Tax Lawyer's Blog

If you wonder why conservatives are so concerned about Democrats stacking the court with liberals, read Eugene Volokh’s blog post reporting that Justice Ruth Bader Ginsburg appeared on Egyptian television and warned developing nations of the world not to use the U.S. Constitution as a model (emphasis is mine):

Liberty Counsel points to these these excerpts of an interview with Justice Ginsburg on Egyptian television, and argues:

In a recent interview with Egyptian television, Supreme Court Justice Ruth Bader Ginsburg insulted the U.S. Constitution and advised Egypt to look somewhere else when drafting its own constitution. Justice Ginsburg was asked to give insight on this crucial topic for the post-Mubarak government but focused more on liberal human rights, rather than traditional American freedom.

When describing the nature of a constitution, Justice Ginsburg did appropriately recognize the importance of a constitution and the duty of the citizens to defend it. Justice Ginsburg did not, unfortunately, take her own advice. She undermined insight of its crafters and stated, “I would not look to the US Constitution if I were drafting a Constitution in the year 2012.” Instead, Justice Ginsburg referred to the constitutions of more supposedly progressive countries, like South Africa, Canada, and the European Convention on Human Rights. She stated, “I can’t speak about what the Egyptian experience should be, because I’m operating under a rather old constitution.” This directly refutes the U.S. Constitution’s relevance today.

For a United States Supreme Court Justice, entrusted with the duty to interpret the Constitution, this type of statement is unacceptable. Justice Ginsburg failed to respect the authority of the document that it is her duty to protect. When given the opportunity to promote American liberty abroad, Justice Ginsburg did just the opposite and pointed Egypt in the direction of progressivism and the liberal agenda.

Mathew Staver, Founder and Chairman of Liberty Counsel and Dean of Liberty University School of Law, said, “For a sitting U.S. Supreme Court Justice to speak derisively about the Constitution she is sworn to uphold is distressing, to say the least. Justice Ginsburg’s comments about our Constitution undermine the Supreme Court as an institution dedicated to the rule of law, as well as our founding document.”

Amazingly, Volokh disagrees, not with Ginsburg, but with Staver and the folks at Liberty Counsel:

This criticism strikes me as quite misplaced. Justice Ginsburg swore an oath to uphold the U.S. Constitution, and I suspect she thinks that the U.S. Constitution, as interpreted by the U.S. Supreme Court and U.S. political practice, works pretty well in the U.S.  But why should she (or we) think that the 1787 constitutional text, coupled with the 27 amendments that have come in fits and spurts since then, would necessarily work well for a completely different country today?

Professor Volokh says “I suspect [Ginsburg] thinks the US Constitution… works pretty well in the US.” But on what does he base this conclusion? If you read the actual statements Justice Ginsburg made in the interview, you would have to conclude the very opposite: that if Ms. Ginsburg had the power to do so she would scrap our outdated Constitution and replace it with something more modern (and, no doubt, more progressive).

For some reason the usually observant Professor Volokh is unable to see the obvious: Ms. Ginsburg clearly thinks the U.S. Constitution is a stale document, so outdated, in fact, that she wouldn’t even advise a developing nation to use it as a starting point for the drafting of its own constitution. It is no stretch, then, to assume that Justice Ginsburg would, if she could, replace our Constitution with something more to her liking.

I strongly disagree with Professor Volokh. It’s impossible not to construe Justice Ginsburg’s statements as an utter rejection of the very document she has sworn to honor and uphold?

Justice Ginsburg is an exemplar of liberal thinking. The Constitution, for her, is no more than an annoying obstacle to be overcome in advancing a progressive agenda. She wishes she had another, better (meaning more progressive) document to interpret. Of course, she has to appear to follow the one we have, but is there any doubt that whenever she can justify a progressive construction that is at odds with it, she will choose that construction on the grounds that our old, archaic document is alive and breathing?

