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By Edward Zelinsky

The American Taxpayer Relief Act of 2012 is widely understood as a victory for President Obama. However, the long-term story is more complicated than this. The Act in large measure confirms in bi-partisan fashion the tax-cutting priorities of George W. Bush.

In the Act, President Obama achieved his proclaimed goal of increasing income taxes on the country’s most affluent taxpayers through higher income tax rates and reduced deductions. The Act creates a new 39.5% income tax bracket for individuals with taxable incomes above $400,000 and for married couples filing jointly with taxable incomes above $450,000. It phases out personal exemptions for individuals with adjusted gross incomes over $250,000 and for married couples with adjusted gross incomes over $300,000. It also reduces itemized deductions for these affluent taxpayers.

For high income taxpayers, the Act increases the maximum capital gains tax rate from 15% to 20%. When combined with the new Medicare tax on investment income, this results in a combined tax of 23.8 % on capital gains for the highest income taxpayers.

It is thus unsurprising that the Act has been heralded as a triumph for Mr. Obama and his vision of a more progressive income tax law.

However, the reality is more complex than this. For the long run, the winner under the Act was Mr. Obama’s predecessor, George W. Bush. The Act, as it gave Mr. Obama some of what he wanted, also made permanent much of what Mr. Bush desired as a matter of tax policy. Indeed, as a result of the Act, federal taxes are in important measure now permanently at the lower levels where President Bush wanted them.

The vast majority of Americans are not affected by the Act’s changes for the highest income taxpayers. For most taxpayers, the Act thus permanently ratifies the lower federal income tax rates championed by Mr. Bush in 2001. Moreover, the Act confirms that corporate dividends will be taxed at lower capital gains rates rather than as ordinary income. True: capital gains rates are now higher for the most affluent of taxpayers as a result of the Act. However, even at these higher rates, taxing dividends as capital gains, rather than as regular income, significantly reduces the tax burden on such dividends.

Consider, moreover, the federal estate tax. When President Bush took office in 2001, the federal estate tax applied to estates over $675,000. That floor was scheduled to increase in stages to $1,000,000. The maximum federal estate tax rate was then 55%.

While President Bush did not succeed in abolishing the federal estate tax, the Act provides that federal estate taxation will only apply to estates over $5,000,000 adjusted for increases in the cost of living. For 2013, an estate must be over $5,250,000 to trigger federal estate taxation. When it applies, the estate tax will be levied at a flat rate of 40%.

In the area of tax policy, President Bush did not achieve all he sought. No president does. If we define success more realistically, the 2012 Act confirms President Bush’s triumph in permanently lowering federal income tax rates for most Americans, reducing the effective tax burden on corporate dividends, and significantly reducing the reach of the federal estate tax.

To some, these tax reductions are welcome restraints on the federal leviathan. To others, the Bush tax reductions, now permanent, regrettably hamper the federal fisc. What cannot be doubted is that the Internal Revenue Code we have today in large measure reflects the tax-cutting priorities of George W. Bush. In adopting the Act, a Democratic President and Senate, along with a Republican House, permanently confirmed much of these tax-reducing priorities.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. His monthly column appears on the OUPblog.

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By Edward Zelinsky

Like many of us, President Obama is a Warren Buffett fan. Most prominently, the president advocates, as a matter of tax policy, the so-called “Buffett Rule.” This rule responds to Mr. Buffett’s observation that his effective federal income tax rate is lower than the tax rate of Mr. Buffett’s secretary. In President Obama’s formulation, the Buffett Rule calls for taxpayers making at least $1,000,000 annually to pay federal income tax at a 30% bracket.

President Barack Obama and Warren Buffett in the Oval Office, July 14, 2010. Photo by Pete Souza. Source: Executive Office of the President of the United States.

In his most recent letter to the shareholders of Berkshire Hathaway, Mr. Buffett makes another provocative observation. However, Mr. Obama has so far ignored this most recent observation from the Oracle of Omaha. Addressing the nation’s continuing housing malaise, Mr. Buffett wrote:

A largely unnoted fact: Large numbers of people who have “lost” their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender.

In contrast, the dominant narrative about the national mortgage crisis focuses upon the banks which, the narrative goes, knowingly induced homeowners to borrow money the banks knew the borrowers could not repay. The banks then sold the resulting mortgages to unsuspecting investors who were misled by the banks and by the rating agencies which put their respective seals of approval on these unsound mortgages. Banks subsequently compounded their misdeeds by engaging in widespread abuse while foreclosing on the homes subject to these mortgages.

This anti-bank narrative underpins the recent settlement among the federal government, the states and five major lending institutions (Bank of American, JP Morgan Chase, Citibank, Wells Fargo and Ally Financial, previously known as GMAC). Under this settlement, the banks will give a total of $25 billion to homeowners who have been foreclosed upon or who are in danger of being foreclosed upon.

This anti-bank narrative has had legs because there is much truth to it. We now know, for example, that many banks lent money with optimistic public faces at the same time that bank executives knew the loans were unsound and overly-risky.

However, Mr. Buffett’s comments reveal the incompleteness of the anti-bank narrative; many borrowers were culpable along with the banks. It takes two parties — a lender and a borrower — to make a bad loan. Most Americans know a friend, relative, or neighbor who opportunistically gamed the mortgage system during the pre-recession bubble, borrowing against the bubble’s continuation and spending the borrowed funds for personal consumption. As Mr. Buffett suggests, to declare that borrower a victim is to mislabel a willing player in the nation�

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By Edward Zelinsky

Receiving my AARP membership card was one of the truly traumatic events of my life. I had marched for civil rights. I had protested the war in Vietnam. I walked the streets for Gene McCarthy. I was a legitimate Baby Boomer. How could this have happened to me?

My wiser and more self-confident spouse took it in better stride. Doris quickly became adept at pulling out her AARP card and demanding old-age discounts, as I stood sheepishly aside.

My personal disquiet about my AARP card reinforced my deeply-seated, policy-based misgivings about the AARP. President Clinton and Speaker Gingrich could have emulated President Reagan and Speaker O’Neill by negotiating a reasonable, bi-partisan approach to Social Security. At that time, increasing the retirement ages for Baby Boomers and other similarly modest measures would have brought Social Security’s projected payments into line with its expected revenues, with only minor impacts on future retirees.

