#nonpecuniary

[allthebrazilianpolitics]

Braskem sale in the balance as Alagoas ask for compensation

The governor of Alagoas state, Paulo Dantas, has asked the Federal Accounts Court to suspend the possible sale of Braskem, Latin America’s largest petrochemical group, until displaced residents are compensated for damages caused by the company.

Braskem’s abusive salt mining practices led to tremors in the Alagoas state capital of Maceió. The shocks damaged entire neighborhoods and forced tens of thousands to leave their homes. The Brazilian Report produced an award-winning story on the case.

Last week, the company announced a BRL 1.7 billion agreement with the city government of Maceió. “The agreement establishes the compensation and full refund of the municipality of Maceió in relation to any and all pecuniary and nonpecuniary damages incurred, and is subject to court approval,” Braskem told investors.

Mr. Dantas argues that the agreement does not adequately compensate the 60,000 displaced people and does not include neighboring cities, where several of them have moved. The state government, he added, also suffered losses because schools and health centers in the area were also closed.

Continue reading.

[mariacallous]

Jósef Sigurdsson of Stockholm University finds that a change to the Icelandic tax code led men to drop out of school without similarly affecting women. Iceland collected no income tax on earnings in 1987 as it changed its national taxation system, creating an opportunity for Icelanders to earn substantially more in the short term. Dropout rates for men who were just old enough to leave high school and start working were 5 percentage points higher than for men just below the cutoff, while dropout rates for women were unchanged. Dropouts rarely returned to school and suffered large losses in lifetime income despite higher earnings in the years after 1987. The findings indicate that short-term earnings opportunities affect men and women differently, suggesting “gender differences in nonpecuniary costs of school attendance, myopia, or perceived returns to education.”  

[worklabournewsresearch]

Incentives in the Workplace

Symposium: Incentives in the Workplace 

“Labor is supplied because most of us must work to live. Indeed, it is called "work" in part because without compensation, the overwhelming majority of workers would not otherwise perform the tasks. The theme of this essay is that incentives affect behavior and that economics as a science has made good progress in specifying how compensation and its form influences worker effort. This is a broad topic, and the purpose here is not a comprehensive literature review on each of many topics. Instead, a sample of some of the most applicable papers are discussed with the goal of demonstrating that compensation, incentives, and productivity are inseparably linked.”             

Compensation and Incentives in the Workplace, by Edward P. Lazear                

“Empirical research in economics has begun to explore the idea that workers care about nonmonetary aspects of work. An increasing number of economic studies using survey and experimental methods have shown that nonmonetary incentives and nonpecuniary aspects of one's job have substantial impacts on job satisfaction, productivity, and labor supply. By drawing on this evidence and relating it to the literature in psychology, this paper argues that work represents much more than simply earning an income: for many people, work is a source of meaning...We conclude by suggesting some insights and open questions for future research.”

Nonmonetary Incentives and the Implications of Work as a Source of Meaning, by Lea Cassar and  Stephan Meier

“We study how changes in the distribution of occupations have affected the aggregate non-pecuniary costs and benefits of working. The physical toll of work is less now than in 1950, with workers shifting away from occupations in which people report experiencing tiredness and pain. The emotional consequences of the changing occupation distribution vary substantially across demographic groups. Work has become happier and more meaningful for women, but more stressful and less meaningful for men. These changes appear to be concentrated at lower education levels.”         

The Changing (Dis-)utility of Work, by Greg Kaplan and  Sam Schulhofer-Wohl                

American Economic  Association, Summer 2018: Journal of Economic Perspectives, Vol. 32, No. 3: Symposium: Macroeconomics a Decade after the Great Recession and  Symposium: Incentives in the Workplace (292 pages, PDF)               

[jeffreyianross]

Choose wisely my friend. Just because a state’s tax rate and cost of living is low doesn’t mean it’s great place to live or move to

January 28, 2022

One of the numerous benefits of living in the US is that it’s a big country, and if you don’t like where you are currently living, or the location doesn’t provide you with the things you need, want, or desire, then all things being equal, you have the freedom to move.

This is especially true with respect to economic challenges and opportunities you encounter. If you lose your job and can’t find appropriate work in your city, county or state, or your dream job or business lies elsewhere, unless you want or need to be close to family members or friends, in general you have the liberty to pack up and go somewhere else.

Relocating (which is easier for some people than others) has been highlighted during the COVID-19 pandemic. During this time some individuals (particularly knowledge workers) have jobs that are portable, and many of them can move to a different state or country and continue their work with a minimum of headaches.

Unless the local sheriff drove you to the outskirts of your town, and told you to never come back, people have the power to make a rational approach about where they want to relocate. Although “bounded rationality” is real, potential movers can rank order their priorities, develop a list of possible locations, maybe even develop a matrix, collect relevant information about these places, possibly take a vacation there, and even temporally live in the new community before making the final decision.

Here’s the rub. In the desire to move somewhere else many people are attracted to parts of the country that have low costs of living, including property costs and tax rates.

In this scenario some people consider moving from a blue (i.e., Democratic and liberal leaning) state, to a red (i.e., Republican and conservative) or even purple (i.e., half Democratic and half Republican) state.

Some, but not all, traditional red states (e.g., Kansas, Oklahoma, Tennessee, and Wyoming) have very attractive lower costs of living, including lower real estate prices. Also state and sales taxes are less, if not close to nonexistent, in many red states (i.e., Alabama, Alaska, Montana, South Carolina, Utah and Wyoming).

Keep in mind, however, that just because a red state doesn’t have a personal income tax, doesn’t necessarily mean that other types of taxes (e.g., sales) are also absent, nor have the other benefits previously mentioned. But these criteria should not be the only ones that force your hand.

What many red states do have, on the other hand, is a different culture. In general, the majority of people living in these states, have red state attitudes towards politics, race, gender, sexual preference, equality, religion, etc.

If you live in a big metropolis, a university town, or are sedentary (i.e., don’t go out of your house much), home school your children, and really don’t interact with your neighbors or the locals, then this kind of situation may be ideal for you.

On the other hand, if you live in the suburbs of the bigger cities, or in the smaller towns of red states, and do interact with people in your community, you may be tad shocked or disappointed when you talk about things more consequential than the weather. You may end up biting your tongue more often than you care to avoid interpersonal conflicts.

Over time, these kinds of interactions can have very nonpecuniary costs to you, your mental and emotional health, and the people you live with.

In short, you don’t want to be back where you started, looking to move once again.

[armeniaitn]

Blogger Lapshin opens account in Armenian bank to get EUR 30,000 compensation from Azerbaijan

New Post has been published on https://armenia.in-the.news/society/blogger-lapshin-opens-account-in-armenian-bank-to-get-eur-30000-compensation-from-azerbaijan-73875-22-05-2021/

Blogger Lapshin opens account in Armenian bank to get EUR 30,000 compensation from Azerbaijan

Blogger Alexander Lapshin has opened an account at the Armenian Artsakhbank to get the EUR 30,000 compensation from Azerbaijan.

The European Court of Human Rights on Thurday ruled that Lapshin’s right to life had been violated during his detention in Baku and obliged Azerbaijan to pay 30,000 euros in compensation.

The case concerned an incident during the applicant’s imprisonment in Azerbaijan in 2017 for “having crossed the State border outside the checkpoints” during journeys to Nagorno-Karabakh, and the ensuing inquiry by the prosecutor’s office into the incident. The authorities asserted that the incident had been a suicide attempt, while the applicant alleged it had been attempted murder.

The applicant was resuscitated and hospitalized in an intensive-care unit. The following day the applicant was pardoned by the President of Azerbaijan and, upon his discharge from hospital three days later, was expelled to Israel.

The Court found that the inquiry into the prison incident had been ineffective and in breach of the respondent State’s procedural obligations under Article 2 of the Convention. It found that the respondent State had failed to satisfy the burden of proof resting on it to provide a satisfactory and convincing explanation as regards the incident which had put the applicant’s life in danger. There had therefore been a violation of Article 2 under its substantive limb.

The Court held that Azerbaijan was to pay the applicant 30,000 euros (EUR) in respect of nonpecuniary damage.

Read original article here.

[ericfruits]

Occupations, Wages, and Educational Attainment

Four year degrees are not the be-all and end-all when it comes to career choices and earnings. Inevitably some dropouts will become successful managers, while some graduate degree holders will continue to work food preparation jobs. However, the correlation between education and pay is strong. The surest path toward a high-wage job in today’s economy is a college degree, and in some cases a graduate degree. That said, it is important to point out that certificate programs, apprenticeships and the like also further individuals’ skills. Workers are more competitive in the labor market provided the training or program itself is actually of value to employers (not all of them are, unfortunately).

What’s interesting when it comes to occupations, wages, and educational attainment is the wide range of outcomes within similar groups. First, let’s talk about the occupations that have high levels of formal education, or the right-hand side of the chart below. Within this group there are those, like computer programmers, doctors, engineers, and lawyers, that earn more than double the statewide median wage. Conversely, other highly educated occupations, while certainly paying more than the median wage, do pay less that these counterparts. Among these are Scientists, Teachers, Community Service (counselors, social workers, clergy, etc) and Arts, Design and Entertainment occupations (includes public relations and media). The majority of these jobs do require a bachelor’s degree and may reflect more of a lifestyle occupational choice than a pure salary story, where the workers enjoy additional nonpecuniary rewards in addition to their salary.

However, what I find most interesting, or among the most important items to note with this research, are the differences among the upper middle-wage occupations. All of these jobs pay approximately the same wage because they are performed by skilled workers, yet require vastly different levels of formal education. You can see this a bit clearer in the chart below. Note that this chart shows the same exact information, however it is zoomed in a bit, and I have changed the color scheme for aesthetic reasons — it looks better for presentations when there isn’t a sea of red.

The differences here are that construction workers and installation, maintenance, and repair workers learn largely on the job, while teachers, librarians and social workers learn in the classroom. Within the job polarization research, the reason for this is that these jobs require abstract thinking and problem solving skills. These occupations also perform nonrountine physical activities and require human interaction, making them harder to automate. Construction and installation, maintenance, and repair jobs are the gold standard for wages when it comes to jobs that largely do not require a college degree. This is one reason why an increased focus, or at least maintaining focus on the trades and apprenticeships and the like is important for both individuals, and the economy at large.

In terms of the outlook, these upper middle-wage jobs can largely be thought of population driven. Stronger population growth leads to increased demand for housing, repair work, police officers, social workers, and teachers. During the strong 1990s expansion, population growth averaged nearly 2 percent per year. It was during this period that Oregon was able to stem the polarization tide, given the strong gains in these types of jobs. In recent years, we have seen middle-wage jobs increase again as the economy has turned around and population growth has picked up. That said, many of these occupations have yet to fully recover all of their lost jobs to date. The outlook calls for ongoing gains as the expansion continues.