Justice Ginsburg’s statements make me think she might belong to the Howard Zinn/Noam Chomsky school of progressives whose motto seems to be “if it’s American, it sucks and needs to be changed.”

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The left would have you believe that 1 percenters like Warren Buffett and Mitt Romney are the poster boys for a tax system that favors the rich. Enter James Ross, a 1 percenter who paid 102% of his 201o taxable income in federal income, state income local taxes.

James Stewart of the Associated Press has the story:

Meet Mr. 102%.

James Ross, 58, is a founder and managing member of Rossrock, a Manhattan-based private investment firm that focuses on commercial real estate and distressed commercial mortgages. “I realize I am very fortunate, and in fact I am a member of the 1 percent,” Mr. Ross wrote in an e-mail. His résumé is studded with elite institutions: Yale, Columbia Law School and stints at the law firms Cravath, Swaine & Moore in New York and Holland & Hart in Denver. Since his company fits the category of private equity, he even has carried interest, the kind of incentive compensation that enabled Mitt Romney to pay such a low tax rate.

Yet Mr. Ross told me that he paid 102 percent of his taxable income in federal, state and local taxes for 2010. “My entire taxable income, plus some, went to the payment of taxes,” Mr. Ross said. “This does not include real estate taxes, sales taxes and other taxes I paid for 2010.” When he told friends and family, they were “astounded,” he said.

In the midst of a national debate over tax rates and tax policy, I lifted the veil last week on my income tax rates for 2010, a year in which I paid 37 percent of my adjusted gross income in federal, state and city income taxes and 74 percent of my taxable income. (Adjusted gross income — your total income minus retirement plan contributions, tax-exempt interest and other specified exclusions — is usually higher than taxable income, which is adjusted gross income minus your personal exemptions and itemized deductions. So taxes as a percentage of taxable income are almost always higher.)

This story illustrates why in evaluating whether or not our tax system is tilted in favor of the very rich we must take the 1% as a whole rather than pluck out a few members of the group whose tax rates confirm our bias. Deep down progressives understand this. But because the facts don’t support their tired (and politically necessary) argument that the rich are not paying their fair share of taxes, they dishonestly point to isolated instances of very rich people paying very low tax rates and trust that the masses will extrapolate the isolated undertaxation to the entire 1%.

The truth the left is so desperate to avoid is that the very system it insists unfairly favors the rich results in the top 1 percent paying 37% of federal income taxes and the bottom 50% paying less than 3% of federal income taxes.

Courtesy of the IRS, here are the numbers the left either suppresses or outrightly lies about:

Who Pays Income Taxes and How Much?

Tax Year 2009

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A fellow named Charles Sykes has written a new book titled A Nation of Takers: America’s Addiction to Getting Something for Nothing. In the first pages of his book Sykes presents a few scenes from what he calls “Moocher Nation.” Here’s my favorite scene:

Q.  Why are you here?

A.  To get some money

Q.  What kind of money?

A.  Obama money

Q.  Where is it coming from?

A.  Obama

Q,  Where did Obama get it?

A.  I don’t know, his stash… I don’t know. I don’t know where he got it from. But he’s giving it to us. We love him. That’s why we voted for him.

- Detroit, October 7, 2009, where thousands of residents turned out for free government money. According to the Associated Press, they were supposed to apply for federal anti-homelessness grants, but many were under the impression they were registering for $3,000 checks from the Obama administration.

Of course, class warrior progressives don’t consider scenes like this to be indicative of a sickness in America. That’s because the people who star in them are the very people progressives count on to keep them in office.

Be sure to watch Glenn Reynold’s (Instapundit) interview with Sykes over at PJTV.

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The AP’s Sean Murphy reports that Oklahoma Republicans want to abolish their state income tax:

A year after Republicans swept into office across the country, many have trained their sights on what has long been a fiscal conservative’s dream: the steep reduction or even outright elimination of state income taxes.

