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Monday, September 27, 2004

PayPal minutiae

At least one reader was unconvinced by my discussion of the possible PayPal abuse of discretion discussed below.

One overly self-confident reader insisted that PayPal's clause in it's Acceptable Use Policy (AUP) cleared PayPal of any liability. Here's the clause:
PayPal also may, at its sole discretion, prohibit the sale of items which graphically portray violence or victims of violence, and lack substantial social, artistic or political value.

Question: How broadly can PayPal, who wrote that term, interpret the it?

An accompanying clause in the AUP says:
Examples of items that may generally be sold using PayPal:
War documentaries or documentary photos portraying victims of war or violence

Do you suppose that the author of a contract providing himself/herself/itself "sole discretion to prohibit the sale of items..." In some way related to violence, victims of violence, etc. Would be allowed to construe that "discretion" in a way that would allow it to "limit" (suspend) the account of a blogger who has a donation system (not sales) through PayPal who links to digital video of terrorist acts to protest and advocate against the terrorists?

This context of the link seems to be the essence of political speech, and the video itself was a "documentary" of the terrorist act.

Lets think of it like this: If PayPal is allowed to construe donations to be sales and determine that the blogger's discussion doesn't meet it's unspecified standard of "substantial social, artistic or political value," is there anything that they can't use to justify suspending an account? PayPal's discretion, in setting itself up as the final arbiter of political value on a blog that specializes in political discussion vests in itself not only sole but absolute discretion.

Is a contract that can be suspended at any time at the sole and absolute discretion of one of the parties an actual contract?


The promise is "illusory"

Quoting from Calamari and Perillo on Contracts 5th Ed. Sect. 4.12(4):
Under current orthodoxy, a bilateral contract is void if there is no mutuality of consideration. If the promise made by one or both parties is illusory or indefinite it does not constitute consideration. An illusory promise is an expression cloaked in promissory terms, but which, on closer examination, reveals that the promisor is not committed to any act or forbearance.

If PayPal's discretion is allowed to gloss over the difference between "sales" and "donations" and allows it to assign no value to societal or political expressions that it doesn't like, or allows it to determine that the recorded account of a terrorist act isn't really documentation of an act of violence, then there is no safe harbor at all for anybody who discusses anything PayPal doesn't like (if they have an account of any type with PayPal).

I suspect that the particular reader who thinks the inclusion of the phrase "sole discretion" vests the holder with near god-like powers to disregard associated terms in an agreement is unconvinced in the least, so I'll go on.

I think I'm beginning to show that "sole discretion" is not absolute. So, how far does it go? How are the limits to discretion to be found. I suggested that "good faith" be the standard. Of course, my smug reader would hear none of that. So, who's correct?

Well, In Hodgkins v. New England Tel. 82 F.3d 1226 (1st Cir. 1996), the Court seemed favorably disposed to "good faith." Here's an excerpt:

The district court's reading of the written instrument's literal terms is not disputed. The IAW program form submitted by Hodgkins clearly reserves calculation and determination of awards to NET's discretion, and Hodgkins does not argue that he was not aware of these provisions. In the absence of any evidence proffered by Hodgkins that NET engaged in bad faith acts such as intentionally destroying records, we agree with the district court's finding that NET's conduct, including its repeated evaluations of Hodgkins' ideas, falls within the ambit of its "sole, exclusive, and complete discretion" over the IAW program's operation.

However, a question lingers regarding Hodgkins' argument that the discretion reserved by NET was so "unlimited" as to void the agreement. See Corthell, 167 A. at 81 (noting that a party's reservation of an unlimited right to determine the nature and extent of its performance renders its obligation too indefinite for legal enforcement). In Corthell, 167 A. at 81, the Maine Law Court confronted facts bearing some resemblance to those of the instant case. In that case, the plaintiff Corthell executed an agreement with his employer whereby he would be compensated for "all future inventions" with "reasonable recognition," "the basis and amount [of which] to rest with" the employer "at all times." Id. Despite the reservation of discretion to the employer, the Maine Law Court held that the employer's promise was not illusory and that the contract was valid. Id. at 82. Stating that the contract "was to be interpreted in good faith on the basis of what is reasonable and intended, and not technically," and also emphasizing that the contract contained specific language instructing that it should be construed in that manner, the court found that the employer's promise was not illusory based on the provision
for "reasonable recognition" and the parties' exhibition of a contractual intent. Id. (finding a valid enforceable agreement and also concluding that the employer breached it).

Granted, that employment situation isn't factually similar to this the PayPal/DailyPundit issue discussed below, however, the beautiful thing about "contracts" law is that the subject of the contract is often irrelevant. If there was an agreement, and terms, and consideration, etc., we've pretty much got a contract issue no matter what it's for. Of course, there are some special circumstances, especially related to family law, where the general rules get modified, but I'm not going there.

Unlimited discretion over a vital term of a contract will void the contract, unless that discretion is limited by "good faith."

"Abuse of discretion" or "Abuse of rights" under the classical analysis might not have been the precisely correct, or at least most easily proven, descriptor of PayPal's act of discretion. I think it still applies, although the basic exercise of "sole discretion" limited by "good faith" is an easier argument to make.

