Thursday, October 25, 2012
James Alm (Tulane University, Department of Economics) presents Socio-Economic Diversity, Social Capital, and Tax Filing Compliance in the United States at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex Raskolnikov, David Schizer and Wojciech Kopczuk:
In this paper we present a rare empirical study of the determinants of tax filing compliance in the United States. We use county level data for the tax year 2000 and a panel of county and state level data for the tax years 2000 to 2006. We include explanatory variables identified in the rational compliance framework, including an enforcement index against identified non-filers, the audit rate of filers, and the average penalty rate for both filers and nonfilers. We also examine the role of social capital on tax compliance. In particular, we test whether heterogeneity in household income, language, race, or religion can explain variation in filing rates. We find that non-filing rates tend to fall in the enforcement index in 2000 cross section analysis, but instead rise in the audit rate of filers in panel analysis. Non-filing rates also fall in the share of a county’s population that is married or residentially stable, and rise in the share of county income from self-employment or public assistance and in the share of owneroccupied housing. Regarding social capital, non-filing looks to be increasing in heterogeneity by race, though not income or language. Non-filing may also be decreasing in heterogeneity by religious membership, though we have only cross-section evidence.
Following up on my previous post, The NFL's Undeserved Tax-Exempt Status: Atlanta Journal-Constitution, Did You Know That the NFL Is a Tax-Exempt Nonprofit?:
Once in a while, I run across something that I did not know and it leaves me flabbergasted.
For example, I did not know that the National Football League, the colossus of professional sports, is classified as a non-profit — a tax-free non-profit, to be more specific. That’s right: The NFL has its own exemption, written into federal law, that makes it exempt from federal corporate taxes.
The Professional Golf Association and the National Hockey League, among others, enjoy a similar exemption although in their cases, it is not an exemption specifically written into the law.
As described in Waste Book 2012 — compiled by the staff of U.S. Sen. Tom Coburn, a conservative Republican from Oklahoma:
In 2010, the registered NFL nonprofit alone received $184 million from its 32 member teams. It holds over $1 billion in assets. Together with its subsidiaries and teams – many of which are for-profit, taxed entities – the NFL generates an estimated $9 billion annually. Each of its teams are among the top 50 most expensive sports teams in the world, ranking alongside the world’s famous soccer teams. Almost half of professional football teams are valued at over $1 billion….
League commissioners and officials benefit from the nonprofit status of their organizations. Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone. Goodell’s salary will reportedly reach $20 million in 2019. Steve Bornstein, the executive vice president of media, made $12.2 million in 2010. Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010. The league paid five other officials a total of $19.2 million in just one year. In comparison, the next highest salary of a traditional nonprofit CEO is $3.4 million.
The NFL’s exemption stems from a 1966 law, passed at the time of the merger with the old American Football League, specifically allowing “professional football leagues” to enjoy 501(c)(6) status as tax-exempt trade organizations. Other leagues have piggy-backed on that legislation to claim that status themselves.
Major League Baseball also used to enjoy the same tax-exempt protection, but in 2007 it chose to surrender that status in part because as the salary information above illustrates, tax-exempt, non-profit status requires you to report the salaries of your top executives. MLB decided that protecting that information from the public was more important than escaping taxes.
- Business Insider, Why Does the National Football League Deserve Tax-Exempt Status?
- Nonprofit Quarterly, Sen. Coburn’s “Wastebook” Eyes NFL’s Nonprofit Status
- Nonprofit Quarterly, Why Isn’t the NFL Taxed?
(Hat Tip: Adrian Swindells.)
Heather M. Field (UC-Hastings), The Return-Reducing Ripple Effects of the 'Carried Interest' Tax Proposals, 13 Fla Tax Rev. 1 (2012):
The debate rages on about how to tax private equity fund managers and hedge fund managers who, as part of their compensation, receive rights to share in fund profits (“carried interests”). Commentators have paid relatively little attention, however, to the impact that proposals to change the tax treatment of fund managers will have on fund investors, other than to suggest that investors could suffer because managers may try to raise management fees or because overall fund profitability may decline. This Article argues that there is a much subtler reason why the carried interest tax proposals that are aimed at fund managers pose economic risks to fund investors. The reason is that a change to the tax treatment of carried interests changes the economic relationship that investors and managers created and consented to in their fund agreement, often after extensive negotiations. Specifically, the proposed increase in tax rates on carried interests, when coupled with common provisions found in fund agreements (namely, “clawback” provisions and “tax distribution” provisions), increases the risk that the economic burden of losses will be shifted from the managers to the investors without compensation; incentivizes managers to take more risk when managing fund assets; otherwise erodes the alignment of manager/investor incentives; and delays the return of investors’ capital contributions, thereby imposing a time-value-of-money cost on the investors.
This Article explains the indirect route through which the carried interest tax proposals create these return-reducing ripple effects. This Article also provides guidance to investors about how they can protect themselves from harm. More broadly, this Article illustrates how changes in law can alter the economic relationships to which private parties consented under carefully negotiated contracts, thereby creating unintended (and potentially adverse) consequences to parties who are not the desired targets of the law change.
Neil H. Buchanan (George Washington), Does Anyone Really Understand Medicare? Richard Kaplan Does, and You Can, Too (Jotwell) (reviewing Richard L. Kaplan (Illinois), Top Ten Myths of Medicare, 20 Elder L.J. 1 (2012)):
Kaplan, a noted tax scholar who teaches at the University of Illinois College of Law, is the founding advisor of the Elder Law Journal, and a noted expert in the field of elder law. Professor Kaplan draws on his wealth of knowledge about the subject of health care for the elderly in “Top Ten Myths of Medicare,” which was published this past summer. The article expertly walks the line between being technically accurate and broadly understandable. Neophytes, as well as those of us who think we know a lot about these issues, will come away from Professor Kaplan’s short article (fewer than 14,000 words) with both knowledge and insight that are sorely lacking in public discussions about this crucial program. ...
[R]eaders could not find a better article to explain Medicare’s basic workings, its budgetary and political realities, and its combination of shortcomings and truly significant benefits to American society. Even if the next U.S. President were not going to be chosen on the basis of his commitment to protecting Medicare, reading this article would be worth anyone’s time.
(Hat Tip: Leigh Osofsky.)
Ellen P. Aprill (Loyola-L.A.), The Impact of Agency Procedures and Judicial Review on Tax Reform, 65 Nat'l Tax J. 917 (Dec. 2012):
Should we see major tax reform, taxpayers will clamor for guidance from Treasury and the IRS regarding new provisions, as they did after passage of the Tax Reform Act of 1986. Indeed, the greater the degree of reform, the greater the need for guidance. Treasury and the IRS will feel compelled to issue guidance as quickly as possible. If so, they are unlikely to rely on regulations subject to time and resource consuming notice-and-comment by the public. Instead, they will look to guidance not subject to pre-issuance notice-and-comment - temporary regulations in particular, as was the case after the 1986 Act, along with revenue rulings, revenue procedures, and notices.
