Law: It Doesn’t Serve Our Interests

December 21, 2015

Law can be viewed from many perspectives. Of late I’ve been working through how laws do (and too often don’t) serve our interests.

Let’s take criminal law. Traditionally, state laws have governed criminal conduct. Not so much anymore. Gary Fields and John Emshwiller wrote As Criminal Laws Proliferate, More Are Ensnared for the Wall Street Journal in July 2011. The article includes some great examples of conduct which should not be criminalized. Most telling is the fact that no one knows how many federal criminal laws exist. A law professor, the Justice Department and the American Bar Association have counted, and get no closer than estimates of 4500, 3000, and “much higher than 3000,” respectively.

Then there is the area of employment law. Federal law draws a distinction between employees and independent contractors. The difference matters, as it relates to pay, benefits, and payroll withholding/taxes. Here’s Independent Contractor (Self-Employed) or Employee? from It’s the lay version of the 20-factor test which is set forth in Rev. Rul. 87-41. Other, similar tests get used by courts and other governmental bodies. Unfortunately, none of the tests provide answers for Uber and other companies/industries on the cutting edge of providing market-driven solutions. Courts are wrestling with a plethora of Uber-driven issues, in light of binary laws—you’re an employee or an independent contractor, and that’s that and that’s final—which just don’t answer real questions

Uber and its counterpart in the hospitality industry, airbnb, face another set of issues. Cabbies and hoteliers must comply with a slew of regulations, designed for public safety and financial protections. And, traditional bed providers pay taxes. (There’s nothing like a tax which can be imposed on visitors from “somewhere else.”) The regulations do not serve their intended purposes in every instance, but our society is not yet ready for a totally unregulated environment. That said, and as a committed airbnb user, the lodging industry’s complaints about unregulated competitors resonates. Ditto for medallion owning cab drivers who must compete with regular guys and gals with nice cars.

Lastly, I was talking with a friend about a provision in the Internal Revenue Code which attempts to insure that estates and those who receive property use the same basis. Basis is cost less depreciation for real property, but there is a “step-up” to the date of death value. “Riddled with holes,” my friend noted. Basically, if you inherit property from an estate which did not file an estate tax return—only about 1% of estates do—you can decide your own basis and, thus, your profit when you sell the property.

Certainly, some of the issues I have raised are complicated. And legislatures are inherently conservative, as they ought to be when they are making laws.* Still, our legislatures are simply not providing us with the necessary tools to move forward in the 21st century.

Why do we have an expanded number of federal crimes? Congress writes federal laws, and in a “dumbed down” world nothing feels more like an accomplishment than defining a new crime.

And why don’t we have solutions for legal issues which arise out of a technology-driven economy. First, the solutions are complicated, and most legislators don’t have the candlepower or interest which is necessary to find solutions. Second, existing businesses have a big stake in preventing change, and they buy legislators like I buy Honest Green Tea: early and often. Finally, legislatures work part-time. Congress gets three days a week from its Senators and Representatives, when it’s in session. State legislatures are almost all operating as part-time bodies, by design.

We live in a fast-paced world. Opportunities abound. Unfortunately, legal systems in the United States of America are sclerotic, and that fact is holding us back.



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