April 30, 2007
Galle on Irrationality, Unfunded Mandates, and the AMT
Brian D. Galle (Florida State) has posted Salt in Their Wounds? Irrationality, Unfunded Mandates, and the AMT, 106 Mich. L. Rev. ___ (2007), on SSRN. Here is the abstract:
By sheer dollars alone, the largest impact of the Alternative Minimum Tax (“AMT”) lies in its denying to many taxpayers the deduction otherwise permitted to them under section 164 of the Tax Code, the deduction for the taxes they paid to their state and local governments. It is odd, then, that the debate over the fairness of the AMT largely neglects close consideration of the merits of section 164. This Article aims to remedy that oversight, offering a fine-grained analysis of the impact on the overall fairness of the tax system of repeal or, in the case of the AMT, creeping partial repeal, of section 164. The fairness of a federal deduction for state and local tax rests on the underlying fairness of the state and local tax itself. Therefore I offer, I believe for the first time, a close examination of how newly-understood limits on taxpayer mobility and rationality might affect individuals' choices of bundles of local taxes and local government services, which in turn informs our assessment of the “fairness” of those exchanges. Another original contribution here is the Article's efforts to track the reciprocal benefits and burdens that flow between state and local governments -- again, although the intergovernmental flow of billions of dollars surely impacts the overall fairness of a local government, there has been no scholarly treatment of that question. Finally, I note that section 164, and therefore the AMT, can have serious effects on federal-state relations, so that the debate over the AMT is in many ways a debate not only over fairness, but also about federalism.
Tax News Roundup
L.A. Times: Edwards Puts Taxes for Rich on the Table, by Mark Z. Barabak & Maeve Reston
Marketplace: The Ultimate Tax Dodge
Wall Street Journal:
- Congress Should Kill the Monster It Created in 1913 (lettersto the editor)
- $650 Billion Tax Hike (op-ed), by Stephen Moore
Washington Post: Time for a D.C. Congestion Tax?, by Marc Fisher
Goerke & Runkel on Profit Tax Evasion under Oligopoly with Endogenous Market Structure
Laszlo Goerke (Eberhard Karls Universität Tübingen) & Marco Runkel (University of Munich, Department of Economics) have published Profit Tax Evasion under Oligopoly with Endogenous Market Structure, 59 Nat'l Tax J. 851 (2006). Here is the abstract:
This note investigates the impact of profit tax evasion on firms' output decisions in a Cournot oligopoly setting in which the market structure is determined endogenously. It is shown that tax evasion intensifies market entry and raises aggregate output, while production of each incumbent firm decreases. Therefore, tax evasion choices affect activity decisions and an evadable profit tax distorts the market outcome.
Duquesne Law Prof Wins Reversal of Tenure Denial
Interesting article in this week's Chronicle of Higher Education: Duquesne U. Law Professor Defends His Own Tenure Case, by Katherine Mangan & Paul Fain:
John T. Rago spends much of his time working to free wrongly convicted prisoners, but in April, the assistant professor of law at Duquesne University won a reversal in a more personal matter: his own tenure case.
Mr. Rago chairs a statewide committee that studies wrongful convictions in Pennsylvania. He is also founding director of the university's Cyril H. Wecht Institute of Forensic Science and Law and founder of the law school's Post Conviction DNA Project.
In March of 2006, Charles J. Dougherty, Duquesne's president, rejected Mr. Rago's bid for tenure, despite positive recommendations from faculty members and Dean Donald J. Guter of the Law School. ...
Last year the Student Government Association voted to challenge Mr. Dougherty's decision. This past February, a university grievance committee unanimously voted to recommend that the president rescind his decision. In April about 150 students protested at the administration building. Six days after the protest, Mr. Rago received a letter from the president that was as succinct as the negative one he had received a little over a year ago. "This is to inform you that your application for tenure is successful," the letter stated. "I appreciate your important contribution to the university and look forward to your future successes."
Today is Tax Freedom Day®
The Tax Foundation has announced that today (the 120th day of 2007) is Tax Freedom Day® -- Americans will work four months of the year, from January 1 to April 30, before they have earned enough money to pay this year's tax obligations at the federal, state and local levels.
April 30 is the national average -- the Tax Freedom Day® in individual states range from the state with the highest tax burden -- Connecticut (May 20) -- to the states with the lowest tax burden -- Oklahoma and Alabama (April 12).
Here are the ten states with the heaviest tax burdens and the latest Tax Freedom Days®:
- Connecticut (May 20)
- New York (May 16)
- New Jersey (May 10)
- Vermont (May 9)
- Rhode Island (May 9)
- Nevada (May 8)
- California (May 7)
- Washington (May 6)
- Massachusetts (May 6)
- Minnesota (May 4)
Here are the ten states with the lowest tax burdens and the earliest Tax Freedom Days®:
- Oklahoma (April 12)
- Alabama (April 12)
- Mississippi (April 13)
- Alaska (April 13)
- Tennessee (April 15)
- New Mexico (April 15)
- Louisiana (April 16)
- South Dakota (April 16)
- Texas (April 19)
- Idaho (April 19)
For criticism of the Tax Foundation's methodology by the Center on Budget and Policy Priorities, see:
- Tax Foundation Estimates of State and Local Tax Burdens Are Not Reliable, by Nicholas Johnson, Iris J. Lav & Joseph Llobrera
- Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens: Figures May Mislead Policymakers, Journalists, and the Public, by Robert Greenstein & Aviva Aron-Dine
For the Tax Foundation's response to this criticism, see Analysis of the Center on Budget and Policy Priorities' Criticism of Tax Freedom Day and State-Local Tax Burdens.
Overrated and Underrated Law Schools
- Top 25: Chicago (6), Texas (18), Illinois (25)
- 26-50: Wisconsin (31), Hastings (36)
- 51-100: Arizona State (51), Case Western (53), Florida State (53), Chicago-Kent (60), Loyola-L.A. (66), Miami (70), Rutgers-Camden (70), Rutgers-Newark (77), San Diego (85)
- Tier 3: Hofstra, Syracuse
- Tier 4: Wayne State
IRS Seeks Nominations for IRS Advisory Council
Originally called the Commissioner’s Advisory Group (CAG) and renamed in 1998, IRSAC’s purpose is to provide an organized public forum for IRS officials and representatives of the public to discuss relevant tax administration issues. The committee presents a report to the Commissioner of Internal Revenue each year at a public meeting in the fall. In order to effectively advise the Commissioner and IRS executives, members are drawn from substantially diverse backgrounds. Membership is balanced to include representation from the tax professional community, including, but not limited to, tax attorneys, certified public accountants, enrolled agents, enrolled actuaries and appraisers, as well as large and small business representatives and other tax practitioners. IRSAC is comprised of up to 30 members, who are appointed to three-year terms by the Commissioner.
