TaxProf Blog

Non-partisan Group Chides McCain for Tax "Exaggerations and Distortions"

The non-partisan FactCheck.org chides Republican presidential candidate John McCain's for "exaggerations and distortions" on taxes:

• McCain says that eliminating the AMT will save "more than 25 million middle-class families more than $2,000 every year." But McCain's "middle class" includes families making up to $200,000 per year, and the $2,000 figure is an average. Those earning more money will see the lion's share of the savings. McCain also leaves out the fact that the proposal could cost as much as $1.6 trillion over 10 years.
• By the measure most economists prefer, McCain is wrong in his claim that Sens. Clinton and Obama want to implement "the single largest tax increase since the Second World War;" it would be the fifth largest. At a more basic level, it's misleading to tag Clinton and Obama for something that was scheduled during the Bush administration – the expiration of the 2001 and 2003 Bush tax cuts, which by law will occur at the end of 2010.
• McCain also repeats the mantra that cutting the capital gains tax rate will increase government receipts. In fact, rate cuts produce a spike in revenue, but it's only temporary. McCain also falsely claims that higher capital gains tax rates will affect 401(k) plans.
• McCain was the first to announce the now widely discredited proposal to suspend federal gas taxes. The proposal wouldn't lower prices at the pump and would result in (effectively) an $8.5 billion windfall to oil companies.

House to Mark Up Energy and Tax Extenders Act

The House Ways & Means Committee will mark up The Energy and Tax Extenders Act of 2008 today:

• Press Release
• Summary of Bill
• Legislative Text
• Joint Committee on Taxation Explanation
• Joint Committee on Taxation Revenue Estimate

Repetti: Corporate Governance and Stockholder Abdication: Missing Factors in Tax Policy Analysis

James R. Repetti (Boston College) has posted Corporate Governance and Stockholder Abdication: Missing Factors in Tax Policy Analysis, 67 Nore Dame L. Rev. 971 (1992), on SSRN.  Here is the abstract:

Policymakers recognize that management's ability to control publicly held corporations can negatively affect corporate productivity because management objectives may differ significantly from the wealth maximization objective of stockholders. Commentators have generally viewed the ability of management to control public corporations as resulting from stockholder abdication. Congress has used the tax system to respond to this problem. At various times, Congress has enacted the capital gains preference, golden parachute tax, greenmail tax, and incentive stock option preference with three goals in mind: (1) to encourage management to adopt objectives consistent with stockholders' objectives, (2) to encourage stockholders to adopt a long-term perspective with respect to their stock ownership, and (3) to discourage management from insulating itself from the discipline of market forces.

This article argues that these provisions have been ineffective and in some cases harmful because Congress did not consider that the evil it sought to remedy, stockholder abdication, impairs the effectiveness of these provisions. Preferential rates for long-term capital gains are unproductive because they subsidize inefficient retention of earnings, particularly when the tax rate on capital gains is less than the tax rate on dividends. In addition, the holding period requirement of the capital gains preference does not encourage stockholders to adopt a long-term investment perspective and may create market distortions. Moreover, golden parachute and greenmail taxes harm efficient companies. The golden parachute tax prevents well-managed public companies from discouraging unwanted bids by inefficient companies because the stockholder approval exception is not available to public companies. The greenmail tax discourages profit-maximizing bidders from making hostile bids for inefficient companies and, at the same time, prevents efficient firms from thwarting takeover attempts by inefficient firms. Lastly, evidence about the impact of incentive stock options on corporate performance is mixed.

ABA Threatens to Withhold Accreditation for Florida A&M Law School

The St. Petersburg Times has obtained a copy of the report issued by the ABA team after its October 28-31, 2007 site visit to Florida A&M University College of Law questioning whether the school will be able to obtain accreditation.

• ABA Site Team Report
• Law School's Response
• National Law Journal:  ABA Report on Florida Law School May Endanger Accreditation
• St. Petersburg Times:
  • ABA: Legis Mandate Partly to Blame for FAMU Law Woes
  • "A Very Steep Mountain to Climb"
  • FAMU Law School Running Against Clock, Internal Problem

EU to Crack Down on Tax Havens

International Herald Tribune:  EU Considers Toughening Offensive on Tax Havens, by Stephen Castle:

Under pressure from Germany, the European Union on Wednesday agreed to consider a new clampdown on tax havens, despite the opposition of one country, Luxembourg, which said it saw no reason to change the existing law.

