30 June 2006

Aquitted Conduct As Evidence.

In a recent Colorado case, a Colorado trial court allowed a jury to here testimony from two woman who said that they had been sexually assaulted by the defendant in a case involving a third woman, even though the two prior cases had gone to trial and resulted in acquittals. The judge found by a preponderance of the evidence that the sexual assaults had taken place despite the acquittals, and offered the women's testimony as modus operandi evidence (Colorado Rule of Evidence 404(b)). This decision was affirmed in a 2-1 decision, on appeal.

Given that their testimony, which provides trials within trials, in effect, could not be a complete as the actual trials that produced the acquittals, and the fact that the jury wanted that additional evidence and asked for it in deliberation, excluding the fact of the acquittals seems particularly prejudicial. Yes, acquittal does not mean a finding of innocence, and the jury should be instructed of this fact, but given the general distrust the legal systems has of propensity evidence, it should come with footnotes when appropriate to impeach the implication left, which was that the individual was a serial rapist with two prior convictions, something that wasn't the case.

Death Penalty Overkill?

Douglas Berman, of the Sentencing Law and Policy Blog, explains why he thinks that courts, and particularly the U.S. Supreme Court, devote to much attention to death penalty cases. The main points:

1. The death penalty is a regional issue with little or no impact in most of the country.
2. Death is so different that it often can skew the development of the law.
3. Innocence issues aside, the very worst defendants get (very limited) benefits from all the time and attention give to capital cases.
4. Our massive criminal justice systems implicate many issues that get little attention.

The strongest counterpoint is not the one he is responding to in that post. Instead, the best reason to focus on capital punishment is a canary in the mine theory. High capital punishment rates in places like Texas are a symptom of particularly sick criminal justice systems. It is a regional issue because the South it far behind the rest of the county in the fairness of their criminal justice systems, particularly at the state level. After the South, the federal system's draconian sentencing is ailing most seriously.

This isn't to say that other states are paragons of virtue. California's three strikes law, for example, is a nightmare, and the grittier day to day operations of California's system are nothing to write home about. But, most state court criminal justice systems outside the South are far less out of whack.

Big Changes For Wash Park Prophet Blog

I'm keeping my day job. But, starting in July, I'll be taking on a major new project. I'll be going semi-pro as an independent blogger-journalist focused on Colorado.

I've always had a Colorado focus, not just at this blog, but at my previous gigs as a contributor to Political State Report, and before then, in diaries at Daily Kos. This will be a group effort. Some of my blogger-journalist colleagues will be familiar to the progressive Colorado blogosphere. Some may be new faces. The details are under wraps for a few more days. Some of the details have yet to be worked out.

The bottom line is that a large share of my blogging output will be devoted to this project. The Wash Park Prophet blog will continue to exist, partially with cross-posts, and partially with material exclusive to this site that doesn't fit with my new focus. My "Steal All You Want" copyright policy will also probably change soon, at least in connection with my cross-posts. Stay tuned for more details as they become available.

The History and Future of Kosovo

Daily Kos diarist Sirocco offers the fullest history of Kosovo that I have ever read. Near the conclusion of his thorough, illustrated and hyperlinked account, Sirocco sums up the current situation in the wake of a concluded U.S. lead NATO military campaign that had just been resolved in 1999:
Upon the end of hostilities in June, Kosovo Albanian refugees started to return; but at the same time, Serbs fled or were chased out by Albanians in equally large numbers. By July 20, the UN High Commissioner for Refugees estimated that 150,000 Serbs were flooding into Serbia, which already harbored half a million refugees from the other ex-Yugoslavian wars. The total number of refugees from Kosovo rose to some 230,000, most of them Serbs. Of these, over 200,000 remain Internally Displaced Persons in what is Europe's biggest refugee problem. A hundred thousand Serbs stayed put among approximately 1.8 million ethnic Albanians, among whom little love was lost on Serbs.

This minority now dwell in KFOR-guarded enclaves, with limited freedom of movement and high unemployment even by the standards of a dysfunctional UN protectorate where only the black economy flowers. The Serbian apartheid state has effectively been inverted. More than 4,000 Serbs worked at the public electricity service in 1999; today around 30 do so, out of 8,000 employees. Meanwhile, barbed wire and armed KFOR troops protect those medieval monasteries that remain recognizably intact.

Independence is, however, finally in the offing, mostly because the Western powers acknowledge once again that the majority would never settle for less. Serbia, impoverished and demoralized, is unable to do more than strut and fret at the impending loss of its "historical heartland."
I recently discussed more recent events related to Kosovo. U.N. sponsored talks in Vienna aimed at mapping out Kosovo's future are ongoing. As I summed up then, the U.N. and by extension NATO which has committed to following its lead:

will be pushing hard for Kosovo's independence, if ratified in a referendum whose outcome is largely a foregone conclusion. But, the U.N. will also likely push to have independence for Kosovo limited by provisions of Kosovo's own constitution and/or international treaties with Serbia, which would provide the human rights protections and protections for cultural and religious heritage which Serbia has sought to retain jurisdiction over in an autonomous state (the flexibility referred to by the U.N. representative), but not foreign policy, currency or border control for Serbia.

The international community would very much like Serbia to consent to Kosovo's independence, however, because it fears "opening up the can of worms associated with the notion of unilateral declarations of independence by a portion of an existing sovereign state."

Serbia is trying to leverage that fear into an agreement to broad autonomy short of sovereignty, that would permit it to salvage its national pride and would leave open an opportunity to restore greater control some time in the future when it is not in a world spotlight. This is the approach that it took in 1989 when it attempted to roll back autonomy status granted to the region in 1974 by Yugoslavian leader Tito, precipitating the crisis in Kosovo that lead to international military intervention.

The assessment of the situation on the ground provided by Sirocco, where the current population is almost 95% Albanian Kosovar, and the Serbian minority lives in segregated, economically depressed compounds at the sufferance and protection of international forces (and more would probably leave, if international forces ceased to protect them), suggests that the Serbian bid to retain sovereignty is unlikely to succeed.

29 June 2006

Enforcing Hamdan

I won't be the first observer to note that one of the most important aspects of the U.S. Supreme Court's Hamdan decision today is its holding that al Queda members are still entitled to the benefit of Common Article 3 of the Geneva Convention. This case focused on the right of those individuals to due process prior to punititive sanctions. But, another part of the same article bans torture and near torture.

The question that immediately follows is, how does this get enforced?

Hamdan does not, itself, authorize private lawsuits to prevent the government from torturing detainees. It applies the Geneva Convention only as part of the law of war which is referenced in the Uniform Code of Military Justice. The Detainee Treatment Act of 2005, on its face, at least, expressly forbids Guantanamo Bay detainees from bringing new lawsuits to remedy the harms they have suffered as a result of violations of the Geneva Convention by the Bush Administration. It would appear unlikely that a taxpayer or individual legislator would have standing to bring such a lawsuit.

There is some chance that the issue may be raised in a lawsuit already pending when the Detainee Treatment Act of 2005 was enacted, whose jurisdictional validity is affirmed in Hamdan. In that case, a court could enforce compliance by holding responsible officials, such as Secretary of Defense Rumsfield in contempt of court, either detaining him at the hands of a U.S. Marshall, or fining him, in order to secure compliance, or perhaps even empowering another individual to issue such binding military orders as are necessary to ensure compliance with the Geneva Conventions.

But, suppose that this legal strategy doesn't come together. Is Hamdan's pronouncement about the meaning of the Geneva Conventions necessarily without effect? I don't think that it is meaningless. Admittedly, the President has discretion to direct the attorney-general not to commence war crimes prosecutions based on the United States Code that prohibits violations of the Geneva Conventions in exercise of prosecutorial discretion. And, admittedly, the President can shut down courts-martial directed to punish misbehaving soldiers. But, the federal governments is fundamentally comprised of relatively intelligent individuals, selected on the basis of merit except at the very highest levels, who are in the business of following rules. This is what bureaucrats do.

It is one thing for a lone bureaucrat or soldier to go out on a limb to quash what political leaders want on the grounds that the order is unlawful when the law is a subject of debate. It is quite another to do so when the U.S. Supreme Court has spoken clearly on the issue. Indeed, even many politically appointed officials in the Office of Legal Counsel would have qualms about outright defying the U.S. Supreme Court's recent, clear determination of an issue of constitutional law. To do so would be to welcome legal anarchy, when they themselves need to have a system for giving themselves legal authority to maintain their own power.

In confidential areas of national security and intelligence, legality has always rested on the commitment of government officials to adhere to the law, because no one else is in a position to know of the violations that take place. Ambiguity in the law engineered by people like Judge Yoo and Alberto Gonzales, created a cover which permitted things like the torture memos and illegal NSA surveilance to go forward despite discomfort from career government employees used to operating on a more restrained basis. But, the Hamdan case, along with the McCain Amendment limiting torture, blows away much of that legal cover, and the Hamdan case also decisively wipes out the authority of the President to follow "signing statements" purporting to take the position that the President does not have to follow duly enacted laws regarding national security.