Finally, for those interested in more details, the last chart shows more granular educational attainment shares for all occupational groups. The chart is sorted not by median wage but by the share of college graduates, from highest to lowest.

This post was an updated and modified excerpt from our office’s original Job Polarization in Oregon report. I pulled this information for two reasons. First, as mentioned the other day, I am updating and working on some new research regarding the trades and blue collar occupations. And second, at times the reasoning behind these issues, and the labor market outcomes are not discussed enough. Consider this an effort to keep these in mind.

http://ift.tt/2D2xtoX

[maxwellyjordan]

Opinion analysis: Punitive damages not available under general maritime law in personal-injury unseaworthiness action

In a decision implicating two of its recent admiralty precedents and its role in fashioning general maritime law more generally, the Supreme Court today held 6-3 that a seaman cannot recover punitive damages for injuries allegedly caused by the unseaworthiness of a vessel to which he was assigned.

Justice Samuel Alito rested his majority opinion largely on the absence of a “historical basis for allowing punitive damages in unseaworthiness actions” and “to promote uniformity with the way courts have applied parallel statutory causes of action.” That formulation allowed Alito to reconcile the two precedents, the 2009 decision in Atlantic Sounding Co. v. Townsend and the 1990 opinion in Miles v. Apex Marine Corp. In the process, Alito, who had written a forceful dissent in Atlantic Sounding, was joined in today’s opinion by Justice Clarence Thomas, the author of the majority opinion in Atlantic Sounding, even though Justice Ruth Bader Ginsburg, who had joined Thomas then, argued in dissent that the logic of Thomas’ majority opinion dictated a contrary result.

The Supreme Court had held 5-4 in Atlantic Sounding that punitive damages are available to a seaman for an employer’s willful and wanton disregard of its obligation to pay maintenance and cure, a strict remedy essentially affording a very limited allowance for some living and medical expenses. Christopher Batterton argued in this case that Atlantic Sounding supports allowing recovery of exemplary damages for personal injuries due to a vessel owner’s willful and wanton failure to provide a vessel reasonably fit for its intended purpose, the test for the unseaworthiness action the general maritime law provides.

Yet Miles had held that the estate and survivors of a deceased Jones Act seaman could not recover for nonpecuniary loss under the general maritime-law unseaworthiness doctrine because such relief was unavailable under the Jones Act, a statute that provides a seaman a negligence remedy against his or her employer, modeled on the Federal Employers Liability Act applicable to railroad workers. The Dutra Group argued that the logic of Miles precludes allowing a seaman to recover punitive damages under a general maritime-law unseaworthiness action because the Jones Act and FELA were thought to bar such recovery.

Alito found that “the overwhelming historical evidence” suggests that exemplary damages were unavailable in an unseaworthiness action for personal injuries. The absence of such recovery in “traditional maritime law cases” was “practically dispositive.” The “overwhelming historical evidence” precluded creating “a novel remedy” unless necessary to preserve “uniformity with Congress’s clearly expressed policies,” a formulation drawn from Miles.

The majority also thought the uniformity consideration led to the same result as its historical inquiry. Consistent with his Atlantic Sounding dissent, Alito concluded that long-standing Supreme Court and lower court precedent precluded recovery of punitive damages under FELA and the Jones Act. In Atlantic Sounding, Thomas had relied on “historical evidence” that punitive damages had been available in maintenance-and-cure cases, but the absence of such proof regarding unseaworthiness cases made it unnecessary for the court to revisit the long-standing interpretation of these federal statutes. The situation accordingly did not call on the court to fashion a novel remedy “to maintain uniformity with Congress’s clearly expressed policies.”

Alito was unpersuaded by multiple public-policy arguments raised by Batterton. The Supreme Court’s “overriding objective” in maritime cases is “to pursue the policy expressed in congressional enactments.” Because the Supreme Court had created “unseaworthiness in its current strict-liability form” following the Jones Act,  “it would exceed our current role to introduce novel remedies contradictory to those Congress has provided in similar areas.” The need for uniformity between maritime common law and maritime statutory law is particularly compelling because unseaworthiness, more than maintenance and cure, resembles and duplicates the Jones Act. Punitive damages are a needed incentive to deter an employer from abandoning an ill or injured seaman in a distant port, but vessel owners have other incentives to avoid unseaworthy conditions. Allowing punitive damages in injury cases would also create various anomalies and would disadvantage American shippers.

Finally, Alito rejected the argument that the doctrine that seamen deserve “special solicitude” justifies a punitive-damages remedy. Alito reasoned that in view of changes in the respective maritime-law roles of the Supreme Court and the political branches and in the position of seamen, “the special solicitude to sailors has only a small role to play in contemporary maritime law,” a statement that seemed at odds with the court’s invocation of that doctrine to “reinforce[]” its decision in Justice Brett Kavanaugh’s majority opinion in Air & Liquid Systems Corp. v. Devries just over three months ago. Chief Justice John Roberts and Justices Elena Kagan and Kavanaugh joined both majority opinions, which seem to assign different weight to the “special solicitude” doctrine.

Ginsburg’s dissent, which Justices Stephen Breyer and Sonia Sotomayor joined, started from the premise that punitive damages are normally available in maritime cases, and accordingly viewed the court’s decision as an exception that followed Miles instead of Atlantic Sounding. She distinguished Miles as  involving the more narrow situation in which a judge-made cause of action was created as a gap-filler. In her view, Atlantic Sounding provides the appropriate approach. The court reasoned in that case that punitive damages had a long common-law pedigree whose general applicability was not undermined by anything in maritime law. Contrary to Alito’s claim that Atlantic Sounding relied on evidence of the availability of punitive damages in maintenance and cure cases, Ginsburg cited Alito’s Atlantic Sounding dissent for the proposition that little such authority existed. Nor did Congress preclude punitive damages under the Jones Act, a question Atlantic Sounding had reserved. The Jones Act had expanded, not contracted, a seaman’s remedies and had not barred punitive damages in unseaworthiness actions. The general availability of punitive damages in maritime matters should govern here, too.

Both opinions, as had Kavanaugh’s earlier Air & Liquid Systems Corp. majority opinion, explicitly or implicitly reaffirm the court’s role in fashioning federal common law in an admiralty context. Alito’s majority opinion endorses the approach Justice Sandra Day O’Connor took in Miles in suggesting that the court’s formulation of general maritime law will be somewhat constrained by legislative policies in areas in which Congress has been active.

The decision produced a somewhat unusual alignment, as Alito’s opinion was joined by Roberts, Thomas, Kagan, Justice Neil Gorsuch and Kavanaugh. Ginsburg and Breyer had been part of the five-justice majority in Atlantic Sounding, but significantly, Thomas, who wrote that opinion, silently joined Alito’s majority opinion in this case. At oral argument, Kagan had focused on how the justices might reconcile their general maritime-law-making role with the Jones Act and she may have found appealing a resolution that expressed deference to congressional policies and perceived doctrine, especially given her recent protests against the court’s overturning long-standing precedents.

The post Opinion analysis: Punitive damages not available under general maritime law in personal-injury unseaworthiness action appeared first on SCOTUSblog.

from Law https://www.scotusblog.com/2019/06/opinion-analysis-punitive-damages-not-available-under-general-maritime-law-in-personal-injury-unseaworthiness-action/ via http://www.rssmix.com/

[ustribunenews-blog]

S.1062 introduced in Senate by Deb Fischer (R)

S.1062 introduced in Senate by Deb Fischer (R)

New bill introduced: A bill to provide authorization for nonpecuniary damages in an action resulting from a cruise ship accident occurring on the high seas.

Republican Senator Deb Fischer from the state of NE, without any cosponsors, introduced bill S.1062 on Apr 08, 2019.

There are currently no amendments.

Read this bill online

Deb Fischer Short bio

Deb Fischer was born on a 1951 in Lincoln.

[benrleeusa]

[Eugene Volokh] Court Throws Out Season Ticket Holder's Lawsuit Over Football Anthem Protests

A creative legal theory, roundly rejected.

From Dragna v. New Orleans Louisiana Saints, LLC, decided in October by the Louisiana Court of Appeals, but just noted on the Westlaw Bulletin Saturday:

On December 11, 2017, plaintiff/respondent, Lee Dragna, filed this lawsuit against the Saints, seeking rescission of his season ticket sale and other nonpecuniary damages. He contends that at the September 17, 2017 home game between the Saints and the New England Patriots, some Saints players, as a "protest," refused to take the field until after the National Anthem was played.

Mr. Dragna asserts that when these players entered the field after the National Anthem, they passed directly in front of his seats and many fans "booed" and "cursed" at the Saints players. According to Mr. Dragna, he would not have purchased his season tickets if he had known that Saints players would use their games as a platform for protests, and he requested rescission of the sale. Mr. Dragna also pleaded that he purchased the tickets for entertainment and is entitled to non-pecuniary damages for those losses.

On January 19, 2018, Mr. Dragna filed a supplemental and amending petition, adding claims of intentional infliction of emotional distress, failure to warn of the potential protests, and violation of his right as a member of a captive audience to be protected from unwanted speech in the form of protests.

The Saints moved to dismiss, but the trial court concluded "that Mr. Dragna has sufficiently 'listed a cause of action under intentional infliction of emotional distress, negligence, and a Captive Audience Doctrine.'" The court of appeals reversed, rejecting all the claims:

In order to recover for intentional infliction of emotional distress, a plaintiff must show: 1) that the conduct of the defendant was extreme and outrageous; 2) that the emotional distress suffered by the plaintiff was severe; and 3) that the defendant desired to inflict severe emotional distress or knew that severe emotional distress would be certain or substantially certain to result from his conduct.... [BUt a]ccepting the alleged facts as true, the facts alleged do not satisfy the required elements of this tort.

Further, the facts pleaded in the petitions do not state a valid cause of action for negligence or "failure to warn," or a violation of the captive audience doctrine. Mr. Dragna's claims, as stated in his petitions, are simply not actionable....

Sounds quite right to me.

[albstone94]

Pro-Se Litigation Ends in an Appellate Brawl

Some of the most unusual and unstable law arises from chance litigation between pro-se plaintiffs and professional defendants. Borges v Placeres  2018 NY Slip Op 28224  Decided on June 27, 2018  Civil Court Of The City Of New York, New York County  Ramseur, J. is a wonderful example.  Immigration plaintiff sues immigration attorney for his unnecessary deportation and wins a $ 900,000 verdict for “emotional pain and suffering” which is completely wrong in a legal malpractice setting.  There is plenty of Court of Appeals and Appellate Division law which completely outlaws such an award.  Nevertheless, the attorney-defendant failed to make these arguments when he had the chance.  So, the case followed into Bankruptcy Court and from there into utter confusion.

