Against Electing Treasurers

The state treasurer in Colorado, a job currently filled by Cary Kennedy, a very competent and honest Democrat, is elected on a statewide partisan ballot, just like the Governor, the Attorney General, and the Secretary of State. But, the job is technocratic.

The state treasurer is charged with investing state funds (including involvement in the management of the state retirement system, PERA), with confirming that requests to spend funds from the executive branch are authorized by law, with implementing directions to borrow money made by the Governor with legislative authorization, with handling claims to abandoned property, with claculating interest rates according to legal formulas, with calculating the inflation indexed value of certain statutory dollar amounts, and not a whole lot else.

The budget is handled by the Governor and the Joint Budget Committee of the legislature. The Colorado Department of Revenue, which collects taxes, reports to the Governor, not to the Treasurer. The state treasurer is basically the chief bank officer of Colorado, and has no partisan policymaking authority.

I've been asked, "Why are you so adamant that the Treasurer doesn't do anything?"

There is a reason. It is because I am one of those old fashion good government advocates at heart.

I am a firm believer in superiority of appointees in positions where the public where technocratic expertise is important and policy preferences are not very important. I am also very wary of the nature tendency of partisan elections to such posts to politicize matters that should not be political. I think that the late 19th century/early 20th century progressives did us a great disservice by making so many posts elective.

In the same vein, I am opposed to Colorado's current practice of electing on a partisan basis county treasurers, county assessors, county coroners, and county surveyors. All of these posts should be appointive. Sooner or later, selecting people for these offices in partisan races leaves you with somone who isn't competent. For example, elected coroners have led to serious problems both in Colorado (where it threw a wrench in the organ donation process) and in Philadelphia. Denver, meanwhile, probably is one of the financially best managed municipalities in the nation, and not coincidentally, has a mayorally appointed CFO rather than an elected county treasurer like most of the other counties in the state. One need look no further than Jefferson County and Araphoe County in the past few years to see the problems involved in putting partisan elected officials in charge of jobs like county treasurer and clerk and recorder (remember Tracy Baker).

I also favor stripping the non-electoral functions of the Secretary of State from the office (Colorado has suffered maladministration of those non-partisan duties regularly under political appointees over the past couple of decades), and either centralizing election administation responsibilities at the state level (perhaps under the direction of the same blue ribbon committee charged with redistricting) or segregating them from the duties of the clerk and recorder at the county level, where they would be put in the charge of a non-partisan appointee. How can we ever expect that elections run by partisan elected officials will avoid the appearance of impropriety. Remember Katherine Harris. This is hardly a radical suggestion. It is the international norm.

Also, one of the things that is a barrier to meaningful mass participation in elections is the sheer length of the ballot. Any contested race requires a voter who his making a good faith effort to make a good choice to spend more time engaged in research, and leaves those who do not feeling as if they are ill informed and not fully worthy of voting. Denver is better than most, and we at least do not have contested or partisan races for judicial office in Colorado. But, we could do much better.

Individually, putting an fundamentally non-political office on the ballot doesn't do much to change the burden on a voter. But, collectively, the long ballot does take its toll. We don't need to go to the extreme of the Canadians and British, who have only a single set of candidates running for a single office on the ballot at any one time. But, slimming down the ranks of elected officials would improve the quality of government.

There is also a widespread misperception, which partisan candidates have no incentive to dispell, that the state treasurer has meaningful discretionary power over the state budget and over tax collection. The the budget is made by the Governor and Joint Budget Committee, that many close calls under TABOR are the subject of opinions of the Attorney General, and that the Colorado Department of Revenue reports to the Governor rather than the Treasurer. But, a lot of voters don't realize that and choose someone for the office on the assumption that it has greater policy making authority than it actually does.

I have nothing against Cary Kennedy, and state treasurer is a job (or at least a group of jobs) that someone has to do well. But, I do have a big problem when people misperceive what is involved in the job, and I do have a problem with the larger issue of electing partisans to technocratic jobs.

The SEC always wins

[T]he SEC rarely loses. According to official statistics, it obtained a favorable outcome--judgment, default judgment or settlement--in 99% of the cases it brought.

From here.

