Horrible Supreme Court Decision on Taxes 6-3

[FIPS]

Horrible Supreme Court Decision 6-3

http://www.reuters.com/article/2012/...8530QV20120604

By James Vicini

WASHINGTON | Mon Jun 4, 2012 1:08pm EDT

(Reuters) - The Supreme Court ruled on Monday that a city did not violate the Constitution when it forgave some future property tax obligations for certain taxpayers, but refused to refund payments made by other taxpayers for the same assessments.

In a case that impacts tax policy, taxpayers and local governments, the high court ruled by a 6-3 vote that authorities in Indianapolis had a rational basis for making the distinction and had not violated the Constitution's Equal Protection Clause in their handling of a special sewer tax levied in 2004.

Property owners who paid the $9,278 tax up front were upset when the Indianapolis Board of Public Works in 2005 decided to forgive the obligations of those who chose to pay in monthly installments, with interest, over 10, 15 or 30 years.

The property owners who had paid in full sued the city when it refused their demands for a refund, noting that those on the 30-year installment plan had paid only $309.

A trial court and the Indiana Court of Appeals ruled that their constitutional right to equal protection had been violated, but the Indiana Supreme Court disagreed and ruled the city had acted properly in seeking to reduce administrative costs and preserve its limited resources.

On Monday, the U.S. Supreme Court upheld that decision. Writing for the majority, Justice Stephen Breyer said it was rational for the city to draw a line that avoided complex, expensive burdens, and such administrative concerns ordinarily could justify such a tax-related distinction.

He said the distinction between past payments and future obligations was well known in the law.

Breyer said the city's tax classification did not involve a fundamental constitutional right, describing the subject matter as local, economic, social and commercial. No one has claimed the city discriminated against out-of-state commerce or new residents, he said.

Chief Justice John Roberts and Justices Antonin Scalia and Samuel Alito dissented.

The Supreme Court case is Armour v. City of Indianapolis, No. 11-161.

Zounds like a basis for adding immigrunts to Social Security without full time in the system making contributions, doesn’t it?

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[Macrobius]

The underlying economic (not legal) problem here is that there is no mechanism to hedge against the regret of paying now, thus avoiding future interest costs, vs. incurring some of those costs and randomly winning the forgiveness lottery.

That is, one must make a choice between being a creditor, and paying one's debts promptly, and playing the debtor game of delaying payment for usury, but welching and winning big. Since the objects of largesse are determined by a political process, there is a great deal of uncertainty in the choice -- and no means to simply hedge the risk.

I don't think this is a bad decision legally, though it creates a problem in political economy -- which is that when the political regime hands out largesse arbitrarily, it makes economic calculation all but impossible. The technical means to solve the economic problem however. We need a vehicle to hedge. (I would like to read Scalia's case for dissenting, though).

In particular, we need to give the capitalist class the capacity to buy US sovereign debt, and *simultaneously* to purchase a put option, contingent on 'forgiving' lots of immigrants [that is, the equivalent of a large scale tax collection default event and/or payout in fiscal transfer payments]. This hedge would create a huge economic interest on the part of the government to avoid arbitrary largesse towards immigrants in the future. *Decoupling* the economic interests of the capitalist class from the political fortunes of immigrants could be a key strategy in neutralising the threat from the latter. Give them the means to *hedge either way* and they won't care ... which is a good thing.

[FIPS]

Originally Posted by Macrobius

The underlying economic (not legal) problem here is that there is no mechanism to hedge against the regret of paying now, thus avoiding future interest costs, vs. incurring some of those costs and randomly winning the forgiveness lottery.

That is, one must make a choice between being a creditor, and paying one's debts promptly, and playing the debtor game of delaying payment for usury, but welching and winning big. Since the objects of largesse are determined by a political process, there is a great deal of uncertainty in the choice -- and no means to simply hedge the risk.

I don't think this is a bad decision legally, though it creates a problem in political economy -- which is that when the political regime hands out largesse arbitrarily, it makes economic calculation all but impossible. The technical means to solve the economic problem however. We need a vehicle to hedge. (I would like to read Scalia's case for dissenting, though).

In particular, we need to give the capitalist class the capacity to buy US sovereign debt, and *simultaneously* to purchase a put option, contingent on 'forgiving' lots of immigrants [that is, the equivalent of a large scale tax collection default event and/or payout in fiscal transfer payments]. This hedge would create a huge economic interest on the part of the government to avoid arbitrary largesse towards immigrants in the future. *Decoupling* the economic interests of the capitalist class from the political fortunes of immigrants could be a key strategy in neutralising the threat from the latter. Give them the means to *hedge either way* and they won't care ... which is a good thing.

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This is whitey paying income taxes while Mezzies pay none and are eventually (and quite literally) forgiven their trespasses - writ small.

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[Macrobius]

Originally Posted by FIPS

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This is whitey paying income taxes while Mezzies pay none and are eventually (and quite literally) forgiven their trespasses - writ small.

Economically, it's a complicated issue. Krugman compares the situation in the EuroZone to the parallel situation of Florida in the Confederate States of America ... Er, the 'United Federales States':

http://krugman.blogs.nytimes.com/201...-versus-spain/

He estimates, quantitatively, that the only difference between Greece and the collapse of the US housing boom is that the Germans aren't ponying up, and the rest of the US bailed out Florida during the last crises, on a grand scale.

Please note, that this does not in the least invalidate your thesis.