Isaac Laquedem

Thomas Friedman catches up to one of Isaac's plans

Thomas Friedman, writing in the New York Times on Sunday, credited the blogosphere with the idea of requiring our elected representatives to wear the names and logos of their largest corporate contributors, rather like the logos on the suits and cars of NASCAR drivers.

I can't imagine that I was the first to think of that particular campaign reform, but it did occur to me back in 2005, and I wrote about it here on February 9 of that long-past year.  So I'm delighted to see the idea appear in the Times six-and-a-half years later.  That's faster than it usually takes ideas to get from Portland to New York, but slower than it takes news to make the return trip.

If corporations are people . . .

. . . wouldn't Texas have executed a couple of them by now?

The Laquedem Equal Protection for Corporations Tax and Budget Plan

Last year, in the Citizens United case, the United States Supreme Court struck down part of the McCain-Feingold campaign finance act that limited what corporations could spend to support or oppose political candidates independently of the candidates' campaigns.  The court reasoned that corporations are "persons" protected by the Constitution and have free speech rights on matters of public importance.

I'm delighted that the court recognizes corporations to be artificial persons with rights that the Constitution protects, because its decision makes possible the Laquedem Equal Protection for Corporations Tax and Budget Plan.

One quirk of United States tax law is that citizens of the United States pay income tax not just on their United States income, but on their worldwide income.  Only a handful of other countries tax their citizens on their worldwide income; most tak only income earned within their borders.  United States corporations also pay American income tax on their worldwide income, but with one loophole not available to natural persons (whom we used to call "people").  United States corporations can defer paying tax on their foreign income while they keep the profits offshore.   Real people can't.

So, if American corporations have the same constitutional rights I do, then they and I have the right to the equal protection of the laws, including the right to be taxed under the same general principles.  To require one class of persons (e.g., you and me) to pay tax on their worldwide income while allowing another class of persons (e.g., General Electric) to avoid the tax indefinitely deprives you and me of our right to the equal protection of the laws . . . or it may deprive General Electric of its right to support the United States government on the same terms on which its employees get to support it.

Justice Kennedy, in the majority opinion, and Justice Scalia, in his concurring opinion, have shown the way to close this loophole.  Let's take them up on their offer.

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Here's how the IRS explains the loophole to its staff:

4.61.7.1  (05-01-2006)
Controlled Foreign Corporations (CFC) Subpart F

1. The taxation of foreign income earned by U.S. controlled foreign corporation drastically changed with the introduction of Subpart F into the Internal Revenue Code in 1962. Subpart F deals with the U.S. taxation of amounts earned by controlled foreign corporations (CFCs). It provides that certain types of income of CFCs, though undistributed, must be included in the gross income of the U.S. shareholder in the year the income is earned by the CFC.

2. It is important to note that the Subpart F sections of the Code take precedence over the foreign personal holding company sections. Further, the rules contained in Subpart Fare to be applied after the income of the CFC has been adjusted to conform to U.S. income tax concepts.

3. Under certain circumstances, current earnings of a CFC may be deferred from U.S. tax if not actually distributed to the U.S. shareholder. Since domestic entities are currently taxed, it is essential that the relationships between CFCs and domestic entities be at arm’s length. Any allocations of income and deductions between the CFC and its related organizations under IRC section 482 take precedence over the application of the provisions of Subpart F.

4. The provisions of Subpart F contain many general rules, special rules, definitions, exceptions, exclusions, and limitations that require careful consideration.

The First District debate: the two lawyers were at Witt's end

The Oregonian may not know how many people are running to succeed David Wu in the First District, but the League of Women Voters can count to 13.  Thursday evening the LWV co-hosted two debates in Hillsboro, the first among the eight Democratic candidates and the second among the five Republican candidates.  I observed in both debates that the candidates at the front of the polls, Suzanne Bonamici and Rob Cornilles, each strove to be uncontroversial, with few sharp edges.  Candidates farther back in the polls were more pointed.  The candidates' closing statements exemplified this point: Ms. Bonamici, an attorney, said that she would protect Medicare and Social Security (two points on which few Democrats disagree) and that she has "a record and reputation of getting things done without being divisive."  Mr. Avakian, second in the polls and also an attorney, similarly gave an innocuous reason for voters to choose him: "I work hard and I get the job done."  Brad Witt, running third in the polls and not a lawyer, was more pointed in his ending statement: "Congress has enough lawyers and enough millionaires, and where has that got us?"

