Death, Taxes, and Lawyers

Didn’t someone famous say that there is nothing certain in this world except death, taxes, and proliferating lawyers? These three evils come together in the debate over repeal of the federal estate tax.

A Cato supporter alerted me to interesting data showing that there are 52,000 estate planning lawyers in the United States. Let’s say that half of their time is spent on the estate tax, or about 1,000 billable hours a year each. And let’s say that their billable rate is $200 per hour.

What you get is an estate tax lawyer industry of about $10 billion annually. If you added in the costs of all the estate tax accountants, IRS administrators, the estate tax portion of the life insurance industry, and other workers, the costs of estate tax paperwork could be as high as the amount the government collects from the tax – $28 billion annually. That is the definition of a wasteful tax.

Taylor vs. Corn

FYI, I’ll be on Kudlow & Company (probably around 5:30 EST) to debate ethanol subsidies with Frank Gaffney.  

Something to chew over while you wait for the beating to come: wholesale ethanol is selling today for July delivery at the Chicago Board of Trade for $3.40 a gallon.  Given that ethanol has only two-thirds the energy content of conventional unleaded gasoline, we have to multiply that price by 1.5 if we want to compare apples with apples.  So to get the same amount of energy from ethanol that we would get with a gallon of conventional unleaded, we would have to pay $5.10 a gallon.  What is the wholesale price today for conventional unleaded for July delivery?  All of $2.10 a gallon at the NYMEX.

But that’s not all.  Gasoline moves from refineries to retail distribution centers via pipelines, and transportation costs are low.  It costs a lot more money, however, to move ethanol from processing plants in the Midwest to retail distribution centers because it must be moved by truck and barge (one can’t use pipelines to move ethanol for various technical reasons).  So add another couple of dimes to the differential between the price of ethanol and conventional unleaded to account for that, and perhaps another dime or more if you’re shipping that ethanol to the Atlantic or Pacific coasts.

If the answer is ethanol, what exactly is the question?

Come Back with a Warrant

Last month in Dallas:

Jamie Dolloff was expecting a routine code inspection to check smoke alarms and an electrical breaker box in her northeast Dallas apartment.

She said she wasn’t prepared for a loud banging on her door and police officers entering her apartment and searching her belongings.

“Cops were going through my bathroom drawers. Then I heard them going through my kitchen,” Ms. Dolloff said of the police who accompanied fire and code inspectors during the search.

“I told them, ‘You don’t have a warrant. You’d better stop what you’re doing’,” she said. “They shouldn’t have been going through my stuff.”

Ms. Dolloff is one of at least 21 Dallas residents who have filed complaints with the U.S. Department of Housing and Urban Development over the March 13 incident at Bent Creek Apartments.

The searches were part of a sweep instigated at the behest of a local, politically powerful homeowners’ association.

The situation in Dallas is part of a disturbing trend. Police and municipal officials are increasingly using utility, fire, or regulatory inspections to circumvent the need for a search warrant. Once inside, police who accompany the inspectors snoop around. Given that the resident of the home let them in voluntarily, anything incriminating that they might find is, in theory, fair game.

Two years ago, police in Manassas Park, Va., conducted a massive SWAT raid on a local pool hall involving about 70 officers. Though they were looking for drug activity, the raid was conducted under the auspices of an inspection from the state’s Alcoholic Beverage Control, again negating the need for a search warrant.

Last April, police in Buffalo, N.Y., conducted a series of no-knock SWAT raids in low-income neighborhoods across the city, dubbed “Operation Shock and Awe.” A month later, many of the arrests were thrown out because of insufficient evidence or police errors in obtaining the search warrants. Police officials were livid – at the thrown-out arrests, not at the fact that many innocent people’s homes were wrongly raided, or that innocent people were wrongly arrested. The officials openly discussed using the city’s “Operation Clean Sweep” program to conduct future raids. “Operation Clean Sweep” sends police out with fire code inspectors, electric inspectors, social workers, and other non-police agencies. They tell residents they’re conducting routine inspections. Once inside, police search the homes for evidence of drugs or other illegal activity, again without a search warrant.

New at Cato Unbound: Frank Levy on Education and Inequality in the Creative Age

In today’s reply to Richard Florida’s lead essay on “The Future of the American Workforce in the Global Creative Economy,” Frank Levy, Daniel Rose Professor of Urban Economics in the MIT Department of Urban Studies and Planning, agrees that creativity is more important than ever in a world where computers and foreign workers can do routine work less expensively than domestic workers. This shift, Levy says, requires better education in problem-solving. But better education can only do so much. The gains from rising labor productivity are going largely to the wealthy, Levy argues. Unless policies and norms are reinstated that spread those gains more widely, “all of the nation’s institutions will be at risk.”

