Taking a Stand
Page 14
Around the same time equitable sharing was instituted, the DOJ came up with its own souped-up version of the civil forfeiture law, called substitute assets. Feds could now estimate how much money a drug dealer in their sights made and then confiscate property of equal value.
Not to be outdone, the IRS (what would any scandal be without them?) has its own role in this. In 1970, Congress passed the Bank Secrecy Act, which required financial institutions to report all deposits of $10,000 or more. This includes multiple deposits if the bank suspects the person is trying to circumvent the ten-grand threshold. The practice is called “structuring.” Again, the idea of the law was to catch money launderers and drug dealers. So what could possibly go wrong? Well, how about this: the IRS uses the law to target individuals, business owners, and everyday Americans who they suspect of tax evasion. They don’t file a criminal complaint. They just seize the money in the bank account and leave the account holder with the burden of proving their innocence. As is the case with asset forfeiture laws, many people just give up. According to the Institute for Justice, a public interest law firm that battles civil forfeitures, the frequency of these raids by the IRS has increased markedly over the past decade or so.18 Only after an investigative piece appeared in the New York Times did the IRS promise to curtail the practice. If your view of governmental overreach is anything like mine, a promise from the IRS does not instill much confidence.
Stacks of cash, unchecked power, and little oversight, what could go wrong?
Well, take Bal Harbour, a town of about 2,500 people in the Miami area. Known for its luxury shopping, Bal Harbour is virtually crime-free. According to city crime rate data, between 2007 and 2012 Bal Harbour had a total of no murders, no rapes, and no robberies. There were, however, eight cars stolen in those five years.19
Yet in one month’s time, Bal Harbour cops confiscated $3 million in civil asset forfeitures, which is a record for police departments throughout Florida, including the Miami PD. The tiny force became something of an assets forfeiture road show. Although Bal Harbour officers made few arrests, they traveled around the country infiltrating drug organizations and seizing cash and property. They paid hundreds of thousands of dollars to informants. Bal Harbour cops flew first class to Vegas and to the California wine country on the tail of drug dealers. They spent the confiscated cash as quickly as it came in, including: $100,000 for a thirty-five-foot boat powered by three Mercury outboards, $108,000 for a mobile command truck equipped with satellite and flat-screen TVs, $25,463 for next-generation Taser X-2s. There was $7,000 for a police chiefs’ banquet, $45,839 for a Chevy Tahoe, $26,473 for Apple computers, $15,000 for a laser virtual firing range, and $21,000 for an antidrug beach party.20
Given all that crime-fighting gear, I feel sorry for the eight Bal Harbour car thieves.
Bal Harbour might be an extreme example, but it’s certainly not the only one. The number of police departments that seek to profit from civil asset forfeiture continues to grow, and abuse of the law continues to astound. Throughout its history, civil asset forfeiture has provided police and prosecutors such creature comforts as tanning beds, gold-plated police whistles, and even a weekend home called the Ponderosa.21 My intention is not to be antipolice here. I am not. What I am against is the policy that allows these abuses to happen.
In 2000, Congress tried to rein things in by passing the Civil Asset Forfeiture Reform Act (CAFRA), which requires that federal prosecutors prove “a substantial connection between the property and the offense.” It also allows the people whose property was confiscated a day in court to prove themselves as “innocent owners,” which gives them a little leverage, but is still far from the standard of innocent until proven guilty. Many prosecutors, Loretta Lynch prominent among them, continue to abuse civil forfeiture. During her time as U.S. Attorney for the Eastern District in New York, she confiscated $113 million. From one company that sells candy and snack foods, she confiscated $446,000. It took the owners two and a half years to get their money back. Lynch avoided CAFRA reforms by keeping the cash but not ever filing the civil forfeiture action in court.22
Luckily for Russell Caswell, his motel had its day in court, and it was, literally, the motel that was on trial. The case was labeled the United States of America v. 434 Main Street, Tewksbury, Massachusetts. In January 2013, a federal magistrate ruled that Russell had met the “innocent owner” standard. “This court finds it significant that neither Mr. Caswell, nor anyone in his family, nor anyone over whose behavior he had any control, was involved in any of the drug-related incidents,” wrote Magistrate Judge Judith G. Dein of the U.S. District Court. “There was no reason for Mr. Caswell to suspect that every guest, or even a particular guest, who was coming to the Motel would engage in illegal behavior… Courts do not expect the common landowner to eradicate a problem which our able law enforcement organizations cannot control.”
If Russell’s case hadn’t caught the attention of the press and the Institute for Justice, he would have most likely lost his motor lodge, according to statistics.
The Texas State Legislature has ordered Tenaha police to stop making roadside stops, like the one that involved James Morrow, which resulted in civil asset forfeiture. Finally, this past January, the Justice Department rolled back much of the equitable sharing portion of the civil asset forfeiture law, but did so only after extraordinary pressure by me and many others in Congress. In addition to speaking out repeatedly against civil asset forfeiture, I introduced the FAIR Act, which sought to change federal law by requiring that the government prove its case with clear and convincing evidence before forfeiting seized property. My bill would reform civil forfeiture to restore the presumption of innocence. If my bill passes, the government would not be able to confiscate property without a jury first deciding upon a conviction.
