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Saturday, November 22, 2014

Top Incomes Soared as Tax Rates Fell

Al Jazeera:  Top Incomes Soared as Tax Rates Fell, by David Cay Johnston (Syracuse):

For those at the very top 2010 will be remembered as a very good year. While most Americans struggled to recover from the worst economic collapse since the Great Depression, top incomes soared while tax burdens for those incomes fell.

The 400 tax returns for those with the highest reported incomes showed 31 percent more income in 2010 than in 2009, when the recession officially ended at midyear. Soaring stock prices fueled the increase at the top. On average incomes of $265.1 million the top 400 paid 18 percent in federal income taxes, down from 19.9 percent in 2009. The lowest tax on the top 400 was 16.6 percent in 2007.

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Bloomberg:  Top 400 U.S. Households Paid 18% Average Tax Rate in 2010, by Richard Rubin:

The top 400 taxpayers in the U.S. paid an average tax rate of 18 percent in 2010, the lowest since 2007, according to Internal Revenue Service data released today. ...

The data show the highest-income U.S. households rebounding from the recession in 2009. The minimum adjusted gross income needed for the exclusive list rose 28 percent, to $99.1 million, and the average income of those on the list reached $265 million.

The IRS data offer a glimpse into the finances of the wealthiest U.S. households, who now receive more than twice the share of national income than they did in 1995. These taxpayers had 1.31 percent of all adjusted gross income in the U.S. in 2010 and paid 2.01 percent of the income taxes, though they make up less than 0.001 percent of the population, according to the IRS.

IRS Statistics of Income Division, The 400 Individual Income Tax Returns Reporting the Largest Adjusted Gross Incomes Each Year, 1992–2010:

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November 22, 2014 in Tax | Permalink | Comments (1)

Maryann Jones, Hired as Charleston Law School President Under Renewable 3-Month Contract, Resigns After 8 Days on the Job

ICCharleston Post and Courier, New Charleston School of Law President Steps Down:

Maryann Jones has stepped down as the Charleston School of Law's president after only eight days on the job.

The law school has been embroiled in a controversy for more than a year over the possible sale to the for-profit InfiLaw System, which owns three other law schools.

Two of the school's three owners, George Kosko and Robert Carr, are in favor of the sale. But Ed Westbrook, the third owner, is pushing to form a nonprofit corporation to run the 10-year-old school, which also is for-profit.

But the owners voted unanimously Nov. 13 to hire Jones as president.

In an email sent late Thursday to Kosko, Carr and Abrams, Jones said she decided not to take the reins of the private, downtown law school, and would not sign a contract. "The level of vitriol, with all sides making me a lightning rod for an unfortunate situation that was not of my making, makes this truly a situation that I am unwilling at this stage of my life to undertake." Jones stated in the email.

Westbrook earlier Thursday had sent Jones a letter expressing his disappointment in her speaking to faculty and students in support of a sale to InfiLaw. To get his vote, Jones had agreed to be objective, and to learn more about alternatives for the school, Westbrook stated.

He also stated that he was disappointed that Jones hadn't yet met with him and his attorney Dawes Cooke to discuss the school's future. Westbrook's letter also revealed that Jones was being offered only a three-month contract.

FITS News, CSOL President Steps Down Due To Bullying By Director

Prior TaxProf Blog coverage:

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November 22, 2014 in Legal Education | Permalink | Comments (5)

USC Book Panel Discussion on Kleinbard's We Are Better Than This

Kleinbard Flyer

Prior TaxProf Blog coverage:

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November 22, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 562

Wall Street Journal:  IRS Finds Missing Emails of Former Top Official Lerner in Targeting Probe:

The watchdog agency for the Internal Revenue Service said it has found as many as 30,000 missing emails that could be relevant to a long-running congressional inquiry into alleged IRS targeting of conservative groups.

Investigators for the Treasury Inspector General for Tax Administration recently recovered the emails from IRS backup tapes, according to a spokeswoman for the watchdog agency. The emails belong to a former top IRS official, Lois Lerner, who has been a focus of congressional inquiries. ...

Top IRS officials had told lawmakers that backup tapes were routinely recycled and therefore weren't useful in the effort to find the missing email records. The agency said it had used other employees’ hard drives to recover thousands of the missing emails.

But TIGTA investigators succeeded in locating thousands of Ms. Lerner’s emails on the backup tapes. ...

The IRS said in a statement: “As Commissioner Koskinen has stated, the IRS welcomes TIGTA’s independent review and expert forensic analysis. Commissioner Koskinen has said for some time he would be pleased if additional Lois Lerner emails from this time frame could be found.”

The revelations promise to draw new attention to the targeting controversy, just before lawmakers return to Washington for the new Congress next year. TIGTA officials told lawmakers on Friday about the discovery of the missing emails, but congressional aides said it could take some weeks before the emails are sorted and in shape to examine. The emails must be decrypted and in some cases must be redacted to remove taxpayer-identifying information, aides said.

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November 22, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Friday, November 21, 2014

Hickman Presents Treasury's Retroactivity Today at Miami

Hickman 2014 2Kristin Hickman (Minnesota) presents Treasury's Retroactivity at Miami today as part of its Legal Theory Workshop Series hosted by Leigh Osofsky:

In Bowen v. Georgetown University Hospital, the Supreme Court described retroactivity as "not favored in the law" and generally rejected allowing federal administrative agencies to adopt regulations "altering the past legal consequences of past actions."  Unlike most regulatory agencies, Treasury and the IRS are expressly authorized by Congress to adopt regulations with precisely such primary retroactive effect.  Specifically, IRC § 7805(b) grants Treasury and the IRS the power to backdate tax regulations under a variety of circumstances.  Preliminary analysis shows that Treasury and the IRS utilize this authority regularly with little judicial oversight for abuse of discretion.  Using empirical data, this article will explore more fully Treasury and IRS utilization of the authority to adopt retroactively effective regulations interpreting the Internal Revenue Code.

November 21, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

November 21, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

November 21, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

UC-Irvine Cuts Class by 29% in Bid for Top 20 Inaugural U.S. News Ranking

UC-Irvine (2015)UC-Irvine Law School will be ranked by U.S. News for the first time this March, and Dean Chemerinsky has unabashedly stated that the school's goal is to "be a top 20 law school, by every measure, from the moment we open our doors and from our first rankings."  To help achieve that goal, the school cut its Fall 2014 entering class by 29.4% to 89 students (from 126 in 2013), to keep its median LSAT at 164 (and increase its median GPA by 0.01 to 3.53).  This year's class is 55.5% below Dean Chemerinsky's goal of classes of 200 students.

Update:  Above the Law, Law School Slashes Students To Game U.S. News Rankings

November 21, 2014 in Law School Rankings, Legal Education | Permalink | Comments (21)

California’s Tax Hikes Versus Kansas’ Tax Cuts: Early Results Now In

Tax Justice Network, California’s Tax Hikes Versus Kansas’ Tax Cuts: Early Results Now In:

From a new paper by Paul Caron of Pepperdine University and Joseph Bankman of Stanford University:

The conventional wisdom in California two years ago was that raising taxes on the wealthy would harm the economy and doom any politician who dared touch this third rail. Instead, the public embraced this approach at the ballot box and, after enjoying the fruits of an economic turnaround, appears poised to reward the Governor with a landslide re-election.