There were many reasons such a deal didn’t happen during the Clinton years, but the AARP’s strident opposition was chief among them.

As the financial problems of Social Security and Medicare became more acute, I became increasingly troubled by the AARP’s refusal to address them. The AARP’s effective opposition to reforming these entitlement programs has implemented perfectly the ethic of Baby Boomer narcissism.

I was accordingly surprised and reassured to learn that the AARP has at last acknowledged the need for us geezers, i.e., its members, to reform Social Security benefits for the financial sake of our children and grandchildren. As a mushy moderate, I am convinced that there is a balanced package of tax increases and benefit reductions which can allow the Baby Boomers to retire without bankrupting our offspring.

It is good news that the AARP has belatedly recognized this reality.

Medicare will be tougher to reform. It is now finally sinking in that the Independent Payment Advisory Board President Obama and Congress created as part of the health reform package will effectively ration medical care through its control of Medicare’s payments to health care providers. This should surprise no one: Rationing is how government outlays are controlled. Medicare’s outlays must be controlled.

The same is true of the consumer-driven approach to controlling Medicare expenses proposed by Rep. Paul Ryan. The Ryan plan would place greater responsibility on Medicare consumers to control costs. This approach is also going to be necessary to control Medicare outlays.

Determining the right mix of these two approaches is going to be a difficult task. Regrettably, neither Republicans nor Democrats are now prepared to undertake the serious enterprise of governing.

It would be good for the AARP to also raise its voice on behalf of the cause of Medicare cost reform.

However, for now, I’ll take what I can get. It is progress for the AARP, however gingerly, to acknowledge that Social Security entitlements for the elderly must be curbed in the interests of national solvency and the futures of our children and grandchildren.

But I will still step aside while Doris demands the elderly discount.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America

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By Edward Zelinsky

Nicholas Sarkozy, the president of France, has condemned as “disproportionate” Israel’s response to the flotilla bringing cargo to Gaza. Gaza today is controlled by Hamas, a terrorist organization which is dedicated to the destruction of Israel and which has repeatedly launched attacks on Israel and its civilian population. Israel had told the flotilla’s organizers to bring their goods to the Israeli port of Ashdod for inspection, with all civilian goods to be trucked subsequently from Ashdod to Gaza. The Israeli offer was rejected.

Mr. Sarkozy’s criticism of Israel raises an interesting analogy: Suppose that Monaco were controlled by a violent terrorist organization like Hamas, committed to the destruction of France. This terrorist organization, when it has the means, routinely lobs missiles at French civilians over the French-Monaco border. Would France passively accept this situation? Not likely.

Most probably, France would invade Monaco to destroy the threat to its civilian population. Alternatively, France would blockade Monaco by land and by sea, making sure that weapons and other supplies with military uses do not enter Monaco.

Suppose further that a flotilla were organized to break the French blockade of Monaco. France, concerned about military supplies being part of the cargo, would order its navy to intercept this flotilla. France would perhaps tell the organizers of the flotilla to bring their supplies to Marseille where these supplies could be inspected so that, after such inspection, civilian goods could be transported into Monaco.

Suppose that the organizers of the flotilla rejected this offer and instead proceeded to Monaco. Is there any doubt what, under these circumstances, the French response would be?

Finally, suppose that the President of Israel condemned this French response as “disproportionate.” Mr. Sarkozy’s likely retort: France has the moral and legal right to protect its citizens and its territory. Any violence which results is the responsibility of the flotilla’s organizers who rejected the French offer of inspection and transportation for civilian goods.

Mr. Sarkozy would be right.

By Edward Zelinsky

Certain opponents of President Obama’s effort to revise the U.S. medical system claimed that the President sought “death panels” to deny medical care. Among those decrying such “death panels” was Governor Palin.

President Obama quickly disclaimed any desire to create such panels. The President said he favored permitting Medicare to pay for purely voluntary physician counseling about end-of-life choices. Using the unfortunate metaphor which came to dominate this discussion, President Obama affirmed that he does not want to “pull the plug on Grandma because we’ve decided that it’s too expensive to let her live anymore.”

This debate was apparently resolved when Senator Charles Grassley of Iowa, ranking Republican on the Senate Finance Committee, declared that any federal health care legislation will omit provisions concerning end-of-life counseling. This outcome, now seemingly endorsed by Republicans and Democrats alike, suggests that the United States can provide unlimited medical resources to the elderly during their final illnesses.

Regrettably, this debate obscured larger and more difficult truths: We do not have unlimited resources. No society does. We cannot afford to spend indefinite amounts on the care of the terminally ill, particularly as the large Baby Boomer cohort queues up to meet the Grim Reaper. We consequently need death panels to control medical costs. We already have such panels although we don’t openly label them as such.

There are many reasons that the United States’ outlays for medical care outstrip those of other nations. Among these reasons are our enormous expenditures for medical treatment at the end of life. Roughly thirty percent of Medicare’s expenditures occur within the patient’s last year of life.

Some of this care is palliative and thus relatively inexpensive. Some of this care is for patients who die unexpectedly. However, the American medical system provides aggressive treatment at the end of life which other nations do not. There is no way for us to reduce the burden of medical costs without curbing these end-of-life outlays for aggressive care.

Much political rhetoric on reducing medical costs implies that such cost cutting can be painless. Various formulas (“administrative costs,” “bureaucracy,” “ineffective care”) make cost cutting sound anodyne. Democrats and Republicans, liberals and conservatives have all avoided the unpleasant realities: Medical care costs cannot be controlled without denying services to somebody. Zealous end-of-life treatment is expensive, a prime candidate for cost control.

Every major hospital and medical institution today has an ethics panel. Such panels often address end-of-life issues, advising physicians and other caregivers when to terminate treatment. These are “death panels,” authoritative bodies which often conclude that treatment of the terminally ill should be discontinued.

Flippant references to pulling-the-plug on grandma resonate with me personally since, twelve weeks ago, I became a first time grandfather. That makes me part of the class which President Obama and Governor Palin apparently want to guarantee unlimited access to Medicare resources at the end of life.

Speaking as a new grandfather, there is another perspective I urge on the President and his Republican opponents: my grandson’s. My grandson is a lucky child, born into a loving family that lives in a great nation. But on the negative side of the ledger, his generation inherits a national debt which threatens its economic future.

