Lobbying pays: rewards for legislative favors edition

Sungmun Choi asks, “Do Interest Groups Reward Politicians for their Votes in the Legislature?” And answers: of course they do.  Choi examined monetary contributions paid by interest groups to members of the U.S. House of Representatives and found evidence that the politicians who voted for the 2008 bank bailout were rewarded in the form of "more monetary contributions from the interest groups in the financial sector after passage of the EESA."  Conclsion; "interest groups reward politicians for their favorable votes in the legislature, at least in the case of the EESA. Of the two hypotheses that I develop in the theoretical part of the paper, I find evidence for the hypothesis of the long-term relationship between interest groups and politicians." Paper at the link.

So let's recap.

• Politicans need money to get (re-)elected: lobbying pays for that.
• Politicians need jobs when they retire from public office: lobbying pays for that.
• Lobbyists need clients who benefit from legal reform: lobbying pays for that.
• And now we see that politicians need to be rewarded for their legislative votes: lobbying clearly pays for that, too.

The Two Faces of Facebook

£440M hidden in the Caymans to avoid tax; $500M given to charity.  In my view this is no coincidence; the two events are inextricably intertwined.

Recent scholarship of interest

Here are some recent papers of interest:

On the power and role of the state:

• Bernard Schneider, The End of Taxation without End: A New Tax Regime for U.S. Expatriates, arguing that the US should settle for residence based taxation like everyone else in the world. Has a nice section on the history of the practice.
• Claudia Williamson, Contracting Institutions, asking what constrains the state from plundering its people, if the state has monopoly power, and concluding that cultural norms do.
• Martha Fineman, Beyond Identities: The Limits of an Antidiscrimination Approach to Equality, comparing legal cultures of equality and concluding that in the US, human need is seen as a matter of individual responsibility alone while other constitutional democracies also see it as a state responsibility. 

On the inequitable impact of tax treaties:

• Fabian Barthel & Eric Neumayer, Competing for Scarce Foreign Capital: Spatial Dependence in the Diffusion of Double Taxation Treaties, when bilateral FDI positions are asymmetric (as between rich and poor countries), capital importers (poorer countries, usually) lose by entering into a tax treaty; they sign anyway because of competition. Studies DTTs between 1969–2005.

On subsidies & industrial policy:

• Stephanie Rickard, A Non-Tariff Protectionist Bias in Majoritarian Politics: Government Subsidies and Electoral Institutions. Examines how different governments use trade protection via tariffs and subsidies, and finds that majoritarian systems are biased toward both.

And on methodology in legal scholarship:

• Tom Ginsburg, Pitfalls of Measuring the Rule of Law, pointing out methodological challenges for rule-of-law scholarship, calling for caution in policymaking (same argument as I made about using "case studies" to advance international tax principles, you can find that here)

UK on FATCA: Guidance, and more forthcoming

Here are 81 pages of "guidance notes" from HMRC on how the UK will implement its IGA, and here is a story that says more will be forthcoming in the first 6 months of 2013.  Remember, this is a moving target since everyone is waiting for final regs from the US. They were expected by the end of the year (i.e., in the next 11 days).

An interesting point for treaty interpretation enthusiasts is that the HMRC is issuing its guidance in the form of "regulations" for interpreting the US-UK treaty.  Interesting!  Interpretive regulations for tax treaties--not common, and not uncontroversial--see, e.g., here and here.  FATCA continues to deliver a treasure trove of international law questions.

Your income & taxes, then and now: an interactive

From Flowing Data, a link to this interactive chart where you can input your annual income and then see what you would have earned and paid in taxes back to 1913:

From the chart designer:

Having not been alive in the '50s or '60s, let alone filing taxes, I was struck by the high top income tax rate—exactly double the highest tax rate today. It made me wonder: what would my income tax be if I had earned the equivalent of what I earn now several decades ago—or even in 1913, when the current federal income tax program was first introduced? What would the history of income taxes look like through the collective eyes of people in my exact financial situation over the past 100 years?

Neat! Also, a very fast and easy way to discount a present dollar amount back 100 years.

Another paper on arbitration-as-law

There seems to be a surge of articles on arbitration-as-law lately: the latest, Judging Lite: How Arbitrators Use and Create Precedent, involves empirical research involving hundreds of US arbitration award records, and it provides some interesting insights.  The article was reviewed on jotwell, excerpt:

...The criticisms include the concern that widespread arbitration mandates will lead to a privatization of public law, with arbitrators that are not bound by public law authorities producing awards of no precedential value. 

...Mark Weidemaier worked from [various databases of arbitration awards].  He analyzed these awards to gauge the extent to which arbitrators cited and engaged with precedent. 

Weidemaier, not surprisingly, found very little citation to precedent in securities awards because reasoned opinions accompanying those awards are extremely rare.  Among labor awards, 48.6% cited to at least one precedent, as did 66.7% of employment awards, and 71.8% of class action awards. 

...Weidemaier attributed the differences in types of authorities cited to the different nature of each type of arbitration.  Labor arbitration is concerned predominantly with interpreting and applying collective bargaining agreements and is frequently fact-based, making it more likely that arbitrators will not cite any precedent and more likely that when they do cite precedent, it will be other arbitration awards.  Employment awards are much more likely to be adjudicating statutory claims, resulting in arbitrators looking to judicial authority interpreting the statute.  Arbitral authority is far less relevant.  Class awards look more to judicial authority but many deal with whether class arbitration is permitted under the contract and, consequently, in Weidemaier’s view, they are more likely than employment awards to look to arbitral awards interpreting similar contracts.

... Candidly acknowledging many limitations to his study, Weidemaier found no evidence outside of securities arbitration that arbitrators were deciding cases in an ad hoc fashion.  Rather, he noted, the process has become highly legalized and arbitrators appear to be trying to follow the public law when it is at issue before them.  ... he suggests that judges discuss arbitral authority in their opinions, thereby providing valuable feedback to the arbitrator community.

Jotwell reviewer Martin Malin calls Weidermaier's article "required reading for all participants in the on-going debate over arbitration mandates." You can read his whole review here.

New Issue: International Studies Review

ILR posted the latest issue of International Studies Review, which has several articles of interest:

• Richard J. Harknett & Hasan B. Yalcin, The Struggle for Autonomy: A Realist Structural Theory of International Relations
• Frank Grundig, Jon Hovi, Arild Underdal & Stine Aakre, Self-Enforcing Peace and Environmental Agreements: Toward Scholarly Cross-Fertilization?
• Monika Bauhr & Naghmeh Nasiritousi, How Do International Organizations Promote Quality of Government? Contestation, Integration, and the Limits of IO Power
• Peter Wilson, The English School Meets the Chicago School: The Case for a Grounded Theory of International Institutions
• Johan Hellman, The Occurrence of Mediation: A Critical Evaluation of the Current Debate

Cost to poor countries of illicit Cash flow: $859B

TJN posts this report from Global Financial Integrity, showing that

Crime, corruption, and tax evasion cost the developing world $858.8 billion in 2010

... the biggest exporters of illicit financial flows over the decade are:

• China,  $274 billion average ($2.74 trillion cumulative)
• Mexico, $47.6 billion avg. ($476 billion cum.)
• Malaysia, $28.5 billion avg. ($285 billion cum.)
• Saudi Arabia, $21.0 billion avg.  ($210 billion cum.)
• Russia, $15.2 billion avg. ($152 billion cum.)

