Consumer Law & Policy Blog

Republicans still interested in total repeal of the estate tax

On April 16, the House of Representatives voted to repeal the estate tax for everyone. Yes, that would exempt people who have many billions of dollars, including people who inherited much or most of their wealth, like members of Sam Walton's family and the Koch brothers.

The Center for Effective Government has posted information on the estate tax as it currently operates and on what repeal would entail. Here is the organization's introduction:

The House of Representatives gave 25 of the nation’s billionaires a $334 billion tax break on April 16 when it voted 240-179 to repeal the estate tax. The nearly 100-year old tax raises $27 billion a year for the U.S. government. Of the 2,662,000 Americans who died in 2013, just 3,700 of their estates paid any estate tax – one out of every 700 estates.

Of the nation’s 25 wealthiest billionaires, Bill Gates, Warren Buffett, George Soros, and Carl Icahn have all campaigned publicly to keep a strong estate tax. In contrast, the Mars family has been a big funder of efforts to repeal the tax.  

The repeal would allow the nation’s wealthiest citizens to pass on all of their enormous wealth to their heirs with no taxes paid.  Th[is] chart ... outlines how much the 25 richest Americans would owe if their entire estates were subject to a 40 percent tax rate – after the first $5.4 million in wealth was excluded.

Thoughtful take on government regulation vs consumer choice

A thought-provoking op-ed in The Hill argues that a perspective is missing from the debate about whether government regulation and informed consumer choice is the more appropriate means of addressing public health issues such as obesity. The problem with the debate is the uncritical acceptance of the premise that consumers are being effectively informed. The author suggests that the problem with consumer choice isn't that consumers are lazy or foolish, but the failure of government regulation -- not regulation of consumer behavior but of the information consumers are provided about what they buy.

The piece describes one example in detail: the flaws in nutrition labeling.

Studies evaluating the nutrition label reveal that it is poorly designed. Proper use of the nutrition label requires considerable nutrition knowledge and extensive mental effort at the time of purchase, which time-pressed consumers at the grocery store do not have. In many cases, consumers do not use the nutrition label because they find it difficult to understand and use in purchasing decisions. Moreover, the label does not account for the difficulties that less-educated or elderly consumers could have interpreting the label. The label is essentially designed by the health experts for the health experts and therefore fails most consumers.

Read the rest of "Blaming consumers for government failures" here.

Supreme Court: debtor cannot appeal Bankruptcy Court's rejection of proposed plan

In certain types of bankruptcy proceedings, the debtor who is seeking relief must propose a plan to pay off a portion (or sometimes all) of his debt over a period of years. If the Bankruptcy Court confirms such a plan, dissatisfied parties (such as creditors) can appeal. But what if the court rejects a debtor's proposed plan, and he believes no other plan is workable? Can he appeal the denial?

No, answered the Supreme Court yesterday, in a unanimous decision in Bullard v. Blue Hills Bank. The Court held that the federal bankruptcy law is best interpreted not to permit an appeal from a decision that does not end the proceedings but instead invites them to continue with the proposal of further plans.

The Court did recognize that its decision can put debtors in a tough spot:

The debtor’s only two options would be to seek or accept dismissal of his case and then appeal, or to propose an amended plan and appeal its confirmation. The first option is not realistic, Bullard contends, because dismissal means the end of the automatic stay against creditors’ collection efforts. Without the stay, the debtor might lose the very property at issue in the rejected plan. . . . The second option is no better, says Bullard. An acceptable, confirmable alternative may not exist. . . . All good points.

In response, the Court noted, "our litigation system has long accepted that certain burdensome rulings will be only imperfectly reparable by the appellate process" (citation and internal quotation marks omitted). The Court then expressed confidence that Bankruptcy Courts usually get it right. And:

even when they slip, many of their errors—wrongly concluding, say, that a debtor should pay unsecured creditors $400 a month rather than $300—will not be of a sort that justifies the costs entailed by a system of universal immediate appeals.

Much has been written about the Justices' own experiences providing important background for their own views of hotly contested issues -- whether a Justice who has never been pulled over can sympathize with a driver who is wrongfully or excessive detained, for instance, or whether a Justice who has never met an openly gay person is less sympathetic to LGBT rights.

I think there's a lot to be said for personal experience when it comes to the rights of poor people, too: for the Justices, a difference of $100 in monthly payments might not be a significant error worth correcting expediently, but for a debtor, it might make a huge difference.