This administrative response to major tax reform in the 21st century, however, will face hurdles unknown at the time of the 1986 Act, hurdles that could constrain the ability of the IRS and Treasury to issue guidance that courts will uphold. One is heightened interest in the course of tax litigation regarding compliance by the IRS and Treasury with the Administrative Procedure Act, particularly its requirement for public notice-and-comment in connection with proposed regulations. A second relates to a set of provisions enacted in 1988 and 1996 limiting temporary and retroactive regulations. Moreover, the Tax Anti- Injunction Act and the Declaratory Judgment Act have the effect of postponing challenges to tax guidance until enforcement of administrative guidance has taken place.
All of these considerations could affect the effectiveness of guidance issued after tax reform. This article will examine them in reverse order before discussing actions Congress might take in connection with tax reform to mitigate possible untoward consequences.
The 8th Annual USD School of Law-Procopio International Tax Law Institute kicks off today. Reuven S. Avi-Yonah (Michigan) delivers the keynote address on International Tax Current State of Play. Other tax Prof speakers include:
- J. Richard Harvey (Villanova University), FATCA's Impact on Local Financial Institutions in the Americas
- Mark Hoose (University of San Diego), U.S. International Tax: Regulatory & Legislative Update
- Narelle MacKenzie (San Diego State University), Complex FBAR Questions and Other Foreign Asset Reporting Pitfalls
Tax lawyers, especially aging men losing their hair, should be forgiven for looking past the numerous other aspects of this latest little Trump tempest in a teapot to taxes. Surely Mr. Obama will ignore Mr. Trump’s offer, but if he didn’t, who is taxed? Could The Donald deduct the payment? Is there any taxable income to the President?
The tax law tries to get a piece of just about everything. Even so, I don’t see any income to Mr. Obama. If he did produce the documents he would not be selling them. He would merely be revealing them in exchange for a donation. You don’t have income when you do a walk-a-thon for charity, even if your miles end up causing someone else to pledge money.
But the charitable contribution that Mr. Trump is surely assuming he would get on the off-chance that Mr. Obama complies is another matter. Can Mr. Trump deduct the $5 million if he gives it to Mr. Obama’s chosen charity? Whether or not it seems fair, probably. ...As for Mr. Trump, even if (as seems likely) there’s ultimately no $5 million gift to charity, there’s another tax angle. I would bet that some expenses associated with this gambit end up on his tax return as business expenses. After all, there surely must be some respect in which even this latest from The Donald helps to enhance Mr. Trump’s illustrious—and hard to define—brand.
Nicolas Sauger (Sciences Po - CEE) & Elvire Guillaud (Université Paris I Panthéon-Sorbonne), Redistribution, Tax Policy, and the Vote - The 2012 French Presidential Election:
As tax policy is one of the most prominent issues for France at a time of great economic crisis and public debt, this article analyses how redistribution has been viewed and considered by voters. Assuming three main hypotheses about attitudes towards redistribution (egotropic perspective, sociotropic perspective, and voter incompetence), we propose a series of empirical tests of these various explanations from a cross-section survey fielded after the election. Despite a rather low salience of this issue during the campaign, we show that voters demonstrate quite coherent attitudes in this area. Preferences for redistribution are linked to individuals’ socioeconomic positions, to their beliefs about the effects of taxation, and lead to consistent vote decisions in 2012.
Wednesday, October 24, 2012
Kory Kroft (University of Toronto, Department of Economics) presents Optimal Unemployment Insurance in a Screening Model at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:
This paper studies the role of employer behavior in generating "negative duration dependence" -- the adverse effect of a longer unemployment spell -- by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker's unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions, and find that duration dependence is stronger when the labor market is tighter. We develop a theoretical framework that shows how the sign of this interaction effect can be used to discern among leading models of duration dependence based on employer screening, employer ranking, and human capital depreciation. Our results suggest that employer screening plays an important role in generating duration dependence; employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets
Forbes: The Tax Implications of Lance Armstrong's Banishment From Cycling, by Anthony J. Nitti (WithumSmith & Brown, Aspen, CO):
What will be the tax consequence if Armstrong repays race winnings and bonus amounts that were previously included in his taxable income as compensation?
The issue is not one of deductibility. Because the bonuses were originally earned in Armstrong’s trade or business of being a cyclist, any repaid compensation should be deductible as an ordinary and necessary business expense. Rather, the problem Armstrong faces is one of tax benefit.
If the doomsday predictions surrounding Armstrong’s future income stream are to be believed, it’s possible Armstrong may pay out more in bonus restitution during 2013 than he takes in as income. As a result, he may not be able to reap the full tax benefit of the deductions related to his repayments. And even in the event Armstrong is able to fully utilize his deductions in the current year, he may have been subject to a higher tax rate when the bonuses were originally earned — particularly during the pre-Bush tax cut years of 1999-2001 — than he is today. In either scenario, Armstrong would likely enjoy a larger tax benefit if he could travel back in time, exclude the bonus payments from income in the year they were received, and redetermine his prior years’ tax liability.
Fortunately for Armstrong, there is an Internal Revenue Code provision that contemplates such a dilemma. Section 1341 provides that if the facts are right, a taxpayer like Armstrong who is required to repay amounts previously included in income can compute their tax consequences on a “best case scenario” basis. ... Unfortunately for Armstrong, Section 1341 is rife with requirements that must be met before a taxpayer can take advantage of the retroactive reach of the provision. While Armstrong will satisfy the majority of these hurdles with ease, there is one that poses a potentially fatal challenge. ...
The income must have been originally included in the taxpayer’s income because the taxpayer believed he had an unrestricted right to the income. This requirement poses a significant threat to Armstrong’s ability to use Section 1341 to obtain the most advantageous result from any bonus repayments. Because Armstrong has been accused of knowingly violating race rules and the terms of his sponsorship contracts by doping throughout his seven Tour victories, it is difficult to envision the IRS concluding that Armstrong could have believed he had an unrestricted right to his bonus money. Stated in another way, because Armstrong knew his doping was against the rules, he couldn’t have believed he had an “unrestricted right” to the bonus payments. Rather, he would have accepted the bonus money knowing that a subsequent failed drug test — or as it happened, an investigation eight years after his last race — could result in his being forced to forfeit the bonuses.
Previous case law would support this theory, as the courts have made clear that Section 1341 does not apply to any “ill gotten gains,” such as embezzled income, smuggled goods, or illegal kickbacks. Armstrong’s PED use poses a similar problem in that his bonus payments appear to have been earned through “fraud or deceit,” precluding him from using Section 1341 to achieve the most beneficial tax result of any subsequent repayments.
Should Armstrong be unable to utilize Section 1341, he would be limited to merely deducting any bonus repayments in the year they are made, with the tax benefit of those deductions being dictated by the law — and Armstrong’s specific tax picture — in the year of repayment. Of course, given all that Armstrong has been through over the past two weeks, his future tax returns are likely the least of his worries.
(Hat Tip: Ann Murphy, Peter Prescott, Paul Rozek.)
Kaplan press release:
According to a Kaplan Bar Review survey of over 700 law school graduates from the class of 2012, the vast majority of tomorrow’s attorneys who collected their JDs give their law schools high marks. 37% of law school graduates gave their law school education an “A” grade, while 53% gave it a “B”. Only 9% gave their legal education a “C” grade; 1% scored it a “D”. No respondents gave their law school education an “F”. ...
It’s the toughest job market for new lawyers in nearly 20 years, but the survey finds optimism in the face of adversity. While 56% of recent law school graduates surveyed said they had not found a job in the legal field yet, 62% expressed confidence that they would find employment within the next three months.