We must do many things to put our economic house in order for my grandson and his peers. Controlling medical costs is one of them. Sometime, hopefully far in the future, that may indeed require pulling the plug on his grandfather when it is no longer sensible to treat his final illness. Death is a part of life. In a world of finite resources, “death panels” are and should be part of our national effort to control medical costs.

By Edward Zelinsky

At their much anticipated White House meeting held last Thursday night over beer, President Obama, Professor Henry Louis Gates Jr. and Sergeant James Crowley made a valiant effort to end the national controversy provoked by Sgt. Crowley’s arrest of Prof. Gates. However, these White House atmospherics, while well intended, cannot obscure the troubling questions which persist: Was there probable cause for Sgt. Crowley to conclude that disorderly conduct had occurred? If not, was the arrest, as President Obama initially opined, “stupid”? Of the irreconcilable statements advanced by Prof. Gates and Sgt. Crowley, which is true – and which is false?

Throughout the twentieth century, judges and legal scholars have grappled with the dilemma posed by the notion of disorderly conduct. On the one hand, individuals can behave in ways which unacceptably disrupt other persons and the community as a whole. On the other hand, the term “disorderly conduct,” by itself, is disorderly. This term is vague, giving no effective notice of what conduct is forbidden. Consequently, arresting officers may have great discretion to deem conduct as “disorderly.” In the worst case scenarios, constitutionally-protected expression and purely private behavior can be squelched as “disorderly.”

The drafters of the Model Penal Code (MPC) addressed this dilemma by limiting the concept of “disorderly conduct” to situations in which an individual deliberately or recklessly “cause(s) public inconvenience, annoyance or alarm.” From this perspective, there is no crime of disorderly conduct in private. Moreover, conduct is illegally disorderly only if an individual intentionally or recklessly inconveniences, annoys or alarms the public. In such decisions as Commonwealth v. Peace Chou, the Supreme Judicial Court of Massachusetts incorporated the MPC definition of “disorderly conduct” into Massachusetts law.

In light of this legal definition, Sgt. Crowley lacked probable cause to arrest Prof. Gates for disorderly conduct under either Sgt. Crowley’s description of events or Prof. Gates’. According to Prof. Gates’ narrative, he was arrested as he stepped onto his porch, before he made any public comments. As a legal matter, there is no disorderly conduct in Massachusetts without public impact.

Assuming instead the truth of Sgt. Crowley’s report, he still lacked probable cause to arrest Prof. Gates for disorderly conduct. Nothing in the police report suggests that Prof. Gates intended to inconvenience, annoy or alarm his neighbors or that his behavior, as described by Sgt. Crowley, satisfied the test of recklessness.

That, however, is not the end of the story.

President Obama in his July 22nd press conference called the arrest of Prof. Gates “stupid,” a term which implies that Sgt. Crowley acted irrationally, in bad faith, or both. Again, accepting Sgt. Crowley’s description of the events of that night, his decision to arrest Prof. Gates, while legally incorrect, was not “stupid” since, in Sgt. Crowley’s telling of the story, Prof. Gates’ behavior was abusive and intemperate. From this vantage, the arrest, while faulty, was understandable.

In contrast, accepting Prof. Gates’ statement as the correct version of events, what occurred that night was far worse than “stupid.” The narrative released by Prof. Gates describes him as calmly identifying himself to Sgt. Crowley as the occupant of his home. The Gates narrative then depicts Sgt. Crowley, without provocation or reason, arresting Prof. Gates for disorderly conduct when Prof. Gates stepped onto his porch, before Prof. Gates engaged in any public statements.

Each of these gentlemen, as well as the President, had his own reasons for participating in Thursday night’s brewski diplomacy. Nevertheless, these troubling questions persist. The carefully-crafted Gates and Crowley statements cannot be reconciled. In the former version, the arrest that night in Cambridge was totally unjustified. In the latter version, the arrest was understandable, albeit legally insufficient. Either way, President Obama’s initial characterization of the arrest as “stupid” was wrong, either unfair to Sgt. Crowley or too generous to him.

We should not mistake a feel good event with an authoritative resolution. Suds should not be confused with substance.

By Edward Zelinsky

When President Bush nominated my law school classmate Circuit Judge Samuel A. Alito, Jr., to the U.S. Supreme Court, I supported Judge Alito’s confirmation to the high court. Now that President Obama has nominated Circuit Judge Sonia Sotomayor to the Supreme Court, I favor her confirmation as well. To those who view the Supreme Court primarily as a forum for partisan struggle, this conclusion will seem anomalous. To those concerned about the rule of law, this conclusion will seem compelling.

In earlier times, Presidents reached across party lines in making Supreme Court appointments. President Truman, for example, appointed to the Court Senator Harold H. Burton of Ohio, a Republican. President Eisenhower similarly crossed party lines to nominate to the Supreme Court Judge William J. Brennan, Jr., a New Jersey Democrat. In today’s environment, such bi-partisan appointments are inconceivable.

When President Bush, with a Republican-controlled Senate, confronted a vacancy on the Court in 2005, the realistic expectation was that he would appoint a professionally qualified Republican. Judge Alito easily met that criterion and was properly confirmed by the Senate.

I supported Justice Alito’s confirmation not because I concur with every decision he has made or is likely to make. Indeed, I have disagreed with several of (now) Justice Alito’s decisions, most recently, District of Columbia v. Heller in which the Court read the Second Amendment as invalidating a gun control law of the District of Columbia. I supported Justice Alito’s confirmation because of his professional distinction, not because of his political ideology.

Similar observations apply to Judge Sotomayor. I will not agree with every decision she will make on the high court. Indeed, I disagreed with her participation as an appellate judge in Ricci v. DeStefano, which invalidated New Haven’s promotional examination for firefighters because too many white males passed the test. Recently, a five justice majority of the Supreme Court concluded that, indeed, Ricci was wrongly decided.

However, the relevant question is, given the pool from which Barack Obama will appoint Supreme Court justices, did the President pick a lawyer who is professionally qualified to sit on the nation’s highest court? By that criterion, Judge Sotomayor passes muster.

There are commentators, many quite distinguished, who find naive an emphasis upon a judge’s professional credentials. From their vantage, the Supreme Court has been and will continue to be nothing more than a cockpit of partisan struggle. Concern about professional qualifications is, from this vantage, at best unsophisticated, at worst a smokescreen for other agendas.