Despite our victory over equitable sharing, civil asset forfeiture abuses continue. Stop one case of abuse and another pops up. Why shouldn’t it? There’s big money to be made. The FBI’s website describes assets forfeiture as a way to take “the profit out of crime.”23 But for law enforcement at the local levels it’s a growth industry. In 1985, civil asset forfeitures totaled $27 million. In 2113, they had ballooned to $4.2 billion.
According to the Institute for Justice, the City of Philadelphia alone has seized more than a thousand homes, 3,200 vehicles, and $44 million in cash in the past decade or so. The DAs in Philly pad their budgets with $6 million a year in forfeiture cases.
In a recent case there, a couple’s home was forfeited after their twenty-two-year-old son was caught selling $40 worth of heroin to an undercover police officer. The parents had no idea their adult son was even involved in drugs. According to one recent poll, prosecutors estimate that between 50 and 80 percent of the cars they seize belong to a person other than the driver, usually a family member such as a parent or grandparent.24
Little of what is forfeited is returned to the people who are innocent of any wrongdoing. In St. Louis County, in which Ferguson is located, authorities seized more than $220,000 in forfeiture raids and returned less than $2,000 in 2012. This despite the fact that only seven of the eighty-eight cases of civil asset forfeiture resulted in criminal charges being filed.25
While there is no explicit racial bias in civil forfeiture laws, they result, like everything involved in the war on drugs, in the unfair punishment of a disproportionate number of minorities.
I spend much of my time battling our gargantuan federal government, and still I can’t keep up with all the damage it does, everywhere, every day, and in countless ways. As former White House adviser David Axelrod said recently in defending President Obama over one of the many IRS scandals: “Part of being president is there’s so much beneath you that you can’t know because the government is so vast.”
Interestingly, neither Axelrod nor Obama has ever shown much concern in taming the federal beast. In fact, virtually every solution they offer makes government bigger. This often leaves the individual Ameri
can citizen defenseless against a system so relentless that even its greatest champions can’t seem to comprehend or control it.
Here’s what I believe. Our criminal justice system is built on the immutable fact that the burden of proof should always be on the government. That statement has no wiggle room, and it applies equally to all Americans.
Civil asset forfeiture, offender-funded justice, and other policy-driven law enforcement abuse must be stopped in its tracks. The FAIR Act and other legislation I’ve introduced goes a long way to doing just that. But more needs to be done, and it needs to be done from the top down. There is a simple answer to government overreach. It is called the Constitution.
10
Economic Freedom
When government picks the winners and losers we usually end up with the losers.
When I spoke at the Detroit Economic Club a few months back, I opened my talk by telling the story of the little girl who wrote a letter to God asking for a hundred dollars. When the postman saw the letter he thought it was cute and decided to address it to the president. The president’s secretary read the letter and told her boss about it. The president, too, thought the letter cute and told his secretary to send the little girl a $5 bill and a note signed by him.
When the girl opened the letter from the White House she looked curiously at the five bucks. Her parents had taught her well. She sat down to write a thank-you note.
“Thanks, God, for the money,” the note began. “But next time don’t send it through Washington. They stole 95 percent of it.”
At the time I spoke there, Detroit had entered into the largest municipal bankruptcy in U.S. history—over $1.3 billion. Once home to nearly 2 million people, only 700,000 remain in Detroit, and unprecedented urban decay surrounds many of them. According to Detroit’s Blight Removal Task Force, as of this writing, more than a third of the city’s buildings are condemned and headed for demolition.
Since the day I spoke there, Detroit has come through its bankruptcy and, thanks in no short measure to the people who live there, has begun to valiantly fight its way back. Yet too many poor and disadvantaged individuals continue to struggle with little hope of breaking the bonds that keep them marginalized.
I promised the people of Detroit to come up with a plan to help those who have lost hope. My plan will not only help Detroit. It will help depressed areas across the country.
Those are not just empty words.
The answer to the problems Detroit and other places like it face is right in front of our noses, if we only open our eyes.
American cities, towns, and rural communities that are mired in blight and unemployment already possess the best natural resource available: the residents who live there, people who are willing to work, people who are willing to start new businesses, and people unwilling to exist on a free ride.
Lisa Schlossberg is a young intern who works for Quicken Loans. She wrote in a company journal, “Detroit is unstoppable.” She’s right.
Thanks in large part to Quicken Loans and the company’s owner, Dan Gilbert, downtown Detroit has already staged a miraculous turnaround, and the excitement of downtown is starting to spread outward to all reaches of the city. Residents and shop owners aren’t waiting for government assistance—they’re cleaning up their own neighborhoods.
Detroit Survivors/Entrepreneurs
A few years back, two college students from the University of Michigan started the Michigan Urban Farming Initiative in Detroit’s North End. Once home to the Motor City’s black elite and Motown stars like Aretha Franklin, Smokey Robinson, and Diana Ross, the North End has suffered some of the worst urban decay in modern American history.
