Isaac Laquedem

A 100% business income tax rate in Oregon? Watch your ballot

Professor Bogdanski's post today about the corporate gross revenues tax that's the subject of Initiative Petition 17, which we may see on our November ballot, prodded me to pursue some math that I'd been working on for a week or two.  The basic premise of the corporate gross revenues tax is that corporations that sold more than $25 million/year in Oregon would pay the state a tax of 3% of their gross revenues above $25 million.  The state would distribute that fund equally to all Oregonians who satisfied a modest residency requirement.  The state believes that prices will increase 1.3% if the measure passes.  Willamette Week quotes the chief petitioner's reply: "Giant corporations can deduct the tax increase in IP 17from what they pay to the federal government.  So they are not going to pay that much more, if anything at all.  And No. 2, these corporations price their goods nationally or regionally, right?  An iPhone costs the same in Portland as it does in Texas.  There's no difference.  So we don't think price increases will happen."

Let's unpack that with an unpopular example.  WalMart, the store that all good Oregonians love to hate when they're not inside shopping, will be our case study.  WalMart's sales are about $650 billion/year.  Its consolidated pretax income was $21.8 billion, income taxes were $5.6 billion, and after-tax net income after a deduction for minority interests was $15.5 billion, which is about 2.4% of its annual sales.  About 0.8% of WalMart's United States stores are in Oregon.  Some of WalMart's operations are overseas.  It's a fair guess that WalMart sells about $4.5 billion/year in Oregon (maybe $90 million per store) and nets about $120 million/year from its Oregon operations.

IP 17 would levy a tax of $135 million/year on WalMart for its Oregon sales, which corresponds to an effective state income tax rate of 113%.  WalMart cannot offset the state income tax against its federal tax obligation - the chief petitioner may have skipped the corporate taxation class -- but it can claim the state income tax as a deduction against its federal income.  WalMart allows about 26% of its income for income taxes, so a state tax of $135 million creates a federal tax savings of about $32.5 million, for a net tax increase of $102.5 million on profits of $120 million, an effective tax rate of about 85%.  That's in addition to the actual state income tax, and will push WalMart's effective tax rate in Oregon to the mid-90s. Put another way, Oregon will collect 15 to 20 times as much profit from WalMart as WalMart will.

To bring a mot of Oscar Wilde up to date, "If this is the way Oregon taxes its enterprises, it doesn't deserve to have any."

 

Judge Engoron was the Trump fraud trial judge, but he wrote for the court of appeals

Judge Arthur F. Engoron presided over New York's civil fraud trial against Donald Trump, two of his children, two of his associates, his trust, and nine companies that he controls.  On February 16 Judge Engoron handed down his final ruling on February 16.  In 92 pages he held Mr. Trump and various entities liable for $355 million plus interest, found his sons Eric Trump and Donald Trump, Jr. liable for $4 million each, and barred Mr. Trump, his accountant Allen Weisselberg, and Jeffrey McConney (formerly the Controller at the Trump Organization) from serving as an officer or director of any New York entity for three years. 

Political aficionados with a thirst for blood can be excused for skipping to the last two pages, where the judge laid out the penalties he was imposing, in the manner of the impatient reader of a mystery novel who reads only up to the crime itself and then jumps to the detective's solution, skipping over the 200 pages of investigation in the middle.  The casual reader who skips over Judge Engoron's 6 pages that recite the history of the case, the 67 pages discussing the facts, and the 17 pages of legal conclusions has missed a great deal.  Herewith Isaac's take on what Judge Engoron said.

First, Judge Engoron explained why New York cares about financial fraud.  "New York State, particularly New York City, is the financial capital of the country and one of the financial capitals of the world."  (Page 3.)  "The common excuse that 'everybody does it' is all the more reason to strive for honesty and transparency and to be vigilant in enforcing the rules.  Here, despite the false financial statements, it is undisputed that defendants have made all required payments on time; the next group of lenders to receive bogus statements might not be so lucky.  New York means business in combating financial fraud."  (Page 4.)

Before he dug into the testimony, Judge Engoron threw a dash of shade at Mr. Trump's lead lawyers, Christopher Kise and Alina Habba, stating (correctly) that as the state sought only equitable relief in the form of injunctions and disgorgement of fraudulent profits, the defendants were not entitled to a jury.  The shade came in the form of a footnote on page 6, "In any event, neither party applied nor moved for a jury trial."

