Category: JOL Commentary

The Standard Business Deduction

Kathleen DeLaney Thomas*

In 2017, Congress passed the most sweeping tax reform bill[1]the country has seen in over 30 years.[2]The new legislation responded to many long-held concerns about the U.S. tax system, particularly that taxes were too high and that the corporate and international tax regimes were not competitive.[3]In response to those concerns, Congress lowered individual income tax rates, drastically reduced the corporate tax rate from 35% to 21%, and shifted away from a worldwide system of international taxation.[4]The bill also lowered taxes for pass-through businesses, such as partnerships, S-corporations, and sole proprietorships, by offering a new deduction for up to 20% of the business’s net earnings.[5]

In the months leading up to the tax reform bill, members of Congress also promised much needed simplification of the U.S. tax system, even going so far as to suggest that future tax returns would fit on a postcard.[6]In one respect, Congress delivered on this promise to simplify the tax system. The new legislation doubled the standard deduction, from roughly $6,000 to $12,000 for a single individual.[7]This means that individuals will now claim itemized deductions (e.g., charitable contributions or mortgage interest) only if, in the aggregate, those deductions exceed $12,000 ($24,000 for a married couple filing jointly). The higher standard deduction essentially means that fewer taxpayers will itemize their deductions, which saves time and simplifies tax return preparation.[8]

However, while the 2017 Tax Reform Bill simplifies personal deductions, the legislation does virtually nothing to simplify the tax rules for businesses. Small business owners will not see any reduction in complexity for reporting income, tracking expenses, or preparing tax returns. Instead, the new pass-through deduction only adds further complexity by inserting more steps into the process of calculating a business’s net income.

In short, Congress failed to deliver on its promise to provide simplification when it comes to small business owners. Congress could do more to reduce the complexity faced by these taxpayers, who must pay estimated taxes, track business expenses, and file complicated tax returns. To that end, this essay proposes a “standard business deduction.”[9]

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What is “Disabled?”: Ménière’s Disease & the Americans with Disabilities Act (ADA)

By Thomas Tobin, JD ’16, Harvard Kennedy School MPP ’16[*]

The Americans with Disabilities Act (ADA) prohibits American employers from discriminating against individuals due to disability.[1] As a threshold matter, individuals bringing suit under the ADA’s anti-discrimination provisions must demonstrate that they are “disabled.” While individuals with Ménière’s Disease often suffer impairments to their personal and professional lives, are they “disabled” for purposes of the ADA?[2] Legal precedent provides prescient lessons for individuals with Ménière’s Disease as they seek relief for alleged discrimination or unfair termination at work.

Ménière’s Disease often manifests itself in unpredictable, episodic attacks of nausea and vertigo. While Ménière’s Disease is a progressive, long-term condition, many individuals may experience remission for several months and even years between attacks.[3] Unfortunately, the episodic nature of Ménière’s Disease created a challenge for many individuals in proving their “disabled” status under the ADA.

The ADA does not provide protection for “every individual with an impairment who suffers an adverse employment action.”[4] Individuals bringing suit must prove by a preponderance of evidence that they have a disability.[5] “Disabled” status is defined by statute and occurs when an individual suffers from “a physical or mental impairment that substantively limits one or more of the major life activities.”[6] Hearing, walking, and working are among the statutorily-defined major life activities that may be potentially affected by Ménière’s Disease.[7]

In order to prove a “substantial impairment,” an individual must demonstrate that the impact of the “disability” is permanent or long-term.[8] American courts often follow a long-standing rule that intermittent manifestations of disease processes are insufficient to establish a substantial limitation on a major life activity.[9]

Simply being diagnosed with Ménière’s Disease is not sufficient to warrant “disabled” status under the ADA.[10] In Perkins v. St. Louis County Water Company,[11] a construction worker suffering from Ménière’s Disease was repeatedly absent from work and claimed that several of his absences were due to the disease. The worker’s condition caused permanent hearing loss and occasional episodes of vertigo and vomiting. Even though Ménière’s-related episodes caused the worker to miss over two-and-one-half weeks of work, the court ruled that it was insufficient to render him unable to do his job or limit his major life activities.[12] While Perkins could conceivably be read to foreclose the ability of Ménière’s Disease patients from attaining “disabled” status, one judge in the three-judge panel went so far as to specifically note that Ménière’s Disease is not “outside the bounds of disability per se.”[13]