This has the potential to inspire mass resolve within the career staff of the Central Intelligence Agency and Department of Defense. They are now both on notice that they could be subject to prosecution for continuing to carry out illegal Bush Administration torture policies (perhaps under a successor administration), and empowered to be insubordinate when given a dubious order. By making clear what is legal and illegal, even if there is no formal enforcement mechanism, many career civil servants will do what comes naturally, which is to do what is legal. As comfortable as they may be playing in gray areas of the law, your typical law abiding bureacrat is not comfortable flauting the law, even if the President and his inner circle are perfectly happy to do so.

Of course, bureaucrats are creative people. They don't march in the streets. Most will not even go so far as to leak the fact that the administration is breaking or trying to break the law, which has questionable legality itself, although the brave might send a letter to the inspector general of their agency. But, there are many ways that bureacrats can thwart projects short of outright defiance. They can work to rule. They can slow down and deprioritize questionable projects. The can make "mistakes" in classifying material that informs the media and elected officials of what is going on. They can require more clearances than would normally be insisted upon to cover themselves, before proceeding. Enough delay in implementing administration policies can cause implementation to outlast the administration itself. Most political appointee managers eventually discover the power of the bureacracy and learn to seek peace with it.

Those who do not, like our recently department leadership group in the CIA, often pay for the inability to seek peace with their jobs.

Indeed, this phenomena also comes with a conclusion for good jurisprudence. In private law cases, there is a strong judicial imperative to decide no more in a given case than is absolutely necessary to resolve the case. The norm against making rulings that are dicta, or simply issues raised but not necessarily decided by a case, depending upon the order of decision, makes all sorts of sense in the private law context, which inherently disenfranchses other similarly situated people from participating in the process of making precedent. Indeed, the same norm applies for similar reasons, in the public law context (i.e. suits against government) when it concerns, for example, the rights of police officers employed by our fractures local governments.

But, when the courts address the rights on similarly situated individuals vis-a-vis the solitary federal government, particularly when the case is such that it is hard to posture for court review, the opposite philosophy makes sense. The Courts should push to clarify as many issues legitimately raised by the case as possible, because the guidance that the case provides will bring clarity that will encourage compliance with the law, and the lack of participation by impacted parties is at a minimum.

The Marines' New Ride

The U.S. Navy's newest ship designed to deliver Marines to war, the San Antonio class LPD-17, which entered service in January of this year, is summed up in depth by Defense Industry Daily. Eight more are planned.

Basically, the San Antonio, which, at 25,000 tons, is larger than the Austin class ships it is intended to replace, carries 800 Marines and their vehicles, supplies and gear. Like other ships designed to deliver Marines to amphibious assaults, it is diesel powered.

They will have deck spots for operating and supporting up to 2 $100+ million MV-22 Osprey tilt-rotor aircraft, or 4 CH-46 Sea knights or comparable helicopters, or 6 AH-1 Super Cobra/ Viper attack helicopters, or 2 CH-53 Super Stallion heavy transport helicopters. Hangar space will accommodate only one V-22 Osprey tilt-rotor or CH-53 heavy-lift helicopter, or it could be used for up to 3 AH-1 attack helicopters, or 2 CH-46 or comparable-size helicopters, or any appropriate combination thereof.

These ships will also carry 2 LCAC hovercraft for ship-shore transport, plus 14 of the Marines' forthcoming Expeditionary Fighting Vehicles with swim-out capability up to 20 miles offshore.

It also has amenities like a 24 bed hospital, a water desalinization plant, and advanced sensor and communications gear, and better than average creature comforts, with an eye towards it serving as a flagship for a larger Marine force. It has only defensively oriented weapons: anti-aircraft missiles, a close in weapons system (largely designed for fending off small craft and cruise missiles) and .50 caliber machine guns (for small craft and individuals on docks). It is not equipped to actively fight submarines and warships, a task left to any Navy ships escorting it.

The only U.S. military combatant ships which are larger are aircraft carriers (i.e. supercarriers) which are about 97,000 tons, and amphibious assault ships (i.e. Harrier carriers), such as the Wasp and Tarawa class ships which are about 40,000 tons.

The San Antonio primarily replaces the Austin class of ships, although the Navy has pitched the San Antonio as also replacing a couple dozen other ships that have already been retired from service.

Navy sources note that the 9 scheduled ships of this class (reduced from 12) are slated to assume the functional duties of up to 41 previous ships. These include the USA's older LSD-36 USS Anchorage Class dock landing ships (all decommissioned as of 2004, LSD-36 and LSD-38 transferred to Taiwan) and its LPD-4 USS Austin Class ships (12 ships of class built and serving). The San Antonio Class ships may also replace two classes of ships currently mothballed and held in reserve status under the Amphibious Lift Enhancement Program (ALEP): the LST-1179 Newport Class tank landing ships, and LKA-113 Charleston Class amphibious cargo ships.

Like many defense projects, it was far over budget, was behind schedule, and was built in a manner characterized by "shoddy construction and basic workmanship problems." The San Antonio itself will end up costing $1.7 billion and was projected to cost a little under $1 billion. The next ship of its class, the New Orleans, will cost $1 billion, compared to a projected $0.76 billion. Stealth features are also not living up to promised standards.

The San Antonio does not represent any major conceptual shift from the prior regime, except perhaps, for replacing several smaller Marine transports with one larger one, intended to operate from over the horizon. The big open question is whether this still meets the needs of the Marines in this quantity, or whether bolder innovation was necessary.

1600 Posts

Today is the 11th anniversary of my admission to the practice of law, in New York State, my first bar admission.

Four days from today is the 1st anniversary of this blog, so I've been posting between four and five posts a day, on average. Technorati reports that 75 other blogs link here, although it turns out that many of them are trackback spam. Traffic has steadily increased, with more than 200 unique visitors a day at this point most work days. About half of the traffic comes from search engines (overwhelmingly Google) and most of the rest from website referrrals.

The blogroll needs some updating and is on the "to do" list. I'm thinking about some new directions for the year to come, but haven't come to any definitive conclusions yet.

Government Loses Hamdan Case

The Hamdan case addressed the rights of people detained as enemy combatants at Guantanamo Bay when tried for crimes beyond merely being detained, a detention which was itself upheld. The U.S. Supreme Court ruled against many key parts of the Bush Adminisration's enemy combatant doctrine. The main ruling was 5-3 with Justice Roberts who ruled in favor of the government in the U.S. Court of Appeals before he was appointed, not participating. Justice Kennedy, part of the majority, concurred in only part of the primary opinion by Justice Stevens. SCOTUS Blog has a syllabus of the decision. The full opinion is here.
The Court expressly declared that it was not questioning the government's power to hold Salim Ahmed Hamdan "for the duration of active hostilities" to prevent harm to innocent civilians. But, it said, "in undertaking to try Hamdan and subject him to criminal punishment, the Executive is bound to comply with the Rule of Law that prevails in this jurisdiction."
Basically, the Court's main opinion held that:

1. The government can try Hamdan, but must comply with rules essentially identical to courts-martial for U.S. soliders, not the reduced legal protections of the military commissions established by the administration.

2. The Detainee Treatment Act of 2005, which divests the courts of jurisdiction over most Guantanamo detainee appeals did not apply to pending cases. And, it ruled out refraining from addressing the case out of a generalized deferrence to the President in military affairs, or because the commission had not reached a final verdict.

3. Neither the Detainee Treatmen Act of 2005, nor the Authorization for Use of Military Force following 9-11, which was used as the basis for the war in Afghanistan authorized the creation of military commissions which were contrary to the Uniform Code of Military Justice and the Geneva Conventions. But, the commissions created by the President violated both the UCMJ and Geneva.

4. Military commissions and courts-martial must comply with the Geneva Conventions, at the very least, because they are part of the laws of war, which the UCMJ provides must be considered.

5. Common Article 3 of the Geneva Conventions, at least, applies to the war with al Qaeda, which is not a Convention signatory.

6. Common Article 3 includes: "a prohibition on 'the passing of sentences … without previous judgment … by a regularly constituted court affording all the judicial guarantees … recognized as indispensable by civilized peoples.'"

7. As an aside, Common Article 3 also "provides that detained persons 'shall in all circumstances be treated humanely,' and that '[t]o this end,' certain specified acts 'are and shall remain prohibited at any time and in any place whatsoever'—including 'cruel treatment and torture,' and 'outrages upon personal dignity, in particular humiliating and degrading treatment.' This standard, not limited to the restrictions of the due process clause, is much more restrictive than even the McCain Amendment." This means that the President's treatment of many terrorism suspects was illegal. But, it does not clarify how detainees may go about enforcing this right. For example, do they have a private right of action to enforce it? The other part of Common Article 3, in contrast, is enforceable through the UCMJ courts-martial process through additional Congressional action in the form of express adoption of the "laws of war" as part of the rules of courts-martial.

