Wednesday, November 30, 2011
Huffington Post, Charlotte Church: I Sang At Murdoch Wedding For 'Good Press':
Singer Charlotte Church gave damning testimony against the British press at the Leveson Inquiry into press ethics on Monday. In it, she claimed that she sang for free at Rupert Murdoch's wedding in exchange for favorable press coverage.
Church said that Murdoch gave her a choice: either she could take £100,000 for the job, or she could waive the fee in exchange for positive coverage from Murdoch's outlets.
Question: Discuss the income tax consequences to Charlotte Church and Rupert Murdoch.
In an annual reminder to taxpayers, the IRS announced today that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks this year that could not be delivered because of mailing address errors. Undelivered refund checks average $1,547 this year.
Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the Where’s My Refund? tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems. Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of Where’s My Refund? by calling 1-800-829-1954.
Following up on my prior post, GW Law Prof Sues Catholic U. to Stop Same-Sex Dorms: ABA Journal, DC Agency Tosses Law Prof’s Bias Complaint over Same-Sex Dorms, Cites ‘Absurd Results’:
George Washington University law professor John Banzhaf has lost his case contending same-sex dorms at the Catholic University of America violate discrimination laws.
The D.C. Office of Human Rights dismissed Banzhaf's complaint in an order issued Tuesday, according to a Catholic University press release and the Associated Press. Banzhaf had contended the policy violated Washington, D.C.’s Human Rights Act, which bars discrimination in employment, housing, commercial space and public accommodations.
The order says the D.C. Human Rights Act “does not forbid colleges and universities from making sex-based distinctions between students. We agree that to follow complainant’s reasoning would include a prohibition on same-sex bathrooms, locker rooms and sports teams, which would lead to absurd results.”
Banzhaf filed the complaint after university president [and former Boston College Law School Dean] John Garvey announced in a Wall Street Journal editorial that Catholic University is phasing in single-sex residence halls in an effort to reduce binge drinking and hooking up.
The Alternative Minimum Tax is a parallel system developed more than 40 years ago by Congress to make sure the wealthy paid at least some income tax. But because the AMT was never indexed for inflation, it increasingly ensnares many middle-class Americans. Knowing whether you’re likely to be snagged by the AMT can help guide your year-end tax planning.
By their very nature, partnerships present problems for the U.S. tax system. Are they separate entities or just aggregates of their partners? It depends on the situation. Prior to 1982, the IRS had little choice but to audit the tax consequences of partnership activities by auditing each partner. Congress flipped that aggregate treatment on its head by enacting entity-focused partnership audit rules in the Tax Equity and Fiscal Responsibility Act of 1982. It’s time to flip them back.
Neither the practical problems that drove creation of the entity-focused partnership audit rules nor the tax policy rationales used to justify them retain strength today. Indeed, almost thirty years of experience with those rules has unearthed numerous negative consequences. Furthermore, improvements in the substantive law applicable to partnerships and in the technology available to the IRSce for use in auditing partnerships have significantly reduced the benefits derived from the current partnership audit rules. In short, their costs now outweigh their benefits and they should be repealed.
New York Gov. Andrew Cuomo is considering an overhaul of the state's personal income tax rates that would raise revenue from the wealthy and lower taxes for others, said people familiar with his thinking. ...
[O]ne plan under review would create new, higher-income brackets. Wealthier New Yorkers would pay a higher rate than they did three years ago before the temporary tax hike, which expires this year. But they'd pay less than they did this year when the higher rates were still in effect. The higher rates would be packaged with tax breaks, possibly targeted at the middle class. ... A key question left undecided is who would pay the higher rates—just millionaires or also those with six-figure incomes.
International tax enforcement is continuing to rise in all forms: multilaterally, bilaterally, and unilaterally. The trend will continue as governments look for more tax revenue and as globalization, free trade, and the information revolution enable individuals and businesses to move money, ideas, products, and know-how instantaneously. Tax authorities will struggle to keep pace with taxpayers and technology. Another trend is the continuing interaction between tax law and other types of enforcement law (for example, money laundering, corruption, fraud, and asset forfeiture) and international law.
All Tax Analysts content is available through the LexisNexis® services.
Limited liability companies, formed in states that allow LLC use for non-business activities, are a useful and desirable tool for holding family personal-use property, such as vacation homes. They should allow limited liability protections, protection from intermeddling creditors, and transaction structuring possibilities that are not available in property coownership form or which, if available, are more difficult to realize in a coownership arrangement than they are through use of an LLC operating agreement. When using an LLC to hold family property it is necessary to draft a customized and artful operating agreement that is sensitive to particular family dynamics and that allows use, control and financing of the property with a minimal amount of undesirable friction. My experience is that this is not an easy drafting task.
Tuesday, November 29, 2011
This report includes a series of articles and interviews covering the latest issues in the field of legal education, and is accompanied by a listing of the top LLM programmes in the world.
- Executive Education: Partners in Law
- Interview: At Home Abroad
- Law and Business: A Marriage of Convenience
- Law Firm Profile: Jones Day
- Learning the Law Business
- LL.M. Courses 2011
- LL.M. Programs 2011
- Student Q&A: Johannes Buabeng-Baidoo
- Student Q&A: Jan van den Broeck
- U.S. Law School Profile: Northeastern
The Journal of Chinese Tax and Policy, published by the University of Sydney, has released its inaugural issue:
- Eva Huang & Antony K.F. Ting (both of the University of Sydney, Business School), Editorial, 1 J. Chinese Tax & Pol'y 1 (2011)
- Natalie P. Stoianoff (University of Technology, Faculty of Law), The Coming of Age of Enterprise Taxation in China, 1 J. Chinese Tax & Pol'y 2 (2011)
- Eva Huang (University of Sydney, Business School) & Bin Yang (Xiamen University, Department of Public Economics), Characteristics of the Chinese Tax System and its Cultural Underpinnings: A Comparison with the West, 1 J. Chinese Tax & Pol'y 13 (2011)
- Luo Yang, Real Estate Tax (RET) of People’s Republic of China – An Analysis of the Effectiveness of the Implementation of the RET in the Shanghai Trial, 1 J. Chinese Tax & Pol'y 13 (2011)
Miami Herald, Scammers Steal IRS Refunds With Ease:
Identity-theft crimes have soared in the electronic age, with crooks graduating from everyday credit-card fraud to stealing people’s identities such as Social Security numbers for income tax-return scams.
Almost one year ago, in broad daylight, North Miami postal carrier Bruce Parton was killed for his key — a master key, authorities say, that unlocked personal financial information to residents of a North Miami-Dade condo building.