The idea has circulated among academics and think-tank researchers for years. But it’s moving quietly into mainstream political discourse, despite the fact that such sweeping changes would almost certainly mean a total rewiring of tax systems at a time when most states are still struggling in the aftermath of the recession.

“I think there’s going to be more action that way,” especially as Republican governors release their budget plans, said Kim Rueben, an expert on state taxation at the Brookings Urban Tax Policy Center.

Last year, GOP lawmakers in many states quickly went to work on a new conservative agenda: restricting abortion, cracking down on illegal immigration, expanding gun rights and taking aim at public-employee unions.

Emboldened by that success, the party has launched income tax efforts in Idaho, Kansas, Maine, Missouri, Ohio, Oklahoma and South Carolina. But it’s not clear how all those states would make up for the lost revenue, and Rueben said she’s not aware of any state in modern history that has eliminated an income tax.

Nine states already get by without an income tax, mostly by tapping other sources of revenue. Nevada and Florida rely on sales taxes that target the tourism industry. Alaska has taxes on natural resources, and Texas imposes substantial property taxes. The other five states are: New Hampshire, South Dakota, Tennessee, Washington and Wyoming.

But in the rest of the country, income taxes pay for bedrock government services, including roads and bridges and schools and prison systems.

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Last month in American Tax Compliance Rates Highest in Civilized World Despite What David Cay Johnston Says I refuted David Cay Johnston’s absurd claim that America’s low tax rates are the cause of it’s alleged rampant tax evasion:

Johnston claims that there is “rampant evasion in the U.S.” even though the very study he cites shows that there isn’t rampant tax evasion in the U.S. In fact, the study shows the very opposite: That the United States’ rate of compliance is the highest in the civilized world and it’s underground economy as a percentage of its economy is among the smallest.

… .

The reason America has a greater absolute amount of tax losses from tax evasion than do other countries is simply because it has a much larger economy than those other countries. America’s shadow economy as a percentage of its GDP is a mere 8.6%, by far the lowest of the ten countries included in the study. This, and not absolute dollars, is the important statistic in the study and one that should prompt all fair and impartial observers to assume what, even without the study, it is intuitive to assume: The lower the taxes, the greater the rate of compliance.

Now here comes Cato’s Daniel Mitchell reminding us once again of what is obvious to everyone but Mr. Johnston: The higher the tax rates, the greater the non-compliance:

Leftists want higher tax rates and they want greater tax compliance. But they have a hard time understanding that those goals are inconsistent.

Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.

• When tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities legally.
• When tax rates change, sometimes they choose to alter their levels of work, saving, and investment.
• And when tax rates go up, sometimes they resort to illegal steps to protect themselves from the tax authority.

In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes.

Macroeconomic and microeconomic modeling studies based on data for several countries suggest that the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments… The bigger the difference between the total cost of labor in the official economy and the after-tax earnings from work, the greater the incentive for employers and employees to avoid this difference and participate in the shadow economy. …Several studies have found strong evidence that the tax regime influences the shadow economy.

Indeed, it’s worth noting that international studies find that the jurisdictions with the highest rates of tax compliance are the ones with reasonable tax systems, such as Hong Kong, Switzerland, and Singapore.

The above is an excerpt. Be sure to read the whole thing.

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I winced this morning when former Pennsylvania Governor, Democrat Ed Rendell, said that he hoped the Supreme Court majority that had decided the Citizens United case was paying close attention to the corrosive influence of super-pacs in the Republican primary.¹

Mr. Rendell apparently believes that the Citizen United Justices should have based their decision not on what the law was, but on what they believed the law should be. But had they done this they would have violated their sworn oaths to uphold the constitution.

Supreme Court justices are not legislators. It is utterly irrelevant whether they personally like or dislike a particular law or whether they personally think a particular law would be good or bad for the country. Their only job is to determine whether the law is constitutional.