- Business Inisder, They Don't Have Jobs But Recent Law Grads Still Think Law School Was Worth It
- JD Journal, Class of 2012 Law Grads Issue Law Schools Good Grades
- National Law Journal, Law School Retains Luster for Many Recent Graduates
- WSJ Law Blog, Despite Job Market, Recent Grads Heart Law School
This article argues that the so-called “Agency Theory” provides a coherent justification for limiting the federal income tax deduction to contributions to nonprofit providers of charity and withholding it from contributions to providers of charity whose owners or managers have a right to the profits from the firm. It does so by expanding the “Agency Theory” in a novel way — recognizing that when the government provides tax subsidies to the providers of charity, it ceases to be a neutral regulator of a market transaction, and becomes a participant in that transaction. As such, the government must examine its own agency costs to determine the most efficient structure of the transaction. In the case of the tax deduction for charitable contributions, the government’s agency-cost analysis counsels in favor of providing such subsidies only to nonprofit providers of charity.
This novel expansion of the Agency Theory has implications not only for whether the law should be changed to permit true for-profit firms to receive tax-deductible contributions (it should not), but also for shaping the law respecting various types of incentive-based compensation for managers of nonprofit organizations. This area of the law has been notoriously murky, with the IRS being especially hesitant to issue guidance on what kind of compensation structures are permitted and which are prohibited. The Agency Theory, as expanded in this article, provides some guidance as to how the government should proceed.
David S. Walker (Former Dean, Drake), A Consideration of an LLC for a 501(C)(3) Nonprofit Organization, 38 Wm. Mitchell L. Rev. 627 (2012):
With limited liability companies (LLCs) being formed at two to three times the frequency with which people form corporations, the LLC is indisputably the "entity of choice" for one forming a business today. Quite apart from the advantages in tax treatment that an LLC offers, the flexibility, adaptability, and informality the LLC offers as "a creature of contract" is of real value to those forming a business organization, especially one that is "small" or has relatively few people involved in its organization and management. In contrast, in the nonprofit sector it is the nonprofit corporation — with its less flexible structure and myriad formalities — that is the predominant form of organization.
The nonprofit sector is large and growing and includes two million or more various kinds of nonprofit organizations exempt from federal taxation under § 501(c) of the Internal Revenue Code. The largest percentage of registered and reporting nonprofits — 60%, practically speaking — are organized under § 501(c) (3) of the Code. These are "public charities" subject to a "nondistribution constraint" and to which both organizational and operational tests are applied to ensure that they serve "a public rather than a private interest." According to data reported by The Urban Institute, nearly half of these reported annual expenses of less than $100,000, and just short of another 30% reported expenses above $100,000 but less than $500,000. These are "small charities" for which organization as an LLC rather than as a corporation could be suitable and advantageous.
The IRS does not dictate the form in which to organize a nonprofit; and in consequence, the question arises whether a LLC would be possible and appropriate.
On behalf of LexisNexis and the Graduate Tax Series Board of Editors (Ellen Aprill (Loyola-L.A.), Elliott Manning (Miami), Philip Postlewaite (Northwestern) and David Richardson (Florida)), I am delighted to announce the publication of Federal Taxation of Property Transactions (2012), by Elliott Manning (Miami) and David Cameron (Northwestern).
The Graduate Tax Series is the first and only series of course materials designed for use in tax LL.M. programs. Like all books in the Series, Federal Taxation of Property Transactions was designed from the ground-up with the needs of graduate tax faculty and students in mind:
- More focus on Internal Revenue Code and regulations, less on case law
- Analysis of complex, practice-oriented problems of increasing sophistication
- Teacher’s manual with solutions to problems and other guidance
- On-line access to the comprehensive and current Code and regulations, designed to complement the book
Two significant complications affect the taxation of property transactions. The first complication is the special treatment of capital gains and losses. The second complication arises from the time value of money. This book aims to provide students with an appreciation for these two significant complexities through the descriptive materials and problems presented.
Chapter 1 introduces the concepts of basis and realization that are fundamental to the taxation of all transactions involving property. Chapter 2 follows with the effects of taxing gains and losses from capital assets differently from ordinary gains and losses. Chapter 3 deals with liabilities, which are essentially the opposite of assets or property, so that they can be considered negative property. Chapter 4 covers the rules applicable to the capitalization of costs incurred in the creation or acquisition of property and the recovery of those costs through a variety of expensing, amortization, and depreciation provisions. Chapter 5 covers non-recognition transactions (other than transfers involving partnerships, corporations or trusts) in which gain or loss is not recognized on disposition but is deferred through the mechanism of substituted basis. Chapter 6 deals with deferred compensation issues and other special problems arising in executive compensation arrangement using employer stock or stock options that reflect the lure of capital gain treatment. Chapter 7 covers the complexities that arise from the cliché that property is a bundle of rights, particularly when the ownership and long-term right to possession is divided under a lease or similar arrangement. Finally, Chapter 8 covers a number of special provisions that affect the deductibility of losses, including the wash sales rules, limitations on related party transactions, the at-risk and passive loss rules, and losses arising in certain leasing transactions.
Ten other books in the Series also are available for adoption:
- Civil Tax Procedure (2d ed. 2007) & 2011 Supp.), by David Richardson (Florida), Jerome Borison (Denver) & Steve Johnson (Florida State)
- Corporate Taxation (2012), by Charlotte Crane (Northwestern) & Linda Beale (Wayne State)
- Employee Benefits Law: Qualification and ERISA Requirements (2d ed. 2012), by Kathryn Kennedy (John Marshall) & Paul Shultz
- Estate and Gift Taxation (2011), by Robert Danforth (Washington & Lee) & Brant Hellwig (South Carolina)
- Federal Tax Accounting (2d ed. 2011), by Michael Lang (Chapman), Elliott Manning (Miami) & Mona Hymel (Arizona)
- Partnership Taxation (2d ed. 2008), by Richard Lipton (Baker & McKenzie, Chicago), Paul Carman (Chapman & Cutler, Chicago), Charles Fassler (Greenebaum, Doll & McDonald, Louisville) & Walter Schwidetzky (Baltimore)
- Regulation of Tax Practice (2010), by Linda Galler (Hofstra) & Michael Lang (Chapman)
- Tax Crimes (2008), by Steve Johnson (Florida State), Scott Schumacher (Washington), Larry Campagna (Adjunct Professor, Houston) & John Townsend (Adjunct Professor, Houston)
- Taxation and Business Planning for Real Estate Transactions (2012), by Bradley Borden (Brooklyn)
- United States International Taxation (2d ed. 2011), by Allison Christians (Wisconsin), Samuel Donaldson (Washington) & Philip Postlewaite (Northwestern)
- For more details about the Graduate Tax Series, see here.
- Click on these links to purchase a copy of Civil Tax Procedure, Corporate Taxation, Employee Benefits Law, Estate and Gift Taxation, Federal Tax Accounting, Federal Taxation of Property Transactions, Partnership Taxation, Regulation of Tax Practice, Tax Crimes, Taxation and Business Planning for Real Estate Transactions, and United States International Taxation. Faculty can request a complimentary review copy by emailing here (in the body of your email, note the title of the book you are requesting and your contact information).
- Email me if you would like more information about the Series or if you would like to submit a book proposal.