Nominations are currently being accepted for five to seven appointments that will begin January 2008. Interested parties may nominate themselves and/or one other qualified person for membership. Nominees should be in good standing regarding their own tax obligations, and should represent professional and ethical ideals. All nominees must complete an application and a tax check waiver form.
Applications will be accepted through June 15, 2007.
- Tax Prof Profile: Patricia Bradford
- Krugman: Gilded Once More
- Bloomberg: Congress Wrangles Over Bush's Expiring Tax Cuts
- Chalmers on Systematic Risk and the Muni Puzzle
- House & Shapiro on Temporary Investment Tax Incentives: Theory With Evidence from Bonus Depreciation
- Top 5 Tax Paper Downloads
- WSJ Tax Articles
- Treasury & IRS Seek Public Comment on 2007-08 Guidance Priority List
- TIGTA Releases Tax Reports
- Yamamoto Posts Papers on SSRN
April 29, 2007
Top 5 Tax Paper Downloads
SSRN apparently is still experiencing server problems, as this week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. Download data have not been updated since April 16:
3. [137 Downloads] Pulling a Rabbi Out of His Hat: The Bankruptcy Magic of Dick Posner, by Randal C. Picker (Chicago) [blogged here]
5. [114 Downloads] The Significance and Composition of Deferred Tax Assets and Liabilities, by James M. Poterba, Nirupama Rao & Jeri Seidman (all of MIT, Department of Economics) [blogged here]
WSJ Tax Articles
- Homeowners Wage a Tax Rebellion; Rising Property-Value Assessments Drive Up Appeals as House Prices Decline, by Jeff D. Opdyke
- Land of 10,000 Taxes, by Jason Lewis
- A Stock Gift? The Tax Is in the Size of the Giving, by Kelly Greene
- Taxable Social Security Benefits, by Tom Herman
Treasury & IRS Seek Public Comment on 2007-08 Guidance Priority List
The Treasury Department and IRS on Friday issued an advance copy of Notice 2007-41, 2007-21 I.R.B. ___ (5/21/07), inviting public comment on recommendations for items that should be included on the 2007-08 Guidance Priority List:
Treasury's Office of Tax Policy and the Service use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2007-2008 Guidance Priority List will establish the guidance that the Treasury Department and the Service intend to issue from July 1, 2007, through June 30, 2008. The Treasury Department and the Service recognize the importance of public input to formulate a Guidance Priority List that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. ...
In reviewing recommendations and selecting projects for inclusion on the 2007-2008 Guidance Priority List, the Treasury Department and the Service will consider the following:
- Whether the recommended guidance resolves significant issues relevant to many taxpayers;
- Whether the recommended guidance promotes sound tax administration;
- Whether the recommended guidance can be drafted in a manner that will enable taxpayers to easily understand and apply the guidance;
- Whether the Service can administer the recommended guidance on a uniform basis; and
- Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the Service.
Recommendations must be submitted by May 31, 2007 to be included in the original 2007-2008 Guidance Priority List.
TIGTA Releases Tax Reports
The Treasury Inspector General for Tax Administration has released two tax reports:
- Fiscal Year 2007 Statutory Review of Compliance With Legal Guidelines When Issuing Levies (2007-30-070)
- Interim Results of the 2007 Filing Season (2007-40-072)
Yamamoto Posts Papers on SSRN
Kevin Yamamoto (South Texas) has posted several papers on SSRN:
- A Proposal for the Elimination of the Exclusion for State Bond Interest, 50 Fla. L. Rev. 145 (1998)
- Taxing Income from Mailing List and Affinity Card Arrangements: A Proposal, 38 San Diego L. Rev. 221 (2001)
- A Trust Analysis of a Gestational Carrier's Right to Abortion, 70 Fordham L. Rev. 93 (2001) (with Shelby AD Moore (South Texas))
- What's in a Name? The Letterhead Impact Project, 22 J. Legal Stud. Educ. 65 (2004)
April 28, 2007
Patricia C. Bradford (Marquette)
- B.A. 1977, SUNY-Buffalo
- J.D. 1981, Hastings
If someone had told me when I entered law school that I would eventually spend my entire career as a tax professor, I would said, “Your crystal ball is broken.” First of all, when I entered law school, I had never done anything since leaving home for more than 2 years. I dropped out of college after a year and a half because I had completed enough credits for junior status (taking Spanish and Art as electives) and I didn’t know what I wanted to major in. I moved from Northern California to Santa Barbara and got my first real job as the file clerk in the Santa Barbara County Courthouse. Before long, I moved again and became a court clerk in a small two judge county. That’s when I decided I wanted to become a lawyer. I went back to college and finished an English degree at SUNY-Buffalo a year and a half later. A year after that I started law school at Hastings. I was sure I would end up specializing in criminal law. (Every criminal case had a great story. The problem was, I couldn’t decide which side – prosecuting or defending – had the fewest ethical and moral dilemmas.)
When I was registering for my second year of law school, other students advised me that “everyone has to take at least the basic federal income tax class.” Convinced that I wouldn’t like the course, I decided to get it over with. At Hastings we had the option of taking a 3 credit or a 4 credit Federal Income Tax course. Since I didn’t want to learn much about tax, I opted for the 3 credit course. The first week of classes the professor would ask a question and numerous hands would go up. I had never been in a class where so many students volunteered. And their answers were all correct. I studied hard, still telling myself I was just getting tax out of the way. Then one day I discovered that I was doing my class preparation for tax before preparing for any other course. I discovered that I like tax! I didn’t even seem to mind carrying home the book, Code and the three volume set of regulations we had to have for the course. At the end of the semester when I was registering for classes, I read the description for the 3 credit course I enrolled in. I discovered that it was an “accelerated” course for students with a tax background. The second part of the course was offered in the Spring. It covered Partnership Tax and Corporate Tax at an accelerated 3 credit pace. I enrolled. After that I took every tax course Hastings offered.
After graduating in 1981, my first long-term job was with a local Milwaukee firm (14 members) that primarily focused on real estate development. It was bath by fire. When I wasn’t working on the tax section of private offerings, I was handling tax litigation for clients of other firms who had retained our firm after their deals got audited. Business was good – rapid ACRS deductions, no passive loss rules, no Section 704(b) or (c) regulations and high appreciation made the deals fairly easy for the dealers to sell. Occasionally, we had some exotic shelters that individual clients wanted us to assess involving reproductions of fine arts. Meanwhile, I taught a class occasionally for the partners who were adjunct professors at Marquette and UW Milwaukee (Masters of Tax program).
