Inconceivable Agreement

Bryan Garner has a bone to pick with his local paper, the Dallas Morning News, regarding its coverage of an event that he and Justice Scalia hosted at SMU:

I really must protest the paltry and even silly treatment of the Scalia–Garner event in the January 29 edition (believe it or not, on page 8B of the Metro section). 

Let’s forget for the moment that it was a full house of over 1,700 at SMU’s McFarlin Auditorium and that Justice Scalia (I was merely fortunate to be onstage) received a standing ovation. And let’s forget the fact that never before in history has a Supreme Court justice coauthored one or more books with anyone, much less a Dallasite—and that this is the first coverage the paper has given our second book, which appeared last June. Not even our joint appearance on Piers Morgan received mention in my hometown newspaper. All that is probably my fault: I don’t have a publicist and never trumpet such matters.

What is especially disappointing is that Tasha Tsiaperas seriously misreported the gist of the joint presentation at SMU. She quotes me as saying, “I will tell you that my political beliefs are different from those of Justice Scalia” and reports that “Garner supports gay marriage and favors stricter gun control laws.” But she fails to follow up with the only reason that mentioning these issues or the authors’ political differences is relevant: Justice Scalia and I worked through 700 cases while writing our 600-page book and have not found a single case on which we disagree about legal interpretation. The point is that judicial textualism leads to consistent results, regardless of political bent. 

I found this emboldened portion of Garner's letter to be literally unbelievable. They really went 700 for 700, without a single disagreement?

Too bad they can't get married.

E-Filers Beware

A Hearing Board of the Illinois Attorney Registration and Disciplinary Commission has reprimanded an attorney who permitted documents with unredacted personal identifying information (such as social security numbers) to be electronically filed with the Northern District of Illinois's CM/ECF system. As is common at law firms, it was actually a non-lawyer assistant who filed the documents, using the attorney's log-in credentials. Here are the stipulated facts:

1.    In 2010, Respondent, an associate attorney at the law firm of Greene and Letts in Chicago, Illinois, was the attorney responsible for all cases stemming from a contract the law firm had with the United States Department of Justice to represent the United States in debt collection cases involving student loans.

2.    In July and August 2011, at Respondent's direction, one of Respondent's several non-lawyer assistants prepared complaints and corresponding exhibits alleging that defendants were indebted to the United States for failure to pay student loans.

3.    At Respondent's direction, one of Respondent's several non-lawyer assistants logged on to the U.S. District Court for the Northern District of Illinois ("N.D. Ill.") Case Management/Electronic Case File ("CM/ECF") system to file the complaints and exhibits.

4.    When logging on to the CM/ECF system, one of Respondent's several non-lawyer assistants, was required to check a box that declared that the filings were in compliance with Rule 5.2(a) of the Federal Rules of Civil Procedure ("Rule 5.2(a)"), which required that personal identifying information be redacted from all filings.

5.    The exhibits that Respondent attached to the complaints were loan documents that contained the defendants' personal identifying information, such as social security number, date of birth, and account numbers. In numerous complaints and exhibits, defendants' personal identifying information was not redacted, which cause the defendants' personal identifying information to be available to the public and viewable on the N.D. Ill. website home page.

6.    In late August 2011, defendant Aimee Krause ("Krause") notified the Clerk of the N.D. Ill. and Respondent that her personal identifying information was available to the public and viewable on the N.D. Ill. website home page.

7.    Also, Krause notified Respondent that other defendants' named in complaints filed by Respondent's had their personal identifying information in exhibits not redacted, and thus available and viewable on the N.D. Ill. website home page. The Clerk of the N.D. Ill. also notified Respondent of other defendants with personal identifying information not redacted in the exhibits.

8.    After Respondent was made aware that defendants' personal identifying information was not redacted, Respondent or his non-lawyer assistants at Respondent's direction, filed motions to correct and replace exhibits. However, Respondent did not provide appropriate supervision to his non-lawyer assistants to ensure that Respondent's subsequent filings were redacted as required to comply with Rule 5.2(a).

