How Should We Think About Wealth Tax Avoidance?

Diana Onu, Lynne Oats, Erich Kirchler, & Andre Julian Hartmann, Gaming the System: An Investigation of Small Business Owners’ Attitudes to Tax Avoidance, Tax Planning, and Tax Evasion, 10 Games 46 (2019).

A recently published empirical study by Diana Onu, Lynne Oats, Erich Kirchler, and Andre Julian Hartmann compares taxpayer attitudes towards acceptable tax planning, aggressive (yet legal) tax avoidance, and illegal tax evasion. While the study itself examines small business owners subject to income tax in the U.K., its implications should be of great interest to policymakers concerned about legal avoidance strategies with respect to any tax base. For example, aggressive but legal tax avoidance might be an important concern under recent wealth tax proposals in the United States.

As noted by the study’s authors, tax compliance literature has traditionally focused on the binary choice between compliance and evasion. That literature explores the various underpinnings of the decision to evade, from deterrence theory, to social norms, to attitudes that evasion is a victimless crime. But largely absent from this literature on individual taxpayers are studies of the motivations underlying aggressive, yet legal, tax avoidance strategies. In thinking about the U.S. tax system, this makes sense. Aggressive avoidance strategies are typically attributed to firms, where individual attitudes and other psychological factors are arguably less relevant. Evasion, on the other hand, is typically attributed to individual taxpayers (most often, sole proprietors), who often lack the resources to employ aggressive yet legal avoidance strategies. But if the U.S. were to adopt a wealth tax like the one proposed by Elizabeth Warren, the stakes or potential payoffs from avoidance might grow. If so, individual level avoidance strategies would presumably become much more commonplace.

So what do we know about the psychological factors that motivate legal tax avoidance, as distinct from evasion? It turns out, not much, but the study by Onu, Oats, Kirchler, and Hartmann sheds some light on this question. Continue reading "How Should We Think About Wealth Tax Avoidance?"

The Forest, the Trees, and Lone Pine Orders

Nora Freeman Engstrom, The Lessons of Lone Pine, 129 Yale L.J. 2 (2019).

1986 wasn’t just a big year for Mets fans. It was a big year for civil procedure. The Supreme Court decided the summary judgment trilogy—Anderson, Celotex, and Matsushita—two of which would go on to become the most frequently cited Supreme Court cases in history. Earlier that year—but with considerably less fanfare at the time—Monmouth County Superior Court Judge William Wichmann issued an unusual order in a case about alleged contamination from the Lone Pine Landfill in Freehold Township, New Jersey. He set a deadline by which the plaintiffs had to provide documentation supporting their exposure to substances from the landfill and the injuries that were caused as a result. Later that year—just three weeks after Jesse Orosco struck out Marty Barrett for the final out of Game 7—Judge Wichmann found the plaintiffs’ submissions inadequate and dismissed their claims with prejudice.

Judge Wichmann’s order would come to bear the name of that case (and that landfill) and it spawned a revolution in civil procedure—particularly in the mass-tort context. As Nora Freeman Engstrom’s excellent article explains at the outset, Lone Pine orders have featured in a “Who’s Who” of mass-tort cases—including “Love Canal, asbestos, Vioxx, Fosamax, Rezulin, Celebrex, Zimmer NexGen knee implants, Baycol, Avandia, Fresenius, and the Deepwater Horizon oil spill.” Her must-read piece is a comprehensive dive into the use of Lone Pine orders, their advantages and disadvantages from a practical and theoretical perspective, and the lessons that can be drawn for civil litigation more broadly. Continue reading "The Forest, the Trees, and Lone Pine Orders"

Hidden In Plain Sight and In All-Caps

Yonathan A. Arbel & Andrew Toler, All-Caps (January 15, 2020), available at SSRN.

A strange thing has been happening in the world of consumer contracts. “Contract” is being elbowed–roughly–aside by “notice.” While contract requires offer, acceptance, mutual assent and consideration, notice seems to require only conspicuousness. Accordingly, it is ihttps://contracts.jotwell.com/?p=862&preview=truemportant that we get conspicuousness right. Unfortunately, too often, we get it wrong. One of the most common ways we get it wrong, as Yonathan A. Arbel and Andrew Toler explain in their article, ALL-CAPS is by relying upon the effectiveness of capitalized text. Their article, the first to test the effect of capitalized text upon consumer perception, shows that all-caps not only fails to improve the quality of consent, it may diminish it for some consumers.

