replacing American workers with low-wage people in places such as China and India. There is some evidence that this line of attack is quite effective.
I wonder if the focus on outsourcing has implications for the terms of U.S. international tax policy debate. One of the common arguments for strengthening worldwide taxation of U.S. companies, rather than moving towards exemption, is that this would discourage them from relocating factories abroad. While the Obama Administration has been at times on both sides of this debate - offering pro-worldwide budget proposals but expressing conditional sympathy with a shift towards exemption - there might be a political logic to coming down more heavily on the pro-worldwide side. This would permit them to draw a stronger contrast with Romney on real world policy issues, and to back up the "Outsourcer in Chief" claim with an eye to the future not just the past.
Such a move in the presidential campaign would tend to strengthen the longstanding stalemate in U.S. international tax policy debate, relative to the prospect that we will shift to exemption, unless the Republicans win across-the-board in 2012 (in which case what the Democrats think or say might simply not matter).
Just to be clear, all this is speculation about the politics of U.S. international taxation, not my own assessment of how we ought to analyze the substance.
I wonder if the focus on outsourcing has implications for the terms of U.S. international tax policy debate. One of the common arguments for strengthening worldwide taxation of U.S. companies, rather than moving towards exemption, is that this would discourage them from relocating factories abroad. While the Obama Administration has been at times on both sides of this debate - offering pro-worldwide budget proposals but expressing conditional sympathy with a shift towards exemption - there might be a political logic to coming down more heavily on the pro-worldwide side. This would permit them to draw a stronger contrast with Romney on real world policy issues, and to back up the "Outsourcer in Chief" claim with an eye to the future not just the past.
Such a move in the presidential campaign would tend to strengthen the longstanding stalemate in U.S. international tax policy debate, relative to the prospect that we will shift to exemption, unless the Republicans win across-the-board in 2012 (in which case what the Democrats think or say might simply not matter).
Just to be clear, all this is speculation about the politics of U.S. international taxation, not my own assessment of how we ought to analyze the substance.
Tuesday, June 26, 2012
Might inequality actually be narrowing??
Kevin Hassett and Aparna Mathur of the American Enterprise Institute have just published a study entitled "A New Measure of Consumption Inequality." The foreword, by Mathur, offers the following overview of the piece:
"In this study, Kevin A. Hassett and I set out to refute the common claim that inequality has grown to the extent suggested in [Thomas] Piketty and [Emmanuel] Saez’s [recent] work [deriving dire conclusions from the fact that U.S. income equality has so vastly grown in recent years and decades.]
"Economists have widely acknowledged that consumption is a better measure of economic welfare than income. In general, individuals are better able to smooth consumption rather than income over their lifetimes, making consumption a more informative indicator in the study of inequality. Unlike income, consumption remains relatively steady throughout life since individuals borrow during years with low income and save in high-income years. Using consumption as the relevant measure of inequality, most studies conclude that, contrary to popular belief, inequality has remained fairly steady over the past thirty years. Our study retains the focus on consumption inequality and arrives at a similar conclusion .....
"Overall, our analysis reveals a trend toward narrowing of the consumption gap between low-income and other households, contrary to popular perception of the issue. Public discourse can often become skewed in one direction, therefore it is especially valuable to explore new methodologies in evaluating important issues such as the inequality gap, Our conclusion in this study debunks the claim of widening inequality."
A couple of preliminary points in response here. First, Hassett and Mathur don't contradict (nor do they claim to) the Piketty-Saez finding of dramatic increases in income (mainly earnings) inequality. Second, their empirical finding on consumption inequality is indeed both credible and consistent with other studies. The question is what to make of it all. Given what we mean by inequality, and the reasons we might be concerned about it, how should we evaluate the importance of the Hassett-Mathur finding, relative to the Piketty-Saez finding?
On this matter, with all due respect, I must say that I find Mathur's closing claim that the study "debunks the claim of widening inequality" to be extremely wide of the mark - indeed, so much so that it inclines one (not 100% fairly) towards classifying the piece as towards the frivolous advocacy end, rather than the serious scholarship end, of work that AEI publishes. This is unfortunate, because the study's findings are relevant, and they do help to fill out the overall picture concerning inequality that interested analysts and policymakers should keep in mind. I'd certainly think things were even worse if consumption inequality had increased as much over the last 20-odd years as income inequality. But Mathur's argument that consumption is the right standard here begs credulity - even for one, like myself, who has sympathy for a progressive consumption tax, based on arguments that initially seem similar to what she is saying, but in fact are quite different.
