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International Law, As Established At Nuremberg*: The ACTUAL Grounds On Which the Supreme Court Will Rule For Shell Oil’s Parent Company In Kiobel v. Royal Dutch Petroleum

In her post earlier today on Kiobel v. Royal Dutch Petroleum, the sort-of-CitizensUnited-like case argued yesterday in the Supreme Court, Linda discusses the issue that was supposed to be the one that the Court would decide, because, well, that was the issue that the lower appellate court, the Second Circuit Court of Appeals, decided.  The issue is whether under the Alien Tort Statute, which was enacted in 1789 and allows “aliens” to file civil lawsuits in the U.S. for violations of the “law of nations,” allows aliens to sue corporations, or instead only individuals, for violations of human rights as defined under clearly-established international law.

The Second Circuit court said it doesn’t, and, as the excerpt from that opinion that Linda posts shows, the appellate panel used as its justification the judges’ own moral judgment that since individuals (i.e., the corporation’s top executives) make the corporate decisions to leverage the corporation’s resources to accomplish these heinous acts, only those individuals, and not the ill-used corporation itself, should be suable.  And that therefore, only those individuals, and not the ill-used corporation itself, will be suable in U. S. federal courts under the ATS.

This notwithstanding that the statute itself says nothing at all about whocan be sued under it; it states only what acts the actor can be sued for.  And notwithstanding that the Second Circuit panel’s stated grounds for the ruling, if not necessarily the result (the dismissal of the lawsuit), conflict with the Supreme Court’s ruling two years ago in Citizens United v. FEC.  Which parlayed the First Amendment free-speech right of individuals into a right of corporate CEOs to leverage those rights of its individual human shareholders into a First Amendment speech right of the CEO to use corporate funds to advance his or her political preferences.

The plaintiffs in the case, 12 Nigerians, allege that Shell Oil aided and abetted the Nigerian government in committing horific violations of human rights against protesters of the company’s operations in that country in the 1990s.  According to the several reports I’ve read about yesterday’s argument, Anthony Kennedy, author of the Citizens United opinion, said at the very outset that he agreed with Shell’s statement in its brief that international law does not recognize corporate liability. Case closed.
But Elena Kagan (not a personal favorite of mine, for reasons that I’ll leave for another post, but someone who does demonstrate the ability to recognize distinctions in procedural/jurisdictional law in response to Kennedy’s indications that he cannot, and who is not shy about showing it; this is the second time in about a year that Kagan has done that during an oral argument) pointed out that international law addresses the acts that violate universally accepted human rights, but is silent on who can be sued for committing those acts.

And Samuel Alito and Stephen Breyer agreed. “Let’s assume that the French ambassador is assaulted or attacked in some way in the United States, and that that attack is by a 10 corporate agents. Would we say that the corporation cannot be sued under the Alien Tort Statute?” Slate’s Dahlia Lithwick quotes Alito as asking Kathleen Sullivan, Shell’s lawyer.  Who responded, “Yes, because there is no assaulting ambassador norm that applies to corporations.” Oh?  Does the State Department’s Foreign Service know this?  

Lithwick also quotes Sullivan as saying that “Nuremberg, if it established nothing else, established that it is individuals who are liable for human rights offenses.” She must be right that that’s what the Nuremberg trials established, since the Nuremberg prosecutors didn’t indict Volkswagen and try to have it executed. 

Breyer suggested that pirates should incorporate themselves, under the name “Pirates, Inc.”  A company in which I want to buy stock, if it ever goes public. Under international securities law.  As established at Nuremberg.

Nuremberg, by the way, didn’t establish “nothing else.”

Lithwick suggests that a majority of the justices will not say that corporations cannot be sued under the ATS.  Given the 5-4 ruling in Citizens United, the juxtaposition of the two opinions would be too damaging to the Court’s standing among the public.  I agree; after all, the First Amendment doesn’t say that corporations have First Amendment speech rights, nor mention corporations at all, but that didn’t stop the majority of justices from …  well ….

But neither do I think the Court will say that the ATS does allow lawsuits against corporations for violations of internationally recognized human rights. I think a majority will decide not to decide that issue at all, in this case.  Instead, a majority will say what Alito said at another point: that the statute was not intended to allow people who have no connection to the United States to sue under the statute for violations of human rights by anyone—human or corporate—that himself/itself has no legal-status connection to the United States and that occurred outside the United States.  The Nuremberg defense will have to await another day to succeed or not.