Then the judge described the testimony of the 14 non-party witnesses (mostly bankers and outside accountants), the five individual defendants, the eight other witnesses from the Trump Organization, the state's expert, and the 13 expert witnesses that the defendant called.  What's important in his descriptions of the testimony of the witnesses is not what they testified to, but the judge's evaluation of their credibility.  (Isaac will explain why this is important later on.) 

Judge Engoron did not comment on the credibility of the 14 non-party witnesses.  He began his saltiness with four of the five individual defendants.  In the  judge's view, Jeffrey McConney's credibility was "severely impaired" (page 25), then "further compromised" (also page 25), and then further strained when he could not recall if his separation agreement prohibited him from voluntarily cooperating with governmental investigations of the Trump Organization, which lapse the court found "implausible" (page 26).  Allen Weisselberg came in for more direct treatment: his separation agreement bars him from cooperating with the government, which "renders his testimony highly unreliable.  The Trump Organization keeps Weisselberg on a short leash, and it shows." (page 26.)  The judge turned to Eric Trump, whose "credibility was severely damaged when he repeatedly denied knowing that his father ever even compiled a [statement of financial condition] that valued his assets and showed his net worth 'until this case came into fruition.'" (Page 32.)  And the court kept firing salvos in his direction: "When the documentary evidence against him became overwhelming, Eric Trump reversed his previous testimony."  (Page 32.)  "Eric Trump's testimony [about appraisals] was shown to be false when he was confronted with the ample contemporaneous documentary evidence demonstrating otherwise." (Page 33.)

And then there was Donald Trump himself, whom Judge Engoron deflated in a footnote.  On page 36, the judge wrote, "Nonetheless, Donald Trump insisted that he believed Mar-a-Lago is worth 'between a billion and a billion five' today, which would require not only valuing it as a private residence, which the deed prohibits, (footnote 19), but as more than the most expensive private residence listed in the country by approximately 400%."  Footnote 19 reads, "A fact of which he is well aware, having signed the deed himself."  He concluded with this politely damning description of the former president's time on the stand: "Overall, Donald Trump rarely responded to the questions asked, and he frequently interjected long, irrelevant speeches on issues far beyond the scope of the trial.  His refusal to answer the questions directly, or in some cases, at all, severely compromised his credibility."  (Page 37.)

Yet it was not the Trump family but its hired experts that drew the sharpest of the judge's stiletti.  One expert witness, Steven Witkoff, "conceded that he is neither an appraiser nor an accounting expert, nor is he familiar with what 'estimated current value' is under GAAP."  (Page 48.)  Of Steven Laposa, whom the defense offered as an expert witness on real estate research, the court observed that he had "formed no opinion as to whether any of the valuations at issue in this case were accurate, and, prior to this assignment, he had no experience preparing or reviewing personal financial statements."  (Page 50.)  The next expert witness earned a more severe burn from the judge.  He was Gary Giuletti, offered as an expert in surety underwriting and surety brokering.  He testified that he has known Donald Trump for about 25 years, plays golf and eats lunch with him, and is a member of "a bunch of his clubs."  He's also the Trump Organization's insurance broker.  (Page 51.)  The judge's evaluation:  "In its over 20 years on the bench, this Court has never encountered an expert witness who not only was a close personal friend of a party, but also had a personal financial interest in the outcome of the case for which he is being offered as an expert."  (Page 51.)  In 2022, Mr. Giuletti's firm earned $1.2 million in commissions from insurance that he handled for the Trump Organization. 

Mr. Giuletti got off easier than Robert Unell, whom the Trump Organization offered as an expert in commercial real estate finance and banking.  The court summarily disposed of his work: "On the whole, the Court was unable to ascribe any reliability to Unell's 'expert' opinions, finding them unresearched, unsupported, inconsistent, and contradicted by ample other documentary and testimonial evidence."  (Page 56.)

Why are the trial judge's conclusions on credibility important?  Judge Engoron undoubtedly knew that Mr. Trump and the other defendants, except possibly Allen Weisselberg, would appeal his final decision.  It's a principle of appellate law that the appellate court will usually defer to the trial judge's assessment of the credibility of the witnesses.  The trial judge sees and hears the witnesses and their demeanor; the appellate judges read their words from a transcript and only rarely will watch or listen to the testimony. Judge Engoron underscored this point on page 6: "Witnesses testified from the witness stand, approximately a yard from the Court, who was thus able to observe expressions, demeanor, and body language."  My sense is that he's emphasizing to the appellate court that most of the Trump Organization's principal witnesses, including Donald Trump, Eric Trump, and Ivanka Trump, were simply not credible.