OK, let's take a simple comparison, between James the CEO and Joe the factory worker. Suppose that in 1982 their income ratio was 20 to 1 and their consumption ratio was 10 to 1. Then we look at their successors in 2012 (James, Jr. and Joe, Jr.) and find that the income ratio is 200 to 1 but the consumption ratio is still 10 to 1. Does this "debunk[] the claim of widening inequality?"
Mathur's claim that the answer is yes appears to rest on assuming lifetime consumption smoothing. In other words, she is apparently positing that their relative lifetime positions have not changed! To make this really simple, suppose everyone knew his or her lifetime earnings (in present value) up front and engaged in perfect smoothing, i.e., spending the same amount each year. Also, of course, assume zero bequests. (The paper never mentions either bequests or inter vivos inter-generational wealth transfers.) Then the fact that the consumption ratio was still 10 to 1 would show that we were somehow being duped by the rising one-year income gap into thinking that relative lifetime earnings had changed - when in fact they hadn't. (Perhaps, for example, James' earnings had simply become more jammed into his peak earning years.)
As applied to actual people, this cannot possibly be true. Surely the ratio of lifetime earnings, as between CEOs and people on the shopfloor, has sharply diverged since 1982, even if not quite as much as one might initially think from the Piketty-Saez annual data. You simply can't make the numbers work in a believable fashion otherwise. So where is it coming out? Presumably in deferred consumption that departs from the perfect smoothing model, and above all through transfers to one's heirs. Do we really believe that, say, Mark Zuckerberg is smoothing perfectly and that his current year consumption is likely to represent the same percentage of his expected lifetime income as in the case of a factory worker? Leaving out the bequest issue is really not defensible - although I recognize that it raises further issues that it would be hard to discuss adequately in a short and mainly empirical paper.
Another way vastly unequal annual incomes may play out, other than through comparably increased annual consumption, is in terms of retirement and leisure. CEOs can retire earlier than factory workers, if that's what they want to do. That's an aspect of true consumption and welfare that the studies don't capture. (Although in fact high earners often like their work enough to be far less eager to retire, even when this is affordable, than are the people with drudgery jobs.)
Suppose that, in 1982, Joe the factory worker was spending 95% of his income on current consumption, while James was spending just under 50% (consistently with the posited relative ratios). In 2012, we find that Joe, Jr. is likewise consuming 95%, while for James, Jr. it's just under 5%. Has the claim of rising inequality been "debunked"? Do we really think that the ratio between James, Jr.'s lifetime earnings and those of Joe, Jr., is likely to be the same as that for James versus Joe? And can we actually believe that James. Jr. merely has a steeper peak earnings spike than James, rather than hugely increased relative lifetime earnings? That does not strike me as empirically credible.
OK, let's turn to the income versus consumption tax issues that are in the neighborhood, though not expressly invoked by Mathur. As I discuss in my 2007 article, Beyond the Pro-Consumption Tax Consensus, the actual extent of lifetime consumption smoothing is very important to this debate. With perfect lifetime smoothing (and holding the bequest issue to one side, as best resolved via the decision whether or not to have an inheritance or estate tax), the case for preferring consumption taxation to income taxation becomes compelling indeed. But a vulgar version of the lifetime and smoothing-based argument, which mirrors Mathur's statement in the foreword, would clearly be wrong.
Let's look at James, Jr. and Joe, Jr. again, with their 10 to 1 consumption ratio and their 200 to 1 earnings ratio. Suppose, purely for arithmetical convenience, that we would have a flat-rate tax whether it was levied on income or on consumption. Thus, the ratio of their current year tax liabilities would be 10 to 1 under a consumption tax and 200 to 1 under an income tax. Does favoring a consumption tax imply that one really thinks 10 to 1 is the right ratio to keep in mind when comparing these two individuals' relative wellbeing?
The answer is a flat-out No. Consider here two points about the consumption tax. First, if James, Jr. did indeed spend his entire salary this year, the ratio of their curent year tax liabilities would be 200 to 1, not merely 10 to 1. (Again for arithmetical convenience, I ignore the point that Joe, Jr. is only spending 95%, not 100%.) Second, if there's one thing we know about a well-designed consumption tax, it's that it is neutral as between current and future consumption. Thus, James, Jr. lowers his current year consumption tax bill by consuming under 5% - but he does not reduce the present value of his (and his heirs') long-term expected tax liability with respect to these earnings. Thus, in present value-equivalent terms, under the consumption tax he actually is paying 200 times as much tax as Joe, Jr. - not just 10 times as much.