Alito’s French-ambassador-assaulted-in-the-U.S. hypothetical was not a random fact selection. The purpose of the statute, it was made clear during the argument, was to grant ambassadors to the U.S. the right to sue in U.S. court for violations of human rights committed in the U.S—rights they have long had here anyway.  But this is a very old statute, and apparently predates those rights.  The statute itself doesn’t say that it’s limited to circumstances involving victims or perpetrators who have with legal ties to the U.S.  But, whatever.  

I expect that the Court will fill in those blanks.  Although I won’t bet on it. I’ll save my money instead for the Pirates, Inc. IPO.

*Just to be clear: The first part of the title—the part before the colon—is intended as sarcasm.  It’s a takeoff on Kathleen Sullivan’s weird claim about the meaning of the Nuremberg trials.

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Pandering to the Right Fringe

by Linda Beale

Pandering to the Right Fringe

This campaign season has revealed more clearly than ever the ultimate goal of today’s hard right, as manifested in campaign debates and the right-wing think tanks’ output. It is nothing less than dismantling the protections established under FDR–Social Security, Medicare, minimum wage and other safety net protections that are nonetheless thinner than most advanced democracies have–under the guise that these programs are too costly, do not require personal responsibility, and can’t be afforded under the new right’s ‘realism’ about the deficits.

The right doesn’t want to afford these programs. Now that it has managed to ‘starve the beast’ through the Bush tax cuts, the repetitive stalling on increasing the debt ceiling, and numerous other revenue reduction measures–especially in the corporate tax provisions–it will claim that there is simply nothing else to be done but cut the safety net away.

This is mere spin. Tax increases and judicious stimulus measures can allow us to recover. Removing the safety net will thrust the country into a deep recession, since it will impact seniors, dependent children and the most vulnerable. The poverty increase that we have witnessed over the last few years will continue. Surely this is not what Americans want for their country!

But the politicians continue to preach the failed approaches of Reaganomics, in the claim that their deregulatory and corporate tax cutting agenda will “revive” manufacturing.

Santorum is riding his near-miss in Iowa under the guise of a populist who understands the worries of the downtrodden labor class in America. The Wall Street Journal (Jan. 7-8, 2012) says that he “cast[s] himself as an advocate for blue-collar workers and their economically troubled communities, hoping to capitalize on differences with Mr. Romney, a wealthy former private-equity investor and son of a Michigan governor.”

Santorum once didn’t have much money and he has memories of a coal-miner grandfather. Is that enough to create ‘bona fides’ for his views on how we should manage the U.S. economy? Seeing poverty can help a person to empathize with those in poverty, or it can lead that person to denounce those who remain in poverty as lazy bums who are in poverty from their failure to take the steps the person took to rise above it. Seeing poverty doesn’t mean that person understands the kinds of gut-wrenching problems that much of middle America and especially those at the lower end of the distribution are experiencing today–small towns that are rotting off the map as manufacturing jobs vanish and farms have become corporate enterprises, extensions of Cargill and AMD and Tyson and the few others that dominate the American production of food from seed to harvest to grocer to table.

And the policies that Santorum favors will be extraordinarily destructive of the middle class: they favor the wealthy and corporate enterprises, not the little guy.

Some of the things Santorum is mentioning on the campaign trail might benefit some in the middle class–like the idea of tripling the exemption for children, though the proposal apparently isn’t linked to income level and so would not be focused on families that need the help. (And it would be widely available, adding significantly to the deficit).

The rest of Santorum’s tax proposals favor the wealthy–lowering corporate tax rates to half their current level, eliminating corporate tax entirely for manufacturers, eliminating corporate tax on overseas profits that are used to buy manufacturing equipment (not clear whether that applies even if the equipment is used overseas as well, since the current tax code is already too friendly to active overseas businesses), and eliminating taxes on capital income.

Those provisions are most favorable for the wealthy who own most of the corproate stock and other financial assets. hough the right likes to label these kinds of tax policies ‘pro-growth’, they are in fact a replay of the failed policies of the last 40 years that have resulted in stagnate wages for the middle class and dying small towns, while the beneficiaries of the tax largesse flourish in gated communities.