A reprimand under these circumstances certainly seems appropriate. First, I am well aware of the little check-box you have to check every time you log in to the Northern District's CM/ECF system. If you don't check the box, you don't get to file. This serves as a conspicuous reminder of the duty to redact this kind of information from filings. Second, this particular attorney was engaged in debt collection, and nearly every document involved in that kind of practice is plastered with the forbidden information. So he should have known well to be careful.

But this reprimand is a useful reminder that the duty to redact this information is not to be taken lightly. It's also a reminder that good help is hard to find.

h/t: Legal Profession Blog

40 years in the wilderness? Can this be true?

Smithsonian.com has an incredible story about a Russian family that lived by themselves in the Siberian Taiga for over 40 years with no contact with the outside world.  Given the details, one is tempted to think it is a hoax but apparently it is not.  Depending on your point of view it is a testament to or indictment of the power of religion.  

Subway Sued

There is a Subway restaurant just down the street from my office. I occasionally go there for lunch. When I do, my brain says that all I need is a "six-inch" sub and a cup of water. But my body—specifically my belly—objects strenuously. "We demand 12 inches! We demand Doritos!" My belly is  like the House of Representatives, and my brain is like the Senate, you see. Although the upper chamber is dominated by sober, contemplative types, there are a few rabble-rousers up there too. Call them anarchists. They tend to argue that, in the grand scheme of things, that extra six inches and that bag of Doritos certainly isn't going to do any harm. And they will be so delicious. And they will shut up those plebeians down in the belly. The negotiations go right up to the brink, but usually President Mouth says, "I'll have a footlong ..." and Secretary Hand grabs a bag of chips. The brain gets a pittance when soda is eschewed.

This is on my mind because Subway has been sued here in Chicago (and elsewhere—this has been a feeding frenzy* for plaintiffs' lawyers) for allegedly mischaracterizing the size of its "footlong" and "six-inch" sandwiches. In fact, say the complainants, so-called footlong subs are often only 11 or even just 10 inches long, and six-inchers are actually just half of that. Here's a picture from the lawsuit:

Hitting another lawyer in the courthouse is a bad idea.

Various media outlets in West Virginia are reporting that one West Virgina attorney has been charged with malicious assault for allegedly beating up another West Virginia attorney in the Marion County Courthouse. 

You think you know somebody.

People are constantly told in the media that the Republican party is the party of small-or sometimes "limited"-government.  One might conclude from that Republicans might like government officals who don't show up to work.  After all, government is extremely limited in what it can do if no government officals show up to work.

A Triumph of Reason

With news that House Republicans have decided to cave on the "debt ceiling" brinkmanship (at least for now—but in reality forever), the Gillette-Torvik Blog's position on the Trillion-Dollar Platinum Coin has been utterly vindicated in every particular.

You may remember that in Part One of the 94-Part Series I contended that the Platinum Coin was both "illegal and ill-advised." The "illegal" part was vindicated a week ago when the Treasury Department and the Federal Reserve went public with a statement that neither believes "the law can or should be used" to produce the Trillion Dollar Coin.

And now the "ill-advised" part of my post is vindicated as well. As Reader(s)™ will recall, I argued that if Obama used the Trillion Dollar Coin option, it would destroy his own very strong position against the debt-ceiling brinkmanship. Instead, I advised Obama to "fight this battle from the high ground and on the merits"—where it could not be lost.

Sure enough, this was the winning strategy, as should have been obvious to anyone with a brain. And yet many smart people—including Paul Krugman, Josh Barro, and Matt Yglesias—essentially freaked out and made fools of themselves in this affair. Krugman infamously accused the Obama people of being "hopeless negotiators" when they ruled out the Platinum Coin.

Thank goodness these people aren't actually in charge of anything. But when that glorious day comes and the Gillette-Torvik Blog is in charge, you all can rest easy.

This is Part 7 in The Gillette-Torvik Blog's 94-Part Series on the Trillion Dollar Platinum Coin idea. 

Collective bargaining rollback bill in Wisconsin hits snag—UPDATE

UPDATE:

The Seventh Circuit Court of Appeals has reversed the district court and upheld Act 10—otherwise known as Scott Walker's collective bargaining bill—in its entirety. The opinion is available here. A state court action seeking to invalidate the law on various bases remains pending.