I respectfully suggest that it is those commentators who are indulging in naivete. President Bush in 2005 was going to place a conservative Republican on the Supreme Court. Similarly, in 2009, President Obama will place a liberal Democrat on the Supreme Court. Given those political realities, the question becomes whether the President, in satisfying his political imperatives, has nominated to the Court a professionally qualified appointee.

The professional qualifications of judges matter because of the role the courts play in our national life. Courts are where Americans go for the fair, principled application of law administered by a judge who is guided, not by the identity of the parties, but by legal norms and standards. All too often, the reality falls short of this ideal. Nevertheless, this ideal is an important part of America’s self-image and of our success as a nation: We believe in the rule of law. Our judges should thus be more than partisans. They should be legal professionals in the best sense of that term, knowledgeable, hardworking craftsmen who seek to administer the law in a fair and principled fashion. This commitment to professionalism should start with the judges at the pinnacle of the legal system.

To be sure, judges, particularly Supreme Court justices, are also policymakers. Many of the cases reaching the U.S. Supreme Court are there because conventional legal reasoning does not resolve them. Consequently, much of what the Supreme Court does entails choices of policy and political philosophy.

It is accordingly appropriate for Judge Sotomayor’s confirmation hearing to focus, not just on her professional credentials, but upon the substantive issues she will address on the Supreme Court. Supreme Court confirmation hearings (a relatively recent innovation in our constitutional history) have become an important and legitimate part of our national conversation – though I would urge the Republicans to approach this hearing with greater civility than many of his Democratic interlocutors brought to Justice Alito’s confirmation process. Judge Sotomayor’s hearing should be a dialogue befitting constitutional principles, not a partisan slugfest.

In short, I was for Sam and now, for the same reasons, I’m for Sonia.

By Edward Zelinsky

The torture debate has become its own form of torture. House Speaker Nancy Pelosi finds herself enmeshed in ongoing acrimony about what she knew and when she knew it. Former Vice President Dick Cheney has emerged as an outspoken defender of the Bush Administration’s interrogation policies. Unfortunately for him and his party, Vice President Cheney, like Speaker Pelosi, currently lacks credibility with much of the public.

Our public debate about torture will continue to be as unedifying as it is bitter until we move beyond the partisan counter charges and acknowledge some simple, albeit inconvenient, truths: In the wake of 9/11, we were scared – and justifiably so. In this environment, some practices took place which should not have occurred. The universal fear felt after the attack on the Twin Towers does not justify these improper practices. It does, however, explain them.

Though it was only eight years ago, it is difficult for many of us to recall the environment after the 2001 attack on the World Trade Center. That attack traumatized the United States. September 11, 2001 was, by some measures, the single bloodiest day in U.S. history. The general, and quite plausible, assumption was that the U.S. mainland would again be assaulted by terrorists. The overwhelming imperative, embraced by Republicans and Democrats alike, was to prevent or mitigate another 9/11-type onslaught.

It is now clear that the U.S. government did some things in the wake of 9/11 which it should not have been done. Federal agencies did these things, not because Americans are a bad or immoral people, but because we were frightened. Members of Congress, Democrats and Republicans alike, were informed of these practices and supported them – or at least acquiesced to them. Democrats today do not want to admit that they were complicit in these improper practices. Republicans do not want to admit that inappropriate practices occurred. Until we get past this unproductive posturing, we cannot have a serious and necessary national debate about the future.

In large measure, America’s response to 9/11 is cause for national pride. Despite the trauma of the World Trade Center attacks, there was nothing equivalent to the Red Scare of World War I or the World War II detention of Americans of Japanese descent. The spirit of McCarthyism did not reemerge after 9/11, in no small measure because President Bush carefully and consistently defined America’s battle as a fight against Islamic extremism, not against Islam’s believers.

Nevertheless, after the attacks on the Twin Towers, some things happened which should not have. Congressional Democrats and Republicans were informed and acquiesced. We need to explore these improper practices in a sober, careful way. Such an exploration must identify which practices crossed ethical and legal borderlines. Such an exploration must also help us understand how to deter such improper practices in the future while, at the same time, encouraging the aggressive protection of Americans and the American homeland. Such a measured debate will not interest the partisans determined to score political points. It will, however, be the way in which we pursue simultaneously our security and our national values.

By Edward Zelinsky

Many important decisions are embedded in the federal budget proposed by President Obama. Among these are the President’s embrace of the defined contribution paradigm. That paradigm promotes retirement savings through individual accounts such as IRAs and 401(k) accounts.

The Internal Revenue Code currently provides a savers’ income tax credit for lower income individuals who contribute to IRAs and 401(k) accounts. The Obama budget proposes to expand this credit and make it refundable. In addition, the Obama budget proposes to establish administrative infrastructure in the Department of Labor as the first step toward requiring employers without pension or profit sharing plans to enroll their employees in workplace IRAs.

Together, these two proposals commit the Obama Administration to the existing system of individual accounts as the prime means of encouraging private retirement savings.

Some observers had predicted a retreat from individual accounts in light of the Crash of 2008 and the consequent decline of most participants’ 401(k) and IRA balances. However, the Obama budget indicates that such a retreat is, so far at least, not occurring. Indeed, the Obama budget, if adopted as proposed, commits the federal government even more deeply to the individual accounts of the defined contribution paradigm.

Something similar happened after the fall of Enron. Enron’s demise devastated the 401(k) accounts of many Enron employees who held large quantities of Enron stock in such accounts. Some observers predicted that this debacle would force reconsideration of the individual accounts of the defined contribution paradigm. But, like Holmes’s dog that did not bark in the night, no such reconsideration occurred.

Similarly, the Obama budget signals that, in the wake of the Crash of 2008, the federal government remains committed to individual accounts for retirement savings. President Obama proposes to double our bet on IRAs and 401(k) accounts, both by enriching the tax-subsidy for low income persons who contribute to such accounts and by making such accounts universal in the workplace.

This decision puts President Obama in potential conflict with his allies in the union movement. Today, the last bastions of the traditional defined benefit plan are the unionized work forces of state and local governments. Taxpayers thus find themselves paying taxes for lucrative defined benefit plans for unionized state and local employees. And now the Obama budget makes clear to these taxpayers that their retirement savings future is financing their own 401(k) accounts — even as these taxpayers fund often rich defined benefit pensions for government employees.