LafferIt seems that the absurd Laffer Curve, which is often used to make the ridiculous proposition that tax cuts increase revenue, didn’t work in this case. Now in Kansas, they went the other way. ... “Kansas’ budget problems keep getting worse. . . . state revenues dropped 11 percent in the fiscal year 2014 (which ended in June) after the tax cuts took effect. But that may not even be the whole picture. A close look at the state’s new revenue projections makes clear they are highly optimistic, even after this week’s cut in the forecast.”

Back to the Caron / Bankman paper, which does an unusual and welcome thing for academics.

Get this: it urges scholars to take their heads out of the sand and get stuck into the real world. In fact, this is the central argument of the paper (which is entitled California Dreamin’: Tax Scholarship in a Time of Fiscal Crisis [48 U.C. Davis L. Rev. 405 (2014)]).

We have found that the need for more revenue is a common conversation topic among tax scholars. However, it is not a common topic in tax scholarship. Indeed, it is not even clear that it “qualifies” as scholarship, as that term is commonly defined. In law, at least, highly praised scholarship is generally marked by a masterful description of the law that suggests the need for change.

Quite so, and strong and unusual medicine.

Now here is some discussion that we at TJN and quite a few others have been saying for years. It’s worth quoting at length.

In recent years, legal tax scholars have made normative claims based on those arguments. However, those normative claims are quite limited and explicitly apolitical . . . . writing about the fiscal crisis, in contrast, throws the scholar directly into the political world. . . . Legal tax scholars who write on this subject run the risk of being dismissed as political, or lacking requisite knowledge.

Unfortunately, scholars in allied fields face similar problems. Economists are also reluctant to write on subjects so entwined with politics and often have less knowledge of specific tax provisions than legal tax scholars. Political scientists lack economic sophistication and knowledge of the tax law, and know less about the politics of tax preferences than either lawyers or economists. The fiscal crisis thus falls between at least three disciplines. As a result, scholars in each of those disciplines are reluctant to write on a subject they believe is central to the nation’s health.

They cite honourable exceptions, such as this highly recommended book by Ed Kleinbard [We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014)], if you’re interested in the U.S. tax system.

And they conclude:

Two years ago, both California and the nation were imperiled by long- term, structural, budget imbalances. California has reduced that peril by raising (already high) personal tax rates on the wealthy. The political success of that approach suggests that at the national level, Americans might be willing to support higher rates to maintain government services and move toward fiscal solvency.

November 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

Viard: Moving Away From the Realization Principle

Tax Analysys Logo (2013)Alan D. Viard (American Enterprise Institute), Moving Away From the Realization Principle, 145 Tax Notes 847 (Nov. 17, 2014):

Viard describes the realization principle’s flaws and the federal tax system’s incremental movement toward mark-to-market taxation.

November 21, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

CBO: Options for Reducing the Deficit, 2015 to 2024

Congressional Budget Office, Options for Reducing the Deficit: 2015 to 2024:

This document provides estimates of the budgetary savings from 79 options that would decrease federal spending or increase federal revenues over the next decade. 

36 of these 79 options are tax increases:

CBO

Individual Income Tax Rates
1.  Increase Individual Income Tax Rates
2.  Implement a New Minimum Tax on Adjusted Gross Income
3.  Raise the Tax Rates on Long-Term Capital Gains and Dividends by 2 Percentage Points

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November 21, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

The IRS Scandal, Day 561

IRS Logo 2Legal Insurrection:  IRS Fears Employees Being “Seized With Spontaneous Diarrhea”, by WIlliam Jacobson (Cornell):

Hey, remember the Reader Poll we did about whether it was okay to follow and try to interview Lois Lerner in her neighborhood? ... 

Someone noticed the comments to the blog post.  The IRS.  And it’s not happy.

In a federal FOIA lawsuit by Judicial Watch seeking records of Lerner emails and IRS efforts to retrieve the emails, the IRS used two of the comments to the Legal Insurrection Reader Poll post to justify the IRS no longer disclosing the identities of IRS personnel.

Think about that. The IRS is reading our comments. Don’t they have anything better to do, like hassle conservative groups seeking tax-exempt status? On second thought, keep reading our comments and leave conservative groups alone.It’s all set forth in the IRS’s opposition to Judicial Watch’s Motion to Compel Discovery. You can read the whole thing here.

The Legal Insurrection post is Exhibit D to the IRS affidavit. ...

Does the IRS really fear “public whipping with a buggy whip” and being in such fear its employees are “seized with spontaneous diarrhea”?

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November 21, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, November 20, 2014

Polsky: A Compendium of Private Equity Tax Games

Gregg D. Polsky (North Carolina), A Compendium of Private Equity Tax Games:

This paper will describe and analyze tax strategies, lawful and unlawful, used by private equity firms to minimize taxes. While one strategy — the use of “carried interest” — should by now be well understood by tax practitioners and academics, the others remain far more obscure. In combination, these strategies allow private equity managers to pay preferential tax rates on all of their risky pay (through carried interest), pay preferential tax rates on much of their non-risky pay (through management fee waivers and misallocations of their expense deductions), and push much of the residual non-risky pay down to their funds’ portfolio companies who, unlike the fund, can derive significant tax benefits from the resulting deductions (through monitoring fees and management fee offsets).

November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Zelinsky: The Giving Pledge and Reform of the Estate Tax Charitable Deduction

Giving PledgeEdward A. Zelinsky (Cardozo), Why the Buffett-Gates Giving Pledge Requires Limitation of the Estate Tax Charitable Deduction, 16 Fla. Tax Rev. 393 (2014):

The Buffett-Gates Giving Pledge, under which wealthy individuals promise to leave a majority of their assets to charity, is an admirable effort to encourage philanthropy. However, the Pledge requires us to confront the paradox that the federal estate tax charitable deduction is unlimited while the federal income tax charitable deduction is capped. If a Giving Pledger leaves his wealth to charity, the federal fisc loses significant revenue since the Pledger thereby avoids federal estate taxation as charitable bequests are deductible without limit for federal estate tax purposes. Despite its laudable qualities, the Giving Pledge is a systematic (albeit inadvertent) threat to the estate tax base.

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November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Number of Ultra Rich Increased 6% in 2014

Wealth-X and UBS World Ultra Wealth Report 2014:

12,040 new ultra high net worth (UHNW) individuals were minted this year, pushing the global UHNW population to a record 211,275, a 6% increase from 2013. The combined wealth of the world’s UHNW individuals – defined as those with US$30 million and above in net assets – increased by 7% to US$29.725 trillion in 2014, almost twice the GDP of the world’s largest economy, the United States.

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Wealth 3

November 20, 2014 in Tax | Permalink | Comments (0)

Harvey: Corporate Tax Aggressiveness -- Recent History and Policy Options

J. Richard (Dick) Harvey (Villanova), Corporate Tax Aggressiveness -- Recent History and Policy Options, 67 Nat'l Tax J. 831 (2014):

This paper examines corporate tax aggressiveness from the 1990s to 2014. The paper also discusses various public indicia of corporate tax aggressiveness and analyzes selected data from 21 public companies. Finally, the paper discusses several policy options for further reducing corporate tax aggressiveness, including: (1) improvements to the IRS whistleblower program, (2) increased transparency, and (3) changes to the penalty structure surrounding aggressive tax positions. 