These tax policies will carve out huge holes in federal revenues, resulting in increased deficits that will be used as justification for decimating earned benefit programs (Social Security, Medicare, and unemployment compensation). A vicious circle of cutting revenues and then using the loss of revenues to justify cutting important federal programs will leave the middle class (and especially the poor and the near-poor) in even worse condition, as the safety net that is especially needed now is weakened or removed.

These ideas on the right, stale as they are, are getting the kind of attention that cements them in people’s views, no matter how wrong they are. In debate after debate, candidates vie with each other to pander to the right. See, e.g., Santorum Claims Romney’s Tax PLan Isn’t Bold Enough, Huff. Post (Jan 9, 2012). Romney wants to cut taxes and spending and thinks Government is too big, but he at least thinks we need taxes to cover core responsibilities that government should do. Santorum wants more–more tax cuts for the wealthy and large corproations.

And when you repeat something over and over, it tends to stick. The American people are hearing these same ideas from every Republican candidate, as they compete to win the radical fringe of the Republican party.

What is worrisome is that progressives are disengaged. They are miffed about the continuing degradation of civil rights under the continuing “war” on terrorism, Obama’s weakness in not being able to stand up to the Republican minority or even hold to his threat to veto (see, e.g., the pipeline problem) and the way corporate lobbyists are succeeding in causing agencies to weaken or delay important environmental regulations. They are miffed because they had projected onto Obama their specific dreams of revitalization and change, and there is no way that any one person could have satisfied all that. Much less this person, who was an inexperienced politico with a stable of advisers from Wall Street and past administrations who valued change not one whit.

But it seems fairly obvious that the only hope for progressives is to defeat the resurging right that intends to deregulate, cut taxes and privatize if it gains complete power through control of the White House, House and Senate.

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Graph That Explains Everything About Amity Shlaes

by Mike Kimel

Thanks to Linda Beale, I headed over here:

The George W. Bush Institute announced today that Amity Shlaes has been named director of the 4% Growth Project, a key part of the Institute’s focus on economic growth. Miss Shlaes will open the project’s office in New York. The aim of the project is to illuminate ideas and reforms that can yield faster, higher quality growth in the United States, and to underscore the importance of growth in America’s future. Part of that work involves finding ways to make growth and economics generally accessible to more Americans, especially younger Americans. The program will conduct and sponsor research on all aspects of economic growth, host conferences, as well as partner with other institutions in such endeavors.

The following graph, I think, illustrates you need to know about Amity Shlaes:

OK. I lied. The graph is actually missing something. See, we only have official data going back to 1929. And the Great Depression began very, very early in Hoover’s term. And Hoover had been a cabinet secretary under Coolidge, and ran for office under a platform which essentially called for continuing Coolidge’s policies. And Shlaes’ forthcoming book is in praise of Calvin Coolidge. It should be noted that the economy was in recession during over 38% of the months in which Coolidge took office, which makes much of the Coolidge era a dry run (so to speak) for the monster that would come in 1929.

Put another way… Shlaes is part of a movement to praise policies responsible for a lousy economy culminating in the Great Depression (i.e., those of Coolidge and Hoover). Shlaes is also part of a movement to praise the policies responsible for a lousy economy culminating in the start of the Great Recession and the mess we’re in today. (Yes, the Great Recession started in 2007, and no, Obama hasn’t made any substantial changes on taxes or regulation from the way GW Bush ran the country.) Conversely, Shlaes is a well-known critic of the policies that produced the fastest period of peace time economic growth this country has seen.

To me this feature of economics is kind of odd. For some reason, policies that have failed spectacularly over and over continue to have adherents. Policies that have worked spectacularly have critics. Debating the merits of a cavalry charge into the teeth of an armored column was barely excusable in August of 1939, but at least that debate was put to a rest by the German blitzkrieg. Its been generations since anyone argued that horsemen can go toe to toe with tanks.

Which leads me to a hypothetical. Say we lived in a parallel universe where Shlaes was a quisling, a real villain whose goal was to harm this country as much as she could by convincing the nation to commit economic suicide. How would the graph above and the two paragraphs that followed it look any different?