In what is likely to become a lengthy negotiation, the European Commission will propose the expansion of a directive that aims to ensure that EU citizens do not evade taxes on the interest from savings by opening accounts abroad.

(Hat Tip:  Ann Murphy.)

"The Moral Heart of Higher Education: Motivating Senior Faculty to Write"

Following up on Monday's post, Why Don't Some Faculty Write? It's the Law Reviews' Fault:  Louisville Dean Jim Chen offers four possible alternative ways of dealing with law faculty that do not write:

1. Do nothing. At the very least, do nothing drastic. Ask nonwriters to focus on teaching, advising, outreach, and university-wide committees.
2. Issue nonwriters a free pass, to the extent they were hired without scholarly expectations.
3. Increase symbolic rewards for writing.
4. Work harder to avoid hiring (future) nonwriters in the first place.

It should be clear by now that I endorse, with wildly variable levels of enthusiasm and significant misgivings, all four of the strategies I have outlined. I've expended great thought and effort on this whole exercise because I realized ... that the task of motivating senior faculty members to write goes to the moral heart of higher education.

Scholarship is a core responsibility held, even cherished, by most members of the academy. Indeed, the best among us do not view it as a duty, but as a privilege. If higher education were to identify its gravest sins, the complete failure to produce scholarship surely would rank among the top seven.

Here at MoneyLaw and elsewhere, I have enthusiastically endorsed Hanlon's razor, the folk aphorism that reminds us: Never attribute to malice that which can be adequately explained by stupidity. I am now prepared to embrace an even more expansive version of Hanlon's razor. Never attribute to active sin that which can be adequately explained by inertia.

Continue reading ""The Moral Heart of Higher Education: Motivating Senior Faculty to Write""

WSJ: What Congress Is Likely to Do to Your Taxes

Today's Wall Street Journal Tax Report:  What Congress Is Likely To Do to Your Tax Bill, by Tom Herman:

It's going to be a tricky year to do your tax planning. Look for Congress to revive several popular tax breaks this year that expired at the end of 2007 and to shield more than 20 million people from being caught in the tangled web of the AMT. ... Here is a summary of several major proposed tax changes that would affect individuals this year:

• Alternative minimum tax. ...  Approval of a temporary AMT patch this year is "all but certain" ...  The most likely outcome: Congress will increase the AMT's income-exemption levels and take other action to keep the number of AMT victims about the same as in 2007.
• Sales-tax deduction. ... Outlook for passage: excellent.
• Tuition and fees deduction. ...  Outlook for passage: excellent.
• IRAs. Another law that expired at the end of last year allowed taxpayers who were 70½ or older to transfer as much as $100,000 a year, tax-free, directly from their individual retirement accounts to qualified charities. That transfer also counted toward the taxpayer's required minimum distribution for the year. ...  Outlook for passage: very good.
• "Cost basis" reporting. President Bush has called for requiring many brokerage firms and other institutions to report to the government what investors paid for stocks and other securities. Advocates say this cost-basis reporting would make many taxpayers more honest in reporting capital gains and also make it easier for law-abiding taxpayers to calculate taxes. ... Outlook for passage: possible.
• Penalties for nonfilers. President Bush wants to increase criminal penalties for "willful" failure to file federal income-tax returns for several years. His budget includes making it a felony, instead of a misdemeanor, and imposing stiffer financial penalties. This proposal received more attention earlier this year when Wesley Snipes, the actor, was convicted of misdemeanor charges for failing to file returns but was found not guilty of more serious felony charges. ... Outlook for passage: possible.
• Estate taxes. Expect lots of heated rhetoric in coming months about the need for major changes in the federal estate tax. ... Outlook for this year: Forget about it.
• Educator deduction. This expired deduction allowed elementary and secondary-school teachers and other educators to deduct up to $250 a year for buying classroom supplies out-of-pocket. ... Outlook for passage: excellent.