I started teaching fulltime at Marquette in Fall, 1983. (I had heard Marquette was looking for a tax professor and I called the chair of the Faculty Recruitment committee. Even though I only had two years of experience (and they usually required five), I was hired. I think the article I had co-authored with a partner in the Journal of Taxation, tipped the balance in my favor. (Back then it was unusual for a candidate to have any completed scholarship.)
I regularly teach Federal Income Taxation of Individuals, Taxation of Partnerships and S Corporations and Taxation of Corporations and S Corporations. I taught Law and Economics for a number of years, but now I teach Torts. Amazingly, I seems as though I keep a huge classroom full of Individual Income Tax students more fully engaged that a class of 1L Torts students. I owe this to the fantastic tax professors I had at Hastings who I’m sure benefited from the fact that I was taught to analyze and think critically by Profs Mary Kay Kane and William Crawford. Prof. William Hutton taught a course called “Tax Strategies for Personal Investment.” That class taught me how to make the individual income tax class relevant to my students – whether they are thinking about the clients they will one day advise or how to build and invest their own savings. As much as I like teaching income tax, my favorite subject is still Partnership Tax.
My personal life revolves around my kids and my husband. My son, Mike (12) and my husband, Tom (52) play hardball. Tom still pitches, he’s a lefty. My daughter, Sally (9) plays softball. That’s a lot of games to watch. The rest of the year, Sally plays soccer and Mike plays tackle football and basketball. We all play golf, but even Sally out drives me – with my driver! Maybe this will be the year that I finally break – I’m not telling.
Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles. For prior Tax Prof Profiles, see here.
Krugman: Gilded Once More
Interesting op-ed in today's New York Times: Gilded Once More, by Paul Krugman:
One of the distinctive features of the modern American right has been nostalgia for the late 19th century, with its minimal taxation, absence of regulation and reliance on faith-based charity rather than government social programs. Conservatives from Milton Friedman to Grover Norquist have portrayed the Gilded Age as a golden age, dismissing talk of the era’s injustice and cruelty as a left-wing myth.
Well, in at least one respect, everything old is new again. Income inequality — which began rising at the same time that modern conservatism began gaining political power — is now fully back to Gilded Age levels. Consider a head-to-head comparison.
We know what John D. Rockefeller, the richest man in Gilded Age America, made in 1894, because in 1895 he had to pay income taxes. (The next year, the Supreme Court declared the income tax unconstitutional.) His return declared an income of $1.25 million, almost 7,000 times the average per capita income in the United States at the time.
But that makes him a mere piker by modern standards. Last year, according to Institutional Investor’s Alpha magazine, James Simons, a hedge fund manager, took home $1.7 billion, more than 38,000 times the average income. Two other hedge fund managers also made more than $1 billion, and the top 25 combined made $14 billion. How much is $14 billion? It’s more than it would cost to provide health care for a year to eight million children — the number of children in America who, unlike children in any other advanced country, don’t have health insurance.
The hedge fund billionaires are simply extreme examples of a much bigger phenomenon: every available measure of income concentration shows that we’ve gone back to levels of inequality not seen since the 1920s.
The New Gilded Age doesn’t feel quite as harsh and unjust as the old Gilded Age — not yet, anyway. But that’s because the effects of inequality are still moderated by progressive income taxes, which fall more heavily on the rich than on the middle class; by estate taxation, which limits the inheritance of great wealth; and by social insurance programs like Social Security, Medicare and Medicaid, which provide a safety net for the less fortunate.
For more, see Linda Beale.
Bloomberg: Congress Wrangles Over Bush's Expiring Tax Cuts
Interesting article on Bloomberg: Congress Wrangles Over Bush's Expiring Tax Cuts, by John M. Berry:
The high-stakes revenue wars have begun again, with some Republicans complaining that the Democrats controlling Congress are planning the biggest tax increase in U.S. history. As usual, the rhetoric is overblown, especially the claims that any tax increase would sink the economy.
What isn't so usual is that the potential tax increases worrying the Republicans will occur if nothing is done, because many of the tax cuts enacted since President George W. Bush took office six years ago will expire in the next two or three years unless legislation extending them is passed. If that happens, Republicans have only themselves to blame, because the expiration dates were set originally to mislead the public about the amount of revenue loss involved. Of course, from the beginning the plan was to argue that letting the cuts expire would impose tax increases that would harm the economy and cost jobs.
Chalmers on Systematic Risk and the Muni Puzzle
The muni puzzle refers to the empirical fact that relative to taxable bond yields, long–term tax–exempt yields are significantly higher than predicted by theory, while short–term yields conform well to theory. The systematic risk hypothesis is a candidate to explain the muni puzzle. I find that risk characteristics of government and municipal bond portfolio returns are very similar across the term structure. From this evidence, I conclude that systematic risk is unlikely to explain the muni puzzle. I also illustrate that a tax adjustment to duration is important when comparing the expected volatility of bonds with different tax status.
House & Shapiro on Temporary Investment Tax Incentives: Theory With Evidence from Bonus Depreciation
Christopher L. House & Matthew D. Shapiro (both of the University of Michigan, Department of Economics) have posted Temporary Investment Tax Incentives: Theory With Evidence from Bonus Depreciation on SSRN. Here is the abstract:
Investment decisions are inherently forward-looking. The payoff of acquiring capital goods, particularly long-lived capital goods, is governed almost exclusively by events in the far future. Because the timing of the investment itself does not affect future payoffs, there are strong incentives to delay or accelerate investment to take advantage of predictable intertemporal variations in cost. For sufficiently long-lived capital goods, these incentives are so strong that the intertemporal elasticity of investment demand is nearly infinite. As a consequence, for a temporary tax change, the shadow price of long-lived capital goods must reflect the full tax subsidy regardless of the elasticity of investment supply. While price data provide no information on the elasticity of supply, they can reveal the extent to which adjustment costs are internal or external to the firm. In contrast, the elasticity of investment supply can be inferred from quantity data alone. The bonus depreciation allowance passed in 2002 and increased in 2003 presents an opportunity to test the sharp predictions of neoclassical investment theory. In the law, certain types of long-lived capital goods qualify for substantial tax subsides while others do not. The data show that investment in qualified properties was substantially higher than for unqualified property. The estimated elasticity of investment supply is high--between 10 and 20. Market prices do not react to the subsidy as the theory dictates. This suggests either that internal (unmeasured) adjustment costs play a significant role or that measurement problems in the price data effectively conceal the price changes. While the policy noticeably increased investment in types of capital that benefited substantially from bonus depreciation, the aggregate effects of the policy were modest. The analysis suggests that the policy may have increased output by roughly 0.1 percent to 0.2 percent and increased employment by roughly 100,000 to 200,000 jobs.