November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Pepperdine/Tax Analysts Symposium Papers: Tax Reform in a Time of Crisis

TaxSymposiumHeaderHere are links to the eleven published papers from the Pepperdine/Tax Analysts Symposium on Tax Reform in a Time of Crisis (Jan. 17, 2014):

Thanks to the paper commentators:  Donald Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel), Nancy Staudt (Dean, Washington University), and Eric Zolt (UCLA)

November 20, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (2)

Sander: The Mismatch Critique of Law School Affirmative Action and Its Opponents

MismatchRichard Sander (UCLA), Mismatch and the Empirical Scholars Brief, 48 Val. U. L. Rev. 555 (2014):

In April 2013, the Valparaiso University Law Review held a symposium on diversity in legal education, commemorating the contributions of Justice Randall Shepard and featuring a number of distinguished speakers. I was invited to participate in a panel on Fisher v. University of Texas, a then-pending Supreme Court case that seemed likely to revise the rules under which universities can consider race in higher education admissions. The conference organizers generously allowed me to participate by videoconference, as did my co-panelist Professor Eboni Nelson. They and I agreed that my talk should explore some of the empirical issues that might frame how the Supreme Court viewed Fisher.

I approached the event with some concern. I had been the bête noire of many diversity advocates ever since 2005, when the Stanford Law Review published my long analysis and critique of law school affirmative action programs. I had advanced, and since steadfastly defended, something called “the mismatch hypothesis,” which postulated that very large preferences--racial or of any other kind--may undermine student learning, because professors tend to teach to the middle of their class, and students far below the middle will have trouble keeping up and advancing as concepts build day by day. Critiques of my essay had been many, but I had answered them, and an increasingly broad array of other scholars had published articles that found other strong evidence of mismatch in a wide variety of academic contexts. Certainly, the evidence for mismatch was mixed--at least in some contexts--and social scientists who found evidence of mismatch never argued--to my knowledge--that the existence of mismatch should preclude affirmative action policies. But just as certainly, universities tended to completely ignore the mismatch problem, and this was quite disturbing. The Supreme Court's decision to review the Fifth Circuit's holding in Fisher--and to thus reconsider the constitutionality of university racial preferences--increased the level of interest and anxiety about mismatch research.

Lawyer and journalist Stuart Taylor, Jr., had joined forces with me to write a broadly accessible book on the effects of racial preferences, called Mismatch, which appeared in October 2012. That, along with two briefs that Stuart and I wrote as amici curiae to the Court on Fisher, helped to elevate the mismatch hypothesis to a prominent place in the public discussion of Fisher. The New York Times, The Economist, the Wall Street Journal, and NPR's All Things Considered all ran prominent articles on mismatch, generally treating it as, at the very least, an idea to be reckoned with seriously. The general tone was well-captured by The New York Times' David Brooks, who wrote: “[A]ffirmative action programs ... perpetrated some noteworthy wrongs .... The evidence on this is hotly disputed, but Richard Sander and Stuart Taylor Jr. make a compelling case ....”

Yet at law school events during the 2012-2013 academic year, when I was invited to speak about any aspect of Fisher, a strangely repetitive pattern emerged. Regardless of whether the topic at hand was mismatch, or some entirely different part of the affirmative action issue, panel members who disliked my mismatch research would start to recite from a document known as the Empirical Scholars Brief. This document, they would suggest, was the definitive refutation of Richard Sander, the other “mismatch” researchers, and all that we were taken to represent. Often they would distribute copies of the Empirical Scholars Brief to the audience, like revivalists passing out the Gospel of St. James. But--and this was the oddest part--these panelists were never interested in engaging or debating any of the claims that were actually in the Empirical Scholars Brief (which I will sometimes, as shorthand, refer to as the “ESB”). One panelist, at an AALS panel in a large ballroom, disclaimed any intention of getting into the details. “I'm not a trained quantitative empiricist,” she said, “instead I'm compelled to rely on critiques by other empiricists.” Pretty much exactly the same thing happened at the Valparaiso symposium. Professor Nelson began our panel with a very thoughtful discussion of the “deference” issue--that is, when and to what degree the Supreme Court should defer to the educational judgment of universities in evaluating their diversity programs. Professor Sumi Cho followed with some rather discursive remarks on the importance of diversity. I then spoke about some of my empirical findings on university behavior--a sort of empirical comment on some of the same issues Professor Nelson had raised. When we finished, and the question and answer portion began, Professor Cho distributed a copy of the ESB to the audience, with the standard comment that the audience could better evaluate my comments if they knew what other social scientists thought of my work. With my time up, and on my remote monitor, I was not in a very good position to respond to and engage the ESB claims. I encouraged anyone in the audience to ask me to discuss any specific claim they could identify, but there were no takers. It felt to me like a completely non-substantive, ad hominem, and unfair attack.

It therefore seems appropriate to take the opportunity afforded by the written version of the symposium to provide the sort of thoughtful engagement that I would have liked to provide the live symposium audience. What follows is an assessment--though it may sound more like an expose--of the “Empirical Scholars Brief.” The thrust of my analysis is that the ESB is not just substantively wrong, but it is also a deeply dishonest document that relies on outright falsehoods and misleading claims to support an argument, which should be embarrassing to its signatories, and is entitled to no substantive weight in discussions of mismatch and affirmative action.

Richard Sander (UCLA), The Stylized Critique of Mismatch, 92 Tex. L. Rev. 1637 (2014):

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November 20, 2014 in Legal Education, Scholarship | Permalink | Comments (7)

Seven Companies Spent More on CEO Pay Than Federal Taxes

IPS_Fleecing_Uncle_Sam_Report_Nov2014 coverInstitute for Policy Studies and the Center for Effective Government, Fleecing Uncle Sam: A Growing Number of Corporations Spend More on Executive Compensation Than Federal Income Taxes:

Of America’s 30 largest corporations, seven (23 percent) paid their CEOs more than they paid in federal income taxes last year.

  • All seven of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits. However, they received a combined total of $1.9 billion in refunds from the IRS.
  • The seven CEOs leading these tax-dodging corporations were paid $17.3 million on average in 2013. Boeing and Ford Motors both paid their CEOs more than $23 million last year while receiving large tax refunds.

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November 20, 2014 in Tax, Think Tank Reports | Permalink | Comments (4)

Drexel 3L With Asperger's Syndrome Sues Philadelphia Law Firms For Relying on U.S. News Rankings in Hiring Decisions

U.S. News (2015)Dave Hoffman (Temple) blogs lawsuits by William Hanrahan, a Drexel 3L with Asperger's Syndrome ranked #4 in his class, claiming that three big Philadelphia law firms (Blank Rome, Dechert, Pepper Hamilton) discriminate against disabled job applicants by unduly relying on the U.S. News ranking of the applicant's law school:

I’m not an expert in this area of the law, but I thought the complaint provided an interesting set of facts for discussion. My uninformed view is that the chain of causation (disability –> lower LSAT –> lower-ranked school –> fewer job offers) isn’t incredible, but that it’s hard to imagine a judge forcing firms to discount rankings (which, after all, aren’t entirely or even mostly based on student credentials) when making hiring decisions.