Leviner Presents A New Era of Tax Enforcement -- From "Big Stick" to Responsive Regulation Today at Tel Aviv Law School

Sagit Leviner (Bar-Ilan University, Israel) presents A New Era of Tax Enforcement -- From "Big Stick" to Responsive Regulation at Tel Aviv University, Buchanan Faculty of Law, as part of its Tax Policy Colloquium.  Here is the abstract:

Recent developments in regulation and tax administration in Australia inspired this article on tax compliance and responsive regulation, a concept Ian Ayres and John Braithwaite developed and the Australian tax administration implemented, as an alternative approach to enforcement. The Article begins with a discussion on what has become the dominant approach to tax enforcement of the past three and a half decades: the economics of crime and compliance. It evaluates the key advantages and disadvantages of the economic approach as well as its application to tax. Next, the Article explores responsive regulation as a method that draws on the economic paradigm but that also supplements this approach with other theories, particularly those involving identity, conflict escalation, and procedural justice. The Article suggests that this broader, more balanced, and closely tailored method of regulating responsively may enable regulators to draw on the advantages of the economic model while alleviating some of its drawbacks and that it may therefore constitute a superior method for regulating compliance.

Stephen Gey: A Dying Law Professor's Last Class

I previously have blogged (here and here) the tragic news that one of the true giants and nicest people in our business, Steven G. Gey, David and Deborah Fonvielle and Donald and Janet Hinkle Professor of Law at Florida State, is dying of amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease.

Please take the time to read the incredible story in the St. Petersburg Times, ALS Saps Professor's Strength, Not His Ideals: A Dying Professor Believes in the Law. His Students Believe in God. The Only Faith They Share Is In Each Other, by John Barry.  (Hat Tip:  Brian Leiter.)

Two Professors Urge Students to Lie on Survey to Increase School's Ranking

See the details, including this audio of Fiona Barlow-Brown, at Times On Line:

“If Kingston comes down the bottom, no one’s going to want to employ you because they’re going to think your degree is shit,” she added. “Although this is going to sound incredibly biased, if you think something’s a four, my encouragement would be to give it a five. Because that’s what everyone else is doing.”

(Hat Tip:  Inside Higher Ed.)

SSRN Tax Professor Rankings

SSRN has updated its new monthly rankings of 457 American and international law school faculties and 1,500 law professors by (among other things) the number of paper downloads from the SSRN data base.  Here is the new list (through May 9, 2008) of the Top 25 Tax Professors in two of the SSRN categories: all-time downloads and new downloads (within the past 12 months) [click on chart to enlarge]:

Here are the biggest upward moves in each category from the April 2008 ranking [click on chart to enlarge]:

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

Continue reading "SSRN Tax Professor Rankings"

Government Wins 5th Circuit Son of BOSS Tax Shelter Case

The Fifth Circuit on Monday handed the government another victory in a Son of BOSS tax shelter case.Kornman & Assoc., Inc. v. United States, No. 06-11422 (5th Cir. 5/12/08):

In these consolidated TEFRA partnership proceedings, the Government argues that the Appellants attempted to create an enormous, artificial tax loss that is devoid of any economic content by using the short sale variant of the "Son of BOSS" tax shelter. Through a pre-arranged series of transactions involving the short sale of Treasury Notes (T-Notes) and subsequent transfers between a trust, two limited partnerships (LPs), and an individual, the Ettman Family Trust (the Trust) reported a short-term capital loss of approximately $102.6 Million on its 1999 tax return despite the fact that it only suffered an economic loss of approximately $200,000 in connection with those transactions.3 Because non-corporate taxpayers can carry an unused capital loss forward to succeeding taxable years until it is exhausted, the trust used this artificial capital loss in 1999 to offset its legitimate income and capital gains in 2000 and 2001. ...  [W]e conclude that the obligation to close a short sale is a liability for purposes of § 752.

Before we begin our excursion into Subchapter K, we would be remiss if we did not comment on the elephant in the room. The Trust acknowledges that it only suffered a $200,000 economic loss in connection with these transactions, yet it claimed a $102.6 Million tax loss on its return. The Trust used this fake loss in 1999 to offset over $2 Million in legitimate income and capital gains in 2000 and 2001. The Appellants' premeditated attempt to transform this wash transaction (for economic purposes) into a windfall (for tax purposes) is reminiscent of an alchemist's attempt to transmute lead into gold.

