Is Imposing A Wealth Tax A Good Idea?

(Image via Getty)

A few days ago, a group of wealthy Americans wrote an open letter to the 2020 presidential candidates asking that they and their peers — 0.1 percent of the richest Americans — be subject to a wealth tax. The letter cites Senator Elizabeth Warren’s campaign proposal: a 2 cent per dollar tax on assets after a $50 million exemption and an additional 1 cent on the dollar tax on assets over $1 billion.

They claim that the revenue from the tax would be used to fight climate change, expand health care, provide student loan debt relief, and modernize infrastructure to name a few.

Finally, they claim that the majority of Americans support a wealth tax for the financially well off. Of course people will support a tax that they don’t have to pay.

These calls to “tax us more” are nothing new. Every so often, usually before an election, a faction of the ultra-wealthy for whatever reason thinks their group does not pay enough taxes. Some believe they are being enlightened and altruistic. Others suspect they are suffering some kind of wealth or privilege guilt.

Critics say that these statements are illusory and even condescending. If these people care so much about the deficit and inequality, they should be the first to contribute to the public fisc. They can do this either by artificially inflating their tax bill or making a donation to the Federal Bureau of the Fiscal Service. According to the bureau’s website, for the last three years, the average yearly donation totaled $2.69 million. This is not a lot considering that the federal government received $3.38 trillion dollars in revenue during the 2018 fiscal year. From that perspective, the yearly donations are not enough to cover the daily accrued interest of the federal debt. It’s like going to a Kickstarter page and donating a measly $1 in exchange for a simple “Thank You” email.

I’m not going to opine on whether a wealth tax will work. Instead, I want to highlight some of the issues I had with this letter.

First, they might regret this if the wrong people are in charge of the government. While the authors claim that the letter is nonpartisan, it is very likely they are reaching out to the Democratic presidential candidates as they are more likely to implement a wealth tax. They also claim to be more receptive to addressing climate change and wealth inequality. But let’s suppose the Republicans sweep the 2020 elections and proposes their own version of a wealth tax. Would the authors support it then? Will they agree with the conservatives’ approach and interpretations to everything they addressed in their letter?

Second, there might be more effective ways to accomplish the author’s goals. Look, it is great to want to improve health care and fight climate change and wealth inequality. Few people would disagree although reasonable minds can differ on how to do it.

There are many non-profit organizations that exist to improve the environment or to provide free or low-cost health care. Some of them could face financial problems if their donor base erodes due to a recession or some other unexpected event. The authors can use their fortunes and connections to either help new or existing organizations have a steady donor base. Or they can set up new organizations in an underserved area.

As the presidential candidates prepare their agendas, the wealth tax will be one topic up for debate. The open letter indicates that there is at least some support from unlikely allies. But will their peers agree with them? Will there be a feasible way to value taxable wealth when the ultra-wealthy are likely to own all kinds of assets? Is it better to encourage the wealthy to invest in the private sector or non-profits instead? And will it create any distortions in economic behavior? These are the questions I hope will be answered as the presidential race continues.


Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Morning Docket: 06.26.19

Robert Mueller (Photo by SAUL LOEB/AFP/Getty Images)

* After being subpoenaed, former special counsel Robert Mueller has agreed to testify in open hearings before the House Judiciary and Intelligence Committees on July 17. How rare that someone would actually comply with a Congressional subpoena these days! [Washington Post]

* “What are they hiding? Tell Joe Biden. Trump released his list. Why won’t you?” In case you missed it, a conservative legal advocacy group plans to spend big money on national ads demanding that 2020 Democratic presidential candidates release a shortlist of their potential Supreme Court nominees. [POLITICO]

* Harvard Law’s Pipeline Parity Project, a group that’s working to end mandatory arbitration among Biglaw firms, is going national. Now known as the People’s Parity Project, the group has expanded its mission and hopes to form chapters at least six other law school campuses. [Law.com]

* “It is time to do away with the stigmatization of women who challenge discrimination and harassment in their workplaces.” Three of the four women who were previously proceeding anonymously in their gender bias case against Jones Day have come forward to reveal their names. [Big Law Business]

* The latest high-dollar addition to the Yankees is Mike Mellis, formerly the top lawyer at Major League Baseball, who will slide into home as the Bronx Bombers’ executive vice president and chief counsel. [New York Law Journal]

* Timothy Thornton, CEO of 150-lawyer Greensfelder Hemker & Gale, RIP. [American Lawyer]


Staci ZaretskyStaci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

Mnangagwa talks up currency reform but business wary – The Zimbabwean

Emmerson Mnangagwa

Mnangagwa, who replaced longtime leader Robert Mugabe after an army coup in November 2017, is trying to attract investment and lift growth after a litany of failed economic interventions under his predecessor.