In short, well-thought-out support for consumption taxation rests NOT on the point that current year consumption is the best measure of relative wellbeing - how could it, when extra savings can pay for future consumption? - but rather on the notion that the seeming current-year under-taxation of the bigger saver is actually corrected (at least in theory) over the long run.
It's a well-known fact, by the way, that higher-income people generally spend smaller percentages of their current year income on consumption than do lower-income people. And this reflects departures from uniform smoothing, not just different relationships between peak and average earnings. Ignoring this whole point, which pretty much guarantees that annual consumption differences will lag behind rising annual earnings differences, is not, in this setting, intellectual fair play.
It's a shame that the Hassett-Mathur piece, which provides information that is relevant to the inequality debate, is being oversold to support a clearly false proposition, which is that nothing relevant has changed. But it's still worth reading, and the issue of what significance to ascribe to relatively unchanged consumption ratios does indeed merit further thought.
"In this study, Kevin A. Hassett and I set out to refute the common claim that inequality has grown to the extent suggested in [Thomas] Piketty and [Emmanuel] Saez’s [recent] work [deriving dire conclusions from the fact that U.S. income equality has so vastly grown in recent years and decades.]
"Economists have widely acknowledged that consumption is a better measure of economic welfare than income. In general, individuals are better able to smooth consumption rather than income over their lifetimes, making consumption a more informative indicator in the study of inequality. Unlike income, consumption remains relatively steady throughout life since individuals borrow during years with low income and save in high-income years. Using consumption as the relevant measure of inequality, most studies conclude that, contrary to popular belief, inequality has remained fairly steady over the past thirty years. Our study retains the focus on consumption inequality and arrives at a similar conclusion .....
"Overall, our analysis reveals a trend toward narrowing of the consumption gap between low-income and other households, contrary to popular perception of the issue. Public discourse can often become skewed in one direction, therefore it is especially valuable to explore new methodologies in evaluating important issues such as the inequality gap, Our conclusion in this study debunks the claim of widening inequality."
A couple of preliminary points in response here. First, Hassett and Mathur don't contradict (nor do they claim to) the Piketty-Saez finding of dramatic increases in income (mainly earnings) inequality. Second, their empirical finding on consumption inequality is indeed both credible and consistent with other studies. The question is what to make of it all. Given what we mean by inequality, and the reasons we might be concerned about it, how should we evaluate the importance of the Hassett-Mathur finding, relative to the Piketty-Saez finding?
On this matter, with all due respect, I must say that I find Mathur's closing claim that the study "debunks the claim of widening inequality" to be extremely wide of the mark - indeed, so much so that it inclines one (not 100% fairly) towards classifying the piece as towards the frivolous advocacy end, rather than the serious scholarship end, of work that AEI publishes. This is unfortunate, because the study's findings are relevant, and they do help to fill out the overall picture concerning inequality that interested analysts and policymakers should keep in mind. I'd certainly think things were even worse if consumption inequality had increased as much over the last 20-odd years as income inequality. But Mathur's argument that consumption is the right standard here begs credulity - even for one, like myself, who has sympathy for a progressive consumption tax, based on arguments that initially seem similar to what she is saying, but in fact are quite different.
OK, let's take a simple comparison, between James the CEO and Joe the factory worker. Suppose that in 1982 their income ratio was 20 to 1 and their consumption ratio was 10 to 1. Then we look at their successors in 2012 (James, Jr. and Joe, Jr.) and find that the income ratio is 200 to 1 but the consumption ratio is still 10 to 1. Does this "debunk[] the claim of widening inequality?"
Mathur's claim that the answer is yes appears to rest on assuming lifetime consumption smoothing. In other words, she is apparently positing that their relative lifetime positions have not changed! To make this really simple, suppose everyone knew his or her lifetime earnings (in present value) up front and engaged in perfect smoothing, i.e., spending the same amount each year. Also, of course, assume zero bequests. (The paper never mentions either bequests or inter vivos inter-generational wealth transfers.) Then the fact that the consumption ratio was still 10 to 1 would show that we were somehow being duped by the rising one-year income gap into thinking that relative lifetime earnings had changed - when in fact they hadn't. (Perhaps, for example, James' earnings had simply become more jammed into his peak earning years.)