ORIGINAL POST (3/30/2012):

A federal district court judge in the Western District of Wisconsin has struck down portions of Scott Walker's bill rolling back collective bargaining rights for public employees. The opinion is here.

For every topic there is someone who sees a conspiracy to cover up the truth.

There is a stereotype that professional baseball players are not very smart.  It may be that this stereotype exists because baseball players, unlike may athletes in other professional sports, do not have to attend college for any period of time.  It is not uncommon for baseball players to be drafted out of high school, play a few years in the minor leagues, and then join a major league team.

Some might say that Deadspin's recent story about Washington Nationals outfielder (and former Minnesota Twin) Denard Span is an example that proves the stereotype.  Mr. Span has apparently been watching videos on YouTube that make him question whether there is a conspiracy to cover up information related to the shooting at Sandy Hook Elementary School in Newtown Connecticut.

Maybe one should not be surprised that there are people questioning the events around the shooting.  As P.T. Barnum supposedly pointed out, "there's a sucker born every minute."  The corollary to the statement is that this means there are an awful lot of suckers walking around. 

North America looks different at night

Recently, NPR's Planet Money podcast did a story about the challenges that Williston, North Dakota faces as it deals with an population boom caused by fracking.  Among other things, demand for housing is so high that rent for a one bedroom apartment is equal to rents in New York City.  Also, local businesses are not growing to meet demand because oil workers are not moving their families to Williston.  This leads to a lack of workers for businesses like Wal-Mart or McDonald's.  Also the piece discusses how Williston plans to make itself attractive enough that the oil workers settle there long term.

Robert Krulwich on his blog Krulwich Wonders has a post showing how the boom in Williston has altered the nighttime view of North America from space.  You should check it out.  To me, it looks like the night view of Williston has the most light of anything between Chicago and the California coast.  Mr./ Krulwich also has a picture of the nighttime view of Williston six years ago.  The difference is astonishing and gives an interesting way of thinking about the growth in Western North Dakota.

In case you were wondering.

In April, Mr. Torvik wrote about the problems that professional football has with head injuries, among other things. Perhaps because of all the bowl games, I recently wondered what college football was doing about brain trauma.  Patrick Hruby at Sports on Earth has the answer.

Lance Armstrong's Lawyer Continues to Talk ...

The other day I posted about a quote Tim Herman—Lance Armstrong's lawyer—gave to the New York Times, and the fact that this quote subsequently disappeared from the Newspaper of Record without explanation.

Since then we've learned that Lance Armstrong is indeed coming clean, to Oprah. And Mr. Herman is out there talking to the media again, for reasons that defy explanation. Here he is getting interviewed, via Skype, by Bloomberg Law:

Strom Thurmond did what now?

Because he was in the Senate for 48 years, it is easy to think that Strom Thurmond was always a senator.  However, Senator Thurmond was 54 when he became a senator.  Prior to that he had been Governor of South Carolina, a World War II combat veteran, a judge, a county attorney, farmer, coach, teacher, and the superintendent of education for Edgefield County, South Carolina. It is the last job that prompts this post.

Paul Krugman versus Jon Stewart on the Platinum Coin

New York Times columnist Paul Krugman recently went after satirist Jon Stewart for what he called a "lazy" bit on the frivolity of the Trillion Dollar Platinum Coin idea:

[W]hat went wrong here is a lack of professionalism on the part of Stewart and his staff. Yes, it’s a comedy show — but the jokes are supposed to be (and usually are) knowing jokes, which are funny and powerful precisely because the Daily Show people have done their homework and understand the real issues better than the alleged leaders spouting nonsense. In this case, however, it’s obvious that nobody at TDS spent even a few minutes researching the topic. It was just yuk-yuk-yuk they’re talking about a trillion-dollar con hahaha.