“Plaintiff/judgment creditor Jose Borges retained Defendant/judgment debtor Alfred Placeres, an immigration attorney, for immigration proceedings. During the proceedings, Defendant instructed Plaintiff not to appear in immigration court on a specific date. Upon Plaintiff’s absence, an immigration court judge issued an in absentia deportation order which resulted in Plaintiff’s 14-month detention. Plaintiff consequently filed a legal malpractice action arguing, in sum and substance, that Defendant’s instruction was negligent (Borges v Placeres, 43 Misc 3d 61, 63 [App Term 2014], affd, 123 AD3d 611 [1st Dept 2014]). The jury found unanimously in favor of Plaintiff that Defendant committed malpractice and a judgment was entered of $1,250,206.37—-including, as relevant here, damages for pain and suffering in the amount of $900,000.00.

Defendant subsequently engaged in several unsuccessful appeals, arguing, in relevant part, for vacatur of the verdict because damages for pain and suffering are unrecoverable for legal malpractice (43 Misc 3d 61 [App Term 1st Dept 2014]; 123 AD3d 611 [1st Dept 2014]; 2015 NY Slip Op 77781[U] [1st Dept 2015]). The Appellate Term held that

With respect to damages, it need be emphasized that our review of the jury’s award may not be based on the recent decisional law relied upon by defendant—precedent holding that an award of nonpecuniary damages is generally unavailable to a plaintiff in an action for attorney malpractice. Notably, defendant did not raise an objection to the jury charge as given, instructing the jury that they could award plaintiff damages for pain and suffering, or to the corresponding question on the verdict sheet, and, indeed, defendant raised no objection at trial to the introduction of evidence regarding the mental and emotional disturbance caused by plaintiff’s detention (43 Misc 3d at 64).

After Defendant exhausted his appeals, on January 22, 2015, Plaintiff served upon Defendant an information subpoena pursuant to CPLR § 5224(a)(3) (Pl Exh A [the “Subpoena”]). Plaintiff contends that Defendant never responded to the Subpoena and, in any [*2]event, should update any response to include new assets because “Defendant’s lot in life seems to have improved” (Pl Reply at 2).[FN1]Defendant responds that he has provided full disclosure but, in any event, is willing to supplement that disclosure (Def Aff ¶¶ 11-12, citing Def Exh F).[FN2] “

“The parties agree that a cause of action for legal malpractice is generally assignable (NY [*5]Jur 2d Assignments § 16; Chang v Chang, 226 AD2d 316 [1st Dept 1996]; Greevy by Greevy v Becker, Isserlis, Sullivan & Kurtz, 240 AD2d 539, 541 [2d Dept 1997]; Molina v Faust Goetz Schenker & Blee, LLP, 230 F Supp 3d 279, 285 [SDNY 2017]; General Obligations Law § 13-101; Def Memo of Law at 12). Where the parties disagree, however, is whether this Court can compel the assignment of a prospective cause of action to satisfy a debt.

Defendant fails to provide a credible argument that a debtor cannot be compelled to assign a prospective cause of action to satisfy a debt (see Def Memo of Law at 11). A money judgment may be enforced against any debt, including “a cause of action which could be assigned or transferred accruing within or without the state” (CPLR 5225[a]; ABKCO Indus., Inc. v Apple Films, Inc., 39 NY2d 670, 673 [1976]). CPLR 5225(b) provides that

Upon motion of the judgment creditor, upon notice to the judgment debtor, where it is shown that the judgment debtor is in possession or custody of money or other personal property in which he has an interest, the court shall order that the judgment debtor pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff (emphasis added).

CPLR § 5201(b) further defines the property subject to turnover: “a money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested, unless it is exempt from application to the satisfaction of the judgment” (emphasis added). By its explicit terms, and reading CPLR 5225(b) and CPLR § 5201(b) together, CPLR § 5201(b) includes future and/or unvested rights, including, as relevant here, a legal malpractice claim which has not yet been filed, and which Defendant has made clear he has no intention to file.

The preceding statutes and case law codify the principle that compels “the ultimate payment of a debt by one who in equity and good conscience, should pay it” (see CPLR § 5240 [“The court may at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure”]; Natl. Sur. Co. v Natl. City Bank of Brooklyn, 184 AD 771, 773—74 [1st Dept 1918] [citing the principle that “compel[s] the creditor to assign a cause of action which he had against a third person to sureties who have paid the debt of their principal”]; see also De Long Corp. v Lucas, 176 F Supp 104, 127 [SDNY 1959], affd, 278 F2d 804 [2d Cir 1960] [finding that an assignment of future improvements to a patent which the inventor may thereafter produce is effective so long as the language of the contract [is] very plain and evidence unmistakably that such an agreement was in the mind of the inventor”]; see also Cohen v Hughes, 38 NYS2d 874, 877 [Sup Ct NY County 1942] [denying motion to dismiss cause of action seeking to compel assignment of interest in limited partnership], affd, 266 AD 658 [1st Dept 1943], affd, 291 NY 698 [1943]). Several sister jurisdictions have also recognized such a remedy (see, e.g., Cahaly v Benistar Prop. Exch. Tr. Co., Inc., 68 Mass App Ct 668, 678—79, 864 NE2d 548, 558—59 [Mass App Ct 2007], affd, 451 Mass 343, 885 NE2d 800 [2008] [affirming trial judge’s assignment of cause of action to judgment creditor to satisfy judgment]; Renger Mem. Hosp. v State, 674 SW2d 828, 830 [Tex App 1984]).

This conclusion is further buttressed by CPLR 5227, which provides for a special proceeding for a determination of whether or not a prospective garnishee is indebted to the [*6]judgment debtor, and seeks to effectuate Article 52 enforcement, which “should be liberally construed to help reach any property interest that CPLR 5201 has declared to be available” (Reilly, CPLR Commentary C5227:1). A CPLR 5227 proceeding will

be akin to a direct action by the judgment debtor against the garnishee, but with the judgment creditor standing in the judgment debtor’s position and prosecuting the judgment debtor’s claim. If the proceeding adjudicates that the garnishee does owe a debt to the judgment debtor, the court will render a judgment to that effect in the special proceeding and further direct that the garnishee pay the debt—for a “debt” is what the cause of action now becomes under the adjudication—to the judgment creditor. Or the court may simply render a judgment in favor of the judgment creditor directly against the garnishee (Reilly, CPLR Commentary, C5201:2; see also C5227:1).

Rather than objecting to the availability of assignment as a remedy, Defendant argues, under various theories, that the cause of action cannot be assigned because the issue has already been decided, or that the claim cannot be assigned because it will eventually fail.”

  Pro-Se Litigation Ends in an Appellate Brawl

[michelle2dickson-blog]

ECO 450 Week 9 Quiz – Strayer

Click on the Link Below to Purchase A+ Graded Course Material

 http://budapp.net/ECO-450-Week-9-Quiz-Strayer-386.htm

 Quiz 7 Chapter 13 and 14

  Chapter 13

The Theory of Income Taxation

True/False Questions

 1.   The actual federal income tax currently taxes all income irrespective of its source or use at the same tax rate. 

 2.   Comprehensive income excludes unrealized capital gains. 

 3.   Under a comprehensive income tax, transfer payments received by Social Security recipients would be fully taxable. 

 4.   Homeowners earn rental income-in-kind from their home that would be taxable under a compre­hensive income tax. 

 5.   A comprehensive income tax is a lump-sum tax. 

 6.   A comprehensive income tax will result in a divergence between gross wages paid by employers and net wages received by workers. 

 7.   A comprehensive income tax will always reduce work effort by taxpayers. 

 8.   The substitution effect of a tax-induced decline in wages always leads workers to work less. 

 9.   The market wage elasticity of labor is zero. If this is the case, the excess burden of a tax on labor income will also be zero. 

10.   Points on a compensated labor supply curve are always more elastic than points for corresponding wage levels on a regular labor supply curve. 

11.   Comprehensive income is the sum of annual consumption and the change in net worth. 

12.   A tax on interest income does not prevent credit market from efficiently allocating resources. 

13.   If an individual is subject to a 30-percent income tax, then the net interest on a certificate of deposit yielding 5 percent would be 3.5 percent after taxes. 

14.   Because a tax on interest income results in income and substitution effects, it is not possible to pre­dict the effect it will have on saving. 

15.   Most empirical studies indicate that the interest elasticity of supply of savings is close to zero. 

16.  Income tax became a permanent fixture in the United States starting in the early nineteenth century.  

17.  The Haig-Simons definition of income is different from comprehensive income.  

18.  Comprehensive income equals consumption plus the change in net worth.    

Multiple Choice Questions

 1.   Comprehensive income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

 2.   A tax on labor income:

a.   results only in an income effect that always decreases hours worked per year.

b.   results in a substitution effect that always decreases hours worked per year.

c.   results in an income effect that increases hours worked per year if leisure is a normal good.

d.   both (a) and (b)

e.   both (b) and (c)

 3.   The market supply of labor is perfectly inelastic. Then it follows that:

a.   the substitution effect of wage changes is zero.

b.   the income effect of wage changes is zero.

c.   leisure is a normal good and the income effect of wage changes exactly offsets the substitution effect.

d.   the excess burden of a tax on labor income will be zero.

 4.   The compensated labor supply curve:

a.   will always be vertical.

b.   will always be upward sloping.

c.   will always be downward sloping.

d.   reflects both the income and substitution effects of wage changes.

 5.   Using a regular labor supply curve instead of a compensated supply curve to calculate the excess burden of a tax on labor income will:

a.   result in an accurate estimate of the excess burden.

b.   overestimate the excess burden.

c.   underestimate the excess burden.

d.   accurately estimate the excess burden only if the market supply of labor is perfectly inelastic.

 6.   Most empirical research indicates that the market supply curve of labor hours by prime-age males is:

a.   very elastic.

b.   almost perfectly inelastic.

c.   always upward sloping.

d.   perfectly elastic.

7.   A flat-rate tax on labor income will:

a.   always reduce hours worked per year.

b.   always increase hours worked per year.

c.   either increase or decrease hours worked per year.

d.   never have any effect on the amount of leisure hours per year.

 8.   A tax on interest income:

a.   causes the gross interest rate paid by investors to exceed the net interest rate received by savers.

b.   will always reduce saving.

c.   will always increase saving.

d.   is equivalent to a lump-sum tax.

 9.   If the market supply curve of savings is upward sloping, a tax on interest income will:

a.   increase the amount of saving.

b.   increase the market rate of interest.

c.   decrease the market rate of interest.

d.   have no effect on the market rate of interest.

10.   If the supply of labor is perfectly inelastic, then the incidence of a payroll tax levied entirely on employers will be:

a.   borne by employers as a reduction in profits.

b.   split between workers and employers.

c.   paid entirely by workers.

d.   shifted forward to consumers.

11.   Which of the following is true about comprehensive income?

a.   Only labor income is included.

b.   Only capital income is included.

c.   Capital gains are not included.

d.   Both realized and unrealized capital gains are included.