As applied to actual people, this cannot possibly be true. Surely the ratio of lifetime earnings, as between CEOs and people on the shopfloor, has sharply diverged since 1982, even if not quite as much as one might initially think from the Piketty-Saez annual data. You simply can't make the numbers work in a believable fashion otherwise. So where is it coming out? Presumably in deferred consumption that departs from the perfect smoothing model, and above all through transfers to one's heirs. Do we really believe that, say, Mark Zuckerberg is smoothing perfectly and that his current year consumption is likely to represent the same percentage of his expected lifetime income as in the case of a factory worker? Leaving out the bequest issue is really not defensible - although I recognize that it raises further issues that it would be hard to discuss adequately in a short and mainly empirical paper.
Another way vastly unequal annual incomes may play out, other than through comparably increased annual consumption, is in terms of retirement and leisure. CEOs can retire earlier than factory workers, if that's what they want to do. That's an aspect of true consumption and welfare that the studies don't capture. (Although in fact high earners often like their work enough to be far less eager to retire, even when this is affordable, than are the people with drudgery jobs.)
Suppose that, in 1982, Joe the factory worker was spending 95% of his income on current consumption, while James was spending just under 50% (consistently with the posited relative ratios). In 2012, we find that Joe, Jr. is likewise consuming 95%, while for James, Jr. it's just under 5%. Has the claim of rising inequality been "debunked"? Do we really think that the ratio between James, Jr.'s lifetime earnings and those of Joe, Jr., is likely to be the same as that for James versus Joe? And can we actually believe that James. Jr. merely has a steeper peak earnings spike than James, rather than hugely increased relative lifetime earnings? That does not strike me as empirically credible.
OK, let's turn to the income versus consumption tax issues that are in the neighborhood, though not expressly invoked by Mathur. As I discuss in my 2007 article, Beyond the Pro-Consumption Tax Consensus, the actual extent of lifetime consumption smoothing is very important to this debate. With perfect lifetime smoothing (and holding the bequest issue to one side, as best resolved via the decision whether or not to have an inheritance or estate tax), the case for preferring consumption taxation to income taxation becomes compelling indeed. But a vulgar version of the lifetime and smoothing-based argument, which mirrors Mathur's statement in the foreword, would clearly be wrong.
Let's look at James, Jr. and Joe, Jr. again, with their 10 to 1 consumption ratio and their 200 to 1 earnings ratio. Suppose, purely for arithmetical convenience, that we would have a flat-rate tax whether it was levied on income or on consumption. Thus, the ratio of their current year tax liabilities would be 10 to 1 under a consumption tax and 200 to 1 under an income tax. Does favoring a consumption tax imply that one really thinks 10 to 1 is the right ratio to keep in mind when comparing these two individuals' relative wellbeing?
The answer is a flat-out No. Consider here two points about the consumption tax. First, if James, Jr. did indeed spend his entire salary this year, the ratio of their curent year tax liabilities would be 200 to 1, not merely 10 to 1. (Again for arithmetical convenience, I ignore the point that Joe, Jr. is only spending 95%, not 100%.) Second, if there's one thing we know about a well-designed consumption tax, it's that it is neutral as between current and future consumption. Thus, James, Jr. lowers his current year consumption tax bill by consuming under 5% - but he does not reduce the present value of his (and his heirs') long-term expected tax liability with respect to these earnings. Thus, in present value-equivalent terms, under the consumption tax he actually is paying 200 times as much tax as Joe, Jr. - not just 10 times as much.
In short, well-thought-out support for consumption taxation rests NOT on the point that current year consumption is the best measure of relative wellbeing - how could it, when extra savings can pay for future consumption? - but rather on the notion that the seeming current-year under-taxation of the bigger saver is actually corrected (at least in theory) over the long run.
It's a well-known fact, by the way, that higher-income people generally spend smaller percentages of their current year income on consumption than do lower-income people. And this reflects departures from uniform smoothing, not just different relationships between peak and average earnings. Ignoring this whole point, which pretty much guarantees that annual consumption differences will lag behind rising annual earnings differences, is not, in this setting, intellectual fair play.