Note that such high success rate isn't necessarily a good thing. It may indicate that the agency is not bringing cases that are very strong, but not certain to prevail, and thus is failing to aggressively enforce securities laws. The high success rate is particularly notable because securities law violators are among the most affluent and sophisticated defendants out there. Many securities fraud defendants have college degrees and sufficient funds to hire expensive and highly skilled attorneys to represent them. By comparison, about a third of state prison inmates in Colorado are high school dropouts with substance abuse problems and no marketable skills.

On the other hand, almost all prosecutorial bodies have very high success rates on cases that they choose to prosecute. It would be unusual for a local district attorneys' office to secure convictions either by guilty plea or at trial, in less than 95% of the cases that it brings. Civil plaintiffs also receive either a judgment or settlement in a very large percentage of all cases brought with a handful of exceptions (medical malpractice suits, habeas corpus suits and civil suits brought by inmates being among the most likely to fail). Courts are better described as "right enforcement" bodies than "dispute resolution" forums.

The History of the ESOP

To the question, “Why does the United States have ESOPs?” it is not an exaggeration to say the answer is that a guy in California thought they were a good idea, and he personally persuaded a member of the Louisiana congressional delegation that he was right.

From here.

Ideas have a power all their own.

An ESOP is an employee stock ownership plan established in accordance with safe harbor provisions of the federal tax code and ERISA (the Employee Retirement Income Security Act of 1974, which is the principal federal employee benefits law and is best known for its broad pre-emption of state law in the area). Typical, employer stock is held in a trust, tax free, for the benefit of employees who are plan participants, on a tax favored basis. Generally, an ESOP transfers economic benefits (and risks) to workers, without ceding control of the business.

One of the better lay treatments of ESOPs including their history can be found in several articles regarding "ESOPs and the Financing of Worker Cooperatives" in "Worker Cooperatives in America" edited by Robert Jackall and Henry M. Levin (1984).

The indirect ownership ESOP model bears considerable resemblence to the system used in the Mondragon industrial cooperatives, in Basque Spain, probably the largest community of worker owned large businesses in the capitalist world, that was established in the 1950s, which included about 85 worker cooperatives employing about 18,000 workers in 1984.

Denver Post Distorts Estate Tax Headline

Associated Press article headline: "Estate Tax Hits Few Ordinary People."

Denver Post headline for same article: "Estate tax can hit ordinary people."

Who are those ordinary people?

Folks receiving inheritances from estates of $3.5 million or more ($7 million or more in the case of married couples with a simple trust arrangement). Serious planning can considerable increase the amount the passes tax free and can reduce the effective estate tax rate. Small business almost never have to be sold to pay estate taxes.

Needless to say, the AP headline provides a more accurate description. The Denver Post headline creates unjustified fear.

Estate tax issues aren't that common (certainly not ordinary) for people who are merely relatively affluent members of the middle class (perhaps because they are retirees), but could be a particular problem in a divorce of a same same couple with unequally owned assets, of only modest wealth, or large gifts to a spouse who is same sex or not a U.S. citizen.

A gay spouse or non-citizen spouse receiving a spousal gift during life in excess of $1,013,000 (gay spouse) or $1,133,000 (non-citizen spouse), or in excess of $3,500,000 (for either) from a spouse via inheritance or bequest (in either case reduced by certain large gifts made during life to people who are not charities) could be subject to the gift or estate taxation, but even this is an uncommon upper middle class issue that can be resolved with tax planning (one solution is a type of trust called a QDOT).

Colorado has the cheapest, easiest probate system in the nation, which provides a fairly high degree of privacy, so that is rarely the worry it is made out to be either.

The far more ordinary money issues at death are (1) taxes due on never taxed traditional IRA and 401(k) assets, and (2) the Medicaid estate recovery system's application to people who needed publicly assisted nursing home care in the final days.

The key point made in the article, however, is that:

In 2010, the federal tax as it currently stands will expire; if Congress does not change the law, there will be no estate tax next year. In 2011, the old exclusion of $1 million returns, and the top rate for holdings above that amount would jump back to 55 percent, where it was in 2001.

Several bills have been proposed in Congress to address the issue, but none has passed yet.