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The AMT: why we should retain it with minor reforms to protect the true middle class

by Linda Beale

The AMT: why we should retain it with minor reforms to protect the true middle class

A commenter on an earlier thread complained about the Alternative Minimum Tax (AMT), saying it should be abolished. He seemed somewhat misinformed, suggesting that the alternative to the AMT is better enforcement.It seems that it might be timely to remind readers about the purpose of the AMT, its advantages as well as its flaws, and the way that reform could reasonably be undertaken to better accomplish its purposes. The following is an edited excerpt of my response to that reader on this issue.

The purpose of the AMT is to limit the advantage from aggregating deductions and exclusions and other provisions that are of particular benefit to those with high incomes.

For background, readers may want to read my extensive article on the AMT, available on SSRN at Or you can skim through the more accessible (and less dense) series of blogposts on the AMT based on the ideas and information in the article, titled “What Should Congress Do about the AMT?:

Part 1, available at,

Part 2, available at;

Part 3, available at;

Part 4, available at;

Part 5, available at; and

Part 6, available at

The AMT operates (admittedly imperfectly) to reduce the tremendous advantage that the highest-income Americans in the top 20% of the income distribution enjoy from the many deductions, exclusions and outright subsidies built into the tax Code. Many of those deductions and exclusions make some sense if provided to those who otherwise would pay too high a rate of tax—i.e., the personal exemption, the medical expense deduction–or if the intent of a transaction would be somewhat undone by taxation–i.e., the gift exclusion. But many of them don’t make much sense at all (e.g., the charitable contribution deduction at face value rather than at investment amount; the mortgage interest deduction) and certainly don’t make sense as a regressive item that provides the greatest benefit to the highest income recipients. The AMT operates to reduce that unmerited advantage by measuring (again, imperfectly) the cumulative effect of preferences that reduce taxes. As tax policy, it has the disadvantage of adding complication and creating some confusion, but the clear advantage of providing another way of ensuring that those with high incomes pay some tax.

Congress should quit its annual extension of stupid giveaways like the R&D credit, and it should quit its senseless annual extension of the AMT “patch”. Instead, it should reform the AMT along the lines that I suggested in the article and series of postings–by treating the capital gains preferential rate as an AMT preference item (which was done earlier in our more sensible history), by indexing the AMT exemption amount to inflation at an amount that would correspond, in the context of the AMT, to similar protection offered by the regular tax for those in the bottom 60% of the income distribution. The latter step would prevent the problem of the AMT reaching ever lower into the income distribution and thus protect the middle class, while permitting the AMT to operate as it should on the top two income quintiles.

originally published at ataxingmatter

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Audit rates for the rich increasing–about time

by Linda Beale Audit rates for the rich increasing–about time

crossposted with Ataxingmatter

Note to readers:  sorry for the long absence again–personal circumstances prevented my blogging for the last several weeks.  I hope that I can again resume regular blogging now, but do apologize for the absence.

The IRS recently released its 2010 Data Book, which describes the agency’s activities for the 2010 FY ending September 30, 2010.

One important part of the data revealed is a much-needed focus on the compliance of wealthy taxpayers.  IRS Commission Doug Shulman admitted in late 2009 that the agency needed to shift its focus to pay more attention to high-net-worth individuals–at least in part to reassure ordinary Americans that the rich weren’t able to avoid compliance (i.e., the idea that they might be able to avoid paying taxes simply because they had lots of money and could seek out tax shelters unavailable to the rest of us).  The IRS created a group within the agency focused on “global high wealth” individuals–those with $10 million or more.  Plans for the group required increased audits as a way to call attention to the problems and for the agency to teach itself more about the ways that these high-wealth individuals maintain their wealth and receive their income.  The Data Book shows that the IRS audited 18.4% of those high-income taxpayers in FY 2010, up considerably from the rate of 10.6% the prior fiscal year.

The release describing the databooks highlights the following information–including the fact that tax revenues are down compared to prior years.

During fiscal year 2010, the IRS collected $2.3 trillion in revenue, and processed 230 million returns. More than 116 million returns, including almost 70 percent of individual income tax returns, were filed electronically. More than 119 million individual income tax return filers received a tax refund, totaling $358 billion. In fiscal year 2010, IRS spent an average of 53 cents to collect each $100 of tax revenue.

The IRS examined more than 1.5 million individual income tax returns and nearly 30,000 returns filed by corporations, excluding S corporations. The IRS provided taxpayer assistance through 305 million visits to and assisted more than 78 million taxpayers through its telephone helpline or at walk-in sites.

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