The two men charged with the 60-year-old’s murder used his so-called Arrow Key to steal the information from dozens of residents’ mailboxes. Like magic, the pair converted the identities of others into an electronic stream of cash, by filing fabricated income tax returns in the victims’ names over the Internet, according to court documents.Their unwitting accomplice turned out to be the Internal Revenue Service. The IRS, without verifying their false income claims, loaded the refunds onto debit cards the men allegedly used in others’ names at Winn-Dixie supermarkets, 7-Eleven convenience stores and Chase Bank, records show.
Scammers have, in fact, exploited a hole in the IRS electronic filing system, according to the General Accountability Office. The federal watchdog agency found that the IRS does not actually match tax returns to the W-2 income forms that employers file until months after the filing seasons ends on April 15. Employers file them at the end of February or early March, but the agency does not match them up with incomes reported on 1040 forms until June — way too late to catch identity thieves.
“The refunds go out the door first, and then the matching is done afterward,” Jim White, GAO’s director of strategic issues, said in a report prepared for a congressional hearing last summer. He said the IRS needs to modernize its processing system and require employers to file workers’ income statements earlier in the year. White said “the IRS could do matching before refunds go out and catch more fraud,” but he warned “this is something that’s years away.”
In the meantime, everyday criminals are moving into the identity-theft rackets, using computers, the Internet and online tax services to fleece the IRS -- and taxpayers. The GAO reports that the number of identity theft-related fraud incidents on tax returns reached 248,000 last year, about five times more than in 2008.
Nancy A. McLaughlin (Utah), McLaughlin on Kaufman: Tax Court Protects Public Investment in Conservation Easements, 2011 Emerging Issues 6074:
In two recent decisions [Kaufman v. Comm'r, 134 T.C. No. 9 (2010); Kaufman v. Comm'r, 136 T.C. No. 13 (2011)], the Tax Court held that the conservation purpose of a conservation easement will be "protected in perpetuity" as required by § 170(h) only if the holder is given an absolute right to a share of post-extinguishment proceeds. This short article discusses the import of this holding, as well as the court's approach to penalties and the deductibility of required cash payments to the donee.
[W]ith his soothing voice and kindly deportment [Repetti] manages to exert a calm influence over a lecture room packed with five dozen second-year law students. “It’s about creating an environment where they’ll feel comfortable, empowered, self-confident,” Repetti, a 1980 Boston College Law graduate, said immediately after class in his office. “You’re teaching the whole person intellectually, but you’re also building character. I hope that by seeing me treat them respectfully they’ll go on to treat others the same way." ... Repetti, who was a running back (for Harvard) in the early 1970s and is built like one, does not let up as he impels his students through the arcane ways and byways of tax-law analysis. ...
He says that he aims for his courses to embody a teaching philosophy borrowed from the late Daniel Degnan, SJ, a law professor with whom he crossed paths at Boston College in the late 1980s. “Love your students to death, work your students to death,” Degnan had advised the young law professor. In the Jesuit tradition of education, ... these commandments are mutually inclusive: Love, which must be entwined with communication, is epitomized in action.
Mitt Romney and Newt Gingrich are the two candidates with solid ideas on tax reform and the potential to win his support, anti-tax advocate Grover Norquist said Sunday.
"They've both looked you in the eye and said they're not going to raise their taxes," he said on NBC's Meet the Press, referring to his pledge not to increase taxes that both candidates have signed. Norquist said Jon Huntsman was the only candidate not to have signed.
Companies providing cloud computing services should consider the following interrelated subjects:
- the nature of the service provided (including its taxonomy) and the service's taxability;
- the sourcing by state and local jurisdiction for the particular service offered and the related question of whether a taxable sale of that service has occurred;
- the potential tax collection obligations as a result of nexus;
- and the exemption from use tax for providers' purchases or leases of equipment and software used to provide the service.
We discuss these subjects below in the context of each type of cloud computing service and try to provide some sunshine to help clear up this cloudy area of state and local tax.
All Tax Analysts content is available through the LexisNexis® services.
In the next American Enterprise Debate, Grover Norquist, founder of Americans for Tax Reform, will argue that the Taxpayer Protection Pledge is an effective bulwark against tax increases. New York Times columnist Ross Douthat will counter with his claim that the tax pledge has created political gridlock that threatens to derail serious tax reform and deficit reduction. AEI research fellow and former chief economist to the House Ways and Means Committee Alex Brill will moderate.
This column focuses on the minimum required distribution (MRD) rules that apply to QRPs because an understanding of the MRD rules is essential in order to incorporate QRPs into an estate plan. Future articles will discuss the income taxation of QRPs; tax issues associated with naming trusts as benefi ciaries of QRPs, including both the application of the MRD rules as they apply to trusts named as benefi ciaries of QRPs and the income taxation of trusts that receive QRP benefi ts; and Roth IRAs.
Monday, November 28, 2011
Although I teach, write and practiced predominantly in corporate and commercial law, I also have an LL.M. in Tax. Granted, my LL.M. coursework largely focused on business taxation, and therefore falls squarely within my interests. Nonetheless, given that tax and corporate/commercial law are treated as separate legal disciplines, I see tremendous opportunities for comparative and interdisciplinary analysis among tax, corporate and commercial law.
For instance, I find it intriguing that courts employ highly divergent decision-making approaches in these realms. In the tax realm, courts tend to focus on the actual economic arrangement of the parties, in an effort to identify economic substance rather than mere contractual form. Courts presiding over tax cases tend to utilize more expansive and contextual interpretive methodologies, and routinely scrutinize objective and subjective intent and other "facts and circumstances." These approaches stand in contrast to the dominant, textualist interpretive paradigm in corporate and commercial law, which relies almost exclusively upon strict interpretive norms (such as rules of contract interpretation) to construe written agreements.
To be sure, these divergent methodologies reflect the differing goals of tax, corporate and commercial law. While jurisprudence across all three disciplines emphasizes the need for certainty, uniformity and predictability in the law, tax law remains manifestly skeptical of the party autonomy that corporate and commercial law strive to protect. Courts presiding over tax cases are often called upon to examine possible crimes against the public fisc; in contrast, courts presiding over corporate and commercial law cases are generally called upon to manage disputes among sophisticated parties to voluntary, utility-maximizing arrangements.
Yet despite these distinctions, courts are increasingly importing tax doctrine into the corporate and commercial law context. ...
Why should 1990s taxes be considered the outer limit of revenue collection? Think about it: The long-run budget outlook has darkened, which means that some hard choices must be made. Why should those choices only involve spending cuts? Why not also push some taxes above their levels in the 1990s?
Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions.
- CNBC, Bah, Bah, Paul Krugman, Have You Any Wool?
- Hot Air, Krugman: It's Time To Go BIG ... On Taxes
- Krugman-in-Wonderland, Yes, Krugman, Maybe We Should Have Singapore's Tax Rates
- Newbusters, Krugman Calls for Higher Taxes Than Under Clinton
- Red State, Things to Cut?