Table 2 of the report's appendix has a complete list. This demonstrates why information gathering and exchange has got to be global and, contrary to how it's going right now, should probably start with the world's wealthiest countries imposing their gathering, reporting, and sharing regime on their own financial institutions vis a vis the rest of the world, rather than working to protect their own bases first and foremost.  This is a time for leadership by example.

International Tax as Depicted by Cats

Kevin Jon Heller linked to international relations as depicted by cats, which I should have avoided.  But then there were these ones depicting international tax, so of course I couldn't resist (apologies for the language in the last one):

Fortune 500 holding trillions offshore

Taxprof links to a Citizens for Tax Justice report (pdf) that says Fortune 500 corporations are holding at least $1.6 trillion in profits offshore.  290 of the 500 collectively self-reported the figure (via SEC filings), as at the end of 2011. Interesting: half of the $1.6T is reported by just 20 companies (7% of the self reporting, .4% of the fortune 500--the corporate 1%?).  The report includes a list of each of the 290 and the amount they reported as offshore.

It looks like notorious tax dodger GE tops the list here, with $102B waiting for a holiday to repatriate (recall that GE's global head of tax Will Morris, is also head of the tax committee of the business and industry advisory council at the OECD, winner of an "external engagement award" for his service to HMRC, and a long time and vociferous opponent of corporate tax transparency efforts through the OECD and related fora, for a discussion, see here).

Next in line comes a familiar cast of characters, all on that ever-growing tax dodger ledger:

• Pfizer (63B) 
• Microsoft (60B) (and check out Microsofttaxdodge.com)
• Apple (54B) 
• Exxon (47B)
• Merck (44B)
• Johnson & Johnson (a family company that doesn't like to pay taxes in its very own family's back yard, let alone around the world, 42B)

But really, every big American company you can think of appears on this list.  Starbucks can be forgiven for being a bit touchy on the tax dodging radar, since its offshore holdings of less than a billion look positively benign compared to the companies occupying the top of the list.  No wonder that multinationals fear increased corporate tax disclosure, because you never know where the media will train its spotlight for naming and shaming.

Scholarship on Global Citizenship

International Law Reports posts the latest issue of Global Society, a special issue on the topic of Cosmopolitanism and Global Citizenship--of interest especially to anyone thinking about citizenship-based taxation (perhaps especially in a post-FATCA world--you can see what's occupying my thoughts these days).  Contents at the link.  Good vacation reading, especially if you're travelling across a border to visit family.

WTO overwhelmed with disputes

Simon Lester notes a deluge of cases: "they keep coming, and it may be starting to strain the WTO's resources." He cites this report from Reuters:

The WTO's 157 members have launched 26 trade disputes so far in 2012, the most since 2003 and three times more than the eight new complaints filed in 2011. 

According to an internal WTO document seen by Reuters, the WTO decided to reallocate staff to the disputes team to deal with the increasing number and complexity of legal cases....

As well as moving staff, the trade body also advertised for a senior dispute settlement lawyer, at a starting salary of around 161,900 Swiss francs ($175,300), and is seeking short term candidates to help deal with the caseload.

Interesting development, especially against the backdrop of increased scrutiny and questions about the legal nature of these decisions.

Picciotto: States can and should switch to unitary corporate tax

Professor Sol Picciotto has a guest post over at TJN today, in which he talks about the viability of unitary taxation for multinationals and why detractors are too pessimistic because they are too wrapped up in transfer pricing. Excerpts:

The main response to my paper on unitary taxation published last week has been that it would take too long or be impossible to agree. ... Not so.  

.. people have spent too long labouring in the salt mines of the OECD's Transfer Pricing Guidelines: They need to get out and look at the real world.

... The trouble is that the OECD approach starts from the wrong end [by treating offshore subs as independent from their onshore parent companies]. ... A unitary approach would do what any sensible person would, as even the M.P.s on the PAC did, and compare the profits shown in the UK with the share of the companies' worldwide business actually done in the UK. If they are seriously out of line, as they have been shown to be, the UK companies' taxable profits should be adjusted accordingly.

 Sol goes through the history of arms' length and how the world has evolved past the principles.  He concludes that yes, agreeing cooperatively on a measurement and allocation regime will take time, but --

In the meantime, tax authorities could use the weapons already at their disposal much more vigorously. ...Perhaps now that they all are beginning to understand that public opinion will no longer find this acceptable, they will see the need for a new approach.

More at the link.

Model participating FFI FATCA agreement: a plea to readers

It really does not pay to start getting interested in FATCA because it raises all sorts of questions to which I really don't know the answers. And re-reading the statutes is not helping much. My question pertains to these "agreements" (aren't they really more like "submissions"--I assume they are one-sided) between the IRS and participating foreign financial institutions (PFFIs). The IRS apparently promised to release some sort of model PFFI agreement at some point...vague. Of course, the IRS has been so busy pushing through on the IGA front that it hasn't done that, at least, I cannot find anything like that anywhere. Notice that the deadline for FFIs to become PFFIs (and thereby avoid withholding, but not necessarily completely) by June 30 of next year? Again, one gets the feeling that FATCA is rushed and it is truly brazen given that the problems for the rule of law it poses are legion.

So my question: does anyone have (or know where I could find) an existing PFFI agreement I could look at? Or at minimum does anyone have a sense of what's in these agreements? Are they just one-sided agreements with the FFIs agreeing to hand over all the info listed in IRC s 1471, or does the IRS undertake anything therein? If you prefer not to comment in public, you can always email me via my faculty profile here.

To sell weed legally, you're going to need a shell company

NPR had a story not too long ago that is of interest, not (or not only) because it is always fun to think about how the world would be a better place if states would legalize & tax it, but also because it highlights the central role of US shell companies in facilitating crime. Since the US won't legalize weed but some states have effectively decriminalized it, it falls to shell companies to ease the federalist rift.

NPR talked to an owner of a "legal" (under state law) medical marijuana business in Washington state:

He described one of the big hurdles of starting a legal marijuana business: It's really hard to get a bank account. His story reveals not only the gray area the marijuana business still inhabits (it's still illegal under federal law), but also just how hard it is to run a small business without a bank. 

Here are four key steps Davis recommends, based on his own experience: 

...4. Create a shell company. Banks don't want to do business with weed shops. But they don't mind opening accounts for legal corporations whose business dealings are vague. "I had to be colorful with the way that I opened my account," Davis said. "I don't feel great about having to toy with the truth, but it's essential for me to have banking. I'm a business."

This might sound like an apology for shell companies. But it is absolutely not.