Judge King issued a one-paragraph concurring opinion:

I concur in the judgment of the panel and in the panel's opinion. I write separately to express my unease with what we have been asked to do here. The basic problem with this case is that the underlying transactions have absolutely no economic substance. The IRS seeks a rule of law from a circuit court to dispose of this case, and others, without being put to the expense and delay of litigating the fact-bound question whether these transactions should be recharacterized for tax purposes under the no-economic substance and step-transactions doctrines. The result is a rule of law addressing what is here a pretense, an unsettling undertaking.

For TaxProf Blog coverage of the Government's victory in the district court, see here.

Update:  DOJ Press Release

Cain: Taxing Families Fairly

Patricia A. Cain (Santa Clara) has posted Taxing Families Fairly, 48 Santa Clara L. Rev. 805 (2008), on SSRN.  Here is the abstract:

This article focuses on the historical role of state marital property law in shaping the current federal tax rules regarding taxation of the family. Now that a number of states have granted status recognition to same-sex couples and granted them marital property rights, the tension between state property law and federal tax law has produced new problems. This article identifies those problems and proposes a solution that would restore uniformity and tax all families fairly.

Poll: Increasing Capital Gains Tax From 15% to 20% Won't Trigger Sales

Bloomberg:  Investors Say Tax Increase Wouldn't Alter Strategy, by Matthew Benjamin:

Affluent investors say a small increase in the capital gains tax, as suggested by Democratic presidential candidates Barack Obama and Hillary Clinton, wouldn't affect their investment decisions. According to the annual Bloomberg/Los Angeles Times investor poll, 69% of upper-income investors say a raise in the capital gains tax to 20% from 15% wouldn't cause them to sell assets they would otherwise hold.

Feds Indict Two in UBS Tax Evasion Case

The feds today indicted a former UBS banker (Bradley Birkenfeld) and a co-conspirator (Mario Staggl) for tax evasion in a scheme that allowed a wealthy American client to use overseas trusts to avoid paying taxes on $200 million in assets.

• DOJ Press Release
• Indictment
• Associated Press
• DealBook
• Forbes
• Miami Herald
• New York Times
• Reuters
• Roth & Co.
• Wall Street Journal
• WSJ Wealth Report

(Hat Tip: Karla Simon.)

Oregon Names Gary, Shurtz to Professorships

Oregon has announced several professorship appointments, including:

Susan Gary, Associate Dean for Academic Affairs, as Orlando J. and Marian H. Hollis Professor of Law:

Professor Gary's research examines the way inheritance laws apply to changing family structures, regulation of nonprofit organizations, and use of mediation in estate planning and probate. She currently serves as reporter for the Uniform Management of Institutional Funds Act.     

Nancy Shurtz, as Bernard Kliks Professor of Law:

Professor Shurtz's scholarly interests include individual and business tax law, tax policy, environmental policy, and women and the law. She is editor for the Media/Book Products Committee of the American Bar Association's Real Property, Probate, and Trust section. Professor Shurtz has been a literature reviewer and columnist for Estate Planning magazine since 1990.

Leviner Presents A New Era of Tax Enforcement - From "Big Stick" to Responsive Regulation Today at Haifa University

Sagit Leviner (Bar-Ilan University, Israel) presents A New Era of Tax Enforcement - From "Big Stick" to Responsive Regulation at Haifa University in Israel today as part of its Faculty Workshop Series.  Here is the abstract:

Recent developments in regulation and tax administration in Australia inspired this article on tax compliance and responsive regulation, a concept Ian Ayres and John Braithwaite developed and the Australian tax administration implemented, as an alternative approach to enforcement. The Article begins with a discussion on what has become the dominant approach to tax enforcement of the past three and a half decades: the economics of crime and compliance. It evaluates the key advantages and disadvantages of the economic approach as well as its application to tax. Next, the Article explores responsive regulation as a method that draws on the economic paradigm but that also supplements this approach with other theories, particularly those involving identity, conflict escalation, and procedural justice. The Article suggests that this broader, more balanced, and closely tailored method of regulating responsively may enable regulators to draw on the advantages of the economic model while alleviating some of its drawbacks and that it may therefore constitute a superior method for regulating compliance.