Enviros Embrace “Free Market Environmentalism”!

We don’t need no stinkin’ environmental regulations to save the earth – all we need are well functioning property rights for environmental resources and common law courts to protect that property against trespass. Pollution is simply a neighbor’s garbage dumped in your backyard without permission. If we simply recognize and enforce property rights for nature, the need for most environmental regulation goes away.

That’s the libertarian pitch anyway, and it goes by the moniker “Free Market Environmentalism,” or “FME” to its acolytes.  FME was given a firm theoretical foundation by Ronald Coase, embellished and blessed by libertarian economist Murray Rothbard, given academic life by the Political Economy Research Center and the Foundation for Research on Economics and the Environment, popularized in Washington by the Competitive Enterprise Institute, and even pitched by yours truly to the Board of Trustees of the Natural Resources Defense Council about nine years ago.

Alas, there has never been much evidence to suggest that libertarians were making much headway with these arguments and I have come to believe that they have less promise than I had once imagined. But what do you know? FME is now all the rage amongst environmentalists who have discovered that suing polluters for tresspass is easier than passing satisfactory laws against the same.

Think I’m pulling your leg? Read this from Darren Samuelsohn in today’s issue of Greenwire (subscription required):

Efforts to force a stronger U.S. global warming policy through the courtroom came under sharp scrutiny yesterday as eight states, New York City and conservation groups pressed for reduced greenhouse gas emissions from the nation’s five largest electric utilities.

A three-judge panel of the 2nd U.S. Circuit Court of Appeals pressed plaintiffs over why their case was necessary when other avenues exist for addressing global warming – from Capitol Hill to state courts. “My basic question is should we be invoking this doctrine in this very unusual case when there are many other remedies available?” asked Judge Sonia Sotomayor, the lone Democratic appointee on the 2nd Circuit’s panel.

Connecticut Attorney General Richard Blumenthal (D) replied that the utilities’ emissions violate federal common law by harming residents in multiple states. The utilities’ emissions are creating a public nuisance and must be reduced to counteract a variety of global warming effects, including California’s diminished snow pack and more intense heat waves.

Addressing Sotomayor’s question, Blumenthal said his case is not unusual compared with other seminal common law challenges upheld by the Supreme Court, including suits over Illinois sewer water running into Lake Michigan and air pollution from two Tennessee smelters.

“We’re dealing with a developing area of science where federal common law provides a remedy under the doctrines that exist,” Blumenthal said.

Plaintiffs singled out the five companies and their subsidiaries for litigation almost two years ago because they are the largest emitters of carbon dioxide from the power sector in the United States.

… The electric utilities’ defense covered some of the same ground offered successfully last summer before a federal district court, which dismissed the case on the grounds it raised political questions better left to the other two government branches. Both current and former sessions of Congress and presidents have not adopted such an aggressive climate change policy, argued Washington-based industry attorney Joseph Guerra.

Guerra also insisted federal common law has not been applied to an issue of such sweeping scale. Of the Supreme Court precedents Blumenthal cited, Guerra replied, “None of those cases could have possibly affected the entire U.S. economy.”

Pushing another line of the industry’s defense, Guerra cautioned the litigation would be a precursor to more global-warming nuisance claims – with no end in sight as plaintiffs tick through other sources of greenhouse gas emissions.

But Sotomayor, who asked the bulk of the questions during the hearing, took issue with the line of industry defense. “That’s the nature of every tort action,” she told the utility attorney.

Sotomayor also said she had a problem with dismissing the case just because potential remedies were so large.

OK, I’ll grant that enviros are going the common law route less out of conviction than out of necessity.  But so what?  What was once a fringe argument has now migrated into the political and legal mainstream with a vengeance.  Good news for libertarians, right?

Well, if libertarians and fellow-travelling conservatives are popping champagne bottles, it has escaped my attention.  FME blogs are dead silent. Conservatives are taking the corporate line that common law is an inappropriate venue for all of this with no dissenters that I can tell.  In short, FME’ers either aren’t paying attention or aren’t willing to back their doctrines when they are employed by the Left.

Sure, one can argue that the plaintiffs don’t have proper standing, that there is really no nuisance here to begin with, that the tort system is so messed up that employing it in such cases is problematic, etc.  But nonetheless, this is a growing trend and libertarians seem surprisingly ambivalent about it.