Plaintiffs with Ménière’s Disease have, at times, struggled to marshal adequate evidence to prove their “disabled” status. In one case, a public school teacher sought accommodation for Ménière’s Disease so that she could avoid excessive walking and ascending stairs. [14] Treatment notes found that her problems with Ménière’s Disease were exacerbated by stair-climbing and rocking. Still, her supervisors “openly questioned the nature and existence of her ailments.”[15] Ultimately, her case was dismissed for insufficient evidence that the teacher suffered from a disability that substantially limited a major life activity.[16]

In McGuire v. Miami-Dade County, a computer technician with Ménière’s disease alleged that her condition caused seizures and problems with her mobility and balance.[17] She described her limitations thusly,

I lose balance. I have to lay down. I am dizzy. I vomit a lot. Those are the attacks, but in general when I handle this condition, most of the time I’m dizzy and, at some point, noises start to bother me.[18]

The federal court was unconvinced that the limitations of the employee’s Ménière’s disease were more than temporary.[19] The court called the worker’s allegations “vague” as they did not explain with adequate specificity exactly how her condition affected her or she was affected in comparison to that of the average person in the general population.[20]

Whether an individual is “disabled” is a fact-specific inquiry, often necessitating case-by-case judgment by the courts.[21] Even if a court accepts that Ménière’s Disease is a disabling condition, it must further find that the impairment substantially limits an individual’s major life activity, such as hearing or walking.[22] Ultimately, the court must be convinced that it is a disabling condition rather than an individual’s conduct that resulted in the discriminatory action.[23] The story of Patricia Brennan provides insight on what plaintiffs should guard against when approaching the courts regarding Ménière’s Disease claims.

Illinois social worker Patricia Brennan suffered from Ménière’s Disease, complaining of dizziness, decreased hearing in one ear, vertigo, and loss of balance.[24] She was subsequently terminated, and she brought suit against her former employer claiming it had failed to accommodate her disability. The Brennan court and the parties did not dispute that Ménière’s Disease was an impairment, but they contested whether Brennan was “disabled” as a result of the condition. Even as her doctor had characterized her hearing loss in her left ear as “severe,” the court claimed that she had:

offered no evidence to show how that loss affected her overall ability to hear in comparison to that of an average person in the population, whether the loss was mitigated by the use of a hearing aid and whether, when the loss occurred, it was expected to be temporary or permanent.[25]

The court went on to note that she had an operation restoring her hearing after she was dismissed from her job. Moreover, the court declared that the social worker’s ability to walk was impaired during episodes of vertigo, but the record showed that her walking was not impaired when she did not have vertigo.[26] The court dismissed her claim for insufficient evidence.

It is an unfortunate reality that individuals may suffer from employment discrimination due to their Ménière’s Disease. In order to prevail in court and prove their claim, they must demonstrate evidence of how they are affected by the condition. It is often necessary to provide sufficient evidence to (a) establish that one has Ménière’s Disease and (b) demonstrate how it is disabling in order to prove “disabled” status.

For example, a utility worker at a tire plant was found to suffer from hearing loss and tinnitus after multiple tests. [27] His employer was required to conduct annual hearing tests, the standard threshold shift test, to determine whether the plant caused its workers permanent hearing loss.[28] This worker was dismissed from his job after his employer claimed that he falsified the hearing tests. The court found there was sufficient evidence that he did not adulterate his test results. Instead, he suffered from Ménière’s Disease which would explain his abnormal test results.

In another case, a bank teller in Ohio suffering from Ménière’s Disease was subjected to teasing at work for her vertigo and hearing loss.[29] Even while her hearing loss was self-described as “profound,” the teller’s colleagues and supervisors were “snickering and laughing.” From the available evidence, the court concluded that the teller’s hearing loss was permanent, not temporary.[30] Her former employer claimed that the teller’s non-use of a hearing aid was proof that her hearing could have otherwise been controlled and was not disabling. In this case, the teller testified with specificity and had corroborating doctors’ notes that showed that her Ménière’s Disease had caused total hearing loss in her left ear, a reduction of her hearing in her right ear, and vertigo and constant tinnitus.[31] According to the teller, a hearing aid would be “of no value.”