12.   Which of the following will increase a person’s comprehensive income?

a.   an increase in the market value of the person’s home

b.   a decrease in the value of the person’s stock portfolio

c.   a decrease in labor income

d.   a decrease in consumption

13.   A tax on labor income will:

a.   increase the net wage received by workers.

b.   decrease the net wage received by workers.

c.   cause that net wage received by workers to decline below the gross wage paid by employers.

d.   both (b) and (c)

14.   If the return to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s marginal rate of time preference will equal:

a.   r

b.   t

c.   (1 + r)

d.   [1 + r(1 – t)]

15.   The higher the compensated elasticity of supply of savings,

a.   the lower the excess burden of a tax on capital income.

b.   the higher the excess burden of a tax on capital income.

c.   the higher the excess burden of a tax on labor income.

d.   both (b) and (c)

16.   The Haig-Simons definition of income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

17   Comprehensive income:

a.   includes realized capital gains, but not unrealized capital gains

b.   includes both realized and unrealized capital gains.

c.   excludes cash from the sale of assets.

d.   excludes increases in the value of assets.

18.   Income-in-kind:

a.   is exemplified by nonpecuniary returns.

b.   is generally non-taxable because there is no monetary transaction.

c.   is generally taxable.

d.   both (a) and (b).

19.   An example of a nonpecuniary return is:

a.   job satisfaction.

b.   unemployment benefits.

c.   employer contributions to a retirement plan.

d.   both (b) and (c).

  20.   Income from labor services (wages) account for what percentage of gross income in the U.S.?

a.   90%

b.   75%

c.   60%

d.   50%

   Chapter 14

Taxation of Personal Income in the United States

True/False Questions

 1.   Taxable income in the United States exceeds adjusted gross income. 

 2.   Taxable income in the United States includes all capital gains earned, whether or not they are realized. 

 3.   Taxable income in the United States amounts to less than 50 percent of personal income. 

 4.   Tax preferences are really subsidies to certain activities. 

 5.   A tax deduction allowed for an activity for which positive externalities are not likely to exist (such as home ownership) is likely to cause the marginal social cost of the activity to exceed its marginal social benefit. 

 6.   The value of a personal exemption to a taxpayer varies with his or her marginal tax rate. 

 7.   The U.S. personal income tax is not a progressive tax. 

 8.   The highest statutory marginal tax rate under the federal personal income tax is 50 percent. 

 9.   Under current rules, only real interest earned is subject to income tax. 

10.   Realized, long-term capital gains that reflect inflation are currently exempt from taxation. 

11.   The tax base under the personal income tax in the United States is the Haig-Simons definition of comprehensive income. 

12.   Tax credits vary with a person’s marginal tax rate. 

13.   The cuts in marginal tax rates initiated in 2001 are likely to reduce the excess burden of tax pref­erences. 

14.   The earned income tax credit is a negative tax the subsidizes the earnings of low-income workers. 

15.   If a progressive income tax is replaced with an equal-yield, flat-rate tax, then work effort will unequivocally increase. 

16.           As of 2009, there is no marriage penalty for an adjusted gross income of $60,000.  

17.           Tax preferences are exclusions, exemptions, and deductions from the tax base.  

18.           Income-in-kind is not considered a tax preference.  

Multiple Choice Questions

 1.   Adjusted gross income, as defined by the United States Tax Code,

a.   exceeds taxable income.

b.   equals taxable income.

c.   is less than taxable income.

d.   is greater than comprehensive income.

 2.   Tax preferences:

a.   are exclusions, exemptions, and deductions from the tax base.

b.   are in the tax code by accident.

c.   are extra taxes on certain taxpayers.

d.   increase the amount of income that is taxable.

e.   both (a) and (d)

 3.   Currently, the tax treatment of capital gains in the United States is such that:

a.   all capital gains are taxed.

b.   all realized capital gains are taxed.

c.   most realized capital gains are taxed.

d.   only capital gains adjusted for inflation are taxed.

 4.   The exclusion of interest of state and local bonds from taxation by the federal government:

a.   decreases interest costs for state and local governments.

b.   increases interest costs for state and local governments.

c.   benefits lower-income taxpayers more than upper-income taxpayers.

d.   discourages borrowing by local governments.

 5.   The value of personal exemptions in terms of taxes saved:

a.   is the same for all taxpayers.

b.   varies with family size.

c.   varies with taxpayers’ marginal tax rates.

d.   both (b) and (c)

 6.   A taxpayer is in a 33-percent tax bracket and itemizes deductions. He obtains a mortgage from a bank at 9-percent interest. The actual rate of interest he pays is:

a.   6 percent.

b.   9 percent.

c.   20 percent.

d.   25 percent.

 7.   Tax expenditures are:

a.   expenditures made to collect taxes.

b.   losses in revenue due to tax preferences.

c.   less than 1 percent of tax revenue.

d.   both (b) and (c)

 8.   Under the federal personal income tax rules prevailing as of 2009,

a.   all interest expense is tax deductible.

b.   the interest expense for mortgages on first and second homes is tax deductible.

c.   the interest expense for mortgages only on first homes is tax deductible.

d.   no interest is tax deductible.

 9.   The reduction in marginal tax rates will:

a.   increase the excess burden of tax preferences.

b.   increase tax expenditures.

c.   decrease the excess burden of tax preferences.

d.   have no effect of tax expenditures.

10.   “Bracket creep” is no longer a problem in the United States because:

a.   the tax brackets are indexed.

b.   capital gains are now fully taxable.

c.   only real interest is taxed.

d.   capital gains are indexed.

11.   Which of the following is true for the federal income tax in the United States?

a.   All income irrespective of its source or use is taxed at the same rate.

b.   Comprehensive income is the tax base.

c.   The tax base is less than 50 percent of comprehensive income.

d.   All realized and unrealized capital gains are included in the tax base.

12.   Because of the Earned Income Tax Credit, the effective tax rate for the lowest-income taxpayers in the United States is:

a.   only 15 percent.

b.   higher than that paid by upper-income taxpayers.

c.   zero.

d.   negative.

13.   The excess burden of tax preferences:

a.   depends on average tax rates.

b.   will be higher, the higher the marginal tax rate is.

c.   will be lower, the higher the marginal tax rate is.

d.   is independent of marginal tax rates.

14.   A shift to an equal-yield, flat-rate personal income tax from the current progressive income tax rate structure will:

a.   reduce the tax burden on upper-income groups.

b.   increase the tax burden on upper-income groups.

c.   increase the share of taxes paid by lower-income groups.

d.   both (a) and (c)

15.   Removing savings from the tax base of the personal income tax is likely to:

a.   increase work effort.

b.   decrease work effort.

c.   lower market equilibrium interest rates by increasing the supply of loanable funds.

d.   increase market equilibrium interest rates, thereby increasing the demand for loanable funds.

16.   Which is a justification for tax preferences?

a.   administrative difficulties

b.   improving equity

c.   encouraging private expenditures that create external benefits

d.   all of the above

17.   If the excess burden from tax is $10 million, lowering marginal tax rates should make the excess burden:

a.   more than $10 million.

b.   less than $10 million.

c.   remain at $10 million.

d.   none of the above is certain to occur

18.   Which of the following is the result of The Economic Growth and Tax Relief Reconciliation Act enacted in 2001?

a.   reduction of the highest marginal tax rate

b.   increased the marriage penalty

c.   created a new 40% tax bracket

d.   both (a) and (c)

19.   As of 2009, the highest marginal tax rate is:

a.   39.6%

b.   38%

c.   35%

d.   32.5%

20.   Which is an example of an itemized deduction under the U.S. code as of 2009?

a.   state and local income tax

b.   state and local property tax

c.   all medical expenses

d.   both (a) and (b)

[simonconsultancypage]

Guest Post: Divided Second Circuit Panel Overrules Prior Newman Insider Trading Decision

One issue with which courts dealing with insider trading cases have struggled is how to interpret and apply the personal benefit element of the liability standard. The personal benefit standard was in fact an important part of the U.S. Supreme Court’s 2016 decision in Salman v. United States (as discussed here). Last week, the Second Circuit issued an important decision in the United States v. Martoma, in which the appellate court provided important additional perspective on the personal benefit test. In the following guest post, Brad S. Karp, Geoffrey R. Chepiga, Daniel J. Kramer, Lorin L. Reisner, Audra J. Soloway, and Richard C. Tarlowe of the Paul Weiss law firm take a look at the Second Circuit’s decision in the Martoma case and the appellate court’s discussion of the personal benefit test. I would like to thank the authors for their willingness to allow me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ guest post.

  *********************************************

  On Wednesday, in United States v. Martoma, the United States Court of Appeals for the Second Circuit overruled its own 2014 decision in United States v. Newman and altered the standard for determining whether the personal benefit element of insider trading has been satisfied.  The decision had been eagerly anticipated as a key test for how courts would interpret the U.S. Supreme Court’s 2016 decision in Salman v. United States.

For more than 30 years, since the Supreme Court’s seminal decision in Dirks v. SEC, the dividing line between lawful trading on material, nonpublic information and unlawful insider trading has been whether the tipper breached a duty in exchange for a “personal benefit.”  In most cases, courts have had little difficulty defining the boundaries of that requirement because either the tipper received a financial benefit, or the tippee was a close friend or relative with whom the insider had no legitimate, business reason to be sharing confidential corporate information.  In those circumstances, courts have generally permitted an inference of a personal benefit.

In Newman, however, the Second Circuit was faced with a corporate insider (an investor relations employee) who shared information with an analyst at an institutional investor.  In order to enforce the dividing line created by the Dirks Court, and avoid chilling legitimate communications between market professionals and company insiders, the Second Circuit in Newman held that, in the absence of an explicit quid pro quo, a gift of confidential information from a tipper to a tippee could only amount to a “personal benefit” when the tipper had a “meaningfully close personal relationship” with the tippee.

On Wednesday, however, the Second Circuit panel majority in Martoma overruled that test and created a new standard for defining the boundaries of the “personal benefit” requirement:  a “personal benefit” to the tipper may exist “whenever the information was disclosed with the expectation that the recipient would trade on it and the disclosure resembles trading by the insider followed by a gift of the profits to the recipient.”[1]  One judge dissented from the panel’s decision.

If the Second Circuit’s new test for determining “personal benefit” survives a potential en banc review, it will remain to be seen how lower courts implement that test, particularly in the context of communications between a corporate insider and a market professional.  It will be incumbent upon the courts to ensure the test has real teeth to address the Supreme Court’s concerns in Dirks and avoid blurring the line between lawful and unlawful trading.