Even before cancer diagnosis, the 84-year-old legend was looking to shield his legacy from taxes, not lawsuits stemming from one-time protege’s sex abuse scandal. ...
[T]he transfer of Paterno’s $400,000 house to a spousal trust is widely touted as an indication that he saw the writing on the wall a few months ago and was trying to protect his assets from angry parent lawsuits. ... [But] Paterno actually moved his house into trust a full year ago as part of a surprisingly routine estate plan. ...
[The Paternos] transferred their joint ownership of their house to two qualified personal residence trusts back in November, well before the public had any idea that anything had gone wrong. There were a few glitches in the November deed, so they refiled corrected paperwork in July.
Business as usual, says Philadelphia estate planner Milton Abowitz. “A typo in the legal description, someone’s name spelled wrong, an error that should be corrected — but one that had no substantive significance,” he explains. “That was the purpose of the correctional deed in July of 2011.” ... [H]is motive was more about estate taxes than potential legal action. ...
[T]he future of the federal estate tax remained nebulous for most of 2010, so the timeframe here points toward good advice and a tax-minimization scenario. “When the estate tax was changed by the ‘compromise’ on extending the Bush tax cuts, there were many changes that required a reexamination of estate plans of many wealthy clients,” Abowitz says. “The transfers that occurred in November of 2010 appear to be a result of that.”
A year later, the federal estate tax is back in play and it turns out that Paterno has treatable lung cancer. He might well beat it, but the man was still born in 1926 and the actuary clocks are ticking. While Sue Paterno would ordinarily inherit the house tax-free, moving his half of its value into trust can’t hurt.
One thing that is clear is that the Paternos are wealthy enough for their lawyers to be worried about estate taxes. He’s been earning between $400,000 and $500,000 a year from the school — a royal salary for the king of coaches — and endorsements probably net him a lot more.
Over a 62-year career, he’s probably stashed away a few million dollars. And even if the couple don’t end up with the $10 million it currently takes to trigger the federal tax, Pennsylvania taxes everything — starting at a rate of 4.5% on the inheritances of children and grandchildren.
That’s nothing shady. It’s just good estate planning.
See also Investment News, Inside Joe Paterno's Estate Planning Play. (Hat Tip: Alan Henning.)
I understand why CEOs of public corporations take advantage of every opportunity to condemn taxes. The lower the tax rate, the greater the after tax profit. The greater the after tax profit, the greater the share price. The greater the share price, the closer they come to or exceed “their number”. You know, the number. The share price times the number of shares they effectively own when everything is awarded and vested. It is the number they need to be able to live the life they want to become accustomed to. After all, the ONLY reason you take the job as CEO of a company you were not a founder of is for the money. Period end of story. Lower taxes puts more money in your pocket. If you want an example of how corporate tax rates are important to CEO wealth, just look at how often public companies manage their effective tax rates to move their earnings per share numbers.
I can tell you with complete confidence that when a company’s stock is moving, for whatever reason, the CEO (and most employees with a lot of effective stock ownership) is marking to market his/her holdings and calculating his net worth AT LEAST once a week if not more. Stock is up 10pct, big smile. Stock is down 10pct. , don’t let your dog near him/her.
So we know why every CEO claims that lower tax rates are critical. But does it really impact how their companies are run ?
Bottom line is that while CEOs of public companies and financial engineers have good reasons to ask for lower taxes, I don’t see lower taxes creating jobs. I am not suggesting that increasing taxes is a good thing for companies. That is a topic for another day.
- Competition has a far greater impact on operating a business than the tax rate
- Companies hire because they need people to compete and keep customers happy, not because of lower tax rates
- Companies invest their cash because its strategic
- The exception that proves the rule
(Hat Tip: David Herzig.)
Twice before in its history, the U.S. federal government enacted a flat tax. Both times, they were imposed to deal with a major crisis. However, these taxes share another common bond. In both cases, they never ended up being collected.
The country's first experiment with a flat tax came in 1861. The nation was mired in civil war, and President Abraham Lincoln's administration had to find a way to help raise money to wage the conflict. Keep in mind that up to this point, there was no form of income tax in place in the United States.
"You have to understand the revenue system prior to the Civil War," says Steven Bank, a law professor at UCLA and an expert on tax history. "It was primarily tariff revenues. Once the Civil War hits, that tariff revenue dropped considerably and expenses rose." As a result of this, President Lincoln signed the Revenue Act of 1861 into law. America had its very first income tax -- a 3% flat rate on income above $800.
However, that particular tax was never enforced. Bank credits opposition from the U.S. Treasury Secretary at the time, Salmon P. Chase, and points out there were no resources to gather up the revenue even if Chase had been a cheerleader for it. "Remember, we had no internal revenue system at the time," Bank says. "There's nobody going around collecting taxes." ...
Two decades would pass before Congress's second attempt at levying a flat tax. It was born out of what became known as the Panic of 1893. ... Revenue was needed, and it all prompted Congress to take a long, hard look at the tax code."Grover Cleveland came in as president on a tariff reform platform, and the income tax was dubbed the 'handmaiden of tariff reform' by newspapers," Bank says. "The theory was that we needed something to counterbalance the regressive effects of the tariffs. The view was that attaching customs duties to goods coming into this country raises prices, puts money into the pockets of the big domestic manufacturers and out of the pockets of the little guy."
The income tax was seen as a way of giving Congress a way to lower the tariff rates. In 1894, it enacted the Wilson-Gorman Tariff Act. This included another flat-rate tax -- 2% on incomes above $4,000. In the end, the tariff rates themselves were only lowered slightly, prompting a disappointed President Cleveland to allow the act and the tax to become law without his signature.
Debating taxation is all the rage these days, and not a moment too soon. A report released this month exposes some unpleasant truths about America's uncompetitive system for taxing businesses.
The Paying Taxes 2012 study, produced by the World Bank, International Finance Corp. and PricewaterhouseCoopers, ranks countries based on the ease or difficulty of paying business taxes. The Maldives came in first, followed by Qatar and Hong Kong. America clocks in at 69 out of 183 countries, down one spot from last year and 23 places shy of its finish in 2009.
This survey offers a more detailed analysis of tax policy than does the World Bank's annual Doing Business survey, to which it's a complement. It measures compliance costs such as hours spent filling out forms in addition to tax rates to weigh the full tax burden on companies. ...
America's decline in the rankings is attributable to tax-policy stagnation as other countries reform their own revenue codes. Already a notably complex system with the second-highest corporate tax rate in the world after Japan, the U.S. tax code appears ever more cumbersome compared to countries that grow simpler and cheaper by the year.
