Sneaking Suspicions

Archives--January 13-19, 2002 (Week 2)


Commentary from a practical perspective

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This page includes posts from the site's second week, January 13-19, 2002 in the usual reverse order.

January 19, 2002

Where you stand sometimes depends on where others sit

Glenn Reynolds wrote a short update on four historians and how they've been treated by the media based on complaints about their honesty: Joseph Ellis, Stephen Ambrose, Doris Kearns Goodwin, and Michael Bellesiles. Reynolds notes that Bellesiles' work on firearms in Colonial America is now challenged as based on fabricated evidence, the most serious of the complaints against any of the four. Even so,

if you look at it in terms of media attention, the worst offense has gotten the least attention.

The fact that many media outlets such as the New York Times are sympathetic to gun control laws, and that Bellesiles' book would help that argument if true, certainly can't be ignored as a possible motivation for the apparent kid-glove treatment.

When someone's historical work supports your political position, you will naturally point to it as compelling evidence for your side. There will also be a natural reluctance to call in a rhetorical air strike in on yourself by calling attention to the news that your evidence may not be so powerful, and in fact may not even exist.

The situation reminds me a bit of how sympathetically some of the press treated Alger Hiss, despite the compelling evidence of his perjury, even after his second trial and conviction. The last chapter of Allen Weinstein's book, "Perjury" (Knopf, 1978, ISBN 0-394-49176-9) illustrates the point nicely, especially in his discussion of the Watergate era.

It's always hard to admit you've been snookered.

GO EAGLES!

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'nuff said.

Update: YAY EAGLES (32-19!)

January 18, 2002

A Momentary Lapse of Reason*
(In which I propose a real Alternative Minimum Tax)

The subhead for this site says, "Commentary from a practical perspective."

For this piece, however, I freely admit that the suggestion I make below is completely impractical, at least politically.

Nonetheless, as I begin collecting my 1099s, W-2s, and other fun financial papers for my Federal income tax return, I wanted to vent a little.

Nina E. Olson, the national taxpayer advocate for the IRS, recently issued her annual report to Congress. She stated that an increasing number of taxpayers were subject to the Alternative Minimum Tax (AMT).   According to the Washington Post piece discussing her testimony, about 1 million had to pay AMT in 1999, and that number could increase to 35 million by 2010.

Here's what the folks at Fairmark Press say:

The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the AMT reaches more people each year, including some people who don't have very high income and some people who don't have lots of special tax benefits.

The IRS website warns that this year, Single or Head of Household filers with $35,750 in Taxable Income may be subject to AMT.

The IRS also says this about the AMT:

The alternative minimum tax is a separate tax computation that, in effect, reduces the benefit of certain deductions and credits, thus creating a tax liability for an individual who would otherwise pay little or no tax.

Let’s think about that statement for a minute. Some people legally managed to arrange their affairs so that they owed no income tax. Therefore, Congress felt it was important to amend the Internal Revenue Code to make sure those people paid at least some tax.

On the other hand, over the years Congress also felt it was important to amend the tax code to make sure that millions of other people paid no income tax. With every major deal concerning income taxes, at least since I began following the issue in the mid-1970s, one heard how important it was to take people off the tax rolls.

I completely understand the political sentiment, if not the logic. What’s so bad about a little class warfare, if it’ll enhance your chances for re-election?

On the other hand, what’s wrong with this picture?

I certainly recognize that the AMT should be amended. I just have a slightly different view of what the appropriate goal should be, and how to go about it.

The AMT should be set at a mere one per cent of Adjusted Gross Income--for everyone.

If my Adjusted Gross Income (AGI) is $25,000, then the minimum income tax is $250, no matter what happens after deductions from AGI for personal exemptions, standard or itemized deductions, and the EIC or other tax credits.

I pay either the new AMT or whatever amount I owe based on the Tax Tables or Schedules, whichever is larger. (For the 2001 year, I'd use the Tax Table under this arrangement after my Taxable Income exceeded a blistering $1675.)

