Monday, January 22, 2018

Hardball Politics and Unconstitutional Ideological Targeting by Republicans

by Neil H. Buchanan

Taxes are not supposed to be in the news right now.  Back in December, Republicans abandoned all pretense of legislative order and sensible lawmaking to pass their stroke-the-rich tax bill, which Donald Trump happily signed.  And now we are supposed to have moved on, which is pretty much what has happened.  Why continue to worry about the last tragedy when new tragedies are hitting us in the face every day?

It is amusing to note, however, that Trump and the Republicans apparently think that their awful tax bill was a political win for them, which means that they are the ones who want to keep talking about it.

In his inimitably narcissistic way, Trump even argued that the current government shutdown is all about the tax law.  As The New York Times reported on January 18: "Traveling in Pennsylvania, Mr. Trump accused Democrats of provoking a shutdown to drown out discussion of the Republican tax overhaul. 'I think the Democrats would like to see a shutdown in order to get off that subject,' Mr. Trump told reporters before delivering a speech."

The words "detached from reality" seem especially apt here.

Given how unpopular the tax bill was, and given that the bill is going to be the Democrats' best non-Trump talking point in the upcoming elections, the idea that Democrats would want to change the subject away from the tax bill is absurd.  Democrats should be spending every day hoping to get people to remember just how bad this bill is, because the Republicans handed them a huge political win with this reviled and regressive mess of a bill.

It is true that companies have been trying to suck up to Trump by making splashy pronouncements about how the corporate tax cuts are having positive effects, even though the companies' moves are mostly either window dressing or entirely unconnected to the new law and do not even fit within the Republicans' theory of how the tax cuts are supposed to work.  Nevertheless, a spokesman for the U.S. Chamber of Commerce (hardly a group that is hostile to Trump) admitted that such moves are "an extremely clever way to get the president’s attention [and] probably gets them some good points inside the White House."

I realize that Trump can never be taken at his word, especially when he is flailing about in an effort to gain political advantage.  After all, he is also claiming that Democrats planned the shutdown to distract everyone from the gala celebrations of Trump's one-year anniversary as president.  Apparently, Democrats were willing to shut down the government in pursuit of a two-fer, ruining Trump's happy tax talk and reducing his ego gratification, notwithstanding the political risk of Republicans sliming Democrats for being too cozy with "illegals."

In any case, Trump and the Republicans seem to have convinced themselves that their extremely unpopular tax bill is somehow going to become popular.  Stranger things have happened, I guess.

In the meantime, people are trying to figure out how to respond to the bill as it exists, and the leaders of blue states might have found a particularly satisfying way to frustrate Republicans' efforts to target citizens who tend to vote for Democrats.

One of the most nakedly partisan provisions in the 2017 tax act was the reduction of the deductibility of state and local taxes (SALT).  Republicans in Congress figured out that they could punish upper middle class voters in blue states by putting a limit on the deduction for SALT, effectively increasing the federal tax liabilities of educated professionals in states with relatively high state taxes, all of which voted against Trump.  Clever.

The Republican response to any claim of unfairness is that people who do not like to pay more in taxes can now put pressure on their state legislators to reduce the state's tax take, which fits into Republicans' theory of government -- or more accurately their theory of anti-government.

On its face, then, this change in the federal tax code could simply be one of many ways for the party that controls the government to pursue its policy agenda.  It gives people an incentive to do what Republicans want them to do.  Playing hardball in politics is not necessarily unfair.  (And this is hardly the Republicans' only attempt to punish their perceived enemies, given that the tax bill includes a tax on colleges and universities.)

As Michael Dorf pointed out in a column and a short note last month, however, the Republicans' move was not merely an especially shameless attempt to pursue their extreme agenda.  By targeting those who voted against them, Republicans actually violated the Constitution.  He concedes that this violation is unlikely to be struck down by the courts, but as he put it, this "does not mean the [constitutional] objection is invalid; it just means that there are institutional limits to where the claim can be pursued."