Conventional wisdom is that the final deal for 2010 and thereafter will be a $3.5 million exclusion and a 45% rate on the balance, just as under current law, with a few tweaks that make estate planning less important and close some loopholes in the way minority interests in closely held businesses are valued (basically, President Obama's proposal). But, a proposal to do this narrowly failed in the U.S. Senate where some Senators would prefer a larger exclusion and/or lower tax rate.

SCOTUK

It took long enough, but starting October 1, 2009, there is now a Supreme Court of the United Kingdom. This essentially copies the separation of powers the Americans adopted in 1789, when they put in place the current constitution.

The country's new Supreme Court opens on Oct. 1, when the Law Lords - a dozen senior judges who currently sit as members of Parliament's House of Lords and serve as the country's highest court of appeal - make a formal procession across London's Parliament Square to their new courthouse home. . . . the newly titled justices of the Supreme Court will correct one of Britain's ancient constitutional quirks, and deliver on a government promise to separate the country's judicial and legislative powers after hundreds of years of muddled compromise.

Once sworn in, the 12 justices won't be allowed to return to the House of Lords until they have retired. Justices appointed in future will not be members of Parliament and will have no link to the House of Lords.

It's the latest major reform to Britain's constitution, and follows the removal of almost all hereditary members of House of Lords and the creation of regional governments in Scotland, Wales and Northern Ireland.

Lord William Bach, a justice minister, said: . . .

"The opening of the Supreme court in October this year will be a major constitutional milestone and a change that will help to build the country's future. It will achieve above all a clear and physical separation of the judiciary, of Parliament and the executive, and improve the visibility of the highest court in the land," . . .

The site of the new court . . . stands in the shadow of Westminster Abbey and the Houses of Parliament and opened as a criminal court in 1915. . . . [It will] have proceedings broadcast live once first cases are heard Oct. 5. . . .

Like the current Law Lords, the Supreme Court will act as the final court of appeal in all British civil cases and in criminal cases in England, Wales and Northern Ireland. Scotland has its own distinct system of criminal law. . . . The new court will also be the final point of appeal for about 30 British territories overseas and many Commonwealth nations, including Jamaica, a host of other Caribbean islands, Gibraltar, the Falkland Islands and Bermuda. Unlike the U.S. Supreme Court, the British equivalent won't be able to strike down acts of Parliament. . . .

In the future, newly appointed justices will be selected by the court's president, his deputy and representatives of the independent bodies that appoint judges to Britain's lower courts.

Like all major constitutional change in Britain, the change was accomplished by simple statute as there is no one document protected from amendment except with extraordinary procedures in the United Kingdom (other than certain international treaties).

The British talent for making changes that are initially superficial, but will gain substance imperceptibly over time is remarkable. All incumbents will return upon retirement to the House of Lords and have no different powers before or after the move, but as the Law Lords age, and they aren't young to start with, the Court will become a completely separate branch of government after several hundred years of fusion with parliament.

Indeed, the appointment process doesn't even directly put parliament into the loop. The United Kingdom's fused executive and legislative branch will have input only indirectly through the Colorado style blue ribbon commissions that appoint lower court judges.

This will replace all or most of the jurisdiction of the Appellate Committee of the House of Lords. These powers are as follows:

Generally, only important or particularly complex appeals come before the House of Lords.

In civil cases, the House of Lords may hear appeals from the Court of Appeal of England and Wales, the Court of Appeal in Northern Ireland and the Scottish Court of Session. Alternatively, cases raising important legal points may leapfrog from the High Court of England and Wales or High Court in Northern Ireland. Leave (or permission) to appeal may be granted either by the court whose decision is appealed or the House of Lords itself.

In criminal cases, the House of Lords may hear appeals from the Court of Appeal of England and Wales, the High Court of England and Wales, the Court of Appeal in Northern Ireland and the Courts-Martial Appeal Court. . . . Appeals are not heard from the High Court of Justiciary [Scottish Supreme Criminal Law Court].

There is a case screening system that serves a purpose similar to certiorari petition grants and denials, but not vested primarily in the Court itself:

In addition to obtaining leave to appeal, an appellant must also obtain a certificate from the lower court stating that a point of general public importance is involved. The effect of this is that, in criminal matters, the House of Lords cannot control its own docket.