As he stood in the opulent marble foyer of a Fifth Avenue mansion late last month, greeting the coterie of prominent guests arriving at his private art gallery, Ronald S. Lauder was doing more than just being a gracious host.... Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.
The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent....
An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad. ...
“There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent,” said Victor Fleischer, a law professor at the University of Colorado. “Any taxpayer lucky enough to have appreciated property is usually put to a choice: cash out and pay some tax, or hold the property and risk the vagaries of the market. Only the truly rich can use derivatives to get the best of both worlds — lots of cash and very little risk.”...
Some tax reform advocates say that it is unfair that the wealthiest can subsidize their lifestyles using myriad offshore maneuvers and complex accounting strategies. “It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”
(Hat Tip: Ann Murphy, Michael Simkovic.)
A tax lien filed in Florida by the federal government says the rapper [Bow Wow], real name Shad Gregory Moss, owes the government $91,105.61 for unpaid taxes from the year 2006.
- Neil Buchanan (George Washington), In Defense of Teaching About Old Things -- and In Defense of Teaching and Writing
- Neil Buchanan (George Washington), The Scales and Arpeggios of Learning the Law
- Paul Campos (Colorado), Brave New World
- Marc DeGirolami (St. John's), Instrumentalism?
- Noah Feldman (Harvard), For Better Government, Don’t Kill All the Lawyers
- Brian Leiter (Chicago), The NY Times Jumps the Shark...
- Sandy Levinson (Texas), Reforming Legal Education
- Jason Mazzone (Brooklyn), An Invitation to the Editorial Board of The New York Times
- Larry Ribstein (Illinois), The NYT on Legal Education Again
- WKRP in Cincinnati Thanksgiving Turkey Drop
- What Tax Profs Are Thankful For
- 'Mentoring' versus 'Scamming' Law Students
- WSJ: New MLB Rules Your Tax Lawyer Will Love
- Is Capital Gains Tax Law Biased Against Low Income Investors?
- Ann Coulter: Republicans Rightly Oppose Democrats' Spending Cuts/Tax Increase Ruse
- Does Apple Pay its Fair Share of U.S. Taxes?
- TIGTA: 82% Error Rate in Investment Theft Loss Deductions
- For First Time, Tax Court Approves Use of Geithner/Turbo Tax Defense
- Tyson: Tackling Income Inequality
- Why Law Schools Are So Bad at Creating Lawyers (and How to Fix It)
- NY Times Editorial: Legal Education Reform
- Think Long Committee for California Releases Tax Reform Report
- Grover Norquist: The Anti-Tax Puppeteer Pulling Washington’s Strings
- Are Asian-American Lawyers Too Nerdy to Get to the Top?
- WSJ: Year-End Tax Planning Amidst Political Chaos
- Top 5 Tax Paper Downloads
- Tax Court: Glam Metal, Hair Bands, Ecdysiasts, and Deciduous Calisthenics
- Former AG Sues Five Additional Law Schools for Age Discrimination in Faculty Hiring
Sunday, November 27, 2011
Epic failure in Washington is causing epic uncertainty for taxpayers.
This week, Congress's special 12-member deficit-cutting committee failed to agree on even a broad outline for addressing the U.S.'s fiscal woes. It marked the third year in a row that taxpayers headed into December with major tax-code issues unaddressed.
Now tax experts don't expect action on the most important issues—income-tax rates, capital-gains rates, estate-tax exemptions and rates, and the alternative minimum tax—until after next year's election. Unless, that is, something happens in the economy to move lawmakers to act. "If the markets insist, Congress will respond," says Michael Graetz, a professor at Columbia University Law School and a former top Treasury official.
Lawmakers have a lengthy to-do list. The 2% Social Security payroll-tax cut for employees expires at the end of 2011. So do a host of other provisions, including a fix to keep the alternative minimum tax from expanding to millions more taxpayers in 2012, and an extension of the popular IRA charitable contribution for people older than 70½.
Other changes are set to take effect at the end of next year, including the expiration of the tax cuts enacted in 2001 and 2003. The top tax rate on wages would reset to 39.6% from 35%, and the top rate on long-term capital gains would rise to 20% from 15%. The special 15% rate on dividends would lapse, as would the current generous estate-tax provisions. As many 10 million lower-income families and individuals would also be restored to the tax rolls, according to the nonpartisan Tax Policy Center.
How can individual taxpayers cope with this chaos? Here are our best suggestions for moves to make before the end of the year as well as longer-term issues to consider.
WSJ Total Return Blog, More Year-End Tax Tips:
The Weekend Investor cover story, “The Tax Mess Deepens,” presents a roundup of year-end tax moves to make and issues to consider. Here are more.
- Stock options and restricted shares
- Charitable gift timing
- State sales-tax deduction
- Kiddie tax
- 2011 IRS forms and instructions
3. [332 Downloads] Charitable Gifts by S Corporations and Their Shareholders: Two Worlds of Law Collide, by Christopher R. Hoyt (Missouri-Kansas City)
4. [281 Downloads] Charitable Gifts by S Corporations: Opportunities and Challenges, by Christopher R. Hoyt (Missouri-Kansas City)
5. [271 Downloads] 2011 Federal Tax Update, by Samuel A. Donaldson (U. Washington)
Robert Willson opened a bar in 1986, and it gave him nothing but trouble. He’s seen lawsuits, endless repairs, and even a catastrophic fire. One might say the City of Des Moines did him a favor when it finally condemned the land in 2000 to expand its airport--right around the time Willson began serving a federal prison term. But the Commissioner wouldn’t let things be and says that the condemnation triggered a large capital gain that Willson didn’t correctly report. This meant the bar would give him one more headache--because, though Willson represented himself at trial, the facts as he described them would be worthy of an advanced exam problem in tax accounting....
Willson did his best to explain in as plain a way as possible the history of the property and what he spent on it. We will try to return the favor by minimizing taxspeak. . . .
[T]he bar became a local mecca for a type of “rock and roll” called “glam metal.” While the Court took no expert testimony on the nature of such groups, it did allow into the record Willson’s own explanation of this genre of musical entertainment. We also took judicial notice that “hair bands” had lost much of their popularity with the coming of something called “grunge rock” (another type of “rock and roll” music) in the early nineties. This was important to Willson’s business because “hair bands,” with such unlikely names as Head East, Great White, and Saturn Cats could still draw large crowds to a bar on the outskirts of Des Moines but had become affordable providers of live entertainment. Willson even invited one of these “hair bands” to be a sort of artist-in-residence. One night in 1994, a few band members did something to a smoke machine that sparked an enormous fire. This fire engulfed everything except the parking lots, the shed, and the property’s original house. It also forced Willson to make a choice--sell to the City as part of its airport expansion, or rebuild. Willson was unable to sell, so he had to rebuild. He rented out the old house to a tenant who installed minor improvements (e.g., poles) and opened an establishment felicitously--and paronomastically--called the “Landing Strip,” in which young lady ecdysiasts engaged in the deciduous calisthenics of perhaps unwitting First Amendment expression. . . .
