I have submitted comments in opposition to Governor Hogan’s proposed “Retirement Tax Reduction Act of 2020.” The bill is an unwarranted tax give-away to the well-off that will poke a large hole in state and local revenues.
This is an update to my previous comments here.
Today, I filed written comments in opposition to Maryland H.B. 61 that would exempt large amounts of retirement income from Maryland state income tax. My initial comments, with all attachments, can be found here. Included as an attachment is an updated chart that was linked to in my previous posting. I went over my calculations and found several to be incorrect. The skew in favor of the wealthy was not as bad as I had previously calculated, but was still quite significant.
After I sent off my comments, the Tax and Policy Note on H.B. 61 was posted. The calculations in that note will undoubtedly kill the bill since, over five years, there will be billions of dollars of revenue loss. I then sent a second letter to the Committee.
In a sense, H.B. 61 is a prelude to the bill that the Governor has introduced, H.B. 342. That bill also exempts broad swaths of pension income, but tempers the cuts somewhat by capping the exempt income to $50,000 and limiting the full benefit to individuals making less than $100,000. In due course, I will be commenting on that bill as well.
The point is that the bulk of the incentives to save for retirement provide benefits that are weighted heavily toward the wealthy.
Update: building in engineered wood is taking off
Remember the satisfying thunk when you strike a nail squarely with a strong hammer blow and the nail sinks an inch into wood? Few metaphors are as sound and accurate as “hitting the nail on the head”. Forgive the boast, dear readers, for a post Mike O’Hare and I made here five years ago proposing more building in wood as a way of cutting carbon emissions. There is a nifty new technology (engineered wood beams and panels) that makes it much easier; trees fix carbon, and using the wood in structures extends the sequestration for decades.
Dave Roberts at Vox has a long new post up making essentially the same points. With more recent data, he has better and higher estimates than ours of the potential savings in carbon emissions. The other news is that things are beginning to move, as wood is transitioning from a handful of bespoke prestige projects to routine use in large buildings.
I thought the trendsetter would be New Zealand, which is heavily forested and has innovative wood structural engineers. But it’s small (4 million population), remote, and does not export much timber. No, it’s Canada; specifically British Columbia, the centre of the large Canadian forestry industry.
A mundane timber-framed 18-storey block of student rooms, Brock Commons, in Vancouver. The concrete stairwells are presumably required for fire safety.
BC has changed its building code to allow 12-storey wooden buildings routinely, and its code has been copied in the rest of Canada. Three are 500 mid-size wooden buildings under construction across the country. The new standards have spread to China and now much of the USA. US building codes are a local or state responsibility, but they often rely on common models, which now allow engineered wood.
The caveat to the RBC paean is that to get the full benefit, the forest management has to be based on forests that are (1) sustainably managed (2) second-growth. In BC, the timber building movement runs into nuanced criticism from defenders of the splendid old-growth forests. There is no inherent conflict here: engineered wood can perfectly well use fairly small pieces of lumber, such as those you get from smaller second-growth trees (in parts of Europe, eighth-growth), or 40-year thinnings, glued together in factories into panels and beams of the required size. But the lumber industry is what it is, and greater demand poses a threat to old growth worldwide unless its appetite is restrained by firm government and honest regulation. This will be a battle in the Pacific Northwest, and an even bigger one in tropical Africa and South America.
Endnote 1: the inventor of cross-laminated timber
Dave Roberts credits Austrian Gerhard Schickhofer, a professor at Graz Technical University. Alpine forestry is necessarily conservative; prevention of landslides and avalanches has priority over wood yield, and you don’t see clear cuts. Hillside trees tend to be small. This environment encourages a frugal approach to wood use, and lamination is a natural extension.
Endnote 2: Notre Dame
As you all know, the roof of the great Notre Dame cathedral in Paris burnt down in a huge fire in April last year. The roof above the vaulting was supported by massive oak beams, so many that they were known as “the forest”. There were no firewalls or sprinklers in this huge drafty space, an ideal system to keep the flames supplied with oxygen. The rebuilding fund has money: but what to do about the roof?
A very French grand débat has started over this. Suggestions include the wacky (a rooftop open-air swimming pool, an all-glass roof). Nobody will listen to our views but it’s fun to join in anyway.
The baseline restoration scheme is “just as it was before”, including the 19th-century iron central spire. Taken literally, this requires replacing the Forest with new oak beams. Where do you find the trees? The oak forests of France have shrunk since the 12th century, or the 9th when the acorns that generated those beams fell. There are fine oaks like these planted by Colbert to replace those he cut to build warships for Louis XIV – trees that have preservation orders on them. Even in a good cause, felling a thousand of them is not on.