Rather, the shady area between federal criminal law and state law has opened up an opportunity to find honest people who are willing to talk about shell companies and how they work. They are sympathetic souls who seem to be acting in good faith, so we will listen to them when they tell us the quasi-criminal or criminal-feeling, anyway, path they must travel in order to do something, the essentially criminal nature of which is itself in question.

That presents a fascinating confluence of actors, institutions, lawmaking, and compliance issues, worthy of much further study. Field research anyone?

FP's Top Global Thinkers for 2012

Whatever credibility this list might have had, it was all lost at #8.

Precedents for selling sovereignty

This is an interesting take on the Honduran charter cities (which I view as just a super-charged gated community or free zone), finding historical precedents in the longstanding and uncontroversial tradition of sales by states of parts of their territorial jurisdiction:

The first point is that international legal precedent affords us an abundance of examples in which states freely exchange sovereignty over territories for money. Most Americans will have heard of the Louisiana and the Alaska Purchases, of course, but there are also less well-known cases: Woodrow Wilson’s purchase of sovereignty over the Danish West Indies in 1917, for instance. Europeans may recall cases closer to home. Here one thinks of Prussia’s purchases of sovereignty over Lauenburg and Jade Bay. Last, but not least, there is Asia, where, among other cases, Britain recently concluded its ninety-nine-year lease for sovereignty over the New Territories and Kowloon extension in Hong Kong.

...The Honduran debate grows still more interesting when one considers its theoretical relevance to today’s highly indebted states. Should people, or rather their elected representatives, be able to treat parts of their state’s territory as assets in transactions?... Statesmen have often answered in the affirmative during the twentieth century; indeed, on occasion they have alienated their own territory as a path towards fiscal salvation ... without the direct majority consent of the people affected by the transfer. Nonetheless, all the transactions have been held to be perfectly valid in international law.

The author gives some more contemporary examples: one scholar has suggested that Greece could reduce its debt by selling jurisdiction over some of its islands; US "Special Operations Command" (I have no idea what that is) recently opined that jurisdiction was “a commodity driven by market-like forces” that will go to the “state, organization, corporation, tribe, gang, etc. that can best meet individual security, economic, and demographic interests.” He forgot to add, at the lowest cost, naturally. He concludes that there is plenty of precedent for states to buy jurisdiction and sovereign rights from the recognized “owners.” He concludes:

Whatever the orientation of Honduras and its court system in the twenty-first century, these precedents attest to the existence of a marketplace open to all. 

Thinking about statehood as a commodity with owners that can auction it off--disturbing, especially because what then are the humans. In particular, what then are the humans in the designated for-sale zone. Spoils of war capitalism?

If arbitration acts like law, it should act like law

A paper recently posted on SSRN says investment treaty arbitration tribunals are facing pressure to conform to legal review standards since they are recognized as performing law-like functions. Required reading for anyone who wants to think about arbitration in tax treaties.

Anthea Roberts, The Next Battleground: Standards of Review in Investment Treaty Arbitration. Abstract:

We are witnessing growing calls by States, academics and NGOs for investment arbitral tribunals to recognize that they are engaged in a form of international judicial review and thus should adopt appropriate levels of deference when reviewing the legislative, executive and judicial acts of respondent States. Some draw on domestic public law comparisons, arguing that tribunals should adopt deferential standards of review when adjudicating upon governmental conduct. Others rely on international comparisons, invoking notions such as the margin of appreciation doctrine that some international courts adopt when reviewing State actions for conformity with international obligations. Whether and when investment treaty tribunals should adopt deferential standards of review represents the next battleground for those who conceptualize investment treaty arbitration as a form of global governance.

Deutsche Bank offices raided in tax evasion inquiry | World news | The Guardian

"Tax officials clutching backpacks and suitcases were seen leaving the bank's twin-tower headquarters in Frankfurt."

Come on now. 

Call for Papers: The Changing Face of Global Governance: International Institutions in the Internat

From the International Law Association - British Branch, another call for papers of interest to many of us studying international tax law through the lens of institutions like the OECD, the G20, and the UN.  The topic is The Changing Face of Global Governance: International Institutions in the International Legal Order.  The conference will be at the University of Oxford, April 12-13, 2013. Info:

...In the past, the content of the term 'international institutions' was by and large exhausted by reference to international organisations. However, the term comprises today not only traditional intergovernmental organisations but includes an expanded range of formal and informal institutions of global governance. The conference will explore the full range of international institutions, including international judicial and quasi-judicial organs, which—even when they are (subsidiary) organs of an international organisation—have acquired a life of their own; conferences of parties with wide-ranging powers over the interpretation and application of international treaties; compliance mechanisms; hybrid organisations which provide vital content to generic provisions of international treaties; a system of international criminal justice diffused in States and complemented at the international level; non-governmental organisations; informal networks of regulators, and so forth. 

Papers will examine the role of international institutions in making, developing, interpreting, applying and enforcing international law and thus shaping the legal landscape of international and transnational interaction in a globalised world. The conference theme explores the multifarious impact of ever-present international institutions on international law, both by querying their impact in the areas of law-making and law-enforcement and by tracing their presence and importance in 'sectoral regimes' of international law, ranging from the law of armed conflict to international economic and investment law, through to the global environment.

More info at the link; h/t Int'l Law Reporter

Workshop on social economic rights in practice-Coventry

The Human Rights Centre in Practice and the Institute of Advanced Study at the University of Warwick are holding a workshop tomorrow on Strategies for realising social economic rights in practice: Multi-disciplinary experiences from early career researchers.  The program asks:

1. Should social economic rights be considered human rights at all?
2. How helpful is the international legal framework in enabling the achievement of these rights?
3. How do we measure social economic rights in practice?
4. What lessons can we learn from practitioners in our pursuit of achieving social economic rights?

Interesting.  Hope to see some of the papers as they emerge from abstract to publication.

FATCA Forum this Saturday-Toronto

If you're following FATCA, and more specifically the Canadian response thereto, you might be interested in a forum being held on the subject this Saturday in Toronto, specifically at UofT's Victoria College, 91 Charles Street West (doors open at 10am). I'll be there to try to work through some of the international law angles, and to learn a bit more about how Canadians perceive both the regime and their governments' response to date. You can find more details here.

The Disabilities Convention and the making of international law

Tyler Cowan had this to say: "More generally, the U.S. will be most interested in ratifying Conventions only if they bind other nations in a useful way to the United States."

That, I think, sums up US foreign policy: the society of states is by no means a society of equals, therefore neither good faith nor fair dealing is requisite in matters of international negotiation. All that is requisite is the power to bind other nations to your own goals. That certainly explains US foreign policy in international tax: the lopsided (north/south) tax treaty network, the TIEA network, and the growing FATCA network. 

Conversation on the Sources of International Law

An interesting dialogue is taking place over at EJIL over Jean d'Aspremont's book, Formalism and the Sources of International Law: A Theory of the Ascertainment of Legal Rules. Philip Allott posted today, and he says the book

evokes subliminally two recurring nightmares – one social, one intellectual. Socially, it reminds us of the failure of law to secure its proper place in international society. Intellectually, it reminds us of the part played by the modern university in the disempowering of the human mind.

