Category Archives: Courts

Misunderstanding

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It’s surprising that so many so-called journalists misunderstand, but it’s a widespread failure, and it includes too many economists, as well. For good or ill, there is a loophole in the 2018 tax law that’s providing windfalls for American companies.

The loophole is a mismatch of critical dates between that law’s Section 245A and Section 78. The former lets US companies bring home their foreign profits without paying US taxes, with an effective date of 1 January 2018; the latter was intended to prevent inappropriate tax breaks in the old international tax system, with an effective date of 31 December 2017. Those 24 hours are a loophole far beyond the size of a single day. Three companies, for instance, are claiming—and one has already won in court—tax refunds:

[Varian Medical Systems won its case for] $150 million in deductions. The electronics manufacturer Kyocera and the food distributor Sysco have similar court cases pending, each involving more than $100 million in deductions.

Others are putting together their own refund filings that, in their aggregate will be worth several tens if not hundreds of millions of dollars more.

The misunderstanding is not about the Congressional gridlock blocking reconciliation of those two dates, as the writer of the Wall Street Journal article went on about, even though she got it right in her lede.

That [loophole] is now allowing big companies to save tens or hundreds of millions of dollars that otherwise would have gone to the government.

The misunderstanding—an understanding which goes to the core of our tax system and its and its constitutionally mandated purpose—is this:

The Varian case highlights how gridlock in Congress can cost the public….

No. Leaving money in the hands of our private economy, or returning money to those hands, is not a cost to the public—we American citizens and our enterprises are that public—but a benefit to the public, to us. Leaving the money or refunding it does reduce the amount of money accruing to Government, but that also could be a benefit to the public by restricting the money available to government to misspend. That latter, though, puts the onus on us in the public to elect politicians who will honor that restriction by not borrowing to spend more than government takes in and by not raising taxes to match excess spending.

Then there’s this:

A recent ruling by the Supreme Court will put more emphasis on the literal text of laws….

Literal text of the laws: the text of a law is what Congress intended the law to say, else Congress would have passed a different law saying something different.

And that’s as it should be, since the American system of governance restricts legislation to Congress and judicial action to the limits of those laws’ text. Judge Emin Toro, writing in his ruling on the Varian case, was quite clear on this:

Congress “spoke clearly” when it selected the mismatched effective dates. “Appeals to policy and Congress’s overarching purpose cannot overcome these choices[.]”

Activist judges—and that’s the only kind that presumes to legislate from the bench, that presumes to Know Better than the rest of us what a law should be—are broadly held as Truth Sayers by the Left and its Progressive-Democratic Party. These unelected representatives judges writing law rather than ruling within it are the bane of American liberty.

“Conservative Leanings”

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In a Wall Street Journal article centered on a Federal judge’s ruling against the FTC’s rule presuming to ban noncompete agreements between employers and employees, the author quoted Mark Goldstein of ReedSmith LLP who characterized the Supreme Court as having conservative leanings.

This is a misapprehension that’s all too widespread among both conservatives and liberals.

In fact, the Supreme Court does have, currently, a strong originalist/textualist bent. There’s nothing particularly conservative, or liberal, in originalism/textualism, though; there is only rule of law.

This core tenet of our republican democracy runs contra activist judges’ and today’s political liberals’ demand for rule by law. That demand is epitomized by the late Justice Thurgood Marshall’s proudly self-important statement that he rules and expects the law to catch up and by today’s Progressive-Democrat administration’s repeated attempts to cancel student debt after each of our courts’ repeated strikes of prior attempts as contrary to existing law.

A Supreme Court Justice Doesn’t Understand our Constitution

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The Supreme Court has a very good code of ethics—pronounced so by no less a light than Justice Elena Kagan—but it lacks teeth sufficient enough to suit that same light. So Kagan wants—and she’s serious—a panel of lower court judges to pass judgment on claimed ethics violations done by a Justice.