As with a good detective story, the description of the crime is at the beginning and the resolution is at the end.  In the case of Judge Engoron's decision, the good stuff is the part in the middle.

Lament for Kevin McCarthy

Kevin McCarthy's nearly nine months in office (a full term in other contexts) deserves a ballad to commemorate his service.  Isaac has written one.

 

 

Lament for Kevin McCarthy

(to the tune of “Whatever Became of Hubert?” by Tom Lehrer)
Words by Isaac Laquedem (2023)

Whatever became of Kevin?
Does anyone even know?
Once he mastered the floor, then they showed him the door
When four of his core voted “no.”

It required fifteen rounds to elect him
And only one vote to eject him.
Watch Gaetz and his pals playing games
As the GOP throws out more names

We must amend the rules, ex-Speaker
Says each Fox News reporter
Your successor’s going to be even weaker
And serve a term even shorter.

Whatever became of you, Kevin?
Do you miss being at the top?
Can you keep a straight face
When erased from your place
While you wait for Matt Gaetz
To flop?

Does McConnell look down from the Senate with glee
And gloat to his friends that “it’s NMFP”?
Do you wonder what Nancy would do?
Kevin, what happened to you?

The fields of the House republicans need no Gaetz to guard them

At the instigation of Representative Matt Gaetz of Florida, a small group of revanchist republicans combined with the House Democrats to remove Kevin McCarthy from his post as Speaker of the House in revenge for his having worked with the Democrats last week to extend funding for the government and avoid a weekend shutdown.  The revanchists have no plan to replace Mr. McCarthy and appear to have believed that their Democratic colleagues would stand behind Mr. McCarthy and vote to keep him in office. 

Their plan has both succeeded and failed spectacularly.  Their plan succeeded in that they won the vote and demoted Mr. McCarthy to the rank and file.  Their plan failed in that they have shown the nation that they have no plan, no agenda, and no goal other than to throw a spanner in the works, as the British say.

That delightful British phrase reminds Isaac of another odd British phrase, this one from the Parliamentary sphere, which points to how the republican leadership should respond to Mr. Gaetz and his cohort if they wish their party to again be taken seriously by the public.  Each party in Parliament appoints a number of its members, called "whips," to communicate the leadership's wishes to the members and to instruct them on how to vote on matters important to the party.  The title "whip" derives from fox hunting; the Oxford English Dictionary defines "whipper-in" as an assistant to a huntsman "who keeps the hounds from straying by driving them back with the whip into the main body of the pack."  The Parliamentary whips similarly keep the backbench members from straying by driving them back into the main body of the pack, the word "whip" having morphed from meaning the instrument itself into meaning the person who wields it.  A party can discipline a recalcitrant or obstructive member by "withdrawing the whip," effectively expelling the member from the party until the leadership decides to "restore the whip."

It's past time for the House republican leadership to do the American equivalent of withdrawing the whip from Mr. Gaetz.  Remove him from all committees, expel him from the caucus, withdraw all funding . . . and if he does not reform, recruit and fund a candidate to oppose him in next year's primary.  The others will fall in line rather than be pushed overboard to join him in Congressional limbo.

Wendell Phillips reminds us that history sometimes rhymes

The recent stalemate among the House republicans over their choice of speaker and the current threats of Speaker McCarthy to refuse to raise the ceiling on the national debt so that the nation can pay its bills brought to mind this delightful observation from a while back:

"A few years ago * * * the Republican party dared to refuse the appropriations for support of government - the most daring act ever ventured in a land that holds Bunker Hill and Brandywine.  They dared to persevere some twenty or thirty days.  It seems a trifle; but it is a very significant straw.  Then for weeks when Banks was elected, and a year ago, again, the whole government was checked till the Republicans put their Speaker in the chair."

Does that bring to mind Newt Gingrich shutting down the government, or Lauren Boebert holding up the organization of the House in January?  The author of the quoted words was Wendell Phillips (1811-1884), the famous orator and abolitionist.  They're from a speech that he gave in Boston on February 17, 1861.  The four omitted words represented by the three asterisks give the joke away: they are "while Pierce was President."

The House Democrats should pick a republican for speaker, but not just any republican

About a year ago, a republican political strategist named Sarah Longwell wrote in The Bulwark that the republican party was facing an ‘extinction event’ that resulted from Donald Trump having converted it into the MAGA party. The flailing efforts of the republican House majority to elect a speaker yesterday and so far today also are another sign that the extinction event has descended on the party.