Forbes: 10 Reasons Reagan Could Cut The Top Tax Rate To 28%, But Romney Can't, by Janet Novack:
Twenty-six years ago today, President Ronald Reagan signed a sweeping bipartisan tax reform that chopped the top individual income tax rate from 50% to 28%; curbed special deductions, exclusions and breaks; gave most families a tax cut; left the richest 1% paying a slightly higher share of taxes; and didn’t add to the deficit.
In short, the Tax Reform Act of 1986 did much of what former Massachusetts Governor Mitt Romney says he will do as president. The Republican candidate’s tax plan would make the expiring Bush tax cuts permanent and then cut individual income tax rates a further 20%, bringing the top rate down from 35% to 28%. Romney says these cuts can be financed primarily by limiting itemized deductions or other tax breaks for the well off—and without decreasing the share of income taxes paid by the wealthy, raising taxes on those earning less than $200,000, or increasing the deficit. ... [I]t would be harder for Romney to get to a 28% top rate. Here are 10 reasons why.
- Reagan shifted the tax burden to business, Romney isn’t likely to
- Reagan raised the tax on capital gains; Romney won’t
- Romney wants to get rid of the estate tax
- Romney says he’ll preserve existing savings incentives
- …And add new ones
- The 1986 reform didn’t have to raise revenues
- The baseline has become a ticking bomb
- The income tax is no longer broad based
- The 1986 reform hit tax shelters and arbitrage hard
- Reagan didn’t have to fix a $1 trillion AMT hole
Above the Law, Biglaw’s Most Underrated Firms by Practice Area:
Above the Law, Biglaw’s Most Overrated Firms by Practice Area:
Above the Law, Biglaw’s Happiest Campers Are…:
Today, we look at whether there are notable differences regarding satisfaction based on practice area. If we slice our survey data by practice, we find that there certainly are. So after the jump, let’s look at how practice groups stack up against one another in terms of the happiness of its practitioners.
And the Happy Camper prize goes to…. Tax! An impressive 89% of tax attorneys tell us that they would make the same choice. Coming in last in this category, although with a still respectable 74% “Yes” rating, was Bankruptcy.
Mark Jackson, Sonja Pippin & Sonja Pippin (all of the University of Nevada, Reno), The Practical Tax Implications of Not Enforcing DOMA:
The Defense of Marriage Act (DOMA) defines marriage as a legal union between one man and one woman for federal issues. The tax implications of this law has been that same-sex couples who were legally married in their state are treated as single taxpayers for federal tax purposes. However, the Attorney General has announced that the Justice Department would no longer enforce Section 3 of DOMA because the President believes that this part of the act is unconstitutional. This implies that while DOMA is still law, the Justice Department will not take any measures to uphold it. We examine the tax implications for same-sex couples that apparently have the option to file as single individuals (according to DOMA) or married couples (since the law is not being enforced).
Michael Findley (University of Texas, Department of Government), Daniel Nielson (BYU, Department of Political Science) & Jason Sharman (Griffith University, Centre for Governance and Public Policy), Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies:
For criminals moving large sums of dirty money internationally, there is no better device than an untraceable shell company. This paper reports the results of an experiment soliciting offers for these prohibited anonymous shell corporations. Our research team impersonated a variety of low- and high-risk customers, including would-be money launderers, corrupt officials, and terrorist financiers when requesting the anonymous companies. Evidence is drawn from more than 7,400 email solicitations to more than 3,700 Corporate Service Providers that make and sell shell companies in 182 countries. The experiment allows us to test whether international rules are actually effective when they mandate that those selling shell companies must collect identity documents from their customers. Shell companies that cannot be traced back to their real owners are one of the most common means for laundering money, giving and receiving bribes, busting sanctions, evading taxes, and financing terrorism.
The results provide the most complete and robust test of the effectiveness of international rules banning untraceable, anonymous shell companies. Furthermore, because the exercise took the form of a randomized experiment, it also provides unique insight into what causes those who sell shell companies to either comply with or violate international rules requiring them to collect identity documents from customers. Just as the random assignment to control (placebo) and treatment groups in drug trials isolates the effect of a new drug, so too the random assignment of low-risk “placebo” emails and different high-risk “treatment” emails isolated the effects of different kinds of risk on the likelihood of (a) being offered a shell company, and (b) being required to provide proof of identity. Key findings include:
Tuesday, October 23, 2012
Law School Transparency: Ex-CSO Assistant Director from Thomas Jefferson Admits to Fraud, Alleges Deliberate Scheme by Law School:
In a sworn statement, Karen Grant, a former career services assistant director at Thomas Jefferson School of Law, admits that she fabricated graduate employment outcomes for the class of 2006. Grant alleges that her fraud was part of a deliberate scheme by the law school’s administration to inflate its employment statistics. She also claims that her direct supervisor, Laura Weseley, former Director of Career Services, instructed her on multiple occasions to improperly record graduate employment outcomes and justified the scheme because “everybody does it” thus “it is no big deal.” TJSL could face sanctions from the American Bar Association as severe as losing accreditation.
Update: Thomas Jefferson School of Law, Litigation Update
- 677 New Loudon Corp. v. New York Tax Appeals Tribunal, No. 157 (NY Oct. 23, 2012)
- ABA Journal
- Associated Press
From the dissent:
The ruling of the Tax Appeals Tribunal, which the majority upholds, makes a distinction between highbrow dance and lowbrow dance that is not to be found in the governing statute and raises significant constitutional problems. I therefore dissent. ...
Like the majority and the Tribunal, I find this particular form of dance unedifying -- indeed, I am stuffy enough to find it distasteful. Perhaps for similar reasons, I do not read Hustler magazine; I would rather read the New Yorker. I would be appalled, however, if the State were to exact from Hustler a tax that the New Yorker did not have to pay, on the ground that what appears in Hustler is insufficiently "cultural and artistic." That sort of discrimination on the basis of content would surely be unconstitutional. It is not clear to me why the discrimination that the majority approves in this case stands on any firmer constitutional footing.
As the dust from the financial crisis begins to settle, we learn that the lack of IRS enforcement of the mortgage-backed securities industry bears blame for the financial crisis. The financial crisis began when lenders started making bad loans on a large-scale basis in the late '90s and early '00s. Big banks purchased these bad loans, bundled them into trusts, and sold interests in the trusts to investors worldwide. The interests in the trusts are mortgage-backed securities. The investors (financial institutions, pension and retirement plans, insurance companies, state and local governments and individuals) did not know the loans were bad, and paid inflated prices for the mortgage-backed securities. Now that the practices of lenders and banks are coming to light, borrowers and investors are seeking to recover losses through lawsuits. And it is obvious that better practices, as required by tax law and enforced through IRS audit, would have prevented or mitigated those losses. ...
The IRS possesses a fearsome audit power that gives it access to records and information that the public and litigants are yet to obtain. It should have used that power more effectively before the financial crisis. With hundreds of billions of dollars of potential tax revenue at stake and an unprecedented federal deficit, the IRS can use its audit power now with respect to purported REMICs to collect tax revenue and penalties. Action it takes now should enhance the current federal budget, help stabilize the real estate market and uncover bad actions and bad actors in the mortgage-backed securities industry. Congress and Treasury have an obligation to help the IRS realize its grave responsibility and act with respect to this serious matter.