Wow. His subsequent comments are lengthy but well worth the read. He begins by talking about the academic research & writing exercise, which produces an "industrial-scale intellectual effort" in sorting and analyzing competing views, all "while, the wicked world goes on its merry way to ruin." Allott asks that toughest of all question for the academic writer: 

Why would anyone choose to write creatively and intelligently about the philosophy of International Law? They are unlikely to be heard by those who exercise international public power – politicians, diplomats, civil servants, intergovernmental officials, international judges and arbitrators, legal practitioners – the international ruling class, a self-satisfied and self-regarding conspiracy, many of whose members have the crudest ideas about the nature of law, and many of whose members relentlessly abuse public power, national and international.

He answers the question in power terms and concludes that "more or less sophisticated ideas only escape haphazardly and fortuitously [from universities] into the outside world where, if they are not appropriated by public power or mass culture, they wither and die."

That is a depressing but true reflection of reality, I am afraid. In any event, read the whole thing to get his reaction to more of the substance of the book.

Billionaires Warn Higher Taxes Could Prevent Them From Buying Politicians

Satire.  but is it, really?

WASHINGTON (The Borowitz Report)—Introducing a new wrinkle into the already fraught fiscal cliff showdown, a consortium of billionaires today warned that if their taxes are raised they will no longer have enough money to buy politicians.

The group, led by casino billionaire Sheldon Adelson, commissioned a new study showing that the cost of an average politician has soared exponentially over the past decade. 

...The Vegas magnate complains that the media has ignored billionaires’ essential role in giving jobs to politicians who would otherwise have difficulty finding “honest work of any kind.” 

“Billionaires are providing employment for a group of seriously incompetent and marginal people,” Mr. Adelson says. “You raise taxes on us, and who’s going to create those jobs? I really don’t think people have thought this through.” 

Well done.

Is the Hobbit a Public Good? If no, why am I paying for it with taxpayer $$?

Hard on the heels of the story about why states are broke comes another example in the ongoing parade of horribles that is the global film tax incentive race to the bottom. Is the Hobbit a public good? If not, it's hard to understand why New Zealand gave its producers $120 million and changed its labor laws to prevent collective-bargaining, among other moves designed to keep production in New Zealand. This is a film that is expected to generate $3 billion in proceeds: they obviously don't require subsidies or labor suppression efforts in order to turn a profit. 

How many steps lie between the denial of labor rights in New Zealand to the appalling conditions and loss of life in Bangladesh? Not many. And why should a state ever be involved in driving its people down that road to serfdom?

Joe Karagnis has an account of the subsidies and legal reforms: To save regular earth, kill Hobbit subsidies. He says:

Film money is the hottest of hot investment money, fast in and fast out. Production is very mobile, and studios have become adept at extracting subsidies from governments for a few trinkets and promises of jobs.

Translation: film production acts just like capital. Countries (and states) compete for it, and it flows to the most welcome jurisdiction. That probably means tax incentives though there are lots of reasons to believe tax incentives aren't enough--investors need rule of law, good physical and financial infrastructure, competent workforce, etc. Really, what companies want is:

• a highly educated workforce
• that can't organize or demand high wages
• a well organized legal system that protects contracts and property rights
• but only (or mainly) of multinationals
• a well-organized financial system that protects the investment from currency/inflationary etc pressures
• but only if multinationals don't have to support it with taxes

Karagnis demonstrates the global spread of the problem: 

in the US ... state and local subsidies rocketed from US$2m in 2003 to about US$1.5b in 2012. Film subsidies are epidemic in Europe, where countries compete to attract and retain productions. And it has been a major part of New Zealand's cultural and industrial policy, where more than US$400m has been invested in The Lord of the Rings, Avatar and a handful of other productions over the past decade. 

But competitive subsidies are the quintessential sucker's game, in which winning is losing.

And a part of the story I just don't get at all:

For keeping Warner Bros happy, Prime Minister John Key - a former Merrill Lynch currency trader - got a replica magic Hobbit sword from President Obama...

This is puzzling and ridiculous (not to mention kind of embarrassing on both sides). The race to the bottom in film incentives is just another form of offshoring. Of course, it spreads US culture which is apparently viewed by someone that matters as the more important objective. My view: it is well past time for a little austerity for the film industry.

IGA flurry shows US is locking down on FATCA

A recent flurry of signed IGAs and press releases on ongoing negotiations suggests the US is acting tremendously quickly and even brazenly on FATCA. Almost as if they are trying to get this all nailed down before anyone outside the US government has time to study it and think it through. This is absurd, considering the enormity of what FATCA is trying to do--an enormity that is acknowledged in the IGAs themselves merely as "issues"--issues involving taxpayers' inability to comply with US law because it would involve breaking the law in their own country. The hubris is breathtaking. But it is virtually invisible as a policy matter because it is all wrapped up in the idea that we are cracking down on the world's tax cheats, and who could be against that?

The speed and intensity on FATCA is troubling though, when we consider the lock-in nature of the agreements in terms of future flexibility on the part of the US. To see what I mean by this, let's take a look at the IGA Mexico signed on November 19.  I blacklined it against the US Model 1A (reciprocal) IGA: it reads as virtually identical. Interesting, as the agreement with Mexico has apparently been two years in the making and the model IGA came out this past July. I find it amazing that the model was apparently so easy to write and these IGAs so easy to conclude--Denmark signed one just four days earlier. Contrast that to the US model double tax agreement, which was written some three decades after its first double tax conventions appeared (and which only gets updated every six years or so) and the average five year span it typically takes to get a new tax convention negotiated and signed. In terms of Treasury resources, it looks like a lot more time is spent on FATCA these days than on new tax treaty protocols, multilateral information sharing standards, or perhaps anything else.

The first thing the parity between the model and the actual agreement with Mexico suggests is that the terms of agreement on FATCA are absolutely non-negotiable.  This is a put up or shut up, my way or the highway moment: sign our template or face sanctions in the form of draconian and even unprecedented (such as in the treatment of gross sales proceeds) gross basis withholding. That's hard enough on its own but it is also bad news for other countries that might see themselves in a position to drive a hard bargain with the US.  It is bad news not only because it looks like the US will not deviate from its chosen path right now, but also because, perversely, the US has included a "most favored nation" clause in the FATCA agreements--something almost unheard of in double tax agreements, because it makes a better deal for one a better deal for all.  The language is in article 7 of the model, and it reads virtually identically in the US-Mexico agreement, the UK agreement, and the Denmark agreement (signed Nov 15 2012).

Consistency in the Application of FATCA to Partner Jurisdictions 

1. [FATCA Partner] shall be granted the benefit of any more favorable terms under Article 4 or Annex I of this Agreement relating to the application of FATCA to [FATCA Partner]  Financial Institutions afforded to another Partner Jurisdiction ....   