Ultimately, whether an individual is “disabled” is a fact-intensive inquiry for the courts. To prove that one is “disabled” due to Ménière’s Disease under the ADA means to prove by a preponderance of the evidence that it affects one or more of an individual’s major life activities. Future claimants can learn from past precedent, which all too often has found insufficient evidence to prove “disabled” status. To increase the odds of prevailing, future claimants should assemble available medical evidence to substantiate and corroborate their listing of symptoms, document the extent of their limitations to fundamental life activities due to Ménière’s Disease, and communicate clearly the extent of these limitations to court officials, especially in a deposition. Further, a best practice would have an expert, such as a physician or audiologist, detail specificity exactly how Ménière’s Disease has affected the individual in comparison to that of the average person in the general population.

Obtaining “disabled” status under the ADA is a threshold issue to achieving its statutory protections. The episodic nature of Ménière’s Disease can create a significant barrier for individuals to avail themselves of the ADA’s relief. Such barriers may be especially high if defendants attempt to confine Ménière’s-related impairments to an intermittent manifestation of a disease process not worthy of “disabled” status.[32] By detailing the extent of these impairments, future plaintiffs can express their arguments in terms of major life activities and better present evidence before the court to surpass this critical threshold. In doing so, claimants can further educate courts about the disabling nature of Ménière’s Disease for many individuals and specifically how it has affected them. Documenting the disabling nature of their condition can assist individuals with Ménière’s Disease in obtaining “disabled” status.

[*] Tommy Tobin recently served as Instructor of Law at UC Berkeley’s Goldman School of Public Policy, where he taught a module on food law and policy.

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Making Cities Work

By Nino Monea JD ‘17

National elections dominate the news. But precious little policy is actually coming out of Washington these days. And officials there are often disconnected from our daily lives. At the local level, the challenges of how to run an effective city may appear more mundane on the surface, but that does not mean they are less important, or less complex.

Among the most persistently vexing questions that local leaders face is how to attract families and businesses. In January, professors from Wayne State University and Michigan State University published a working paper that found that virtually all trendy economic development strategies employed by cities over the past several years, such as building casinos, are not the driving force behind growth.[1]

Many cities attempt to spur economic growth using unproven techniques. Casinos are a perfect example of economic snake oil. In Atlantic City, lawmakers successfully pushed casinos on a skeptical population with the promise that the casinos would dedicate 2% of their annual revenue to the “health and well-being” of the city.[2] After being built, the casinos were able to subvert the “health and well-being” part of the deal through a legal loophole.[3] Much like the slot machines that they peddle, casinos usually have long odds for the city.

Rather than creating long-term growth, these sorts of projects often amount to little more than spitting matches between states. In 2013, then-Texas Governor Rick Perry made headlines for buying television ads in California encouraging businesses in the Golden State to relocate to Texas.[4] The end result is not that new jobs are created; they are simply relocated.[5]

Last year, Boston fervently attempted to win its bid to host the 2024 Olympic Games. The bid was vigorously opposed by the community group No Boston Olympics, which pointed out that the average price tag to an Olympic host city is $15 billion.[6] The group also cited research that shows Olympic Games are bad investments. In fact, there has never been a profitable one, unless accounting tricks are used to gin up the numbers, such as counting subsidies from the government as revenue.[7]

At least Boston had a relatively happy ending, as the community activists ultimately won and forced the city to drop its bid,[8] and so the city did not end up losing any money. The same cannot be said for Brazil, which hosted the 2014 World Cup. The country spent $600 million to build a massive stadium in the rainforest city of Manaus that was used for all of four games.[9] Another World Cup stadium cost Brazil $550 million and is now being used as a parking lot.[10] This is a tremendous waste, given that, in Rio de Janeiro alone, over 200,000 people lack adequate housing.[11]

Of course, not everything in life can be measured in dollars and cents. There can be perfectly legitimate reasons to invest in public projects that do not return a profit. The Hubble Space Telescope has not earned a dime, but that doesn’t make its photos any less stunning, or the knowledge about the universe that we have gained from it any less profound. But at the same time, if the goal of a project is explicitly to bolster economic growth, municipal leaders need to be upfront about what works and what does not.