Nevertheless, in a desperate (and probably futile) attempt to enlighten my discretion-fixated reader, I'll move forward a bit farther. When "Abuse of Rights" is alleged, it is generally examined under (a) Malicious motive, (b) Exercise of the right is unreasonable and without any legitimate interest, or (c) The right was exercised form an illegitimate purpose. (Again from Calamari and Perillo, Sec 11.39)

I'm not going to argue that PayPal's motive was Malicious, and although I suppose I could come up with an argument that PayPal didn't really have a legitimate interest that motivated it's actions with regard to DailyPundit, I won't. I think that of the "Abuse of Right" theories, the "exercised for an illegitimate purpose" is the closest fit.

The apparent purpose of the AUP is to avoid being associated with the promotion of violence or the exploitation of violent criminal actions. (If you disagree, let me know what you think it's purpose is.) The AUP is available to anyone who wants to read it, so any potential client for PayPal would be able to read it first. In that way, it's not really to change the user's content, but to put the user on notice that they don't want to be associated with that sort of content. Fair enough.

This situation was one in which PayPal unilaterally decided that some content, despite its political and societal context was something it didn't like. PayPal then flexed it's contractual muscle, in the form of its "sole discretion" to attempt to coerce DailyPundit into eliminating the content it didn't like, even though that content was, to virtually any reasonable observer, not within the universe that the AUP seemed to prohibit. What was PayPal's purpose in it's exercise of discretion? Apparently it was not to protect its image (because if it was offended and didn't want to have its name and/or logo associated with a site that included the offensive content, it could have demanded that DailyPundit remove any links or logos immediately, but it didn't). PayPal's objective was, apparently, to influence the content of the internet to the extent that it had any leverage over content providers, to produce a world wide web more in tune with its vision of goodness. That's nice, but it's exercise of discretion to force users to act in accordance with its own political values appears to be an illegitimate purpose (one not contemplated by the original contract).

It's late... I might be making this stuff up... Or not.

Speaking of "sole discretion" in Tymshare, Inc. v. Covell, 727 F.2d 1145. 1154 (D.C. Cir. 1984) , Justice (then Judge) Scalia said, "this phrase is not necessarily the equivalent of 'for any reason whatsoever, no matter how arbitrary or unreasonable.'" This was a case in which an employer had a sales quota system which it could raise or lower as it saw fit and give bonuses based on that quota. The employer, after terminating the employee, retroactively raised his quota so he wouldn't qualify for bonuses he, otherwise would have been entitled to receive. Scalia went on to say, "that in using its quota adjustment authority (combined with its termination authority) to reduce Covell's compensation, Tymshare was not acting for any of the purposes implicitly envisioned by the contract." Id. at 1154-55.

What can we take away from this long posting? Well, if you're rational, you will probably think that, "Hmmm... I may not be certain that PayPal necessarily violated the implicit terms of the agreement with DailyPundit, but I see that it's exercise of 'sole discretion' would quite possibly be limited by the doctrine of 'good faith' in respect to the purpose of the agreement, and therefore positing that PayPal could be liable was a perfectly reasonable thing for the editor of this blog to do."

One final note... I really don't want to hear any complaints about this posting not having enough links to "prove" what I'm writing. It's late, I did the research necessary to demonstrate my points, and I've provided citations to authority (which may or may not be freely available on the internet... I didn't use the free sources myself, and I'm not going to stay up any later to find those free resources for you (if they do exist). You can believe what I wrote, or not. I don't care.

If you still think that my musing that Wire Fraud would be "absurd," then since I took the effort to educate you on this aspect of contract law, and I did provide URLs for you to look up the relevant statute yourself, you need to "prove" that wire fraud wouldn't apply in the circumstances as I posited. Otherwise concede that you don't know what the hell you're talking about.

Friday, September 24, 2004

PayPal abuse of discretion?

Bill Quick (Daily Pundit) is getting strong-armed by PayPal

PayPal has, apparently, decided that Daily Pundit is a "Hate Site." Now, to be sure, Bill has a sharp e-tongue, and a fairly quick temper, but that doesn't make his site a "Hate Site" in the sense of encouraging violence against some identifiable group or of encouraging or celebrating terrorism.

My take on the issue is that PayPal is abusing what discretion it gives itself in its contract ("Acceptable Use Policy") Here's the Policy as regarding "Offensive Material" which is apparently what PayPal was objecting to on Bill's site:

PayPal believes that it is important to respect the diversity of beliefs of our members, and generally permits the use of PayPal to pay for anything the law allows. However, PayPal cannot condone the sale of items or support of organizations that promote hate, violence, or racial intolerance. In addition, PayPal is a worldwide company with many users residing in countries where the possession or sale of items associated with hate organizations is a criminal offense. Therefore, PayPal will judiciously disallow organizations that promote or glorify hatred, violence, or racial intolerance (such as the KKK, Nazis, neo-Nazis, and Aryan Nation), from using PayPal to accept payments. Furthermore, such organizations may not be listed in PayPal Shops, nor may any website listed in PayPal Shops advertise or support such organizations.