2. The United States shall notify [FATCA Partner] of any such more favorable terms and shall apply such more favorable terms automatically under this Agreement as if they were specified in this Agreement and effective as of the date of the entry into force of the agreement incorporating the more favorable terms.  

The implication is that the US is tying its own hands against the possibility of making any different deal for any other country.  Now why on earth would they do that? 

Purely, I think, to drive home the unilateral message. Information sharing is no longer going to be multilateral, engaged in through international dialogue and consensus. Information is a commodity, the US can apparently afford to extract it on a unilateral basis and without regard to "issues" like other countries' domestic laws, and there will be no spoils for any other country that can't or won't submit to the US standard, even if they themselves are victims of the US' own bank secrecy & notorious apathy when it comes to things like anonymous incorporation. 

None of this is to say that bank secrecy is good, that information should not be shared among countries. This is not an apology for tax havenry.  I do think information has to be shared if we are to keep taxpayers honest the world over. But it is to say that a unilateral battering ram is not the right answer. The problem of global misconduct by wealthy taxpayers is not solved by the US strong arming to get information that serves itself alone.

If you'd like to see the blackline I ran, you can download it here. Careful readers will note that in the agreement with Mexico, some periods are followed by two spaces (old school) while others are followed by one (new school), and these are different from the US Model.  So someone somewhere is paying attention to these important details as the US rips through a century long tradition of multilateral information sharing to build its own private empire of information gathering. That's good to know. 

Call for Papers: Legitimation & Delegitimation of Global Governance Orgs

Of interest:

The Changing Norms of Global Governance research group at the Institute of Intercultural and International Studies of the University of Bremen has issued a call for papers for a conference on "The Legitimation and Delegitimation of Global Governance Organizations," to take place September 11-13, 2013.

We are particularly interested in papers that address the following issues:

Legitimation norms: Which norms and values (e.g. legality, justice, democracy, peace, growth) do various actors refer to in order to legitimize the identities and/or activities of global governance organizations? How does the content of such norms and values vary over time, across (types of) global governance organizations and across world regions? How do changes in the international system (e.g. rising powers) affect the set of norms and values against which global governance organizations are conventionally evaluated? And how is the contestation between different norms and values played out?

The structure of legitimation discourse: Where does (de-)legitimation take place? How are legitimation discourses structured? Whose contributions count and on what terms?  How do organization-specific discourses relate to each other? How are they connected to the broader social discourses in which they are embedded? And to what extent do the worldwide expansion of education (referred to by some as a ‘skill revolution’), the revolution in communication technologies and the mediation/mediatization of societies alter the nature, content and processes of legitimacy communication as well as the conditions under which legitimation discourses take place? 

Drivers and effects of (de-)legitimation: When and how do efforts at legitimizing global governance organizations succeed? Under which conditions can legitimacy claims be successfully challenged from the inside (e.g. diplomats, recalcitrant bureaucrats or NGO observers) or the outside (e.g. social movements, the business community or states that are not members of an international organizations)? With which repertoires and resources? And what are the major short-term and long-term effects of successful (de-)legitimation efforts for an international organization? 

Institutionalization of legitimacy management: How do global governance organizations internally organize and institutionalize their legitimacy management and how has this changed over time? How are particular legitimation strategies developed internally? How has the emergence and spread of social media changed the ways in which international organizations (seek to) manage their legitimacies? 

Opening up as a legitimation strategy: When and why do global governance organizations pick the specific legitimation strategy of opening up, i.e. increasing their transparency towards the public and opening their governance processes to non-state actors? How are organizations in different policy fields opening up? How is opening up presented as a legitimacy building measure to the organizations’ audiences? What are the micro-processes of opening up? How do changes in transparency and access interact with each other? Which actors are marginalized, which favoured through increasing participation and transparency?

Many or perhaps all of these questions have been on the minds of many international tax scholars, particularly those who view the OECD as central to any analysis of international tax law issues, or who are thinking about alternatives for cross-border cooperation and collaboration, such as through the G-20 or the UN.

h/t Intl Law Reporter

HSBC: We're Profoundly Sorry and Totally Different Now. Promise.

NPR reports. They may be even more profoundly sorry and more totally different if as expected additional agreements will emerge with other countries, e.g. the UK.  NPR reported that HSBC is not the only foreign bank to be accused of money laundering recently, and that Britain's Standard Chartered "agreed to pay $327 million to settle charges that it helped Iran and other countries evade U.S. sanctions."

But there is a real sense that the fine won't make them sorry enough: the Guardian is alarmed at the prospect that (1) the fine might not cause sufficient pain to the wrongdoers and those that (continue to) profit by the wrongdoing and (2) governments see banks as too-big-to-prosecute:

Is HSBC's $1.9bn (£1.2bn) fine enormous or a drop in the ocean? 

Well, it's a record for the offence of money laundering and breaking sanctions, which could be said to underline the gravity of the bank's actions. On the other hand, the sum represents about four weeks' earnings given the bank's pre-tax profits of $21.9bn last year.

...The New York Times reports that some DoJ officials wanted to bring criminal charges against the bank but eventually decided not to for fear such a move would put the future of one of the world's largest banks at risk and thus threaten global financial stability.  

...the idea that a bank could be "too big to prosecute" is alarming. It sends a message that, whatever the scale of wrong-doing, the world's biggest banks can never lose their licence to operate overnight. Instead, a hefty fine can always make the problem go away. 

Yet another blow to the public trust in both the financial sector and government.

Speaking of austerity: Surprise for Quebec's Universities

Just in time for the holidays: the Quebec government has announced it will cut another $140 million from University budgets this year; schools will have to come up with the cuts by April--yes, in 4 months. That's on top of the rolled-back tuition increases, which represented about another $40 million. This is not a good surprise. It's especially harsh when the PQ is raising taxes all over the place and we all know into whose pockets some outlandish proportion of our taxes go. From the Montreal Gazette:

the PQ repeatedly promised to maintain funding to universities for this year despite cancelling the strongly opposed tuition hike that was to have gone into effect this fall. Universities have been waiting for compensation for about $40 million in lost revenues from the aborted increase.

The student protesters see this as an unintended consequence of their success:

Even the Fédération étudiante universitaire du Québec (FEUQ), which has suggested that universities are more mismanaged than underfunded, was shocked with what president Martine Desjardins called a “hasty” decision. 

“We talked about a redistribution of money, but we never wanted to see university budgets cut,” said Desjardins. “We’re shocked. We fear it’s services to students that will be cut, that students will have to pay the price again.”

I doubt the students alone will pay the price, but the juxtaposition of widespread & rampant corruption, steadily increasing taxes, and steadily increasing cuts to education reads like a serious governance crisis.

Pledge to HMRC notwithstanding, Starbucks sit-in is on

Check out the logo. It juxtaposes the austerity-driven dismantling of the welfare state against an apparent cause: high-profile taxpayers with available wealth who are withholding it from society.