More on The Future of the Tax Academy

I previously blogged The Future of the Tax Academy, sparked by a series of blogosphere posts on the future of law and economics launched by Josh Wright.  In the most recent installment, former George Mason Dean Henry Manne writes:

I really do not think that we should be bothering in law schools with either teaching or research that in some ways does no make for better lawyers or for better legal scholars (not necessarily the same thing, but again there is convergence in the long run).

Larry Solum has written a detailed post in response:

[T]he legal academy stands at a crossroads. One can imagine a variety of possible futures. Law schools might begin to realize that the study of law must become a distinctive multidisciplinary enterprise: this is the path taken by political science, where political phenomena are studies from a variety of perspectives, including rational choice & formal modeling, empirical studies, political theory, political history, and so forth. Or one can imagine a return to the idea of law schools as professional schools that emphasize doctrine--although this would require an intellectual foundation that justified the return to doctrinalism. Or perhaps the legal academy will segment itself--with most law schools returning to the trade school model that emphasizes the training of practising lawyers and the law schools of major research universities functioning to produce elite lawyers, legal academics, and multidisciplinary research. Or something else.

CTJ: State-by-State Data Show Majority of Bush Tax Cuts for Capital Gains & Dividends Go to the Richest 1%

Citizens for Tax Justice today released a report, Capital Gains and Dividends Tax Cuts Offer Almost No Benefit to Middle-Income Americans and Add to the Nation’s Fiscal Problems.  Among the findings:

The state-by-state data shows how the benefits of these tax breaks are distributed among different income groups and examines available data on the revenue collected to see if revenues can actually increase in response to a tax cut. The report finds that:

• The majority of the benefits of these tax cuts go to the richest 1% in every state.
• Revenue collected by the capital gains tax was much higher during the Clinton administration, when the tax rate on capital gains was higher.

Lefty College Seeks Right-Wing Prof

Interesting front-page article in today's Wall Street Journal: Help Wanted: Lefty College Seeks Right-Wing Prof; CU-Boulder Bid to Endow A "Conservative" Chair Leaves Both Sides Uneasy, by Stephanie Simon:

How liberal is the University of Colorado at Boulder? The campus hot-dog stand sells tofu wieners. A recent pro-marijuana rally drew a crowd of 10,000, roughly a third the size of the student body. And according to one professor's analysis of voter registration, the 800-strong faculty includes just 32 Republicans.

Chancellor G.P. "Bud" Peterson surveys this landscape with unease. A college that champions diversity, he believes, must think beyond courses in gay literature, Chicano studies and feminist theory. "We should also talk about intellectual diversity," he says. So over the next year, Mr. Peterson plans to raise $9 million to create an endowed chair for what is thought to be the nation's first Professor of Conservative Thought and Policy.

Mr. Peterson's quest has been greeted with protests from some faculty and students ... Even some conservatives who have long pushed for balance in academia voice qualms. Among them is David Horowitz, a conservative agitator . ... While he approves of efforts to bolster a conservative presence on campus, Mr. Horowitz fears that setting up a token right-winger as The Conservative at Boulder will brand the person as a curiosity, like "an animal in the zoo." ...

Mr. Peterson -- a Republican who took over as chancellor two years ago -- says he would like to bring a new luminary to campus every year or two to fill the chair, for an annual salary of about $200,000. No candidates have been approached, but faculty and administrators have floated big names like Secretary of State Condoleezza Rice, columnist George Will and Philip Zelikow, who chaired the 9/11 Commission. "Like Margaret Mead among the Samoans, they're planning to study conservatives. That's hilarious," says Mr. Will.

Senate Holds Hearing Today on Tax Reform for Individuals

The Senate Finance Committee holds a hearing today on Cracking the Code--Tax Reform for Individuals.  From the hearing announcement:

The hearing will examine how social policy is implemented through the Code -- for instance, with efforts to lift low-income, working families out of poverty through the earned income tax credit.  The hearing will identify those goals the tax code addresses most effectively, and ask whether these goals should be part of a reformed system.