Its schism into the group of the shamed and silent and the smaller and louder Trump-MAGA group brings back memories of the 1854 fracturing of the Whig Party, with some important differences, the largest of which is that the Whig Party fell apart over an irresolvable policy dispute: should slavery expand, continue, or be eliminated?  No common ground among the factions was available, as the policy difference was over a stark yes-or-no question.

By contrast the modern republican party gave up any pretense of policy ambitions years ago under Newt Gingrich’s leadership.  It has no policy; its modest platform for the 2020 election could be described as “policy” only in the way that a fig leaf can be described as “clothing.”  But where can the remaining rational republicans find a home?  On philosophical grounds they can’t join the Democratic Party, and without a billionaire or two as a funding source and a media presence (their henhouse won’t stand without a Fox to advertise it) they can’t start a new national party.  The two-party system needs two strong and responsible parties, and the republican leadership is too frightened of its cohort of crazies to make the effort to return it to reason.  Maybe what saves the system is not right-wing repentance but a variant of the solution played out in the Utah senate race, where the Democrats tried to elect a rational conservative to replace Mike Lee, something like the plain-bellied Sneetches temporarily donning stars.  The Democrats could contribute to bringing the opposition toward reason by picking a few moderate republican representatives and then voting as a bloc for those representatives, one after another, until one of their candidates from across the aisle attracts the votes of 10 sane republicans.  Odd as it would be for the Democrats to vote for a republican for speaker, doing so is their one way to get a speaker of the House who won't have had to make promises to the Boeberts and Gosars of the republican caucus.

Clarence Thomas points the way to the future - and to the past

I wrote on June 24 about the Supreme Court's decision in Dobbs v. Jackson Women's Health Organization, in which a majority of the court overruled Roe v. Wade, and argued that the two important opinions are not the majority opinion and the dissent, but Chief Justice John Roberts's opinion concurring in the decision but not the reasoning, and Justice Clarence Thomas's opinion concurring in both the decision and the reasoning.  I discussed the chief justice's opinion.  Justice Thomas's opinion also merits scrutiny.

Justice Thomas wrote his concurring opinion not so much for the rest of the court - none of the other justices agreed with his views - but as a guide to state legislatures and the Federalist Society on what to challenge next. He focused on the doctrine of substantive due process, and listed several cases that he wants the supreme court to overrule when it gets the chance, among them the Obergefell v. Hodges (2015), protecting same-sex marriage, Griswold v. Connecticut (1965), protecting married persons' access to contraceptives, and Lawrence v. Texas (2003), preventing Texas from criminalizing private sexual acts between consenting adults.  He gives his game away in his two closing sentences: "Substantive due process conflicts with that textual command [the due process clause] and has harmed our country in many ways. Accordingly, we should eliminate it from our jurisprudence at the earliest opportunity."

What he means by substantive due process is this. If you are indicted for murder, the state cannot take away your life or liberty (i.e., execute or imprison you) without affording you the due process of law: the right to a lawyer, the right to cross-examine witnesses, the right to be tried by a jury of unbiased persons, and so on. These are all rights to have a fair process, not rights to have a fair result. The idea of substantive due process is that as a citizen you have a constitutional right to have not just a fair process, but also a fair result.

In other words, if you are actually innocent of the murder, then you have a substantive due process right not to have the state execute you anyway - at least, you used to have that right. The court started 29 years ago to go down the path to which Clarence Thomas now points. In Herrera v. Collins (1993), a case from Texas, a majority of the supreme court held that a state does not violate the federal constitutional right to due process of a United States citizen if the state convicts and executes him for a murder that he did not commit, as long as the state provided the defendant with a fair trial and a proper appeal. 

Justice Thomas has shown the nation the legal future, and it looks a lot like the past.

The Alito Court finishes its first year with a bombshell

Earlier today, to the surprise of none, the Supreme Court released its opinion in Dobbs v. Jackson Women's Health Organization.  The court overruled Roe v. Wade, 410 US 113 (1973) and ruled that the United States Constitution does not prohibit states from regulating or prohibiting abortions, even as soon as one day after conception.  The majority opinion, in which five justices joined, is one of three constitutionally significant opinions that the Alito court issued this term.

"The Alito court?" you say.  "Not the Roberts court?"  Don't we customarily refer to the Supreme Court by reference to the chief justice, such as "the Rehnquist court" or "the Warren court"?