President Obama has not embraced President Bush’s rhetoric about an “ownership society.” However, there is in substance great continuity in the retirement savings policies embodied in President Obama’s budget and the prescriptions of the Bush Administration. The Obama budget, by expanding the savers’ income tax credit and moving toward universal IRAs in the workplace, embraces the defined contribution paradigm.

By Edward Zelinsky

In recent remarks to the leadership of the AFL-CIO, President Obama and Vice President Biden affirmed their support of the Employee Free Choice Act. The Act is a priority of labor unions, a central element of the Democratic coalition. If enacted into law, the Act would effectively eliminate union recognition elections. Instead of secret ballot elections in which workers choose whether to belong to unions, the Act would amend federal law so that unions can achieve recognition based solely on public “card counts.”

Ironically, at the same time unions disfavor secret ballot elections in the workplace, many unions and their Democratic allies have aggressively advocated expanding the voting rights of corporate shareholders.

A similar paradox befalls the Republican Party. While the GOP has been stalwart in supporting workers’ right to vote in confidence on whether to join unions, the GOP has defended with equal fervor the efforts of corporate management to neuter shareholders’ voting rights. These efforts have been particularly troubling as corporate managers and quiescent directors have moved executive compensation packages into stratospheric levels and have denied shareholders the ability to vote their shares in protest.

No one has done a good job of explaining why workers should vote but not shareholders or vice versa. The underlying issue in both contexts is the same: the right of persons to vote confidentially on matters of importance to them. The secret ballot is the accepted method by which Americans exercise self-determination. Both as shareholders and as workers, Americans should enjoy a robust right to vote.

Just as President Obama’s endorsement of the Employee Free Choice Act highlights the issue of workers’ right to vote on unionization, the American Recovery and Reinvestment Act of 2009 (known to most Americans as “the stimulus bill”) underscores the question of shareholders’ voting rights. Under this Act, firms receiving federal funds from the Troubled Asset Relief Program must permit their shareholders to cast advisory votes on managerial compensation. But why just these firms? And why just advisory votes?

The limited voting provisions of the stimulus bill reflect the Obama Administration’s marked disinterest in giving shareholders the ability to vote on important matters, including questions of executive compensation.

Plausible arguments can be advanced both by those who would deprive workers of the right to vote on union representation and those who oppose shareholders’ right to vote on corporate policy. The procedures of the National Labor Relations Board, we are told, are so cumbersome that employers can delay union recognition elections inordinately and can create coercive environments when such elections are finally held. Shareholders, we are similarly told, often focus on short-term profits, rather than the long-term welfare of the corporation.

In the spirit of bi-partisanship advocated by President Obama, federal law should be amended to affirm the rights of Americans, both as workers and as shareholders, to vote. In the work place, unions seeking to represent workers should be required to obtain a majority vote by secret ballot of such workers. Similarly, important issues of corporate policy, most obviously the compensation packages of corporate managers, should be subject to binding shareholder votes by secret ballot.

While affirming the voting rights of workers and shareholders, Congress and the President should also address legitimate concerns raised by opponents of these voting rights. In response to the complaint that employers inappropriately delay votes on union organizing campaigns and create coercive environments, Congress should adopt administrable rules to prevent such delays and coercion and should appropriate the resources to enforce such rules effectively. In response to the complaint that shareholders ignore long-term corporate interests, Congress should similarly restrict voting rights to those shareholders who have owned their stock for a reasonable holding period and have thereby demonstrated a concern for the corporation’s long-term well-being.

With these protections in place, Democrats and Republicans alike should simultaneously affirm the rights of all Americans, both as workers and shareholders, to vote.

Mr. President: At the most basic level, the secret ballot is the American way.

By Edward Zelinsky

In light of the Democratic party’s control of both houses of Congress and the White House, it is probable that the federal government will continue to levy an estate tax when affluent decedents transmit their wealth to their descendants. The most likely possibility is that Congress will continue to exempt decedents’ estates valued less than $3.5 million while it taxes estates exceeding that threshold amount. In light of President Obama’s statements on the subject, it is also probable that such excess will taxed at a 45% rate when a decedent dies and leaves his wealth to his descendants.

Important details remain to be determined, e.g., whether the $3.5 million federal estate tax exemption will be adjusted annually for increases in the cost of living; whether various estate tax planning techniques such as family partnerships will be curbed or eliminated.

How ever these matters are ultimately resolved, the legislation perpetuating the federal estate tax should contain a provision subjecting to federal taxation all large intergenerational transfers of family wealth. Specifically, Congress should repeal the grandfather exemption from the federal generation skipping tax (GST) for irrevocable trusts established on or before September 25, 1985. This exemption unfairly immunizes from federal taxation transfers at death of “old” wealth while economically equivalent transfers of new wealth are taxed.

As an historic matter, the federal estate tax was often avoided through the use of so-called generation skipping trusts. When a decedent established such a trust, the trust continued for his children, grandchildren and great-grandchildren with no further federal estate taxation being due whenever any of these lineal descendants themselves subsequently died.

The term “generation skipping trust” was a misnomer. The trust didn’t skip any generations. The tax did. Families could continue to enjoy and grow inherited wealth in trust without paying federal estate taxes.

In 1986, Congress prospectively outlawed this planning technique by imposing the federal GST. The GST backstops the federal estate tax by assessing a tax on a death-related transfer of wealth in trust whenever an equivalent transfer outside of a trust would trigger the estate tax. Thus, with the GST in place, families can no longer use trusts to avoid taxation on intergenerational transmissions of large fortunes. Rather, federal taxation must be paid at least once in every generation.

However, Congress grandfathered from the GST transfers of wealth from trusts which were in existence and irrevocable on September 25, 1985.

This exemption creates for federal tax purposes an unfair and unconvincing distinction between new wealth (think Michael Bloomberg) and old wealth (think the Kennedys and the Rockefellers). Because of the federal GST, families inheriting new wealth now pay a federal estate tax or its equivalent at least once every generation. However, families inheriting old wealth live estate-tax free by virtue of the grandfathered status of tax-avoiding trusts established by such families’ patriarchs and matriarchs on or before September 25, 1985.

There are respectable arguments for and against federal estate taxation. However, if there is to be an estate tax, there is no convincing reason to treat differently old wealth from new wealth.