It's a shame that the Hassett-Mathur piece, which provides information that is relevant to the inequality debate, is being oversold to support a clearly false proposition, which is that nothing relevant has changed. But it's still worth reading, and the issue of what significance to ascribe to relatively unchanged consumption ratios does indeed merit further thought.
Friday, June 22, 2012
Tribute to Bernard Wolfman
The Harvard Law Review has just published a tribute to the late Bernard Wolfman, available here. I am one of seven contributors, and you can find my piece at the back end (pages 13-16 of the download, at 125 Harv. L. Rev. 1899-1902).
Rather than be generic, I emphasized the ethical core of Bernie's best-known writings, and its continuing relevance today.
Rather than be generic, I emphasized the ethical core of Bernie's best-known writings, and its continuing relevance today.
Constitutional law and the Supreme Court's healthcare decision
Courtesy of Ezra Klein, here is Yale Law School constitutional law professor Akhil Amar on the widespread expectation that the Supreme Court will vote by 5-4 to find the healthcare mandate unconstitutional:
“I’ve only mispredicted one big Supreme Court case in the last 20 years. That was Bush v. Gore. And I was able to internalize that by saying they only had a few minutes to think about it and they leapt to the wrong conclusion. If they decide this by 5-4, then yes, it’s disheartening to me, because my life was a fraud. Here I was, in my silly little office, thinking law mattered, and it really didn’t. What mattered was politics, money, party, and party loyalty.”
Constitutional law is an odd subject. There is only so much there there. Suppose I say that X is better tax policy than Y. I base this claim on a clear framework, and once one accepts this framework - which admittedly is not a forced move unless you go full Kaplow and Shavell on the case for utilitarianism - my claim can in principle be rigorously evaluated under this framework. The assessment becomes in large part empirical, even if the relevant facts are not entirely knowable, and although it's true that "utility" is not quite a single, even in principle measurable, thing.
Constitutional law doesn't have an underlying framework in the same sense. It has some policy content (including in a roughly rule-utilitarian kind of a sense, i.e., how would it be best in the long run to interpret a document such as the Constitution), some linguistic interpretative content, with history and precedent mattering in some way that one can't quite specify. And it has always been true that constitutional scholars on both the left and the right tend to find that the U.S. Constitution, as properly interpreted, has this mysterious tendency to come out the way they like more often than not, on grounds not confined to their policy preferences.
As Klein headlines his piece, "of course the Supreme Court is political" - although his point is not just that con law is inevitably political, but that the Court's being affected by rising partisanship throughout our political system and society is only to be expected.
But constitutional interpretation used to be a kind of formal game that had rules and constraints, limiting (if you operated in at least a modicum of good faith) the extent to which you could always come out however you liked. There was in effect an implicit pact - I on one side will play the game in at least moderately good faith although this constrains my ability to get the outcomes I like, because I believe that you on the other side are doing the same thing. Actual or implied tit-for-tat can keep this a stable state of affairs, at least under the right circumstances.
It's that element of good faith that we are starting to lose. I have the impression that the 5 Republican votes on the Supreme Court do not see their role any differently than say, Senator Mitch McConnell sees his. To give another illustration, if the 2012 presidential election ends up in the Supreme Court just like in 2000, only with different issues - admittedly an extreme longshot - I believe there is a 100% chance that the 5 Republicans will anoint Romney. Precisely reverse the legal issues so that Obama, not Romney, is raising exactly the same arguments, and again it would be 5 Republican votes for Romney. I believe this degree of crass and dishonest partisan result orientation is something relatively new (or at least unusual) in U.S. constitutional history, enhanced by the intoxicating experience that the 5 Republicans who were on the court in 2000 must have felt when they got away with Bush v. Gore and saw how easy it was.
This is a dangerous state of affairs, endangering the U.S. legal and political systems and the rule of law. I agree with Amar that (as paraphrased by Klein) "a 5-4 party-line vote against the mandate would be shattering to the court’s reputation for being above politics." The arguments against it are so ludicrous and paper-thin (e.g., claiming that mandatory health insurance is an end product, not a way of financing healthcare) that only the vast human capacity for self-deception prevents those who argue against the mandate's constitutionality from being consciously in bad faith. And even if the general public doesn't see how corrupt a decision to strike down the mandate would be - given existing precedent and the accepted constitutionality of Social Security and Medicare - elite opinion (on the right as well as the left) clearly does.