8. Specific problems with the military commissions include: (a) the use of evidence kept secret for the defense, (b) a lack of real limits on evidence that the commission may consider, (c) the UCMJ requires its proceedures to be applied, if practicable, to trials of detainees in commissions, but the administration has failed to show good cause for deviating from those procedures, and (d) in the sense of the Geneva Conventions it is not a "regularly constituted court affording judicial guarantees."

In a part of the opinion not joined by Justice Kennedy, Justice Stevens stated:

1. The conspiracy crime with which Hamdan has been charged cannot be brought because it is not part of the law of war.

2. "[A]n accused must, absent disruptive conduct or consent, be present for his trial and must be privy to the evidence against him." If he is not, the commission violates the Geneva Conventions.

Justice Kennedy, agreeing that Hamdan’s military commission is unauthorized under the Uniform Code of Military Justice, 10 U. S. C. §§836 and 821, and the Geneva Conventions, concluded that there is therefore no need to decide whether Common Article 3 of the Conventions requires that the accused have the right to be present at all stages of a criminal trial or to address the validity of the conspiracy charge against Hamdan.

The exact status of this part of the ruling is not exactly clear. While Kennedy didn't join it, he didn't dissent. So, is this a 4-4 ruling, or a 4-3 ruling? This will only come up when new charges using a court-martial procedure are used, and only if the Bush Administration goes this route. The secret evidence holding probably is moot if a court-martial procedure is used. The conspiracy holding, in contrast, is central to any result, since this is a charge against all of the military commission defendants, and the only charge against many of them. To the extent that the issue is not decided in this case, there are at least four votes to say that conspiracy charges are not permitted, and probably four votes to say that they are permitted, leaving Kennedy as the swing vote if the issue returns to the U.S. Supreme Court.

Bottom line: The Bush Administration's military commissions in Guantanamo Bay are kangaroo courts. But, Gitmo can stay, if it stops engaging in torture and near torture.

28 June 2006

Ken Salazar Disses First Amendment

Ken Salazar and Wayne Allard, Colorado's U.S. Senators care more about the flag than the political freedoms it represents. This is predictable in the case of Wayne Allard, who has a long record of standing up for torture and all things un-American. We could have hoped for better from Democrat Ken Salazar, whose Democrat party was able to prevent a constitutional amendment to ban flag burning from passing in the Senate by one vote, with the help of three Republicans with some sort of conscience, and one former Republican who is now an independent.

Base appeals to knee jerk reactions from faux patriots are apparently more important to Ken Salazar than the principal of protecting the freedoms established in the Bill of Rights. Ironically, under prior flag care laws, most of those punished were people who were trying to be patriotic and were ignorant of the established rules for doing so, the same sort of people who want this amendment now. Senators should lead, not just cave to our baser impulses. But, Ken Salazar has again failed that test.

The Cost Of Ignoring Mentally Ill Felons

When you ignore predicable problems, you pay a price. Sometimes, the price comes like clockwork every month, like the interest on the national debt or on the balance you are carrying on your credit card. Sometimes, the problem resurfaces suddenly, like deferred maintenance on your car or a bridge that collapses because warnings that it was crumbling were ignored. When you ignore a mentally ill person with a history of violence, often the price paid is that an innocent person ends up dead. This is what happened at the Englewood, Colorado K-Mart store on Sunday.

Anthony Law, 39, is in an Arapahoe County jail right now, charged with shooting Kathy DeBell, 43 and Claudia Nunez, 30, outside the Kmart at 200 W. Belleview Ave. He hasn't been convicted at this point in time, but I'm not too worried that the police have the wrong man. K-mart has surveilance videotape. Witnesses observed the direction the killer walked away immediately after the early evening shooting. He was a regular at that K-mart store, where he bought lottery tickets, so K-mart employees who saw him can be expected to be reliable witnesses. I suspect that physical evidence will surface before the case is over. The press has not stated whether a gun was recovered. When his case goes to trial, it will be an insanity defense case with a decent chance of success because the mental illness was well documented long before the murder took place. Even if Law is convicted of the first degree murder with which he has been charged, a death penalty is probably unlikely, given mitigating evidence of his mental illness, although statistically, his fate is made perilous because he is a black man who killed a white woman.

Law didn't know either of the victims and there does not appear to have been a heated argument that led up to the shooting. It could have been entirely random, or it could have been a case where Law felt that DeBell got a job that he applied for and should have received. Whatever the motive, DeBell is dead now. Nunez is in critical condition at Swedish Medical Center. If this Level One Trauma Center weren't so close to the scene of the crime, she'd probably be dead now as well. Many researchers believe that one of the main causes of the declining murder rate in the United States is improved trauma treatment at hospitals.

The Denver Post revealed today that Law has a long history of schizophrenia including being "paranoid with hallucinations." He was hospitalized for it at age 18 in about 1985. He had a run in with the law in 1991. He attacked a co-worker and arresting officer in 1995, in an incident that left him with a felony record, and was on medication through 2000 when his correctional supervision ended. Is it really a surprise that six years later, apparently without any supervision from anyone, that he slips up and acts violent under the influence of his mental illness again?

We don't know, but the fact that he had recently applied for a job at K-mart suggests that Law was unemployed. The fact that his rap sheet isn't longer and that he completed correctional supervision while taking psychiatric medicine without reoffending suggests that he was not a threat when he was on meds, even though he was when he was off them. He may have skipped appointments with psychiatrists or failed to buy mediciations he needed to control his schizophrenia because he didn't have the money to pay for them. Incidents like this one are a common result of a disruption in taking psychiatric medication.

While there is no cure for schizophrenia, it is a highly treatable and manageable illness. However, people may stop treatment because of medication side effects, disorganized thinking, or because they feel the medication is no longer working. People with schizophrenia who stop taking prescribed medication are at a high risk of relapse into an acute psychotic episode.
In America, prescription drugs that necessary to provide life or sanity are just one more luxury, available only to those who have the money to pay for them. Never mind that drugs to treat schizophrenia not only heal the person who is mentally ill, but also protect the rest of us from random violence. The fact that he lived in an apartment in a working class neighborhood and shopped at bargain basement K-mart on a regular basis is also suggestive of the notion that he may not have been able to afford the medicines he needed. Medicaid is hard to qualify for if you are single man with no dependents Even if Law qualified, he may have lacked the bureaucratic acumen to apply and prove that he was an eligible disabled person by virtue of his mental illness and income. Colorado enrollment in the relevant program is also capped at 2,040 people at a time, and there are often waiting lists, even for men like Law, who, we learned, was a ticking time bomb that the system was informed of, but ignored. Certainly, nothing in existing law gave anyone the right to be told that he had slipped out of treatment, or the authority and duty to urge him to get back on his meds, at state expensive, if necessary.

This is despite the fact that clear evidence shows that Medicaid coverage reduces recidivism rates for mentally ill convicted felons. A Washington State program targeting dangerous mentally ill offenders for special follow up after release significantly reduced recidivism according to a 2005 study of the program.

We have a system of lifetime supervision for every convicted rapist (class four felony or more see pdf page 50) in Colorado, since 1998. This is true despite the fact that many studies have shown that violent offenders, including sex offenders, are much less likely to reoffend than felons who commit economic crimes (including drug offenses) for which crime is a profession, not just an acting out of improper impulses that tend to fade with age after long sentences.

While mentally ill felons do not necessarily commit future crimes at lower rates than other felons, it is possible to predict those with the highest risk of doing so to some degree, and knowing that an offender was mentally ill provides a clear and effective approach to preventing recidivism, not necessarily available for other felons. We also know that mental illnesses like schizophrenia are lifetime conditions, which makes lifetime supervision of people with such conditions who have proven to be threats to themselves or others in the past more rational than existing lifetime supervision provisions for sex offenders (although the fact that the vast majority of sex offenders under lifetime supervision in Colorado who are in prison are child molestors is suggestive of the possibility that they too may suffer from their own form of mental illness.)

Law was typical of the small class of mentally ill persons who are a threat to themselves or others, in that he spent more time in prison than receiving mental health treatment in facilities designed for that purpose. Law isn't atypical in this regard. About 42% of inmates in Colorado prisons have mental health problems (pdf page 53) according to the the Department of Corrections. The same source reports that 0.2% of inmates have a severe mental health problem, another 3.7% have a moderately severe mental health problem, and another 16% have a moderate mental health problem (even larger percentages have severe or moderately severe substance abuse problems). Even Republicans in Congress like Senator Mike DeWine from Ohio and Representative Chris Cannon of Utah, recognize that this is bad policy.

Of course, another important question is how he got a gun. Both convicted felons and people have have been committed to a hospital for a mental illness are prohibited from buying guns under Section 922 of Title 18 of the United States Code. In reality, the mental illness part has never been effectively enforced, because mental health information is kept private and few states have effective registries of mental health commitments. This is a problem that needs to be fixed, although it was not a factor in this case. As a convicted felon, and this is probably one reason that the D.A. pushed for the 1995 conviction of this clearly mentally ill man, background checks should have prevented him from buying a gun from any legitimate dealer.