As an interesting comparison, long-time readers of my columns might recall the dark days of debt ceiling standoffs, when Professor Dorf and I argued that if President Obama had ever failed to pay the government's bills in full and on time, he would have violated the Constitution.  One of our most prominent antagonists at the time was Harvard Law School's Laurence Tribe, who asserted that the debt ceiling supersedes the government's spending obligations and thus that Obama would have had to stiff people who had valid legal claims to payments by the federal government.

Interestingly, Tribe offered a throwaway line that at the time seemed uncontroversial.  Yes, he conceded, if Obama were to decide which bills not to pay using some nefarious decision rule -- something crazy and unthinkable like, say, favoring blue states over red states -- then he would be violating the Constitution.  But other than such a completely outlandish move as that one, Tribe insisted that his analysis was better than ours.

There is a very good chance that there will be another debt ceiling crisis later this year, at which point I will revisit the relevant arguments that will again arise.  For now, however, my point is that Tribe's deliberately absurd hypothetical was a near-perfect description of how Republicans have actually abused their power.  Amazingly, that constitutional violation is not even on the top-50 list of outrages that have been perpetrated by the Trump-Republican machine.

But let us imagine that this actually is merely a tough version of standard politics, with winners and losers feeling the consequences of elections.  Hardball politics can be played both ways, and it should be no surprise that political leaders in the affected states -- California, New York, Massachusetts, New Jersey, and others -- have been trying to figure out ways to frustrate congressional Republicans' political hit job.

Again, the SALT provision in the new tax law is bad for upper-middle-income people in blue states because such states have relatively high property taxes (due in part to high home values in and around big cities) and relatively high income taxes, all of which supports the kind of redistributive safety net that Republicans love to hate.

When the tax code is changed to eliminate or limit one deduction, however, any sentient person is going to look for other provisions in the code that could allow them to deduct the same payments.  Among several strategies, some of these states are considering (or are already in the process of) setting up "charities" to collect state taxes, because Republicans for obvious reasons did not dare limit the deduction for charitable contributions.

For anyone who thinks that this cannot possibly work, because the charitable deduction has always been understood to be unavailable to people who are using such contributions for personal gain (that is, not truly being charitable), there is a bit of delicious irony.  Religious conservatives succeeded several years ago in gaining legal blessing to deduct their "contributions" to religious schools, contributions that are simply payments of tuition and are thus otherwise nondeductible.

If the blue states go through with these efforts, therefore, there is a very good chance that they will be able to misuse the charitable contribution deduction because Republicans opened the door for such abuse of the tax system.  And although congressional Republicans could revisit this issue and change the tax code to close such a loophole, it seems unlikely that they could win an up-or-down vote on that provision alone, because it would no longer be hidden by the other jaw-droppingly bad provisions in the larger tax bill.

But is this a good idea?  Should liberals actually be trying to reduce the tax bills of arguably comfortable people in the name of foiling conservatives' attack on state governments?  The answer is yes, as I will explain in a follow-up column.

13 comments:

John Barron said...

Libs have to start playing hardball. The price of a debt-ceiling increase s/b repeal of the Bribery Yields Fantastic Returns Act of 2017. Make 'em "go nuclear," if necessary.

Failing that, at the state level, impose a 20% corporate income tax, calculated on the basis of GAAP (a/k/a, "street") income, apportioned on the basis of sales. Companies can move out of states, but ceding enormous markets like CA and NY is cutting off your nose to spite your face. Changing the corporate income tax would actually encourage corporations to stay in CA/NY, as they aren't taxed on world-wide income (a major sore-point, which is why you keep intellectual property and inventory in Nevada).

Next, impose a 70% state estate tax on estates over $100M (lower rates below). Tax the last dollar of the estate for non-residents, and disregard loans taken out on buildings for presumptive avoidance purposes. DT can't move his Towers to North Dakota.... :)

Next, impose real state tax reform, by having one state sales tax. There are ~10,000 taxing districts. Compliance is a nightmare.