The Court's reputation depends, to a large extent, on elite views that last over time, even if these views don't show up in the overnight polling of the general public. But I'm not convinced that the members of the pack of five actually care about that. They just want their side to win today. So I am expecting that they will strike down the mandate and perhaps even the entire Act, even though if Romney had been elected in 2008 and passed exactly the same legislation, it wouldn't even have been challenged. Let's hope that my pessimism is misplaced.
“I’ve only mispredicted one big Supreme Court case in the last 20 years. That was Bush v. Gore. And I was able to internalize that by saying they only had a few minutes to think about it and they leapt to the wrong conclusion. If they decide this by 5-4, then yes, it’s disheartening to me, because my life was a fraud. Here I was, in my silly little office, thinking law mattered, and it really didn’t. What mattered was politics, money, party, and party loyalty.”
Constitutional law is an odd subject. There is only so much there there. Suppose I say that X is better tax policy than Y. I base this claim on a clear framework, and once one accepts this framework - which admittedly is not a forced move unless you go full Kaplow and Shavell on the case for utilitarianism - my claim can in principle be rigorously evaluated under this framework. The assessment becomes in large part empirical, even if the relevant facts are not entirely knowable, and although it's true that "utility" is not quite a single, even in principle measurable, thing.
Constitutional law doesn't have an underlying framework in the same sense. It has some policy content (including in a roughly rule-utilitarian kind of a sense, i.e., how would it be best in the long run to interpret a document such as the Constitution), some linguistic interpretative content, with history and precedent mattering in some way that one can't quite specify. And it has always been true that constitutional scholars on both the left and the right tend to find that the U.S. Constitution, as properly interpreted, has this mysterious tendency to come out the way they like more often than not, on grounds not confined to their policy preferences.
As Klein headlines his piece, "of course the Supreme Court is political" - although his point is not just that con law is inevitably political, but that the Court's being affected by rising partisanship throughout our political system and society is only to be expected.
But constitutional interpretation used to be a kind of formal game that had rules and constraints, limiting (if you operated in at least a modicum of good faith) the extent to which you could always come out however you liked. There was in effect an implicit pact - I on one side will play the game in at least moderately good faith although this constrains my ability to get the outcomes I like, because I believe that you on the other side are doing the same thing. Actual or implied tit-for-tat can keep this a stable state of affairs, at least under the right circumstances.
It's that element of good faith that we are starting to lose. I have the impression that the 5 Republican votes on the Supreme Court do not see their role any differently than say, Senator Mitch McConnell sees his. To give another illustration, if the 2012 presidential election ends up in the Supreme Court just like in 2000, only with different issues - admittedly an extreme longshot - I believe there is a 100% chance that the 5 Republicans will anoint Romney. Precisely reverse the legal issues so that Obama, not Romney, is raising exactly the same arguments, and again it would be 5 Republican votes for Romney. I believe this degree of crass and dishonest partisan result orientation is something relatively new (or at least unusual) in U.S. constitutional history, enhanced by the intoxicating experience that the 5 Republicans who were on the court in 2000 must have felt when they got away with Bush v. Gore and saw how easy it was.
This is a dangerous state of affairs, endangering the U.S. legal and political systems and the rule of law. I agree with Amar that (as paraphrased by Klein) "a 5-4 party-line vote against the mandate would be shattering to the court’s reputation for being above politics." The arguments against it are so ludicrous and paper-thin (e.g., claiming that mandatory health insurance is an end product, not a way of financing healthcare) that only the vast human capacity for self-deception prevents those who argue against the mandate's constitutionality from being consciously in bad faith. And even if the general public doesn't see how corrupt a decision to strike down the mandate would be - given existing precedent and the accepted constitutionality of Social Security and Medicare - elite opinion (on the right as well as the left) clearly does.
The Court's reputation depends, to a large extent, on elite views that last over time, even if these views don't show up in the overnight polling of the general public. But I'm not convinced that the members of the pack of five actually care about that. They just want their side to win today. So I am expecting that they will strike down the mandate and perhaps even the entire Act, even though if Romney had been elected in 2008 and passed exactly the same legislation, it wouldn't even have been challenged. Let's hope that my pessimism is misplaced.
Thursday, June 21, 2012
New Federal Income Taxation casebook edition
The 16th edition of Bankman, Shaviro, and Stark, Federal Income Taxation (the second-leading - but we try harder - casebook for introductory income tax classes in law schools) is now ready for prime time. I just got a copy, and they should be generally available momentarily.