The “Personal Benefit” Requirement

In Dirks v. SEC, [2] the U.S. Supreme Court held that trading on material, nonpublic information is not, without more, unlawful.  Rather, tippers must receive a personal benefit for insider trading to be unlawful. [3]  The Court viewed it as “essential” that there be a “guiding principle” for market participants “whose daily activities must be limited and instructed by the SEC’s inside-trading rules.”[4]  Accordingly, the Court held that the “test” for determining whether such a breach has occurred is “whether the insider personally will benefit, directly or indirectly, from his disclosure.”[5]  “Absent some personal gain” by the insider, there has been no breach and thus no duty to refrain from trading.[6]

Prior to the Second Circuit’s 2014 decision in United States v. Newman, the personal benefit requirement was generally not perceived as imposing a particularly high bar.  Nonpecuniary benefits, including friendship and “gifts” of information, were generally viewed as sufficient to constitute a personal benefit that triggered a duty to abstain from trading.  But in many of those cases, the facts easily permitted an inference of a personal benefit because the tippee was a close friend or relative and therefore the insider had no legitimate reason to be discussing corporate information with them.

In Newman, however, where the tippee was a market professional whose job involved speaking to company insiders, the Second Circuit imposed a more stringent test of what constitutes a personal benefit.[7]  In that case, portfolio managers at two hedge funds were convicted after trial based on alleged tips from an investor relations employee to an analyst.  The government argued that the personal benefit to the investor relations employee included career advice and friendship.[8]  The Newman panel held that in the context of a gift of inside information, a personal benefit to the tipper requires “a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature.”  The panel held that absent potential financial gain in response to the gift, no personal benefit exists.[9] [10]

After the Second Circuit’s decision in Newman, the Supreme Court considered the scope of the personal benefit requirement in Salman.  There, the tipper was an investment banker who provided material, nonpublic information about impending mergers to his brother who, in turn, provided the information to Salman, his brother-in-law.  In affirming Salman’s conviction, the Court concluded that a gift of confidential information to a trading relative or friend satisfies the personal benefit requirement.[11]  The Court characterized the issue presented as a “narrow” one that was “easily resolve[d]” by Dirks. [12]  As the Court explained, “Dirks makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to ‘a trading relative’ and that rule is sufficient to resolve the case at hand.”[13]  According to the Court, under Dirks, “when a tipper gives inside information to ‘a trading relative or friend,’ the jury can infer that the tipper meant to provide the equivalent of a cash gift.”[14]

The Court explained that, to the extent that the Second Circuit’s holding in Newman requires that the tipper receive something of a “pecuniary or similarly valuable nature” in the context of “a gift to family or friends,” such a requirement is inconsistent with Dirks, and therefore should be rejected.[15]  The Court acknowledged, as it had in Dirks, that “determining whether an insider personally benefits from a particular disclosure. . .will not always be easy for courts,” but found no difficulty resolving that question under the facts presented in Salman because the case involved “precisely the gift of confidential information to a trading relative that Dirks envisioned.”[16]

The Decision in Martoma

In United States v. Martoma, the defendant argued that Salman did not affect Newman’s requirement that there be a “meaningfully close personal relationship” between the tipper and tippee for a personal benefit to exist absent financial gain.[17]  The defendant argued that in Salman, it was clear that such a relationship existed between the tipper and tippee because they were brothers, whereas no such “meaningfully close personal relationship” existed between the defendant (Martoma) and his alleged tipper in this case (a doctor involved in a clinical trial).[18]

The Second Circuit rejected these arguments and affirmed the defendant’s conviction in a split panel decision.  The majority (Chief Judge Katzmann and Judge Chin) concluded that a tipper can receive a personal benefit from giving a gift of inside information to another person even where there is no “meaningfully close personal relationship” between the two.[19]  While Dirks referred to gifts of information to a “relative or friend,” and Salman repeatedly limited its holding to those same categories of tippees, the majority held that Dirks was merely using this as an example of a situation in which there is a personal benefit, not as a limitation on when insider-trading liability can be imposed.[20]  The majority wrote that, under Dirks and Salman, a corporate insider benefits personally when “he disclos[es] inside information as a gift . . . with the expectation that the [recipient] would trade” on that information.[21]  This logic applies whether or not there is a “meaningfully close personal relationship” between the tipper and tippee.[22]  The majority acknowledged that Salman had not explicitly overruled this aspect of Newman, but nevertheless concluded that Salman cast sufficient “doubt” on the Newman analysis to justify holding that Newman’s requirement of a “meaningfully close personal relationship” is “no longer good law.”[23]  The majority emphasized, however, that “not all disclosures of inside information will meet this test.”[24]  There must be sufficient facts from which an inference can be drawn that the information “was disclosed with the expectation that the recipient would trade on it and that the disclosure resembles trading by the insider followed by a gift of the profits to the recipient.”[25]

One judge on the three-judge panel (Judge Pooler) dissented, and offered a starkly different view of the appropriate scope of insider trading liability.  Judge Pooler concluded that the majority went too far in eliminating important restrictions on when the sharing of information in the absence of financial benefit is illegal.  While Salman abrogated Newman’s requirement that an insider must have the potential to profit financially from a disclosure, Newman’s conclusion that insider trading liability based upon a gift requires a “meaningfully close personal relationship” between the tipper and tippee is fully consistent with the ruling in Salman.[26]  Moreover, Judge Pooler wrote, this rule is logical, since tippers will typically have no “legitimate commercial reason to share business secrets with friends and family,” and a personal benefit can thus be inferred from a gift to close friends or family.[27]  By contrast, gifts to colleagues or acquaintances are more likely to result from “innocent conduct,” so inferring a personal benefit in such situations is harder to justify.[28]  By overriding Newman’s requirement of a “meaningfully close personal relationship,” the dissent maintained, the majority had “vastly expanded” when a gift of information can support insider trading liability.[29]  Because it is so difficult to know when inside information is a “gift” and when it is not, the majority’s approach would result in “decision-making that is arbitrary and subjective” and would “undermine[] the objectivity and limitation that the personal benefit rule is designed to provide.”[30]  As a result, the dissent concluded, the personal benefit requirement would cease to serve as a meaningful limitation on insider trading liability and would no longer address the concerns articulated in Dirks that initially necessitated the personal benefit requirement.[31]

Discussion

The U.S. Supreme Court intended the personal benefit requirement to provide clear boundaries to guide market participants and avoid chilling legitimate communications between market professionals and company insiders.  Without a statutory definition, however, or much clarity from the Supreme Court, lower courts have been left to define and apply the personal benefit requirement.

A personal benefit to the tipper clearly exists when he receives a financial benefit or quid pro quo.  And, where an insider discloses information to a close friend or relative with whom they have no legitimate commercial reason to share business secrets, an inference of a personal benefit is often not difficult to justify.  In that circumstance, the risk of sweeping in “innocent” conduct is low.

On the other hand, in the context of analysts and other market professionals, whose job functions generally require direct contact with company insiders, there are often legitimate business reasons for such communications, and an insider might disclose material, nonpublic information to a market professional without intending for it to be an improper “gift” of information.  As such, as Judge Pooler recognized in her dissent, the risk of sweeping in “innocent” conduct is far greater, and the corresponding need for clear boundaries more acute, in that context.

The competing tests articulated by the panels in Newman and Martoma reflect very different approaches to this problem.  In Newman, where the alleged tip was made to an analyst for no financial benefit, the Second Circuit developed the “meaningfully close personal relationship” standard.  In Martoma, the Court overruled Newman and replaced that standard with a new test for assessing the “personal benefit” requirement:   whether the information “was disclosed with the expectation that the recipient would trade on it and the disclosure resembles trading by the insider followed by a gift of the profits to the recipient.”  It will now be up to the lower courts in the Second Circuit to interpret and apply this new standard.  It remains to be seen whether this new test will be effective in providing clear boundaries and preventing innocent conduct from being swept up in insider trading actions, particularly in the context of communications between company insiders and market professionals.  To carry out the Supreme Court’s mandate in Dirks, courts must treat this test as imposing a meaningful burden on plaintiffs and prosecutors rather than a hollow standard without real teeth.  That means that courts will need to require real proof that a tipper believed the tippee would trade and that the tipper truly intended the disclosure to be a gift akin to sharing trading profits with the tippee.  Otherwise, if courts permit generalized allegations that can be made in nearly every circumstance, such as a corporate executive trying to maintain a good relationship with a large institutional investor, the new test risks eviscerating the “guiding principle” viewed as essential by the Supreme Court and chilling the communications the Court sought to preserve in Dirks.

The Newman and Martoma opinions paint two different pictures of the appropriate way to determine when there is a personal benefit in the absence of a financial benefit.  Given the stark contrast between the two opinions (and between the majority and dissent in Martoma), the importance of Second Circuit law in this area, and the unusual procedural posture involved in overruling such a recent precedent, the Martoma decision may be a candidate for en banc review by the full Second Circuit.

Conclusion

In United States v. Martoma, a divided panel of the Second Circuit overruled the court’s own 2014 decision in United States v. Newman, abandoning the “meaningfully close personal relationship” test and instead creating a new test to define the boundaries of the personal benefit requirement.  If the opinion withstands a potential en banc review, it will be up to lower courts in the Second Circuit to implement the test in a way that gives meaning to the concerns that led the Supreme Court to impose the personal benefit requirement in the first place.

  *                                              *                                              *

This memorandum is not intended to provide legal advice, and no legal or business decision should be based on its content.  Questions concerning issues addressed in this memorandum should be directed to:

Bruce Birenboim

+1-212-373-3165

bbirenboim@paulweiss.com

  Geoffrey R. Chepiga

+1-212-373-3421

gchepiga@paulweiss.com

  Charles E. Davidow

+1-202-223-7380

cdavidow@paulweiss.com

  Andrew J. Ehrlich

+1-212-373-3166

aehrlich@paulweiss.com

  Michael E. Gertzman

+1-212-373-3281

mgertzman@paulweiss.com

  Udi Grofman

+1-212-373-3918

ugrofman@paulweiss.com

  Brad S. Karp

+1-212-373-3316

bkarp@paulweiss.com

  Daniel J. Kramer

+1-212-373-3020

dkramer@paulweiss.com

  Lorin L. Reisner

+1-212-373-3250

lreisner@paulweiss.com

  Walter G. Ricciardi

+1-212-373-3350

wricciardi@paulweiss.com

  Richard A. Rosen

+1-212-373-3305

rrosen@paulweiss.com

  Audra J. Soloway

+1-212-373-3289

asoloway@paulweiss.com

  Richard C. Tarlowe

+1-212-373-3035

rtarlowe@paulweiss.com

  Theodore V. Wells Jr.

+1-212-373-3089

twells@paulweiss.com

  Associates Matthew J. Carhart and Jacob R. Fiddelman contributed to this Client Memorandum.

  [1] United States v. Martoma, No. 14-3599, slip op. at 27–28 (2d Cir. Aug. 23, 2017).

[2] 463 U.S. 646 (1983).