If my AGI is $2,500,000, then the minimum income tax is $25,000, again no matter what the tax computations would result after determining total taxable income.

This proposal has the benefit of being simple to execute, and mostly likely impossible to enact into law.

As for objections beyond political reality checks, I realize it’s a slight misnomer to state that millions of people pay no income tax. It’s more correct to state that millions don’t pay any direct income tax. They pay indirect income tax in the billions of transactions that lead to income for other people, from whom the taxes will be collected. For these indirect taxpayers, their taxes are simply part of the price they pay for food, rent, furniture, cars, and nearly anything else. Then again, those who pay income taxes directly do the same thing.

Why aren’t we more up front about it? Why not set up an income tax system so that everyone directly contributes?

If I only directly pay FICA, it’s possible that I will only pay attention to how that money is spent. If I don’t directly pay income tax, it’s likely that I will less interested in how the government is spending other people’s money.

Hmmnn. Maybe I’m onto something here as a political explanation for the current system, beyond simple class envy.

Another argument could be that the cost of administration of this AMT would outweigh its utility. I’m not impressed with this suggestion.

Over 127 million people file tax returns now. Millions of them only file to make sure they receive a refund that brings their tax liability to zero. An AMT that held onto one per cent of AGI would still produce a refund in most cases—just not as much.

I have no real hope of ever seeing this idea enacted into law. I’m interested in seeing what others think.

*Pink Floyd. No plagiarism here.

And if you like golf, here's this week's golf column.

January 17, 2002

A bite from two different apples

Early this morning I said I’d discuss the Supreme Court’s Waffle House decision.

So here’s the deal, as it were. Eric Baker, a Waffle House employee, suffered a seizure, and later the restaurant discharged him. He filed discrimination charges with the state human relations commission and the EEOC, alleging that his employer violated the Americans with Disabilities Act. The state commission ruled against him, but the EEOC continued with its own investigation.

Baker’s employment agreement with Waffle House included an arbitration clause that essentially took his personal claims about his discharge out of the court system. Or so Waffle House thought.

The EEOC filed its own ADA claim in Federal Court against the restaurant, allegedly on Baker’s behalf. Baker didn’t become a party to the EEOC suit. He didn’t seek arbitration, either.

The agency sought the usual injunctive relief, including backpay for Baker, as well as compensatory and punitive damages for him.

Waffle House challenged the lawsuit under the Federal Arbitration Act. It argued that the FAA policy in favor of arbitration had to mean that the EEOC couldn’t seek relief for Baker, or at least that the lawsuit had to be stayed pending the arbitration.

The Fourth Circuit picked a middle-ground approach in trying to reconcile the two Federal statutes. It ruled that the EEOC couldn’t seek victim-specific relief, because the FAA policy favoring arbitration prevailed over the power of the EEOC to seek damages on behalf of individuals. The Circuit Court nonetheless held that the Commission could go forward with the claims for injunctive relief.

Justice Stevens and five other Supreme Court members disagreed. They held that nothing in the FAA limited the EEOC’s independent statutory authority to seek relief, even on behalf of persons whose employment agreements included arbitration clauses. If Baker won an arbitration case with Waffle House, that might affect the eventual redress the EEOC could be awarded on his behalf, but that fact didn’t affect the initial power to seek it in the first place.

Waffle House neglected to keep in mind a fundamental element of arbitration—you don’t have to go through arbitration if you never agreed to it. It’s not as if the Waffle House ever managed to have the EEOC sign off on its employment agreements. There was no deal.

In dissent, Justice Thomas argued that this case meant that employees gain "two bites of the apple."

Actually, there are two apples, the employee’s and the EEOC’s. They each get a first bite, but they might not be able to share afterward.

As I said this morning, it’s up to Congress to find a different blend among the conflicting policies of the FAA and the ADA and other civil rights acts. It's not up to the courts to make that choice.