 Having been attacked by one of his own, Stewart had no choice but to respond:

The Daily Show with Jon Stewart

Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Now, part of Stewart's response is his standard, somewhat weaselly excuse of, "I'm just a joke man!" But another part of his response is more substantive—his point that there are always counterarguments on the topics that he chooses to lampoon, but it is simply not funny to acknowledge them. It's probably not an overstatement to say that exaggeration is the essence of comedy. What matters here is that Stewart has considered the counterarguments and (correctly) decided that, nonetheless, the platinum coin is a "stupid fucking idea." So it's open season.

This is something to keep in mind when watching "The Daily Show": it doesn't present a fair or nuanced view of the issues of the day. It picks out the worst arguments being made to support a particular position and it shreds them, to great comic—and rhetorical—effect. It takes a certain sort of humorlessness to notice this unfairness only when it's your own position being shredded.

This is Part 6 in The Gillette-Torvik Blog's 94-Part Series on the Trillion Dollar Platinum Coin idea.

Judge Posner Ruins Weekends

Not long ago, Mr. Gillette noted that some lawyers like to drop Friday afternoon bombs on their adversaries—apparently just to ruin their weekends. (Although an alternative explanation is that the lawyers are just trying to save their own weekends.)

Longer ago, I blogged about a patent infringement case that started out in the Western District of Wisconsin. The initial "newsworthiness" of the case was that a tiny Milwaukee bakery was included as a defendant among several other multi-national corporations. (**SEE below for update on that front.) But the plot eventually thickened when the case was reassigned for pre-trial and trial here in Chicago in front of Seventh Circuit Judge Richard A. Posner. (Judge Posner likes to keep busy, obviously.)

At that time I noted that Judge Posner's case management order contained a rather unorthodox provision: all motions were to be filed by the close of business on Friday, and responses were due by the end of the day on the next Monday. This is built-in weekend ruination. Someone asked in the comments whether that was standard practice in the Northern District of Illinois, but I never answered. Rest assured, it is not.

I decided to check up on the case. Right now it is mired in patent-litigation hell. Judge Posner issued his "Markman order" (construing various claims of the patent) back in August, then the parties exchanged expert reports. Now both sides have filed "Daubert motions" attacking the foundation and/or reliability of the other side's experts.

Just last Friday, Judge Posner issued an order regarding the Daubert motions. His two-page, single-spaced order notes that the Daubert motions raise two issues that require claim constructions not resolved by his previous Markman ruling. Judge Posner wants the parties to brief these two issues before he can rule on the Daubert motions. And, in this order issued last Friday, he says he wants those briefs by Monday—today.

Once again: happy weekend, lawyers!

***Update on East Side Ovens: Reader(s)™ may recall that I originally speculated that the only reason the tiny bakery (East Side Ovens) was included as a defendant was to secure a basis for venue in the Western District of Wisconsin, which has a reputation as a "rocket docket" in patent cases. This was bolstered when the plaintiff cited that reputation in opposition to the defendants' motions to transfer venue. And it was absolutely confirmed on September 12, 2012, when the plaintiff stipulated to dismissal of its claims against East Side Ovens. By that point, the venue issues were done, and the case had been transfered to Chicago for trial in front of Judge Posner. So there was no longer any need to keep the tiny bakery over the coals.

Our long national nightmare is over

According to Scotusblog's Twitter feed and the Washington Post, Justice Thomas's seven-year streak of not speaking at Supreme Court oral arguments is over.  We covered Justice Thomas's streak here.  Apparently Justice Thomas spoke up in order to put down the competence of graduates of Yale's law school.  Justice Thomas, of course, is one of them.

Dancing on the Platinum Coin's Grave

With the trillion-dollar coin's abortion blessedly assured, Tom Maguire at the Just One Minute blog says "I told ya so." His analysis focuses on the fact that the relevant statute permits only "bullion" and "proof" platinum coins. Both these terms have a specific and well-understood meaning that Congress reasonably relied on in drafting the statute. In sum, the coin envisioned by trillion-dollar coin advocates would be neither a bullion nor a proof coin, as those terms are commonly understood, so it is not authorized by the plain text of the statue.

His analysis is pretty convincing. One could poke some holes in it, but it's enough that it gets us to ambiguity. From there, we can use other interpretative tools to determine the actual intent of the statute, which, after all, it utterly obvious.