If, as the President Obama and the current Congress apparently believe, federal estate taxation represents sound social and tax policy, there is no warrant for continuing to exempt from such taxation some families simply because they had the good luck to make their fortunes before 1985. As part of its legislation continuing the federal estate tax, Congress and the President should eliminate the immunity from generation skipping taxation for intergenerational wealth transfers accomplished by irrevocable trusts established on or before September 25, 1985. For federal tax purposes, all inherited wealth should be taxed the same, whether it is “old” wealth or “new” wealth. The GST grandfather exemption should be abolished.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Zelinsky argues that President-elect Barack Obama should hope that Democrats do not obtain the sixty U.S. Senate seats which would enable them to shut down a Republican filibuster. A filibuster-proof Senate will make it more difficult for Obama to hold together the disparate coalition which elected him.

One important question remains from the 2008 election: Will Democrats occupy the sixty U.S. Senate seats which would enable them to shut down a Republican filibuster? Two Republican incumbents, Coleman of Minnesota and Stevens of Alaska, are still locked in tight battles for re-election. One Republican incumbent, Chambliss of Georgia, must win a run-off election in December to retain his Senate seat. Independent Senator Lieberman of Connecticut has reportedly indicated that he will join the Republican caucus if the Democrats punish him for his vocal support of Senator McCain’s presidential candidacy. Democrats now occupy fifty-seven Senate seats including Lieberman and independent Sanders of Vermont, who caucuses with the Democrats. If the closely-contested seats in Alaska, Minnesota and Georgia all go Democratic and if Lieberman stays in the Democratic caucus, the Senate Democrats would have the magic sixty votes to squelch a Republican filibuster.

One person in particular should hope that the Senate Democrats don’t reach this talismanic number: President-elect Barack Obama. A filibuster-proof Senate will make it more difficult for him to hold together the disparate coalition which elected him.

As James Madison famously noted, a majority in a large democracy invariably consists of different interests (what Madison called “factions”) assembled into an inherently unstable, tension-filled coalition. President Bush’s Republican majority included social conservatives, economic conservatives, libertarians, neo-conservatives – all of whom had some things which united them but many things which did not.

Similarly, the Obama coalition includes unions, minorities, social liberals, and economic moderates who agree on some things but not on others. Holding that majority together will require careful balancing. If the Democrats hold a sixty seat majority in the Senate, elements of the Obama coalition will credibly demand measures which other parts of that coalition oppose. In contrast, if the Republicans can sustain a filibuster, Mr. Obama can better finesse the tensions in his coalition by pinning failure on the G.O.P.

Consider, for example, the union demand that federal labor laws be changed to require recognition of unions without secret votes by the affected workers. No less a Democratic icon than Senator George McGovern has made clear that many Democrats oppose this proposal. If the Senate Democrats have the sixty votes which can stop the Republicans from filibustering this measure, the unions will demand that the new president deliver for them on this issue.

This, however, will alienate those parts of the Obama coalition who were persuaded that he is an economic moderate. If, in contrast, the Republicans can sustain a Senate filibuster, the President-elect has the perfect out: He can support the unions’ demand while counting on the Republicans to successfully filibuster and thereby save him from his commitment.

Or consider gay marriage. The voting results from California reflect the tension on this issue within the Obama coalition. As Californians voted overwhelmingly for Mr. Obama, they also voted against same-sex marriage. This result indicates the fissure between, on the one hand, those social liberals who supported Mr. Obama and favor gay marriage and, on the other, minorities and economic moderates who also supported Mr. Obama but oppose gay marriage. After their California defeat, gay marriage advocates may seek federal action to advance their cause. Mr. Obama can finesse this issue which divides his majority if he can point to the filibustering Senate Republicans as the barrier to federal recognition of gay marriage.

It may be true that to the victor belongs the spoils. But, under our system, to the victor also belongs the problem of holding together his winning coalition. And if the victor is too victorious, that problem can be severe.

The President-elect cannot openly say that he is better off with a Senate which the Republicans can successfully filibuster. But the political reality is that he is. Mr. Obama can control his unruly coalition more easily with external opposition in the form of a Republican minority capable of sustaining a Senate filibuster. President-elect Obama should want the Senate Republicans wounded, not down for the count.

(thanks to Ms. Fuse )

online until September 21st

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Zelinsky discusses the failure of House Ways and Means Chairman Charles B. Rangel to report on his federal income tax return Rangel’s rental income from his condominium in the Dominican Republic. Zelinsky contrasts that failure with the ethical standards established by Rangel’s legendary predecessor as Ways and Means Chairman, Wilbur Mills. Check out Zelinsky’s previous articles here.

For most Americans, there is a run-of-the-mill quality to reports that Congressman Charles B. Rangel of New York failed to report for federal tax purposes the income from his condominium in the Dominican Republic. Congressman Rangel, as Chairman of the House Ways and Means Committee, is the nation’s chief legislative tax writer. Predictably, Republicans have decried Congressman Rangel’s failure to comply with the tax law. Democrats, with equal predictability, have treated Representative Rangel’s problem as a nonevent.

For members of the tax community, however, Congressman Rangel’s troubles evoke a more profound specter, the ghost of Wilbur Mills.

For almost two decades, Mills was the legendary Chairman of the House Way and Means Committee. Like all legends, underneath this one was a flesh-and-blood human: Mills’s career terminated abruptly as a result of his ignominious relationship with Fanne Foxe. Fanne, “the Argentine Firecracker,” was the Ashley Dupre of the mid-1970s. Moreover, in no small measure, the contemporary financial problems of the federal Social Security system are attributable to the cost-of-living formula which Mills crafted to support his quixotic run for the presidency in 1972.

However, the positive side of Mills’s ledger far outweighs these negatives. Mills was the gold standard of a legislator, and our tax system is better for it. Mills mastered the details of the Internal Revenue Code as few, if any, other legislators have done in our nation’s history. Mills had a genuine concern about the quality of tax policy.

Moreover, Mills was not just concerned with the integrity of the tax law. He was equally sensitive to his ethical position as the nation’s chief tax writer. Mills famously prepared his own tax returns and took the standard deduction. He thought it unseemly for the Chairman of the House Ways and Means Committee to take the higher, legal deductions to which he was entitled.