I don't know if it works for an uninformed passerby--could it not rather convey something about Starbucks' giving nature, Starbucks aligned in the cause? Hey, Starbucks is giving HMRC £20m, that more than covers the £5.6m that "is being directly cut from domestic violence services," per the activists! Sure, we're all in this together!

Not so fast, says UKUncut:

Offering to pay some tax if and when it suits you doesn’t stop you being a tax dodger. Starbucks have been avoiding tax for over a decade and continue to deny that it paid too little tax in the past. Today’s announcement is just a desperate attempt to deflect public pressure. There’s no money yet, and hollow promises on press releases don’t fund women’s refuges or child benefits.

 As a result, UK Uncut is planning 40 'actions' across the UK: "People will be transforming Starbucks stores into refuges, crèches and other services which the government are cutting with their unjust and unnecessary austerity plans.”

Also, isn't Starbucks' decision in conflict with it's duty to maximize shareholder profits? Maybe this an opportunity to bring a lawsuit charging breach, arguing that Starbucks' duty is to pay the lowest amount of taxes it possibly can under the law. If the suit fails (debatable--in the US anyway), it might help lay to rest the fiction that the shareholder is the only relevant stakeholder in the scope of managers' fiduciary duties.

Why Are States Broke? Lobbying Hollows out the Tax Core

Over at Naked Capitalism, a lengthy discussion about that $80 billion in state-level corporate welfare from David Segal:

Our states and localities are cannibalizing one another as they concoct targeted tax breaks which they use to lure corporations from their neighbors. Meanwhile, a bevy of middlemen wet their beaks by helping corporations pit sucker states off of one another and brokering deals to sell the tax credits that comprise much of the ensuing largess. 

...It's the most basic of game theory dilemmas, and in a less corrupt political dynamic, one that could be solved by the intervention of sensible federal government actors, or perhaps even through the initiation of an interstate compact that had states agree to stop poaching from one another. 

Segal offers up Boeing as an example of the more successful manipulators ("Washington State residents bested a couple dozen other states, offering to pay the hometown company $3 billion not to forsake them" but South Carolina eventually won when it "offered Boeing around $1 billion to open a Dreamliner plant there.") Segal says only the WTO has "threatened to provide any sort of meaningful check" on these subsidies.

He also singles out one of my favorite targets, the infamous and ludicrous state film tax incentive war:

Perhaps the most transparently absurd manifestation of war-between-the-states phenomenon is the case of the film tax credit ... [which] spurred the most precipitous race to the bottom I've witnessed in my time in politics. It came to a head in 2009, when Wisconsin had just spent $100,000 dollars to support Johnny Depp's personal grooming expenses and Connecticut was fixing to subsidize episodes of Jerry Springer's talk show — lots of broken chairs to pay for.  ... California's recent budget includes a half-billion in tax credits of its own ... to keep Hollywood from off-shoring to Manhattan, Indianapolis, and Santa Fe, which are offering bribes of their own. ... At least 42 states now provide incentives, with some exceeding 40% of production costs.

That battle is lost, I think, and state-to-state is only compounded internationally. Hello Quebec, I'm looking at you, boasting about your "most advantageous cash rebates available in North America"--with your 25 % cash-back on all expenses, your 20 % bonus on all CGI and Green screen shots and no minimum spend, no caps; you don't even have to release the film in Quebec. Paradise.

Segal's got the analysis right:

all that we're doing is paying people to move jobs to-and-fro, creating no new social value, and reducing net public benefit.

WHen you do that among the several states it seems merely silly; when you do it among countries, however, that's a bit of a different matter now isn't it.

He also explains the mechanisms of the film tax credit and concludes that

tax credits of this form are always a raw deal for the public, unless a substantial percentage of the credits go unclaimed: A full 25% or so of the subsidy is misfiring, going to middlemen and corporations with significant tax burdens. If you want to fund something efficiently, just fork over cash. (This, of course, could never be made to happen, since then the public would understand that all we're really doing is forking over cash to millionaires.)

Well said. More at the link.

Money does not buy happiness: Senate banking committee edition

After Spending $9 Million To Defeat Her, Wall Street Watches Sen-Elect Warren Join Banking Committee

The securities and investments industry contributed just $245,000 to Warren and spent $3 million supporting her opponent Scott Brown, according to OpenSecrets data from mid-October. The industry was Brown’s top supporter. 

The Financial/Insurance/Real Estate sector followed suit and contributed $6 million to Brown and a puny half-a-million to Warren. Businesses also favored Brown heavily, and his top contributors came straight from Wall Street. And though there wasn’t much outside spending in the race because of a pledge made by the two candidates, the U.S. Chamber of Commerce, whose members include business and financial interests, spent $400,000 on the race in support of Brown and against Warren.

If you've never explored opensecrets before, you should, it's fascinating.

Teaching journalists to cover tax dodging

Interesting development from the Tax Justice Network, which seeks to train journalists how to research and write about tax avoidance and evasion:

Over four days you will be shown how to investigate corporate accounts, offshore activity and corporate corruption. We will show you where to find documents, how to analyse them and other practical tools to help uncover financial secrecy.

Students of my tax policy classes inevitably come to the conclusion that so many tax policy outcomes are bad because "the people" really don't understand tax, and the educational barriers to their understanding are so high. With this initiative, it seems the TJN seeks to increase public discourse on tax, make tax more salient to the public by training the translators of human experience, news reporters, to see what the TJN sees.

Tax chats, with your friendly local tax authority

From the Daily Mash (satire): "YOUR tax bill can be negotiated over a cup of tea and a chocolate Hobnob, officials have confirmed."  That's because:

Her Majesty’s Revenue and Customs revealed that tax laws are all very well, but what really matters is having a nice chat about how much you think you should pay.

But don't get too excited:

The spokesman added: “Oh Christ, I’m really sorry, but I’ve just realised I should have said that ‘tax chats’ are only available to large corporations.

Another sign of the widespread effect on public perception of the Starbucks approach to taxation; more at the link.

 

Links this week

A selection of links posted on twitter this week that were not discussed here, possibly of interest:

On the Fiscal Cliff:

• Naked capitalism says don't believe the hype, better to go over the fiscal cliff than take the grand bargain being offered 
• FT seeks tax holiday to bring home corps' $1.5T offshore, because what we need is more tax breaks for apple, google, etc. (Sigh)
• Krugman: proposed tax hikes would raise 14 times as much as would be saved by raising Medicare age, yet only the latter is deemed "serious" 

Of Reefer and Revenues, and other Canadian tax news

• B.C marijuana tax could total billions if pot was legalized (CBC)
• Canada’s budget watchdog takes government to court for refusing to release austerity details (Fin Post)
• Outrageous: Quebec officials entitled to severance pay with just two years of service, even if they were convicted of crime during office.  