Imagine treating new loans on commercial real estate as sales proceeds, and abolishing the like-kind exchange rules. Surtaxes on pass-through entities, such as DT's 500 LLCs (probably all check-the-box partnerships).

You build a better mousetrap; I'll build a better mouse.

The purpose for these taxes? Infrastructure, real tax relief for the poor and middle class, and education subsidies. We can't win the century without them.

Shag from Brookline said...

With respect to the #Trump/Miller/RyanGovShutdown of 2018, this essay reviewing two recent books on the KKK in the early 20th century may provide background to consider:

"The KKK’s Attempt to Define America"
Two new books explain how the Klan gained so much power in the 1920s.
By Eric Herschthal January 16, 2018

https://newrepublic.com/article/146616/kkks-attempt-define-america

A major political accomplishment of the KKK then in rejuvenation (reportedly 4-6 million members) was the enactment of the Immigration Act of 1924, as the KKK was aiming beyond African-Americans.

John Barron said...

Shag:

At the end of the day, either you are incapable of rational argument or unwilling to engage in it here because you know that your position is a ("Roger"?) stone-cold loser. Tragically, you again indulge in an ad verecundiam argument: because New York's village idiot or the KKK believes X, it couldn't possibly be true.

One cannot argue with Thomas Malthus, and math is a pesky thing. And again, I raise the obvious question: If 500,000,000 Chinese or Indians (more than the entire population of South America) showed up on our northern border tomorrow morning, would you let them all in, and if not, why not?

I'd like to see a thoughtful discussion as to what we would like our country to look like in 2068, but Shag is content to indulge in Trumpery.

Shag from Brookline said...

John obviously wishes to push the Trump/Miller/Barron talking points on immigration policy at this Blog. Now if John had his own blog, he could control the "debate." Alas, John and I are guests here at this Blog. I don't know if Mike et al wish to open this Blog to an open debate o immigration policy.

John would "... like to see a thoughtful discussion as to what we would like our country to look like in 2068, ...." How thoughtful was John's comment to begin this thread? Consider John's hyperbole of " ... 500,000,000 Chinese and Indian ... showed up on our norther border tomorrow morning ....?" Is john expanding Trump's wall to the northern border? I suggested this and seawalls along both coasts, tongue in cheek, of course, on another thread at this Blog. What might China and India do with their nuclear weapons if they came and were not shown hospitality?

The Malthus theory and global warming are international concerns that America alone cannot resolve. Cpmsoder that circumstances could occur such that hordes might be compelled to leave America (and in what order?). Where might they go?

John can play with his coloring book on this all he wants: It's all Trump/Miller/Barron talking points.

John Barron said...

You're the one who keeps bringing it up, Shag. I'm not as obsessed with it as you. I mean, the KKK???

I'm far more interested in discussing a way forward. Tactics. Forcing the Rs to "go nuclear," setting precedent that will allow the damage to be undone. Just not willing to fall on the sword of amnesty for all illegals (not popular) to lose the larger war.

On the Court, requiring them to discharge their non-delegable duty to attend to error-correction will demand that it be at least trebled in size. Ditto, the circuit courts, which have devolved into de facto certiorari courts. Republican bias, cured.

WRT the House, an increase to 2,000 seats will all but inter the gerrymander. (As the Court has been predictably Republican, I'm not sanguine that the problem will be fixed judicially.)

Cuomo ensured that the tax problem won't be fixed in New York. No courage at the state level, to be honest.

Think "big picture." I stand ready to debate immigration where it is relevant, but it doesn't appear to be particularly relevant here.

John Barron said...

Shag: "Consider John's hyperbole of " ... 500,000,000 Chinese and Indian ... showed up on our norther border tomorrow morning ....?"

You did attend law school, didn't you? Thought you'd be able to recognize a reductio ad absurdum argument. Socratic Method 101. What is your limiting principle? You demurred the first time.

This remark is not about immigration, but about principled and logical argument. When a lawyer doesn't have a case, he goes off on an irrational rant. Just waiting for Hitler to raise his ugly head.