We'll have greatly expanded Internet features this time around, both for adopting faculty and students who use the casebook. But in addition, despite adding new material to remain current, we have struck a vigorous blow against creeping length, the great malady that multiple-edition casebooks tend to have. The 15th edition was 819 pages, but the 16th edition checks in at an at least comparatively svelte 730 pages, reflecting a more than 10 percent reduction.
We'll have greatly expanded Internet features this time around, both for adopting faculty and students who use the casebook. But in addition, despite adding new material to remain current, we have struck a vigorous blow against creeping length, the great malady that multiple-edition casebooks tend to have. The 15th edition was 819 pages, but the 16th edition checks in at an at least comparatively svelte 730 pages, reflecting a more than 10 percent reduction.
Slides from my talk at a recent conference in Tel Aviv
I'm back from this past Monday's 6th Annual Columbia-Ono Conference in Tel Aviv, where I presented a talk at a conference entitled "Corporate Governance, Taxes, and Social Justice."
A PDF version of the PowerPoint slides for my talk, which was entitled "Taxing High-Income Individuals: Should We Aim for the Peak of the Laffer Curve?," is available here.
This is not, or at least not yet, even the skeleton of a paper. But it draws a bit on the second half of my 2011 Tax Notes article, 1986-Style Tax Reform: A Good Idea Whose Time Has Passed. I am perhaps more likely to use a couple of the ideas in the slides in some broader project that I don't yet have in mind, than actually to turn the slides into an article. But before even considering any such thing I have an international tax book in progress that I need to complete, and at least 2 planned articles on very different subjects from this, that are going to take me well into the fall even under an optimistic view.
The conference was fun and interesting. In the morning, in response to a presentation by Lucien Bebchuk concerning new Israeli legislation (on which he advised) that addresses corporate pyramid structures, I noted what I consider the back-to-the-future quality of both corporate governance and tax policy scholarship: namely, that in some ways we have circled back to conclusions, if not modes of analysis, that were mainstream before the full rise of law and economics, then became badly discredited in the high-Chicago era, but more recently have come back in revised form. Just as events of the last 12-plus years, along with the work of scholars such as Bebchuk, have rebutted the view that markets for corporate control work so well that there couldn't possibly be serious governance problems, so "optimal income tax" thinking has importantly changed since the era when low individual rates that were also quite flat were high academic orthodoxy.
Hopefully, the political world will eventually catch on with regard to individual income tax rates - as it has to a degree in the governance realm, albeit subject to fierce resistance. But progress, if any, is fitful and slow at best.
A PDF version of the PowerPoint slides for my talk, which was entitled "Taxing High-Income Individuals: Should We Aim for the Peak of the Laffer Curve?," is available here.
This is not, or at least not yet, even the skeleton of a paper. But it draws a bit on the second half of my 2011 Tax Notes article, 1986-Style Tax Reform: A Good Idea Whose Time Has Passed. I am perhaps more likely to use a couple of the ideas in the slides in some broader project that I don't yet have in mind, than actually to turn the slides into an article. But before even considering any such thing I have an international tax book in progress that I need to complete, and at least 2 planned articles on very different subjects from this, that are going to take me well into the fall even under an optimistic view.
The conference was fun and interesting. In the morning, in response to a presentation by Lucien Bebchuk concerning new Israeli legislation (on which he advised) that addresses corporate pyramid structures, I noted what I consider the back-to-the-future quality of both corporate governance and tax policy scholarship: namely, that in some ways we have circled back to conclusions, if not modes of analysis, that were mainstream before the full rise of law and economics, then became badly discredited in the high-Chicago era, but more recently have come back in revised form. Just as events of the last 12-plus years, along with the work of scholars such as Bebchuk, have rebutted the view that markets for corporate control work so well that there couldn't possibly be serious governance problems, so "optimal income tax" thinking has importantly changed since the era when low individual rates that were also quite flat were high academic orthodoxy.
Hopefully, the political world will eventually catch on with regard to individual income tax rates - as it has to a degree in the governance realm, albeit subject to fierce resistance. But progress, if any, is fitful and slow at best.
Tuesday, June 05, 2012
Upcoming conference appearance
On Monday, June 18, I will be participating in the 6th Annual Columbia-Ono Conference, which is being held at the Ono Academic College in Tel Aviv, Israel. A link for the conference is available here. The morning sessions will be discussing corporate governance, while the afternoon sessions will be discussing taxes and social justice. Though I'm interested in corporate governance, readers may not be surprised to learn that I am speaking in the afternoon.