For nearly two decades the Tax Foundation has published an estimate of the combined state and local tax burden shouldered by the residents of each of the fifty states. For each state, we compute this measure of tax burden by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divide these totals by each state’s total income.
Interestingly, the ten states with the highest per capita tax burden voted for Barack Obama in the 2008 presidential election, and eight of the ten states with the lowest per capita tax burden voted for John McCain
The IRS yesterday issued IR-2012-79:
The IRS today reminded the nation’s 730,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2013. Also, preparers who have a competency test requirement should take the time now to schedule an appointment for the exam.
Anyone who is a paid federal tax return preparer must register with the IRS and have a PTIN, as must all Enrolled Agents. Additionally, some return preparers have new continuing education and competency test requirements.
Also yesterday, Atlanta CPA Jay Starkment sent this letter objecting to the IRS's sale of confidential information:
I have just submitted my 2013 Form W12 (Rev. September 2012) application to renew my PTIN (on paper, of course).
The instructions contain a misleading and erroneous Privacy Act Notice which reads: Generally, the information you provide on this form is confidential pursuant to the Privacy Act of 1974 and tax returns and return information are confidential pursuant to Code section 6103.
Meanwhile, the IRS website on August 4, 2012, began selling Form W12 information – apparently all 850,000 PTIN holders – including email addresses, phone numbers, professional credentials, and websites on a CD for just $35. IRS even offers an option for ordering a “customized listing” at additional cost. ...
I get enough spam and robocalls without having IRS contribute to such disturbances. I will urge my fellow tax preparers that the only way to omit their email address and phone number is to apply on paper.
Any original paper concerning federal taxation between 20-50 double spaced pages is welcome. Seminar papers and articles submitted (but not yet selected for publication) to law reviews, journals, or other competitions are eligible.
Winning authors receive $2000 (first place) or $1000 (second place) and a trip to the FBA’s Annual Tax Law Conference in Washington, D.C. The winning entries may be published in the Tax Section newsletter the Report or in The Federal Lawyer.
The deadline is January 7, 2013. Entries may be submitted by email to Sherwin Valerio.
Michael J. Graetz (Columbia) & Rachael Doud (J.D. 2012, Yale), Technological Innovation, International Competition, and the Challenges of International Income Taxation, 113 Colum. L. Rev. ___ (2013):
No one today doubts the fundamental importance of technological development to economic growth. And there is a consensus that research and development, which is crucial to ongoing technological advances, is underproduced in the absence of government support. Substantial government support of technological advances is ubiquitous. Technological innovation — the development of intellectual property (IP) — has become the key element in building national wealth.
Policymakers throughout the world have enacted tax benefits for both R&D and the gains from innovation. Designing cost-effective methods of supporting technological innovations has, however, become substantially more difficult as the world economy has become more interconnected. Labor and capital mobility, along with cross-border trade, complicate matters substantially: they allow the location where R&D is performed and the location where income is earned to change in response to the nature and level of government support. Adding to the mix, the flexibility of MNEs to shift across national borders the locations of production of their IP, the ownership of their IP, and the locations of the income from IP, along with their ability to establish new corporations resident in tax-favorable jurisdictions, renders designing cost-effective incentives even more difficult. Devising appropriate tax rules for the costs of developing IP and for IP income has become the central challenge for international income taxation.
Fashioning appropriate national policies to further technological innovation has become herculean for governments that support such advances primarily to increase the wellbeing of their own citizens and residents. It is hardly surprising, therefore, that the variety of public policies that have emerged from contests among nations to capture many or all of these benefits for its citizens and residents sometimes have beggar-thy-neighbor aspects and often are hard to fathom, much less defend. The difficulties in evaluating such public policies are compounded when, as here, any such effort is fraught with empirical uncertainties.
Tax policies have taken center stage in national policy efforts to stimulate and attract R&D and to capture a share of the income from technological innovations. Here we examine the three primary tax policies supporting innovation: (1) incentives for R&D, (2) so-called patent boxes, and (3) proposals for tax benefits for “advanced manufacturing.” We begin by describing the current smorgasbord of incentives and the economic evidence concerning their efficacy. We then briefly describe common techniques used by MNEs to lower the income taxes on income from IP. After that, we assess the soundness of the various incentives and offer our recommendations about how the United States might respond to the challenges it now faces in promoting technological innovation. Based on our extensive examination of the economic evidence, we conclude that, at most, only R&D incentives are justified.
We also summarize the current proposals for limiting opportunities for USMNEs to shift IP income to low or zero-tax jurisdictions. In that connection, we offer new proposals for change that emphasize imposing U.S. tax based on U.S. sales. These kinds of proposals merit serious consideration when the U.S. Congress takes up business reform.
The NYU International Tax Program and the University of Amsterdam Centre for Tax Law are hosting a conference today in New York City on U.S. International Taxation: Issues for the Years Ahead:
Panel #1: FATCA and Tax Treaty Discrimination
- Dennis Weber (ACTL; Loyens & Loeff) (moderator)
- Jesse Eggert (U.S. Treasury Department), Update on FATCA (commentary by Tom Prevost (Credit Suisse))
- Bruno da Silva (ACTL), Non-discrimination Under Tax Treaties; EU Developments, Relevant for U.S. Treaties (commentary by Dennis Weber)
Panel #2: Tax Policy and Tax Arbitrage
- David Rosenbloom (NYU; Caplin & Drysdale) (moderator)
- Michael Graetz (Columbia), International Tax Policy (commentary by Michiel van Kempen (Loyens & Loeff)
- David Rosenbloom, Tax Arbitrage (commentary by Peter Blessing (Shearman & Sterling)
Fred Thompson, Ken Beatty & Jon Thompson (Willamette University, Graduate School of Management), Ranking State Tax Systems: Progressivity, Adequacy, Efficiency:
A good tax system must raise sufficient revenue – and do so fairly, efficiently, transparently, and coherently. How do the tax systems of the states stack up in terms of fairness, adequacy, and neutrality? To answer this question, we assess each state’s relative performance in terms of progressivity, growth, and administrative and economic efficiency.
Albert Feuer (Law Offices of Albert Feuer, Forest Hills, NY), How the Supreme Court and the Department of Labor May Dispel Myths About ERISA’S Family Law Provisions and Protect the Benefit Entitlements that Arise Thereunder, 45 John Marshall L. Rev. 635 (2012):
This Article discusses the interaction between ERISA and family law (i.e., domestic relations law and estates law). The Supreme Court and the US Department of Labor (“DOL”) may improve the practice of both ERISA and family law by dispelling myths that they have reinforced.
First, the Court incorrectly asserted that the Retirement Equity Act of 1984 (“REACT”) “enhanced protection to the spouse and dependent children in the event of divorce or separation, and in the event of death the surviving spouse.” This assertion has encouraged plan administrators and other courts to find that domestic relations orders (“DROs”) govern an excessively broad class of ERISA pension and life insurance benefits. However, REACT, like ERISA, was a reaction to the inadequacies of state law and prior federal law pertaining to domestic relations and estate law. Thus, it similarly circumscribed the role of state law and increased substantive protections for ERISA participants and beneficiaries.