Here are the witnesses scheduled to testify:

• Leonard Burman (Director, Tax Policy Center; Senior Fellow, Urban Institute)
• William Gale (Vice President and Director, Economic Studies, Brookings Institution)
• Stephen Entin (President and Executive Director, Institute for Research on the Economics of Taxation)
• J.D. Foster (Norman B. Ture Senior Fellow, Economics of Fiscal Policy, Heritage Foundation)

The hearing takes place at 10:00 a.m. today in 215 Dirksen Senate Office Building.

Tax Evasion Kills 1,000 Children Every Day

Christian Aid: Death and Taxes:  The True Toll of Tax Dodging:

Christian Aid has concluded that the necessary money, and more, is already available – if only those who owe it would pay up. We are talking about tax. This report seeks to expose the scandal of a global taxation system that allows the world’s richest to duck their responsibilities while condemning the poorest to stunted development, even premature death.

This is in part to do with super-rich individuals. It is also to do with governments, including the UK government, who have let this situation develop and persist. But it is mostly about the world’s transnational corporations wielding their enormous power to avoid the attentions of the tax man – with devastating results.

The situation is stark and urgent. We predict that illegal, trade-related tax evasion alone will be responsible for some 5.6 million deaths of young children in the developing world between 2000 and 2015. That is almost 1,000 a day. Half are already dead.

(Hat Tip:  Tax Justice Network.)

Update:  Joe Kristan disagrees:

I don't buy it. In much of the developing world governments are merely lawless gangster regimes. Millions of people trying to scratch out a living in countries without the rule of law survive only because they, or their employers, hide enough to eat from their parasitical overlords. In such places tax evasion saves lives by letting people feed their children, rather than their dictators' Swiss bank accounts. It's hard to see where the people of Burma, for example, or companies that operate there, have a moral obligation to feed a government that won't even let outsiders in to help feed their subjects after a humanitarian disaster.

It's wrong to apply the same kind of ethical standards to tax evasion in a despotic land that applies in the U.S. While our tax system has flaws (heaven knows it does), at least you have some predictability as to what is taxable, and you have a reasonably fair system to turn to if you disagree with the IRS. Try telling, say, the Cuban or Russian government that you disagree with their tax assessment and see how far you get.

Jensen: Taxation and Doing Business in Indian Country

Erik M. Jensen (Case Western) has published Taxation and Doing Business in Indian Country, 60 Me. L. Rev. 1 (2008). Here is the abstract:

Furthering investment in Indian country (a term that includes, but is not limited to, reservations) is an important goal, but potential investors are hesitant - and with reason. One disincentive to invest is uncertainty about tax liability. Understanding taxation in Indian country requires knowledge not only of traditional tax law, but also of American Indian law principles dating from the early nineteenth century, and not many practitioners are up to that task. This article tries to make sense, as much as is possible, of the doctrines that have developed over the centuries.

The article first discusses some basics: the concept of Indian country and various other doctrines of American Indian law that can affect the analysis of taxation (federal plenary power, the federal government's obligation to act as trustee for American Indian nations, tribal sovereignty, the nature of treaties between the U.S. and many tribes, and the Indian canons of construction). The article then discusses the power of various governments (federal, state, and tribal) to tax within Indian country. Among the subjects considered in depth are the federal government's power to tax tribes and tribal corporations; doctrines affecting state governments - taxing powers (including legal versus economic incidence, the infringement test, and the federal preemption doctrine); the limits on tribal power to tax non-Indians within Indian country; and doctrines affecting the ability of tribes to waive their taxing power in order to attract investors.

