The Paris Hilton relief plan

Lee Drutman: The Paris Hilton relief plan

01:00 AM EDT on Saturday, April 23, 2005
The Providence Journal

Here are the circumstances, as they stand assembled before us. The Congressional Budget Office has forecast this year's budget deficit at $394 billion, with cumulative deficits expected to add up to $2.6 trillion during the next 10 years. Numerous economists have expressed concern that these burgeoning deficits could lead to high interest rates, further weakening of the dollar, and other serious economic problems.

Meanwhile, President Bush barnstorms the countryside, howling that the Social Security system is about to run out of money,and that, rather than raising taxes to keep it solvent, the entitlement program should be privatized.

Other social-welfare programs are also on the chopping block. For example, a House-passed budget resolution calls for an estimated $30 billion to $35 billion in cuts over the next five years in Medicaid, Food Stamps, foster care and adoption, assistance for abused and neglected children, and other programs that help low-income families.

Given the dire financial situation, not to mention a basic sense of fairness, you might be forgiven for thinking that the U.S. House would oppose a tax cut for the wealthiest 2 percent of Americans -- at a cost over 10 years of $290 billion: enough to cover most of the current budget deficit. After all, President Bush's 2001 tax cut has already taken away $1.35 trillion in government revenue, over 10 years, and given most of it to the rich.

You would, of course, be wrong. The House has voted 272 to 162 to repeal the tax on all estates valued at more than $1.5 million, for individuals, and $3 million, for couples -- about 2 percent of all estates.

You might even be tempted to think that, at the very least, the House would keep in place a tax on estates of over $3.5 million ($7 million for couples) -- which would amount to just three-tenths of one percent of all estates (or just 8,500 estates in 2011, when the repeal would kick in).

Again, you'd be wrong -- by a 238-to-194 House vote.

At a time of dangerously large federal deficits, at a time when Congress is proposing large-scale cuts in social-welfare programs, it is hard to understand how anybody in Congress could defend this massive tax cut for the rich with a straight face -- let alone say that, as a matter of "basic fairness," we must permanently repeal the estate tax, as did bill sponsor Rep. Kenny Hulshof (R.-Mo.).

House Speaker Dennis Hastert (R.-Ill.), meanwhile, said that the estate tax was "just evil, because it takes away the American dream from too many American families."

The estate tax does not take away the American dream, from anyone.

The rich have already achieved the American dream, and they have found multiple ways to avoid paying the lion's share of estate taxes. They do this especially through charitable giving -- which actually helps make the American dream possible for more people (and which, according to Congressional Budget Office estimates, would be reduced by an annual $13 billion to $25 billion if the estate tax were repealed).

More serious, repealing the estate tax would greatly accelerate the growing concentration of wealth, by preserving the largest fortunes -- making it even harder for the vast majority of people to have a shot at the American dream.

When the Senate takes up the estate tax, as it has promised to do, the members should think long and hard about fairness. It's difficult to see how cutting help for abused and neglected children and saddling all children with massive future federal debt -- so that children of the wealthiest Americans can inherit millions and not work a day in their life -- resembles anything close to "basic fairness."

-- Lee Drutman

http://www.projo.com/opinion/contributors/content/projo_20050423_23estat.1bfe769.html

Special counsel on prisoner abuse

Lee Drutman: Special counsel on prisoner abuse

01:00 AM EDT on Friday, April 8, 2005
Providence Journal

In recent months, Bush-administration critics have lodged disturbing accusations against U.S. Atty. Gen. Alberto Gonzales for his alleged role in authorizing torture in the war on terror.

For example: On Jan. 25, 2002, Mr. Gonzales (then White House counsel) dismissed parts of the Geneva Conventions as "quaint" in advising President Bush that the document did not apply to detainees held at Guantanamo Bay. And on Aug. 1, 2002, Mr. Gonzales requested a Justice Department memo to approve such practices as "water boarding" (simulated drowning) and "open-handed slapping of suspects" as acceptable prisoner treatment.

A long list of similar memos skirting the spirit of both domestic and international law -- documented by the American Civil Liberties Union and other groups -- has led such critics as the president of the Alliance for Justice, Nan Aron, to conclude that "Alberto Gonzales was the chief engineer behind the Bush administration's policy justifying the abusive treatment of prisoners of war."

