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Tuesday, August 19, 2014

Obama's Use of Executive Authority: Could a Republican President Refuse to Enforce the Estate Tax?

New York Magazine:  Obama's Immigration Plan Should Scare Liberals, Too, by Jonathan Chait:

What if a Republican president announced that he would stop enforcing the payment of estate taxes?

The New Republic, The Liberal Fear of Obama's Executive Action Is Irrational, by Brian Beutler:

[L]et’s look at the estate tax. First, it’s important to note that Obama isn’t proposing to “suspend” immigration law. It’s impossible to reconcile Chait’s admission that the action Obama’s considering is legal with the suggestion that he will be suspending the law. He’s rather proposing to direct resources toward enforcing the law against higher-priority offenders. Washington Post reporter Greg Sargent’s expert sources have more here. So the proper comparison isn’t to a Republican president who suspends the estate tax, but to a Republican president who decides to enforce the estate tax against the highest priority offenders—the super-duper rich—rather than the merely exorbitantly wealthy.

I can’t claim to know (yet) whether a presidential administration has identical discretion over tax law as it does over immigration law, so I don’t know whether this would pass the threshold test of legality. I suspect the president has more discretion over the latter than the former, and if deferred action for recently deceased wealthy people were slam-dunk illegal, I would oppose it on those grounds. But assuming President Ted Cruz could plausibly shield estates valued below, say, $20 million from tax, within the bounds of the law, my instinct would neither be to scream “Caesar!” nor to blame Obama for setting a bad precedent, but to note that Cruz was insane. It’d be crazy for any president to apply tax law more leniently to people who hit the estate tax threshold than to regular people who don't accrue much if any wealth, and I believe they’d ultimately lose that fight in the political realm, either through legislation or at the ballot or upon the election of a Democratic president who would resume strict enforcement. ...

If Ted Cruz becomes president and his Republican Congress gets to work on a comprehensive tax reform plan that would (among other things) abolish the estate tax, a decision to defer estate tax enforcement through 2017 might make sense (again, assuming legality) to avoid penalizing people who have the misfortune of dying before Cruz can sign the bill. If that bill were to fail, enforcement would surely resume at some point. Norms wouldn't have very much to do with it.

The Daily Caller:  Nice Try, New Republic, by Micky Kaus:

[V]irtually any categorical we-won’t-prosecute-you decree will serve the interests of “consistency” and “predictability.” Take the hypothetical that Obama’s defenders seem to have the most trouble dealing with: Imagine Mitt Romney, campaigning on a platform of raising the limit on taxable estates to $20 million dollars (from the current $5.3 million).  Romney wins the election. He’s President! But he can’t get his estate tax bill through Congress. He decides he can’t wait! If Congress won’t act to boost the incentives to “job creators,” he will! His IRS announces that, as a matter of “prosecutorial discretion,” no estates under $20 million that fail to pay estate tax will be pursued by the IRS.  Romney could grant case by case leniency power to IRS auditors and lawyers — but a blanket categorical free pass makes the law so much more predictable, don’t you think? And predictability is important for job creators!  They have investments to make. You wouldn’t want an IRS with the leeway to play favorites — going soft on Republicans, or Romney donors, while coming down hard on dead multimillionaire Democrats. ...

President Romney, for example, could cite the Internal Revenue Code’s goal of increasing tax receipts and spurring economic growth — and argue that because a zero capital gains rate would encourage revenue-producing asset sales, he would now exercise his discretion to avoid punishing people who don’t pay their (legislated) capital gains taxes as well as most of  those who duck their estate taxes. Jonathan Chait is right to be worried.

P.S.: TNR‘s Brian Beutler takes a simpler approach. He appears to argue that, if there aren’t statutory provisions that would make a Romney estate-tax move “slam-dunk illegal” (which there probably aren’t) then Romney is free to go ahead. He’d be “insane,” Beutler says. The voters would probably reinstall the Democrats at the next election. But democracy itself would provide the limit.

Beutler’s theory has the virtue of clarity. It would create a parliamentary-style government except that — absent Congressional intervention — the parliament that mattered would be a parliament of one in the White House, elected every four years. This may be Obama’s emerging ideal. It’s a plausible vision for a constitution. But it’s some other country’s constitution. ...

If the people who wrote the constitution wanted to allow a President with 51% of the vote to make law after law that pleased his 51%, they could have written a document that created such an institution. They didn’t, because they were famously terrified of mob rule by the 51%. Instead, they took elaborate — I’d argue, excessive — precautions against that type of one-man democracy.

(Hat Tip:  Glenn Reynolds.)

http://taxprof.typepad.com/taxprof_blog/2014/08/president-obamas-use-of-executive-authority.html

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Comments

One important thing that seems left out: our taxes are self-assessed. Immigration laws aren't self-enforced.

Posted by: Andrew Greiner | Aug 19, 2014 10:57:26 AM

Isn't it obvious that the IRS, given its partisan composition, would never accommodate such a request by the President? One by one they would all resign instead.

Liberals have nothing to fear here. The IRS only rolls over for the President if he's a Democrat.

Posted by: AMT buff | Aug 19, 2014 4:11:03 PM

Please don't use the words "President" and "Ted Cruz" together ever again. It gives me indigestion.

Posted by: sw | Aug 20, 2014 5:13:08 AM