January 17, 2002

Why didn’t they just go ahead and get in line?

The unanimous Chicago Park District decision made me wonder--Would it have been so hard to just apply for the permit?

A group pushing for legalization of marijuana challenged the Park District’s permit ordinance for events expected to draw more than 50 people. The Park District can cite 13 specific grounds for denying the permit, such as insufficient insurance coverage. The District has a limited time to explain any denial, and there’s only one step between the initial turndown and going to court.

The District had previously granted the group some permits and denied others. For some reason, the group decided to challenge the ordinance, arguing that it was unconstitutional on its face.

Writing for the Court, Justice Scalia had little trouble affirming the District and Circuit Court decisions dismissing the case. The ordinance is a straightforward, content-neutral time, place, and manner regulation. It’s not directed at speech. It covers all park activities. The ordinance simply provides a reasonable method to balance claims for limited public space, maintain public safety, and "assure financial accountability for damage."

One aspect of the decision also looks promising. This lawsuit was a "facial validity" challenge. The plaintiffs didn’t bother to wait for an actual permit denial before filing their suit.

I’m not a fan of facial validity challenges. Most of the time they seem just like advisory opinions, and don’t meet the normal requirements for a real case or controversy.

The Court noted that even a content-neutral permit process could be abused, for example in the way that waivers might be granted. Nonetheless, "abuse must be dealt with if and when a pattern of unlawful favoritism appears, rather than by insisting upon a rigid, no-waiver application of the permit requirements."

Perhaps this little reminder to deal with a real case will help reduce the impulse to file a First Amendment challenge based solely on what might happen.

January 17, 2002

Supremes endorse common sense.

A busy Wednesday. Regular work, then a board meeting, then finishing the weekly golf column on deadline. I managed to find time to read three new U.S. Supreme Court opinions that point to a comforting trend. (Reading them counts as regular work, an added bonus.)

In two of the cases, the Court endorsed a common sense analysis of constitutional rights. The first case, U.S. v. Arvizu, is a Fourth Amendment traffic stop decision involving more than 100 pounds of marijuana (obviously intended solely for personal use). The second case, Thomas v. Chicago Park District, is a First Amendment decision involving park permits.

In the third case, EEOC v. Waffle House, Inc., the justices gave appropriate deference to Congressional intent. The result is not so great from a policy perspective, but the way to fix that problem is by amending the law, not by evading that difficult process with a questionable judicial interpretation.

I'll deal with the last two cases later today (it's about 1 a.m.), but for now here's my take on the Arvizu decision.

A border patrol agent made a routine traffic stop on an unpaved road in southeastern Arizona, in an area known as a pipeline for smuggling near the Mexican border. Kids in the car waved at him, and the vehicle was moving through the area during a patrol shift change. Based on his other observations during the vehicle registration check, including the way the driver reacted to him, the agent eventually searched the vehicle, and the marijuana was discovered.

On appeal after conviction, the Ninth Circuit Court of Appeals reversed. The appellate court carefully and separately reviewed each of the factors relied upon by the officer and the trial court to support the search. They found a few of the facts capable of innocent interpretation and others simply insufficient to justify the search. 

The Supremes then reversed the Ninth Circuit. When police officers make these kinds of traffic stops, any search must be justified based on a "totality of the circumstances" approach. Cops can't be fairly expected to weigh the relative merits of each of the elements that give them more than a mere suspicion or hunch that something's wrong. It's enough if the stated factors taken together support the reasonable suspicion needed to justify the kind of search that took place on that dusty border road.

This makes sense. The particularized form of second-guessing that the Ninth Circuit engaged in simply doesn't. It strikes me as too sterile, too disengaged from the reality of the fluid decision-making process that police officers must use in such cases.

This holistic approach to evidence works, and not just to support the police decisions. I lost a DWI revocation appeal years ago that helps prove the point.