This is Part 5 in The Gillette-Torvik Blog's 94-Part Series on the Trillion Dollar Platinum Coin idea.

White House Rules Out Platinum Coin

According to Ezra Klein:

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

Absolutely the correct judgment.

The lesson? Always trust content from the Gillette-Torvik Blog.

Have no fear, however—my 94-part series on the platinum coin will continue.

Bad Advice

Eric Goldman details the facts of a case where an attorney told his client to "clean up" his Facebook page (which contained some unflattering photos) during a wrongful death suit, even after the other side requested its contents in discovery.

The scheme was easily detected by opposing counsel, and the lawyer was hit with a $542,000 sanction. (The client was also ordered to pay $180,000 to cover the other side's attorneys' fees for litigating the issue.)

Ultimately, the sanctioned lawyer and his client won an $11 million verdict, and the Court of Appeals recently reinstated the entire verdict. So the lawyer is still coming out way ahead on this case.

But it sort of frustrating to know that a lawyer who is stupid and unethical enough to order his client to tamper with or destroy evidence is taking home a multi-million dollar payday.

R.I.P. Evan S. Connell

According to the Washington Post, Evan S. Connell has died.  Mr. Connell's book Son of the Morningstar: Custer and the Little Bighorn is fantastic.  Actually it is Fan-flipping-tastic.  In any event, buy it check it out from your library now.

It's official:

Professional football is slow-motion suicide.

Previous coverage here and here.

Score one against corporations being people.

Taking a break from our platinum coin coverage, let's see what's the latest in the fight over corporate personhood. The San Francisco Chronicle has a story about a case that decided whether corporations are people for purposes of counting the number of occupants in a car. 

The Importance of Interpretation

This is part three in my planned 94-part series on the $1 Trillion Platinum Coin, which clever people continue to peddle feverishly and foolishly.

The basic argument in favor of the legality of the Platinum Coin is, "Hey, the statute says what it says. Sure, it's a stupid loophole, but we take the law as we find it." In other words, it's hyper-technical literalism—strict constructionism—a way of interpreting texts that even Justice Scalia denounces.

But it's also self-defeating because if you give a hyper-literal reading to the relevant statute (31 U.S.C. 5112) you'll see that it is self-contradictory. That is, it contains irreconcilable provisions.

Section 5112(a) says: "The Secretary of the Treasury may mint and issue only the following coins" and then goes on to specify just twelve specific coins of specific denomination. By its terms, § 5112(a) prohibits the minting of any other coins. Since the trillion dollar platinum coin is not among the enumerated coins, the Secretary of the Treasury may not mint or issue it. "Hey, just read the statute, idiot!"

But wait! Section 5112(k) says "The Secretary may mint and issue platinum bullion coins and proof platinum coins." So, under subsection (k), the Secretary can mint a coin that subsection (a) clearly prohibits. DOES NOT COMPUTE!

Even worse, there is the embarrassment of § 5112(e), which authorizes the minting of silver dollars. That provision, however, is reconcilable with subsection (a) because it explicitly begins with a magical phrase: "Notwithstanding any other provision of law, the Secretary shall mint and issue . . . [silver dollars]." Subsection (k), the platinum-coin section, lacks the magic words. It just contradicts without excuse.

The provisions are irreconcilable—what Congress literally gives with subsection (k), it literally takes away with subsection (a). What can we do???

Well, we interpret the statute as a whole, of course. Turns out, there's a basic canon of interpretation that governs when two parts of statute are irreconcilable: the general/specific canon. This is the interpretive rule that, if two provisions are irreconcilable, the specific provision wins out over the more general provision. So if the question is whether the Secretary of Treasury may mint a platinum coin, you have two applicable provisions: (1) the general provision that the Secretary may mint only 12 kinds of coins, none of which are platinum; and (2) the specific provision that says the Secretary may indeed mint a platinum coin. The rule is that the specific provision wins. THE PLATINUM COIN LIVES!