Goodwin: Robertson v. Princeton Provides Liberal-Democratic Insights into Cy Pres Reform

Iris J. Goodwin (Tennessee) has posted Ask Not What Your Charity Can Do for You: Robertson v. Princeton Provides Liberal-Democratic Insights into Cy Pres Reform, 50 Ariz. L. Rev. ___ (2008), on SSRN.  Here is the abstract:

This article centers on a long-standing problem in the law of public charity: how to ameliorate the force of restrictions imposed by donors on large gifts in the face of societal change. Seeking to advance personal beliefs or social agenda, donors of large gifts commonly limit the application of donated funds to particular programs. Under current law, such restrictions obtain in perpetuity. A restriction, if socially apposite when made, often functions as a dead hand upon the charity with the passage of time. What has long been sought by the legal community is a substantive standard by which to evaluate the continued social efficacy of these donor-imposed restrictions and to justify interpreting them more liberally in the face of change. This article sheds light on this challenge by first understanding these restrictions as private views of the public good, and by then locating charitable mission and in particular restricted gifts in the context of liberal democracy. At that point, we can discern the deep, normative reasons for which this criterion has eluded commentators, judges and legislatures operating in a tradition of political liberalism. This argument is grounded in John Rawls's use of the distinction, fundamental to liberal political thought, between the concepts of the right and the good, to locate within a liberal democracy certain claims about the public good.

By way of illustration, this article also examines aspects of the ongoing legal dispute between the Robertson family and Princeton University. The Robertsons allege that the University has failed to comply with a restriction that the family imposed on a gift made decades earlier and, further, has applied Robertson funds far outside the compass of the grant. Now valued at almost $800 million, the gift represents 6% of Princeton's endowment. The Robertsons' gift was made in response to President Kennedy's challenge to Ask not what your country... The Robertsons claim that, consistent with the patriotic impulse that motivated the grant, funds were to be used to establish a graduate program to educate students for careers in the U.S. government. As one family's response to Kennedy's challenge to the nation, the Robertson restriction is a quintessential example of a private view of the public good. Within a few short years, however, the moment of idealism that inspired the gift came to an abrupt end with the assassination of Kennedy, the mire of Vietnam and other national embarrassments, and young people were not interested in working for the U.S. government. No case or controversy better illustrates the role that restricted gifts play in the charitable sector or demonstrates the particular inadequacies of the current law in guiding charities in their stewardship of such gifts over time.

Kane & Rock: Corporate Taxation and International Charter Competition

Mitchell Kane (Virginia, moving to NYU) & Edward B. Rock (Penn) have published Corporate Taxation and International Charter Competition, 106 Mich. L. Rev. 1229 (2008).  Here is the abstract:

Corporate charter competition has become an increasingly international phenomenon. The thesis of this Article is that this development in corporate law requires a greater focus on corporate tax law. We first demonstrate how a tax system’s capacity to distort the international charter market depends both upon its approach to determining corporate location and upon the extent to which it taxes foreign source corporate profits. We also show, however, that it is not possible to remove all distortions through modifications to the tax system alone. We present instead two alternative methods for preserving an international charter market. The first-best solution involves severing the markets for corporate law and corporate tax law through coordination of locational rules under each regime, with a “place of incorporation” rule for corporate law and a “real seat” rule for corporate tax. The second-best solution relies on a properly designed federal structure. The crucial design elements for such a federal system are the allocation of substantive law between the federal and subfederal levels, corporate and corporate tax locational rules, and the taxation of corporate migration and foreign source corporate profits. With due attention to these details, an international charter market can avoid the potentially distorting effects of corporate taxation. In the final part of the Article we apply our analysis to the United States, Canada, the European Union, and Israel, and show how difficult it is, in the real world, to separate corporate charter and corporate tax competition.

Joint Committee on Taxation: A Reconsideration of Tax Expenditure Analysis

Following up on last week's post:  the Joint Committee on Taxation today released A Reconsideration of Tax Expenditure Analysis (JCX-37-08).  Here is the summary:

This document ... reconsiders the utility of the JCT Staff’s current implementation of tax expenditure analysis. Tax expenditure analysis can and should serve as an effective and neutral analytical tool for policymakers in their consideration of individual tax proposals or larger tax reforms. Its efficacy has been undercut substantially, however, by the depth and breadth of the criticisms leveled against it. Tax expenditure analysis no longer provides policymakers with credible insights into the equity, efficiency, and ease of administration issues raised by a new proposal or by present law, because the premise of the analysis (the validity of the “normal” tax base) is not universally accepted. Driven off track by seemingly endless debates about what should and should not be included in the “normal” tax base, tax expenditure analysis today does not advance either of the two goals that inspired its original proponents: clarifying the aggregate size and application of government expenditures, and improving the Internal Revenue Code. The JCT Staff therefore has begun a project to rethink how best to articulate the principles of tax expenditure analysis, in order to improve the doctrine’s utility to policymakers, reemphasize its neutrality, and address the concerns raised by many commentators.