A car approached the area where the police had set up a sobriety checkpoint. Within clear sight of the cops, the driver turned quickly into a driveway, backed out, and headed the other way. An officer immediately chased the car and stopped it, and sure enough the driver was impaired by demon rum.

The only basis to support the traffic stop was the mighty suspicious but perfectly legal U-turn within sight of the checkpoint. The cops didn't observe any violation of the traffic laws, such as speeding or weaving. There were no Delaware precedents, and the case law in other jurisdictions was divided.

The judge decided that the U-turn by itself simply didn't provide a reasonable suspicion of wrongdoing to support the stop, and overturned the revocation. It was clear that if the cops had seen a single traffic law violation in addition to the U-turn, that would have been enough.

I can't say I was pleased with the result, but I couldn't really fault the judge's reasoning.

I'll write about the other two cases after work today. They're also intriguing, but I'm tired.

January 15, 2002

Our Friends the Corps of Engineers

Today the U.S. Army Corps of Engineers issued new rules governing wetlands. The revised regulations provide the tantalizing prospect of restoring some balance in the social/economic policies governing development in ecologically sensitive areas, whether public or private.

It’s tantalizing because each district office of the Corps will have discretion in administering the new rules. The use of that discretion in practice may be less beneficial than Congress or the Bush Administration had in mind, at least for publicly funded programs.

These rules involve what are called Nationwide Permits (NWPs), required from the Corps to disturb wetlands and streams when building projects such as bridges. The NWPs are mainly limited to construction activities with minimal real impacts on wetlands.

Among the amendments to the previously proposed rules, according to the Washington Times, "[t]he most significant is a redefining of the ‘no net loss’ standard, a one-for-one replacement of wetland acreage. Rather than require the one-for-one standard for individual projects, the replacement goal must be met or exceeded in the entire program…."

The new regulations allow applicants that must mitigate for wetlands impacts to provide replacement wetlands that will benefit the same watershed, and not necessarily in the same stream or wetland as the area directly affected by the project.

For transportation departments, this means that a promising multiple-acreage candidate location for a wetlands mitigation site could be used for more than one project. That would minimize the cost of creating small mitigation sites on each affected stream or wetland area. Permitting this option creates the added benefit of recognizing the fact that the larger a newly created wetland is, the better its chances are to take hold and remain a viable wetland.

If applied appropriately, for example, this new rule could speed up the process of building new bridges, while still meeting valid environmental concerns. Considering that some DOT projects can take a very long time to design, obtain permits, and then build, that’s not a small consideration.

The discretionary problems may arise when the new rules go into effect March 16. When I talk to my counterparts in other states, I’m sometimes surprised at what the Corps' districts in their areas will approve, compared to my clients’ experience. In addition, many public agencies often can’t help feeling that the Corps is far more restrictive with them in its application of wetlands rules than when the Corps deals with the private sector. Wait and see, I guess.

The Times also reported the comments of Julie Sibbing, a wetlands specialist for the National Wildlife Federation: "These permits certainly signal the end of 'no net loss' as a policy of the United States."

It’s so nice to see that the environmental lobby continues to remain balanced and thoughtful in its approach to wetlands policy.

January 15, 2002

What did Delaware? A New Jersey, apparently.

The folks at Best of the Web today gleefully noted that somebody needs a geography lesson. The graphic accompanying the White House's web site for a story on the education bill shows Delaware as the southern half of New Jersey, while the real Delaware is blended into Maryland.

Geez. It's enough to give us native Delawareans a complex or something. It also doesn't look too good that this screw-up came as part of an education initiative, does it?

For those who need a little help remembering:

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Delaware

Not Delaware

January 15, 2002

A New Gay TV Channel? Fabulous!

Our home is just outside Rehoboth Beach, a popular Mid-Atlantic summer resort. It's a great place to live year-round, actually, for all kinds of people. Our neighborhood is a good-sized mix of families with kids, empty-nester retirees, and gay couples. (Halloween is really big around here.)