Update:  

November 20, 2014 in Law School Rankings, Legal Education | Permalink | Comments (3)

GAO Report on 'Supersize' IRAs

Super Size MeFollowing up on my previous posts:

GAO, IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed (GAO-15-16):

For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with a total reported fair market value (FMV) of $5.2 trillion. As shown in the table below, few taxpayers had aggregated balances exceeding $5 million as of 2011. Generally, taxpayers with IRA balances greater than $5 million tend to have adjusted gross incomes greater than $200,000, be joint filers, and are age 65 or older. Large individual and employer contributions sustained over decades and rolled over from an employer plan would be necessary to accumulate an IRA balance of more than $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans.

Estimated Taxpayers with Individual Retirement Accounts (IRA) by Size of IRA Balance, Tax Year 2011

Estimated Taxpayers with Individual Retirement Accounts (IRA) by Size of IRA Balance, Tax Year 2011

A small number of taxpayers has accumulated larger IRA balances, likely by investing in assets unavailable to most investors—initially valued very low and offering disproportionately high potential investment returns if successful. Individuals who invest in these assets using certain types of IRAs can escape taxation on investment gains. For example, founders of companies who use IRAs to invest in nonpublicly traded shares of their newly formed companies can realize many millions of dollars in tax-favored gains on their investment if the company is successful. With no total limit on IRA accumulations, the government forgoes millions in tax revenue. The accumulation of these large IRA balances by a small number of investors stands in contrast to Congress's aim to prevent the tax-favored accumulation of balances exceeding what is needed for retirement.

(Hat Tip: Greg McNeal.)

November 20, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 560

IRS Logo 2American Spectator:  The Lois Lerner Curve: How Anti-corruption Laws Cause Even More Corruption:

Corrupt countries, where the rule of law is weak and political pilfering is common, are poor countries. Entrepreneurs and investors cannot safely start or finance businesses in states that don’t respect property rights and honor contracts, or that use the levers of the government to go after political opponents. And it’s not as though America doesn’t have a corruption problem. On Transparency International’s Corruption Perceptions Index, the U.S. comes in at number 19, behind most of the rest of the First World.

For anyone following the Lois Lerner scandal, that’s not surprising. What should be surprising, perhaps, are her defenders. Lerner tampered with IRS nonprofit applications, and revealed them only when an Inspector General was about to report on them. Then the cover-up began. The IRS put out a story that blamed the shenanigans on low-level Cincinnati employees. We were told that the IRS hadn’t picked on conservative any more than liberal groups. All lies. Then Lerner pled the Fifth, and her emails mysteriously disappeared. ...

[T]here’s another reason why the Lois Lerner scandal was to be expected: we have an excess, not an insufficiency, of laws. Now, we do need laws to police corruption of the obvious sort, such as bribery and extortion. But anti-corruption laws can cause more corruption than they prevent when they rely on complicated five-point standards of the kind loved by Anthony Kennedy and law school professors, with balanced and nuanced rules that seek to apply a scalpel to tasks better suited to an earthmover. We end up giving politicized bureaucrats a weapon to use against their opponents. It’s like handing a match to a giddy pyromaniac.

I call this the Lois Lerner Curve. With few laws policing corruption, there’s a lot of it. Then, as law enforcement increases, corruption declines, down to point zero on the curve. Thereafter, however, additional laws result in more corruption, because citizens and bureaucrats alike become lost in the complexity and enforcement is unevenly applied. ...

Lerner

I think of this when I read about proposals for campaign finance reform. Sure, there’s room for cleaning up the pay-for-play politics of crony capitalism and the gerrymandering that makes most Congressional seats into fiefdoms for life. And there are well-meaning people, like Harvard’s Larry Lessig, who for honest motives want to limit campaign spending. Whatever their intentions, however, what they would do is take our election laws up the right-hand side of the Lois Lerner Curve, resulting in more corruption. Lurking behind them are Lois Lerner’s duplicitous partisans, the bare-knuckled street fighters who seek to end the scandal of Republican money in politics, and who would give us a country as free of corruption as Russia. They are scoundrels in the cause of honor, whores who clamor for morality, thieves in defense of property rights. 

Was that a little rough, just now? Then let me remind you about True the Vote, the conservative vote-monitoring organization led by Catherine Englebrecht. True the Vote trains volunteers to record and report on suspicious voter registrations. We’re not talking about the New Black Panthers with their baseball bats, but nevertheless Rep. Elijah Cummings opened up a congressional investigation into the group. His staffers wrote to Lois Lerner about it, and subsequently the IRS questioned its tax-exempt status. In in short order Engelbrecht’s business was visited by the FBI, ATF, and OSHA. She testified about this in February, and what’s interesting is how Democrats treated her. Cummings questioned her about her possible racist motives, and Gerry Connolly complained of McCarthyism and mocked her “paranoia” for thinking the audits might have been politically motivated.

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November 20, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, November 19, 2014

Raskolnikov Presents Rational Decisions Under Legal Uncertainty Today at Washington University

RaskolnikovAlex Raskolnikov (Columbia) presents Rational Decisions Under Legal Uncertainty at Washington University today as part of its Faculty Workshop Series:

Law is full of rules that are neither clear nor socially optimal. How do rational actors respond to these rules? What are the implications of these responses? These deceptively simple questions have no answers in law and economics. This paper offers a model of rational decisionmaking under legal uncertainty and explores its implications by combining formal economic analysis with a practical understanding of the market for legal advice. The model produces a number of intuitive, realistic results. It demonstrates why rational actors take uncertain positions even if these positions are highly likely to be detected. It suggests that most of these positions will have a better than a fifty-fifty chance of being sustained. And it allows us to investigate a popular but controversial view that greater legal certainty does not necessarily lead to greater compliance. The model’s analysis both refutes the obvious explanation for this view and offers an alternative one. When detection uncertainty is taken into account, the model confirms that the standard damages multiplier works when legal rules are ambiguous. At the same time, the model raises difficult questions about the meaning of compliance when rules are uncertain, the normative significance of various types of uncertainty, and the challenges of assessing private responses to legal uncertainty outside of the familiar confines of the optimal deterrence theory.

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hayashi Presents Phantom Income and the Simple Economics of Paying In Kind Today at Texas A&M

HayashiAndrew Hayashi (Virginia) presents Phantom Income and the Simple Economics of Paying In Kind at Texas A&M today as part of its Business Law Seminar:

Modern tax instruments impose cash taxes on non-cash bases. Property taxes, income taxes, gift taxes and estate taxes all must be paid in cash, even though income, gifts and estates only sometimes take the form of cash, and property never does. If it is costly to convert the tax base into cash, taxpayers may suffer from liquidity problems that require them to make painful adjustments to their savings or consumption. Although concern about taxpayer liquidity has shaped tax law and looms large in current debates about wealth taxation, tax accounting, and mark-to-market reforms, the economic factors that influence the welfare costs of cash tax collection have not been explored in a rigorous way. In this paper I present an economic analysis of the liquidity problem, identifying the factors that determine the welfare costs of cash tax collection. I apply this analysis to the property tax and to the taxation of income that accrues before it is received, sometimes called “phantom income.”