More than a hundred improper gun purchases are prevented every year by the system in Colorado, and hundreds of people who try to purchase guns when they aren't eligible to do so are arrested in Colorado every year. In the wake of the Columbine shooting, Colorado voters in 2000 closed the "gun show loophole" in its background check requirements (a response considerably more meaningful than the establishment of "Respect Life" license plates which have ended up being largely a bumper sticker alternative for anti-abortion advocates that generated nothing to help Columbine victims.)

It is possible, indeed, likely, that the only one criminally punished from this incident will be the person who provided Law with a gun. He probably obtained the gun through a straw man purchase, or a private sale outside a gun show, or by theft. But, this is probably too little too late. Also, in all likelihood, the person who did it has too few assets to make a civil suit for damages for the wrongful death and injuries arising from the shootings made possible by the illegal gun sale meaningful. Straw man purchasers such as those recounted in a 1999 Denver Post article don't tend to be well heeled.

Paranoid delusional people are uniquely not impacted by a fear of criminal laws on the books. Prevention is the only way to stop incidents like the one that took place at K-Mart last Sunday from happening. And, there are warning signs. In this case, there were two decades of warning signs, some of which came through loud and clear. But, our system wasn't designed to listen. Not everyone in our society needs an elaborate and intrusive safety net. But, some of us, based on a history of prior actions and personal conditions are accidents waiting to happen. For them, an intrusive safety net, not the default rule of live and let live applied to the population at large, can prevent tragedies for everyone later on.

27 June 2006

Colorado Supreme Court Justice Ideology

The judicial philosophies of the sitting members of the U.S. Supreme Court are widely known. On the right are Chief Justice Roberts, and Associate Justices Scalia, Thomas and Alito. On the left are Associate Justices Beyer, Souter, Ginsberg and Stevens. The swing vote is Associate Justice Kennedy.

You can make exceptions and qualifications to the characterizations I've made above, on an issue by issue basis, in terms of personal style, and in terms of degree. But, the left-right divide in this "political model" turns out, on its own, to have a great deal of predictive power in explaining what the U.S. Supreme Court does. Ethnographic accounts of the way the U.S. Supreme Court operates confirm that not much deliberation actually occurs when the justices meet to discuss cases.

Colorado's Supreme Court's justices also follow predictable patterns that to a significant extent fit the left-right divide, but these Justices, unlike their U.S. Supreme Court counterparts, are not household names. Indeed, many members of the practicing bar in Colorado, while they might recognize the justice's name as familiar, would be hard pressed to describe their judicial philosophies. This post provides readers with this bare bones outline.

There are seven members of the Colorado Supreme Court. They are, with their respective dates of appointment:

Appointees of Roy Romer (a Democrat)
Chief Justice Mary Mullarkey (June 29, 1987)
Justice Gregory J. Hobbs, Jr. (April 18, 1996)
Justice Alex J. Martinez (September 12, 1996)
Justice Michael L. Bender (January 2, 1997)
Justice Nancy E. Rice (August 5, 1998)

Appointees of Governor Owens (a Republican)
Justice Nathan B. Coats (April 24, 2000)
Justice Allison Eid (February 15, 2006)

A comprehensive review of every single case decided by the Colorado Supreme Court since Justice Eid was sworn in (March 13, 2006, shortly after her appointment) leaves room for some tenantive conclusions.

Justice Eid frequently recuses herself at the moment, because of her involvement in many of the cases before the Court while she was solicitor general in the attorney general's office. In other words, she was in charge of arguments on behalf of Colorado to the Colorado Supreme Court. But, this will be temporary.

Predictably, one of the most common alignments of justices in non-unanimous cases (and many cases are decided unanimously) is for Justices Coats and Eid to dissent from, or write an opinion concurring in result but differing in reasoning, from the other five justices. To oversimplify the matter, Coats and Eid are the right wing of the Colorado Supreme Court.

Of the five justices appointed by Governor Romer, Justice Rice most often differs with the other four, although given the makeup of the Court she can't be properly called a "swing vote" on the Colorado Supreme Court. For example, Justice Rice joined Justice Coats in dissent in the recent high profile case in which the Colorado Supreme Court found that Initiative #55, regarding services for illegal immigrants, contained more than a single subject. (Justice Eid recused herself in the case, but was on the title board whose decision was reversed by the Colorado Supreme Court in the case.)

The other four justices, however, do not invariably vote as a block. For example, in a recent series of contentious rulings made on June 26, 2006 on the power of a trial court to disqualify the district attorney for a district from prosecuting a case, Justice Hobbs and Rice joined with Coats and Eid, securing a rare win for the Court's usual dissenters. When Justices Martinez, Bender or Mullarkey dissent, it is frequently a dissent "to the left" of the majority to the extent that this is discernable. Of course, it is also true that not every issues has a discernable partisan element and hinge merely on details that only a lawyer could love.

Garbage Statistics and Affordable Housing

Garbage Statistics

The world is full of meaningless statistics. Sometimes, even the more respected traditional media outlets produce them. The latest example, The Economist magazine, which published a cost of living survey that excludes housing from the cost of living.

It turns out that housing accounts for 29% of the most common cost of living index (Table 709), making it the single largest factor in an individual's cost of living. But, the even more important thing about the exclusion is that housing accounts for a much larger share of the variation in cost of living from place to place, particularly at the extremes.

Housing costs vary from 69% of the national average in Albany, Georgia, to 387% of the national average in Manhattan, and there is considerable variation from metropolitan area to metropolitan area.

Miscellaneous goods and services, in contrast, make up 33% of the normal cost of living index, but the variation is much smaller. Manhattan is still the most expensive by that measure, but miscellaneous goods and services cost only 139% of the national average there, while the cheaptest miscellaneous goods and services are found in Youngstown, Ohio, where they cost 91% of the national average.

This is not surprising. Goods can typically be shipped anywhere for only the cost of transportation, which are in the continental United States, at least, even with high gasoline prices, only a small part of the retail cost of most goods. The primary drivers of area specific good prices are retail store rental costs and the prevailing local retail employee wages, which are themselves, to some extent, housing cost driven. Lawyers in New York City make more money than lawyers in Cleveland, primarily because the New York City cost of living is higher, which is primarily because real estate in New York City is so expensive. This trend is true right down the line to the baristas on the first floor of those lawyer's office buildings, and the janitors who sweep the building's floors after hours.

Indeed, housing prices alone are a good proxy for cost of living generally, even though cost of living minus housing prices is almost meaningless.

Overall Denver's cost of living is about 3% above the national average, and if you really want to measure the "cost of living" the composite figure is really the only thing that matters. Knowing category specific prices may matter to anti-trust regulators wondering if a metropolitan area's gas stations are engaged in price fixing, or for people interested in identifying ways to reduce health care costs, for instance, so the outliers can be identified and studied.

But. a composite index that excludes housing is rubbish. Metropolitan Denver's own fairly high ranking on non-housing elements of the survey (it comes in 8th according to the Economist) may have as much to do with the Gallagher Amendment (which disproportionately allocates property taxes to businesses, who in turn pass that cost on, rather than residential property), as anything.

Affordable Housing

The revelation that housing prices are the main drivers of a locality's cost of living, and that these prices decidely local, does cast some important light on the issue of affordable housing.

The United States does not have a shortage of affordable housing. There are small towns on the Great Plains that will actually give away land to newcomers who agree to settle there. And, the abundance of cheap housing isn't limited to prairie ghost towns. Some friends of the family in Rochester, New York recently bought a large single family house for their growing family for less than the cost of a one bedroom condominium in Denver. What the United States has, instead, is a lot of localized affordable housing shortgages.

Cost of living statistics don't capture it, but in fact, housing prices tend to march in lock step. In San Francisco, everything from mansions to cottages have eye popping prices. In Pueblo, Colorado housing prices tend to be reasonable regardless of whether you are looking for four thousand square feet or four hundred.

Basically, housing prices shoot up because jobs in an area grow faster than the housing supply. Housing prices tend to lag in places where job growth has been stagnant relatively to the housing supply.

It happens very fast. In Grand Junction, Colorado, when the oil shale bust occured in 1983, real estate prices dropped virtually overnight. The jobs disappeared and the housing prices responded. In the same vein, right now on the Western Slope, the revival of interest in the areas high cost oil resources, as oil prices have increased, has made the area one of the most quickly appreciating real estate markets in the state.

There is some flexibility for people to get homes other than where they work, but the vast majority of people will live within a reasonable commute of where they work, with reasonable itself a function of just how expensive in terms of housing costs a few more minutes each day of commuting turns out to be for an employee. Where a long commute can save an employee a lot of money, say in Vail or San Francisco or Manhattan, people will do it. Where it won't, people try to live close to work.

This, in turn, points to one of the problems with addressing high housing prices directly. There are two ways you can do it. Stymie job growth or build housing, and the first one is a choice almost no community would willingly make. But, building lots of housing takes lots of time and money.