April 27, 2007
NY Court: Davis Polk Did Not Commit Malpractice in Tax Court Case, May Keep 50% "Success Fee" Kicker
The New York Court of Appeals yesterday unanimously ruled that Davis Polk & Wardwell did not commit legal malpractice in its successful handling of a federal tax case for AmBase Corp and was entitled to its $1.4 million fee, which included a 50% "success fee" kicker. AmBase Corp. v. Davis Polk & Wardwell, No. 51 (4/26/07).
AmBase retained Davis Polk in 1992 to represent the company in a dispute over $20 million in federal withholding taxes the IRS sought from the company for 1979-85. In 2001, Davis Polk won the Tax Court case (AmBase v. Commissioner, T.C. Memo. 2001-122), but AmBase balked when Davis Polk submitted a $1.4 million bill, which included a "success fee" provided for in the retainer agreement, consisting of 150% of Davis Polk's billed time, up to a $2 million cap:
AmBase then commenced this action for legal malpractice alleging that, although it won the tax case, it suffered substantial damages as a result of defendants' failure to advise that it was only secondarily liable for payment of taxes as per the Agreement with its parent.
AmBase filed a legal malpractice suit and demanded that Davis Polk return previously paid fees. The Supreme Court dismissed the complaint, and the Appellate Dvision (30 A.D. 3d 171 (2006)) and Court of Appeals (No. 51 (4/26/07)). For more details, see today's New York Law Journal.
Tax Court to Disclose Judges' Attendance at Educational Programs
The Tax Court yesterday issued a press release announcing that the court has adopted the private seminars disclosure policy established by the Judicial Conference of the United States in September 2006:
The public may obtain information from the Tax Court’s Internet Web site about nongovernmental education programs attended by Judges, Senior Judges, and Special Trial Judges of the Tax Court. Under the Judicial Conference’s private seminar disclosure policy, if a significant purpose of a nongovernmental seminar is the education of Federal or State judges, and the seminar provider pays or reimburses judges’ expenses, the provider must disclose to the Administrative Office of the U.S. Courts information about the seminar, including the source of funding. Judges who attend seminars are to report their attendance within 30 days. Such reports by judicial officers of the Tax Court will be available for 3 years on the Tax Court’s Web site.
This policy is effective for invitations extended to judicial officers of the Tax Court on or after January 1, 2007, for programs attended after April 13, 2007.
Keen & Lockwood on Is the VAT a Money Machine?
Michael Keen (International Monetary Fund, Fiscal Affairs Department) & Ben Lockwood (University of Warwick, Department of Economics) have published Is the VAT a Money Machine?, 59 Nat'l Tax J. 905 (2006). Here is the abstract:
This paper considers what it might mean to describe the VAT as a "money machine," tests whether it is one, and asks if it might consequently be wise not to adopt it. We find broadly persuasive evidence, using panel data for the OECD, for a "weak form" of the money–machine hypothesis: that countries with a VAT raise more revenue than those without. But the effect may not be large. The evidence also supports a "strong form" of the hypothesis: that this association reflects not increased demand for government, but rather the greater effectiveness of the VAT in raising revenue. Models in which citizens/voters are likely to lose by entrusting politicians with a "money machine" rely on quite extreme views of their preferences and/or the effectiveness of electoral discipline.
U.S. News: Dow 13,000 and the Bush Tax Cuts
Interesting article in today's U.S. News & World Report: The Dow and the Bush Tax Cuts, by James Pethokoukis:
With the Dow industrials making new records every day of late–even cracking the 13,000 barrier to fascinate all the Wall Street numerologists out there–I thought it would be a real kick to see how the stock market has performed since Congress passed the 2003 Bush tax cuts on May 23, 2003. (The Jobs and Growth Tax Relief Reconciliation Act accelerated the 2001 tax cuts and cut taxes on capital gains and dividends.) Since then, the Dow is up 52%, the S&P 500 60%, and the Nasdaq 69%. (Overall, the stock market has created some $6.8 trillion in new wealth since then as the size of the economy has grown by some $2.8 trillion, not adjusted for inflation.) ...
[O]ne could argue that the super stock market and declining deficit are somehow happening independently of the tax cuts. That is what the government's "static analysis" economic models do. They're the same ones, of course, that predict no negative economic effect from $2 trillion of tax hikes if the Bush tax cuts from 2001 and 2003 are left to expire at the end of 2010, as some in Congress and in the Democratic presidential race advocate. I wonder if investors will have the same benign analysis.
Top 50 Law Schools by Graduates Among Top 500 Lawyers & Judges
We previously blogged LawDragon's ranking of the Top 25 Law Schools based on the number of graduates in LawDragon's lists of the Top 500 lawyers and judges in various fields (n = 2,342). LawDragon has since expended its ranking to include the Top 150 Law Schools. Here are the Top 50 (52 with ties) (click on chart to enlarge):
House Holds Hearing on Closing the Tax Gap Without Creating Burdens for Small Businesses
The House Small Business Committee held a hearing yesterday on Closing the Tax Gap Without Creating Burdens for Small Businesses. Statements from the following witnesses are available here:
- Mark W. Everson (Commissioner, IRS)
- Thomas M. Sullivan (Chief Counsel for Advocacy, U.S. Small Business Administration)
- John Satagaj (President & General Counsel, Small Business Legislative Council)
- Keith Hall (Partner, Hall & Hughes)
- Abraham Schneier (Abraham Schneier & Associates)
- Leonard Steinberg (The Steinberg Group)
- Ronald Hegt (Member, American Institute of Certified Public Accountants)
SOI Releases 2004 Corporation Income Tax Returns
The publication consists of data from the Statistics of Income Corporation Study for returns with accounting periods ending July 2004 through June 2005. The data are classified by industry, accounting period, and size of total assets, business receipts, and total income tax after credits. In addition to tables that cover all corporations and those with net income, there are tables that specifically cover small business corporations from Form 1120S, consolidated returns, foreign corporations with U.S. effectively connected income, and domestic corporations controlled by foreign persons. In all, there are a total of 35 tables with separate sections of explanatory text. Included for the first time is a group of eight tables separately detailing 1120S data. Many of these were formerly contained in the Spring issue of the SOI Bulletin.