Arbel and Toler argue that capitalization of contract clauses is treated by judges, legislators and consumer agencies as “strong evidence, often dispositive, that the text was read and understood by the consumer.” (P. 5.) Consequently, all-caps is “used to show meaningful consent to especially onerous terms that would not be enforced but-for the use of all-caps.” (P. 10.) They review the background surrounding this faith in all-caps and find that, despite its pervasiveness, it is based upon “speculation and intuition.” (P. 6.) They explain how the focus on conspicuousness was intended to be a sort of compromise, the idea being that even if consumers don’t read all the terms in form contracts, they could read conspicuous key terms.  All-caps became “a widely endorsed method of making a term conspicuous and thus rendering it enforceable.” (P. 5) But the evidence for this support of all-caps, they note, was nowhere to be found. Continue reading "Hidden In Plain Sight and In All-Caps"

Don’t Forget the States

Jessica Bulman-Pozen, Administrative States: Beyond Presidential Administration, 98 Tex. L. Rev. 265 (2019).

In 2001, Elena Kagan published Presidential Administration—her now well-known account of presidents’ increasingly aggressive efforts to control agencies’ regulatory decisions. In the nearly two decades since her article appeared in the pages of the Harvard Law Review, presidents have exerted more and more control over agencies. Indeed, in recent years, the entrenchment of presidential administration has been evident simply by reading the nation’s news headlines. In 2015, for example, the New York Times trumpeted that “Obama Announces New Rule Limiting Water Pollution,” and then in 2019, the same paper announced: “Trump Administration Rolls Back Clean Water Protections.” Similar headlines about other presidentially influenced regulatory reversals abound.

In response to the entrenchment of presidential administration, many scholars have written about potential counterweights that might come from various federal actors, such as the federal courts, Congress, or the executive-branch bureaucracy. Largely missing from this scholarly discourse, however, has been a focus on the important role that the states can and have played in both furthering—and counteracting—presidential administration. In her forthcoming article titled Administrative States: Beyond Presidential Administration, Professor Jessica Bulman-Pozen seeks to remedy this scholarly void. Specifically, Professor Bulman-Pozen seeks to bring the states into the modern day account of presidential administration. Continue reading "Don’t Forget the States"

Getting Reacquainted with Constitutional Torts

Richard Fallon, Jr., Bidding Farewell to Constitutional Torts, 107 Cal. L. Rev. 933 (2019)).

Richard H. Fallon, Jr.’s Bidding Farewell to Constitutional Torts is an important article at many levels. The provision by a leading constitutional scholar of a thoughtful and rigorous overview of the field, recent Supreme Court decisions within it, and new trains of scholarship criticizing those decisions is itself of great value. But there is much more here, and some of it is surprising. One might have expected a robust defender of the rule of law such as Fallon1 to excoriate the Supreme Court’s repeated expressions of skepticism about the principle that “where there’s a right, there is a remedy.” Instead, Fallon shares much of the Court’s skepticism and, in principle, shares its view that, in a range of scenarios, it is sensible to permit anticipated social costs to defeat the ability of victims of constitutional rights violations to hold those who have victimized them accountable. While the article ultimately defends the landmark Bivens decision itself, and a certain notion of state accountability to victims before courts of law, this too is something of a surprise in a piece purporting to “bid farewell” to the entire field.

In a manner consistent with his sensitivity to a range of constraints on legal interpretation, Fallon subdivides his article into three parts: (1) a doctrinal descriptive section; (2) the articulation of normative considerations relevant to the establishment of an attractive framework of liability rules for government actors and a proposal for such a framework; and (3) an analysis of which institutions are well-suited to adopt and implement that framework. Each of these inquiries is thoughtful, defensible, and important. Continue reading "Getting Reacquainted with Constitutional Torts"

Reckoning with Slavery

Justin Simard, Citing Slavery, 72 Stan. L. Rev. 79 (2020).

Slavery is deeply imbedded in our nation’s history, economy, and law. The legacy of slavery is readily apparent in the disproportionate poverty of people of color and the new Jim Crow regime in our nation’s criminal justice system. Yet our country has never engaged in any sort of reconciliation process, let alone a reparation process. Recent years, however, have been marked by attempts to reckon with the history and legacy of slavery in the United States. In southern cities, local officials are debating whether to remove statues of confederate officials from public spaces. Those statues symbolize, and arguably celebrate, our nation’s legacy of slavery and racial discrimination. Removing the statues may ease the dignitary harm they cause but mask the ongoing impact of the legacy that the statues represent. In Citing Slavery, Justin Simard reveals how the legacy of slavery in our common law is hidden in plain sight. Lawyers and legal scholars know the legacy of slavery in our society but have failed to confront its impact on our common law.