Recent scholarship:

• New paper of interest on revenue agency discretion, by Judith Freedman and John Vella

And from around the world:

• In communist Cuba, the tax man cometh (Reuters)
• London calling! Dec 8th action in London revealed! Activists will descend on Starbucks flagship stores and transform them into social service centers
• Border Carbon Adjustments and WTO law (Simon Lester)
• Zambia Says Tax Avoidance Led by Miners Costs $2 Billion a Year (Bloomberg) 

UK PAC vs Starbucks and HMRC: Driving recursive cycles of change in tax law?

An interesting real time example of the recursive cycle of lawmaking, as described e.g. here by Halliday and Carruthers, is unfolding in the ongoing drama of the UK Public Accounts Committee's hearings on tax avoidance by Google, Starbucks, and Amazon. Richard Murphy has posted a press release issued by the PAC today in which they hit a lot of core tax policy notes: what "fairness" requires in taxation, the duty of taxpayers to the state, the state's duty toward taxpayers as a group, the problem of taxpayer morale when perceptions of unfairness abound, the role of morality in taxation.

But it also draws a picture of contestation in both the domestic and the global lawmaking spheres, drawing in ideas about and challenges to the rule of law, standards, and norms, and involving legal and nonlegal actors. Halliday & Carruthers point to four mechanisms that drive the recursive cycle forward and lead to phases of legal change: the indeterminacy of law, contradictions, diagnostic struggles, and actor mismatch. The press release suggests we have all four of these drivers in play. Excerpts:

"Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here. This is outrageous and an insult to British businesses and individuals who pay their fair share. 

...There is little credible information about what is going on. The evidence we took from large corporations was unconvincing and, in some cases, evasive. HMRC also lacked clarity when trying to explain its approach to enforcing the corporation tax regime. The inescapable conclusion is that multinationals are using structures and exploiting current tax legislation to move offshore profits that are clearly generated from economic activity in the UK. HMRC should be challenging this but its response so far to these big businesses and their aggressive tax planning has lacked determination and looks way too lenient. Policing the tax system must be at the heart of what HMRC does.

So we see the PAC taking on a role as a fiduciary for the people and claiming that the state revenue authority has failed in its own duty to act in that capacity: the result has been indeterminacy of law, contradictions and diagnostic struggles as per H&C.

The PAC calls for naming and shaming of "offenders" (difficult when all these companies claim full compliance with all applicable laws), and for transparency and fairness in the administration of the tax regime by HMRC, that "Government has a responsibility to assess and collect tax due from all taxpayers, without fear or favour," and that "[i]f companies do not pay their fair share of tax, other taxpayers have to pay more." As a result, the PAC says "[b]oth HMRC and corporate taxpayers are failing to meet the legitimate public expectations from the tax system."

This essentially frames multinationals as lawbreakers with HMRC in an accomplice role, whether intentionally or out of neglect. The PAC says "it will always be an unequal fight between HMRC and multinational companies," but calls on the revenue authority both to be more agressive in chasing MNCs and to do more to publicly explain why these companies pay so little. We can interpret this to mean that the PAC seeks to involve more public input into this cycle of legal change, i.e., introducing more actor mismatch.

 You can read the rest of the press release at the link above. Will be interesting to see what comes of it, whether the PAC succeeds in driving forward legal change and whether we will be able to identify a beginning and end of a particular recursive cycle of tax lawmaking (H&C say this is generally very difficult to do, since so many variables are involved in legal change). So far on the part of Starbucks, the result seems to be PR/damage control, in the form of public assertions of willingness to pay a bit more. That just underscores the effectively voluntary nature of international taxation when it comes to MNCs--Starbucks is negotiating with the state--and won't address any of the issues raised by the PAC, so the contestation should continue and may bring in more actors and more struggle.

Colbert's latest civics lesson

A little while ago, Stephen Colbert gave America another civics lesson on the the topic of campaign finance, as he decided what to do with all his unspent donation revenues (if you missed it, definitely watch it--here).  The show featured Colbert's lawyer Trevor Potter, who essentially suggested that Colbert could 'disappear' the money left in his current super PAC structure simply by adding another layer of secrecy. I confess, I watched the whole thing with incredulity. So I contacted Lloyd Mayer, who knows much about campaign finance law, election law, charities, etc. (you can read one of his many articles on the subject here), and who moreover worked as a legal associate at Potter's firm.  Lloyd had this to say in response:

I believe what is creating this "disappearing money" trick is an at least arguable disconnect between the federal election law rules for PACs and the federal tax rules for 501(c)(4)s.  Under federal election law, a PAC (including a SuperPAC, which is not an actual legal category) must report the name and address of the payee for any disbursement of more than $200, along with the purpose of the disbursement, the date of payment, and the amount.   

In this case, the payee would be the entity on the initial check - the first 501(c)(4) - reading this requirement literally.  Under federal tax law and principal-agent principles, however, the "agency letter" Trevor described would arguably render both the first and second 501(c)(4)s mere conduits for the funds and so those funds would not show up on their returns as either income or expenses because those funds are really those of the principal (the SuperPAC).   

My unresearched take is that this is an aggressive position, but probably defensible on audit. Note this trick works in part because PACs do not have to file IRS Form 990 or to make any other filings under federal tax law that would require reporting the disbursement using the tax rules (which presumably would require the ultimate recipient of the disbursement pursuant to the agency letter, not the payee listed on the SuperPAC's check).

Thank you Lloyd!  So it's not incredible to him, but then again, neither is it straightforward. Another legal scholar recently posted Campaign Finance Disclosure and the Information Tradeoff, with the following abstract:

Campaign finance law is in shambles, and American politics, by many accounts, is dominated by wealthy, shadowy interests. Reformers have rested their hopes on disclosure – mandated, public disclosure of what individuals, corporations, super PACs, and others spend on politics. Reformers argue, and the Supreme Court agrees, that disclosure provides valuable information to voters. Opponents, on the other hand, vilify disclosure for chilling speech and infringing speakers' First Amendment rights. Both positions – disclosure informs voters, disclosure chills speech – have become conventional wisdom.

This paper challenges that wisdom. First, it shows that disclosure does not necessarily inform voters. ... Second, the paper argues that disclosure does not necessarily chill speech. It can thaw it. By providing potential speakers with information about the positions and credibility of candidates, disclosure can prompt actors to speak when they otherwise would not. When disclosure thaws speech, there is no information tradeoff. Voters gain information in two ways – source revelation, more speech acts – and lose it in none. When disclosure thaws speech, it promotes exactly those First Amendment values it is thought to undermine.

I don't know whether disclosure would explain Colbert's disappearing money trick, and if it did, whether that would chill or thaw speech or which of those two options is preferable. But I like disclosure as a means of bringing to light what Lloyd describes as the unintended and possibly absurd consequences of ill-coordinated regulatory regimes. Perhaps disclosure would not create a means of achieving public accountability for those consequences. But I'm all for any sunlight that can be shed on the subject, even if it does come from the comedy channel.

Finnish Tax Research Project?

I am wondering if anyone is working on the corporate tax data published by Finland last month.  I can't read Finnish, so can't make anything of the charts or pdfs, but I assume someone somewhere is gleefully playing with this new data source--I think the first of its kind in all the world. If you're working on it, please contact me, I would really like to know about it.