PayPal also may, at its sole discretion, prohibit the sale of items which graphically portray violence or victims of violence, and lack substantial social, artistic or political value.

PayPal may also, in its discretion and out of respect for the families of murder victims, prohibit the use of PayPal to sell items closely associated with individuals notorious for committing murderous acts within the last 100 years, such as personal belongings of criminals, letters or artwork created by such criminals, or novelty items that bear the name or image of the criminal.

Further, PayPal prohibits a person convicted of a violent felony, or his relatives or associates, from using PayPal to benefit financially from the convict's criminal notoriety.

PayPal will review sellers that are brought to its attention by its worldwide community, and will look at the seller's entire website, and other public information to determine whether it falls within this rule. Examples of items that generally may not be sold using PayPal:

  • Items that bear symbols of the Nazis, the SS, or the KKK, including authentic German WWII memorabilia that bear such marks

  • Crime scene photographs

  • Morgue shots

  • Letters and artwork from notorious murderers

  • Electric chairs and related capital punishment items

    Examples of items that may generally be sold using PayPal:

  • German coins and stamps from the WWII era regardless of markings

  • WWII memorabilia that does not bear the Nazi or SS markings

  • Books and movies about WWII or Nazi Germany, even if the Nazi symbol appears on the item
  • War documentaries or documentary photos portraying victims of war or violence

  • Items of historical importance associated with acts of violence against public figures.
  • [Emphasis in Italics added. ]

    The problem here is that Bill wasn't "selling" anything, and even if that term is broadly construed, his site is almost entirely about political ideas, and even if the display of or links to images of terrorist actions is offensive to some, the manner in which it is presented almost certainly falls within "War documentaries or documentary photos portraying victims of war or violence."

    In the final analysis, I suspect that PayPal has gotten an email complaint about Bill Quick / Daily Pundit, and in response to the complaint, PayPal has decided to investigate. According to their User Agreement, they indicated that they will limit accounts about which they get complaints while they investigate the complaint.

    It looks to me like a liberal hate-monger has figured out how to harass conservatives who accept donations through PayPal by sending a complaint. It would be unreasonable for PayPal to not investigate, and in the mean time Bill Quick, or whoever else is the target of this harassment gets their normal operation interrupted.

    IF that's the case, then the complainer could quite possibly face civil liability, and maybe criminal liability as well. It seems to me like sending a false complaint in order to interfere with someone's enjoyment of the benefits of a contract is "Tortious Interference with Contract." Also, and I haven't looked at the law in this area, so don't hold me to it, it may be an issue of some sort of wire-fraud, which would make this a federal criminal offense.

    Wouldn't that be funny... You're a liberal crank, and decide to screw with some evil conservative/libertarian, and so you shoot off a baseless complaint to PayPal so they will, at least temporarily, suspend the account of the evil conservative/libertarian. As a result, you find your butt in a Federal Prison and a civil judgment against you too.

    UPDATE: I forgot... Thanks to Instapundit for the heads-up.

    Thursday, September 23, 2004

    Criminalizing "Reckless Sex"? Why not criminalize stupidity first?

    The Insta-professor posted a bit about a new proposed law to criminalize "reckless sex."

    Anybody who has suffered a "sports-injury" from bedroom gymnastics might understand a call for some level of regulation on variations that, upon the calm reflection in the peace and quite of a hospital room while in traction, might seem to always be inherently dangerous no matter how expertly performed...

    Well, that's not what this law is apparently trying to prohibit. Here's the quoted text:
    "To convict, prosecutors would need to show beyond a reasonable doubt (i) a first-time sexual encounter between the defendant and the victim; and (ii) no use of a condom. The defendant would then have the opportunity to prove, by a preponderance of the evidence, that the victim consented to the unprotected sex."

    As most of you know, I'm a law student. When I see stuff about laws, my interest is piqued. Here's what struck me about the proposed law:
    1. Presumption of guilt as to the basic elements of rape. (i.e. non-consensual sex). It seems as if this would be a Due Process problem to allow the legal presumption of non-consensuality of the sex based on evidence of (a) First-time, and (b) lack of a condom.
    2. And then there's this, what makes either (a) having sex for the first time with a particular person, or (b) not using a condom illegal? From what I've seen, least one of the elements of a crime needs to be, well, against the law, that is, a violation of some right retained by another or by the government? E.g. "Speeding," presumably, is a violation of the government's right to regulate highway safety, and theft is a violation of someone's title to property. I could go on and on, but I won't.

    While people who consider themselves smart enough to speak to a topic feel free to propose legislation, I'll throw my hat into the ring. Here's my proposal for a new criminal law:

    (a)It shall be illegal to propose patently stupid statutes.

    (b)"Patently stupid" shall include, but not be limited to,

    (i) blatent violations of constitutional rights,

    (ii) non-sensical verbiage, and

    (iii) criminalization of actions that do not necessarily invade the rights of another person or the established provinces of governmental control.