It also points to an important aspect of a likely solution. It isn't terribly important to make designated "low income housing" to reduce the demand for housing, which will impact the real estate market generally. Those who can afford to pay less are going to end up with the bottom of the barrel in the housing market, in any case. But, if you build lots of higher end homes, then existing housing residents will move into them leaving their existing homes for those who couldn't afford housing before, while if you build lots of low end homes, the more affluent will stay where they are and the less affluent will move into new properties. This has limits, but the basic solution to affordable housing problems, when affordable housing really is the problem, is to build more houses.

Sometimes, of course, the problem isn't really affordable housing at all. The problem is frequently underpaid workers. If employers are thinking about building housing for the purpose of letting employees pay a submarket rent or purchase price for the housing, then the employer is basically providing an off the books paycheck increase, and one has to wonder whether it wouldn't make more sense to keep employers in the pay check writing business and putting someone else in the landlord business. If teachers, firefighters and baristas can afford to live close enough to their jobs to afford to live there, maybe you just need to pay the more.

26 June 2006

Protocols Save Lives

While individual acts of negligence can be linked to particular deaths, most medical mistakes are attributable to bad systems. Colorado hospitals are part of a national effort to institute some of the simplest and most important protocols that make the difference between good care and bad, or even life or death. The results, predictably, are good.

3,100 hospitals (out of more than 5,000) are participating in an unprecedented national campaign led by Harvard professor Dr. Donald Berwick to reduce fatal hospital errors. After 18 months, some 122,300 lives had been saved as a direct result of improved care and reduced errors . . . . Berwick launched the program after a startling 1999 study found that as many as 98,000 Americans die each year from preventable hospital errors
. . . . Sixty-two of Colorado's 71 acute care hospitals took part in implementing some of the changes proposed . . .
How many lives saved again? About two per hospital per month.

Key practices include:

(1) Rapid response times for patients outside ERs whose vital signs deteriorate.
(2) Encouraging less experienced staff to call for help.
(3) Double checking patient medications.
(4) Using pre-operative antibiotics.
(5) Washing hands and a patient's skin prior to IV insertions.
(6) Giving asprin and beta-blockers to potential heart attack patients.
(7) Raising the heads of people on ventilators.

The real pioneer in a systems approach to preventing medical mistakes was the professional association of anesthesiologists, which has worked to identify key systems and improve them with impressive results:
One medical specialty, anesthesiology, has already made significant improvements in its safety record. Mortality resulting from errors in anesthesia has been reduced by 95 percent over the past 15 years.
In the same time frame, a focus on protocols has dramatically improved the quality of care at Veterans Administration hospitals.
[H]ere's a curious fact that few conservatives or liberals know. Who do you think receives higher-quality health care. Medicare patients who are free to pick their own doctors and specialists? Or aging veterans stuck in those presumably filthy VA hospitals with their antiquated equipment, uncaring administrators, and incompetent staff? An answer came in 2003, when the prestigious New England Journal of Medicine published a study that compared veterans health facilities on 11 measures of quality with fee-for-service Medicare. On all 11 measures, the quality of care in veterans facilities proved to be “significantly better.”

Here's another curious fact. The Annals of Internal Medicine recently published a study that compared veterans health facilities with commercial managed-care systems in their treatment of diabetes patients. In seven out of seven measures of quality, the VA provided better care. It gets stranger. Pushed by large employers who are eager to know what they are buying when they purchase health care for their employees, an outfit called the National Committee for Quality Assurance today ranks health-care plans on 17 different performance measures. These include how well the plans manage high blood pressure or how precisely they adhere to standard protocols of evidence-based medicine such as prescribing beta blockers for patients recovering from a heart attack. Winning NCQA's seal of approval is the gold standard in the health-care industry. And who do you suppose this year's winner is: Johns Hopkins? Mayo Clinic? Massachusetts General? Nope. In every single category, the VHA system outperforms the highest rated non-VHA hospitals.
Veteran's Administration hospitals do this with some of the lowest paid doctors in the profession.

Another major breakthrough along the same systems oriented lines has been the development of the "trauma center", a specialized hospital unit with systems tailored to maximizing trauma patient survival, an idea largely attributable to R. Adams Cowley, M.D. of Maryland, which has produced great improvements in patient care. In metropolitan Denver, the most visible effect of this reform can be found at Denver Health our level one trauma center. Swedish Medical Center and St. Anthony's Hospital in Denver are also level one trauma centers.

Studies in Boston and Scandinavia have shown similarly promising results in having specialty centers with the proper systems in place to treat heart attacks and strokes.

Call Central Casting: Ignorant Sheriff Candidate

Routt County, Colorado Sheriff John Warner seems intent on fitting into the stereotypical ignorant rural sheriff role we see so often in the media.
Rainbows customarily go by whimsical names they have chosen for themselves, but Warner said U.S. Magistrate Judge David West, who had traveled over from his usual base in Gunnison, was having none of it.

"He is addressing them by their God-given names, and the tickets are written out that way, too," Warner said.
One wonders if, in addition to the divinely inspired theory of child naming, he also believes in the "stork theory" of childbirth, widely discredited in the medical community but still widely propogated in children's literature. Or, perhaps he thinks that all parents are gods, but I suspect he is more inclined to monotheism than Shinto in his religious orientation.

Neither the judge nor the sheriff appear to be right on the law when it comes to names. Colorado law follows the common law, which provides that a person can adopt another name at will, and that the statutory method for changing one's name, provided at Sections 13-15-101 and 13-15-102 of the Colorado Revised Statues, merely provides an additional method beyond the common law for making a name change. In re Knight, 36 Colo. App. 187, 537 P.2d 1085 (1975). Incidentally, in Christian scripture, divine naming is restricted to exceptional cases, see e.g., Luke 1:31, Mark 3:16-17, and arguably Luke 1:59-63, compared to the general rule of Genesis 2:19, where humans get the job.

The Rainbow Family of Living Light has an unofficial home page here and is running into trouble for not obtaining a permit for their 20,000 person gathering in the rural area on federal land near Steamboat Springs. Probation and orders to leave the area, were the order of the day in the special session of the federal court (one not unlike an effort of Justice Souther when he was a state attorney general, that was instrumental to bringing him to the U.S. Supreme Court).

I imagine that a little creativity and tolerance could have produced a more productive interaction here from mainstream society in Routt County, but apparently, those involved are incapable of the feat.

24 June 2006

Secret Societies

The whole world is fascinated with secret societies.

Many of our Presidents, including our current one, have been members of them. Indeed, one of those secret societies, the Free Masons, was central to the formation of the United States. My own alma mater was profoundly influenced by opposition to that same organization. Public enemy number one in the United States today, Al-Queda, is something of a secret society, as are, more generally, most elements of the Iraqi insurgency. Others are more social in nature, like the many secret societies of New Orleans. In politics, we focus on secret cabels of private contributors funding shadowy 527 political groups. We are governed by one of the most secretive administrations in U.S. history.

Even organizations that are not themselves secret, often operate in secret. Petite jury deliberations, grand jury proceedings, the college of cardinals, and almost every board of every governmental organization conducts secret deliberations. Even Congress has secret conference committee proceedings, and sometimes entire secret sessions. Even ordinary offices frequently have "Secret Santas."

The best selling Da Vinci Code, now a movie, tells the tale of dualing secret societies. Many of the classics of science fiction and fantasy, like Frank Herbert's Dune series, Asimov's Foundation series, and J.K. Rowling's Harry Potter series, give central roles to secret societies. There is an entire genre of fiction devoted to a secret society known as the mafia. Other genres are built around secret governmental agencies that no one knows exists, from the Mission Impossible series to Men In Black. Denver Post columnist Ed Quillen frequently discusses his fictional committee that really runs America. Almost every Superhero has a secret identity.

We fear them, but also look to secret societies for salvation. We are loathe to underestimate their power, yet recognize that many conspiracy theories are overblown. They often seem diminished once they are in public view.

Secretive banks from Switzerland to the Cayman Islands use the mystique of secrecy as a sales pitch. Many professions, from attorneys, to doctors, to accountants, to teachers, to psychologists, to journalists, to salespeople, to clergy are bound by law and honor to keep secrets. Encryption software is available at your local office supply superstore, along with shredders, firewalls, safes and lockable file cabinets. Blogs are frequently published anonymously.

It would be nice to have a powerful, secret, force for good afoot in the world. It would be nice if its members were well connected in politics and business. It would be nice if this society were out there countering all the conservative plots and dubious government actions that seem to surface again and again.

The left has journalists and attorneys working in the public eye to save the world, but do we have anyone behind the scenes working towards the same ends? If we don't, do we need one?

I'm not exactly sure what such an organization would actually do, but it does make for a nice pipe dream.

23 June 2006

What Should Estate Tax Reform Look Like?

Sometime, probably in the next two weeks, the U.S. Senate will vote on H.R. 5638, the estate tax reduction bill passed in the U.S. House of Representatives yesterday.