I burst out laughing at today's Washington Post piece by Hank Stuever. He suggested a possible schedule line-up for Viacom's proposed premium cable channel dedicated to gay programming. Some of my favorites:

The Real World: Rehoboth (reality): Find out what happens in the summer rental house when 23 men (it was supposed to be seven) have to stop being polite and start getting real.

Everybody Hates Andrew (cartoon): Once-sensible conservative pundit starts a contrarian Web site with his wisecracking pet beagle.[I like Andrew, even if he prefers Provincetown.]

It Was, You Know, Okay(dining): Two men (formerly boyfriends, now "business partners") travel to other cities and review trendy restaurants in a peevish manner.

Breeder Lane (drama): Daily life in a cul-de-sac of straight people involves cookouts, soccer practice, Lamaze classes. Critically acclaimed, diversity-oriented glimpse of life in another world.

Thanks, Hank!

January 14, 2002

No food snobs here

Matt Welch returned to blogdom last weekend, with an entertaining piece about the European versions of McDonalds restaurants.

Welch took care to note that he’s not usually a big McD fan: "I go to McDonald’s about once a year in the States (awful food, really)...."

I’m not that finicky, either here or abroad.

Two summers ago my wife and I stayed at the Royal British Hotel in Edinburgh, Scotland. Nice place, and the room rate included the Full Scottish Breakfast. As they defined it, the meal included the following:

Two eggs,
Toast,
Sautéed mushrooms,
Scottish sausage,
Scottish bacon,
Grilled half-tomato, and

Blood Pudding.

The fried pudding disk was centered on the plate. It was about half the size of a hockey puck, and looked every bit as appetizing.

After about thirty seconds, I looked up and said, "Those of us who grew up eating scrapple shouldn’t make any smart remarks about Scottish cuisine. Pass the ketchup, please."

Wasn’t too bad, actually. Needed a little salt.

January 13, 2002

"Peace Process" = WBOM

Acronyms are handy things. I come across them in my regular work all the time.

For instance, when there enough NIMBY people incensed about LULUs, you can achieve the BANANA effect.

(For those unfamilar with the terms: NIMBY—Not In My Back Yard; LULU—Locally Unwanted Land Use, e.g., a prison or new highway; and BANANA—Build Absolutely Nothing Anywhere Near Anything)

Acronyms sometimes help remind us what’s really going on. If I read about certain local groups "expressing concern about the total impact" of a proposed project, using NIMBY is a quick way to identify their actual intent.

I’d like to see a good acronym developed for "peace process," at least as that tired old phrase is used to refer the Palestinian/Israeli war. For Arafat and his gang, "peace process" is simply War By Other Means (WBOM). The recent capture of 50 tons of weapons and ammunition from a freighter in the Red Sea makes the point in a fairly obvious way.

At least it should, but I still see some hand-wringing about how this incident "might affect the peace process." All that the capture of this shipment really means to me is that the Israelis won this particular skirmish in their continuing WBOM with the Palestinians.

Here’s my suggestion: think WBOM whenever you see "peace process" and Arafat used in the same story.

I welcome others’ suggestions for a better acronym.

January 13, 2002

Blogger Primers

One of the benefits of reading other bloggers is the opportunity to learn something from people who know their fields. More Than Zero gave a good description in his January 12 posting about the differences in regulatory treatment among the types of investment instuments used by companies such as Enron.

He's correct that the level of regulation sometimes fails to have an impact on preventing fraud. Exemptions from intensive regulation are frequently based on limits on who may invest in the particular instrument, on the theory that sophisticated investors need less governmental protection. The unfortunate fact is that idiot-proofing can only have a limited impact on human beings, regardless of apparent sophistication. Fraud schemes work in both the regulated and unregulated environments because too often hope triumphs over experience and careful thinking.



Contact Information:

Fritz Schranck
P.O. Box 88
Nassau, DE  19969
USA

fschranck@sneakingsuspicions.com


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© Frederick H. Schranck 2002