It’s astonishing to me that so many very smart people, some of whom, like Mr. Rendell, are trained in the law, seem unable to grasp what the role of a Supreme Court Justice is.

Supreme Court Justices often make rulings upholding laws they find personally offensive. For example, they have consistently ruled that neo-Nazis, Black Panthers, white supremacist Skinheads and the Ku Klux Klan have all  have the same rights under the first amendment to hold marches and engage in public demonstrations as Martin Luther King, Jr. and the Civil Rights marchers of the 60′s did. Now, if you believe Governor Rendell that Justices should rule based on their personal preferences, you would have to believe that the Justices who decided these first amendment cases approved of the messages these groups were spreading. That, of course, is ridiculous.

In the Citizens United case it is possible, and probably even likely, that some of the Justices who were in the majority personally believe that there is too much money in politics and that something should be done about it. But it’s not their job to do something about it. It’s the job of democratically elected legislators.²

Footnotes:

¹  Citizens United held that certain campaign finance laws prohibiting corporations from airing political commercials within a certain number of days of an election were violations of the first amendment. This decision rankled a lot of people. But it was the right decision. As Justice Scalia pointed out in his concurring opinion, the first amendment does not distinguish between speakers, but merely says that speech itself shall be protected. In other words, whether the speaker is a person, a trade union, a newspaper or a corporation, his or its speech is protected under the first amendment.

It may be true that allowing corporations the same free speech rights that we allow individuals poisons our political process, but that does not make it constitutional to deprive them of those rights. The evaluation of the results of a particular law is the job of elected legislators, not appointed jurists and Governor Rendell should know this.

²  Our founders gave us a mechanism for changing things we don’t like about the constitution. It’s called the constitutional amendment process. The proper way to limit big corporate money in politics is to amend the constitution, not to have unelected Judges illegally short-cut that process by judicial fiat. Who knows, I might even vote for such an amendment.

Related Posts:

• Are Corporations Persons for Tax Purposes But Not for First Amendment Purposes?
• Obama Slams Supreme Court on Result, Not Reasoning
• Supreme Court Jurisprudence: Public Opinion is Irrelevant
• First Amendment Guru Floyd Abrams Applauds Citizens’ United Ruling

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My favorite IRS employee has started a blog. Paul Caron reports:

National Taxpayer Advocate Nina Olson has started a blog:

Welcome to the National Taxpayer Advocate’s blog about taxpayer  rights and taxpayer burden. For starters, let me explain that I use the  term “taxpayer rights” here to mean not only statutory rights but also  the unstated “agreement” underlying our system of voluntary tax  compliance. That is, the government expects and requires taxpayers to  pay the correct amount of tax due under the laws, and in return commits  to treating taxpayers fairly, with dignity and respect, and providing  them with the necessary assistance and guidance to comply with the tax  law. In short, taxpayer rights incorporate the government’s obligation  to minimize taxpayer burden.

Why a blog about taxpayer rights, and why now? As I said in my preface to the 2011 Annual Report to Congress,  the IRS has experienced a huge increase in its workload while its  resources have declined over the last two years. This trend increases  the risk that the IRS will take shortcuts that, perhaps unintentionally,  deprive taxpayers of their ability to dispute effectively an IRS action  or achieve a reasonable resolution to their tax problems.

The imbalance between work and resources drives the IRS to use  automation to increase the productivity of its employees. While on the  surface this observation may seem like a good thing, further analysis  yields a number of areas of concern.

Related Posts:

• Taxpayer Advocate Nina Olson Concerned that Burdens of New 1099 Reporting Requirements will Exceed Benefits
• Whatever Nina Wants, Nina Gets 
• National Taxpayer Advocate, Nina Olson, Delivers Report, Congress Pandiculates
• Taxpayer Advocate Scolds Unenrolled Preparers, Favors Regulation
• Taxpayer Advocate’s Recommendation: Go Easier on Taxpayers Experiencing Economic Hardship

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