His government said on Monday the country’s interim RTGS dollar would be the only legal tender, ending a decade during which multiple currencies including the U.S. dollar had been accepted in shops.

But the surprise manner in which the latest currency reform was announced, and Zimbabwe’s track record of printing money to plug holes in its public finances, mean many people do not believe it will succeed.

With inflation close to 100% last month and desperate levels of unemployment, Zimbabweans are impatient for progress. Unions are threatening strikes if the government does not overturn its policy.

“It has always been clear that for our economy to truly take off, we need our own currency,” Mnangagwa said in a statement.

“While the multi-currency regime helped stabilise the economy, it did not give us control of monetary policy and left us at the mercy of U.S. dollar pricing which has been a root cause of inflation.”

In the capital Harare, major grocery and fast food chains appeared to heed the directive to stop accepting foreign currencies, but some informal traders selling clothes, car parts and electronics vowed to defy the new rules.

“If I stop taking U.S. dollars, how am I going to replace my stock? I have not seen anyone who got U.S. dollars from the bank in a long time,” said a clothes seller who only wished to give his first name, Thomas.

PROTEST THREAT

The RTGS firmed slightly on the black market on Tuesday, but exchange rates were quoted in a wide range, between 7 and 11 to the U.S. dollar compared with between 11 and 12 on Monday, reflecting uncertainty about how the reform would pan out.

Traders attributed the generally firmer rate to tight availability of the RTGS a day after the central bank hiked its overnight lending rate to 50% from 15% and announced plans to try to curtail RTGS liquidity.

Zimbabwe introduced the RTGS as a transitional unit in February as a step towards relaunching the Zimbabwean dollar.

The Zimbabwe Stock Exchange’s industrial index fell 0.7% on Tuesday, breaking a sustained rally. Volumes were thinner, with shares worth 4.3 million RTGS traded on Tuesday, down from 32 million RTGS on Monday.

One sign Zimbabweans are distrustful of the RTGS is that it is weaker on the black market than on the official interbank market, where it trades around 6 to the dollar.

Analysts are sceptical that Zimbabweans and local firms will sell foreign currency to buy RTGS, as the government wants them to, unless they are forced.

They point out that Zimbabwe has few foreign-currency reserves with which to defend the RTGS.

The country’s largest labour body and the main opposition party, the MDC Alliance, sharply criticised the decision to switch to using the RTGS as the country’s sole currency.

“If the government does not reverse this ruinous policy immediately and announce U.S. dollar salary payments, we will immediately mobilise workers for mass action,” Zimbabwe Congress of Trade Unions (ZCTU) president Peter Mutasa told reporters.

The ZCTU – which groups teachers, factory workers, mine workers, farmhands and others – led protests against a 150% fuel price increase in January, triggering a violent crackdown by the army and police that left at least 12 people dead, according to rights groups.

The MDC’s head of policy and research, Tapiwa Mashakada, said the currency reform would exacerbate widespread shortages of critical goods.

“The wheels have finally come off as the Zimbabwe government has been cornered and forced to involuntarily de-dollarise without a plan,” Mashakada said. “At present Zimbabwe cannot afford a paper currency which has no economic value.”

Present-Day: On the bus from Harare to Mutoko
‪Ncube is Dressing Deep Wounds With Dirty Bandages in Unsanitary Conditions

Post published in: Business

Gigi Hadid Wants To Change Copyright Law And She Has A Point

An image where Hadid chose the timing, lighting, wardrobe, and pose… but we’re paying Getty instead. (Photo by Marc Piasecki/WireImage)

The Verge has a write-up on model Gigi Hadid’s current legal battles with the dismissive headline, “Gigi Hadid wants to rewrite copyright law around her Instagram account.” And while that’s technically accurate, it’s not really fair to the underlying argument Hadid and her lawyers are making, which is that America’s intellectual property laws were woefully unsuited to the modern world, and something needs to change fast.