I won't be presenting a formal paper, but my twenty-minute talk (to be followed by ten minutes of discussion) has the working title "Taxing High-Income Individuals: Should We Aim for the Peak of the Laffer Curve?" I will argue that there are several reasons for answering this question "yes," which I certainly would not have said ten years ago.
The other presenters in the PM session are David Schizer, Reuven Avi-Yonah, Sagit Leviner, Yoram Margalioth, and Yariv Brauner. The papers by Schizer and, I believe, Avi-Yonah (if it's the one that's co-authored by Ohrn) are available on SSRN. I must confess I find myself less than wholly sympathetic with either, although both of the authors are good friends.
Schizer argues that we should refrain from directly addressing the horrendous damage that is being inflicted by the ongoing global economic slump, given the "uncertainties and challenges with traditional Keynesian stimulus," and instead seek to boost employment and growth by ... wait for it ... cutting the U.S. corporate tax rate! While I happen to agree that we should do this under the right overall circumstances, it certainly makes life easier for authors if the answer doesn't have to depend on the question. (Note also that another of the big motivating concerns that the paper mentions up front is the budget deficit, which a stand-alone corporate rate cut would make worse. The paper notes this problem and suggests corporate base-broadening, but is also open to 'mak[ing] up the revenue in other [unspecified] ways.")
To my mind, the fact that macroeconomists disagree does not absolve one of the responsibility to look a bit more deeply into the ongoing under-employment crisis, the seriousness of which really needs to be appreciated. The paper distresses me because I find its analysis facile and convenient. People who believe that academics in the economics and business fields (including related tax law) are overly in the tank to Wall Street will view this paper as confirmatory of their hypothesis (indeed, I know of several who do so view it).
The Avi-Yonah paper is on the other side politically, likely to be congenial to Democrats rather than Romney supporters, as it opposes recent arguments for moving at least somewhat in the direction of consumption taxation. [UPDATE: I previously had a critique of the paper in this blog post, but it's been brought to my attention that I was commenting on a draft that wasn't supposed to be public, as only the abstract has been posted on SSRN. My apologies for this error.]
I won't be presenting a formal paper, but my twenty-minute talk (to be followed by ten minutes of discussion) has the working title "Taxing High-Income Individuals: Should We Aim for the Peak of the Laffer Curve?" I will argue that there are several reasons for answering this question "yes," which I certainly would not have said ten years ago.
The other presenters in the PM session are David Schizer, Reuven Avi-Yonah, Sagit Leviner, Yoram Margalioth, and Yariv Brauner. The papers by Schizer and, I believe, Avi-Yonah (if it's the one that's co-authored by Ohrn) are available on SSRN. I must confess I find myself less than wholly sympathetic with either, although both of the authors are good friends.
Schizer argues that we should refrain from directly addressing the horrendous damage that is being inflicted by the ongoing global economic slump, given the "uncertainties and challenges with traditional Keynesian stimulus," and instead seek to boost employment and growth by ... wait for it ... cutting the U.S. corporate tax rate! While I happen to agree that we should do this under the right overall circumstances, it certainly makes life easier for authors if the answer doesn't have to depend on the question. (Note also that another of the big motivating concerns that the paper mentions up front is the budget deficit, which a stand-alone corporate rate cut would make worse. The paper notes this problem and suggests corporate base-broadening, but is also open to 'mak[ing] up the revenue in other [unspecified] ways.")
To my mind, the fact that macroeconomists disagree does not absolve one of the responsibility to look a bit more deeply into the ongoing under-employment crisis, the seriousness of which really needs to be appreciated. The paper distresses me because I find its analysis facile and convenient. People who believe that academics in the economics and business fields (including related tax law) are overly in the tank to Wall Street will view this paper as confirmatory of their hypothesis (indeed, I know of several who do so view it).
The Avi-Yonah paper is on the other side politically, likely to be congenial to Democrats rather than Romney supporters, as it opposes recent arguments for moving at least somewhat in the direction of consumption taxation. [UPDATE: I previously had a critique of the paper in this blog post, but it's been brought to my attention that I was commenting on a draft that wasn't supposed to be public, as only the abstract has been posted on SSRN. My apologies for this error.]
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