    If we could get this passed, we could go down to the (appropriate) state capitol and round up 90% of all legislators within 3 days of the beginning of the next legislative session!

    Imagine the tax dollars that would be saved!

    Tuesday, September 21, 2004

    Maryland in play? (YEAH, Baby!!!)

    I don't know how long the Maryland results will be at the top of this page, but I thought it was interesting to take a peak at this new survey.
    Survey USA - Current Election Polls

    I know, I know, the margin of error is pretty high (4.1) but even if the full 4.1% goes to Kerry, that means the committed vote-spread is less than 10% in Maryland.

    Did you notice, I said, IN MARYLAND!

    Maryland is a traditional Democratic stronghold, although, Reagan did win the state in '84 (and GHWB may have won the state in '88), Democrats can almost always count on a solid Dem result from the Free State.

    That result seems less certain at this point in time. What I like about it is that for the Democrats to keep Maryland, they'll have to divert their attention from other (bigger) electoral prizes.

    The Free-State Republican Insurgency is taking its toll!

    Now, all we have to do is keep the momentum for 6 more weeks.

    Monday, September 20, 2004

    Rather like a "CYA memo", no?


    // Mon Sep 20 2004 11:58:02 ET
    Last week, amid increasing questions about the authenticity of documents used in support of a 60 MINUTES WEDNESDAY story about President Bush's time in the Texas Air National Guard, CBS News vowed to re-examine the documents in question—and their source—vigorously. And we promised that we would let the American public know what this examination turned up, whatever the outcome.

    Now, after extensive additional interviews, I no longer have the confidence in these documents that would allow us to continue vouching for them journalistically. I find we have been misled on the key question of how our source for the documents came into possession of these papers. That, combined with some of the questions that have been raised in public and in the press, leads me to a point where—if I knew then what I know now—I would not have gone ahead with the story as it was aired, and I certainly would not have used the documents in question.

    But we did use the documents. We made a mistake in judgment, and for that I am sorry. It was an error that was made, however, in good faith and in the spirit of trying to carry on a CBS News tradition of investigative reporting without fear or favoritism.

    Please know that nothing is more important to us than people's trust in our ability and our commitment to report fairly and truthfully.

    Since it wasn't a link, I've coppied the statement directly off of Drudge's main page.

    I'm sure lots of folks are blogging about this by now, but I wanted to bring a thought to bear on the topic.

    Did anybody else gag when they saw the line "...in the spirit of trying to carry on a CBS News tradition of investigative reporting without fear or favoritism"?

    Excuse the heck outta me, but if there's no favoritism here, where is the CBS 60 Minutes II investigative report on Kerry's sketchy war record? The Swift Boat Veterans for Truth have substantiated and stood by everything they've said. Sure, a few chinks in their armor have appeard, but the main topic of their book, Unfit for Command, has not been discredited.

    If there's no favoritism, then why did CBS decide to run with forged memos with obvious signs of being false, and with family members of the supposed author, and document experts alike telling them that there are serious reasons to doubt the authenticity of the documents, but they won't provide a real investigation of anything unfavorable about Kerry?

    I guess the question that arises is, what is it that Rather knows now that he didn't know back when the story was first aired? Since we know that there were plenty of warnings about the authenticity of the documents prior to the running of the story, then what, exactly has Rather learned in the last couple of weeks? The only thing I think he could have possibly learned is how easily and how conclusively the memos could have been proven to be fakes. We're less than two months before the election. If the story could get out there and not be too easily shown to be fake it would linger in the minds of the electorate and fester and persuade the moderately uninformed to dislike the overwhelmingly liked President Bush.

    What else might Rather have learned? My guess is that he learned that the day and age where his word and that of the anchors of the other two big networks defined the truth as understood by America is over. Blogs and talk-radio may not be bigger than the traditional media, but they are now so big that they cannot be ignored. It's the new underground economy of ideas, just like I said, and it will not be ignored.

    Tuesday, September 14, 2004

    A Blog worth Bookmarking

    The University of Baltimore Federalist Society has a new weblog, The Well FED Society.

    It won't be the place to go for the most partisan stuff, but if you want updates about what the Student Chapter of the Federalist Society at UB, is up to, it's the place to look.

    I also expect that you will be able to get some original thought and analysis about law and public policy issues among the posts at that site.

    Just remember, if you like to feed your brain, then The Well FED Society is a site you don't want to miss.

    OK, that might have laid it on a little too thickly... But still, it's worth checking periodically.

    Monday, September 13, 2004

    Bias in Economics reporting... No! You don't say!

    I'm not a big fan of the New York Times... There are a lot of reasons to not be a big fan of the NYT. Nevertheless, this article Do Newspapers Make Good News Look Bad? looks pretty interesting.

    Since it is from the NYT, I really should have fact checked every word, but since I only claim to be fairer and more ballanced than some warning you that you might need to be skeptical of what you get from the NYT means I'm, at least, beating them.

    The point of the article is that bias in favor of the Democrats, or at least against the Republicans is pandemic in most traditional media, and even infects the economics reporting. What makes this a little more newsworthy than just claiming that the media is biased is that (1) We're talking about economics news, ferpetesake, and (2) this allegation isn't just a gut reaction, it's got some real statistics behind it.