Now, this may seem like common sense. And it is. But remember: people are talking about the minting of a trillion dollar coin. So I am going back to first principles. Today's lesson: to give a statute its fair meaning, you have to read all of it, and you almost always have to interpret it. If you read just ten or twenty words and apply no judgment, you'll almost never actually know what the law is.

Keeping those basic concepts in mind, ask yourself a question: given that the specified denominations in § 5112 range from one cent to $50, does a fair reading of subsection (k) give the Secretary of Treasury "discretion" to mint and issue $1 trillion coins? Or would that be an abuse of the discretion delegated by Congress?

"A clever little scheme having only the color of legality..."

"...cannot be upheld." 

Anyone who thinks the "platinum coin" solution to the Debt Ceiling is obviously legal needs to read Bloomington Nat'l Bank v. Telfer, 916 F.2d 1305 (7th Cir. 1990), in which a court bench-slapped the Comptroller of the Currency for abusing his discretion under the National Banking Act. Chevron deference goes only so far.

The cost of incivility

While it depends somewhat on the case, normally I try to keep briefs I write free of invective or pejoratives.  Mostly, that is because I figure that calling something "an outrage" (to use one phrase that lawyers seem to love) is ridiculous in a civil case.  The Holocaust was an outrage. Darfur an outrage.  Failure to perform the terms of a contract is not, and never will be, an outrage.  The failure to turn over some piece of discoverable information is wrong and should not be countenanced by a court.  But, it is not an outrage.

Lance Armstrong's Lawyer

Juliet Macur of the New York Times reports that Lance Armstrong may confess to doping during his cycling career. (We previously discussed Mr. Armstrong here.)

I can't say I really care that much whether Armstong admits the doping or not. But I was intrigued by some comments that Tim Herman, Armstrong's lawyer, made to the New York Times about whether Armstong might confess: "I suppose anything is possible. Right now, that’s not really on the table."

I thought this was a strange comment. "Right now" that's not on the table? "Anything's possible"? This sort of implies that it is a possibility that could be on the table in the future. And it's far from the stern denial you might expect. Fundamentally, why would the lawyer say anything, especially on the record?

But you'll notice that the link I provided for Mr. Herman's comment isn't actually to the New York Times article itself. That's because that quote no longer appears in the New York Times article. Instead, the article now quotes Herman as saying, "Lance has to speak for himself on that." Good answer.

I suspect that Mr. Herman claims that this comment was made off the record and demanded that the quote be removed. Either that or he claims he was misquoted. I've sent an inquiry to Ms. Macur, the reporter, through Twitter but she has not responded. (Apparently she does not know the power I wield through this blog.)

I don't understand why lawyers ever talk to reporters about live cases. Nothing good can come of it. But I certainly like Mr. Herman's new quote better than his old one.

Neil Macdonald is not a member of the National Rifle Association.

At least I assume he is not a member based on this op-ed he wrote.  He probably should be a member, however.  Members of the NRA vote to elect the leadership of the NRA.  So if you do not like the NRA's position on the availability of assault weapons or on the advisability of having an armed guard in every school, join the NRA and vote for leadership that does not espouse those positions.  The alternative is joining anti-gun groups like the Brady Campaign to Prevent Gun Violence.  I hope I do not insult anyone associated with the Brady Campaign by pointing out that the NRA has been cleaining the Brady Campaign's clock lately when it comes to both gun legislation and court decisions.

What do you think Mr. Torvik?  Would infiltration be a more effective means of change than joining the current anti-gun groups?

The Platinum Coin is a Terrible Idea

Now that we've averted the Fiscal Cliff, the country's next looming catastrophe is the "Debt Ceiling." This is the law that limits the amount the federal government can borrow. In about two months, we will hit the ceiling unless Congress acts to raise it, in which case the President will have to stop paying people the government owes money to. This would be calamitous. Republicans says they will demand spending cuts in exchange for any rise in the Debt Ceiling; Obama says he won't negotiate on this issue, because Congress needs simply to grant him the ministerial authority to create the debt necessary to pay for the spending that Congress has already appropriated.

One clever idea that's been going around is that the President can short-circuit this whole crisis by having the Secretary of the Treasury order the minting a platinum coin with a $1 trillion face value. That coin could then be deposited with the Federal Reserve, which would credit the Treasury's account with the $1 trillion, which the President could use to pay the country's creditors.