This is a legal regime that supercharges patent and copyright trolls and while every legal observer bemoans the trolling culture, few are willing to stand up and demand concrete legal changes to fix it. Apparently, we need to rely on Gigi Hadid to handle that for us which — no offense to Gigi — should really embarrass every academic, jurist, and legislator.

At issue is an Instagram photo Hadid posted of herself. One would think that posting pictures of yourself is entirely fair game (or fair use as the case may be) because this is basically the language of all online communication these days. But because Hadid is a celebrity instead of your cousin, she got a shakedown request from an agency demanding payment for infringing the copyright, claiming — without much evidence — that it’s now the owner of the copyright of the paparazzo who took the picture.

There’s an argument over whether or not the copyright has been properly registered and whether or not this agency actually has an assignment to pursue this claim, but let’s push all that aside and focus on Hadid’s fair use arguments because that’s the source of the controversy here.

The memorandum of support says Hadid didn’t infringe on any copyright “because Ms. Hadid posed for the camera and thus herself contributed many of the elements that the copyright law seeks to protect.” She, the memorandum states, creative directed the photograph, not the photographer who captured her on the streets of New York City. (The photo has since been deleted from Hadid’s Instagram, but it shows Hadid standing on a street smiling in a denim outfit.)

The media coverage kind of scoffs at that, but isn’t it safe to say that Hadid provided value to the work by posing for it instead of storming past in a blur? That may not be enough to make her the actual “creative director” of the portrait — though one imagines that a professional model can frame a better picture than a guy with a zoom and a lot of free time — but it at least complicates the idea that this “work” is the exclusive creation of the photographer. There’s no real provision for this in the existing copyright regime — though Hadid does cite cases where “posing” could be deemed joint authorship — but a system that allows someone to profit off of a model’s skill without even allowing the model a limited license to share the picture on her social media cannot be the right balance of the equities. The concept that it even might be is a sign of how thoroughly broken this system is right now.

Isn’t there something about fair use that says non-commercial use gets leeway? Absolutely there is! But the agency offers the convoluted argument that Hadid posting the photo to her feed constituted a commercial use even though she sells no ads on her feed because everything a model does is implicitly commercial. But if her mere appearance is indirectly commercial, isn’t the photographer straight up stealing from her when he takes her picture? That doesn’t seem like a thread that the paparazzi would want to pull but it’s one that we should consider when we ponder how intellectual property law should work ideally.

The second factor of fair use grants leeway when the work isn’t particularly creative. From the agency’s opposition memo:

It is not just a mere snapshot of an individual on a street corner taken on a cellphone; the Photograph in this case is a highly creative work, involving a number of creative choices including timing, lighting, angle, composition, and others.

Timing? The photographer didn’t choose when Hadid would be walking by. The only thing that arguably transformed this into a carefully constructed glamor shot was Hadid deciding to stop and pose for it, bringing us full circle to the “creative director” argument above that seemed a little kooky until you started reading more of these arguments, didn’t it?

Concerning Hadid’s assertion that she somehow maintains joint copyright in the Photograph because she noticed the photographer and smiled at the moment the photographer chose to snap the shutter is preposterous. Ms. Hadid is as much a joint copyright holder in the Photograph as the subject of a biography is joint copyright holder to the words used by the author to describe her life.

Actually, these are more like the rights of the subject of a biography being a joint copyright holder with their ghost writer.

Frankly, the best argument that the agency makes is that Instagram will promote “sharing” that will obviate the need for anyone to attain a license to the work, which then robs the photographer of his livelihood. That’s fair, but at a certain point intellectual property law is about promoting progress and if our laws are inflexibly bound to protecting the market for running down Princess Di instead of the market for a free and open exchange of images through a social media platform then we’re basically protecting the whalers at the expense of electricity.

