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Tax policy, cybersecurity and prisons

Professors address a variety of policy challenges with a range of suggestions: Implement a strategy to protect computer users from attacks, restore the importance of protecting individual privacy, invest in prisoner re-entry into society, look to make fundamental, long-term changes in the tax system and consider a cut in state sales taxes to boost consumer spending.

L. Jean Camp

A three-pronged strategy for protecting computer users. Security research, commercial network management, software providers and public policy have left those with computers at home unable to defend themselves from malicious attackers. As a result, the number of attacks and subverted computers and identities continues to increase. In 2004, Boomers owned more than one-third of the value of all stocks and more than 10 percent of the value of all bonds in the U.S. -- that is, one-third of the value of all the American stock exchanges combined. They are being asked to defend this wealth from a world of criminals far more trained in computer science than these targets of crime will ever be. What is required is a three-pronged strategy. First, software itself must come of age, providing security as well as fun and functionality. Second, network service providers must assist individuals whose computers are (unknown to them) participating in malicious activity after having been subverted. Those who connect the network to the computer are in a unique position to know when a machine has been subverted, and assist the victim of the digital assault. Third, finally, public education on computer security should address the virtual as well as the physical threats to the public interest.

L. Jean Camp is an associate professor of informatics at IU Bloomington. Top

Fred Cate

Fred Cate

Restore protection for individual privacy. Mr. President: You have won the most important -- and, I suspect, most difficult -- job in the world. You confront an array of complex and urgent issues, but in addition to those you are already focused on, I encourage you to focus on one more.

Protect privacy effectively and appropriately. During the past eight years, personal privacy has been significantly eroded in the name of national security. The government now operates an extensive video camera network throughout our nation, routinely surveils telephone calls, engages in widespread data profiling and requires disclosure of a growing volume of personal data as a condition of employment, travel and education.

Many of these recent surveillance programs result from executive orders, outside of the overview of Congress and the courts, so as president, you can stop those that are inappropriate, and subject the rest to legal requirements designed to ensure that they are effective, intrude as little as possible into personal privacy and are subject to appropriate oversight.

There is good reason to act, in addition to living up to our nation's tradition of respecting individual privacy: a growing array of research suggests that many of these surveillance programs do not work. The National Academy of Sciences reported in October 2008 that surveillance systems built on untested theories, deployed with inadequate testing, relying on faulty data, providing inadequate redress, and operating without a meaningful legal oversight are as dangerous to our security as to our privacy.

One important first step would be to take up the National Academy of Sciences' recommendations for a framework of legal requirements to ensure that surveillance programs are effective and legal.

Another is to get the Privacy and Civil Liberties Oversight Board working. The board was operating a year ago until Congress replaced it with a more powerful one, but then neglected to consider any of the president's nominees. This was an embarrassment, but it can be remedied easily by the Obama administration and an amenable Senate. The board is very important in its own right, but it may also serve as a prod to the many federal agencies that have failed to appoint civil liberties officers, despite a Congressional requirement that they do so.

A third obvious step forward is to push Congress to act on the Government Accountability Office's (GAO's) recommendations to modernize the Privacy Act. The Privacy Act of 1974, which was designed more than 30 years ago primarily for personnel records and benefits files, is increasingly ill-suited for addressing 21st-century data privacy issues. In June 2008, the GAO identified a number of weaknesses in the Privacy Act, and proposed specific corrections. These straightforward suggestions reflect a consensus among privacy experts about long-needed steps to bring the privacy act into the 21st century; the administration should push for congressional action on them, even while considering whether more changes are needed in the future.

Privacy is important and it is, in the words of the Department of Defense's Technology and Privacy Advisory Committee, also "critical to a range of fundamental civil liberties, including our rights to speak, protest, associate, worship, and participate in the political process free from government intrusion or intimidation." It is worthy of your attention. I wish you success.

Fred Cate is Distinguished Professor and C. Ben Dutton Professor of Law at the IU Mauer School of Law -- Bloomington. He also directs IU's Center for Applied Cybersecurity Research. Top

Crystal Garcia

Crystal Garcia

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Crystal Garcia

Reinvest in Re-entry: We can't afford not to. Perhaps the most critical criminal justice issue that Congress and the administration will face is prisoner re-entry. As a senator, Mr. President, you co-sponsored the Reducing Recidivism and Second Chance Act of 2007 (SCA). This legislation provides re-entry services to adult and juvenile offenders and their families. This was a good first step. However, greater coordination of effort and resources are needed to provide state and local governments the appropriate technical assistance and seed money to implement and institutionalize effective re-entry programs.

The SCA is slated to receive $65 million in Fiscal Year (FY) 2009. This is not enough to provide the programmatic elements necessary for successful reintegration (e.g., employment and educational assistance, substance abuse treatment, housing, family programming, mentoring, victims support, etc). Do the math. State and federal prisons release 700,000 individuals each year. Divide the dollars appropriated for the SCA for FY2009 by 700,000. This results in an expenditure of $92.85 per ex-offender. None of the needs identified above can be met in any meaningful way for that amount of money. Such a pedestrian attempt to assess federal investment in re-entry may be unfair. Unfortunately, queries to think tanks, non-profit organizations and government agencies failed to produce an exact dollar amount invested by the federal government for re-entry.