Des Moines began moving to condemn the bar and the land sometime in 1999. Willson closed the bar doors by May 5, when he transferred the property to his lawyer for safekeeping until the matter with the City was resolved. His criminal troubles-- something to do with money and drugs and possibly the bar--were reaching the point where Willson was about to begin serving a federal prison term, and he authorized his lawyer to act for him in dealing with the City while he was imprisoned. ...
Despite his legal problems, however, Willson did manage to file his 2000 tax return. The Commissioner determined that he had underreported his income. Willson timely filed a petition to contest the Commissioner’s determination, but trial was postponed for several years while he served out his sentence. The one remaining issue is Willson’s adjusted basis in the property at the time of the condemnation. ...
The Commissioner, however, doesn’t divide the $160,000 cost of the real estate between the land and the buildings. This is a critical mistake. ...
(Hat Tip: Bob Kamman.)
- Former AG Sues Michigan State, Files EEOC Complaints Against 100 Law Schools, for Age Discrimination in Hiring (July 20, 2011)
- At Law Schools, Age Bias Co-exists with Outdated Practices (Aug. 29, 2011)
Blog of the Legal Times, Law School Fights Former N.D. Attorney General's Age Discrimination Suit:
Nicholas Spaeth, the former attorney general for North Dakota, first sued the school on July 28 in U.S. District Court for the District of Columbia. Spaeth claims that despite his vast experience as a lawyer, [Michigan State University College of Law] passed him over for a teaching job because he was too old.
The school moved for dismissal on Oct. 14. Less than a month later, Spaeth filed an amended complaint on Nov. 7, this time against Michigan and five additional schools and their representatives. On Nov. 21, Michigan renewed its motion to dismiss, and asked in the alternative that the court separate it from the other defendants and move the case to U.S. District Court for the Western District of Michigan. ...
The other schools now named in the lawsuit include University of Missouri School of Law, University of California Hastings College of the Law, Georgetown University Law Center, University of Iowa College of Law and University of Maryland Francis King Carey School of Law.
(Hat Tip: Donald Dobkin.)
Saturday, November 26, 2011
American legal education is in crisis. The economic downturn has left many recent law graduates saddled with crushing student loans and bleak job prospects. The law schools have been targets of lawsuits by students and scrutiny from the United States Senate for alleged false advertising about potential jobs. Yet, at the same time, more and more Americans find that they cannot afford any kind of legal help.
Addressing these issues requires changing legal education and how the profession sees its responsibility to serve the public interest as well as clients. Some schools are moving in promising directions. The majority are still stuck in an outdated instructional and business model. ...
Instead of a curriculum taught largely through professors’ grilling of students about appellate cases, some schools are offering more apprentice-style learning in legal clinics and more courses that train students for their multiple future roles as advocates and counselors, negotiators and deal-shapers, and problem-solvers. ...
In American law schools, the choice is not between teaching legal theory or practice; the task is to teach useful legal ideas and skills in more effective ways. The case method has been the foundation of legal education for 140 years. Its premise was that students would learn legal reasoning by studying appellate rulings. That approach treated law as a form of science and as a source of truth.
That vision was dated by the 1920s. It was a relic by the 1960s. Law is now regarded as a means rather than an end, a tool for solving problems. In reforming themselves, law schools have the chance to help reinvigorate the legal profession and rebuild public confidence in what lawyers can provide.
- Paul Campos (Colorado), Brave New World
- Marc DeGirolami (St. John's), Instrumentalism?
- Brian Leiter (Chicago), The NY Times Jumps the Shark...
- Sandy Levinson (Texas), Reforming Legal Education
- Jason Mazzone (Brooklyn), An Invitation to the Editorial Board of The New York Times
- Larry Ribstein (Illinois), The NYT on Legal Education Again
A group of billionaires, old-line political movers and shakers, and influential advocates released their recommendations Monday for changing the state's tax structure to increase state revenues by $10 billion a year, with half of that going to K-12 schools and community colleges and another $2.5 billion for the University of California and California State University.
The Think Long Committee for California, chaired by Nicolas Berggruen, founder and president of Berggruen Holdings, intends to place two initiatives on the 2012 ballot to overhaul the state's tax and finance structures, and to amend the school funding law, Proposition 98.
The proposals, explained in the committee's 24-page report, A Blueprint to Renew California, seek to get the state out of debt by reducing personal income taxes at every level, cutting corporate taxes, and reducing sales taxes for consumer goods while extending them at a higher rate for services like haircuts, accounting, and car repairs.
Here are the proposed tax changes:
A Modern, Broad-Based Tax System, Updating California’s tax system to mirror the real composition of our modern service and information economy and provide a stable, broad-based tax system that is sustainable over the long term.
While maintaining California’s progressive income tax structure, we would reduce rates for every bracket and reduce the sales tax on goods from 5% to 4.5% while broadening the sales tax at a 5% rate to apply to services, which are more discretionary. Education and medical care would be exempted.
Those with low incomes would receive a sales tax rebate. Those earning $45,000 and under would pay zero income taxes. The working middle class with incomes up to $95,000 would pay only 2%. The homeowners’ exemption and renters’ credit would be doubled. Those making above that amount would pay 7.5%. Because of the 1% surcharge for mental health on millionaires, they would pay a top rate of 8.5%.
A family with income of $90,000, which would have paid $1,449 in personal income taxes under the current system, would now pay $832 – a more than 40% reduction in their state personal income tax. Overall, the reform will maintain California’s progressive tax system. Households with Adjusted Gross Income of less than $20,000 per year would pay an average of $71 more in direct and indirect state taxes, while those earning more than $1 million would pay an average of $11,478.
This combination of cutting the personal income tax and broadening the tax base will help stabilize the boom and bust cycle of the budget while generating $10 billion in new revenues annually to start paying down the state’s “wall of debt,” and provide funding for K-14 schools, for CalState and the University of California and for local public safety and other local needs.
Small and medium-sized business proprietorships, “S” corporations and LLC’s are the backbone of the California economy. Unlike the large “C” corporations, profits and losses are “passed through” and taxed at the personal income tax rate. Therefore, a PIT cut will boost job-creating business prospects. For example, a business with a taxable income of $480,000 that would have paid $39,452 in income taxes under the current system will pay $33,114 under the proposed system.
Further, the mandatory single sales factor would be imposed on corporations while, at the same time, California’s corporate tax, one of the highest in the nation, would be reduced to make it competitive with other states and foster an improved business climate.
(Hat Tip: Francine Lipman.)