The farming initiative began by clearing the rubble from a one-acre abandoned lot and cultivating the ground. In 2013, the urban farm produced 12,000 pounds of organic Detroit-grown, Detroit-sold, and Detroit-bought vegetables, filling the streets and nearby abandoned buildings with fresh aromas and views of green space.
Then there’s Detroit Dirt, a composting company that collects plant-eater manure from the Detroit Zoo and food scraps from local restaurants and recycles them into mineral-rich fertilizer. The company’s cofounder is Pashon Murray, who’s been featured in a Ford commercial and won Martha Stewart’s American Made Award.1
In Detroit’s Midtown neighborhood, new restaurants, coffeehouses, and clothing stores are opening where illegal drugs and prostitution once flourished. The neighborhood is literally bursting with entrepreneurship.
Our ancestors came here hungry. Their hunger drove their desire to work. Their hunger drove their desire for education. Their hunger drove their desire to freely follow their faith. They came to Detroit from Eastern Europe, from Ireland and England. They came from the Southern states during the Great Migration. The auto industry in Detroit, specifically the Ford Motor Company, was like a beacon for African Americans searching for a better life. They were willing to work and shed blood, sweat, and tears, and they carried the Motor City on their backs.
I believe that ambition is still alive in Detroit. I believe it’s still alive in eastern Kentucky—I see it in the faces of the miners. It’s alive in Mobile, Rockford, and Toledo. We just haven’t given these communities the chance.
Government stimulus packages haven’t worked because they insist on picking winners and losers, doling out money to firms that are politically well connected or located in congressional districts that benefit the ruling party. Firms without political connections or the ability to navigate bureaucratic hurdles, or that are deemed unimportant to Washington, will lose out. When government picks the winners and losers we usually end up with the losers—think Solyndra. The president gave a $500-million loan to one of the richest men in the world to manufacture a product nobody wanted. Imagine, instead, those millions left by tax breaks in the pockets of the hardworking people of Detroit. Think of the groceries, clothing, and maybe even tickets to a Lions game that money could have bought. Instead it went up in the smoke of cronyism and government deceit.
What these places need is not more government stimulus or welfare checks. They need the exact opposite: relief from government policies that chain them to poverty.
I have a solution. A similar idea was originated in England by a London School of Economics professor named Peter Hall. In the United States, Jack Kemp, the Republican congressman from Western New York State and Housing Secretary under George H. W. Bush, adopted Professor Hall’s idea and adjusted it for American use. Kemp loved to figure out ways to empower people, real people, regardless of race or background. You might remember that he was the quarterback for the Buffalo Bills in the days of the AFL. He was one of the few white members of the league to join a boycott of the 1965 AFL All-Star game, which was being held in then racially segregated New Orleans. Kemp was dedicated to upward mobility for the poor and disenfranchised.
He called his plan “a conservative war on poverty,” and Ronald Reagan endorsed it. “Those who view poverty and unemployment as permanent afflictions of our cities fail to understand how rapidly the poor can move up the ladder of success in our economy,” Mr. Reagan said. “But to move up the ladder, they must first get on it. And this is the concept behind the enterprise zones.”2
My Economic Freedom Zones will capture the spirit Kemp championed in his enterprise zones but update it for the twenty-first century. I recently told someone that my plan is like Kemp’s on steroids. It will allow blighted and bankrupt areas like Detroit and Eastern Kentucky to remove the shackles of big government by reducing taxes, regulations, and burdensome union work requirements. These zones will give parents and students the flexibility to find better schools, will allow talented immigrants to pursue entrepreneurial and job-creating endeavors, and will provide additional incentives for philanthropy to help those in need.
Most of Detroit, twenty-five counties in Kentucky, and many other poverty-stricken areas across the country will be designated as areas of reduced taxation. Unlike a government stimulus, these
zones will encourage businesses and individuals that the market has already selected. You’re a hard worker? You’re going to make more money because less will be taken out of your check. You’re a small business owner, or you want to start a small business? Your profits will be higher because you’ll pay less tax.
I propose a stimulus that simply leaves the money in the hands of its rightful owners: those who have earned it.
For those who work or own businesses in designated areas, my plan slashes individual income tax to 5 percent and payroll tax to 2 percent. In Detroit, it would mean over $1 billion in tax revenues staying in the pockets of those who can make the biggest change in their own lives and the life of the city in which they live.
Here’s the nuts and bolts of it. Any city, county, or municipality that has officially entered Chapter 9 bankruptcy will be eligible. Any city, county, or municipality that is at risk of entering Chapter 9 will be eligible. And any city, county, or municipality with unemployment 1.5 times the national rate will be eligible. Other criteria will also make you eligible. It’s not my intention to exclude people from these tax breaks. If you need it, you’ll get it.
What Will It Entail?
As I’ve mentioned, my plan will reduce the individual income tax to a single flat rate of 5 percent. This includes not only a reduction for individual wage earners but also for small businesses. More than 75 percent of small businesses are organized as pass-through entities, businesses that pass along income directly to the individual and therefore get taxed at the individual income tax rates.