Aprill on Tax Strategy Patents
Recently, patents for tax strategies have drawn attention from Congress, tax policymakers, the press and tax practitioners. The phenomenon of tax strategy patents presents worries many tax practitioners as a matter of both policy and practice. This article reviews four categories of concerns - patent policy, the nature of our tax system, tax policy, and the impact on the tax profession. It then considers four possible kinds of responses - prohibiting patents on tax strategies, granting immunity for infringements of tax strategy patents, reforming the patent process, and relying on changes to the tax law - such concerns suggest. In the course of this review, it compares proposals regarding tax strategy patents to the current prohibition on patents for atomic energy and nuclear energy and to the special immunity afforded physicians for infringement of medical procedure patents. It also considers whether granting tax strategy patents special treatment would raises questions under TRIPs. Finally, it discusses the trade-off that tax practitioners will face in seeking legislative or administrative action regarding tax strategy patents. To gain any kind of special treatment for tax strategy patents under the patent system, it concludes, tax professionals will have to show Congress how tax practice differs from other endeavors and why special treatment would not violate obligations under TRIPs.
April 26, 2007
School's Out for Summer!
I taught my last class of the year today. Thanks to my students in Federal Income Tax and Estate & Gift Tax -- you made it a wonderful semester! To mark the occasion, here is Alice Cooper singing School's Out for Summer (lyrics below the fold):
Well we got no choice
All the girls and boys
Makin' all that noise
'Cause they found new toys
Well we can't salute ya
Can't find a flag
If that don't suit ya
That's a drag
School's out for summer
School's out forever
School's been blown to pieces
No more pencils
No more books
No more teacher's dirty looks
Well we got no class
And we got no principles (principals)
We ain't got no innocence
We can't even think of a word that rhymes
School's out for summer
School's out forever
My school's been blown to pieces
No more pencils
No more books
No more teacher's dirty looks
Out for summer
Out 'til fall
We might not come back at all
School's out forever
School's out for summer
School's out with fever
School's out completely
CTJ Releases U.S. Remains One of Least Taxed Industrial Countries
Taxes continue to take up a relatively small part of American economic output, according to data compiled by Citizens for Tax Justice from the Organization for Economic Cooperation and Development, the U.S. Treasury and the U.S. Census. For example, in all but two OECD countries, taxes make up a larger percentage of gross domestic product (GDP) than in the United States.
Bergman & Nevarez on Do Audits Enhance Compliance?
Marcelo Bergman & Armando Nevarez (both of the Centro de Investigación y Docencia Económicas) have published Do Audits Enhance Compliance? An Empirical Assessment of VAT Enforcement, 59 Nat'l Tax J. 817 (2006). Here is the abstract:
Research on the effects of audits on individual compliance has been inconclusive. In this paper, we analyze for the first time VAT tax return information and enforcement data to assess the impact of audits on subsequent compliance of taxpayers in Argentina and Chile. The evidence of this unique data set shows that audits have the undesired effect of furthering noncompliance behavior among cheaters but a more positive effect among those prone to compliance. Descriptive and multivariate analysis supports the assumption that the effects of additional assessments on individuals are offset by higher subsequent evasion presumably to compensate for taxpayers' costs incurred in audits.
Judge Sues for $65 Million Over Dry Cleaner's $10 Alteration to His Pants
Non-tax, but a sad/funny story about our legal profession in today's Washington Post: Lawyer's Price For Missing Pants: $65 Million, by Marc Fisher:
When the neighborhood dry cleaner misplaced Roy Pearson's pants, he took action. ... Pearson is seeking to make Custom Cleaners pay ... $65,462,500. The original alteration work on the pants cost $10.50. By the way, Pearson is a lawyer. Okay, you probably figured that. But get this: He's a judge, too -- an administrative law judge for the District of Columbia. ...
Why should Ki, Jin and Soo Chung -- the family that owns Custom Cleaners on Bladensburg Road NE in the District's Fort Lincoln section -- pay Pearson $15,000 so he can rent a car every weekend for 10 years? The plaintiff, who says he has devoted more than 1,000 hours to represent himself in this battle, says that as a result of poor service at Custom, he must find another cleaner. And because Pearson does not own a car, he says he will have to rent one to get his clothes taken care of. This, he says, amounts to fraud, negligence and a scam. ...
A week after that routine mishap -- pants go astray all the time at cleaners -- Soo Chung came up with gray trousers that she said were Pearson's. But when the judge said that he had dropped off pants with red and blue pinstripes, there was no joy in Fort Lincoln. Pearson's first letter to the Chungs sought $1,150 so he could buy a new suit. Two lawyers and many legal bills later, the Chungs offered Pearson $3,000, then $4,600 and, finally, says their attorney, Chris Manning, $12,000 to settle the case. But Pearson pushes on. How does he get to $65 million? The District's consumer protection law provides for damages of $1,500 per violation per day. Pearson started multiplying: 12 violations over 1,200 days, times three defendants. A pant leg here, a pant leg there, and soon, you're talking $65 million. The case, set for trial in June, is on its second judge. ...
In a closet of a lawyer's office in downtown Washington, there is a pair of gray wool pants, waiting to be picked up by Roy Pearson. "We believe the pants are his," Manning says. "The tag matches his receipt."
(Hat Tip: Howard Bashman.)
UDC Seeks Visitor to Supervise Tax Clinic
The University of the District of Columbia David A. Clarke School of Law is looking to hire a visitor to supervise its Low-Income Taxpayer Clinic in the 2007-08 academic year. For more information or to apply, contact either of the co-chairs of the faculty appointments committee:
Not Your Garden Variety AMT-ISO Case
The Tax Court yesterday decided Chou v. Commissioner, T.C. Memo. 2007-102 (4/25/07):
These issues arise in the context of a frequently occurring factual situation involving the alternative minimum tax (AMT) on incentive stock options (ISOs) exercised in 2000, followed by a drop in the value of the shares, a claim by the taxpayer that the taxable event occurred in a later year when the value of the shares was lower, and attempts to avoid or compromise the outstanding AMT liability. ...
In 2000, Mr. Chou exercised 106,560 of his Cisco ISOs when the fair market value of the Cisco stock had an average price of $64.69 per share. Mr. Chou did not sell any of the Cisco shares acquired by him through the exercise of the ISOs during 2000. By the end of 2000, the price per share of Cisco stock was approximately $40.
In March 2001, petitioners had their tax return prepared and were told that they owed $1,962,365 in tentative AMT because of the exercise of Mr. Chou’s stock options. By April 2001, the price per share of Cisco stock was $17.64. ...