As a boy growing up in Massachusetts in the 1960s, Grover Norquist claims to have had a political epiphany. He thought Republicans should brand themselves as members of the party that would never raise taxes, much as Coca-Cola had stamped itself in the public mind as a trusted drink. At the time it was not a popular idea. “When I was 12, no one was particularly interested in my thoughts on how to restructure the modern Republican party,” he recalled this week.
They are now. Other than being voted class president at high school and to the board of the National Rifle Association, Mr Norquist has never held elected office. But some four decades later, the idea that germinated when he was a young man has a grip on Republicans in Washington and is at the heart of the country’s political gridlock. ...
In his telling, some of the most powerful Republicans now bend to his will. In the midst of the deficit committee’s sensitive deliberations, Mr Norquist divulged an exchange with Jon Kyl, the Arizona senator. He is one of the Senate’s big barons who is not easily pushed around. But after he made a marginally ambiguous statement about taxes, Mr Norquist jumped on the phone. Recounting the conversation “in the tone of a teacher scolding a second-grader”, according to Politico, the Washington website, Mr Norquist pressed Mr Kyl on tax rates. “And then,” he said, “[Kyl] went down on the floor, and he gave a colloquy about how we’re against any tax increases of any sort. Boom!”
Democrats are unanimous in charging that the debt-reduction supercommittee collapsed because Republicans refused to raise taxes. Apparently, Republicans are in the thrall of one Grover Norquist, the anti-tax campaigner, whom Sen. John Kerry called “the 13th member of this committee without being there.” Senate Majority Leader Harry Reid helpfully suggested “maybe they should impeach Grover Norquist.” With that, Norquist officially replaces the Koch brothers as the great malevolent manipulator that controls the republic by pulling unseen strings on behalf of the plutocracy....[W]hy does the myth of the Norquist-controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness — the inability to tell the difference between tax revenue and tax rates. In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.
The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. ... Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.
Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue.
Asian Pacific American ... lawyers are dweebs. In other words, APAs have a reputation of working their tails off, which gets them to the right law schools and the right firms. But then what happens? They get stuck because they lack that je-ne-sais-quoi to get to the next level. (Asian Americans make up only 2.5% of all partners in the Am Law 200.) ...[H]ow do most tiger cubs fare? Not so well, according to the panelists, which included Javade Chaudhri, GC of Sempra Energy; Wilson Chu, partner at K&L Gates; Don Liu, GC of Xerox Corporation; Linda Lu , associate GC of Allstate Inc.; Larry Tu, GC of Dell; and me. ...
The upshot of the discussion: Emphasizing high academic achievement is myopic because it overlooks the soft skills that propel people to the top ranks. "Like I tell my daughter," said K&L Gates's Chu, "it's just as important to know how to read people as it is to know how to read books."
[T]here was quite a bit of chest-pounding about whether the fixation on academic excellence is making Asian Americans into ideal associates who can't morph to leaders. Are APAs too deferential to authority and too quiet about blowing their own horn? The audience said yes.But the problem is that Asians just can't help themselves when it comes to academic obsession.
Friday, November 25, 2011
Bored with the Penn State scandal because it didn't implicate any prominent Republicans, the mainstream media have suddenly become obsessed with Grover Norquist's "Taxpayer Protection Pledge." They are monomaniacally fixated on luring Republicans into raising taxes. If Democrats could balance the budget tomorrow and quadruple government spending, they'd refuse the deal unless they could also make Republicans break their tax pledge. That is their single-minded goal. But the media are trying to turn it around and say that it's Republicans who are crazy for refusing to consider raising taxes no matter how much they get in spending cuts. ...
For Americans who are unaware of the Democrats' history of repeatedly reneging on their promises to cut spending in return for tax hikes, the Republicans' opposition to tax increases does seem crazy. That's why Republicans need to remind them. ...
[I]n 1982, Reagan struck a deal with the Democrats to raise some business and excise taxes -- though not income taxes -- in exchange for $280 billion in spending cuts over the next six years. As Reagan wrote in his diary at the time: "The tax increase is the price we have to pay to get the budget cuts." But, of course, the Democrats were lying. Instead of cutting $280 billion, they spent an additional $450 billion. ...
Unable to learn from the first kick of a mule, President George H.W. Bush made the exact same deal with Democrats just a few years later. Pretending to care about the deficit -- created exclusively by their own profligate spending -- Democrats demanded that Bush agree to a "balanced budget" package with both spending cuts and tax increases. In June 1990, Bush did so, agreeing to tax hikes in defiance of his "read-my-lips, no-new-taxes" campaign pledge. Again, Democrats, being Democrats, produced no spending cuts, and within two years the increased federal spending had led to a doubling of the deficit. ...
Republicans can read the Democrats' record, too. They know that Democrats will promise to cut spending in exchange for tax increases and then screw Republicans on the spending cuts. It's been 20 years since they pulled that scam, so Democrats figure it's time to make Republicans break a tax pledge again. As long as no one knows the history of these "deals," the media can carry on, blithely portraying Republicans as obstructionist nuts for refusing the third kick of a mule.
Does Apple really pay its fair share of U.S. taxes?
In a Nov. 3 report, Citizens for Tax Justice estimated that Apple paid an average effective U.S. tax rate of 31% between 2008 and 2010. That is close to the ostensible corporate income tax rate of 35%. Out of 280 companies in the study, only 49 had a higher effective tax rate than Apple.
Various bloggers and columnists seized on the report to put Apple on another pedestal, praising it as one of the few tech giants paying its fair share of U.S. taxes.
But in an overlooked report published in the journal Tax Notes in August, economist Martin Sullivan said Apple is no better than other multinationals that have been "painted as corporate tax dodgers by major media outlets."
He said that "despite outward appearances, Apple enjoys enormous foreign tax benefits, just as GE and Google do. By taking advantage of lax U.S. and foreign tax laws, Apple has been able to book a large share of its foreign profits in low-tax jurisdictions and greatly reduce its tax liability in the United States and other major countries where it conducts most of its real business activity."
He estimated that by shifting profits overseas, Apple is costing the U.S. government more than $1 billion a year.
Federal law ... provides taxpayers with tax relief for investment theft losses. The IRS estimates that more than 19,200 taxpayers filed Tax Year 2008 tax returns claiming a combined total of more than $8 billion in property income casualty and theft deductions. Our review identified that taxpayers may be erroneously claiming investment theft loss deductions. ... TIGTA estimates that 1,788 (82 percent) of 2,177 taxpayers may have erroneously claimed deductions totaling more than $697 million, resulting in revenue losses totaling approximately $41 million. The potential revenue loss estimate is conservative in that it only represents electronically filed tax returns for one year.
Petitioner works as a patent attorney for the Department of Energy at a national laboratory, holds a Government security clearance, and is subject to detailed and periodic background investigations.