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Macnaughton Presents Income Splitting and Anti-Avoidance Legislation Today at Toronto

AlanAlan Macnaughton (Waterloo) presents Income Splitting and Anti-Avoidance Legislation: Evidence from the Canadian “Kiddie Tax” (with Andrew Bauer (Illinois)  & Anindya Sen (Waterloo)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

We examine whether “kiddie tax” legislation in Canada, effective as of 2000, deters income splitting between parents and minor children by taxing at the top marginal rate certain types of non-labour income received by children. OLS estimates based on cross-province and time-series data reveal that the share of dividend income reported by children aged 19 and under declines by 86% after the introduction of this anti-avoidance rule. The estimates also reveal that the share of capital gains (income not covered by the legislation) reported by minor children increases by 70% in the post-legislation period, suggesting that parents are switching to an alternative income splitting technique. However, the latter percentage effect is on a small base, and thus the decrease in dividend income is much larger than the increase in capital gains income. Hence, our analysis suggests that the “kiddie tax” is an effective method to deter income splitting.

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Blank Presents Reconsidering Corporate Tax Privacy Today at Rutgers

BlankJoshua D. Blank (NYU) presents Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at Rutgers-Newark today as part of its Faculty Colloquium Series:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy protections, should be publicly accessible. The ongoing global discussion of base erosion and profit shifting by multinational corporations has generated calls for greater tax transparency. Throughout this debate, participants have focused exclusively on the potential reactions of a corporation’s managers, shareholders and consumers to a corporation’s disclosure of its own tax return information. There is, however, another perspective: how would the ability of a corporation’s stakeholders and agents to observe other corporations’ tax return information affect the corporation’s compliance with the tax law?

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November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Why Did So Many People Flunk the Bar Exam This Year?

Following up on my earlier posts (here, here, and here):  Bloomberg, Why Did So Many People Flunk the Bar Exam This Year?:

The most recent bar exam test results are in, and they are ugly. In several states, people who took the bar in July were more likely to fail than those who took it last year, and scores on one portion of the test dropped to their lowest point in 10 years.

Are America’s law graduates really getting dumber? The people who put together the bar exam seem to think so.

The National Conference of Bar Examiners, a nonprofit that prepares one of the state-specific multiple-choice sections in which scores dropped dramatically, sent a curt message to law school deans in October. “The results are correct,” wrote Erica Moeser, the group’s president, in an Oct. 23 memo. “The group that sat in July 2014 was less able than the group that sat in July 2013,”

It’s technically true that this year’s crop of grads was “less able” than before, if you use their pre-law-school test scores as a proxy for their smarts. The median LSAT score among students at American law schools has declined every year from 2010 to 2013, according to an analysis by Jerry Organ, a law professor at the University of St. Thomas. ...

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November 19, 2014 in Legal Education | Permalink | Comments (1)

NY Times: Al Sharpton's Influence Grows, As Do His Unpaid Taxes

SharptonNew York Times, Questions About Sharpton’s Finances Accompany His Rise in Influence:

Mr. Sharpton’s influence and visibility have reached new heights this year, fueled by his close relationships with the mayor and the president. Obscured in his ascent, however, has been his troubling financial past, which continues to shadow his present. 

Mr. Sharpton has regularly sidestepped the sorts of obligations most people see as inevitable, like taxes, rent and other bills. Records reviewed by The New York Times show more than $4.5 million in current state and federal tax liens against him and his for-profit businesses. And though he said in recent interviews that he was paying both down, his balance with the state, at least, has actually grown in recent years. His National Action Network appears to have been sustained for years by not paying federal payroll taxes on its employees.

With the tax liability outstanding, Mr. Sharpton traveled first class and collected a sizable salary, the kind of practice by nonprofit groups that the United States Treasury’s inspector general for tax administration recently characterized as “abusive,” or “potentially criminal” if the failure to turn over or collect taxes is willful.

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November 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Seto: New BLS Data Project More Lawyer Jobs Than Law Grads in 2016

Seto (2014)Following up on yesterday's post, Government's Data Collection Change Will 'Solve' the Law School Crisis:  TaxProf Blog op-ed:  The Proposed New BLS Lawyer Replacement Projections, by Theodore P. Seto (Loyola-L.A.):

Commentators who believe that the end of the world is near for legal education often point to Bureau of Labor Statistics estimates of replacement needs in the legal profession and compare those estimates to the number of projected law school graduates.

On May 16, 2014, the BLS issued a notice proposing a new method for measuring what it calls “occupational separations” – that is, workers leaving a particular occupation who need to be replaced. The BLS explains that the current method indirectly measures leavers by measuring employment change by age group, relying on an assumption that workers enter at a young age, work in their field until they are old, and then retire, creating opportunities for the next generation of young workers. In this framework, occupation is fixed throughout a worker’s career. The BLS notes: “However true this may have been in the past, it does not apply to many workers today.”

The new method, by contrast, directly measures workers who leave an occupation, "taking advantage of the longitudinal aspects of the CPS monthly survey and supplements."

BLS states that it believes that the current method fails to capture a large number of separations that result in openings for new entrants and that the new method is a more accurate measure. Specifically, the current method undercounts openings because it only accurately measures workers who follow a traditional career path—entering an occupation at a young age, working in the same occupation for many years, then retiring—which is not the case for many workers in most occupations.

It has tested the relative validity of the two methods against historical data from selected professions – among them, lawyers. As to projected lawyer replacement rates, the notice states:

External data is available on historical new entrants for lawyers. Not all law school graduates become lawyers, but the American Bar Association (ABA) conducts a census of employment outcomes for all law school graduates in order to count the number who find employment in positions that require bar passage (effectively, lawyers). Since ABA began collecting this data in 2011, the number of graduates finding employment in such positions has averaged 29,000 per year. Because some graduates who don’t immediately find such positions may become lawyers later in their career (for example, many graduates become law clerks, a position that does not require bar passage, for a few years before becoming lawyers), this number should be less than the total number of new entrants into the occupation.

Under the current method, BLS projects an average of 19,650 job openings per year, while the new method projects 41,460 openings per year. Again, no direct comparison between the ABA number and the BLS numbers is possible due to conceptual differences, but the results under the current method are significantly below the actual number of new graduates finding work in the occupation. (emphasis supplied) The new method projects a higher number of openings, which allows for additional entrants not immediately after completion of a law degree.

Based on 2012 and 2013 matriculation rates and historical drop-out rates, we should expect 40,082 ABA-accredited law school graduates in 2015 and 35,954 in 2016. If the new BLS projections are accurate, we should see demand and supply in relative equilibrium in 2015 and a significant excess of demand over supply beginning in 2016. (These estimates only take into account JD-required jobs. Demand from JD-advantage employers is not included.)

Update:  ABA Journal, Are 2016 Law Grads in Luck? New Stats Say Lawyer Jobs Will Exceed Graduates That Year

November 19, 2014 in Legal Education | Permalink | Comments (4)

The Tax Consequences of the Lincoln Center's Naming Rights

NYCForbes:  What's In A Name? Should Naming Rights Reduce Charitable Deductions?, by Peter J. Reilly:

When Avery Fisher gave Lincoln Center $10.5 million in 1973 to renovate Philharmonic Hall it was agreed that the hall be called Fisher Hall in perpetuity. Perpetuity turns out to be measured in decades rather than centuries or millennia. Lincoln Center wants to renovate or raze and rebuild now and is hoping to auction off naming rights. According to this story in the New York Times, objections by the Fisher family have been assuaged by “essentially paying ” them $15 million. I’d really like to dig into what is meant by “ essentially paying”, but dammit Jim, I’m just a tax blogger, not an investigative reporter. I’m going to take “essentially paying” to mean paying and what was paid for was some amorphous right that the Fisher family had to keep its name plastered on a building.