    Read the article.

    The thing to remember, when developing a propaganda strategy, is that facts are, for the most part, neutral. How you choose to frame them and what you emphasize is where you can inject bias in "factual" reporting. It looks as if even the economics reporters in most media outlets have not overlooked that tid-bit of advice and are doing their part in the war against Republicans.

    In other news:
    Posting will be light this week and may continue to be somewhat light through early October. I'm sorry. We've got a number of things at ye ole law school that are demanding extra attention. I'll post as frequently as I can and or feel inspired.

    Thursday, September 09, 2004

    Something to watch... Developing

    According to CNSnews.COM, "60 Minutes" or its sources might have been a tad bit to eager with the Bush records... Here's the article:'60 Minutes' Documents on Bush Might Be Fake

    Basically, typographical experts are finding reasons to believe that the memos that 60 Minutes has found were created on a modern Word Processor program.

    Please note, THIS is why hearsay is not admissible. The person who supposedly made these claims is dead. Col. Killian cannot attest to the accuracy and authenticity of the documents. There's no way that these documents could possibly ever be used in court against President Bush because of evidentiary rules.

    I don't know that the documents are fake, but it wouldn't surprise me, but the fact that there's no way to guarantee that they are authentic should give anybody who wants to use them a serious reason to approach them cautiously, lest your own credibility be seriously damaged.

    Same old lies.

    It appears that when the going gets tough, the Dems go back to re-using lies that haven't worked for them before. Perhaps we should take heart... Sure we know that the Democrats don't have the intestinal fortitude to see national defense issues through the rough patches, but at least they are showing that they will stand by lies even after the lies have been exposed and blown away by the truth.

    AP has this article: Democrats Say Bush Lied on Guard Service

    It sounds like a real big story, right? It's not.

    This is the same set of tired old lies and half-truths that have been floating around the lefty-conspiracy-theory crowd for years.

    There are two main prongs of this current attack against President Bush, and one just plain stupid part.

    The first substantive attack is that President Bush avoided taking his physical exam. Now they've added a new twist. They (CBS's investigative team from "60 Minutes) are now saying that files from Col. Jerry Killian, who died in 1984, indicate that Lt. George W. Bush disobeyed an order to get the physical. Did George W. Bush lose his flight status because he didn't take the physical? Yes. We've always known that. HOWEVER, there's more to the story than that Bush didn't report for his physical. At the time, he was trained to fly the F-102A, a fighter-interceptor. That's what was flown in that unit of the Texas Air National Guard (111th Fighter Interceptor Squadron). The rest of the story is that in 1972, when Bush was supposed to get his physical to retain his flight status, he was serving his commitment to the Guard, by express permission in the Alabama Air National Guard 187th Tactical Reconnaissance Wing at Montgomery, AL). They didn't fly the F-102(A) there. They flew reconnaissance jets there. President Bush was NOT rated to fly those aircraft. He would have had to take a slot in the training program for it to become rated for it, and he knew he was slated to be discharged in 1973. It made no sense to anyone for President Bush to take the physical to retain his flight status since he couldn't fly at the location where he was serving his commitment. This has been known for a long long time.

    If President Bush had disobeyed a direct order which he was obligated to obey, he would not have been able to be honorably discharged, or he would have, at least, had to undergo some discipline. There is no record of that.

    The second attack is that Ben Barnes (Former Lt. Gov. of Texas) is now claiming that he pulled strings for Bush to get into the Air National Guard, and now, Mr. Barnes poor conscience is bothering him enough that he has to confess to the press that he pulled strings.

    Let's address the first question: Even if all of this is true, were any laws broken? I don't think so. Politicians doing favors for other politicians is the ugly truth of politics, and though it's very bad for the public image, there is no indication of any illegal activity (like a bribe or some other quid pro quo action). So what we've got is a situation that looks bad, if it's true, but not illegal, and we don't know to whom to assign any blame. Is it possible that Mr. Barnes took the task to pull strings upon himself to get himself into a position where he could ask for a future favor? That's as likely as anything else. There is no unequivocal statement about who asked for the strings to be pulled to help President Bush get into the Air National Guard.

    Finally, whenever an accusation is made (against anyone) the credibility and motive of the accuser, in addition to the truthfulness of the accusation is fair game to be examined. Hmmm. When you take a look at who Mr. Barnes is, what he does, who he does what for, and what he plans on doing in the future, it looks highly suspicious. Mr. Barnes is a TOP fundraiser for the Democrats. He's a top fundraiser for Senator Waffles, and he, apparently, hopes to get some position in a Kerry administration.

    These accusations are easy to frame in a bad light against President Bush, but, when examined don't appear to have much substance. They're just the same old lies.

    Oh, and before I forget. Now, in response to the Swift Boat Veterans for Truth, the veterans' group that has hammered Senator Kerry for some significant discrepancies in Kerry's record and his claims, the Democrats have come up with their own veterans' group, Texans for Truth. (That's right, no link for this band of brothers. You'll see why.) This group is attempting to insinuate that President Bush absolutely did not serve since they don't remember his service.