There’s a problem with that. Here’s what Art III, Section 1, of our Constitution says about our courts and our judges and Justices:

The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.

The editors of the WSJ understand this full well:

The Supreme Court was established by the Constitution, but the lower courts were created by Congress. A lower-court tribunal would therefore subject the High Court to supervision by a creature of Congress, which is constitutionally dubious.

It’s not just dubious; such a travesty would be a blatant violation of the separation of powers that our Constitution has created for our Federal government.

How is it that the Light of the Supreme Court does not understand this?

One More Thought

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Or maybe two….

My first concerns Corner Post, Inc v Board Of Governors of the Federal Reserve System. In this case, the Supreme Court ruled 6-3 that newly created businesses really are allowed to argue against decades-old regulations, here the Fed’s long-standing cap on credit card fees that card issuers are allowed to charge.

Justice Ketanji Brown Jackson wrote in dissent,

The tsunami of lawsuits against agencies that the Court’s holdings in this case and Loper Bright [which removed Chevron defense] have authorized has the potential to devastate the functioning of the Federal Government.

In an era of burgeoning regulatory, vice Congressional, governance of our economy, and in an era where Federal government officials routinely ignore Federal law (immigration) and Court rulings (student debt “forgiveness”) to go about doing whatever an official feels like doing whenever one of them feels like doing it, it’s hard to see the downside of limiting the functioning of the Federal Government, much less to see any “devastation.” The tsunami of lower court lawsuits is simply the dam holding back private citizens’ and our businesses’ objections to such overreach finally bursting. The flood has every chance of flushing away a large part of that overreach detritus before it abates. And abate it will, just as even tsunamis do.

My second thought concerns the worry of Kevin King, a partner with Covington & Burling, regarding the Federal government’s reduced legal ability to blow off the objections of us private citizens and our businesses to government behaviors and the resulting potential for significant differences in interpretation of statutes by courts to develop:

The risk is that you’re going to get variation over geography, a patchwork of decisions[.]

Again, I say, “Yeah, and?” King’s worry seems centered on the possibility that the federated republican democracy nature of our constitutional governance, where the several States are, in their aggregate and individually, the equal of the central government regarding domestic matters might be starting to reassert itself. Furthermore, those geographic disparities are simply the noisy nature of democracy and a reflection of the plain fact that the citizens of one State might not have the same imperatives as the citizens of other States.

There’s also that Commerce Clause in our Constitution, a clause too long dormant, that can be put to the use for which it was devised and included—to smooth over (not paper over) the larger differences among the States where those differences too much impact the separate doings of other States.

Both of these are outcomes to be welcomed, not feared. Especially are they not to be obstructed.

Presidential Immunity

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Justice Sonia Sotomayor waxed hysterical in her dissent to the Supreme Court’s ruling on Presidential immunity from prosecution for alleged crimes committed while in office.

Orders the Navy’s Seal Team 6 to assassinate a political rival? Immune. Organizes a military coup to hold onto power? Immune. Takes a bribe in exchange for a pardon? Immune. Immune, immune, immune.

Maybe some broader context is in order.

Consider, for instance, our individual right to commit piracy on the high seas, so long as that, too, is done with the express permission of our Federal government (the immunity parallel is that the sovereign, We the People, have granted a considerable measure of permission to a President by electing him to that office).

The Federal government’s authority to authorize piracy by us private citizens exists in so many words in Article I, Section 8, of our Constitution:

To…grant Letters of Marque and Reprisal….

It’s instructive that that clause comes immediately on the heels of this clause:

To define and punish Piracies and Felonies committed on the high Seas….

It’s hard to get any clearer than that: our Constitution authorizes our Congress to define what piracy is and then to authorize us private citizens to commit what otherwise would be that piracy by sailing as privateers under Congress-issued Letters of Marque.

Immune, immune, immune, indeed.

 

H/t AJ Jacobs, writing in The Free Press