Second, the Court added a gloss to ERISA in non-family law contexts that emphasizes the importance of limiting the cost burdens imposed on employers by ERISA, which, if excessive, would discourage employers from establishing and maintaining employee benefit plans. This gloss has encouraged other courts to lose sight of the leitmotif of ERISA, protecting plan benefits of participants and beneficiaries. Thus, courts have wrongfully permitted individuals to use superseded (state family law or federal common law) ownership claims to obtain benefit entitlements from the recipients of those entitlements rather than the plans. Such holdings violate Supreme Court decisions extending over more than a hundred years, which consistently protected ERISA entitlements and other federal entitlements, before and after their distribution.
The DOL has created issues by both its actions and inactions. First, the DOL incorrectly asserted that the ERISA benefit claim provisions should not govern plan reviews of DRO for compliance with the pertinent ERISA requirements, the qualified domestic relations order (“QDRO”) requirements, but has failed to present an alternative set of review provisions for plans to follow. This has created unnecessary issues concerning the roles of plan administrators, participants, their families, and courts in such reviews Second, the DOL has provided only nonbinding, informal guidance to the general public rather than extensive DOL regulations with respect the QDRO requirements. This has created unnecessary issues for persons seeking to prepare a DRO that complies with the pertinent ERISA requirements, and for plan administrators responding to such requests.
Monday, October 22, 2012
This Article explores the limits of tax law and economics. The inquiry is comparative. The Article argues that outside of the tax context two pivotal insights account for the general success of law and economics in explaining and possibly shaping the law. First, accepting just a few fairly simple and plausible assumptions yields clear, intuitive, powerful and widely applicable policy prescriptions. Second, the normative strand of law and economics benefits greatly from a substantial similarity between several theoretically optimal legal regimes and the corresponding actual systems of rules and sanctions. Neither insight applies in the tax setting because the tax optimization problem is uniquely complex. The optimal tax system must account for the impossibility of deterring socially undesirable behavior, provide for redistribution, and accomplish all of that on the basis of assumptions that are laden with deeply contested value judgments, pervasive empirical uncertainty, or both. Given these challenges, it is hardly surprising that the welfarist theory has a much weaker connection to the content of our tax laws and their enforcement than it does to the content and enforcement of many other legal regimes. This weakness has a profound effect on the debates about the fundamental features of our tax system. It affects many familiar arguments about anti-avoidance rules and sanctions. And it extends to evaluating outright tax evasion. In sum, every aspect of tax policy is affected by the limits of tax law and economics. At the same time, accepting these limits shifts focus to several broad research agendas where tax law and economics will continue to yield invaluable contributions to the project of improving our tax system.
The Atlantic: The Single Word That Could Make or Break Obamacare, by Naomi Schoenbaum (George Washington):
Obamacare has been one of the yardsticks of Obama's term in office and one of the touchstones of the 2012 election. Last night's presidential debate was no exception, with health care reform mentioned at least half a dozen times. But an important piece of the discussion has been missing: is the health care law a tax or a penalty?
It turns out how Americans perceive the health care mandate could affect whether they end up purchasing health insurance at all, and therefore whether the law achieves what it was meant to do. During the next four years, the way the president chooses to frame the law will have a large impact on its policy future.
The health care law's individual mandate requires that Americans purchase health care insurance. The financial consequences of refusing will be the same whether we say that the mandate requires you to pay a tax or pay a penalty. The purely rational actor would not quibble over terminology, then.
Or so we would think, if it weren't for an entire field of research known as behavioral economics, which shows that our decisions are about more than just dollars and cents. In particular, the way we frame the options we have influences which option we choose. For instance, people will tend to spend money more if they think the money they are receiving is a $1,000 "bonus" payment rather than a thousand dollar "rebate" payment. The dollar amount might be the same, but the framing of it is different.
In other words, what we call things matters. And labels matter when it comes to the health care law as well. Much discussion was devoted to the political costs of framing the mandate a tax as opposed to a penalty, but much less discussion was given to the policy costs of this label. (Solicitor General Donald Verrilli raised this issue briefly during oral arguments before the Supreme Court.) With the mandate not due to go into effect until 2014, it is too early for us to have direct empirical data about how framing will matter for the health care law in particular, except the data showing that Americans still have "confusion" about what the law is. But there is extensive experience and research suggesting that framing it as a tax might reduce the number of people who comply.
J. Richard (Dick) Harvey (Villanova) delivers the keynote address today on FATCA Background at the Fall 2012 Symposium hosted by the George Mason Journal of International Commercial Law on The Foreign Account Tax Compliance Act: Privacy and Enforcement Challenges & the Implications For Your Client’s Financial Interests.
The symposium will tackle the international and diplomatic concerns raised by FATCA, as well as specific implementation and compliance challenges faced by affected industries. The two panels feature representatives from the United States and German governments, as well as FATCA experts from private practice and academia.
Frank Fagan (Erasmus University Rotterdam, School of Law) & Michael G. Faure (University of Maastricht, Faculty of Law), The Role of Lawmakers, Lobbyists, and Interest Groups in the Normative Evaluation of Timing Rules, 160 U. Pa. L. Rev. PENNumbra 61 (2011):
Professor Rebecca Kysar has written an interesting and informative article on the disadvantages of temporary legislation, or legislation that expires by default, when compared with lasting legislation, or legislation that does not expire by default. [Lasting Legislation, 159 U. Pa. L. Rev. 1007 (2011).] The article aspires to move the underlying ideological preferences of lawmakers toward lasting legislation, and represents a needed counterweight to recent scholarship that has advocated temporary legislation, or has at least viewed it less critically. Professor Kysar advocates a policy presumption against temporary legislation and in favor of lasting legislation.
Professor Kysar’s appeal to lawmakers is most forceful with respect to tax policy. She notes that internal congressional rules are easily outmaneuvered, and that budgetary rules therefore do not meaningfully constrain lawmakers. Thus, any long-term budgetary advantage of confining tax cuts and expenditures within the budget window is illusory. Moreover, Professor Kysar notes that temporary tax legislation often produces post-expiration effects that are socially costly, and that temporary tax legislation may lead to higher levels of rent-seeking. All of this leads her toward a conclusion that benevolent legislators interested in minimizing social cost should prefer lasting tax legislation to temporary tax legislation.
She likewise concludes that the social cost of temporary legislation in policy domains other than taxation is likely to be greater than the social cost of lasting legislation, and that legislators should therefore presume to legislate permanently across the board.
The analysis that leads to this conclusion details how the law and economics literature on temporary legislation has understated its costs and overstated its benefits. Lasting Legislation is heavy on criticism of temporary legislation, but perhaps given the scholarly optimism in favor of temporary legislation, this criticism may be partly characterized as pushback. Elsewhere, Fagan has shared some of Professor Kysar’s views on temporary tax legislation, and our Response accordingly focuses on her critique of the “information-producing” and “flexibility” functions of temporary legislation found in Parts III and IV of Lasting Legislation.
From Carlton Smith (Cardozo):
This is to let everyone know of a pending challenge in the Tax Court to the President's power to remove a Tax Court judge.
In Freytag, 501 U.S. 868 (1991), the Supreme Court, in the course of solving an Appointments Clause conundrum regarding Special Trial Judges, held that the Tax Court held part of "the judicial power of the United States". In his concurrence, Justice Scalia noted the inconsistency of the ruling in that, by statute, the President could still remove (for cause) Tax Court judges under § 7443(f). He pointed out the oddity of this result, since, in Bowsher v. Synar, 478 U.S. 714 (1986), the Court had held that a similar interbranch removal power was unconstitutional under the separation of powers doctrine.