I hope that the bill doesn't get the 60 votes it needs to pass. Outright repeal won 57 votes, and this bill still gives away the farm.

Of course, nothing prevents Democrats, should they secured control again, if H.R. 5638 is passed, from restoring some of the estate tax cuts to raise revenue to help close the defict.

A better proposal is set forth below. I have put my recommendations (in addition to some subheadings) in bold, for those who like to save the analysis for later (if ever).

Towards A Reasonable Compromise

A compromise worth shooting for would be to freeze the estate tax at the levels set forth for 2009 under existing law, with some slight modications.

In 2009, the tax rate will be 45% and the exemption amount will be $3,500,000.
Under current law, the rate jumps to 55% (with a 60% bubble rate) in 2011, with an exemption that falls to $1,000,000. The increase in the exemption from $1,000,000 to $3,500,000 isn't outrageously costly in terms of revenue collected and eliminate the need for large number of people to have to file estate tax returns or do tax planning. This increases revenue relative to compliance costs and reduces the political pressure to eliminate the tax. The rate drop is fairly modest.

One would want to make some minor changes at the same time:

Gift Taxes and Generation Skipping Transfer Taxes

* The gift tax exclusion, currently $1,000,000 and scheduled to remain there indefinitely should be harmonized with the $3,500,000 estate tax exclusion.

* Gift taxes should be calculated on a tax inclusive basis, just as income and estate taxes are now. Right now, while the gift tax rate in 2009 will be a nominal 45%, because of the "tax exclusive" way that it is calculated, this is equivalent to an estate tax rate of 31%. There is no principaled reason for gift and estate tax rates to be different.

* Likewise, the generation skipping transfer tax rate (which covers transfers made to grandchildren directly in an effort to avoid estate taxes in the children's estates), which is now identical to the gift tax rate, should also be made the same as the gift tax rate.

* The generation skipping transfer tax exemption, unlike the gift and estate tax exemption, does not need to be increased. While the gift and estate tax exemptions are integrated in a way that makes unifying them into a single exemption useful, the generation skipping transfer tax exemption is an entirely different beast which has no linkage to the other exemptions.

Current law creates a strong incentive, especially in large estates, to make large gifts during life, and to make large gifts to grandchildren, even when they don't really want to do either, in order to benefit from the favorable tax rates that flow from the way these taxes are calculated.

Incidentally, there are almost no direct revenue impacts to changing gift tax rules, many people choose to limit their lifetime gifts to an amount that won't cause them to pay actual tax during life.

Indexing Exemption Amounts

The unified exclusion should be indexed. Almost all other comparable amounts in the tax code, such as the personal exemption, tax brackets, standard deduction and gift tax annual exclusion are already indexed. Inflation shouldn't change effective tax rates.

The political drive to repeal the estate tax was largely a product of the fact that the original tax free amount, $600,000, established in 1976, didn't change for twenty-five years, many of which were marked by high inflation. By the time the $600,000 was finally increased to $1,000,000 in the Clinton Administration, this once tidy sum barely covered a medium sized single family house in California.

Inheritability of Exemptions

The ability of a surviving spouse to inherit a deceased spouse's unified credit should be implimented in some form. This proposal is part of H.R. 5638 and its purpose is to dramatically reduce compliance costs. H.R. 5638's right of a surviving spouse to inherit any unused exclusion amount of a decedent should be adopted.

Most married couples want to leave everything to a surviving spouse, but this is an idiotic thing to do if the couple has a combined net worth in excess of an individual's estate tax exclusion.


The estate tax basically applies to everyone you own at death that is not given to a spouse or a charity. The estate tax exclusion is use it or lose it, and is on a per person per lifetime basis.

For example, if a husband and wife each own $2,000,000, the husband leaves all to his wife at his death, and then wife dies, she has an estate of $4,000,000, and no estate taxes were due at the first death. But, if she dies in 2009, she has only $3,500,000 of exemption and pays a tax on the remaining $500,000.

In contrast, if husband had left his $2,000,000 to a trust for the benefit of his wife, his exemption would have made that trust funding tax free, and the wife has a taxable estate of only $2,000,000 at her death, so she would also pays no estate tax, producing a savings of about $225,000 under current law.

Setting up trusts to accomplish this objective cost about $2,500 (your mileage may vary). Just about everyone with a net worth over the exemption amount, or for that matter, even close, needs one. This means that about three million families need them, which means that an aggregate $7.5 billion of investment in legal paperwork to avoid estate taxes needs to be in place at any time to deal with the non-inheritability of the exclusion. Realistically, this means that people need to spent about $200 million a year or so, as newcomers to the wealth level for estate taxes are a concern replace those who have died or seen their wealth dissipate. This is a dead weight loss to the tax system.

The simplest way to eliminate the need for this kind of tax planning is the one found in H.R. 5638, in which a surviving spouse inherits all unused exemption of a decedent. But, this isn't the only available approach.

The main alternative would be to limit inheritance of an exclusion amount to the amount given to the surviving spouse by the decedent, rather than to the amount unused at the decedent's death. This would be administratively more complex, because it would make it necessary to assign a value to assets at the first spouse's death, even if everything was left to the surviving spouse. But, some people would prefer it because it encourages "estate equalization."

Under either H.R. 5638, or an inheritance of exemption system based on the amount received by the surviving spouse from the decedent, the decedent has to leave something to the surviving spouse to avoid wasting the surviving spouse's exemption at the second death, although this can be done in the form of a QTIP trust, which requires that all income be paid to the surviving spouse, but allows the decedent to control who receives the property at the surviving spouse's death.

But, the couple can benefit taxwise from H.R. 5638 if the poor spouse is the first to die, but, husband and wife must first equalize their estates to benefit if the poor spouse if first to die if inheritance of exemption is limited to the amount received by the surviving spouse.

Under current law, if one husband has lots of money in his name, and wife has little or none, or visa versa, there is a strong tax incentive to change this by equalizing their estates. The trust for the surviving spouse system only works if the decedent has assets to fund the trust with at death. Normally, this is accomplished by simply transferring property from the rich spouse to the poor spouse.

Estate equalization can also be accomplished with a trust known as an "inter vivos QTIP" which pays income annually to the beneficiary spouse, and is treated for estate tax purposes as belonging to the beneficiary spouse, but leaves the rich donor spouse in control of who gets the property at the beneficiary spouse's death. QTIP trusts are normally used in second marriages, to perserve assets for children from a first marriage, and an inter vivos QTIP costs another thousand or two dollars to set up.

If estate equalization is an important value, it makes sense to limit inheritance of the exclusion from a surviving spouse to the amount actually inherited. But, in the case where the beneficiary spouse is the first to die, the QTIP income is paid at a time when the beneficiary spouse probably already lives in the same household as the spouse and hence usually benefits from the spouse's wealth, regardless of how it is titled, so the benefit's to the poor spouse from this requirement are modest.

The other benefit of not requiring estate equalization is that it doesn't disadvantage couples who don't do it simply out of lack of familiarity with the specialized area of tax law pertaining to estate taxes, something that is particularly common among wealthly people who have not grown up in wealthy communities where these taxes are more widely known.

The estate tax shouldn't be simply a tax on those too ill informed to plan for it. The best taxes, indeed, have little unintended impact on economic behavior at all. Estate taxes are designed to encourage people to make large charitable gifts. The fact that they encourage elaborate trust and entity arrangements is merely an unintended side effect which is wasteful and serves no valid purpose.

Given the limited benefits involved in linking estate tax exemption to the amount received by the surviving spouse, the H.R. 4638 method of allowing a surviving spouse to inherit the unused exemption of a decedent is the better choice.

State Tax Credits

Ten percent of federal taxes should be designated as a state tax credit, to be allocated amongst states where the decedent was domiciled and states where there are assets with a strong connection to a particular state like real estate and closely held businesses located in that state, if it agrees to not impose an estate tax of its own. This would discourage states from adding to complexity by enacting their own estate taxes with a different structure, or increasing the total estate tax burden. It would also provide revenues cut from state budgets without consultation from Congress in the lastest round of estate tax reforms.

Closing Loopholes

There are a few other issues that drive an immense amount of costly estate planning, which drives up compliance costs while reducing estate tax revenues. Closing some of these loopholes would make the estate tax simpler, would make up for much of the revenue lost by increasing exemptions and lowering rates, and would make the system more fair. Loopholes related to closely held businesses, life insurance and "split interest trusts" are particular important.

Closely Held Businesses

Privately held businesses are hard to value. This is inherent in the nature of the beast. It is entirely legitimate to note that privately held businesses may be worth less than publicly held businesses because shares are more difficult to buy and sell, because the death of the company founder or CEO makes the business less valuable, or that earnings have been inflated by a CEO who took artificially low compensation because he or she knew that it would be reflected in higher share prices for him or herself and other family members.