In the end, this case may or may not be a winner for Hadid but she’s making some strong points about the fundamental unfairness of the system that too many lawyers and academics uncritically defend. It’s not unlike that abominable “Tom Brady” decision that threw a wrench on the server test, we’re seeing the creaks in an aging regime that barely functioned when Sonny Bono took a hatchet to it in the 90s. It’s positively not built to deal with the modern advancements.

And when something’s out of step with modernity, the right answer is almost never to pull back the reins and stick with the outmoded system.

(Check out the briefs on the next page…)

Gigi Hadid wants to rewrite copyright law around her Instagram account [The Verge]


HeadshotJoe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

Risky Mortgage Bond Products Are Back, And Just In Time For One Last Good Bonus Season

Welcome back, HELOCs, you’ve got some work to do.

Emoluments Lawsuit Trundles On

(image via iStock)

If the Democrats controlled the House of Representatives, Donald Trump would be impeached for brazenly taking foreign money in exchange for politically favorable treatment, in violation of the Constitution’s ban on foreign emoluments.

Oh, what, the Democrats actually won in 2018? No, no, no, you must be mistaken. See, when you have such an obviously corrupt person clothed in the powers of the President of the United States, a Democratically controlled Congress would surely act on their only Constitutional method of holding such a president accountable.

Sorry. Snark off. In lieu of exercising their Constitutional duties, some 200 Congressional Democrats have filed a lawsuit over Trump’s disregard of the emoluments clause. The Trump administration has fought that lawsuit at every step. But, the White House just lost its latest challenge. U.S. District Judge Emmet G. Sullivan declined to issue a stay in the case, which the Justice Department had requested. From the Washington Post:

U.S. District Judge Emmet G. Sullivan declined to put the case on hold and to block lawmakers from immediately seeking financial information, interviews and other records from the Trump Organization.

“This case will be poised for resolution within six months; an immediate appeal would hardly materially advance its ultimate termination,” Sullivan wrote in a 12-page ruling rejecting the president’s position…

Justice Department lawyers had asked Sullivan to take the unusual step of signing off on an immediate appeal of his earlier rulings because of the “exceptional circumstances” of the case. “Plaintiffs are now poised to seek civil discovery against the President, including into his personal finances and official actions, which will distract the President from his official duties.”

The argument that the Justice Department keeps trotting out, that President Trump is too busy playing golf and trying to start a shooting war via Twitter to submit to normal discovery regarding his potential crimes, seems not to be working on federal judges.

But Trump keeps obstructing and delaying, hoping to one day get in front of the Supreme Court where he seems to remain confident that his handpicked arbiters will deliver him victory.

There will be no resolution soon. The courts don’t seem inclined to fast track any aspect of this case. My read is that judges, and Supreme Court justices especially, want to allow Trump to keep filling his pockets in the most corrupt fashion, and drag out the proceedings past the 2020 election. After the election, this lawsuit might be moot, after all.

And the Democrats are complicit in this slow-moving corruption as well. Impeachment is the way to hold Donald Trump accountable for corruption. This lawsuit is a way to… inspire some awesome law review articles in a few years.

Democrats’ emoluments lawsuit against President Trump can proceed, federal judge rules [Washington Post]


Elie Mystal is the Executive Editor of Above the Law and a contributor at The Nation. He can be reached @ElieNYC on Twitter, or at elie@abovethelaw.com. He will resist.

Number Of Times Pre-Law Students Can Take LSAT Now Limited Due To ‘Security’ Concerns

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We want to prevent bad actors from abusing our policy. We saw repeaters who were concerning to us—more than we expected—in some tiny minority of cases. [The council] has to be cautious of the people who try to strategize about how to get an unfair advantage on our test.

— Lily Knezevich, senior vice president for learning and assessment at the Law School Admission Council (LSAC), commenting on the reinstatement of limits on the number of times people may take the LSAT each year. Beginning in September, pre-law students may only take the LSAT three times in a testing year, which runs from June through May. Under the new rules, would-be law students may take the LSAT up to seven times total. LSAC had previously done away with these limits in 2017 when it increased the numner of LSAT testing dates from four to nine.


Staci ZaretskyStaci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.