    There are lots of things I don't remember. I had a very good friend at my first job. He and I worked in the same building for about a year, but we worked on different projects. I never saw him at the office. Since I don't remember seeing him at work, does that mean he didn't work? NO. It means I didn't see him.

    All of this has the potential for becoming an issue in the campaign, but I think that, if handled properly, it won't. Why? John Kerry's record has become an issue because he's running, almost exclusively, on the 4 months he spent in Vietnam. If that's what qualifies him to be president, in his own mind, then we should examine what he did there. President Bush, on the other hand, hasn't held up his National Guard service as why we should vote for him. He's acknowledged his service, and that it wasn't as valorous as combat service, but that it's still honorable and he was honorably discharged. That's the extent of it from the Bush Campaign.

    The question I've got is this: Is CBS/Dan Rather reporting to the FEC their roll in the Kerry Campaign? So far as I know, CBS has never run that kind of expose on Kerry, and the primary way the informatin has gotten out is by the Swift Boat Vets funding the publicity themselves. CBS just smells bad. Pehaps they should change their name to "See, BS!"

    Friday, September 03, 2004

    Tax basics

    In the comments of my previous posting on a Tax curiosity, I have apparently stoked the interests of (at least one) new reader. (See the comments.) The reply to the latest series of wild and uninformed assertions about the Tax Code was going to take a significant amount of space, so I figured a new post was appropriate.

    In between the various insults for communicating authoritatively on what I know, Mr. Dave Huber has expressed a profound belief that the Tax Code is for a number of reasons unconstitutional. I guess I should expect people to get bent out of shape when they're emotionally invested in their particular idea and I can (relatively easily) smack it down. Oh well.

    Nevertheless, our intrepid potential tax protester (or apparent sympathizer for them) has raised a few urban legend types of canards about income taxation. Apparently rabid libertarians are nearly impervious to logic and simple facts, especially when presented by someone who has sold his/her soul, like yours truly, and affiliated with one of the two major parties.

    Well, since nothing I say will suffice, since I'm not a libertarian, and since I'm going to become a lawyer, I've decided to provide a link to this page, Jail Bait, by Mr. Harry Brown.

    Let's go through the legally meritless ideas that Mr. Huber has thrown out.

    1. Forcing Employers to figure out and withhold employees' income taxes is a type of involuntary servitude that is or should be prohibited by the 13th Amendment.

    Think of it like this: Employers, generally, have to retain paperwork and interact with the government. Employees don't necessarily have to do so. To transact virtually any form of business, you have to get a license, or meet some other governmental standard. OSHA, and EEOC, and ADA, and on and on and on... (I know, very small businesses can usually escape their scrutiny, but that doesn't change the trend.) Licenses and various business regulations require the employer to perform certain acts, and those aren't being considered "involuntary servitude." Those actions are "costs of doing business." They are the friction in the system. Besides, the business has to do nearly all of those calculations anyway because the business is a "taxpayer" under the Code, and employee wages are deductible but records must be provided.

    2. "Voluntary compliance"

    Well... Did the IRS agent show up with a gun and make you file your return? The fact that your alternate options are bleak does not change the legal characterization of filing your returns as voluntary if there is no direct coercion. I freely admit that I could be wrong here. I'm basically borrowing from the Constitutional Criminal Procedure understanding of voluntariness.

    This is the IRS definition of Voluntary Compliance:
    A system of compliance that relies on individual citizens to report their income
    freely and voluntarily, calculate their tax liability correctly, and file a tax
    return on time.

    Did you see the key word... LIABILITY. Voluntary filing does not mean that you can choose not to owe taxes. It means you can choose to comply with the law or be forced to comply and face criminal penalties. It may not be the definition you like, but that's the way it is.

    Finally, take a look at 26 U.S.C. 1. (Please note that this is not the entire tax code, but it's the basic statute.) The tax is IMPOSED. It's not a solicitation for donations.

    3. Didn't people used to pay their own taxes (no withholdings)?

    Yes. So what? Congress changed the law around the time of WWII because they needed far more tax revenue. Prior to that time, about 85 to 90% of all citizens never had to worry at all about income taxes. Rich people are easier to find because they have assets that could be seized if they didn't comply. Congress decided that they would probably get the taxes they had imposed if the companies were required by law to collect them at the time they paid their employees. The individual citizens were much more likely to make mistakes or not comply, or whatever, and back then, they didn't have computers like today that simplified the analysis process. The companies had a lot more to lose if they didn't comply than most individual tax payers, so they were the logical place to tax.

    Additionally, Congress likes to get employers to withhold taxes because it hurts less to get a somewhat smaller pay-check each week or month than to write one annual (or four quarterly) large check(s). Yes, this did make it easier to impose heavier tax burdens.

    Let's be clear about where I stand on this. I DO NOT LIKE the fact that employers withhold taxes. I think citizens would choose much more frugally minded officials if they felt the tax bite more acutely. However, I see no reason to think that the withholdings are illegal. The Tax Code might be immoral, but it's still valid and authoritative law that was passed appropriately.