In 2010, disappointed Kanter petitioners in the Ballard case, 544 U.S. 40 (2005), called for President Obama to investigate Judge Dawson for possible removal. When that happened, I not only spoke up for Judge Dawson on the record in Tax Notes Today (2010 TNT 44-1), but I told myself that I would try to do something in the appropriate case to try to end any President's power to remove a Tax Court judge. The removal power is a vestige of the 1924 establishment of the Board of Tax Appeals in the Executive Branch. In 1924, Board of Tax Appeals rulings did not bind the parties. In 1926, Congress made Board of Tax Appeals rulings binding and directly subject to judicial review in the Circuit Courts. In 1969, Congress moved the Board's successor, the Tax Court, out of the Executive Branch altogether.
Villanova Professor Tuan Samahon -- a separation of powers scholar -- has argued that Justice Scalia was right in Freytag, and he believes that no Supreme Court case law since has eliminated Justice Scalia's concern. Earlier this year, Professor Samahom published a law review article arguing that the President's removal power of Tax Court judges is unconstitutional. Blackmun (and Scalia) at the Bat: The Court's Separation-of-Powers Strike Out in Freytag, 12 Nev. L.J. 691 (Summer 2012) (Note that Article I Court of Federal Claims judges are not removable by the President, but by the Article III judges of the Federal Circuit -- which is a constitutionally permissible removal power if the Court of Federal Claims also holds part of the judicial power, as the Supreme Court has held that its predecessor, the Court of Claims, did.)
Last week, Janet Spragens Award Winner Frank Agostino and I (with the assistance of Prof. Samahon and and John Miscione of Frank's office) timely filed a motion to vacate a recent Collection Due Process Tax Court decision in a case named Kuretski that Frank had tried pro bono. In the accompanying opinion at T.C. Memo. 2012-262 (Sept. 11, 2012) (which we also timely moved to reconsider), Judge Wherry had upheld an Appeals Team Manager's overruling of a Settlement Officer who had agreed to remove all penalties and enter into an installment agreement. Instead, the Team Manager forced the issuance of a notice of determination upholding all penalties and upholding a notice of intention to levy. While we recognize the (appropriately) uphill battle it is to get a Tax Court judge to reconsider his opinion, we have included in the motion to vacate the additional ground that Judge Wherry was subject to an improper interbranch removal power when he made his original ruling, and so was potentially improperly influenced by the threat of Presidential removal. Bowsher v. Synar itself says that a removal power for cause with wording similar to § 7443(f) is unconstitutional when held by another branch because of the power to misuse it or to merely threaten its use.
Judge Wherry has ordered the IRS to respond to the motions by Nov. 26.
Martin A. Sullivan writes about $3.4 trillion of deficit reduction that will be needed over the next 10 years to put the federal budget on a sustainable course.
All Tax Analysts content is available through the LexisNexis® services.
New York Times, Room for Debate: Shrink Inequality to Grow the Economy?:
The International Monetary Fund and others say that income inequality represses economic growth, and is not simply a byproduct of growth. To expand the economy, should the United States enact policies to address inequality? And if so, what initiatives would promote growth and reduce the income gap?
- Tehama Lopez Bunyasi (Ohio University), When Too Many People Are in Prison
- Sheldon Danziger (University of Michigan), All Growth Is Not Created Equal
- Michael Dawson (University of Chicago), Working Harder, and Earning Less
- Diana Furchtgott-Roth (Manhattan Institute), A Big Gap Means There Is Room to Move Up
- Jacob Hacker & Nathaniel Loewentheil (both of Yale University), All Will Benefit If More Are Secure
- Tanya Katerí Hernández (Fordham Law School), We Need Latin American Style Affirmative Action
- Douglas Holtz-Eakin (American Action Forum), Train Americans to Make Their Own Safety Nets
- Timothy Noah (The New Republic), Revive Labor’s Power
- Joseph Stiglitz (Columbia University), Political Causes, Political Solutions
- Scott Winship (Brookings Institution), Inequality Is Not What We Imagine
The centerpiece of Mitt Romney’s tax plan is an across-the-board 20% cut in marginal tax rates. This cut, along with a few other tax changes Mr. Romney has endorsed – such as repeal of the estate tax and the alternative minimum tax – would reduce federal tax revenue from personal income and payroll taxes by an estimated $3.6 trillion to $3.8 trillion over 10 years.
The total is closer to $5 trillion when Mr. Romney’s proposed cut in the corporate income tax rate to 25% is included. About two-thirds of this amount would go to taxpayers making $200,000 a year or more – about 5% of all taxpayers.
Extending the Bush tax cuts for high-income earners, as Mr. Romney proposes, adds another trillion in lost revenue and increases the share of the benefits going to the top 5%. Even if the cost of the Romney tax cuts for the top 5% is covered by base-broadening measures, as Mr. Romney promises -- but as President Obama and many others assert is mathematically impossible -- does it make sense to devote trillions of dollars to lowering income taxes for the top 5%? Is this an effective way to create jobs?
Mr. Romney appears to think so. His plan rests on the assertion that lower taxes for high-income taxpayers will increase economic activity and employment -- that lower taxes for job creators create jobs and will do so quickly. This assertion, while superficially convincing and ideologically compelling, is not supported by the evidence.
If tax cuts for high-income earners generate substantial real economic activity and job creation, then we should expect to see two things in the data. First, employment growth should be stronger in the years after tax cuts for these earners. Second, parts of the country with a larger share of high-income earners should experience stronger employment growth after national tax cuts for these taxpayers, because the places where they live receive a larger share of the national tax cuts.
What do we actually see after combing through a half-century of economic data? Neither of these predictions is borne out. ...
The table below highlights three of these tax changes -- the Reagan tax cut of 1982, the Clinton tax increase of 1993 and the Bush tax cut of 2003 -- and subsequent employment growth. Strong employment growth followed the Reagan cut, but the employment growth following the Clinton tax increase exceeded the employment growth following the Bush tax cut, which was comparable in size to the Reagan cut.
Job growth at the state level after national tax cuts for high-income earners confirms the absence of a strong link between such cuts and the pace of job creation in the next two years. ...
Cross-country comparisons also do not show a close link between top marginal rates and growth. ...
[I]f the priority is to create a substantial number of jobs over the next presidential term, evidence from the last half-century strongly suggests that tax cuts for the top 5% won’t work. Tax cuts for working families, tax cuts directly aimed at expanded hiring or increases in infrastructure investment would have much more bang for the buck and would cost much less in terms of forgone revenue and deficit reduction in the future.
With elevated unemployment, weakness in Europe and slowing growth in emerging economies, fiscal measures that actually increase economic activity and employment in the near term are required. Our research shows that tax cuts for the rich do not meet this standard.
The Tax Policy Center hosts a program today on Red Ink and Bad Blood: What Do Federal Budget Politics Mean for the Next President and You? (webcast here):
Fiscal cliff. Taxmaggedon. Debt default. The Great Recession. Political gridlock. Sequestration. The making -- or unmaking -- of the federal budget is at play with each of these. Making sense of it all is the focus of David Wessel’s new book, Red Ink: Inside the High Stakes Politics of the Federal Budget.