This method of using coinage to raise revenue is called coin seigniorage. The Treasury's ability to mint coins is generally circumscribed by the fact that only certain denominations and types of coin are allowed. Specifically, 31 U.S.C. 5112 states:

Citzens United and freedom from Obamacare

One thing that some lawyers like to do is to wreck the weekend of their adversary. For example, a lot of lawyers like to serve motion papers late in the day on a Friday. This is particularly true of expedited motions, like one for a temporary restraining order, that do not follow longer briefing schedules. Apparently the desire to drop bombs on a Friday does not go away when one becomes a judge. 

New year, new taxes, and an exercise in statutory interpretation

The Senate has passed a bill to avert / delay the so-called Fiscal Cliff. The bill's main feature is to make "permanent" most of President Bush's 2001 tax cuts, except that it creates a new 39.6% tax bracket starting at $400,000 for individuals and $450,000 for married couples filing jointly.

This morning I read a report that the bill included a radical provision that would impose a uniform (rather than marginal) tax rate of 35% on all the income of high-earners:

Finally, rather than (or in addition to) simply slapping the old Clinton 39.6% top tax rate on incomes above $450,000 for joint filers, the economist David Malpass of Encima Global reports that "For incomes above $450,000, the bill also appears to take away the lower tax brackets, applying a 35% rate to all income up through $450,000." New Yorkers know this as a "benefits recapture" provision, and if Mr. Malpass is correct that it's there, it's not pretty.

There was no link to Mr. Malpass's report or how he came to this conclusion, so I went to the text of the bill itself, which I've embedded here for your reading pleasure:

Mat 12564

The relevant provisions start at the bottom of page 6 of the document (line 22, specifically) where the 35% bracket is defined. It says:

(i) the rate of tax under subsections (a), (b), (c), and (d) on a taxpayer's taxable income in the highest rate bracket shall be 35 percent to the extent such income does not exceed an amount equal to the excess of—(I) the applicable threshold, over (II) the dollar amount at which such bracket begins, and

(ii) the 39.6 percent rate of tax under such subsections shall apply only to the taxpayer's taxable income in such bracket in excess of the amount to which clause (i) applies.

Let's break this down. First, clause (i) applies to the rate of tax in the "highest rate bracket" under "subsections (a), (b), (c), and (d)." To what does this refer? It's not super clear, but in fact this is a reference to subsections (a)-(d) of 26 U.S.C. §1. These subsections define, respectively, the different tax brackets for: (a) married individuals filing joint returns; (b) head of household filers; (c) unmarried individual filers; and (d) married individuals filing separately.

To cut to the chase, the bill says that for each of these classes of filers, the tax rate shall be 35% for the income between the dollar amount at which "the highest rate bracket" begins and the dollar amount defined as "the applicable threshold." To understand this, let's look at  at 26 U.S.C. § 1(a) as currently drafted:

If taxable income is:	The tax is:
Not over $36,900	15% of taxable income.
Over $36,900 but not over $89,150	$5,535, plus 28% of the excess over $36,900.
Over $89,150 but not over $140,000	$20,165, plus 31% of the excess over $89,150.
Over $140,000 but not over $250,000	$35,928.50, plus 36% of the excess over $140,000.
Over $250,000	$75,528.50, plus 39.6% of the excess over $250,000.

For married couples filing jointly, the "applicable threshold" is $450,000 (see page 8, lines 1-2 in text above). Under 26 U.S.C. §1(a), the "highest rate bracket" begins at $250,000. Thus, the 35% rate bracket applies to income above $250,000 (that is "income in the highest rate bracket") as long as it does not exceed "the applicable threshold" ($450,000) minus "the dollar amount at which [the highest rate bracket] begins" ($250,000). In other words, a 35% tax applies to the $200,000 in income earned between $250,000 and $450,000. Then the 39.6% bracket applies to income above $450,000 under clause (ii).

Simple!

In conclusion, the economist Mr. Malpass seems to be mistaken.