    4. "...the great irregularities in passing the 16th Amendment."

    I haven't bothered to find all of the history of the passage of the 16th Amendment. Here's one annotation that's pretty good.
    Wikipedia has a real good history of the Amendment that I'll rest my case upon. Please not, especially:
    Some Americans who object to income taxes claim that the Sixteenth Amendment was never properly ratified. The best-known proponent of this claim is Bill Benson, author of the book The Law That Never Was. However, federal courts have rejected appeals based on these claims, and some now consider them "frivolous" claims that are subject to sanction.

    Please notice the explanation of "frivolous" which is basically what I explained in one of the comments mentioned previously.

    5. Irv Homer is probably a great tax expert and the lawyers got him banned because they got pissed off at him!

    I don't know what Irv Homer does or does not know about the tax code. I seriously doubt that he's an expert in the common usage, but I'm very certain that he is not an expert in the sense of what a court would allow to offer expert testimony on law, especially tax law. Having a J.D. (or an LL.M.) does not make you an "expert," but it's a significant indication of a basic level of knowledge. Asking inane questions of lawyers does not prove anything. But, let's remember what a witness's job is: The witness's job is to answer the lawyers' questions, and not the other way around. If Mr. Homer was asking a bunch of questions of the lawyers, then he wasn't being a witness, he was attempting to be an advocate.

    What will get you banned from a court is not pissing off the lawyer, it's pissing off the Judge.

    6. The tax code is a "ridiculous labyrinth"!

    OK. I agree it's complex. So what? I'd love to have the tax code reduced down to one or two pages, but that isn't going to happen any time soon. The only argument you can possibly make is that the law is so complex that a person could not reasonably be expected to be able to comply with it without expert assistance, and that's some form of a denial of due process since it puts people in danger of violating the law even with sincere and diligent effort to comply.

    That argument won't fly because, although the tax law is complex if you attempt to calculate your taxes based directly on the code and accidentally misunderstand anything, you will almost certainly end up paying too much, not avoiding taxes. The first section of the code sets down the basic rates, and after that, you start finding the deductions and exemptions.

    Even if you could make that argument, you would need to be able to demonstrate actions that clearly indicate an attempt to comply, and you will then, probably only get off the hook for the penalties, and still be liable for the basic taxes.

    7. All lawyers are jerks!

    It's a (more or less) free country. You're welcome to that opinion. I suspect you hate being wrong, but hate even more finding out that the truth is not what you like. An awful lot of law is simply stating law the way it is. Advocacy is the art of framing the law and facts in a way that makes one side more persuasive than the alternative(s), but you still have to tell the law the way that it is.

    Surprisingly, I'm not all that emotionally crushed by your apparent low opinion of me.

    Dave Huber, in your future as a self-righteous tax-protesting long-term guest of the Federal government's enforced hospitality, I hope you learn how to read carefully what's written by those with whom you disagree. I suspect you'll have plenty of time to learn that. You can save your concern for me. When I make a legal argument, I bring all the evidentiary and logical ammunition I need, but thank you kindly for your concern.

    *** BREAKING NEWS ***

    Bill Clinton Admitted to Hospital with Chest Pains for Bi-Pass Surgery

    I just heard this on the radio... I can't find any links yet.
    UPDATE: Here's a link to it.

    Chest pains in a Democrat today... Perhaps he watched Bush's speech and then Kerry's speech, and then was sent over the edge when he saw the latest poll results.

    Seriously though, as much as I think President Clinton was a very bad president, I don't wish ill health on him. He was annointed by God to be President while he was in office. I don't think that means that God liked what he did, but Clinton was the President. Perhaps his presidency was to test us. In any event, I pray that God protect him and help bring him to an understanding of the faith he says he has that actually impacts his actions.

    Thursday, September 02, 2004

    Kerry's Health Plan?

    I don't know that Waffles and the Breck Girl are actually advocating this, but it just seems like something I would expect to be popular in heavily deomocratic areas.

    If it works, I suppose it would lower prescription and other associated medical costs...

    Wednesday, September 01, 2004

    Wife finds a way to keep husband hard


    Apparently rigor mortis didn't make her hubby stiff enough.

    Deceased Husband Turned into a Diamond

    At only half a carat, he may not be big, but she'll never complain that he's not hard enough.

    As a final thought, now that hubby has been turned into a diamond, the wife will have to worry about other women trying to steal him more than she ever did while he was alive.

    For what it's worth, no disrespect is intended to Ms. Wodziak. The fact that she loved her husband so much that she would want to turn him into a gem to keep him with her forever is touching, even though it's totally bizzare. The associations, however were too much to pass up, and this (attempt at) humor is mostly about human relations generally, and not really about Ms. Wodziak specifically at all. I hope that she is comforted in her grief and that turning her husband into a "Life Gem" helps her move forward and doesn't tie her to her pain.


    OK, folks, here's the text of one of the best speeches that has been or will be given at the Republican National Convention.

