TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Tuesday, April 11, 2006

Winchester on Working for Free: A New Tax Dodge for the Wealthy Magnifies Employment Tax Defects

Winchester_2 Ssrn_logo_120 Richard Winchester (Thomas Jefferson) has posted Working for Free: A New Tax Dodge for the Wealthy Magnifies Employment Tax Defects on SSRN.  Here is the abstract:

Employment taxes account for an enormous share of federal tax receipts. And it is widely acknowledged that taxes on the self-employed are collected under a dysfunctional set of laws that is long overdue for repair. Yet, there is surprisingly little legal scholarship in the field. This article fills a portion of that gap. It examines some fundamental flaws that plague our nation’s employment tax laws, focusing on how President Bush’s dividend tax cut created an incentive for wealthy individuals to exploit those flaws at the government’s expense when they work for a corporation that they also own and control. Specifically, prior to the Bush tax cut the corporation would have (correctly) paid these employee-shareholders a salary for their labor. However, the corporation is now more likely to substitute a dividend for that compensation, preventing any employment tax from coming into play and shortchanging the social security trust fund at a time when its long term solvency is in jeopardy. The article proposes a new and practical framework for addressing the defects in the law in order to produce more sensible and equitable results while eliminating opportunities for abuse.

http://taxprof.typepad.com/taxprof_blog/2006/04/winchester_on_w.html

Scholarship | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef00d8355fc91069e2

Listed below are links to weblogs that reference Winchester on Working for Free: A New Tax Dodge for the Wealthy Magnifies Employment Tax Defects:

Comments