Possible challenges to Affordable Care Act tax credits even beyond King v. Burwell

Beyond the pending challenge to the Affordable Care Act tax-credit system in King v. Burwell, which threatens the viability of the Act, law professor Andy Grewall writes in a new article that there are other Lurking Challenges to the ACA Tax Credit Regulations. Here is the abstract:

The ongoing King v. Burwell controversy has focused on whether Treasury regulations properly extend Affordable Care Act premium tax credits to purchases of health care policies on federally established exchanges. The Supreme Court’s decision in the case, expected by the end of June, should finally put an end to that particular controversy. However, Treasury regulations under Section 36B present problems beyond those presented in King. As this essay shows, the Treasury has extended credits to potentially millions of individuals plainly not covered by the statutory language. Consequently, further rounds of litigation may arise.

Dodd-Frank's "Biggest Victory Yet"

… is how this piece in the Huffington Post characterized General Electric’s announcement last month that it would sell GE Capital, thus getting mostly out of the banking business and back to its core manufacturing business.

This week, the New Yorker has this similarly laudatory analysis, which details the rise and fall of GE as a financial player and concludes that the transition is for the best. 

New safety regulations for trains carrying oil

We've written before about the dangers of transporting oil by rail car. On Friday, DOT issued new regulations for trains carrying oil, requiring new brake systems and requiring cars to be designed for this purpose (as opposed to the old ones, designed for hauling corn syrup). Here’s the Wall Street Journal’s take, calling the rules “tough.” But Congress can yet do better, as Public Citizen points out in its press release: Sen. Maria Cantwell’s proposed Crude-by-Rail Safety Act (which we’ve also mentioned on the blog) would require puncture resistance and stronger flame retardants, among other safeguards.

Dennis Hirsch Paper on Big Data and the FTC's Unfairness Authority

Dennis D. Hirsch of Capital has written That's Unfair! Or Is It? Big Data, Discrimination and the FTC's Unfairness Authority, 103 Kentucky Law Journal (2015). Here is the abstract:

Big data and data analytics (“big data”) can produce many social and economic benefits.  But they can also generate privacy injuries and harmful discrimination.  The governance of big data should, accordingly, focus on balancing benefits and risks.  Where the potential benefits outweigh the risks, the big data application should be seen as appropriate.  Where the risks outweigh the benefits, it should be seen as inappropriate.  This provides a framework for sorting beneficial from harmful uses of big data, and so for figuring out which big data applications are in bounds, and which are not.

Others have advocated a risk-benefit approach to big data.  However, the scholarly literature has not yet identified a legal basis on which to ground such an approach.  This Article does.  It argues that the FTC could use its Section 5 “unfairness authority” to draw the line between those big data uses that are appropriate and fair, and those that are inappropriate and unfair. In this way, it could provide guidance to big data businesses that are struggling to find a coherent, legally-grounded framework for making such calls.  It could also take an important step towards protecting privacy and civil rights in the era of big data.

This raises an important legal question. Does the Commission’s unfairness authority encompass the governance of big data?  Or does this task lie outside the scope of the FTC's  statutory jurisdiction?  Here, the essay offers an original reading of FTC v. Wyndham Worldwide Corp., a district court decision (on appeal at the time of this writing) that provides the latest word on the scope of the FTC’s unfairness jurisdiction.  It shows that the Wyndham decision both supports the FTC’s authority to govern big data practices and provides guidance on how the Commission could go about doing so.

North Carolina bill would ease restrictions on debt buyers

The state senate is considering a bill that would eliminate requirements that debt buyers have detailed information about the debt they buy before suing to enforce the debt in court. The bill passed out of committee over the objections of consumer advocates that the bill would facilitate abusive lawsuits against consumers.

The Raleigh News & Observer quotes an official the North Carolina Attorney General's office expressing concerns that the new bill would roll back effective consumer protections, enacted in 2009:

Kevin Anderson, who is in charge of the consumer protection division in the state Attorney General's office, said the 2009 law has been effective in stemming collection abuses. Those abuses included lawsuits against consumers who actually had paid their bills in full or who couldn't even determine, based on the scanty evidence presented in the complaint, whether they had paid or successfully disputed the bill. The debt at issue can be years old by the time the debt buyers acquire them.

Such lawsuits “seemed to be predicated on the notion that consumers just won’t show up and contest the suits. They didn’t have much evidence supporting” their claims, Anderson said.

"The rest of the country that hasn't passed laws like this are still struggling with the problem," he said. “We would caution against rolling back some of these protections.”

 

Read the whole N&O story here.