Archives: 06/2010

Russia Scraps Capital Gains Tax

The former communists running Russia apparently understand tax policy better than the crowd in charge of U.S. tax policy. Not only does Russia have a 13 percent flat tax, but the government has just announced it will eliminate the capital gains tax (which shouldn’t exist in a pure flat tax anyhow).

Here’s a passage from the BBC report:

Russia will scrap capital gains tax on long-term direct investment from 2011, President Dmitry Medvedev has said. …Mr Medvedev told the St Petersburg International Economic Forum that long-term direct investment was “necessary for modernisation”. …Its oil revenues fund, which has been financing the deficit, is expected to end next year, and the government wants to attract more foreign investment to boost the economy.

Sounds like President Medvedev has watched my video explaining why there should be no capital gains tax. Now we just need to get American politicians to pay attention.

Tip Your Hat to Government

This is not a story from The Onion

The Associated Press reports that a school in Rhode Island prohibited eight-year-old David Morales from wearing a hat that he decorated with toy soldiers that…gasp…had tiny little plastic weapons. According to school administrators, the hat violates a “no weapons” policy.

Here’s the relevant section of the report:

Christan Morales said her son just wanted to honor American troops when he wore a hat to school decorated with an American flag and small plastic Army figures. But the school banned the hat because it ran afoul of the district’s zero-tolerance weapons policy. Why? The toy soldiers were carrying tiny guns. “His teacher called and said it wasn’t appropriate,” Morales said. Morales’ 8-year-old son, David, had been assigned to make a hat for the day when his second-grade class would meet their pen pals from another school. She and her son came up with an idea to add patriotic decorations to a camouflage hat. Earlier this week, after the hat was banned, the principal at the Tiogue School in Coventry told the family that the hat would be fine if David replaced the Army men holding weapons with ones that didn’t have any, according to Superintendent Kenneth R. Di Pietro.

I’m not sure what to say about this, other than to link to Neal’s PA.

More on Property Rights (Plus Privileges, Immunities, Due Process)

Yesterday I blogged about the Florida property rights case, which I now consider the best unanimous opinion against my position I could ever imagine.  Although the property owners lost, four justices stood for the idea that courts no less than legislatures or executive bodies are capable of violating the Takings Clause (Fifth Amendment), while two others endorsed remedying such violations via Substantive Due Process (Fourteenth Amendment), and the remaining two didn’t express an opinion one way or the other.  For more on the case, see the blogposts of Cato adjunct scholars Tim SandefurIlya Somin, and David Bernstein.

An interesting side note involves Justice Scalia’s excoriation of Substantive Due Process (and Justice Kennedy’s use of it):

Moreover, and more importantly, JUSTICE KENNEDY places no constraints whatever upon this Court. Not only does his concurrence only think about applying Substantive Due Process; but because Substantive Due Process is such a wonderfully malleable concept, see, e.g., Lawrence v. Texas, 539 U. S. 558, 562 (2003) (referring to “liberty of the person both in its spatial and in its more transcendentdimensions”), even a firm commitment to apply it would bea firm commitment to nothing in particular.

The great attraction of Substantive Due Process as a substitute for more specific constitutional guarantees is that it never means never—because it never means anything precise.

Scalia also calls Kennedy’s method “Orwellian”  – after having said that Justice Breyer uses a “Queen-of-Hearts” approach “reminiscent of the perplexing question how much wood would a woodchuck chuck if a woodchuck could chuck wood?”  Really, this is classic Scalia, a delight to read (and you should, here).

The problem with what Scalia says, as Josh Blackman points out, is that the Court is about to release its opinion in the Chicago gun case, McDonald v. Chicago and, based on the oral argument, is about to incorporate the Second Amendment via Substantive Due Process.  If SDP is so bad, how can Scalia (endorsed by Chief Justice Roberts and Justices Thomas and Alito) use it to protect a “new” right? – particularly when the Privileges or Immunities Clause was created for just this purpose!  One answer is that, to Scalia, “babble” – his term for SDP – is still worth more than “flotsam” (his term for P or I), as I discuss here.  Another is that, to put it bluntly, Scalia is a results-oriented non-originalist, as Josh and I discuss here.

Speaking of Blackman-Shapiro collaborations, for the correct way to apply the right to keep and bear arms to the states, see our law review article called “Keeping Pandora’s Box Sealed.”  And Tim Sandefur, who authored Cato’s McDonald brief (read a summary here) just published a fascinating related article called “Privileges, Immunities, and Substantive Due Process.”  I haven’t read it yet but am very much looking forward to it. 