On January 31, 2005, Mrs. Chou filed a Form 8857, Request for Innocent Spouse Relief, for 2000 and 2001. The letter submitting Mrs. Chou’s claims stated that the claim was being submitted as part of petitioners’ section 6330 hearing for 2001. The request asserted: “If Jeff and Cindy’s OIC is not granted, then Cindy’s claim for innocent spouse relief should be granted as to her since she did not cause the AMT liability and received no economic benefit from Jeff’s exercise of his Cisco ISOs.” ...
Petitioners’ rhetoric includes irresponsible accusations against respondent, and respondent unnecessarily attacks the credibility of petitioners’ testimony, even after the Court commented at trial that their testimony was credible. We do not condone or address at length such overzealous advocacy and meritless arguments. Lack of objectivity serves no purpose other than unreasonably to protract these proceedings. ...
When she signed the joint income tax return in April, the amount shown as owing, $1,928,732, appeared approximately 1-1/2 inches above her signature. ... On the entire record, we conclude that Mrs. Chou knew or had reason to know that the tax would not be paid at the time that she signed the return. We do not question petitioners’ allocation of responsibility for family matters between themselves, but they have not shown that Mrs. Chou should be relieved of their joint liability on the 2000 return.
ABA Tax Section Submits Comments
The ABA Tax Section has submitted comments to the IRS on:
- § 409A -- Calculation and Timing of Income Inclusion, Reporting, and Withholding (4/25/07)
- Notice 2006-14 (4/25/07)
- Temporary and Proposed Section 482 Regulations on Services and Other Issues (4/23/07)
Buchanan on Is it Sometimes Good to Run Budget Deficits?
Neil H. Buchanan (George Washington) has posted Is it Sometimes Good to Run Budget Deficits? If so, Should We Admit it (Out Loud), 26 Va. Tax Rev. 325 (2006), on SSRN. Here is the abstract:
There are bad deficits and there are good deficits. What makes a fiscal deficit good or bad depends on both the context in which the deficit is run and the reason that the deficit is rising. The belief that it is unquestionably foolish to adopt policies that directly or indirectly increase the government's annual borrowing on the financial markets - which is what it means to run a budget deficit - is not the universal truth that the current conventional wisdom might imply. Budget deficits are potentially dangerous and must be monitored carefully, but they are not always, inevitably, completely, and irreversibly horrific. Far from it.
Knowing that deficits are not evil incarnate raises some difficult questions, however, most notably whether it is dangerous for policy makers or economists to admit publicly that deficits might sometimes be the result of wise policy choices. While there is always a danger that such knowledge can be distorted and misused, I argue in this article that we have a responsibility to adjust our public discussion of budget deficits to admit that there are good deficits as well as bad. Enhancing the discourse requires us to remind ourselves what it is about budget deficits that can make them harmful, both in the long term and the short term, as a necessary step in understanding when deficits can be beneficial. Only then can we have a full and honest discussion of our taxing and spending policies.
April 25, 2007
Over 450,000 Federal Workers Are Tax Deadbeats
Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Charles Grassley (R-Iowa) sent a letter to President Bush today complaining that over 450,000 federal workers and retirees owe $3 billion in federal taxes. The Senators also released this tax delinquency data, showing that the largest percentages of federal employee/retiree tax deadbeats are in these departments and agencies:
- U.S. Commission on Civil Rights: 9.4%
- Government Printing Office: 7.4%
- Smithsonian: 5.6%
- Courts: 5.5%
- Defense Department: 5.4%
- Selective Service: 5.4%
- EEOC: 5.3%
- Pension Benefit Guaranty Corp.: 5.3%
- Federal Labor Relations Authority: 5.0%
- National Endowment for the Humanities: 5.0%
The Tax Court had 4.9% tax deadbeats, while the Treasury Department had one of the lowest percentages (1.3%).
Update: Jim Maule has more here.
Call for Tax Papers: Ohio Northern Law Review
The Ohio Northern University Law Review will publish the Lawrence N. Woodworth Memorial Lecture in Federal Tax Policy. This lecture will be presented on May 10, 2007 in Washington D.C. as part of the ABA Section of Taxation 2007 May meeting. The Ohio Northern University Law Review would like to surround the publication of the lecture with a series of articles regarding tax policy. ... I invite you to submit an article in the field of tax policy for consideration. ... The Ohio Northern University Law Review will consider for publication all pieces submitted prior to September 1, 2007.
For more information, email Lead Articles Editor Colette Kramer.
Alm & McKee on Audit Certainty, Audit Productivity, and Taxpayer Compliance
James Alm (Georgia State University, Andrew Young School of Policy Studies) & Michael McKee (University of Tennessee, Department of Economics) have published Audit Certainty, Audit Productivity, and Taxpayer Compliance, 59 Nat'l Tax J. 801 (2006). Here is the abstract:
Strategies for reducing tax evasion include stricter enforcement, but taxpayer responses to increased enforcement are difficult to measure with field data. We use experimental methods to examine individual compliance responses to advance information on audit probability and productivity. Our design informs some individuals that their return will be audited prior to making their compliance decision, while other individuals receive information that they will not be audited; we also inform individuals of the productivity (fraction of unreported income discovered) of the audit. Announcement increases compliance of those told they will be audited, but reduces compliance of those knowing they will not be audited; the net effect is that overall compliance falls.
Who Should Provide Higher Education Metrics?
Interesting op-ed on Inside Higher Ed: The Feds Are Coming, The Feds Are Coming!, by Richard Hersh:
Higher education has neither developed adequate metrics to assess learning nor demonstrated a willingness to publish such results when they are available, content to rely on and participate in, while at the same time damning, spurious college guides and reputation rankings. And it is not uncommon to hear faculty and administrators across the country protest that most of what we teach is too complex to be measured, that the diversity of college and university missions precludes one-size-fits-all assessment, or that the market place is the only required arbiter of quality. This implicit “trust us” attitude is now confronted by a market place that is questioning quality and is no longer accepting what amounts to higher education’s privilege of what is in essence a form of “faith-based” entitlement. ...
The Spellings Commission got it right — quality needs to improve, accountability must become far more transparent, and assessing learning, including value-added assessment, is crucial to both. This is not to say, however, that this requires that one single test be imposed on all institutions or that that we know how to measure all that is worth learning. But it is to say that transparent, systematic learning assessment can be a powerful force for improvement and is necessary for regaining public trust in the public good served by higher education. ...
What is needed before anything else, however, is for higher education to get its professional and collective act together immediately on the issues of learning assessment, accountability, and the role of accreditation lest the cry, “the feds are coming” result in a federal No College Left Behind.