In addition to being honest about which projects work, we also need to ask whom the projects are working for. In Detroit, casinos did honor their agreement to hire at least 51% Detroit residents, but several years after their development, there was no black representation in the casinos’ ownership, and the entry-level workers saw lower-than-expected wages.[12] Moreover, the promise that the casinos would deliver $73 million for minority- and women-owned businesses never came to be.[13]

In Boston, wealthy developer John Fish appeared to be the principal beneficiary from hosting the Olympics. Although he pledged to not bid on any projects, he said he would pursue contracts with transportation and college building agencies that would likely see upgrades in preparation for the games.[14] Conversely, many areas around the state would not have seen any investments from the Olympics.[15] Even worse, in Brazil, hundreds of thousands were displaced when their communities were bulldozed to make way for the gleaming new stadiums.[16]

So is there anything that cities can do? According to Professor Laura Reese, a co-author of the economic development report from January, the solution is straightforward: “[j]ust run a good basic city.”[17] To do this, city leaders should invest in things such as education, which is more strongly connected to economic growth.[18]

While investing in public schools and basic municipal services probably is not as glamorous as a shiny new development project, it is a sounder strategy. It is no secret that there are tremendous benefits of early childhood intervention programs —particularly in low-income communities. A Rand Corporation survey of well-designed early childhood intervention programs found a litany of benefits ranging from higher academic achievement to lower delinquency and crime rates, and even greater success in the labor market down the road.[19] The return on every dollar invested ranged from $1.80 to a whopping $17.07.[20] The studies tended to the largest returns when long term benefits, such as careers and reductions in crime.

The benefits of a strong education system can also have benefits for people other than the individual students. For all of the efforts municipal leaders take to woo businesses with one-time investments or tax breaks, companies often want a trained workforce – something education is crucial to accomplish. That explains why local auto dealers have donated equipment to help with vocational training programs at Arizona high schools.[21] They see it as a way to help increase the number of skilled technicians in the area that they hope to later hire.[22]

More broadly, a report from researchers at Napier University in Edinburgh examined what factors businesses consider when deciding to locate or relocate. They found that some of the most important factors were a well‑educated workforce and low crime rates.[23] On a similar note, the U.S. State Department has put together a list to help its employees decide where to live when they are deployed on tours to new locations. It urges families to consider social networks, career opportunities, and educational opportunities.[24]

This should not come as a surprise. When families and businesses have to make long-term decisions, they look at the fundamentals, not frivolities.

Rather than putting all of a city’s eggs in one basket, the better course is to focus on core issues that have widespread appeal. Nearly everyone wants good schools, safe communities, and robust municipal services. If a city gets these things right, people and businesses will come, and entertainment venues that the community wants will naturally flow from that.

All this goes to prove the wisdom of Lee Brice’s advice on the secret to success: “Don’t outsmart your common sense.”[25]

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A Beginner’s Guide to Legislative Drafting
By Deborah Beth Medows, Senior Attorney, Division of Legal Affairs, New York State Department of Health[*]

The ability to impact society through well-written legislation is unparalleled. As President Barack Obama stated, “A good compromise, a good piece of legislation, is like a good sentence. Or a good piece of music. Everybody can recognize it. They say, ‘Huh. It works. It makes sense.’”[1]

As a newly admitted attorney, you will need to know how to draft legislation if you choose to work as a legislative attorney. One of my earliest legal experiences occurred after I was appointed as Assistant Counsel to the New York State Legislative Bill Drafting Commission. I found myself drafting for the New York State Assembly and the New York State Senate, and advising on the constitutionality of the proposed legislation. Legislative attorneys may have different roles and state requirements can differ, so you will need to draft within the scope of your role and jurisdictional requirements. However, these are the general lessons that I gleaned from my own experiences.

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