Congressman Rangel blames his failure to report his full income on his accountant and wife as well as the operators of the condominium who provided little data. It is inconceivable that Wilbur Mills would have mounted such a defense. Indeed, it is inconceivable that Wilbur Mills would have made such a mistake.

The principles involved are basic to our tax system: U.S. citizens must report their worldwide incomes. Rents are income.

For the integrity of the tax system, Congressman Rangel’s problems could not have come at a worse time. While we do not know the precise number of U.S. citizens failing to report their off-shore incomes, the problem is serious. In such an environment, the failure of the Ways and Means Chairman, however inadvertently, to report off-shore income is, at best, troubling.

What should Congressman Rangel do? First, he should fess up. It will not do for the nation’s chief tax writer to blame the inaccuracy of his federal tax returns on his accountant, his spouse and his business partners. He should state, simply and publicly, that he failed the Mills standard.

Going forward, Congressman Rangel should announce that he will assume personal responsibility for his tax returns and will engage whatever professional assistance he needs to help him prepare those returns accurately. Finally, Congressman Rangel should extract something positive from this episode by announcing that the federal income tax returns of all members of the Ways and Means Committee (including the Chairman) will automatically be audited annually.

Wilbur Mills would have done nothing less.

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Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Zelinsky discusses the U.S. Supreme Court’s recent decision in MetLife v. Glenn. That decision, he concludes, unintentionally reinforces the trend from defined benefit to defined contribution plans. Under MetLife v. Glenn, employers which sponsor and administer defined benefit pensions operate under a conflict of interest which subjects their administrative decisions to greater legal scrutiny.

Wanda Glenn was an employee of Sears, Roebuck & Company (“Sears”) and, as such, was covered by the Sears long-term disability insurance plan. Metropolitan Life Insurance Company (“MetLife”) both administered and insured the Sears plan. Ms. Glenn applied for continuing disability benefits. MetLife, as plan administrator, denied Ms. Glenn’s application for benefits which, if granted, MetLife, as the plan’s insurer, would itself have paid.

Ms. Glenn sued. Her lawsuit made its way to the U.S. Supreme Court which held in MetLife v. Glenn that, in light of the discretion confided to MetLife by the Sears plan, MetLife’s denial of Ms. Glenn’s disability benefit was to be reviewed judicially under a deferential “abuse of discretion” standard. However, the Court further stated, MetLife, as plan administrator, operated under a conflict of interest since any benefits MetLife granted as such administrator MetLife itself also paid as the plan’s insurer. Hence, in assessing whether MetLife, as plan administrator, abused its discretion, the courts must, among other factors, “take account of the conflict” MetLife faced as a plan administrator which was also the plan insurer. Such conflict of interest might “act as a tie-breaker when the other factors are closely balanced.”

MetLife v. Glenn has engendered extensive discussion. However, so far, one aspect of this decision has gone unremarked: MetLife v. Glenn is one more unintended push from our legal system, nudging employers away from traditional defined benefit plans towards 401(k) plans and other similar defined contribution retirement arrangements. After MetLife v. Glenn, the administrative decisions of employers sponsoring and administering defined benefit pensions will typically be subject to greater legal scrutiny than will be the administrative decisions of employers sponsoring and administering most 401(k) and similar individual account arrangements. This greater scrutiny incents employers to shift from their defined benefit pensions to defined contribution plans.

Embedded in the traditional defined benefit pension administered by the sponsoring employer is the conflict of interest stemming from the employer’s obligation, as plan sponsor, to pay the costs of the plan — just as MetLife, as insurer, paid from its premium revenues the costs of the Sears disability plan. In the defined benefit setting, greater plan distributions to participants and beneficiaries require greater employer contributions to the plan. Consequently, any distribution denial by the employer sponsoring a traditional defined benefit pension implicates the conflict of interest in which MetLife found itself: If the employer as plan administrator denies plan benefits, it thereby reduces its costs as plan sponsor.

In contrast, an employer sponsoring and administering a typical defined contribution plan usually has no such conflict of interest since the individual accounts of such a plan belong to the participants. If, for example, an employer, as administrator of a 401(k) plan, denies a participant a hardship distribution from the plan, that denial does not decrease the employer’s costs; it merely delays the distribution to the participant of his 401(k) account until later. Since there is no conflict of interest in that setting, under MetLife v. Glenn, the employer’s decision will receive greater deference if challenged in the courts.

An important factor causing the decline of traditional defined benefit pensions and the concomitant rise of individual account arrangements like 401(k) plans has been the heavy regulatory cost imposed on defined benefit plans. MetLife v. Glenn represents the latest such cost, an unintentional cost, perhaps a small cost, but a cost nonetheless. Employers who sponsor and administer defined benefit plans are now on notice that, because of their conflicts of interest, their administrative decisions will generally receive less deference from the courts than will the comparable decisions of their competitors sponsoring and administering 401(k) plans who do not operate under such conflicts of interest. By itself, this will rarely cause an employer to terminate its defined benefit pension and shift to an individual account arrangement. But, to paraphrase the Supreme Court, this is the kind of cost which can act as a tie-breaker when the decision is close.

Consequently, Metlife v. Glenn, by reducing the deference ultimately granted to employers which sponsor and maintain defined benefit pensions, represents one more small, but unintended, push away from such pensions.

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Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Professor Zelinsky criticizes New York’s “convenience of the employer” doctrine for double taxing telecommuters at a time when public policy should be encouraging, rather than hindering, telecommuting. He calls on Congress to pass the Telecommuter Tax Fairness Act to stop such double taxation. Read his past OUPblog posts here.

A gallon of gas today costs $4.00 or more in most parts of the country. The public is concerned, as perhaps never before, about the impact of human activity on the global environment. In this setting, telecommuting has emerged as an environmentally sensitive and economically sensible lifestyle.
By permitting individuals to work at home for part (often much) of the work week, telecommuting removes telecommuters’ cars from the roads, thereby reducing traffic congestion, gas consumption, and automotive pollution. Telecommuting from home also opens job opportunities for persons for whom a conventional, daily trip to the work place is difficult or undesirable – parents’ of small children, disabled individuals, persons who live far from major employment centers. Telecommuting allows employers to hire these individuals who might otherwise withdraw from the labor force.