The story raises the question of whether you should be able to take a full charitable deduction for a donation if, as a legally binding condition of the donation, you get to have a landmark building named after you. It is worth noting that the Fisher family actually ended up making a profit, although rather a modest one on the whole deal. I computed the pre-tax return to the family as being roughly 0.85%, which is really anemic, unless you compare it to what is being paid on contemporary deposit balances. If you assume that Mr. Fisher took a charitable deduction with a 70% benefit in 1973 and the family paid capital gain tax on the Lincoln Center payoff, the after tax return comes to 3.88%, which is not great, but still better than getting poked in the eye with a sharp stick.

I’m not sure where I might have went with this, so I have to say – Thank God for law professors – and not just because the Tax Prof gives me plug now and again. Professor William Drennan of Southern Illinois University has written an article titled Where Generosity And Pride Abide: Charitable Naming Rights [80 U. Cin. L. Rev. 45 (2011)].

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November 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Cost of College Crosses $260,000 Threshold

Chronicle of Higher Education, New Data on Tuition and Fees for Thousands of Colleges:

College

November 19, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 559

Tuesday, November 18, 2014

Hanlon Presents Tax Rates and Corporate Decision Making Today at Columbia

HanlonMichelle Hanlon (MIT) presents Tax Rates and Corporate Decision Making (with John Graham (Duke), Terry Shevlin (UC-Irvine) & Nemit Shroff (MIT)) at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

We analyze survey responses from 500 corporate tax executives to better understand which tax rate firms use to incorporate taxes into their decision making. Prior research assumes that managers use the marginal tax rate (MTR) to evaluate incremental corporate decisions. However, we find that approximately 45% of tax executives surveyed state that their firms use some form of effective tax rate (ETR) as the tax rate input into capital structure, capital expenditure, and acquisition decisions, whereas less than 13% state that their firms use the MTR. We then examine the determinants and consequences of managers’ tax rate choice. We find that public firms and firms with greater analyst following are more likely to incorporate the GAAP ETR as the tax rate input into their decisions, whereas larger firms and firms with high R&D intensity are less likely to do so. Finally, we find that firms using GAAP ETRs as the tax rate input for investment decisions are less responsive to their growth opportunities and have lower acquisition announcement returns when the difference between the firm’s GAAP ETR and MTR is large. Further, we find that these firms adopt an aggressive (conservative) debt policy when the GAAP ETR is greater (less) than MTR. These results suggest that the use of GAAP ETRs instead of the theoretically suggested MTR as the tax rate input for decision making leads to inefficient corporate decisions.

November 18, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Repetti Presents The Role of Economic Efficiency in Formulating Tax Policy Today at Loyola-Chicago

Repetti (2014)James R. Repetti (Boston College) presents What is the Appropriate Role for Economic Efficiency in Formulating Tax Policy? at Loyola-Chicago today:

Traditionally, the great democracies of the western world assigned equal weight to distributive justice and economic efficiency in designing a tax system. In the past few decades, however, economic efficiency has dominated the debate about the best design of a tax system in politics and analysis by legal academics. For example, many advocate low tax rates on capital gains to reduce the efficiency effects of taxing capital income despite the fact that a capital gains preference reduces progressivity and significantly complicates our tax system. Similarly, discussions of progressive tax rates often focus on the adverse efficiency effects of high rates while ignoring benefits arising from a progressive rate structure’s reduced burden on lower income individuals. In addition, many have proposed replacing the income tax with a consumption tax in order to eliminate the tax burden on investment income even though a consumption tax, regardless of its design, would increase the tax burden for many lower income taxpayers.

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November 18, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Top 1% v. the Top .01%: The Haves vs. the Have-Mores

New York Times:  Another Widening Gap: The Haves vs. the Have-Mores, by Robert Frank (Cornell):

The wealthy now have a wealth gap of their own, as economic gains become more highly concentrated at the very top. As the top one-hundredth of the 1 percent pulls away from the rest of that group, the superrich are leaving the merely very rich behind. That has created two markets in the upper reaches of the economy: one for the haves and one for the have-mores.

Whether the product is yachts, diamonds, art, wine or even handbags, the strongest growth and biggest profits are now coming from billionaires and nine-figure millionaires, rather than mere millionaires.

According to a recent paper by the economists Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics, almost all of the increase in American inequality over the last 30 years is attributable to the “rise of the share of wealth owned by the 0.1 percent richest families.” And much of that rise is driven by the top 0.01 percent.

Top 1%

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November 18, 2014 in Tax | Permalink | Comments (2)

Inequality, Unbelievably, Gets Worse

New York Times:  Inequality, Unbelievably, Gets Worse, by Steven Rattner:

The Democrats’ drubbing in the midterm elections was unfortunate on many levels, but particularly because the prospect of addressing income inequality grows dimmer, even as the problem worsens.

To only modest notice, during the campaign the Federal Reserve put forth more sobering news about income inequality: Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top decile rose.

NYT 1

Before the impact of tax and spending policies is taken into account, income inequality in the United States is no worse than in most developed countries and is even a bit below levels in Britain and, by some measures, Germany. However, once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap.

NYT 2

That’s because our taxes, while progressive, are low by international standards and our social welfare programs — ranging from unemployment benefits to disability insurance to retirement payments — are consequently less generous.

Conservatives may bemoan the size of our government; in reality, according to the Organization for Economic Cooperation and Development, total tax revenues in the United States this year will be smaller on a relative basis than those of any other member country.

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November 18, 2014 in Tax | Permalink | Comments (1)

More on the CBO's Distribution of Household Income and Federal Taxes

Following up on last week's post, CBO: The Distribution of Household Income and Federal Taxes, 2011:

American Enterprise Institute:  New CBO Study Shows That ‘the Rich’ Don’t Just Pay Their ‘Fair Share,’ They Pay Almost Everybody’s Share:

AEI 1

The CBO just released its annual report on The Distribution of Household Income and Federal Taxes analyzing data through 2011 on American household’s: a) average “market income” (a comprehensive measure that includes labor income, business income, and income from capital gains), b) average household transfer payments (payments and benefits from federal, state and local governments including Social Security, Medicare and unemployment insurance), and c) average federal taxes paid by households (including income, payroll, corporate, and excise taxes). Some of the key findings of the CBO analysis are displayed in the table above, with the data organized by household income quintiles. The data in the first five rows above appear in the CBO report (from Tables 1 and 4), and rows 6-8 above have been calculated separately based on data from the first four rows in the table. ...

Some additional analysis and commentary will be provided here that reveal a yet-to-be discussed major implication of the CBO report – almost the entire burden: a) of all transfer payments made to American households and b) of all non-financed government spending, falls on just one group of Americans – the top one-fifth of US households by income. That’s correct, the CBO study shows that the bottom three income quintiles representing 60% of US households are “net recipients” (they receive more in transfer payments than they pay in federal taxes), the second-highest income quintile pays just slightly more in federal taxes ($14,800) than it receives in government transfer payments ($14,100), while the top 20% of American “net payer” households finance 100% of the transfer payments to the bottom 60%, as well as almost 100% of the tax revenue collected to run the federal government. Here are the details of that analysis.