In our article, What Law Schools Can Learn from Billy Beane and the Oakland Athletics, 82 Tex. L. Rev. 1483, 1554 (2004), Rafael Gely and I make a similar point:
In our view, law schools are faced with a clear choice. We can continue resisting public demands for accountability and transparency through rankings. But such resistance is futile, as a market that demands rankings of brain surgeons and heart-transplant programs will not accept protestations from the legal academy that what we do is simply too special to be evaluated with objective measures. ...
As institutions and as individuals, we have nothing to fear from the accountability and transparency spotlight. Indeed, we do our best work in the light. We should welcome the opportunity to tell the world what we do and help them measure our performance as teachers and scholars. If we do not, the story will be told by others and it will no longer be our own.
Stanford Provides $21k Child Care Benefit to Junior Faculty
Stanford has announced a new program to provide up to $21,000 per year in child-care reimbursement for junior faculty (including adjuncts) with family AGI of < $175,000. From the press release:
In an effort to help junior faculty cope with the twin pressures of raising families and winning tenure, Stanford has developed a new program to provide financial assistance for childcare to families with children ages 5 and under. Provost John Etchemendy, who announced the Junior Faculty Child Care Assistance Program at Thursday's Faculty Senate meeting, said the seven years during which women are working toward tenure—a time when the university expects them to establish international reputations in their fields—coincides with the time when many of them are starting families. "This intersection of the biological clock and the tenure clock can place extraordinary pressures on young faculty, and I am convinced that it is at least one important reason the percentage of women in academia has remained stubbornly low," he said. ...
The new program was designed for junior faculty—men and women with spouses or same-sex domestic partners—in all faculty lines. ... Award amounts for one child age 5 and younger will range from $5,000 to $20,000. If a family has one or more additional age 5 and younger, the total award will be increased by $1,000.
(Hat Tip: Chronicle of Higher Education.)
Tax Prof Moves, 2007-08
Entry Level Hires
- Keith Fogg (Villanova Tax Clinic)
- David Gamage (UC-Berkeley) (currently Visiting Assistant Professor at Texas)
- Kristin Gutting (Charleston) (currently Visiting Assistant Professor at Florida)
- Sarah Lawsky (George Washington)
- Edward Osei (Widener)
- Adam Rosenzweig (Washington University) (currently Visiting Assistant Professor at Northwestern)
Promotions and Tenures
- Craig Boise (Case Western) to Associate Professor of Law
- Adam Chodorow (Arizona State) to Professor of Law with Tenure
- Brant Hellwig (South Carolina) to Associate Professor of Law with Tenure
- Michael Kirsch (Notre Dame) to Associate Professor of Law with Tenure
- Christopher Pietruszkiewicz (LSU) to Professor of Law with Tenure
- Diane Ring (Boston College) to Professor of Law with Tenure
- Marc Beckerman to Associate Director of Graduate Tax Program at New York Law School
- Leslie Book (Villanova) to Director of Graduate Tax Program
- Paul Caron (Cincinnati) to Associate Dean of Faculty
- Edward McCaffery (USC) to Dean
- Bruce McGovern (South Texas) to Associate Dean of Academic Administration
- H. Beau Baez (Liberty) to Charlotte
- Cheryl Block (George Washington) to Washington University
- Neil Buchanan (Rutgers-Newark) to George Washington
- Patricia Cain (Iowa) to Santa Clara
- Lee Anne Fennell (Illinois) to Chicago
- Vic Fleischer (Colorado) to Illinois
- Darryll Jones (Pittsburgh) to Stetson
- Miranda Perry (Colorado) to Illinois
- Gregg Polsky (Minnesota) to Florida State
- Sharon Reece (Arkansas-Little Rock) to Maryland
- Linda Beale (Wayne State) to Boston College (Spring 2008)
- Joshua Blank to NYU as Acting Assistant Professor (2007-08)
- David Brennen (Georgia) to Deputy Director of the AALS (2007-09)
- Dorothy Brown (Washington & Lee) to Emory (2007-08)
- Johnny Rex Buckles (Houston) to Washington & Lee (2007-08)
- Michelle Cecil (Missouri-Columbia) to Texas (2007-08)
- Mark Cochran (St. Mary's) to Georgia (Spring 2008)
- Mitchell Engler (Cardozo) to NYU
- J. Clifton Fleming, Jr. (BYU) to Central European University (Summer 2007)
- Mitchell Gans (Hofstra) to NYU
- Mark Gergen (Texas) to Harvard
- Megan McKee Healey to NYU as Acting Assistant Professor (2007-08)
- Calvin Johnson (Texas) to Professor-in-Residence, Office of Chief Counsel, IRS (1/07 - 6/07)
- Mitchell Kane (Virginia) to Columbia & NYU
- Michael Kirsch (Notre Dame) to Northwestern (Fall 2007)
- Michael Knoll (Pennsylvania) to Columbia (Fall 2009)
- Georg W. Kofler to NYU as Acting Assistant Professor (2007-08)
- Marjorie Kornhasuer (Arizona State) to Boston College (Fall 2007)
- Michael Lang (Chapman) to Loyola-L.A. (Spring 2008)
- William LaPiana (New York Law School) to Yale
- Stuart Lazar (Thomas Cooley) to Tulane (2007-08)
- Charlene Luke (Florida State) to Utah (Spring 2008)
- Bill Lyons (Nebraska) to University of Limerick (Summer 2007) and Vermont (Fall 2007)
- George Mundstock (Miami) to North Carolina (Spring 2008)
- Ann Murphy (Gonzaga) to Central University of Finance & Economics on a Fulbright Scholarship (Fall 2007)
- Walter Schwidetzky (Baltimore) to California Western (2007-08)
- Joel Slemrod (Michigan) to Columbia
- Kevin Yamamoto (South Texas) to Montana (Fall 2007)
- Edward Zelinsky (Cardozo) to Yale
- Eric Zolt (UCLA) to Harvard
- Thomas Allington (Indiana-Indianapolis)
- Bill Andrews (Harvard)
- Brian Comerford (Brooklyn)
- Martin Fried (Syracuse)
- Alan Gunn (Notre Dame)
- Scott Stafford (Arkansas-Little Rock)
- Philip Wile (McGeorge)
- Bernard Wolfman (Harvard)
For prior years' Tax Prof Moves, see:
UCLA Institute on Tax Aspects of Mergers & Acquisitions Begins Today in New York City
The 3-Day UCLA 4th Annual Institute on Tax Aspects of Mergers & Acquisitions kicks off today in New York City. For more details, see:
John Marshall Hosts Employee Benefits Symposium Today
Stark on State Tax Shelters and U.S. Fiscal Federalism
Over the past two decades, litigation has exploded over state corporate tax shelters. In the typical transaction, taxpayers devise corporate structures so as to shift income (most commonly income from intangible assets) to low or no tax jurisdictions. Much of the literature on these transactions has focused on whether and how states should combat corporate tax avoidance behavior. State courts across the country have opined on various tax shelters, and Congress has considered legislation restricting the states' authority to tax income from these transactions. This essay takes a somewhat different perspective, situating the problem of state tax shelters within the broader context of optimal design of institutions of fiscal federalism. Viewed through that lens, state corporate tax shelters are better understood not as tax avoidance schemes (or, rather, not merely tax avoidance schemes) but rather as a symptom of our flawed intergovernmental fiscal structure. State tax shelters are just one manifestation (and not the most serious manifestation) of the difficulty of taxing corporate income in a multijurisdictional setting. At the same time state tax shelters have proliferated, revenue from state corporate income taxes has fallen off sharply, but for reasons going far beyond the shelter phenomenon. The core problem is one of tax assignment - i.e., which taxes should be assigned to which level of government? A more rational approach, consistent with the basic principles of fiscal federalism, would be to increase federal corporate income tax rates by some small percentage and distribute the revenues generated by that supplemental corporate income tax to the states.