Are WTO dispute settlements "Law"?

From Simon Lester, yet another reminder for those studying tax treaty arbitration that the issues are many and difficult. When basic questions of enforceability can't be answered in an area of the law where things are fairly well developed and are subject to ongoing extensive public vetting and debate, it serves as a warning of what lies ahead for international tax dispute resolution. From the post:

There is some famous scholarly debate on whether WTO dispute settlement rulings are binding.  Here's a media take on it, from the CBC news (in the context of the Ontario feed-in-tariff case):  The World Trade Organization appears to have upheld a [discrimination] complaint against the Province of Ontario's green energy program. ...reports Monday suggest the affected parties have been notified of the [WTO]'s decision to side with the complainants...The WTO ruling is non-binding, meaning Ontario could simply ignore it and not face any monetary punishment. But such a move would likely be met with the implementation of tariffs against any Ontario-made goods in Japan and the EU.

Simon thinks the word "binding" does not tell us much if retaliatory tariffs could be imposed in the event Ontario ignored the ruling. Instead, he says "the key question is how effective the enforcement mechanism is."

I'd agree-it's equivalent to the maxim that "tax administration is tax policy." In international tax there is no doubt that the question is not the substance of standards, rules, or even norms, but rather what countries actually do, and that happens daily through hundreds and maybe thousands of completely opaque diplomatic interactions (competent authority agreements). Adding arbitration to this mix adds yet another layer of administration and enforcement mechanisms and all the attendant problems that go along with them.

Activists seek Canada Tax Gap Estimate

There is a movement afoot to get Canada to get on the "Tax Gap" bandwagon, and make an estimate about how much is lost in tax revenues to tax evasion. As far as I know only the US and the UK even try to estimate this, and the UK's estimate has been criticised as laughably low, while the US estimate is hampered by shoddy data. Still, it's an exercise worth undertaking I think. If the government won't do it, do we have some enterprising accountants or economists willing to give it a go in Canada?

The Real Fiscal Cliff, in Four Charts

Let's juxtapose four charts and draw a picture of the real fiscal cliff. We begin with a common chart, which shows the US tax mix, most recently posted by Owen Zidar:

1. The US Tax Mix, 1934-2012

Earlier in the week, Catherine Rampell posted this:

2. Median Household Income, 2000-2012

And today, business insider had these:

3. Wages as % of US GDP, 1940-2012

4. Corporate Profits as % of US GDP, 1940-2012

Conclusion: the US is taxing the easy-to-tax (see red & blue lines in the first chart), but the easy to tax have less and less at their disposal (chart 2 & 3); the US is not taxing the hard-to-tax (green line in chart 1), but the hard to tax have more and more at their disposal (chart 4). This is the real fiscal cliff.

Activists: inequality is a legal, institutional choice that can be revisited through resistance

Al Jazeera has a short article by a couple of global justice activists and well known justice scholar Thomas Pogge, about growing global wealth inequality, the role of law and legal institutions in fostering and protecting the status quo for those who benefit from it, and the rise in information and collaboration that is empowering resistance from civil society:

The scale of inequality and poverty can appear overwhelming and unchangeable. Yet it is not inevitable. It is the outcome of active choices by people who make and enforce the rules we all live by: rules about global trade, banking, loans, investment, taxes, working conditions, land, food, health and education. These rules are made by people and people can change them.

...Right now, there is a special moment of opportunity. Throughout the world, citizens have access to information in ways once unimaginable. Affordable technologies are revolutionising our ability to communicate with one another and act collectively. The opportunities for new citizen-powered movements to become catalysts for change have never been greater than today. Powerful elites are losing the structural advantages they once enjoyed of being able to maintain secrecy, restrict information and suppress popular movements.  

The authors are launching an activist initiative entitled /The Rules.  This is something to watch as the activists circle around international tax--a technical expertise-laden field that has not worked out important questions of justice in any kind of coherent matter. When Lennon sang about power to the people he did not mention tax havens, but global tax avoidance and evasion appear to be front and center of popular resistance to status quo legal regimes today.

CEOs: welfare is good, but only if it's corporate

From Naked Capitalism, 9 Greedy CEOs Trying to Shred the Safety Net While Pigging Out on Corporate Welfare:

A gang of brazen CEOs has joined forces to promote economically disastrous and socially irresponsible austerity policies. Many of those same CEOs were bailed out by the American taxpayer after a Wall Street-driven financial crash. Instead of a thank-you, they are showing their appreciation in the form of a coordinated effort to rob Americans of hard-earned retirements, decent medical care and relief for the poorest.

...they are gearing up to pull the wool over the public's eyes by cutting Social Security, Medicare and Medicaid. The CEOs are part of the Fix the Debt campaign ... which plans to unleash tens of millions pushing for a deficit reduction deal that favors the rich.

...these Scrooges are so bold as to publicly announce their desire to pick the pockets of fellow Americans while simultaneously pigging out at the corporate welfare trough. Multitasking!

NC provides a sample of what it calls the Fix the Debt CEO Council Hall of Shame (complete list at the Fix the Debt website here):

1. Lloyd Blankfein, chairman and CEO, Goldman, Sachs & Co. Blankfein, infamous for describing his financial activities as "God's work," shared his attitude toward society with CBS news recently. He explained his keen desire to see Americans lowering their sights for the future. ...he gives a pithy summary of what life is going to be like for the 99 percent:

You're going to have to do something, undoubtedly, to lower people's expectations of what they're going to get, the entitlements, and what people think they're going to get, because you're not going to get it.

...Since the financial crash, Blankfein's company, Goldman Sachs, has received tens of billions of dollars in ..."direct and indirect succor from the Fed."...

2. Jeffrey Immelt, chairman and CEO, General Electric Company. ...supporting disastrous financial deregulation, dodging taxes and helping to destroy American manufacturing has not satisfied Immelt. He'd like to add insult to injury by making sure that people who have been screwed by the reckless activities of short-sighted corporate titans like himself are left to starve in their golden years and go without medical care. And as for the poor, well, couldn't they be just a little bit poorer? Immelt thinks that would be swell.

After the 2008 crash, the government gave a giant boost to hard-pressed GE Capital, the company's financing arm, through the Temporary Liquidity Guarantee Program. GE has also helped itself to enormous taxpayer-funded subsidies, especially in green energy. And guess how much GE paid in taxes in 2010? Nothing. ...

3. Jamie Dimon, chairman and CEO, JPMorgan Chase & Co. ... Dimon is deploying a familiar scare tactic on the topic of the so-called fiscal cliff. He's claiming that his company will be forced to cut down on hiring and so on if a budget plan is not tailored to enrich the wealthy. ...Maybe Dimon's company would be better served figuring out what happened to the $6 billion that recently went up in smoke in the "London Whale" derivatives fiasco.

NC covers several more including the CEO of Honeywell (of powerpoint "union busting for dummies" fame), all at the link.