The attorney general may prefer to dismiss such statements as outlandish, while asserting his qualifications with a series of platitudes about the importance of upholding the law and a promise that torture "will not be tolerated by this administration" (as he told the Senate during his recent confirmation hearing). Yet concerns about Mr. Gonzales's role are hard to avoid when he answers tough specific questions with such lawyerspeak as "I don't recall specifically" (again, as he said at his confirmation hearing).

Given the situation, and politics being what it is, Mr. Gonzales's coyness is to be expected. Yet it does not help us get to the bottom of a black mark on the American war on terror: the extensive evidence that the United States, while casting itself as the defender of human rights, has engaged in disturbing treatment of detainees. (One wonders how, exactly, soaking a prisoner's hand in alcohol and setting it afire, putting lit cigarettes in a prisoner's ear, or force-feeding a prisoner with a baseball makes the world safer for democracy.)

Figuring out who did what and who bears responsibility in the torture scandal is crucial, for a simple reason: We cannot be a credible international force for human rights and democracy if we cannot hold ourselves accountable for potential human-rights violations.

We can't say for sure whether Alberto Gonzales bears responsibility for the torture scandal. What we can say is that to find out requires appointing an outside special counsel to investigate. Asking the Gonzales-headed Justice Department to investigate would not provide a satisfactory answer; if the attorney general and other administration figures were absolved of responsibility, few critics would believe it. Mr. Gonzales and his associates are too close to approach the scandal objectively -- or even to appear objective.

-- Lee Drutman

http://www.projo.com/opinion/contributors/content/projo_20050408_08lee.1ba6381.html

Shelters from the storm

Lee Drutman: Shelters from the storm

01:00 AM EST on Saturday, April 2, 2005

Only the little people pay taxes.

-- Leona Helmsley

News item: Americans' unpaid taxes are now topping $300 billion a year, with people who underreport their income the biggest culprits. -- Associated Press

At a time of rising (and well-justified) concern in Washington about the metastasizing federal-budget deficit, most of the solutions proposed these days seem to involve some form or other of cutting spending. Raising taxes remains political heresy, but a lot of us wonder why nobody has seized on doing a better job of collecting taxes, as at least a partial solution.

A recent General Accountability Office report highlighted the opportunity in going after tax shelters. On the definition of tax shelters, the GAO says:

"The Internal Revenue Code has defined tax shelters in various detailed and complicated ways for purposes of having them registered, for applying certain penalties, or for certain tax accounting rules. Although the IRS has no single, authoritative definition of abusive shelters, it has generally characterized them as complex techniques promoted by sophisticated tax professionals that companies and rich individuals use to exploit tax loopholes and reap unintended tax benefits. Tax services include services involving tax compliance, tax planning, and tax advice as described by the Securities and Exchange Commission (SEC)."

According to the report, more than 10,300 individuals and 207 Fortune 500 companies have used tax shelters, accounting for a total tax revenue loss of nearly $129 billion for 1998-2003. That's an awfully large pot of money to go after at a time when revenue is in short supply. Yet, according to the GAO report, the IRS staffing levels in "key occupations" related to compliance were lower in 2002 than in 2000, and "based on past experience and uncertainty regarding some expected internal savings, fiscal year 2004 anticipated staff increases might not fully materialize."

The report further warns that "if IRS carries through with its intentions to increase resources devoted to abusive shelters, it may not have the desired level of resources in other areas of compliance."

Much of the blame can be heaped on the accounting industry, which has grown increasingly aggressive in the art and sale of tax shelters. According to the GAO report, 114 of the Fortune 500 companies and 4,400 individuals using tax shelters obtained the services from an accounting firm.

Meanwhile, a recent report by the Senate Permanent Subcommittee on Investigations found that accounting firm KPMG's revenue from its Tax Services Practice rose from $829 million in 1998 to $1.2 billion in 2001. The report also documented how accounting firms such as Ernst & Young and PricewaterhouseCoopers, banks such as Deustche Bank and Wachovia Bank, and law firms such as Sidley Austin Brown & Wood "developed, implemented, and mass-marketed cookie-cutter tax shelters used to rip off the Treasury of billions of dollars in taxes," as Sen. Norm Coleman (R.-Minn.), the committee's chairman, put it.

Both the Senate Permanent Subcommittee on Investigations and the Senate Finance Committee have been holding periodic hearings on tax shelters for years now, documenting a wide range of abusive practices ripe for regulation. With the budget deficit becoming ever more precarious, a serious congressional crackdown on abusive tax shelters is long overdue.

-- Lee Drutman

http://www.projo.com/opinion/editorials/content/projo_20050402_02tax.1ae8f3a.html