[3] The Supreme Court has recognized two theories of insider trading liability: “classical” and “misappropriation.”   The “classical theory” of insider trading liability applies when a “corporate insider trades in the securities of his corporation on the basis of material, nonpublic information.”  United States v. O’Hagan, 521 U.S. 642, 651-52 (1997).  The “misappropriation theory,” by contrast, applies when an investor “misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.”  Id. at 652.

[4] Id. at 664.

[5] Id. at 662.

[6] Id.

[7] 773 F.3d 438 (2d Cir. 2014).

[8] Id. at 452–53.

[9] Id. at 452.

[10] Additionally, in Newman, the Second Circuit addressed a related question that is not at issue in Martoma: whether a remote tippee is required to have knowledge of the receipt of a personal benefit by the insider.  Based on its reading of Dirks, the Second Circuit held that “a tippee’s knowledge of the insider’s breach necessarily requires knowledge that the insider disclosed confidential information in exchange for personal benefit.”  Id. at 452.  Going forward, it does not appear that the government intends to challenge this aspect of Newman.

[11] Salman v. United States, 137 S. Ct. 420, 426 (2016).

[12] Id. at 427.

[13] Id.

[14] Id. at 428.

[15] Id.

[16] Id. at 429.

[17] Post-Argument Letter Brief of Appellant at 1, United States v. Martoma, No. 14-3599 (2d Cir. Jan. 17, 2017).

[18] Id.

[19] United States v. Martoma, slip op.  at 25.

[20] Id. at 21.

[21] Id. at 25 (quoting Salman, 137 S. Ct. at 428).

[22] Id. at 25–26.

[23] See id. at 23-24 (quoting Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372, 378 (2d Cir.

2016).

[24] Id. at 29.

[25] Id.

[26] United States v. Martoma, dissent slip op. at 18 (Pooler, J., dissenting).

[27] Id. at 29–30.

[28] See id.

[29] Id. at 20.

[30] Id.

[31] Id.

The post Guest Post: Divided Second Circuit Panel Overrules Prior Newman Insider Trading Decision appeared first on The D&O Diary.

Guest Post: Divided Second Circuit Panel Overrules Prior Newman Insider Trading Decision published first on http://ift.tt/2kTPCwo

[brad1miller-blog]

ECO 450 Week 9 Quiz – Strayer

Click on the Link Below to Purchase A+ Graded Course Material

 http://budapp.net/ECO-450-Week-9-Quiz-Strayer-386.htm

 Quiz 7 Chapter 13 and 14

  Chapter 13

The Theory of Income Taxation

True/False Questions

 1.   The actual federal income tax currently taxes all income irrespective of its source or use at the same tax rate. 

 2.   Comprehensive income excludes unrealized capital gains. 

 3.   Under a comprehensive income tax, transfer payments received by Social Security recipients would be fully taxable. 

 4.   Homeowners earn rental income-in-kind from their home that would be taxable under a compre­hensive income tax. 

 5.   A comprehensive income tax is a lump-sum tax. 

 6.   A comprehensive income tax will result in a divergence between gross wages paid by employers and net wages received by workers. 

 7.   A comprehensive income tax will always reduce work effort by taxpayers. 

 8.   The substitution effect of a tax-induced decline in wages always leads workers to work less. 

 9.   The market wage elasticity of labor is zero. If this is the case, the excess burden of a tax on labor income will also be zero. 

10.   Points on a compensated labor supply curve are always more elastic than points for corresponding wage levels on a regular labor supply curve. 

11.   Comprehensive income is the sum of annual consumption and the change in net worth. 

12.   A tax on interest income does not prevent credit market from efficiently allocating resources. 

13.   If an individual is subject to a 30-percent income tax, then the net interest on a certificate of deposit yielding 5 percent would be 3.5 percent after taxes. 

14.   Because a tax on interest income results in income and substitution effects, it is not possible to pre­dict the effect it will have on saving. 

15.   Most empirical studies indicate that the interest elasticity of supply of savings is close to zero. 

16.  Income tax became a permanent fixture in the United States starting in the early nineteenth century.  

17.  The Haig-Simons definition of income is different from comprehensive income.  

18.  Comprehensive income equals consumption plus the change in net worth.    

Multiple Choice Questions

 1.   Comprehensive income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

 2.   A tax on labor income:

a.   results only in an income effect that always decreases hours worked per year.

b.   results in a substitution effect that always decreases hours worked per year.

c.   results in an income effect that increases hours worked per year if leisure is a normal good.

d.   both (a) and (b)

e.   both (b) and (c)

 3.   The market supply of labor is perfectly inelastic. Then it follows that:

a.   the substitution effect of wage changes is zero.

b.   the income effect of wage changes is zero.

c.   leisure is a normal good and the income effect of wage changes exactly offsets the substitution effect.

d.   the excess burden of a tax on labor income will be zero.

 4.   The compensated labor supply curve:

a.   will always be vertical.

b.   will always be upward sloping.

c.   will always be downward sloping.

d.   reflects both the income and substitution effects of wage changes.

 5.   Using a regular labor supply curve instead of a compensated supply curve to calculate the excess burden of a tax on labor income will:

a.   result in an accurate estimate of the excess burden.

b.   overestimate the excess burden.

c.   underestimate the excess burden.

d.   accurately estimate the excess burden only if the market supply of labor is perfectly inelastic.

 6.   Most empirical research indicates that the market supply curve of labor hours by prime-age males is:

a.   very elastic.

b.   almost perfectly inelastic.

c.   always upward sloping.

d.   perfectly elastic.

7.   A flat-rate tax on labor income will:

a.   always reduce hours worked per year.

b.   always increase hours worked per year.

c.   either increase or decrease hours worked per year.

d.   never have any effect on the amount of leisure hours per year.

 8.   A tax on interest income:

a.   causes the gross interest rate paid by investors to exceed the net interest rate received by savers.

b.   will always reduce saving.

c.   will always increase saving.

d.   is equivalent to a lump-sum tax.

 9.   If the market supply curve of savings is upward sloping, a tax on interest income will:

a.   increase the amount of saving.

b.   increase the market rate of interest.

c.   decrease the market rate of interest.

d.   have no effect on the market rate of interest.

10.   If the supply of labor is perfectly inelastic, then the incidence of a payroll tax levied entirely on employers will be:

a.   borne by employers as a reduction in profits.

b.   split between workers and employers.

c.   paid entirely by workers.

d.   shifted forward to consumers.

11.   Which of the following is true about comprehensive income?

a.   Only labor income is included.

b.   Only capital income is included.

c.   Capital gains are not included.

d.   Both realized and unrealized capital gains are included.

12.   Which of the following will increase a person’s comprehensive income?

a.   an increase in the market value of the person’s home

b.   a decrease in the value of the person’s stock portfolio

c.   a decrease in labor income

d.   a decrease in consumption

13.   A tax on labor income will:

a.   increase the net wage received by workers.

b.   decrease the net wage received by workers.

c.   cause that net wage received by workers to decline below the gross wage paid by employers.

d.   both (b) and (c)

14.   If the return to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s marginal rate of time preference will equal:

a.   r

b.   t

c.   (1 + r)

d.   [1 + r(1 – t)]

15.   The higher the compensated elasticity of supply of savings,

a.   the lower the excess burden of a tax on capital income.

b.   the higher the excess burden of a tax on capital income.

c.   the higher the excess burden of a tax on labor income.

d.   both (b) and (c)

16.   The Haig-Simons definition of income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

17   Comprehensive income:

a.   includes realized capital gains, but not unrealized capital gains

b.   includes both realized and unrealized capital gains.

c.   excludes cash from the sale of assets.

d.   excludes increases in the value of assets.

18.   Income-in-kind:

a.   is exemplified by nonpecuniary returns.

b.   is generally non-taxable because there is no monetary transaction.

c.   is generally taxable.

d.   both (a) and (b).

19.   An example of a nonpecuniary return is:

a.   job satisfaction.

b.   unemployment benefits.

c.   employer contributions to a retirement plan.

d.   both (b) and (c).

  20.   Income from labor services (wages) account for what percentage of gross income in the U.S.?

a.   90%

b.   75%

c.   60%

d.   50%

   Chapter 14

Taxation of Personal Income in the United States

True/False Questions

 1.   Taxable income in the United States exceeds adjusted gross income. 

 2.   Taxable income in the United States includes all capital gains earned, whether or not they are realized. 

 3.   Taxable income in the United States amounts to less than 50 percent of personal income. 

 4.   Tax preferences are really subsidies to certain activities. 

 5.   A tax deduction allowed for an activity for which positive externalities are not likely to exist (such as home ownership) is likely to cause the marginal social cost of the activity to exceed its marginal social benefit. 

 6.   The value of a personal exemption to a taxpayer varies with his or her marginal tax rate. 

 7.   The U.S. personal income tax is not a progressive tax. 

 8.   The highest statutory marginal tax rate under the federal personal income tax is 50 percent. 

 9.   Under current rules, only real interest earned is subject to income tax. 

10.   Realized, long-term capital gains that reflect inflation are currently exempt from taxation. 

11.   The tax base under the personal income tax in the United States is the Haig-Simons definition of comprehensive income. 

12.   Tax credits vary with a person’s marginal tax rate. 

13.   The cuts in marginal tax rates initiated in 2001 are likely to reduce the excess burden of tax pref­erences. 

14.   The earned income tax credit is a negative tax the subsidizes the earnings of low-income workers. 

15.   If a progressive income tax is replaced with an equal-yield, flat-rate tax, then work effort will unequivocally increase. 

16.           As of 2009, there is no marriage penalty for an adjusted gross income of $60,000.  

17.           Tax preferences are exclusions, exemptions, and deductions from the tax base.  

18.           Income-in-kind is not considered a tax preference.  

Multiple Choice Questions

 1.   Adjusted gross income, as defined by the United States Tax Code,

a.   exceeds taxable income.

b.   equals taxable income.

c.   is less than taxable income.

d.   is greater than comprehensive income.

 2.   Tax preferences:

a.   are exclusions, exemptions, and deductions from the tax base.

b.   are in the tax code by accident.

c.   are extra taxes on certain taxpayers.

d.   increase the amount of income that is taxable.

e.   both (a) and (d)

 3.   Currently, the tax treatment of capital gains in the United States is such that:

a.   all capital gains are taxed.

b.   all realized capital gains are taxed.

c.   most realized capital gains are taxed.

d.   only capital gains adjusted for inflation are taxed.

 4.   The exclusion of interest of state and local bonds from taxation by the federal government:

a.   decreases interest costs for state and local governments.

b.   increases interest costs for state and local governments.

c.   benefits lower-income taxpayers more than upper-income taxpayers.

d.   discourages borrowing by local governments.