What makes the problem more tractable is that the Forest was not generally open to visitors before the fire. It should be culturally possible to innovate. I’d go for a technically modern roofspace, using a steel space frame or engineered wood, and preserving some of the surviving blackened timbers as a memorial. The space could be made partly usable for religious or cultural purposes, assuming you could put in lifts.
Last year, Maryland Governor Larry Hogan introduced into the Maryland General Assembly a bill entitled the “Retirement Tax Fairness Act of 2019.” The bill had a five-year phase-in. The fiscal note to the bill projected that over that five-year period the exemptions under the bill would cause a $178.6 Million loss in state revenue and an approximate additional loss of $111.15 Million to local jurisdictions. (The fiscal note only calculates the loss to local jurisdictions in the first and last years of the five year period. I calculated the approximate loss by dividing the loss to local jurisdictions in the last year, dividing it by the loss to the state in the last year, and then multiplying the result by $178.6 Million.)
The bill would have exempted from Maryland state tax income from (i) individual retirement accounts (“IRAs”) and annuities under IRC § 408, (ii) Roth IRAs under IRC § 408(a), (iii) simplified employee pensions under IRC § 408(k), and (iv) ineligible deferred compensation plans under IRC § 457(f). Intuitively, I knew that exempting income from the first three categories was bad public policy. After all, all of the growth in value over the amounts contributed in all three categories had already been tax-deferred. And, except for contributions to Roth IRAs, even the contributions to these plans were made in before tax dollars. (I address IRC § 457(f) below.) Thus, for the most part, the assets in these plans were derived from tax-free contributions and the appreciation in all of the plans had never been subjected to income tax. I also assumed that the financially well-off held a disproportionate share of the assets in these plans.
The bill did not make it out of committee and died when the legislative session ended. However, a bill containing similar provisions has been introduced into the 2020 legislative session.
IRAs and SEPs are widely believed to be the “pension for Everyman” (or, if you prefer, “Everywoman”). I began to wonder: How skewed toward the wealthy are these plans? I was quite shocked to find out that the answer was “Really, really skewed.” I was able to locate statistics from the IRS based upon income tax returns filed for tax year 2016. I have prepared a chart, available here, that shows the results of my calculations. (The URL to the portal for the IRS source statistics is set forth on the chart. I used three tables from the IRS. I have uploaded the tables here, here, and here.)
This chart shows that in 2016 only 6.45% of all taxpayers made IRA contributions. While 77.26% of all taxpayers were eligible to make such contributions, only 8.35% of those eligible actually made contributions.
By the end of 2016, only about 19.88% of taxpayers had money in IRAs or SEPs and the average market value in those IRAs & SEPs was only a little over $35K. The real eye-popping numbers, however, are those that show how skewed toward the wealthy IRAs and SEPs are.
Only about 155,625 taxpayers reported income in 2016 of more than $1M. They represent only 0.0762% of all taxpayers. However, the market value of their IRAs and SEPs was, on the average, $235,274 and represented 5.25% of the total market value of all IRAs and SEPs. Taxpayers reporting income of over $100K represented 4.66% of all taxpayers. Yet, they held 60.46% of the market value of all IRAs and SEPs.
Stated simply, as to IRAs and SEPs, the Maryland proposal would exempt from Maryland state and local income tax wealth that has, for the most part, already escaped taxation. The primary beneficiaries would be the wealthy.
Oh, yeah, I promised a discussion of ineligible deferred compensation plans under IRC § 457(f). I can’t find precise statistics as to these plans, but it is clear that the beneficiaries of these sorts of plans are already quite wealthy.
IRC § 457(f) provides a deferral of income under certain non-qualified deferred compensation plans operated by a state, political subdivision of a state, and any other tax exempt organization. Who are the beneficiaries of such plans? Highly paid personnel of colleges, universities, foundations, and hospitals such as executives, doctors, and, of course, college athletic coaches. Not exactly a group in need of special tax breaks. Unlike the bill introduced last year, the bill introduced in the current session excludes IRC § 457(f) plans from tax-exempt distributions.
The statistics concerning IRAs and SEPs open the question of whether the rules pertaining to exemption should be either repealed or radically modified. While the IRA/SEP provisions are widely viewed as being egalitarian, in operation these provisions disproportionately benefit the wealthy.
