Category: Articles

In an income tax system that comported with the economic, or Haig-Simons, definition of income, deductible expenses would not face sourcebased limitations. A true Haig-Simons income tax system therefore would not take the schedular approach of sorting different types of expenses and losses into distinct conceptual “baskets” containing corresponding types of income. Practical realities often require departing from the Haig-Simons norm, however. The U.S. federal income tax system does require individuals to basket a number of types of expenses and losses. For example, individuals’ passive activity losses can only be deducted from passive income gains. By contrast, most corporations taxed under Subchapter C of the Internal Revenue Code are not subject to many of these restrictions. Thus, corporations generally can deduct their passive investment expenses and losses from their active business income. That ability allowed the creation of infamous tax strategies such as Son-of-BOSS and the CINS contingent installment sale shelter. In order to prevent the resurgence of abusive tax shelters, this Article proposes to extend to the domestic corporate context the passive/active distinction that already exists for individuals. If corporations were required to basket their passive-source expenses and losses with their passive income (such as income from interest, dividends, and rents and royalties, other than those produced by an active business), many abusive tax shelters involving financial products would not work. The Article also considers the three principal objections to the proposal—that it is overbroad, underinclusive, and too complex—and argues that the proposal is tailored so as to minimize these costs.

In the United States, retirement income and health insurance are largely provided through private promises made incident to employment. These “benefit promises” are governed by a statute called ERISA, which many health care and pension scholars argue is the cause of fundamental problems with our nation’s health and retirement policy. Inevitably, however, they advance narrowly tailored proposals to amend the statute. This occurs because of the widely held view that reform should leave undisturbed the underlying core of the statute. This Article develops a theory of ERISA designed to illustrate the unavoidable need for structural reform.

This Article argues that the procedural justice—that is, fairness of process—plays a critical and largely unexamined role in legal negotiation, encouraging the acceptance of and adherence to negotiated agreements. An economic focus has dominated prior work on legal negotiation and has largely touted the importance of negotiated outcome rather than process. This Article marshals theoretical support for the role that procedural justice may play in bilateral legal negotiation and supports the theoretical case with empirical data from social psychology. A robust empirical literature has established that procedural justice has a significant effect on individuals’ perceptions of their outcomes in third party decision-making systems, encouraging acceptance of and adherence to outcomes and fostering a perception that decision-making systems are legitimate. Recently, such empirical work has begun to consider the effects of procedural justice in a setting without a third-party decision maker. These newest empirical findings support an increased role for fairness of process in negotiation. The Article concludes by exploring the complexities of taking procedural justice effects in negotiation seriously in light of the fact that legal negotiation is conducted by agent (the attorney), rather than principal (the client).

The Political Fourth Amendment builds on Justice Ginsburg’s recent dissent in Herring v. United States to argue for a “more majestic conception” of the Fourth Amendment focused on protecting political liberty. To put the point dramatically, we misread the Fourth Amendment when we read it exclusively as a criminal procedure provision focused entirely on either regulating police or protecting privacy. In order to see the Fourth Amendment as contributing to the Constitution’s protections for political liberty, and not simply as an invitation to regulate police practice, we must take seriously the fact that the Fourth Amendment’s textual purpose is to secure a “right of the people,” which places it textually alongside the First, Second, and Ninth Amendments that similarly seek to protect the “right[s] of the people.” Narratives focused on regulating police or protecting privacy each risk blinding us to the Fourth Amendment’s broader constitutional setting. By looking at the historical origins of the Fourth Amendment in relation to substantive First Amendment concerns, and examining the textual significance of protecting a “right of the people,” this Article argues that the two dominant narratives overlook a central political purpose of the Fourth Amendment. The political Fourth Amendment seeks to protect the political liberties of the sovereign “People.” Focused exclusively on protecting privacy by regulating police practice, current Fourth Amendment doctrine offers no protection to anything a person knowingly exposes to others, a hazard in an era of electronic social networking. Reading the Fourth Amendment back into the Constitution makes available new grounds for the Constitution’s relevance in an age of pervasive electronic surveillance.

Could embracing the philosophy of “encapsulated trust” as the basis for a fiduciary duty of disclosure improve the integrity and effectiveness of corporate communications? The question arises because a tragedy of transparency threatens the viability of the burgeoning corporate social responsibility (CSR) movement, where consumers and investors employ various social, environmental, or ethical screening criteria before purchasing a company’s stock or products. In an efficient market, fully informed consumers and investors could reward companies that engage in CSR by purchasing their products or stock and, conversely, punish companies that fail to engage in desired practices by refusing to purchase their products or stock. Unfortunately, corporations are increasingly engaging in a sort of “strategic ambiguity” in their public communications—an ambiguity made possible by a variety of static yet inconsistent standards regarding the collection, auditing, and dissemination of information regarding CSR practices. Consumers and investors simply cannot trust the existing disclosure regime to provide reliable information necessary to monitor CSR compliance. That lack of trust will cause the market for CSR to collapse, as consumers and investors stop offering rewards for responsible business behavior. The Article suggests solving that disclosure tragedy by using the philosophy of “encapsulated trust” to reshape the existing fiduciary duties governing officers and directors. In simple terms, encapsulated trust constitutes a rational expectation that others will take our interests into account when determining what course of action to pursue. Applied in the context of corporate disclosures on CSR, encapsulated trust would require officers and directors to demonstrate they took into account shareholder preferences regarding the timing, content, and form of corporate disclosures. In essence, the duty is a process-based standard that relies on continual discourse to improve the integrity of disclosure practices. In contrast to static statutory disclosure rules, an emphasis on improved discourse between the corporations and shareholders would promote greater efficiency in corporate communication by attending more accurately to evolving consumer and investor disclosure preferences. Moreover, the focus on greater discourse within the corporate setting would also lead to enhanced ethical practices by corporate actors and their counsel.