There are nearly 2.3 million Americans (not counting juveniles) behind bars today, and jails and prisons don't offer much rehabilitation. Almost all (97 percent) of these prisoners are getting out and will live in our neighborhoods; roughly two-thirds are re-arrested within three years of release. Given all of this, my advice is to work with Congress to reinvest in re-entry. Such "reinvestment" would include drastically increasing the SCA's annual appropriation, identifying re-entry as its own purpose area in Byrne Formula Grants; requiring states that are granted federal reentry pass-through dollars to map their re-entry networks, assets and gaps in services before receiving funds; implementing transitional job programs, eliminating most bans on federal benefits for persons with criminal histories (e.g., public housing, Temporary Assistance for Needy Families, Medicaid, financial aid for students); and pressuring states to revisit their restrictions on aid.

Why do this? We can't afford not to. Helping ex-offenders succeed helps us all.

Crystal Garcia is an associate professor of criminal justice, law and public safety in the School of Public and Environmental Affairs at IUPUI. Top

Ajay Mehrotra

Look to make fundamental changes in the tax system. The recent financial meltdown and the resulting economic downturn will force your administration to reconsider some of its tax policy positions. In the name of short-term fiscal stimulus, large-scale tax cuts seem inevitable -- for political if not economic reasons.

But at some point in the future, Mr. President, when the business cycle begins to recover, you may be able to use the recent economic turmoil and the impending fiscal crisis associated with Medicare and Social Security to make fundamental changes to our tax system.

Historically, dramatic fiscal reforms have occurred during periods of national emergencies, mainly wars and economic crisis. Although it's uncertain whether the "war on terror" and the looming crisis in entitlement spending will provide the necessary conditions for profound tax changes, the administration should be prepared to introduce bold and ambitious new proposals, including the adoption of a progressive consumption tax to supplement income tax revenues.

Tax scholars and analysts have long documented the complexity and inefficiency of our income tax system. One way to confront these problems is to return to an earlier period in American history, when the progressive income tax applied only to the wealthiest citizens. The lost revenues from a retrenchment of the income tax could be replaced by a progressive consumption tax, such as the value-added-tax currently used by many European nations.

By limiting the reach of the income tax and turning instead to a VAT, your administration can restructure our tax system to make it simpler, fairer and more effective in raising revenue. Such a hybrid tax system may also re-instill public faith in government, as citizens see our political leaders emphasizing the shared social responsibilities that have historically underpinned our tax system.

Ajay Mehrotra is associate professor at the IU Maurer School of Law -- Bloomington. Top

George von Furstenberg

George von Furstenberg

George M. von Furstenberg

Incentivize consumer spending by reducing state sales taxes. Mr. President: One-off payments to individuals and households, no matter what they are "rebating" or "crediting," do not stimulate spending as effectively as temporary reductions of retail sales taxes levied by the states. Please consider that those who have made this claim just may be right. Revenue from such taxes amounted to $435 billion in 2008 and I would propose that about half of this would temporarily be forgiven. Here is how: The lowest tax rate for any of the 45 states and the District of Columbia levying such a tax is 2.9 percent for Colorado. Suppose, therefore, the U.S. Treasury would pay (or prepay) the (estimated) equivalent of a retail sales tax of 2.9 percent to the states to reimburse them for the cost of forgoing that revenue for a short time such as one year. In practice, this would mean that a state with an existing sales tax rate of, say, 5 percent would collect only 2.1percent from its own retail customers and 2.9 percent from the federal government or $1.38 for every dollar collected by that state from this tax.

The cost of goods sold to the retail customers, tax included, thus would temporarily fall by about 2.9 percent (given spare capacity) below what it would otherwise be. It is a fair bet that the volume of sales subject to such a tax would rise at least 2.9 percent in response to this 2.9 percent price cut because you have to spend, and to spend now, to benefit. States would be helped along with consumers and the economy as a whole since their total sales tax receipts, which have been dropping badly of late, would be raised by the induced increase in the volume of retail purchases. Obviously something equivalent would have to be done for the five states that do not levy general sales taxes -- Alaska, Delaware, Montana, New Hampshire, and Oregon -- but I do not know enough about their tax structure to offer suggestions. Since there is federal money to be had, I suspect however that these five states would be quick to come up with some good ideas that fit the concept.

So, while nothing is easy, here is a better way to incentivize consumer spending through tax reductions than to give $500 per individual and $1,000 per couple as the House bill, HR 1, has proposed. Both tax-cut proposals would cost the U.S. Treasury a little over $200 billion per annum.

Best wishes for your stewardship in turbulent times.

George M. von Furstenberg is J.H. Rudy Professor emeritus of economics, IU Bloomington. Top