Historians and legal scholars have been commemorating the 150th anniversary of the abolition of slavery and the establishment of fundamental rights for freed slaves during the Reconstruction Era. As part of this commemoration, historians are currently engaged in an ongoing debate over the extent to which slavery permeated our nation’s founding, and our constitution. In The New York Times, the 1619 Project commemorates the 400 years since the beginning of the slave trade in the U.S., fostering a debate over whether the focus on race sidelines the economic exploitation of the system of slavery. In Citing Slavery, Justin Simard makes a crucial contribution to the conversation about the impact and meaning of slavery on our legal system by pointing out the extent to which slavery permeates our nation’s basic principles of law. Like the confederate statues which force us to confront our past, Simard’s revelations force us to confront the question of how to treat law based on the tainted foundation of slavery. Continue reading "Reckoning with Slavery"

Avoidance Creep

Charlotte Garden, Avoidance Creep, __ U. Pa. L. Rev. __ (forthcoming 2020), available at SSRN

Professor Charlotte Garden already has a well-earned reputation as a leading scholar on the intersection of labor law and the First Amendment. This reputation will only be enhanced by her outstanding new article, Avoidance Creep. The article addresses a problem in labor law, and potentially other areas, involving the doctrine of “constitutional avoidance.” This doctrine provides that if one plausible reading of a statute would make its application violate the Constitution, but another plausible reading of the statute would not be unconstitutional if applied in that context, a court should, instead of ruling the statute unconstitutional, interpret the statute such that it does not violate the Constitution.

On its face, doctrine seems sensible. But Garden shows that it has been used to twist statutory language beyond its plain meaning and the intent of its drafters. Further, “avoidance creep” means that later courts amplify and magnify the original problems such that the interpretations are unmoored not only from statutory meaning and purpose but also from proper Constitutional analysis and from the defensible justifications for Constitutional avoidance. In her words, “avoidance decisions have tended to creep beyond their stated boundaries, as decision-makers either treat them as if they were constitutional precedent, or extend them into new statutory contexts while disregarding key aspects of their original reasoning.” Continue reading "Avoidance Creep"

Of Trusts, Grammar, and Gender

Deborah Gordon, Engendering Trust, 213 Wisc. L. Rev. 213 (2019), available at SSRN.

In her new piece, Engendering Trust, Deborah Gordon takes on the relationship between women, wealth, inheritance, and the trust form. This intricate relationship is a long-standing one—a vintage marriage, so to speak—defined by gendered asymmetries, assumptions, and characterizations that are all grounded in historical norms. The landscape that gives life to this relationship between women and the trust form is replete with overt female archetypes, such as evil stepmothers, acquisitive mistresses, and vulnerable widows, and the linguistic coin of the realm is a highly gendered grammar that reveals these and other idioms of financial authority, avarice, and inexperience.

Based on a study of 540 cases involving trust law disputes, Gordon seeks to unearth how courts speak about and incorporate gender in their writing and “where cases show trust law clinging to its gendered past, both in language and effect.” (P. 223.) More specifically, she looks at three “key trust characteristics” in the opinions order to parse the role of gender and its effects. First, Gordon looks at trustee identity and finds that not only do men create marital trusts more frequently than women, but men also name someone other than the surviving spouse as trustee more often than women do. Women, by this measure, have still not gained full access to the world of trusteeship, a world in which—in years gone by—“[a]lmost every well-to-do-man was a trustee.” Pursuing this line of inquiry, it would also be interesting to know who courts choose as trustees in cases requiring the court to appoint one. Continue reading "Of Trusts, Grammar, and Gender"

Against Punitive Approaches to Animal Protection

In the United States, we often rely on criminalization as a way (sometimes the only way) of communicating social value. We purport to communicate the value of those who are harmed or injured by criminalizing the conduct that harmed them and prosecuting those who engage in that conduct. In recent years, scholars who study the criminal legal system have raised questions about this carceral approach to communicating social value. These critics have argued that harsh, punitive approaches to social problems frequently fail to solve those problems, even as they reliably replicate old patterns of injustice and generate a host of unintended consequences. The criminal legal system may also produce carceral “solutions” at odds with the actual wishes of the individuals harmed by the criminalized conduct.

In Beyond Cages: Animal Law and Criminal Punishment, Justin Marceau applies this critique to the carceral turn within the animal protection movement. Marceau uses the term “animal protection movement” as an “imperfect shorthand” for the “disparate groups and philosophies” that make up a “multifaceted” movement. He notes that leaders of the movement “have made clear that carceral animal law policies are a critical strategic priority.” (P. 2.) He then proceeds to explore, in a systematic way, the accumulation of thirty years of “carceral animal law policies” in mainstream animal protection efforts. Continue reading "Against Punitive Approaches to Animal Protection"

Post-Koontz Exactions

Timothy M. Mulvaney, The State of Exactions, 61 Wm. & Mary L. Rev. 169 (2019).

Land-use regulation allows the government to condition approval of a land-use permit on the landowner’s surrender of a property interest (exaction) so long as there is an “essential nexus” and “rough proportionality” between the condition demanded and the anticipated impact of the proposed land use.  Professor Timothy Mulvaney has written extensively about the many legal and policy issues surrounding exactions and he continues to enlighten us in his new article, The State of Exactions.

Mulvaney reviewed the almost 130 cases in a five-year period that cited the Supreme Court’s 2013 decision in Koontz v. St. Johns River Water Management District to illustrate the various ways in which lower courts have applied the Koontz holdings. Continue reading "Post-Koontz Exactions"

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