Some years ago (it might be as many as fifty) I read an article in a scientific journal (it might have been Science, The American Scientist, or Scientific American), which I believe was written by a Nobel laureate in physics from Asia (perhaps India) – as you can see, at my age details get obscured. It was the scientist’s acceptance speech.
The author wrote of a conversation between two dragonfly eggs, attached to a reed below the surface of a lake. They noticed that eggs on other reeds floated to the surface and then disappeared, and they told each other that, when they rise to the surface they would get back to the other and tell it what lies above them.
And then, of course, one of them floats to the surface, shedding its egg sac, its wings unfurl, and it flies off, never to return to make good on its promise. That is, it is basically a parable about one’s mortality and hope for immortality.
Is there anyone who has heard of this, or how I might go about finding it? Google failed me in this search.
What happens to the Illinois weed black market when recreational marijuana goes legal Jan. 1st? As recreational pot is about to become legal in Illinois, Pritzker administration warns it will crack down on “bad actors” who affect medical cannabis availability. Advocates warn immigrants against buying legal weed in Illinois. Illinois emergency rooms prepare for legal marijuana. How marijuana prohibition blocks people of color from getting into the Illinois legal cannabis industry. Black Caucus chair again threatens vote on plan to delay Illinois recreational pot sales until July 1st. Legal recreational marijuana sales to begin Jan. 1 in Chicago Illinois after City Council ordinance fails. Weed smoking would be okay in Chicago cigar shops, hookah lounges and elsewhere, under Mayor Lori Lightfoot’s new plan. Rock Island County, Illinois States Attorney on recreational marijuana.
Hard times ahead for Michigan marijuana businesses.
Massachusetts marijuana stores allowed to resume sales of some vaping products. Dozens apply to open marijuana businesses in now-legal Maine. Rhode Island Senate leaders won’t support marijuana legalization in upcoming legislative session.
Marijuana legalization petition approved in North Dakota.
Don’t try to buy marijuana in Illinois and bring it back to Wisconsin. Wisconsin balks at legalizing marijuana. Oklahoma activists take first step to put marijuana legalization on state’s 2020 ballot.
Pennsylvania is using the vape crisis to try to legalize weed. New Jersey lawmakers vote to put marijuana legalization on state’s 2020 ballot. New Jersey marijuana legalization: Give voters a decriminalization ballot option. NYPD union chief claims that lax marijuana enforcement killed a college freshman. Cuomo hires Rhode Island official as marijuana czar.
Opioid prescriptions down in states with legal marijuana, study finds. Is marijuana linked to psychosis, schizophrenia? It’s contentious, but doctors, feds say yes. Generational divide proves to be a major factor in marijuana legalization debate.
President Trump has now been impeached. Does he retain the power to pardon? Presumably, if he does, he could pardon his alleged co-conspirators–Giuliani, Fruman, Mulvaney, etc.–and thus allow them to lie with impunity without regard to the perjury laws.
A 2018 comment by D. W. Buffa on the Brookings site argues that the original intent of the Framers was to suspend the presidential power of pardon during any period in which the president was impeached. (The link to the Brookings original posting is here. Per the previous discussion on this blog concerning possible link-rot, I’ve pdf’d Buffa’s comments and posted them here.)
Buffa argues that the text of Article II, sec.2, wherein the president was given the “power to grant reprieves and pardons for offenses against the United States, except in cases of impeachment” acts as a bar to the president’s exercise of the pardon power while he is impeached. (Emphasis by Buffa.)
He does not rely merely on the text, however, but goes further and discusses the colloquy between George Mason and James Madison at the Virginia Ratifying Convention. Mason was concerned that:
If [the president] has the power of granting pardons before indictment, or conviction, may he not stop inquiry and prevent detection?
Madison saw the problem, but believed that the text of the Constitution provided an escape hatch. In responding to Mason, he said:
There is one security in this case to which gentlemen may not have adverted: if the President be connected, in any suspicious manner, with any person, and there be grounds to believe he will shelter him, the House of Representatives can impeach him; they can remove him if found guilty; they can suspend him when suspected, and the power will devolve on the Vice-President. Should he be suspected, also, he may likewise be suspended till he be impeached and removed, and the legislature may make a temporary appointment. This is a great security.
Contrary to the conclusion drawn in the Brookings posting is the conclusion set forth in Snopes from Michael McConnell, director of the Constitutional Law Center at Stanford Law School, that “no basis for it whatsoever” exists for the proposition. [pdf of the Snopes posting.]