 5.   The value of personal exemptions in terms of taxes saved:

a.   is the same for all taxpayers.

b.   varies with family size.

c.   varies with taxpayers’ marginal tax rates.

d.   both (b) and (c)

 6.   A taxpayer is in a 33-percent tax bracket and itemizes deductions. He obtains a mortgage from a bank at 9-percent interest. The actual rate of interest he pays is:

a.   6 percent.

b.   9 percent.

c.   20 percent.

d.   25 percent.

 7.   Tax expenditures are:

a.   expenditures made to collect taxes.

b.   losses in revenue due to tax preferences.

c.   less than 1 percent of tax revenue.

d.   both (b) and (c)

 8.   Under the federal personal income tax rules prevailing as of 2009,

a.   all interest expense is tax deductible.

b.   the interest expense for mortgages on first and second homes is tax deductible.

c.   the interest expense for mortgages only on first homes is tax deductible.

d.   no interest is tax deductible.

 9.   The reduction in marginal tax rates will:

a.   increase the excess burden of tax preferences.

b.   increase tax expenditures.

c.   decrease the excess burden of tax preferences.

d.   have no effect of tax expenditures.

10.   “Bracket creep” is no longer a problem in the United States because:

a.   the tax brackets are indexed.

b.   capital gains are now fully taxable.

c.   only real interest is taxed.

d.   capital gains are indexed.

11.   Which of the following is true for the federal income tax in the United States?

a.   All income irrespective of its source or use is taxed at the same rate.

b.   Comprehensive income is the tax base.

c.   The tax base is less than 50 percent of comprehensive income.

d.   All realized and unrealized capital gains are included in the tax base.

12.   Because of the Earned Income Tax Credit, the effective tax rate for the lowest-income taxpayers in the United States is:

a.   only 15 percent.

b.   higher than that paid by upper-income taxpayers.

c.   zero.

d.   negative.

13.   The excess burden of tax preferences:

a.   depends on average tax rates.

b.   will be higher, the higher the marginal tax rate is.

c.   will be lower, the higher the marginal tax rate is.

d.   is independent of marginal tax rates.

14.   A shift to an equal-yield, flat-rate personal income tax from the current progressive income tax rate structure will:

a.   reduce the tax burden on upper-income groups.

b.   increase the tax burden on upper-income groups.

c.   increase the share of taxes paid by lower-income groups.

d.   both (a) and (c)

15.   Removing savings from the tax base of the personal income tax is likely to:

a.   increase work effort.

b.   decrease work effort.

c.   lower market equilibrium interest rates by increasing the supply of loanable funds.

d.   increase market equilibrium interest rates, thereby increasing the demand for loanable funds.

16.   Which is a justification for tax preferences?

a.   administrative difficulties

b.   improving equity

c.   encouraging private expenditures that create external benefits

d.   all of the above

17.   If the excess burden from tax is $10 million, lowering marginal tax rates should make the excess burden:

a.   more than $10 million.

b.   less than $10 million.

c.   remain at $10 million.

d.   none of the above is certain to occur

18.   Which of the following is the result of The Economic Growth and Tax Relief Reconciliation Act enacted in 2001?

a.   reduction of the highest marginal tax rate

b.   increased the marriage penalty

c.   created a new 40% tax bracket

d.   both (a) and (c)

19.   As of 2009, the highest marginal tax rate is:

a.   39.6%

b.   38%

c.   35%

d.   32.5%

20.   Which is an example of an itemized deduction under the U.S. code as of 2009?

a.   state and local income tax

b.   state and local property tax

c.   all medical expenses

d.   both (a) and (b)

[armeniaitn]

European Court rules blogger Alexander Lapshin’s right to life was violated, obliges Azerbaijan to pay 30,000 euros

New Post has been published on https://armenia.in-the.news/society/european-court-rules-blogger-alexander-lapshins-right-to-life-was-violated-obliges-azerbaijan-to-pay-30000-euros-73757-20-05-2021/

European Court rules blogger Alexander Lapshin’s right to life was violated, obliges Azerbaijan to pay 30,000 euros

In today’s Chamber judgment1 in the case of Lapshin v. Azerbaijan (application no. 13527/18) the European Court of Human Rights held:

unanimously, that there had been a violation of Article 2 – procedural aspect (right to life: obligation to conduct an effective investigation) of the European Convention on Human Rights, and

by 6 votes to 1, that there had been a violation of Article 2 – substantive aspect (right to life).

The case concerned an incident during the applicant’s imprisonment in Azerbaijan in 2017 for “having crossed the State border outside the checkpoints” during journeys to Nagorno-Karabakh, and the ensuing inquiry by the prosecutor’s office into the incident. The authorities asserted that the incident had been a suicide attempt, while the applicant alleged it had been attempted murder.

The applicant was resuscitated and hospitalized in an intensive-care unit. The following day the applicant was pardoned by the President of Azerbaijan and, upon his discharge from hospital three days later, was expelled to Israel.

The Court found that the inquiry into the prison incident had been ineffective and in breach of the respondent State’s procedural obligations under Article 2 of the Convention. It found that the respondent State had failed to satisfy the burden of proof resting on it to provide a satisfactory and convincing explanation as regards the incident which had put the applicant’s life in danger. There had therefore been a violation of Article 2 under its substantive limb.

The Court held that Azerbaijan was to pay the applicant 30,000 euros (EUR) in respect of nonpecuniary damage.

Read original article here.

[betty4thompson-blog]

ECO 450 Week 9 Quiz – Strayer

Click on the Link Below to Purchase A+ Graded Course Material

 http://budapp.net/ECO-450-Week-9-Quiz-Strayer-386.htm

 Quiz 7 Chapter 13 and 14

  Chapter 13

The Theory of Income Taxation

True/False Questions

 1.   The actual federal income tax currently taxes all income irrespective of its source or use at the same tax rate. 

 2.   Comprehensive income excludes unrealized capital gains. 

 3.   Under a comprehensive income tax, transfer payments received by Social Security recipients would be fully taxable. 

 4.   Homeowners earn rental income-in-kind from their home that would be taxable under a compre­hensive income tax. 

 5.   A comprehensive income tax is a lump-sum tax. 

 6.   A comprehensive income tax will result in a divergence between gross wages paid by employers and net wages received by workers. 

 7.   A comprehensive income tax will always reduce work effort by taxpayers. 

 8.   The substitution effect of a tax-induced decline in wages always leads workers to work less. 

 9.   The market wage elasticity of labor is zero. If this is the case, the excess burden of a tax on labor income will also be zero. 

10.   Points on a compensated labor supply curve are always more elastic than points for corresponding wage levels on a regular labor supply curve. 

11.   Comprehensive income is the sum of annual consumption and the change in net worth. 

12.   A tax on interest income does not prevent credit market from efficiently allocating resources. 

13.   If an individual is subject to a 30-percent income tax, then the net interest on a certificate of deposit yielding 5 percent would be 3.5 percent after taxes. 

14.   Because a tax on interest income results in income and substitution effects, it is not possible to pre­dict the effect it will have on saving. 

15.   Most empirical studies indicate that the interest elasticity of supply of savings is close to zero. 

16.  Income tax became a permanent fixture in the United States starting in the early nineteenth century.  

17.  The Haig-Simons definition of income is different from comprehensive income.  

18.  Comprehensive income equals consumption plus the change in net worth.    

Multiple Choice Questions

 1.   Comprehensive income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

 2.   A tax on labor income:

a.   results only in an income effect that always decreases hours worked per year.

b.   results in a substitution effect that always decreases hours worked per year.

c.   results in an income effect that increases hours worked per year if leisure is a normal good.

d.   both (a) and (b)

e.   both (b) and (c)

 3.   The market supply of labor is perfectly inelastic. Then it follows that:

a.   the substitution effect of wage changes is zero.

b.   the income effect of wage changes is zero.

c.   leisure is a normal good and the income effect of wage changes exactly offsets the substitution effect.

d.   the excess burden of a tax on labor income will be zero.

 4.   The compensated labor supply curve:

a.   will always be vertical.

b.   will always be upward sloping.

c.   will always be downward sloping.

d.   reflects both the income and substitution effects of wage changes.

 5.   Using a regular labor supply curve instead of a compensated supply curve to calculate the excess burden of a tax on labor income will:

a.   result in an accurate estimate of the excess burden.

b.   overestimate the excess burden.

c.   underestimate the excess burden.

d.   accurately estimate the excess burden only if the market supply of labor is perfectly inelastic.

 6.   Most empirical research indicates that the market supply curve of labor hours by prime-age males is:

a.   very elastic.

b.   almost perfectly inelastic.

c.   always upward sloping.

d.   perfectly elastic.

7.   A flat-rate tax on labor income will:

a.   always reduce hours worked per year.

b.   always increase hours worked per year.

c.   either increase or decrease hours worked per year.

d.   never have any effect on the amount of leisure hours per year.

 8.   A tax on interest income:

a.   causes the gross interest rate paid by investors to exceed the net interest rate received by savers.

b.   will always reduce saving.

c.   will always increase saving.

d.   is equivalent to a lump-sum tax.

 9.   If the market supply curve of savings is upward sloping, a tax on interest income will:

a.   increase the amount of saving.

b.   increase the market rate of interest.

c.   decrease the market rate of interest.

d.   have no effect on the market rate of interest.

10.   If the supply of labor is perfectly inelastic, then the incidence of a payroll tax levied entirely on employers will be:

a.   borne by employers as a reduction in profits.

b.   split between workers and employers.

c.   paid entirely by workers.

d.   shifted forward to consumers.

11.   Which of the following is true about comprehensive income?

a.   Only labor income is included.

b.   Only capital income is included.

c.   Capital gains are not included.

d.   Both realized and unrealized capital gains are included.

12.   Which of the following will increase a person’s comprehensive income?

a.   an increase in the market value of the person’s home

b.   a decrease in the value of the person’s stock portfolio

c.   a decrease in labor income

d.   a decrease in consumption

13.   A tax on labor income will:

a.   increase the net wage received by workers.

b.   decrease the net wage received by workers.

c.   cause that net wage received by workers to decline below the gross wage paid by employers.

d.   both (b) and (c)

14.   If the return to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s marginal rate of time preference will equal:

a.   r

b.   t

c.   (1 + r)

d.   [1 + r(1 – t)]

15.   The higher the compensated elasticity of supply of savings,

a.   the lower the excess burden of a tax on capital income.

b.   the higher the excess burden of a tax on capital income.

c.   the higher the excess burden of a tax on labor income.

d.   both (b) and (c)

16.   The Haig-Simons definition of income:

a.   is the sum of annual consumption and realized capital gains.

b.   is the sum of annual consumption and changes in net worth.

c.   excludes corporation income.

d.   is the sum of annual consumption and net worth.

17   Comprehensive income:

a.   includes realized capital gains, but not unrealized capital gains

b.   includes both realized and unrealized capital gains.

c.   excludes cash from the sale of assets.

d.   excludes increases in the value of assets.