But, one huge tax valuation discount found in the current law has nothing to do with actual value. It flows from the fact that there are no tax rules requiring valuations to be done on a consistent basis across multiple gifts, or across both gifts and estates. Each gift is valued in isolation, without regard to what either the donor or donee owns. For example, it is possible to obtain a discount for the reduced value of owning a minority interest in a company when one receives 1% of a company's shares, even if the shares are received by the controlling owner of the company. It is possible to give all of the shares of a company to heirs at a valuation that values those shares as if they were minority interests in the company (typically 35%-50% less than their pro rata share of the company's asset value), even if all the shares end up going from a father to a single daughter, for example. These discounts have even been obtained when there is little or no underlying business other than inventment assets in the business, and the plan has been developed in the shadow of asset owner's serious health problems which ultimately lead to that person's death not much later on.

This is nonsense, results in massive compliance costs, and is very costly in terms of tax revenues. There is nothing wrong with intentionally giving a tax break of some kind to closely held businesses. There is something wrong with making those tax breaks contingent on expensive disingeneous hypertechnical appraisals that ignore the reality on the ground and elaborate tax motivated transfers.

A simple rule, that reflects the fact that a majority of closely held businesses operate on a consensus basis in which voting rights are largely irrelevant, could solve this problem. This rule would require the value of interests in business entities to be calculated by first valuing the business as a whole, and then allocating that value consistently on all gift and estate tax returns involving the business among the owners on a pro-rata basis proportionate to their economic rights in the company. Thus, while lack of marketability discounts would be allowed, minority interest discounts and control premium analysis would be eliminated.

But, one of the reasons that these ridiculous tax breaks have been allowed by Congress to persist is a strong concern about the impact the estate tax has on family owned businesses.

The legitimate concern of closely held business and farm owners is that they don't want estate tax issues to disrupt business operations, and that unlikely a publicly held company, fair value to pay estate taxes cannot be obtained from the underlying illiquid assets simply by selling shares on the open market in the nine month time frame normally allowed for payment of estate taxes. Congress doesn't want to destroy business value by forcing fire sales.

Another concern is that the estate tax encourages farms to sell out to developers, because farming is often not the most valuable use of land in the short run, and requiring a farm to finance taxes based on development values is unfair.

It is also legitimate for closely held business and farm owners to complain that existing law protections for closely held businesses, such as special use valuation, the family owned business exclusion (currently a dead letter, but something that will again be relevant if current law remains in place in 2011), and special installment payment arrangements for closely held businesses are themselves complex and to some extent micromanage a business.

But, the desire of closely held business and farm owners to owe less tax even when they are just as wealthy as the owner of a portfolio of stocks and bonds is not legitimate.

There are better ways to solve the legitimate concerns of closely held businesses and farms.

One would be to eliminate almost all restrictions on special use valuation, which allows closely held businesses and farms to value property based on its value in a going concern, even if this is less than development value. This currently has a stingy dollar cap, elaborate requirements related to the importance of the business in the estate and which family members must be active in the business, and the number of years that the business must remain family owned.

Instead, special use valuations could be made available without restriction to any closely held business or farm, so long as the heirs agree, in a manner that binds them and any successor in interest by gift, to pay the estate tax rate, rather than the capital gains rate, on any gains in excess of the special use value when the property is ultimately sold or was no longer used as a closely held business or farm.

Thus, for example, if an estate with $90,000,000 of other liquid assets has a ranch worth $1,000,000 as a ranch, but $10,000,000 developed into condominiums, the ranch could be valued at $1,000,000 for estate tax purposes, so long as a 45% tax rate was paid on any gain in excess of $1,000,000. So, for example, if the ranch were sold two years later for $10,000,000 for development into condominiums, a tax of 45% on the $9,000,000 gain would be due, producing only a couple of years of tax deferral from what would have happened if no special use valuation was involved. But, if the property was held as a ranch until the heir's death, the excess development value never realized, would never be taxed.

Similarly, the favorable financing and installment arrangements now available only to estate with a large percentage of closely held business or farm assets, could be made available to any estate, to the extent that their estate tax liability comes from closely held business or farm assets, and would be secured by a lien on those assets, to prevent them from being sold with the deferred estate taxes unpaid.

Life Insurance

Under current law, life insurance is included in a decedent's estate, at death benefit value, if the decedent has any control over naming the insurance beneficiary or access to the policy's cash value. As a result, there is a strong incentive to spend money to create trusts that benefit the insured's family to own the insurance and keep it out of the decedent's estate for estate tax purposes. Frequently, life insurance proceeds are the primary factor causing an individual to have a potentially taxable estate. But, because the planning work around is relatively easy to accomplish, the rule including death benefits doesn't generate too much tax revenue.

Still, existing law does impose some limits, because premium payments from the insured or the insured's spouse are treated as gifts, either to a trust, or in a properly crafted "Crummey trust" to its beneficiaries. Simply excluding life insurance proceeds from taxable estates, which would seem the simple solution, is a problem, because a terminally ill person could, for example, buy a $100,000,000 life insurance policy for $98,000,000 and shield vast amounts of otherwise taxable assets from the estate tax. This already happens to some extent. A large majority of cash value life insurance is purchased by wealthy people aged 55 and up for tax planning purposes, even though they don't need the "insurance" protection against an unlikely event that can't be covered with existing assets for which families with dependent children buy life insurance.

One could limit so called "Crummey trusts," which are named after the fellow who won the court case which made them possible, by tailoring a law narrowly to the holding of the Court case that made the possible. Under current law, gifts to a trust can only escape gift taxation if they are under $12,000 per beneficiary, and the beneficary has a right to withdraw the funds for a reasoable period of time which then lapses and becomes a part of the trust. It would be a simple matter to provide that gift taxation is escaped by a Crummey trust only if the money is actually withdrawn, something that never happens in practice, and this is probably a reform worth encouraging.

But, eliminating Crummey trusts doesn't really solve the entire life insurance problem because this would only encourage wealth insured to give money outright to their children, while strongly encouraging them to buy insurance on their parents with the money, knowning that gifts might not continue otherwise, in the absence of a legally binding trust, and would encourage families with many children to either enter into complex life insurance policy co-ownership arrangements, or to purchase multiple policies on the same person for tax reasons.

The cleanest solution to the life insurance problem would probably be to require that any proceeds from insurance purchased with funds traceable to the insured (made after the effective date of the law, so as not to harm people who reasonably relied on prior law) be included in his or her estate for estate tax purposes. This theory was considered in a few court cases, but ultimately rejected based on the language of the estate tax statute. This would virtually eliminate the incentive to create life insurance trusts for the purposes of estate planning, would partially curtail a largely tax motivated cash value life insurance industry (although income tax benefits beyond the scope of estate tax reform would leave it alive and breathing), and would modestly increase estate tax revenues, which is appropriate if the theory of the estate tax is, as it should be, as a tax in lieu of an income tax on heirs, so that the focus is on what is received by non-charitable and non-spouse beneficiaries, rather than what is actually owned at death.

Split Interest Trusts

A third major strategy to reduce gift and estate taxation is the split interest trust. These trusts have one person who is an "income" beneficary, who receives a fixed dollar amount or fixed percent of trust assets each year, and another person who is a remainder beneficiary.

Under current law, the remainder beneficiary's gift is considered complete and taxed for gift tax purposes, when the trust is created. This is done using a formula based on prevailing interest rates and the current fair market value of the assets in the trust.

The purpose of a split interest trust in an estate planning context is to undervalue the interest of your heirs. For example, if the value of a remainder interest in the trust (usually after a term based on a fixed number of years or life expectency) using the IRS formula is $100,000, but you have good reason to believe that this particular asset will actually be worth far more than the formula predicts at that point, you can reduce the effective gift and estate tax rate on the gift.

This is basically like playing blackjack against a house dealer who has inflexible rules on how to play the game, when you are allowed to count cards to know what your odds of winning are in reality in each hand.

In addition, any appreciation in the asset during the term of the trust is shifted to the remainder interest owners, even though they don't actually have asset to the asset until the trust terminates. So they are treated for gift and estate tax purposes of owning something that the donor, through the terms of the trust, still controls.

Again, a very simple rule could eliminate the elaborate actuarial calculations, complex trusts and gamesmanship that goes into these arrangements, increasing estate tax collections to make up for rate reductions and exemption increases, and reducing the compliance costs associated with trying to jump into Congressionally created loopholes that encourage purely tax motivated behavior.

The solution would be to treat split interest trusts as incomplete gifts from the donor until their term expires. "Income" interest beneficiaries in split interest trusts would be deemed to have received gifts directly from the donor in each year when they get the money from the trust in an amount equal to the fair market value of what was actually received in that year. Remainder interest beneficiaries would be deemed to have received a gift from the donor who established the trust in the year the trust ends in an amount equal to the fair market value of the trust when it terminated. If a donor died prior to the end of the trust term, the trust's assets would be included in the donor's estate.