For all of these reasons, public policy should encourage, or at least not hinder, the growth of telecommuting. Unfortunately, the tax policies of the State of New York discourage telecommuting by double taxing out-of-state individuals who telecommute for New York employers from their out-of-state homes. In particular, New York’s so-called “convenience of the employer” rule imposes nonresident New York income taxes on out-of-state telecommuters on the days they work at home, often hundreds – if not thousands – of miles from New York.

Consider, for example, the recent case of Mr. R. Michael Holt, a human resources compensation consultant who lives in Naples, Florida. In 1999, Mr. Holt worked at his home in Florida for the New York offices of KPMG, LLP and William M. Mercer, Inc. Under the employer convenience rule, New York imposed nonresident income taxes upon Mr. Holt for the income he earned working at home in the Sunshine State, thousands of miles from New York.

When the state in which a telecommuter lives also imposes an income tax, the result of New York’s tax policy is double taxation as the out-of-state telecommuter who works at home must pay tax both to New York and to the state in which she lives. The result is an unfair and inefficient tax penalty for telecommuting, namely, the double taxation of the income earned by the telecommuter on the days she works at her out-of-state home.

New York’s policy is bad, not only for out-of-state persons who telecommute to the Empire State, but potentially for telecommuters throughout the nation and for the employers who employ such telecommuters. If New York can get away with double taxing out-of-state telecommuters, other states will be tempted to emulate New York and likewise tax nonresident telecommuters who work at their out-of-state homes. The upshot will thus be double taxation of telecommuters nationwide when public policy should instead be supporting telecommuting.

Unfortunately, New York’s courts have refused to stop New York’s double taxation of nonresident telecommuters on the days such telecommuters work at their out-of-state homes. In Huckaby v. Tax Appeals Tribunal, New York’s highest court, by a narrow but decisive margin of 4-3, upheld New York’s income taxation of Thomas Huckaby on the days Mr. Huckaby worked at his home in Nashville, Tennessee.

Pending in Congress is legislation which would prevent New York and other states from using the “convenience of the employer” doctrine or any similar artifice to double tax nonresident telecommuters on the days they work at their out-of-state homes. The Telecommuter Tax Fairness Act has attracted bi-partisan support from members of Congress who recognize the importance of telecommuting-friendly public policy.

It is unreasonable for New York to punish telecommuting by double taxing workers who telecommute for New York employers from their out-of-state homes, particularly at a time when sound public policy should encourage telecommuting. There is, however, no sign that New York will alter its irrational “convenience of the employer” rule. Congress should accordingly adopt the Telecommuter Tax Fairness Act to eliminate the ability of New York and other states to double tax nonresident telecommuters on the days they work at their out-of-state homes.

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Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, he criticizes proposals for the states to administer private sector retirement savings plans. Read his past OUPblog posts here.

Legislators throughout the country are proposing that states start to administer private sector retirement savings plans. While the details of these proposals vary from state to state, they all provide that the states should embark upon the business of managing private sector individual account arrangements.

In Connecticut, for example, the state senate, before recently adjourning, passed S.B. 652 which would have created a state-sponsored “universal 401(k).” This legislation would have mandated the state’s comptroller to establish and administer a state-run “tax-qualified defined contribution retirement program” for the self-employed, the tax-exempt institutions, and the “small employers” of the Nutmeg State.

On the other side of the country, currently pending in the California legislature is AB 2940. If enacted, this legislation would authorize CalPERS, the Golden State’s public pension plan, to accept from California residents payroll deposits for state-administered individual retirement accounts. Similar legislation has been introduced in a variety of other states.

The concern animating all these proposals is well-founded. The defined contribution paradigm has worked well for many American households, in particular, middle- and upper-middle families who save and invest through 401(k) plans and IRAs as well as the employees of large employers which sponsor and typically match such employees’ 401(k) contributions. Despite this success, it is troubling that lower-income workers and smaller employers are severely underrepresented in the individual account system.

This problem, however, has deeper roots than is acknowledged by the advocates of state-administered private sector retirement plans. The current retirement savings system relies heavily on the income tax benefits of contributing to tax-qualified arrangements such as 401(k) accounts and IRAs. Those tax benefits are substantial for middle class and more affluent workers who defer significant federal income taxation through their tax deductible contributions to such accounts.

However, low income workers today do not pay significant federal income taxes. They thus have little, if any, tax motivation to make 401(k) or IRA contributions. A deductible contribution is not a meaningful incentive for someone in a low or zero tax bracket. This would remain the case even if states compete with the private sector suppliers of retirement plans. A low-income worker who derives no tax benefit from a deductible IRA contribution at his neighborhood bank will similarly derive no tax benefit from contributing to an IRA administered by his state’s comptroller.

Moreover, even if they want to make such retirement savings contributions, most low-income workers lack the discretionary income to do so.

The private market for retirement savings products is broad and deep. Today, every reader of a major newspaper or of the internet is bombarded by the advertising of the financial services industry, selling 401(k) plans and IRAs. There is no market failure requiring state-provided retirement savings for the private sector.

There is, furthermore, an unintended irony in the idea that the states should ride to the rescue of the private retirement system. The states can’t keep in order in their own pension systems. The states’ underfunding of their own pension plans is today a serious problem. There is something untoward about states which cannot solve their own pension difficulties purporting to act as the saviors of the private sector retirement system.

There is an important step the states can take if they are serious about encouraging 401(k) and IRA participation among low-income individuals. In particular, the states could, in their own income taxes, match part or all of the federal savers’ tax credit which subsidizes the retirement saving of low-income persons by providing a tax credit if a low-income worker contributes to an IRA or 401(k) account.

However, there is no compelling case for the states to enter the private retirement savings business. Let them put their own pensions on solid financial footings first.

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Who am I and how do I look to others? Bob Raczka’s Here’s Looking at Me: How Artists See Themselves, an American Library Association Notable Book for middle readers, stimulates children to explore these two fascinating and important human questions. Fourteen artists’ self portraits, from Velasquez to Harlem painter Jacob Lawrence, introduce children to the many ways that visual artists portray themselves.

Parents and teachers who want kids to explore art on its own terms will find this primer on self-portraits much to their liking. In addition, check out Just Like Me, a multicultural collection of artist self portraits–along with artists’ statements and their childhood photographs–and this art workshop, based on Just Like Me. For some great online ideas about kids’ self-portraits, click here.

Finally, following up on my series of posts on spiritual literacy, here’s Concord Magazine’s gallery of spiritual self portraits by children.