Joint Tax Committee Releases Reports on Small Business and Work Opportunity Tax Act of 2007
The Joint Committee on Taxation yesterday released, in connection with the Small Business and Work Opportunity Tax Act of 2007, in H.R. 1591, U.S. Troops Readiness, Veterans’ Health, and Iraq Accountability Act of 2007:
For other legislative documents, see here.
April 24, 2007
Lucky Cow and Taxes
Check out the funny tax episodes of the Lucky Cow comic strip:
(Hat Tip: Pete Wentz.)
Retirement of Indiana's Tom Allington
Tom Allington's IU career has spanned over three decades and three different buildings. He joined the faculty in 1970 after teaching at the University of South Dakota School of Law. ... Aside from the intricacies of tax law, his area of greatest expertise is undoubtedly technology. In his capacity as resident computer guru, he worked on the planning committee for the current building, Inlow Hall, and helped bring the law school's facilities into the 21st century. During his career he has served as Associate Dean for Academic Affairs (1990-1997) and as Associate Dean for Technology (and webmaster) since 1999. Allington will also be remembered for contributing his talents as a pilot to the service of the law school. He used his Beechcraft Musketeer single-engine plane to fly Dean Lefstein and others to an alumni event in Evansville.
Friends and colleagues of Allington gathered on April 25th to wish him a happy retirement (and a happy birthday as well).
Treasury Seeks to Hire International Tax Counsel
Major Duties: The International Tax Counsel ... is the principal legal adviser to the Assistant Secretary (Tax Policy) and the Secretary of the Treasury with regard to all aspects of international taxation, including legislation, the development and promulgation of administrative guidance, and the negotiation of tax treaties. The International Tax Counsel plans, develops, analyzes, manages, and promotes the Departments tax program in general, and the legislative, regulatory, and treaty affairs aspects of the international tax policy program in particular, including the taxation of foreign income and investment, the taxation of U.S. taxpayers with foreign source income, the prevention of fiscal evasion through transnational transactions, and the reconciliation of U.S. and foreign tax systems.
Salary: $111,676 - $154,600.
For more information or to apply, see here.
House Holds Hearing Today on Energy Tax Incentives
The hearing provides Members the opportunity to speak on behalf of specific tax proposals they have introduced in the 109th or 110th Congress that would encourage the development of alternative energy sources, or that would act to reduce carbon dioxide emissions.
The hearing takes place at 2:00 p.m. in 1100 Longworth House Office Building.
Cancian & Levinson on Labor Supply Effects of the Earned Income Tax Credit
Maria Cancian (University of Wisconsin-Madison, Robert M. La Follette School of Public Affairs) & Arik Levinson (Georgetown University, Department of Economics) have published Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin's Supplemental Benefit for Families with Three Children, 59 Nat'l Tax J. 781 (2006). Here is the abstract:
We examine the effect of the Earned Income Tax Credit (EITC) on labor supply, comparing outcomes in Wisconsin, which supplements the federal EITC for families with three children, to outcomes in states that do not supplement the federal EITC. Relative to previous studies, our cross–state comparison examines a larger difference in EITC subsidy rates, more similar treatment and controlgroups, and a policy that has been in place longer. Whereas most previous research has found significant effects of the EITC on labor force participation, we find no effect.
Buchanan on The New, Brazen, and Completely Dishonest Attack on Progressive Taxation
Last week, I blogged the Wall Street Journal op-ed by Ari Fleischer, The Taxpaying Minority. In response, Neil H. Buchanan (George Washington) has published an op-ed in this week's FindLaw: Is it Really So Tough to Be Rich? The New, Brazen, and Completely Dishonest Attack on Progressive Taxation:
Fleischer argues: "Our tax system comes up short in a lot of areas. It doesn't foster economic growth. It isn't very simple. And it certainly isn't fair. The one place where it does excel is at redistributing income." How do we know this? Because the richest 1% of all taxpayers paid 37% of all federal personal income taxes in 2004; the richest 10% paid 71% of those taxes; and the "most successful" 40% paid 99%. "Think about it. Ten percent pay seven out of every 10 dollars and their share of the burden is rising," warns Fleischer. This argument, however, is fundamentally dishonest in at least three ways. ...
Fleischer insinuates that we're doing a great job of redistributing income because, for example, ten percent of the population paid 71% of all federal personal income taxes in 2004. That statistic, however, tells us absolutely nothing about redistribution, nor does it tell us whether the tax code is even mildly progressive in the first place. ...
Fleischer also complains that some people pay no federal personal income taxes at all: "The income tax system is so bad … that 40% of the country's households -- more than 44 million adults -- pay no income taxes at all. Not a penny." This, of course, ignores the question of whether those 44 million adults are earning enough money to be taxable in the first place. Should they really be paying federal income taxes if the money will come out of their budget for decent food, healthcare, housing and clothes for themselves and their children? ...
Arguments like Fleischer's typically refer to "taxes," but they are really referring only to the federal personal income tax. There are, of course, many other kinds of taxes that people pay. Fleischer argues that Social Security and Medicare taxes do not count because both systems are redistributive in their benefits. He thus rules out of consideration taxes that just happen to be imposed on the first dollar of income earned (while the Social Security tax is not imposed at all on incomes above $97,500). In short, his argument asks us to ignore a significant part of the tax system that is very non-progressive by design.