Well, yes, until now.  Pundits have today focused on the majority opinion, written by Justice Samuel Alito, and the dissenting opinion, a joint production of Justices Breyer, Sotomayor, and Kagan.  The two important opinions in the case, however, are the concurring opinion of Justice Clarence Thomas and the sort-of-concurring opinion of Chief Justice John Roberts.  Justice Thomas's opinion points the way toward returning the United States to the 18th century.  Chief Justice Roberts's opinion reveals that the Supreme Court is no longer the Roberts court; it is the Alito court.

Why?  Let's revisit the history of this case.  Dobbs is a Mississippi official.  Jackson Women's Health Organization provides abortions in Mississippi.  The state passed a law that criminalized abortions from 15 weeks onward, with an exception for medical necessity.  Jackson sued the state to enjoin (prevent) the state from enforcing the law, citing Roe v. Wade as binding precedent.  Jackson won at the trial level and before the appellate court.  The state appealed to the Supreme Court, which granted certiorari (agreed to hear the case) on the narrow question of "whether all pre-viability prohibitions on elective abortions are unconstitutional."  Mississippi told the court that it should "reconsider the bright-line viability rule," and that a decision for the state would "not require the Court to overturn" Roe v. Wade.

Only after the Supreme Court agreed to hear the case did Mississippi change its argument, pressing the court to hold not just that this specific law was constitutional, but that the court should overrule Roe v. Wade entirely.  The court did so.  This fact brings us to John Roberts's opinion.

Chief Justice Roberts concurred in the result: that is, he agreed with the majority that the law was constitutional.  He parted with Justice Alito and his cohort, however, when they struck down the rule of Roe v. Wade.  He agreed with the majority that the viability test of Roe v. Wade "should be discarded," but wrote that a woman's right to terminate her pregnancy -- a right that he specifically acknowledged -- "should extend far enough to ensure a reasonable opportunity to choose, but need not extend any further - certainly not all the way to viability."  He then cited a longstanding principle of judicial restraint: the court should decide only what is necessary to its decision, but not more.  "If it is not necessary to decide more to dispose of a case, then it is necessary not to decide more." [The italics are his.]  To continue to quote the chief justice: "The Court's opinion is thoughtful and thorough, but those virtues cannot compensate for the fact that its dramatic and consequential ruling is unnecessary to decide the case before us."

What can we infer from Chief Justice Roberts's opinion?  I think it's fair to conclude that he attempted to drag his five colleagues back from their full-out repudiation of Roe v. Wade, not because of the merits of the case but because of how the judicial process is supposed to work.  He failed.  Not a single justice joined him.  We know from Justice Alito's draft opinion where the majority started from, and we know from Justice Alito's final opinion where the court ended up.  Chief Justice Roberts's concurrence in holding the law valid coupled with his refusal to overrule Roe v. Wade entirely means that the court no longer belongs to him.  It belongs to Samuel Alito.  John Roberts is now merely a passenger along for the train ride, praying that the engineer doesn't speed around a sharp curve.

Yesterday we learned more about the pardon list

Amusement and consternation followed the revelation earlier this week that retired law professor John Eastman, one of the team that worked to undo the 2020 election in the waning days of President Trump's term, had sent an e-mail to Mr. Trump's personal attorney Rudy Giuliani shortly after the January 6 insurrection.  Professor Eastman wrote, "I've decided that I should be on the pardon list, if that is still in the works." 

What "pardon list"?  Who was working on it?  The Select Committee had hinted two weeks ago that several lawmakers had asked for pardons.  Yesterday's hearing opened the door a little further when witnesses testified that six staunch House supporters of President Trump had asked for pardons: Mo Brooks of Alabama, Matt Gaetz of Florida, Andy Biggs of Arizona, Louie Gohmert of Texas, Scott Perry of Pennsylvania, and Marjorie Taylor Greene of Georgia.

How many more names were on the White House pardon list?  I think we're going to find out.

The Supreme Court stands up for the parental rights of rapists

Yesterday, in a case called Vega v. Tekoh, the United States Supreme Court held that a criminal defendant who gives an incriminating statement under interrogation without being informed of his constitutional right to remain silent, and who is later acquitted, may not recover damages under 42 USC §1983, a civil-rights statute, from the government official who elicited the statement.  Today the Supreme Court expressed a different view on the rights of criminals when it held that the United States Constitution does not prohibit the states from declaring that the right of a rapist to become a father outweighs the right of a rape victim not to become a mother - actually, the court held that a rape victim has no constitutional right not to become a mother against her will.