This pamphlet introduces a new paradigm for classifying tax provisions as tax expenditures. Our revised classification divides the universe of such provisions into two main categories: tax expenditures that can be identified by reference to the general rules of the existing Internal Revenue Code (not, as is the current practice, by reference to a hypothetical “normal” tax), which we label “Tax Subsidies,” and a new category that we have termed “Tax-Induced Structural Distortions.” The two categories together cover much the same ground as does the current definition of tax expenditures, and in some cases extend the application of the concept further. The revised approach does so, however, without relying on a hypothetical “normal” tax to determine what constitutes a tax expenditure, and without holding up that “normal” tax as an implicit criticism of present law. The result should be a more principled and neutral approach to the issues.

Continue reading "Joint Committee on Taxation: A Reconsideration of Tax Expenditure Analysis"

Tax Court Issues Phishing Warning

The Tax Court has posted this notice on its web site:

The United States Tax Court has received many telephone calls regarding an email which purports to originate from the Court being sent by and a member of the Tax Court's practitioner bar. This message is an example of "Spear Phishing", which is an email spoofing attempt that targets a specific organization. The Tax Court is not disseminating any email notice to anyone who currently has a case before this Court. If you receive an email with a subject line that includes the text, "US Tax Petition", along with a malformed docket number following the format #000-000, and a sender address of noreply@ustaxcourt.org, please ignore/delete the email and do not click any link within the email message.

Why Don't Some Faculty Write? It's the Law Reviews' Fault

Why I Don't Write, by Geoffrey Rapp (Toledo):

Three years ago, Paul Horwitz started a wonderful discussion about the value of scholarship by law professors, Why I Write. ...  An equally interesting, and perhaps more troubling question, is why some professors choose not to write. ...  The question I want to explore here is why, even though it seems so obviously harmful to their own personal and professional interests, they choose other activities instead of write legal scholarship. The point isn't to lay blame or scold those who don't write, but rather to try to understand the roots of non-writing in the hopes of generating ideas of how to provide a chance for change.

1. I have nothing to say that would re-invent my field.
2. No one will read it anyway.
3. I object to student-edited law reviews.
4. I get more satisfaction out of service and teaching.

[T]here is something about writing that detracts from some professors' happiness, satisfaction, and sense of self worth. What is it? Maybe rejection. ...  [E]ven the most interesting article, when submitted to 50-100 law reviews, will be rejected by 90% of them. ... Service and teaching, by contrast, provide more immediate affirmation of worth ....

But if the reason some don't write is because of how they feel they are treated by law reviews, maybe we as teachers and advisers of student law reviews need to do a better job of reminding them that the way they reject authors can have real effects. We should encourage them to process pieces in the way they would want the products of their own hard labor to be judged, and to treat authors -- even those who submit pieces editors find lame -- with respect.

Oral Argument in Tax Strategy Patent Case

I previously blogged In re Bilsky, No. 2007-1130, which the Federal Circuit, on its own motion, agreed to hear en banc.  In its amicus brief, the AICPA has asked that the court deny patent protection to tax strategies.  Patently-O covers Thursday's oral argument, and audio files of the oral argument are available here (Part One, Part Two).  (Hat Tip: David Kirk.)

Is the Marriage Penalty Unconstitutional?

Point of Law:  The Marriage Penalty, by Ted Frank:

The death of Mildred Loving this week reminds us of the landmark decision of Loving v. Virginia, 388 U.S. 1 (1967), which struck down appalling anti-miscegenation laws. ... 

Zablocki v. Redhail, 434 U.S. 374 (1978), which struck down a Wisconsin statute requiring a court order for permission to marry if one of the parties is subject to child-support obligation, limited the Loving principle, stating that "reasonable regulations that do not significantly interfere with decisions to enter into the marital relationship may legitimately be imposed." Id. at 386, citing Califano v. Joust, 434 U.S. 47 (1977) (upholding Social Security Act provision terminating benefits for disabled dependent