The idea of hidden taxes is as old as John Stuart Mill, but convincing evidence of their existence is new. In this Article, I survey and critique recent studies that claim to show that there are some taxes that can go unnoticed by those who pay them. I also develop the array of unanswered theoretical questions and policy implications that potentially follow from the studies’ results. Probably the central question for hidden taxes is whether they might enable government to raise revenue without also distorting the economy. If so, I argue, they have the potential to radically refashion the architecture of redistributive government. But, as I also show, whether that is true turns on the cognitive mechanisms that might permit taxes to go unnoticed. For example, if hidden taxes are caused not by rational ignorance but by cognitive shortcomings, then it is likely that the burden of a hidden tax will be borne disproportionately by poorer taxpayers, and vice-versa. Thus, I attempt to integrate with the tax literature some recent developments in our understanding of bounded rationality in consumers more generally.

Every year in this country, hundreds of people are convicted of having shaken a baby, most often to death. In a prosecution paradigm without precedent, expert medical testimony is used to establish that a crime occurred, that the defendant caused the infant’s death by shaking, and that the shaking was sufficiently forceful to constitute depraved indifference to human life. Shaken Baby Syndrome (SBS) is, in essence, a medical diagnosis of murder, one based solely on the presence of a diagnostic triad: retinal bleeding, bleeding in the protective layer of the brain, and brain swelling. New scientific research has cast doubt on the forensic significance of this triad, thereby undermining the foundations of thousands of SBS convictions. Outside the United States, this scientific evolution has prompted systemic reevaluations of the prosecutorial paradigm. In contrast, our criminal justice system has failed to absorb the latest scientific knowledge. This is beginning to change, yet the response has been halting and inconsistent. To this day, triad-based convictions continue to be affirmed, and new prosecutions commenced, as a matter of course. This Article identifies a criminal justice crisis and begins a conversation about its proper resolution. The conceptual implications of the inquiry—for scientific engagement in law’s shadow, for future systemic reform, and for our understanding of innocence in a post-DNA world—should assist in the task of righting past wrongs and averting further injustice.

Government intervention to assist individual businesses and industries during the 2008–2009 economic crisis was extraordinary in variety and scope. Despite official protestations of no more bailout‖ in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, future government interventions are inevitable, should economic circumstances become sufficiently dire. Moreover, even if Congress eliminates overt bailout-type interventions, indirect forms of public bailout are likely to continue. Understandably, taxpayers have been concerned about the cost. A simple tally of dollars authorized or disbursed is wholly inadequate to accurately assess the costs of various interventions. This Article addresses the challenges of providing reasonable budgetary information with respect to different types of bailout expenditures. In addition to looking at costs for the more obvious bailout programs, the analysis explores the special cost estimation challenges for other more covert actions, such as special tax breaks or relief from burdensome regulation, that serve a “bailout” function. The Article also takes issue with the fragmentation of intervention efforts among different “on-budget” and “off-budget” entities and with some of the methodologies used by the government to value assets obtained in its bailout efforts, arguing that decision making about the appropriate allocation of aggregate resources is hampered when some expenditures are “off-budget” altogether and when even “on-budget” agencies use different accounting methods. Finally, the Article calls for transparency and budget accounting for public bailouts accomplished more indirectly through the tax system and other regulatory regimes. Adequate and transparent budget accounting for bailout costs requires greater consistency in valuation and accounting methods, and a more unified presentation of aggregate information in the budget with respect to all government bailout-type activities.

Section 2 of the Thirteenth Amendment grants Congress power to enforce this article by appropriate legislation. In Jones v. Alfred H. Mayer Co., the Supreme Court held that Section 2 permits Congress to define the badges and incidents of slavery and pass all laws necessary and proper for their abolition. Congress has passed a number of civil rights laws under this understanding of its Section 2 power. Several commentators have urged Congress to define the badges and incidents of slavery expansively and to use Section 2 to address everything from racial profiling to discrimination on the basis of gender and sexual orientation. Jones, however, is in serious tension with City of Boerne v. Flores, which held that the Fourteenth Amendment’s virtually identical enforcement language permits only prophylactic legislation that is congruent and proportional to violations of judicially determined rights. Even more critically, Jones’s grant to Congress of substantive interpretive power runs afoul of the principles of separation of powers, judicial supremacy, and federalism that drove the Court in City of Boerne. Thus, the time is ripe to reconsider Jones and the proper scope of Congress’s Thirteenth Amendment enforcement power. This Article does precisely that, delving into the text, history, and structural implications of Section 2. Ultimately, this Article considers three ways to approach Section 2: as a limited power to prevent and remedy coerced labor; as a broad power to define the badges and incidents of slavery and to protect a wide array of civil rights; and as a prophylactic power to prevent the de facto reemergence of slavery by addressing the historical incidents and badges of the slave system. This Article concludes that the prophylactic reading of Section 2 best comports with both the original meaning of the provision and the structural principles of separation of powers, judicial supremacy, and federalism.