18.   Income-in-kind:

a.   is exemplified by nonpecuniary returns.

b.   is generally non-taxable because there is no monetary transaction.

c.   is generally taxable.

d.   both (a) and (b).

19.   An example of a nonpecuniary return is:

a.   job satisfaction.

b.   unemployment benefits.

c.   employer contributions to a retirement plan.

d.   both (b) and (c).

  20.   Income from labor services (wages) account for what percentage of gross income in the U.S.?

a.   90%

b.   75%

c.   60%

d.   50%

   Chapter 14

Taxation of Personal Income in the United States

True/False Questions

 1.   Taxable income in the United States exceeds adjusted gross income. 

 2.   Taxable income in the United States includes all capital gains earned, whether or not they are realized. 

 3.   Taxable income in the United States amounts to less than 50 percent of personal income. 

 4.   Tax preferences are really subsidies to certain activities. 

 5.   A tax deduction allowed for an activity for which positive externalities are not likely to exist (such as home ownership) is likely to cause the marginal social cost of the activity to exceed its marginal social benefit. 

 6.   The value of a personal exemption to a taxpayer varies with his or her marginal tax rate. 

 7.   The U.S. personal income tax is not a progressive tax. 

 8.   The highest statutory marginal tax rate under the federal personal income tax is 50 percent. 

 9.   Under current rules, only real interest earned is subject to income tax. 

10.   Realized, long-term capital gains that reflect inflation are currently exempt from taxation. 

11.   The tax base under the personal income tax in the United States is the Haig-Simons definition of comprehensive income. 

12.   Tax credits vary with a person’s marginal tax rate. 

13.   The cuts in marginal tax rates initiated in 2001 are likely to reduce the excess burden of tax pref­erences. 

14.   The earned income tax credit is a negative tax the subsidizes the earnings of low-income workers. 

15.   If a progressive income tax is replaced with an equal-yield, flat-rate tax, then work effort will unequivocally increase. 

16.           As of 2009, there is no marriage penalty for an adjusted gross income of $60,000.  

17.           Tax preferences are exclusions, exemptions, and deductions from the tax base.  

18.           Income-in-kind is not considered a tax preference.  

Multiple Choice Questions

 1.   Adjusted gross income, as defined by the United States Tax Code,

a.   exceeds taxable income.

b.   equals taxable income.

c.   is less than taxable income.

d.   is greater than comprehensive income.

 2.   Tax preferences:

a.   are exclusions, exemptions, and deductions from the tax base.

b.   are in the tax code by accident.

c.   are extra taxes on certain taxpayers.

d.   increase the amount of income that is taxable.

e.   both (a) and (d)

 3.   Currently, the tax treatment of capital gains in the United States is such that:

a.   all capital gains are taxed.

b.   all realized capital gains are taxed.

c.   most realized capital gains are taxed.

d.   only capital gains adjusted for inflation are taxed.

 4.   The exclusion of interest of state and local bonds from taxation by the federal government:

a.   decreases interest costs for state and local governments.

b.   increases interest costs for state and local governments.

c.   benefits lower-income taxpayers more than upper-income taxpayers.

d.   discourages borrowing by local governments.

 5.   The value of personal exemptions in terms of taxes saved:

a.   is the same for all taxpayers.

b.   varies with family size.

c.   varies with taxpayers’ marginal tax rates.

d.   both (b) and (c)

 6.   A taxpayer is in a 33-percent tax bracket and itemizes deductions. He obtains a mortgage from a bank at 9-percent interest. The actual rate of interest he pays is:

a.   6 percent.

b.   9 percent.

c.   20 percent.

d.   25 percent.

 7.   Tax expenditures are:

a.   expenditures made to collect taxes.

b.   losses in revenue due to tax preferences.

c.   less than 1 percent of tax revenue.

d.   both (b) and (c)

 8.   Under the federal personal income tax rules prevailing as of 2009,

a.   all interest expense is tax deductible.

b.   the interest expense for mortgages on first and second homes is tax deductible.

c.   the interest expense for mortgages only on first homes is tax deductible.

d.   no interest is tax deductible.

 9.   The reduction in marginal tax rates will:

a.   increase the excess burden of tax preferences.

b.   increase tax expenditures.

c.   decrease the excess burden of tax preferences.

d.   have no effect of tax expenditures.

10.   “Bracket creep” is no longer a problem in the United States because:

a.   the tax brackets are indexed.

b.   capital gains are now fully taxable.

c.   only real interest is taxed.

d.   capital gains are indexed.

11.   Which of the following is true for the federal income tax in the United States?

a.   All income irrespective of its source or use is taxed at the same rate.

b.   Comprehensive income is the tax base.

c.   The tax base is less than 50 percent of comprehensive income.

d.   All realized and unrealized capital gains are included in the tax base.

12.   Because of the Earned Income Tax Credit, the effective tax rate for the lowest-income taxpayers in the United States is:

a.   only 15 percent.

b.   higher than that paid by upper-income taxpayers.

c.   zero.

d.   negative.

13.   The excess burden of tax preferences:

a.   depends on average tax rates.

b.   will be higher, the higher the marginal tax rate is.

c.   will be lower, the higher the marginal tax rate is.

d.   is independent of marginal tax rates.

14.   A shift to an equal-yield, flat-rate personal income tax from the current progressive income tax rate structure will:

a.   reduce the tax burden on upper-income groups.

b.   increase the tax burden on upper-income groups.

c.   increase the share of taxes paid by lower-income groups.

d.   both (a) and (c)

15.   Removing savings from the tax base of the personal income tax is likely to:

a.   increase work effort.

b.   decrease work effort.

c.   lower market equilibrium interest rates by increasing the supply of loanable funds.

d.   increase market equilibrium interest rates, thereby increasing the demand for loanable funds.

16.   Which is a justification for tax preferences?

a.   administrative difficulties

b.   improving equity

c.   encouraging private expenditures that create external benefits

d.   all of the above

17.   If the excess burden from tax is $10 million, lowering marginal tax rates should make the excess burden:

a.   more than $10 million.

b.   less than $10 million.

c.   remain at $10 million.

d.   none of the above is certain to occur

18.   Which of the following is the result of The Economic Growth and Tax Relief Reconciliation Act enacted in 2001?

a.   reduction of the highest marginal tax rate

b.   increased the marriage penalty

c.   created a new 40% tax bracket

d.   both (a) and (c)

19.   As of 2009, the highest marginal tax rate is:

a.   39.6%

b.   38%

c.   35%

d.   32.5%

20.   Which is an example of an itemized deduction under the U.S. code as of 2009?

a.   state and local income tax

b.   state and local property tax

c.   all medical expenses

d.   both (a) and (b)

[ericfruits]

Supply Side Constraints

Economic growth has firmed and the expansion continues. As the aftermath of the oil bust recedes, there are not many leading indicators today keeping economists up at night. However that does not mean there are not issues to watch. In fact, the challenges the U.S. economy faces will change as we enter into a different phase of the business cycle. Moving forward, the U.S. economy will begin to hit supply side constraints. While some economists, including the Fed, believe we are already at or beyond full employment, the consistent low levels of inflation in recent years are likely evidence that supply constraints are not holding back economic growth yet. Price pressures have yet to build. How exactly the economy adjusts to reaching some of its current limits, and how the newly reconfigured Federal Reserve reacts are key questions. The answers may go a long way toward determining how long the current expansion lasts.

Now, which supply side constraints will bind the hardest can be challenging to identify in advance. What follows is an effort to think through and sort out which constraints are more likely to be challenges sooner than others. Specifically, the lack of credit availability, labor, new technologies (productivity), and production capacity look to be potential issues in the near future. On the other hand, supply constraints like the lack of raw materials or energy, inadequate infrastructure, or deteriorating international trade relations hurting the global supply chain may be less likely to restrain economic growth in the near-term, however they do remain risks worth watching.

Among the more likely candidates, labor, or the supply of workers is the most obvious. While the unemployment rate itself may be lower than the Federal Reserve’s estimate of the natural rate, it is an imperfect measure. The fact that participation rates remain lower today than in the 1990s and 2000s, even with demographic adjustments, suggest some slack remains. More-plentiful job opportunities for better-paying jobs will bring workers back into the labor market. Currently job openings are at all-time highs and wages continue their slow upward movement, albeit it fits and starts. As such, workers are coming back.

Putting another couple percentage points of prime-age Americans back to work is a reasonable, even minimal baseline outlook. This would match what the U.S. experienced in the mid-2000s. Oregon is already at this point today. However, beyond this you begin to run into larger, longer-run trends that may be harder to reverse. In particular, the rise of those out of the labor force due to illness or disability stands out. Reintegrating these individuals into the labor market is a very important challenge, not just from a labor perspective, but also for the public health and societal benefits that would come with it. A tight labor market will aid this cause considerably.

Additionally, when labor is tight, firms must dig a bit deeper into the resume stack to fill positions. Businesses must be willing to hire candidates with an incomplete skill set, or the long-term unemployed, or those with a gap on their resume. Firms may also compete not just on price (wages) but also on nonpecuniary benefits such as flexible working hours and the like. Similarly, for businesses looking to hire, on-the-job training for those with an incomplete skill set becomes more important in a tight labor market. Overall, the U.S. is not lacking for warm bodies to fill positions. The prime working-age population is growing. It is about attracting workers to fill needs and ensuring the workforce has the skills, or is able to obtain the skills needed.

Other supply constraints likely to impact the economy are the low levels of new business formation and weak productivity growth. Economists are well aware of these trends, but lack a consensus on what is causing these issues, let alone identifying solutions to propel future growth.

Furthermore, while overall industrial capacity utilization remains lower due to the energy sector and oil bust, total manufacturing capacity utilization recently hit a new cycle high. Absent business investment in new facilities and technologies, manufacturers may run out of room to grow sooner rather than later. Industries that are bumping up against capacity include motor vehicles and parts, plastics and rubber, aerospace, and fabricated metal. All other industries look to have some room for additional expansion before new production capacity is likely needed. Over the medium- or long-term the economy desperately needs these new investments, however the path from short-term bottlenecks to long-term economic gains may not be smooth.

Lastly, the lack of market information, or lack of confidence more generally can act as a supply side constraint as well. For businesses reaching capacity today, they need to either hold steady, which slows economic growth, or believe strongly enough in future growth that the firm will bear the risk of making long-term investments. Unfortunately, consumer or business surveys are noisy and typically bear little explanatory power in predicting future growth. However, the ongoing expansion is finally resulting in a tighter labor market and the benefits that come with it, like rising household incomes and falling poverty rates. These domestic gains, coupled with a revived international economy should indicate to firms that even though it took nearly a decade following the financial crisis,  the underlying economic demand is there. The U.S. economy is entering into a new phase of the business cycle; one it hasn’t seen in quite some time. Let’s see how firms and policymakers adjust.

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