Yet another night the lights went out in Georgia banks

The FDIC closed another four banks today, including two in Georgia.  The Peach State's given us -- or, rather, we've taken -- 22 banks this year, more than a quarter of all the 84 failed banks of 2011.  That's a slight improvement over last year, when 139 banks had been shuttered by October 22, but it's not a sign that the banking crisis is abating.  Far from it: all the slowdown means is that the FDIC killed off the terminally ill last year, and is only now getting around to dealing with the walking wounded.

House District 1: The Oregonian outdoes David Copperfield and makes five Democrats vanish

I'd written in September about how the Oregonian anointed four of the thirteen candidates for David Wu's seat as the "major candidates," apparently basing its decision on their ability to raise funds, or possibly on their support for the $4 billion Columbia River Crossing project, rather than on their campaign efforts.   Then last week the Whimperer increased its tally of major candidates to six of the thirteen, three in each party.

I'm sorry to report that the Whimperer has backslid.  In this article in today's print edition, Harry Esteve of the Oregonian disposed of five of the Democratic candidates altogether.  He started his article thusly: "Anyone looking for clear differences among the three Democratic candidates in the race to replace former Oregon Rep. David Wu probably came away disappointed after Tuesday's televised debate," and again referred to the Democratic race having only three candidates -- actually, only three polite candidates -- later in the article.

In the unlikely event that Mr. Esteve or another Oregonian reporter might stop by, the other five Democratic candidates are Saba Ahmed, Dominic Hammon, Robert E. Lettin, Todd Lee Ritter, and Dan Strite.  I don't know whether they are polite candidates, but they were brave enough to file and shouldn't be denied continued existence simply because corporate America hasn't rallied behind them.

Measures 3-386 and 3-388: Isaac channels his inner Ken Rinke

The late Ken Rinke (1913-1997), political consultant extraordinaire, was famous in Oregon politics for many things.  His best-known exploit was to design a campaign to oppose Ballot Measure 6, centered on the slogan "Beware of Tricks in Number Six," and then wait for a suitable Measure 6 to come along that he could be hired to oppose.  (The particular Measure Six turned out to be a precursor to the Oregon Beach Bill that would have imposed a small gasoline tax to fund the purchase of Oregon's beaches.  It failed in November 1968.)

I was considering how voters could remember which of the two competing measures to vote for.  They have similar numbers: 3-386 and 3-388.  Mr. Rinke's example made "There are no tricks in Six" come easily to mind.  A few moments later, I hit on "Don't take the bait / Vote NO on Eight."  Who knows?  Those slogans may show up elsewhere too.

2011 Endorsements I: Three Clackamas County ballot measures

Clackamas County voters face three ballot measures next month.  The easy one is Measure 3-378, which would extend the current special assessment for law enforcement for another five years at the same rate (about $50/year for a house assessed at $200,000).  It's attracted no opposition.  I recommend a "yes" vote.

The real action in Clackamas County isn't in law enforcement, but in urban renewal.  Two competing measures are on the ballot.  Measure 3-386, initiated by citizens, would prohibit the county from creating a new urban renewal agency or adopting a new urban renewal plan without first getting approval from the voters of the county.  Measure 3-388, proposed by the county commission in response, would require the county to get approval from the voters in the proposed urban renewal district, but not voters countywide.  If both measures pass, the measure with the most "yes" votes will take effect.

I read all the arguments with great interest.  I got the impression that the supporters of 3-386 (countywide voting) understand urban renewal and don't like it, while the supporters of 3-388 (district voting only) like urban renewal but don't understand it.

Consider a recurring theme of the supporters of 3-388: local control.  Laurie F. Swanson and three others write "Local voters should decide whether an urban renewal area should be created in their community.  That way local residents can decide what's right for their community."  John Mohlis and Joseph R. Esmonde write "If we keep urban renewal decisions in Clackamas County local, our communities can use urban renewal to meet that need.  If we eliminate local control of urban renewal, and instead have a county wide vote on those decisions, Clackamas could end up as the only county in the region where urban renewal is essentially off-the-table."  Eleven current and former mayors and city councilors write "We worry that if urban renewal decisions for people outside of cities are made through a county-wide vote, people who live outside of cities will lose out.  They will not have the opportunity to control decisions about how their communities grow and develop.  Instead, those crucial decisions could be made by residents of the county who have never been to their community."