AEI 2

The CBO study released this week provides ample evidence that the richest Americans are paying their “fair share” of federal taxes. In fact, the richest 20% of Americans by income aren’t just paying a share of federal taxes that would be considered “fair” — it goes way beyond “fair” — they’re shouldering almost 100% of the entire federal tax burden of transfer payments and all other non-financed government spending. What’s probably not so fair is that the bottom 60% isn’t just getting off with a small tax burden or no tax burden – the bottom 60% are net recipients of transfer payments from the top 20% to the tune of about $10,000 per household in 2011. So maybe what the CBO report shows is that we should be asking whether or not the bottom 60% are paying their fair share when they’re not paying anything – they’re net recipients of transfer payments that come from “the richest” 20% of American households. When the top 20% of US households are financing almost 100% of the transfer payments to the bottom 60% and financing almost the entire non-financed operating budget of the federal government, I’d say “the rich” are paying beyond their fair share of the total tax burden, and we might want to start asking if the bottom 60% of “net recipient” households are really paying their fair share.

Washington Post Wonkblog, Tax Rates Are Finally on the Rise for the Top 1 Percent, CBO Says:

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November 18, 2014 in Tax | Permalink | Comments (0)

Bankman & Caron: Tax Scholarship in a Time of Fiscal Crisis

Joseph Bankman (Stanford) & Paul L. Caron (Pepperdine), California Dreamin': Tax Scholarship in a Time of Fiscal Crisis, 48 U.C. Davis L. Rev. 405 (2014):

This essay makes three claims about the current state of tax law and academic tax scholarship in America: (1) the federal budget imbalance, caused by the failure of both political parties to raise the tax revenues needed to fund the nation’s spending priorities, is unsustainable and threatens our nation’s future; (2) tax scholars need to shift our focus from technocratic work to systemic solutions to the existential threat posed by this fiscal gap; and (3) California’s response to its seemingly intractable budget problems provides a template for resolving the federal budget stalemate in Washington, D.C.

Two years ago, both California and the nation were imperiled by long-term, structural, budget imbalances. California has reduced that peril by raising (already high) personal tax rates on the wealthy. The political success of that approach suggests that at the national level, Americans might be willing to support higher rates to maintain government services and move toward fiscal solvency.

The fiscal crisis highlights a problem with the dominant conception of legal tax scholarship. Under that conception, scholarship is (or should be) apolitical and confined to subjects about which the writer can demonstrate mastery. Unfortunately, the most pressing problem in the field is inescapably political and requires the scholar to address some issues about which no one can master. If we hew to a restrictive definition of scholarship, we limit our voice on a subject about which we have much to say.

November 18, 2014 in Scholarship, Tax | Permalink | Comments (2)

Government's Data Collection Change Will 'Solve' the Law School Crisis

BLS (2015)Matt Leichter, How the Transparency Movement Reinflated the Law School Bubble:

[T]he Bureau of Labor Statistics is changing its employment projections methodology, specifically its measure of how many workers will be replaced in occupations in its 10-year projection periods—as opposed to the number of positions that the economy will create. ...

The BLS’s employment projections have long been a go-to source for law school critics. The ~24,000 projected annual lawyer job growth rates they showed every two years contrasted excellently with the ~40,000 law graduates each year (and the even greater number of bar admits). No longer. ... It writes ...

Not all law school graduates become lawyers, but the ABA conducts a census of employment outcomes for all law school graduates in order to count the number who find employment in positions that require bar passage (effectively, lawyers). Since ABA began collecting this data in 2011, the number of graduates finding employment in such positions has averaged 29,000 per year. Because some graduates who don’t immediately find such positions may become lawyers later in their career (for example, many graduate become law clerks, a position that does not require bar passage, for a few years before becoming lawyers), this number should be less than the total number of new entrants into the occupation.

Under the current method, BLS projects an average of 19,650 job openings per year, while the new method projects 41,460 openings per year. Again, no direct comparison between the ABA number and the BLS numbers is possible due to conceptual differences, but the results under the current method are significantly below the actual number of new graduates finding work in the occupation. The new method projects a higher number of openings, which allows for additional entrants not immediately after completion of a law degree.

Okay, data on law graduate unemployment has actually been around for many years, e.g. the NALP and the Official Guide, crude though it was. I’ve written about the strong correlation between falling proportions of graduates finding bar-passage-required jobs and graduates taking JD-advantage jobs or not finding any work. This is evidence of a saturated lawyer market, even if it’s caused in part by slack aggregate demand.

Percent Employed by Status (NALP)

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November 18, 2014 in Legal Education | Permalink | Comments (2)

The Forever Professors: Academics Who Don’t Retire Are Greedy, Selfish, and Bad For Students

RetireChronicle of Higher Education:  The Forever Professors: Academics Who Don’t Retire Are Greedy, Selfish, and Bad For Students, by Laurie Fendrich (Hofstra):

The 1994 law ending mandatory retirement at age 70 for university professors substantially mitigated the problem of age discrimination within universities. But out of this law a vexing new problem has emerged—a graying—yea, whitening—professoriate. The law, which allows tenured faculty members to teach as long as they want—well past 70, or until they’re carried out of the classroom on a gurney—means professors are increasingly delaying retirement past age 70 or even choosing not to retire at all. ...

Professors approaching 70 who are still enamored with hanging out with students and colleagues, or even fretting about money, have an ethical obligation to step back and think seriously about quitting. If they do remain on the job, they should at least openly acknowledge they’re doing it mostly for themselves. ...

The average age for all tenured professors nationwide is now approaching 55 and creeping upward; the number of professors 65 and older more than doubled between 2000 and 2011. In spite of those numbers, according to a Fidelity Investments study conducted about a year ago, three-quarters of professors between 49 and 67 say they will either delay retirement past age 65 or—gasp!—never retire at all. They ignore, or are oblivious to, the larger implications for their students, their departments, and their colleges. ...

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November 18, 2014 in Legal Education | Permalink | Comments (12)

Dershowitz Wins Acquittal in Spitzer's Prosecution of Biblical Abraham for Attempted Murder of Isaac

AbrahamNew York Times,  At Educational Event, a Modern Legal Interpretation of a Biblical Story:

The facts were undeniable: The defendant, one Abraham (no known surname), had teetered on the brink of stabbing his son Isaac to death, only to be stopped by divine intervention.

Luckily he had a lawyer with a thirst for tough cases, not to mention a jury pool consisting exclusively of people who proudly claim to be descended from the accused.

The setting, too, seemed at least mildly favorable: the soaring Fifth Avenue sanctuary of Temple Emanu-El, with twin menorahs on either side of the courtroom.

But who could begrudge him? When the defendant in question is the father of the Jewish people, it seems only right that the trial — even if it is only a mock trial done for educational purposes — should take place in one of the country’s most eminent Reform synagogues, with two of New York’s most prominent Jews sparring over his fate.

For the prosecution:  Eliot Spitzer, a former governor and attorney general of New York. For the defense:  Alan M. Dershowitz, the Harvard Law School professor who was one of Mr. Spitzer’s former professors but is perhaps better known for defending O. J. Simpson and other notorious clients. ...

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November 18, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 558

IRS Logo 2Town Hall, The IRS Hatchetmen:

[W]hen the Joint Committee on Taxation was started, it was a temporary committee and that was founded because the IRS (then called the BIR) was engaged in the same type of political bullying and illegality that conservatives have used against the Tea Party since 2010.