Buffa’s argument may not carry the day, but McConnell is clearly wrong in asserting that there is “no basis” for the proposition. That said, however, even under the Buffa formulation the House would have to affirmatively vote to suspend Trump’s pardon power and, as yet, has not done so.
Does anyone know of any additional scholarship on this issue?
I have swiped some facts to digest from UK Twitter people I follow. I give RBCers four data points and invite any chewing over of them and the election more generally in the comments.
Fact one: Below the headlines, The Greens and Lib Dems increased the breadth of their appeal.
• Conservative vote rose in 390 seats and fell in 244
• Labour vote rose in 21 seats and fell in 609
• Green vote rose in 389 seats and fell in 20
• Lib Dem vote rose in 568 seats and fell in 41
Fact two: the magnitude of the Tory win over Labour is understated by the seat count. Here are the constituencies in which the Tory vote went up by at least 5000:
Mansfield +8092; North Norfolk +8044; Thurrock +7915; Leicester East +6383; North Devon +5962; Bassetlaw +5463; Cannock Chase +5318; Dudley North +5066. In contrast there isn’t a constituency in the entire country where the Labour vote increased by at least 5000.
Here are the seats where Labour lost 9500 votes or more: Finchley & Golders Green –9595; Jarrow –9657; Falkirk –9786; South Cambridgeshire –9876; Barnsley E –9951; Doncaster N –9971; Leicester E –10026; Barnsley Central –10178; Normanton, Pontefract & Castleford –10971; Wentworth & Dearne –11805; Bassetlaw –13402. Again, this contrasts sharply with the Conservatives who had no seats with such a massive vote loss (Their worst was -5098 in Maidenhead).
Fact three: In 1997, the UK conservatives had a dreadful election, garnering only 30.7% of the vote. But they have increased their vote share every election for 6 elections in a row. Here is a trivia question for politics nerds: has any other party in the developed world had this kind of run in the past quarter century? I can’t think of one, but the hive mind may know what I don’t.
Fact four: 220 of the just elected MPs are women. This 34% female representation is the largest in British history.
I have posted the Executive Order signed by President Trump yesterday.
Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, and national origin in programs and activities receiving federal financial assistance. It does not prohibit discrimination on the basis of religion. The Executive Order directs that agencies charged with the enforcement of Title VI consider the non-binding definition of anti-Semitism adopted on May 26, 2016, by the International Holocaust Remembrance Alliance which provides that:
Antisemitism is a certain perception of Jews, which may be expressed as hatred toward Jews. Rhetorical and physical manifestations of antisemitism are directed toward Jewish or non-Jewish individuals and/or their property, toward Jewish community institutions and religious facilities.
The Executive Order goes on to provide that “the ‘Contemporary Examples of Anti-Semitism’ identified by the IHRA, to the extent that any examples might be useful as evidence of discriminatory intent.” I don’t know whether the Executive Order only means to include the examples currently identified or whether, if the list expands, subsequently added examples will be automatically incorporated into the Executive Order.
I hope to be able to add some additional comments this evening.
(Note: The link to the IHRA definition is to that organization’s website. Later today, I will put the definition on the server that I use for linking to documents and, one that has been accomplished, will edit this post.)
As those who read my posts know, one of the reasons that I post source documents is that I don’t think that people should have to rely solely upon a report summarizing a court opinion or a statute even if I am the author of the summary. Thus, I believe that the practice of linking to source documents should be the rule rather than the exception for all news media.
I am not alone here. Today, the Lawfare Blog announced that, going forward:
Lawfare’s readers [will have] direct access to the primary law underlying the issues discussed on Lawfare. Lawfare readers can now click on references to legal authorities cited in Lawfare’s articles to go to the full text of the opinion or statute, published on Casetext.
While the larger newspapers, such as the Washington Post and the New York Times, have increasingly been linking to source material, their practices are not consistent. Smaller news outlets virtually never provide links. Yet, the marginal cost of downloading source material, storing it on a news outlet’s server, and adding a link to a story carried online is trivial. I rather suspect that the rationale is something like: “We’ve been doing it without links for [fill in the blank] number of years and we see no reason to change now.”
Let me both make a suggestion and ask a favor of RBC members. Whenever you see a story on a court case, a proposed bill, or a statute and there is no link to the source, send an email to the reporter. Ask the reporter to send you a link and suggest that a link to source material should be provided in all similar stories. Perhaps sooner or later they’ll get the idea.