That is, of course, how urban renewal decisions in Clackamas County are made right now: they are made not by the local community but by five residents of the county (the board of commissioners) who may not be familiar with their community.

In one type of urban renewal, the proponents of 3-388 have the better argument.  That's the sort of urban renewal district that is going to make physical improvements not to allow increased development, but to raise the value of the development that is already present.  For example (and one proponent of 3-388 cites an example), residents of an area without sewers and sidewalks might want to form an urban renewal district to pay for sewers and sidewalks.  They are taking some future tax revenues from other jurisdictions, but they aren't imposing an additional burden on the other residents of the county.  That's not unreasonable.

The problem, as I see it, is that most urban renewal districts aren't limited to existing development, but seek to encourage new development.  Why is that bad?  Urban renewal districts borrow money and pay it back with tax increment financing - the taxes levied on the increase in assessed values after the district is formed.  So for example, if a district is formed that includes property assessed at $100 million, and attracts new development that's assessed at $400 million, the property taxes on the $400 million of new development are diverted from schools and cities to pay back the urban renewal bonds.  The $400 million in new development includes houses, apartments, and commercial developments that need public services: schools, fire protection, and policing, but that (thanks to the tax increment being diverted to repay debt) won't contribute anything to those costs for 20 to 30 years.  In effect the people outside the urban renewal district subsidize providing urban services to the people inside the district.

Measure 3-388 says, in essence, that only the people who will benefit from an urban renewal district should get to vote on it.  Measure 3-386 says that the people who have to shoulder the cost of supporting the new development should also get to vote on it.  Measure 3-386 may be too broad in requiring a countywide vote on every district, but 3-388 is far too narrow.  Promoters of urban renewal districts should be willing to put their projects to a vote by the people whom they want to subsidize their projects.  For that reason, I support Measure 3-386 and oppose Measure 3-388.

The Columbia River Crossing poll: It's all in how you ask the question

Sixty-three percent of likely voters in the City of Portland support the Columbia River Crossing project, according to a poll released on October 14 by the Portland Business Alliance and the Columbia River Crossing Coalition.  (The Tribune story is here.)

As critics of the CRC project point out, and the Tribune notes, the poll asked if respondents supported replacing the Interstate Bridges with a new bridge that would accommodate light rail, but did not mention the bridge's cost or the likelihood that it would be a toll bridge.

Here's a fairer way to pose the question, though it's not one that the CRC supporters will tell their pollsters to use:

"Among these three alternatives, do you support (a) spending $4 billion to replace the Interstate Bridges, extend light rail to Vancouver, and rebuild some of the on-ramps to Interstate 5 in North Portland and central Vancouver, or (b) replacing the Sellwood Bridge ($200 million), paving all 59 miles of unpaved roads in the City of Portland ($60 million), filling every pothole in Portland ($30 million), replacing the decrepit Multnomah County Courthouse ($209 million), and having $3.5 billion left over, or (c) doing nothing and letting the free market encourage commuters to move closer to their jobs?"

A First District candidate brings up the election laws

ORS 254.483 is an inconvenient bit of the state elections laws that the county clerks choose not to follow.  It requires county clerks to destroy all unused ballots promptly after 8:00 p.m. on election day.

One of the six major candidates in the First District race, Lisa Michaels, has thrown a figurative grenade into the race.  She's asked the other candidates to in turn ask the secretary of state and the county clerks to follow the law.  I predict that most of the Republican candidates will agree, in some form.  Ms. Michaels has given the Democratic candidates a thorny little problem.  Do they call on the secretary of state, fellow Democrat Kate Brown, to tell the county clerks that they need to obey state law, and provide a future Republican candidate for that office with a ready-made campaign issue?  Or do they ignore Ms. Michaels's open letter (linked to above) and create a campaign issue that the Republican nominee can use against them in the January election for House District 1?  It's an interesting dilemma that the county clerks have created for them.