Tim also recently wrote a book defending economic liberties (which Justice Scalia also disparages in his Stop the Beach opinion), called The Right to Earn a Living: Economic Liberty and the Law.  I hear it makes for good beach reading.

Maher Arar

This week the U.S. Supreme Court declined to hear the appeal of Maher Arar, a dual-citizen of Syria and Canada who was seized by U.S. agents in September 2002 and deported to Syria under a policy of “extraordinary rendition.” Arar claims that Syrian agents tortured him for a year before letting him go. 

Glenn Greenwald, Dahlia Lithwick, and Talkleft discuss the case and related issues.

Brazil Caves

Notwithstanding the efforts of four brave congressmen, the belated concession to reality by House Agriculture Committee Chairman Collin Peterson, and the misgivings of trade analysts including myself, it appears that the “temporary” deal struck by Brazil and the United States in April to ward off Brazil’s retaliation for WTO-illegal U.S. cotton supports is here to stay:

The government said a deal agreed between the two countries in April to head off up to $829 million in World Trade Organization-sanctioned retaliation against U.S. goods would stay in place until a new U.S. farm bill is passed [in 2012]…

“Brazil doesn’t rule out taking countermeasures at any moment,” Roberto Azevedo, Brazil’s envoy to the World Trade Organization, told reporters in Brasilia. “It is just a suspension of this right”.

He said Brazil could retaliate at any time if the United States did not uphold the agreement, but added that Brazil had no interest in retaliating.

“This process of negotiation and reform is better than retaliation that doesn’t bring benefits to anyone in Brazil’s private sector.” [Reuters]

You will recall that the deal includes about $147 million worth of taxpayers’ money given to Brazilian cotton farmers in the form of “technical assistance,” just so we can continue our own insane cotton support programs without fear of U.S. exporters (including holders of patents and copyrights) being hit by retaliatory trade barriers and unpunished piracy.

Brazil in some senses has the right idea, of course. They recognize, correctly, that retaliation in the form of increased tariffs on American imports only hurts their own consumers, hence their stated desire for “negotiation and reform” instead of santions.  But they sure do have a lot of faith in the willingness of Congress to enact reform without serious pressure from, among others, aggrieved trade partners.

I hope their faith and saint-like patience is rewarded. In the meantime, we have (at least) two more years of subsidizing Brazilan farmers in addition to our own.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

  • President Obama wants to give his government employee union pals another $50 billion gift courtesy of  taxpayers.
  • An enterprising reporter from a small newspaper in Illinois shows that federal food subsidies aren’t a free lunch. It’s a good example of the sort of work reporters at the big papers should be undertaking.
  • The Department of Labor is about to send hither swarms of officers to harass already struggling businesses.
  • Former Clinton HUD secretary Henry Cisneros is trying to rewrite HUD’s sorry history.
  • Note to the House of Representatives: the Federal Housing Administration doesn’t need to be reformed – it needs to be abolished.

Obamacare Is Unconstitutional

The very day President Obama signed the Patient Protection and Affordable Care Act, aka Obamacare, Virginia’s attorney general filed a lawsuit in federal court challenging the constitutionality of the health care overhaul. Virginia’s complaint alleges, in relevant part, that the PPACA’s requirement that every individual purchase health insurance or pay a fine – the “individual mandate” – is unconstitutional because Congress lacks the power to enact it.

The U.S. Government filed a motion to dismiss, claiming that Virginia lacked standing to bring this suit but also that the Commerce Clause, the Necessary and Proper Clause, and Congress’ taxing power all justify the individual mandate. Virginia responded, in relevant part, that the Commerce Clause does not grant Congress unbridled authority to regulate inactivity and force every man, woman, and child to enter the marketplace or face a civil penalty.

Cato, joined by the Competitive Enterprise Institute and Georgetown law professor (and Cato senior fellow) Randy Barnett, filed a “memorandum” – not called a “brief” because this is district (trial-level) court – supporting Virginia’s position and explaining that neither of the Government’s fallback positions legitimizes the individual mandate. We point out that the Necessary and Proper Clause is not an independent source of congressional power, but enables Congress to exercise its enumerated powers. Similarly, the taxing power does not authorize the individual mandate because the non-compliance penalty is a civil fine – and it would be unconstitutional even if it were a tax because it is neither apportioned (if a direct tax) nor uniform (if an excise tax). Moreover, Congress cannot use the taxing power as a backdoor means of regulating an activity unless such regulation is authorized elsewhere in the Constitution.

You can read our memorandum here.  The Government now has an opportunity to reply to the arguments raised by Virginia and those supporting its position (including us), and then the court will entertain oral arguments on the motion to dismiss.  We can expect a ruling this fall.