There is a time and a place for an immigration debate, but this particular article does not seem to be it. Why anyone would interject Robert Byrd's long-moribund KKK into the debate is not entirely clear.

Shag from Brookline said...

I guess it was too subtle for john regarding the KKK's major political success in helping get the Immigration Act of 1924 enacted. Charlottesville was a reflection of the this good ole days for the demonstrating white nationalists/supremacists. It was "Miller Time." Maybe John could identify any subsequent immigration laws that he might agree with.

Shag from Brookline said...

By the way, John, your taxing proposal(s) by states seem to " ... recognize a reductio ad absurdum argument." Socratic Method CI.

John Barron said...
This comment has been removed by the author.
John Barron said...

Shag: "Maybe John could identify any subsequent immigration laws that he might agree with."

Since you asked.... https://www.youtube.com/watch?time_continue=29&v=m3yesvvYEvs This notorious neo-Nazi ["Blue Dress Bill" Clinton] agrees with me. :)

David Ricardo said...

Mr. Barron

We (the editorial 'we, I am speaking only for myself) have heard and listened to your arguments and your position with respect to immigration. We do not agree with it for reasons stated and we view your somewhat hysterical and personal attacks as being an indication of the weakness of your logic and a lack of foundation for your opinion. But we do know where you stand.

The post by Mr. Buchanan dealt with tax policy and did not refer to immigration policy. As you have now made your positions on immigration clear we would respectfully ask that you refrain from posting here on that issue unless it is the subject of the original post. And we would also advise you that your personal attacks detract from rather than add substance to your positions. This is one of the most serious and intellectually valid Forums on the internet. Please respect that.

John Barron said...

DR: "We do not agree with it for reasons stated and we view your somewhat hysterical and personal attacks ..."

Shag: "John can play with his coloring book on this all he wants"

And let us not forget YOUR arguably racist name-calling (the word "vulgarians").

DR: "...as being an an indication of the weakness of your logic and a lack of foundation for your opinion."

Seems like you two are the ones persisting in hurling personal attacks. Moreover, you don't object to Shag's persistent ad verecundiam arguments. And yet, you allege flaws in MY logic?!? Res ipsa loquitur.


DR: "The post by Mr. Buchanan dealt with tax policy and did not refer to immigration policy. As you have now made your positions on immigration clear we would respectfully ask that you refrain from posting here on that issue unless it is the subject of the original post."

Shag: "A major political accomplishment of the KKK then in rejuvenation (reportedly 4-6 million members) was the enactment of the Immigration Act of 1924, as the KKK was aiming beyond African-Americans."

Me: "You're the one who keeps bringing it up, Shag. I'm not as obsessed with it as you. I mean, the KKK???

I'm far more interested in discussing a way forward. Tactics. Forcing the Rs to "go nuclear," setting precedent that will allow the damage to be undone. Just not willing to fall on the sword of amnesty for all illegals (not popular) to lose the larger war."

Are you sure you don't have me confused w/Shag?


"He who is without sin, may cast the first stone." Jn. 8:7. And you absolve Shag, even though he was the one who brought the topic up here--my post was about the tax laws and how the Act can and should be opposed. "Different weights and measures--the LORD detests them both." Prov. 20:10.

We disagree. Why do you have to do it so unethically?

Shag from Brookline said...

Here is the 7th paragraph of Neil's post:

***

I realize that Trump can never be taken at his word, especially when he is flailing about in an effort to gain political advantage. After all, he is also claiming that Democrats planned the shutdown to distract everyone from the gala celebrations of Trump's one-year anniversary as president. Apparently, Democrats were willing to shut down the government in pursuit of a two-fer, ruining Trump's happy tax talk and reducing his ego gratification, notwithstanding the political risk of Republicans sliming Democrats for being too cozy with "illegals."

***

My 1:57 PM comment relates to the "illegals" reference. I had become aware of the essay I referenced on Sunday via the Legal History Blog's Sunday book review feature.