In 2007, petitioner's wife received interest income from a trust created by her mother's estate. The funds were attributable to litigation resolved in favor of the estate. As a beneficiary of the trust, petitioner's wife received a Schedule K-1, Beneficiary's Share of Income, Deductions, Credits, etc., reporting the interest income. Prior to this instance, the couple had never received a Schedule K-1 and were unfamiliar with the form.
Petitioner usually takes the lead in preparing the couple's joint Federal income tax returns. He prepared the couple's joint income tax return for 2007 using tax return preparation software. Because he had never dealt with a Schedule K-1 in the past, petitioner upgraded his tax preparation software to a more sophisticated version as a precaution to ensure proper treatment of the unfamiliar form.
Using the upgraded software's interview process, petitioner correctly entered the name and tax identification number of the trust, properly reporting the source of income. While transcribing the remaining information, however, he made a data entry error that prevented the amount of interest income from being correctly displayed on Schedule E, Supplemental Income and Loss, of his Federal tax return. Petitioner reviewed the Federal tax return before filing, including using the verification features in his tax preparation software, but did not discover the error. ...
This Court has observed that "Tax preparation software is only as good as the information one inputs into it." Bunney v. Commissioner, 114 T.C. 259, 267 (2000). An isolated transcription error, however, is not inconsistent with a finding of reasonable cause and good faith. Reg. § 1.6664-4(b)(1).
We found petitioner to be forthright and credible, and we credit his testimony at trial. We conclude that he made an isolated error in transcribing the information from his wife's Schedule K-1 while using the tax return preparation software. [Fn.4] It is clear that his mistake was isolated as he correctly reported the source of the income, and he did not repeat any similar error in preparing his tax return.
Fn.4: We note that petitioner holds a Government security clearance and is subject to periodic background investigations, which, as he is well aware, provide substantial motivation for him to properly report income on his tax return.
The most important factor in deciding whether a taxpayer acted with reasonable cause and in good faith is the extent of the taxpayer's effort to assess the proper tax liability. ... Under the unique facts and circumstances of this case, we hold that petitioner acted with reasonable cause and in good faith within the meaning of § 6664(c)(1). Accordingly, petitioner is not liable for the accuracy-related penalty under § 6662(a) as determined by respondent in the notice of deficiency.
Prior TaxProf Blog coverage:
- Geithner Blames Turbo Tax For His Tax Troubles (Jan. 22, 2009)
- TurboTax, Geithner Edition (June 30, 2009)
- Tax Court Rejects Taxpayer's Attempt to Use Geithner's TurboTax Defense (Aug. 26, 2009)
- Tax Court Rejects "Geithner Defense," Says Reliance on TurboTax Does Not Excuse Taxpayer From Penalty for Errors on Tax Return (Apr. 20, 2010)
- Tax Court Rejects Geithner/TurboTax Defense (June 23, 2010)
- Tax Court Again Rejects Geithner/TurboTax Defense (Nov. 12, 2010)
The Occupy Wall Street protesters have focused attention on rising income inequality in the United States, and they are right to do so.
Income and wealth disparities have reached levels not seen in the United States since the Roaring Twenties. And the concentration of income and wealth contributed to the speculative excesses that brought on the 2008 financial crisis (see Robert Reich’s “Aftershock” and Raghuram Rajan’s “Fault Lines”). ...
In the last 20 years, inequality has been largely a story of a small elite – not just the top 1%, but the top 0.1% – pulling away from everyone else in every source of household income: labor income, capital income and business income.
The top 1 percent’s share of national income has also been rising in most other advanced industrial countries, but it is by far the largest and has grown the most in the United States (see Jacob Hacker and Paul Pierson’s “Winner-Take-All Politics”). ...
Growing inequality in labor compensation played a major role in increasing income inequality between the top 1% and the rest of the population from 1979 to 2007. Over the period, however, both the growing inequality in business income, including income from small firms, partnerships and S corporations, and in capital income in the form of dividends, interest and capital gains, as well as the rising share of these forms of income in household income, played a more significant role, especially after 2000.
According to the Congressional Budget Office, from 2002 to 2007 more than four-fifths of the increase in income inequality was the result of an increase in the share of household income from capital gains, with the remainder the result of an increase in other forms of capital income.
Capital and business income are much more unevenly distributed than labor income and have become more so over time. Capital gains income is the most unevenly distributed — and volatile — source of household income.
The concentration index is a measure of the inequality of income from different sources among households. The index ranges in value from zero to one, with zero indicating complete equality in the distribution of an income source among households and 1 indicating complete inequality (for example, if one household received all of the income from that source).
For years, [law firms] simply bought whatever law schools were selling. Instead of expecting the schools to teach J.D.'s practical skills, they treated them as glorified head-hunting services from which they could draw raw talent. ... To this day, hiring partners at elite firms still mostly look for students with high GPAs and law journal experience--experiences that, as Megan McArdle would tell you, were probably pretty similar to their own.
So firms have reinforced the very education system they now say falls short. The schools haven't had an incentive to rethink their model. And while the bad press may force reform around the edges, it's hard to imagine the legal academy making wholesale changes on its own accord. After all, it's been working on the same basic model for more than a century. ...Imagine what would happen if a coalition of elite law firms approached every Ivy League law school and gave them an ultimatum: Change your curriculum, or in five years we will stop hiring your graduates. They could just as easily go to a group of lower-ranked law schools and offer to start hiring more graduates if they make the same curriculum changes. It would require accepting the possibility of hiring outside of the most elite institutions. But frankly, that might add some much needed diversity to firms anyway.
I imagine the results would be dramatic. In the end, the most important thing to a law school's reputation these days is who hires its students. And where the Ivies go, the rest of legal academia will go.
Thursday, November 24, 2011
- Paul Caron (Cincinnati): "I am thankful for my wonderful wife and children (and dog), terrific faculty colleagues and students at UC, Pepperdine, and USD, and special church communities in Cincinnati, Malibu, and San Diego."
- Bridget Crawford (Pace): "Step-up in basis and Steve Leimberg's Email Newsletter."
- Cliff Fleming (BYU): "I'm thankful that my wife of 47 years is making a remarkable recovery from an aggressive cancer and has a highly optimistic prognosis. Such things cause your attention to switch from global concerns to matters close to home."
- Stephanie Hoffer (Ohio State): "I am thankful for the birth of my son, George. He is my sunshine."
- Mona Hymel (Arizona): "I am thankful for a healthy family and a life filled with wonderful friends and colleagues."
- Sagit Leviner (SUNY-Buffalo): "I am thankful for the life I lead, the people who touch my heart, those who inspire me to be a better person and the ones who illustrate what to steer away from. I am thankful for the mistakes I am making and my many flaws."