    Don't get me wrong, Giuliani was good... VERY good, and there was a profound respect in McCain's endorsement of President Bush. Governor Schwarzenegger hit a home run too with his personalization of the American dream and the fact that it is fostered best in the GOP. You can only say good things about Laura Bush and her speech because she hammered home the humanity of President Bush and the immense respect he has for the gravity of the office of the President.

    Nevertheless, Michael Steele's speech was a true gem of incompletely comprehended value. The essence of the innate goodness of conservativism was the underlying message. Compassion isn't found in maintaining the needy as an underclass, it's found in allowing the opportunities to make your own life better and provide as much as you're willing to work to attain for your family. Compassion is found in fostering an environment that won't punish hard work which provides self-respect and the inherent dignity of self-sufficiency. See it for yourself... Pt 1, Pt. 2, Pt. 3.

    Michael Steele's career is just at it's dawn, although he is at the highest position ever held by a Black American in Maryland. Mark my word... He'll either be the next Senator from Maryland, or he will be the VP candidate for the GOP in 2008. America would be lucky to have a man of such principle in a position of national authority

    Tax curriosity

    No, I'm not suggesting a new revenue source, though I do get a chill down my back when I hear a politician remind us of something in the past with the phrase, "Let me tax your memories."

    Anyway, last night in my Federal Income Tax class, I learned something new. I suppose it shouldn't surprise me, but I was surprised nonetheless. First, a little background. The US Courts have decided to embark on an interesting tactic in interpreting tax statutes. The 16th Amendment allowed income taxes which had been prohibited before.
    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
    That's rather broad language where it says, "...from whatever source derived..." OK. The Courts have therefore decided that the definition of "income" should be broadly construed. I guess that's a reasonable interpretation. But wait... Maybe it's not. The right to enjoy property is something protected by the Constitution (see the 5th Amendment), so broad abrogations of that right are, well, not to put too fine a point on it, improper.

    Don't get me wrong. I know that my understanding of the Tax code and jurisprudence is very limited, and even if I understood it completely, my disagreement even if I'm 100% correct doesn't make my understanding the new law of the land. That's a shame.

    In construing the term "income" broadly and consequently construing any deductions or exemptions narrowly, the Court has implemented a philosophy that the Federal Government's rights to personal property (in the form of income) is paramount to the rights of the taxpayer.

    The 9th and 10th Amendments should prohibit against any such broad construction against individuals.
    Amend. IX: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
    Amend. X: The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

    It seems pretty clear to me. Constitutional rights given enumerated to the individuals are not the extent of our rights, but a sketch of the panoply of rights that are not to be infringed. Not only that, but the Federal Government is supposed to be tightly bound to the Constitutional structure. A broad construction of the Government's ability to take property does not respect the individual's rights and it does not reflect the idea that the Federal Government cannot invade the province of the states or individuals without express Constitutional permission.

    All of that to say, I'm not a big fan of the American Tax-Code jurisprudence. I think a better interpretation that is consistent with the 9th and 10th Amendments is to say "whatever source derived" means that the Congress is able to tax any income IF it SPECIFICALLY names it. Wages for labor... OK. Dividends on investments and other Capital Gains... FINE. Rents... NO PROBLEM. Broad interpretation that allows the courts or the IRS to fill-in-the-blanks to find income not specified or reduce deductions is precisely the opposite of the plain meaning of the 9th and 10th Amendments while not being a necessary interpretation of the 16th Amendment.

    But that's not all!

    The thing that surprised me last night was that I found out that when a crook embezzles funds, those funds are taxable (no surprise) AND that the government's right to the tax pre-empts the rightful owner's claim to have those funds returned!

    Let's see how this works...
    1. A embezzles from B.
    2. B does not report the ill-gotten gain resulting from the criminal activity on his/her tax return.
    3. The US prosecutes B for tax evasion.
    4. A says "Give me my money!"
    5. The US wins and convicts B, AND takes it's share of taxes as if the funds were B's income.
    6. Whatever is left A can attempt to get back in a civil action.
    What you may have noticed, in addition to not passing the smell-test, is that the funds are ALWAYS the rightful property of A. Lost or stolen property is still titled to the original owner, and the possessor has rights to it that exceed all but the original owner.

    What that means is that, according to the common law (preserved in the 7th Amendment) the taxes obtained by prosecution of embezzlers must be held in "Trust" by the government and must be turned-over to the rightful owner when a claim is made. (Each jurisdiction has a statutory limit of how long the property must be held before the finder can claim title to it, usually 7 to 21 years, if I remember correctly.) This means that it's OK to tax the thief, but the government has to return the funds, completely, when the rightful owner claims them. Period.

    If the government claims that taxing B based on classifying the embezzled funds, to which A has title, as the income of B, then the government is "taking" (5th Amendment) the property from B according to Due Process. However, it isn't giving A Due Process in the taking. It's A's property, therefore the taking should be pursuant to A's right to Due Process.

    Maybe I'm being an idealist, again. Who knows. I would like to think that all of this will become moot before I start practicing law.

    (But I won't hold my breath.)

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