Senator James Couzens of Michigan, who helped found the JTC, was the Larry Ellison of his day. Like Ellison, who co-founded Oracle, Couzens made his money as the number two guy and management genius behind Henry Ford and Ford Motors. ... As a Republican from Michigan he was considered a progressive and opposed tax cuts, supported the graduated income tax and–like another rich guy, Warren Buffet—acted as the self appointed popular voice against rich corporations, railing against favorable tax treatment for companies.

At the time Secretary of the Treasury, Andrew Mellon, himself one of the richest men in America was advocating a scientific basis for taxation, “the use of economic theory to identify the tax rates that would maximize revenue yet burden productive capital as little as possible,” according to George K. Yin at the University of Virginia Law School. In short he was proposing an infant Laffer curve.

Mellon noted that tax policy was distorting the distribution of capital with companies less willing to pay dividends to shareholders because of the hostile tax treatment dividends received. He also noted that wealthy people were more inclined to invest in tax-free municipal securities because of the different tax treatment that cities and states had versus corporations.

As a progressive Republican Couzens argued against Mellon, using his own status as a rich man to make his point. His argument—in a preview of Warren Buffet’s own stupidity—was that tax treatment made little difference in what types of investments rich people made. ...

By inviting scrutiny of his tax situation, however, Couzen challenged Mellon publicly and also admitted that the tax treatment of investments changed his behavior. The result eventually was an examination in 1925 of Couzen’s tax liability for the sale of his Ford Motor stock in 1913, according to Yin, which was supposed to amount to 73 percent of the gains from the stock, a tax that Couzen said he supported.

The affair became unseemly with both sides using private tax records as weapons against the other. And when Couzens made the affair public in the Senate, the Senate was outraged that a sitting Senator would be subject to retaliation by an adinistration.

Thus was born the Joint Committee on Taxation whose expressed aim was to "investigate and report upon the operation, effects, and administration of the Federal system of income and other internal revenue taxes and upon any proposals or measures which in the judgment of the Commission may be employed to simplify or improve the operation or administration of such systems of taxes,” according to the JTC’s website.

In reality however it was there to stop internal revenue from being used as a political weapon.

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November 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, November 17, 2014

Cauble Presents Relying on the IRS Today at Chicago

Cauble (2014)Emily Cauble (DePaul) presents Relying on the IRS at Chicago today as part of its Legal Scholarship Workshop Series hosted by Lisa Bernstein:

The IRS issues different types of guidance to taxpayers, and the extent to which taxpayers can rely on IRS guidance depends on the form in which it was offered. For instance, taxpayers generally cannot rely on oral advice provided over the phone but can rely on more formal types of advice. The current state of the law harms unsophisticated taxpayers who disproportionately obtain informal advice -- the least reliable type of IRS guidance.

Existing literature lacks a thorough discussion of why, as a policy matter, we allow taxpayers to rely on some forms of IRS guidance more than others. This Article fills that gap by suggesting and critically evaluating potential justifications for this practice.

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November 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Dietsch Presents Catching Capital: The Ethics of Tax Competition Today at McGill

DietschPeter Dietsch (Université de Montréal) presents Catching Capital: The Ethics of Tax Competition (Oxford University Press) at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series hosted by Allison Christians and Daniel Weinstock:

When individuals stash away their wealth in offshore bank accounts and multinational corporations shift their profits or their actual production to low-tax jurisdictions, this undermines the fiscal autonomy of political communities and contributes to rising inequalities in income and wealth. These practices are fuelled by tax competition, with countries strategically designing fiscal policy to attract capital from abroad.

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November 17, 2014 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Bird-Pollan Presents Utilitarianism and Wealth Transfer Taxation Today at Loyola-L.A.

Bird-PollanJennifer Bird-Pollan (Kentucky) presents Utilitarianism and Wealth Transfer Taxation at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

This Article is the third in a series examining the continued relevance and philosophical legitimacy of the United States wealth transfer tax system. The earlier two Articles used the frameworks of Nozickian libertarianism [Death, Taxes, and Property (Rights): Nozick, Libertarianism, and the Estate Tax, 66 Maine L. Rev. 1 (2013)] and Rawlsian equality of opportunity [Unseating Privilege: Rawls, Equality of Opportunity, and Wealth Transfer Taxation, 59 Wayne L. Rev. 713 (2014)], concluding that the taxation of wealth transfers is consistent with both theoretical approaches. This Article examines the utilitarianism of John Stuart Mill and his philosophical progeny, distinguishing the philosophical approach of utilitarianism from contemporary welfare economics. The Article first identifies the current state of wealth transfer taxation in the United States. Next, the Article explicates the fundamental elements of utilitarianism, starting with Jeremy Bentham’s hedonistic approach, identifying utility with pleasure, and then moving to Mill’s more sophisticated definition of utility, distinguishing between “higher” and “lower” pleasures. After exploring classical utilitarianism, the Article compares the philosophical theory to its more contemporary interpretation in the form of welfare economics. Finally, the Article concludes that heavily redistributive wealth transfer taxation is consistent with the ethical imperatives of classical utilitarianism.

Miranda Perry Fleischer (San Diego) is the commentator.

November 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kleinbard Presents We Are Better Than This: How Government Should Spend Our Money at Loyola Marymount

We Are Better Than This (2014)Edward Kleinbard (USC) presents We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014) at Loyola Marymount tomorrow as part of its Center for Accounting Ethics, Governance, and the Public Interest Speaker Series:

We Are Better Than This fundamentally reframes budget debates in the United States. Author Edward D. Kleinbard explains how the public's preoccupation with tax policy alone has obscured any understanding of government's ability to complement the private sector through investment and insurance programs that enhance the general welfare and prosperity of our society at large.

He argues that when we choose how government should spend and tax, we open a window into our "fiscal soul," because those choices are the means by which we express the values we cherish and the regard in which we hold our fellow citizens. Though these values are being diminished by short-sighted decisions to starve government, strategic government spending can directly make citizens happier, healthier, and even wealthier.

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November 17, 2014 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (5)

James Poterba Awarded Daniel Holland Medal

PoterbaMIT Press Release, MIT Economist James Poterba Awarded the Holland Medal:

MIT Economics Professor James M. Poterba has been chosen to receive the Daniel M. Holland Medal from the National Tax Association in honor of his outstanding contributions to the study and practice of public finance. ...

The Mitsui Professor of Economics, Poterba is the first MIT faculty member to receive the Holland Medal, which was established in 1993 to honor Holland, a nearly 30-year MIT Sloan faculty member who was an expert on taxation and public finance. Holland served as president of National Tax Association in 1989 and edited the National Tax Journal from 1996 until his death in 1991....

Poterba, who joined the MIT faculty in 1983, teaches a graduate course on the economics of taxation. His recent work has emphasized the effect of taxation on the financial behavior of households, particularly their saving and portfolio decisions. He has been especially interested in analysing the impact of 401(k) plans and IRAs on the level and adequacy of retirement saving.

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November 17, 2014 | Permalink | Comments (0)

Law School Tuition v. Bar Exam Success

Huffington Post, Comparing Law School Tuition With How Many Grads Pass The Bar On The First Try:

Paying more money in tuition for law school does not necessarily boost your chance of passing the bar on the first try, but it doesn't seem to hurt either, according to a chart by FindTheBest. [Click on bubbles to see results for individual law schools.]

November 17, 2014 in Law School Rankings, Legal Education | Permalink | Comments (5)