Permission to appeal may be granted by an Appeal Committee. The Committee consists of three Lords of Appeal or Lords of Appeal in Ordinary. Appeal Committees may not meet while Parliament is prorogued or dissolved. Formerly, leave to appeal was unnecessary if two solicitors certified the reasonableness of the case. This procedure was abolished in English cases in 1934 and in Northern Irish cases in 1962. Scottish cases continue to come before the House of Lords in this manner (where two advocates certify the appeal as suitable), as 'leave to appeal' is not required in the Scottish legal system.

The status of the existing House of Lords as court of last resort is complicated a bit by European federalism:

The only further appeal from the House of Lords is to the European courts (the European Court of Justice or the European Court of Human Rights), and only then in matters concerning either European Community law or the European Convention on Human Rights.

The Law Lords do not have the power to exercise judicial review over Acts of Parliament. However, in 1972 the UK signed up to be a member of the European Union, and with this accepted European law to be supreme in certain areas (see the ex parte Factortame case).

That being said, the doctrine of Parliamentary sovereignty still applies - if the UK wants to have ultimate power over her laws as was the case previously, she would need to break from Europe. This is a legal possibility, but politically very unlikely.

In common with other courts in the European Union, however, they may refer points involving European Union law to the European Court of Justice. The Lords may also declare a law inconsistent with the European Convention on Human Rights pursuant to section 4 of the Human Rights Act 1998. Whilst this power is shared with the Court of Appeal, the High Court, the High Court of Justiciary, the Court of Session, and the Courts-Martial Appeal Court, such declarations are considered so important that the question will almost inevitably be determined in the House of Lords on appeal. However, the challenged law in question is not automatically struck down; it remains up to Parliament to amend the law.

It appears that the House of Lords will retain jurisdiction over "peerage claims" (i.e. claims to hereditary nobility) and will continue to be responsible for trying impeachments (the last of which was tried in 1806).

The current domestic jurisdiction of Judicial Committee of the Privy Council of the House of Lords, which it will take over, includes:

The Privy Council has jurisdiction in the following domestic matters:

* Cases involving "devolution issues" arising under the Scotland Act 1998, the Government of Wales Act 2006 or the Northern Ireland Act 1998, i.e. disputes regarding the validity of legislation (Acts of the Scottish Parliament, of the Northern Ireland Assembly, or Measures adopted by the National Assembly for Wales) or executive functions of the Scottish Government, the Welsh Assembly Government or the Northern Ireland Executive.

The cases may reach the Committee as follows:

*** The Attorney-General or other Law Officers may refer a bill from the devolved body to the Committee.

*** The litigants may appeal a case from certain superior courts.

*** Appellate courts, including the House of Lords, may refer a case to the Committee.

*** Any court, if a Law Officer so desires, may refer a case to the Committee.

*** Law Officers may refer any issue not related to a bill or case to the Committee.

* Appeals against schemes of the Church Commissioners (who control the estate of the Church of England).

* Appeals from the ecclesiastical courts (the Arches Court of Canterbury and the Chancery Court of York) in non-doctrinal faculty cases.

* Appeals from the Court of Admiralty of the Cinque Ports.

* Appeals from Prize Courts.

* Disputes under the House of Commons Disqualification Act 1975.

The Constitutional Reform Act 2005 will transfer the devolution powers to the new Supreme Court of the United Kingdom when it comes into force.

Additionally, the Government may (through the Queen) refer any issue to the committee for "consideration and report".

Within the United Kingdom legal systems, judgments of Judicial Committee made in devolution cases are binding on all other courts, including the Appellate Committee of the House of Lords. This is significant because most devolution cases involve the interpretation of Convention rights, which under the Human Rights Act 1998, apply throughout the United Kingdom. Judgments of the Judicial Committee in overseas cases are of only “persuasive authority” in other courts in the United Kingdom; so while courts take them into account they are not as a matter of law binding.

