Forsaking Privacy

If the government had access to the communications between a client and his lawyer, the lawyer would be nothing but a government agent, like Soviet defense attorneys, whose official role was to serve as adjuncts to the prosecution.
Paul Craig Roberts and Lawrence M. Stratton, “The Tyranny of Good Intentions”

Once upon a time, the U.S. Justice Department respected the legal rights that make law a shield of the innocent rather than a weapon of government. No more. What the great English jurist William Blackstone called “the Rights of Englishmen” have been eroded beyond recognition.
The last remaining right ? the attorney-client privilege ? is under full-scale assault by Justice Department prosecutors in the tax shelter case involving the accounting firm KPMG. The Justice Department has demanded, and the accounting firm has agreed to, a waiver of the attorney-client privilege for communications between lawyers and KPMG employees involved in marketing tax shelters the Internal Revenue Service has challenged.
The attorney-client privilege was long championed by jurists because they realized the privilege promoted equality under the law. Convictions can result from lack of access to legal knowledge as well as from actual wrongdoing. To ensure defendants would avail themselves of legal counsel, their communications with attorneys were made confidential, outside the reach of prosecutors.

I’ve written about tax issues before, including this article on our very odd SUV subsidies.

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Tax Legislation for the Trash Heap

Steven Pearlstein updates us on the 930 pages in the recently passed Senate tax bill and the 398-page draft released last week by the chairman of the House Ways and Means Committee, Bill Thomas (R-Calif.).

With a few exceptions, both bills are grab bags of special-interest provisions designed to reward the well-connected at everyone else’s expense. They reward companies that have played cynical tax games and open up new vistas for the tax shelter industry. And while claiming that the purpose of the exercise was to create jobs in the United States, they will only enhance existing incentives for U.S. companies to earn their profits overseas.
Worse still, they are almost certain to add billions each year to a federal deficit that is already too high.

Wisconsin School Finance Reform Proposal

The Governor’s Task Force on Educational Excellence is evidently poised to suggest that the state fund schools by:

  • Increase the state sales tax to 6% (from 5%) and reduce property taxes by 20% (I’ll believe that when I see it)
  • Eliminate the QEO (Qualified Economic Offer)
  • Increase Class size reduction funding to $2,500 per child
  • Reimburse school districts at a higher rate for educating high-cost special education students.

Amy Hetzner summarizes the proposal.
I think that school funding should include:

  • Sales tax reform (newspapers, advertising – are currently not taxed)
  • Increase in annual vehicle fees, reflecting the cost of a auto and the fuel efficiency
  • Increased Federal Funding via reform of the Social Security tax so that all wage income is taxed, not just the first $87,600.

2003 Wisconsin Political Lobbying

Katherine Skiba summarizes state political lobbying spending (data is from the Wisconsin Ethics Board). I was surprised at Wisconsin’s top spender(s):

Tax Avoidance & Intellectual Property


Dave writes about Amazon’s controversial one-click purchase patent (many business process patents, are I believe an abuse of the patent process). Evidently, Amazon assigned their patent(s) to Deutsche Bank as part of a credit agreement between 1995 and 1997.
I wonder if there might be a tax shelter angle to this (amazon was generating huge losses at the time, and other firms might wish to do a deal for the tax benefits of those losses)? Years ago, I worked for a major international beverage firm. One of their (this firm was not unique) tax reduction/avoidance strategies was to create the flavors in tax havens (Puerto Rico, Cyprus, Ireland among other places) and sell that essential component back to US entities at high prices (this is of course a rather simplistic analysis). The US entities then generated small margins or losses while the offshore unit generated the large margins. This tax strategy, among many others is discussed in the very enlightening book by NY Times reporter David Cay Johnston: Perfectly Legal.
Deutsche Bank, like many others, has been part of a number of tax shelter strategies.
This abusive patent process is the major reason I do not link to amazon (barnes & noble online is a fine alternative).

Madison Property Taxes: “Everybody’s Richer”


According to city assessor Ray Fisher Friday when 2004 property assessments were released. “My house went up 10 percent this year. I look at it as money in my pocket.” – Beth Williams writes. Interesting perspective…. Can’t say that I agree with Ray on that one. Bill Novak writes:

“Last year, assessments went up 8.6 percent and the local real estate tax was up 7.1 percent, according to the Assessor’s Office. In 2002, assessments were up 8.1 percent and taxes went up 3.2 percent. In 1997 and 1999, assessments went up and taxes went down.” What about 1998, 2000 and 2001?

There has been talk in the state legislature of completely shifting school taxes from the property tax to other sources, such as the sales tax. Wayne Wood, a retiring representative from Janesville and Rep Mickey Lehman (R-Hartford) developed a proposal that would have used a sales tax increase to reduce property taxes for schools.

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Frontline: Tax Me if You Can

PBS’s Frontline has an interview with Robert McIntyre, Director of the Institute on Taxation and Economic Policy regarding Federal Tax Policy.
Our current tax system is a mess, with many special interests (ethanol, SUV’s) feeding at the trough.
Business Week had an interesting article recently on the “fairness” of the current tax system (including the controversial Alternative Minimum Tax (AMT) implications on middle income Americans).
A friend thinks we’re better off taxing everything at the cash source….