- Jim Maule (Villanova): [see here]
- Claudine Pease-Wingenter (Phoenix): "I am thankful for a job where I get to work with idealistic students who are passionate about using the law to improve people's lives. I am also thankful for a job where I essentially get paid to explore policy issues important to me. I am deeply grateful for recently celebrating my 15th wedding anniversary with the most wonderful husband around."
- John Plecnik (Cleveland State): "I am thankful for my old tax profs, including Richard Schmalbeck, Walter Nunnallee, Mitchell Gans, Brookes Billman, and Leo Schmolka. I am thankful for my new colleagues at Cleveland State, including Debby Geier and Craig Boise. And I am thankful for my BMW F 650 GS."
- Randle Pollard (Widener): "I am thankful for all those in the academia who have helped me with my career as a tax law professor. I am also thankful for teaching in an area as complex, controversial and policy driven as tax."
Major League Baseball's owners and players [have] brought some ... rare and sweeping changes to the game. Among them: two extra playoff teams per season, instant replay for fair/foul calls and trapped balls, an international draft, new limits on what teams can spend to sign draft picks, the effective end of free-agent compensatory draft picks, blood tests for human growth hormone and regulations on when and where players can chew tobacco.
If there's any bad news, it's this: Fans who haven't pursued coursework in theoretical mathematics at the MIT may have a hard time understanding what's going on half the time. ... If you strip away all the new player classifications, salary slots, taxes and penalties, the bottom line is that baseball's current leaders are dead-set on limiting the advantages of rich clubs and helping its tired, poor and huddled teams (like the Kansas City Royals) get a more realistic shot at making it to the World Series.
The current capital gains tax law stipulates that the tax rate for short-term investment (gains and losses) and long-term losses is equal to an investor's marginal ordinary income tax rate, which implies that this rate for low income investors can be significantly lower than that for high income investors. In an optimal consumption and investment model with asymmetric long-term/short-term tax rates, we show that even though capital gains tax rates for low income investors are always lower than those for high income investors, the current capital gains tax law is significantly biased against low income investors in the sense that these investors are willing to pay a substantial fraction of their initial wealth to gain the same capital gains tax treatment as high income investors have. The main reason is that investors have the option of realizing capital losses at the (higher) marginal ordinary income tax rate and realizing capital gains at the (lower) long-term tax rate and the value of this option is significantly lower for low income investors than that for high income investors. This result is robust to various changes in model parameter values. Raising capital gains tax rates for low income investors to the levels for high income investors would reduce the bias and substantially increase stock market participation by low income households. With regard to the optimal tax realization strategy, in sharp contrast to most of the existing literature, we show that it can be optimal to defer short-term capital losses beyond one year and to realize short-term gains.
Wednesday, November 23, 2011
I represented U.S. News at an early November 2011 meeting at St. John's School of Law in New York that was titled Opening Doors: Making Diversity Matter in Law School Admissions. ... U.S. News believes diversity is important and that is why we all ready publish a separate law school diversity index.
Among the reasons why U.S. News doesn't have diversity included in the law school rankings methodology is that there is not an agreement among law schools of the definition of diversity or how it should be measured. For example, is diversity just referring to ethnicity, or should it include income and/or geographic diversity? ...
Many of the speakers and the audience thought that diversity should be added directly into the rankings so law schools would no longer have the goal of maintaining or improving in our rankings as a reason for not accepting a more diversified entering J.D. class by taking students with lower LSATs and GPAs.
I noted that, given the complexity of all the decisions and issues that need to be resolved in terms of creating a more sophisticated and credible diversity rating, U.S. News would need active involvement from the law schools for such a new analysis to be both successful and accepted.
U.S. News has an open offer to meet with an advisory group formed by any of the law school associations—such as the ABA, AALS, NALP, and LSAC—to work on this and any other issue pertaining to our law rankings. U.S. News also is open to meet with an advisory group—independent of both the law school associations and U.S. News—made up of law school academics and law school administrators interested in all aspects of our Best Law Schools rankings. Contact me at [email protected] if you are a legal educator interested in organizing such an advisory committee.
Why has the top 1% of the population done so well relative to the rest? The answer probably lies substantially in changing technology and globalisation. When George Eastman revolutionised photography, he did very well and, because he needed a large number of Americans to carry out his vision, the city of Rochester had a thriving middle class for two generations. By contrast, when Steve Jobs revolutionised personal computing, he and the shareholders in Apple (who are spread all over the world) did very well but a much smaller benefit flowed to middle-class American workers both because production was outsourced and because the production of computers and software was not terribly labour intensive. ...
What then is the right response to rising inequality? There are too few good ideas in current political discourse and the development of better ones is crucial. Here are three.
First, government must be careful that it does not facilitate increases in inequality by rewarding the wealthy with special concessions. ...
Second, there is scope for pro-fairness, pro-growth tax reform. When there are more and more great fortunes being created and the government is in larger and larger deficit, it is hardly a time for the estate tax to be eviscerated. With smaller families and ever more bifurcation in the investment opportunities open to those with wealth, there is a real risk that the old notion of “shirtsleeves to shirtsleeves in three generations” will become obsolete, and those with wealth will endow dynasties.
Third, the public sector must insure that there is greater equity in areas of the most fundamental importance. It will always be the case in a market economy that some will have mansions, art and the ability to travel in lavish fashion. What is more troubling is that the ability of the children of middle-class families to attend college has been seriously compromised by increasing tuition fees and sharp cutbacks at public universities and colleges.
n this article we tackle a fundamental problem in tax law: the resistance of the core concept of “income” to a coherent definition. It has long been recognized that there is a substantial gap between the formal definition of income adopted in 1955 by the Supreme Court in Commissioner v. Glenshaw Glass and the IRS’s actual determinations of what constitutes income. Among various examples described in the article, the IRS has not taxed as income either valuable, record breaking home run baseballs caught by fans or expensive meals provided by lawyers to prospective clients, even though both appear to meet the Glenshaw Glass definition. Scholars have consistently failed either to explain this dissonance or to offer a theoretically and practically satisfying definition of income to replace the one announced in Glenshaw Glass.
We do both and more. Specifically, we develop a new way of thinking about definitions in the law – an approach we call “aptness” – and apply this approach to understanding what “income” means in tax law. The apness of a legal definition describes the extent to which it reflects the values that are important in the relevant field, which in turn minimizes the number of controversial applications of the definition. We conclude that the Glenshaw Glass definition is apt, but in a highly unusual way. Instead of reflecting by its own terms tax law’s defining values, its breadth gives the IRS the flexibility to navigate social opinion regarding income taxation, thereby both providing stability in the administration of the income tax and permitting the evolution of a concept of income that serves the important values – both economic and noneconomic – in taxation.