The Judicial Committee of the Privy Council, Her Majesty in Council, is the Court of Final Appeal for the Church of England. It hears appeals from the Arches Court of Canterbury and the Chancery Court of York, except on matters of doctrine, ritual or ceremony, which go to the Court for Ecclesiastical Causes Reserved. By the Church Discipline Act 1840 and the Appellate Jurisdiction Act 1876 all archbishop and bishops were eligible to be members of the Judicial Committee.

It isn't clear if some residuary judicial authority of the House of Lords will remain in isolated circumstances (e.g. ecclesiastical cases, admiralty, House of Commons qualifications disputes).

Colonial Appeals

Since SCOTUK will be assuming the responsibilities of the Judicial Committee of the Privy Council of the House of Lords, it will also become the court of last resort for many former (and a few current) British colonies. Notably, in its role as successor to the Privy Council, SCOTUK is the court of last resort for many of the world's most prominent tax haven/asset protection trust jurisdictions:

The Committee holds jurisdiction in appeals from the following 30 jurisdictions (including 14 independent nations):

Appeal is "to Her Majesty in Council" from nine independent nations and 16 other jurisdictions:

The Commonwealth realms of Antigua and Barbuda, Bahamas, Belize, Grenada, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines and Tuvalu.

The New Zealand associated states of Cook Islands and Niue (though New Zealand itself established a Supreme Court of New Zealand in January 2004, replacing the Privy Council for appeals originating within New Zealand).

The Crown dependencies of Jersey and Guernsey and appeals from the Staff of Government Division on the Isle of Man.

The British overseas territories of Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, St. Helena and dependencies, Turks and Caicos Islands, Pitcairn Islands. The United Kingdom's Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus.

Appeal is directly to the Committee from four countries:

The Commonwealth republics of Dominica, Mauritius, Trinidad and Tobago, and if the case involves constitutional rights, Kiribati.

Appeal is to the Head of State:

Brunei (Queen Elizabeth II of the United Kingdom and Sultan Hassanal Bolkiah have agreed that the Judicial Committee hears the case and reports to the Sultan).

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Jurisdiction Ceded

Former colonies have gradually removed themselves from the Privy Council's jurisdiction, notably with unilateral statutory declarations, rather than with U.K. consent. In reverse chronological order, the ones who have done so are:

* Barbados (2005) (final appeal is to the Carribean Court of Justice)
* Guyana (2005) (final appeal is to the Carribean Court of Justice)
* New Zealand (2004)
* Hong Kong (1997)
* Singapore (except by consent and in capital cases 1989; in all cases 1994)
* Australia (1986)
* Malaysia (Criminal and Constitutional cases 1978, Civil 1985)
* Grenada (1979) (Grenadian appeals to the Privy Council was temporarily abolished from 1979 until 1991, as a result of the Grenadian Revolution, which brought Prime Minister Maurice Bishop to power. People's Law 84 was enacted to this effect. The People's Laws of Grenada were gradually ruled invalid as unconstitutional.)
* Ceylon (1972) (now, Sri Lanka)
* Guyana (1970)
* Rhodesia (1969)
* India (1950)
* Pakistan (1950)
* Canada (criminal cases 1933; new civil cases 1949)(the last pending case completed 1959; a minority view is that Canadian First Nations may retain the right to appeal to the Privy Council because their treaties predate their relationship to Canada, but the JCPC has not entertained any such appeal since 1867)
* Irish Free State (1933)

* Caribbean Community (Pending) (The nations of the Caribbean Community voted in 2001 to abolish the right of appeal to the Privy Council in favour of a Caribbean Court of Justice (CCJ). Some debate between member countries and also the Judicial Committee of the Privy Council had repeatedly delayed the court's date of inauguration. . . . [A] few . . . CARICOM states appear to be ready for the abolition of appeals to the Judicial Committee of the Privy Council in the immediate future. The government of Jamaica in particular, had come close and attempted to abolish appeals to the Judicial Committee without the support of the opposition in Parliament; however, it was ruled by the Judicial Committee of the Privy Council that the procedure used in Jamaica to bypass the opposition was incorrect and unconstitutional. Caribbean governments have been coming under increased pressure from their electorates to devise ways to override previous rulings by the JCPC such as the Earl Pratt and Ivan Morgan v. The Attorney General for Jamaica (1993) judgement concerning the death penalty in the Caribbean region.)