An estate tax based on proposed 2009 law, with a 45% tax rate and $3,500,000 per person exemption amount, indexed to inflation, with the tax modified to reduce the estate planning driven by quirks of the current law, some of which are true loopholes that reduce tax revenue, and others of which are mere pitfalls in the way the tax is structured, would be a good way to put the issue of the estate tax to bed.

It would:

* Remove a vast number of upper middle class people from the group who has to pay estate taxes or engage in estate planning compared to current law, and make the top marginal tax rate less ominous (45% instead of up to 60%) for those who do pay the tax.

* Continue to impose a tax in lieu of federal, state and local income taxes on unrealized capital gains of decedents, and on inheritances which look no different to heirs than lottery proceeds upon which they would ordinarily pay high ordinary income tax rates, with a minimum of complexity or administration costs. This would also discourage the creation of an American aristocracy and continue to encourage charitable giving of great wealth.

* Reduce revenues from current law by less than existing 2009 law, because it would also close loopholes. The 2009 law involves a cut of about 50% from currrent law, and the proposal above might net out at a cut of 25% or so from current law.

* Greatly reduce compliance costs for taxpayers by closing loopholes that are now the basis for most of the routine tax planning by almost all wealthy families. This also has the effect of reducing dead weight loss from the tax to irrational economic behavior and of increasing the fairness of the tax amongst those who pay it with different levels of sophistication, planning and asset mixes.

* Protect the legitimate interests of closely held business and farm owners, in a greatly simplified manner, without making major concessions on ultimate tax levels for these taxpayers based simply on the form in which they own their wealth.

22 June 2006

American Wealth Concentration

The House voted to cut estate taxes by about two-thirds today (look at my Daily Kos diary in the sidebar if you want more details). It is worth remembering, now, just how concentrated wealth is in America (according to a Federal Reserve Board researcher) as this decision faces the Senate:

* The wealthiest 1 percent of Americans held 33.4 of the wealth in 2004.
* This was up from 30.1 percent in 1989.
* The top 5 percent collectively held 55.5 percent of the wealth in 2004.
* The poorest 50 percent of the American population collectively held 2.5 percent of the wealth, down from 3.0 percent in 1989.
* And the very wealthiest 1 percent of Americans own a bigger piece of the pie (33.4 percent) than the poorest 90 percent put together (30.4 percent).

For particular types of property, the inequality of holdings is even greater.

* The wealthiest 1 percent of Americans owned 62.3 percent of the business assets in 2004.
* The wealthiest 5 percent collectively owned 88.7 percent of business assets.
* The wealthiest 5 percent also owned 93.7 percent of the value of bonds, 71.7 percent of the nonresidential real estate, and 79.1 percent of the value of stock.

The family net worth cutoffs referenced above are:

99th percentile at $6,006,000
95th percentile at $1,393,000
90th percentile at $827,600
50th percentile at $92,900

Some other significant cutoffs are the 10th percentile ($200), the 25th percentile ($13,300) and the 75th percentile ($328,500). About 8% of Americans are millionaires.

Thus, a third of the nation's wealth is owned by those whose net worth is $6,006,000 or more, a third is owned by those whose net worth is $827,600 to $6,006,000, and a third is owned by those with a net worth of under $827,600 (the vast majority of which, in turn, is owned by people with a net worth of, at least, $92,900).

Both African-Americans and Hispanics are less affluent than the population at large. Among African-Americans the 10th percentile is -$1,400, the 25th percentile is $1,700, the median is $20,600, the 75th percentile is $97,000, and the 90th percentile is $248,000. Among Hispanics in the United States the 10th percentile is $0, the 25th percentile is $2,800, the median is $18,600, the 75th percentile is $103,200, and the 90th percentile is $304,100.

Income is distributed significantly more equitably than wealth.

Unrealized, and hence, untaxed, capital gains make up 31% of the wealth of the top 1% and come mostly in investment assets for these families. This trend is probably more extreme at extremely high net worths. In contrast, unrealized capital gains make up 11% of the wealth of the median family, which holds the gains mostly in a principal residence.

Another key policy area where wealth is a factor, in addition to familiar ones like campaign finance and taxation, is tort reform.

Often, tort reformers seek to cap non-economic damages in the $250,000-$500,000 range. This means a lot to someone in the top quarter of the wealth distribution. But, if you have a net worth of $328,500, a significant chunk of which is in exempt assets like a certain amount of home equity and retirement accounts, a $250,000 judgment and a $2,500,000 judgment look identical.

In the same vein, realistically, about 50% of the population is effectively judgment proof to a general non-domestic relations creditor, beyond any insurance coverage, after exemptions from creditors and bankruptcy laws are considered. People who earn below the median income (who make up roughly 80% of bankruptcy filings under Chapter 7 prior to the changes to the law that took effect in 2005) can end garnishments by filing a Chapter 7 bankruptcy, those who have higher incomes often cannot. They are also likely to hold a large part of their personal wealth in creditor exempt forms such as homestead protected real estate equity and retirement accounts. This is why mandatory automobile insurance laws are so central to the tort law system.

The Party Of Bad Ideas.

There is a political party with no ideas in the United States, and it isn’t the Democratic Party. Well, this isn’t entirely true. Of course they have ideas. But, they don’t make a lot of sense. What are the Republican ideas?

* Plan to end frivolous medical malpractice litigation: Reduce recoveries from doctors proven negligent in court.
* Plan for improving K-12 education: Cut education funding.
* Plan for improving higher education: Cut financial aid.
* Idea for making Medicare more efficient: Create world’s most complex prescription benefit.
* Idea for controlling Medicaid costs: Kick poor elderly legal immigrants out of nursing homes and require photo ID for newborn babies.
* Idea for controlling private health care costs: Encourage teen moms to leave home to get Medicaid benefits.
* Idea for expanding access to health care: End tax benefits for health insurance.
* Exit strategy from Iraq: Build permanent bases.
* Solution to global warming: What global warming? (6/22 edition).
* Plan for reducing unemployment: Record low wages.
* Plan for Social Security solvency: Cut benefits and invest in the stock market. Dow when Bush took office: 10,732; Dow on June 13, 2006: 10,764. Gain for past five and a half years: 0.1%.
* Plan for financing government: Cut taxes more than spending and let the kids pay for it.
* Plan for cutting record high foreclosures: End mortgage interest deduction and increase interest rates.
* Plan for encouraging traditional families: Make it harder to get married.
* Idea for government efficiency: More driver's license paperwork and longer lines.
* Idea for discouraging abortions: Make it hard to prevent unwanted pregnancies.

New Family Members

Summer is birthday season in my household. This year, fish were the gift of choice. So, welcome to the family Sparkle, Goldie and Cutie, the family goldfish.

21 June 2006

Estate Tax Proposal Possibly Close To Passing

House Ways and Means Committee Chair Bill Thomas (R-CA) has thrown his hat in the ring of estate tax reform proposals wiht H.R. 5638, the “Permanent Estate Tax Relief Act of 2006.” A floor vote in the House is expected as soon as June 22.

The proposal abandons estate tax repeal in favor of larger exemptions (currently $2 million and increasing to $3,500,000 in 2009), and lower rates (currently 46% and dropping to 45% in 2007), in order to head of a return to higher rates (55% plus a bubble rate) and lower exemption ($1,000,000) in 2011 and thereafter.

The proposal would impact decedent dying and transfer made starting in 2010, when under current law, the estate tax faces a one year repeal.

It would establish an exemption amount for gift and estate taxes (and also for the generation skipping transfer tax) of $5 million per person per lifetime, and surviving spouse could elect to use any unused exemption of a deceased spouse, something not possible under current law which is a basis for a great deal of estate planning activity.

The firsts $25 million would be taxed at the maximum capital gains tax rate(currently 15%, set to increase to 20% in 2011 unless extended) and the balance would be taxed at twice that rate (currently 30%, set to increase to 40% in 2011 unless extended).

Existing "step up in basis" rules, which eliminate capital gains taxes on gains accruing prior to a death, would remain in place. Currently law would switch to a "carry over basis" rule in 2010.

The deduction for state death taxes would be eliminated, presumably in an effort to discourage their imposition.

An unrelated provision would exclude 60% of certain capital gains on timber sales from taxation in 2006-2008. Can you say pork?

The proposal is better than some that have been proposed in Congress recently, some of which would simply reduce the estate tax rate to 15%. This proposal is particularly reasonable if current artifically low capital gains tax rates are not extended. But, is still exceedingly generous to decedents with estates under $25,000,000, in most cases simply imposing a tax in lieu of capital gains taxes that accrued during life and imposing no additional estate tax on the heirs at all.

This proposal might very well peel off the three Democratic Senators needed to overcome a Senate filibuster of estate tax repeal, if complete estate tax repeal were not part of the debate. Senator Frist has indicated that he wants to bring an estate tax bill to the floor of the Senate before the 4th of July, and if this is passed by the House of Representatives tomorrow (and it probably wouldn't make it to the floor if the votes weren't there), it would be an obvious candidate for a negotiated rule with an up or down vote without amendments in the Senate on this bill only in Frist's time frame.