- David Wessel (Economics Editor, The Wall Street Journal)
- Alice Rivlin (Co-chair, Bipartisan Policy Center’s Debt Reduction Task Force)
- Joseph Minarik (Senior Vice-President, Committee for Economic Development)
- Eugene Steuerle (Co-founder, Tax Policy Center)
- Tax Papers at Central States Law Schools Association Annual Conference
- Posner, Becker on Luck, Wealth, and Taxation
- 2011-2012 Law Review Diversity Report
- WSJ: Romney's Tax Deduction Cap: Good Tax Policy, Better Politics
- Advice to the Wealthy: SELL!
- Top 5 Tax Paper Downloads
- The Inequality of Federal Tax Incentives for Conservation Easement Donations
- The Tax Benefits and Revenue Costs of Tax Deferral
Sunday, October 21, 2012
That’s the message from some financial advisers, who are telling wealthy clients that the remainder of 2012 amounts to a last-chance sale on federal tax rates. Taxes are set to rise in January in the U.S., pushing the top rate on dividends to 43.4% from 15% and the top rate on capital gains to 23.8% from 15%. ...
Advisers at companies including Wells Fargo, Bank of America, Bank of New York, JPMorgan Chase, Northern Trust and U.S. Bancorp are discussing with their wealthy clients such strategies as selling appreciated securities, relocating assets to tax-deferred retirement accounts, converting IRAs, exercising stock options and making large gifts to heirs this year.
There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new papr debuting on the list at #5:
1. [367 Downloads] Paul Ryan's Roadmap to Inequality, by Edward D. Kleinbard (USC)
2. [248 Downloads] Time for Permanent Estate Tax Reform, by Jeffrey A. Cooper (Quinnipiac)
3. [199 Downloads] Wall Street Rules Applied to REMIC Classification, by Bradley T. Borden (Brooklyn) & David J. Reiss (Brooklyn)
5. [156 Downloads] Incentives for Tax Planning and Avoidance: Evidence from the Field, by John R. Graham (Duke University, Fuqua School of Business), Michelle Hanlon (MIT, Sloan School of Management), Terry J. Shevlin (UC-Irvine) & Nemit Shroff (MIT, Sloan School of Management)
Elliott G. Wolf (J.D. 2013, Stanford), Note, Simultaneously Waste and Wasted Opportunity: The Inequality of Federal Tax Incentives for Conservation Easement Donations, 31 Stan. Envtl. L.J. 315 (2012):
The Internal Revenue Code and regulations provide myriad federal tax benefits to the donors of conservation easements to non-profit organizations. The net present value (NPV) of these benefits increases with the dollar-value of the easement, calculated by the IRS as “the difference between the fair market value of the entire contiguous parcel of property before and after the granting of the restriction.” Because the tax benefits are all deductions or exemptions, their NPV also increases with the income and assets of the donor.
The government “pays” this price via foregone revenue in order to realize notional “conservation value” -- the value of any ecosystem services or intangible benefits that accrue to society due to the preservation of the property. The tax code, however, decouples an easement's conservation value from the foregone revenue in two ways: (1) an easement's conservation value differs from the IRS's development-based valuation; and (2) the IRS's development-based valuation differs from the NPV of the tax benefits to the donor.
Many commentators focus on the first decoupling, proposing a variety of valuation models that quantify the value of ecosystem services or other environmental benefits afforded by conservation easements. Focusing instead on the second decoupling, this Note quantifies the dramatic increase in the value of the tax benefits with increases in the donor's income and assets, factors which are irrelevant to conservation goals. This Note argues that the current scheme fails to maximize the marginal conservation accomplished per dollar of foregone tax revenue because of ample empirical evidence that the wealthy do not value conservation less than others, and thus do not require a higher inducement to donate conservation easements. The Internal Revenue Code should instead pay the same amount for any two easements of the same value. The most obvious way to achieve this is to replace the multiple tax deductions and exemptions with one refundable tax credit for a fixed percentage of the value of the easement. Donors of conservation easements would thus receive a “production tax credit,” a tool widely used in other conservation and environmental incentive scheme.
This analysis begins in Part II with a brief overview of federal tax benefits afforded to the donors of conservation easements. Part III models the NPV of the tax benefits by levels of donor income and wealth. Part IV uses studies of contingent valuations of non-use environmental goods to argue that the current system is inconsistent with maximizing the marginal conservation achieved per tax dollar foregone. Part V outlines specific changes to §§ 170 and 2031 that would equalize incentives across the income and wealth spectrums. Part VI concludes with a discussion of the implications of equalizing incentives for responses to climate change.
Peter J. Brady (Investment Company Institute), The Tax Benefits and Revenue Costs of Tax Deferral:
Key Findings: A deferral of tax is not equivalent to a tax exclusion or a tax deduction. Exclusions and deductions reduce taxes paid in the year taken, but do not affect taxes in any future year. Tax deferrals — such as the deferral of tax on compensation contributed to an employer-provided retirement plan — reduce taxes paid in the year of deferral, but increase taxes paid in the year the income is recognized.
The benefits an individual receives from deferring tax on compensation (and, equivalently, the revenue foregone by the government) cannot be calculated by simply multiplying the amount of compensation deferred by the individual’s marginal tax rate. The simple calculations used to quantify the tax benefits and revenue costs of tax exclusions and tax deductions do not apply to tax deferrals.
As a rough approximation, the benefits of tax deferral are equivalent to facing a zero rate of tax on investment income. The benefits of facing a zero rate on investment income will depend on how much investment income is generated by the deferral and how much tax revenue would otherwise have been generated by that income. Thus, factors that influence the benefits of tax deferral (and, equivalently, the costs to the government in terms of foregone tax revenue) include the rate of return earned on investments, the length of deferral, and — to the extent that investments produce capital gains — the frequency with which capital gains are realized.
The relationship between the benefits of tax deferral and an individual’s marginal tax rate on ordinary income is complex. The benefits of tax deferral (and the revenue costs) do not increase proportionately with the marginal tax rate that applies to compensation. In fact, the benefits can decline as marginal tax rates increase. Further, the magnitude of the tax benefits depends on tax rates other than the marginal tax rate on ordinary income at the time a retirement plan contribution is made. The magnitude also is affected by the marginal tax rate that would apply to investment income generated during the deferral period, and the marginal tax rate on ordinary income at the time assets are distributed.
For a range of investment portfolios and distribution methods, there is little difference in the tax benefits per dollar of deferred compensation among individuals in the top four federal income tax brackets (marginal tax rates of 25%, 28%, 33%, and 35%). As this paper will demonstrate, controlling for age and assuming no change in marginal tax rates over time, the difference in the tax benefits (and the revenue costs) of deferral for an individual in the 25% federal income tax bracket and for an individual in the 35% income tax bracket is typically 3 cents or less per dollar of deferred compensation.
An individual’s age typically will be more important than an individual’s marginal tax rate in determining the tax benefits of deferral. For example, in realistic simulations for a variety of investments, the tax benefits per dollar of deferred compensation are greater for a 45-year-old in the 15 percent federal income tax bracket than for a 60-year-old in the 35% federal income tax bracket.
Saturday, October 20, 2012
- Samuel Brunson (Loyola–Chicago), Form-Over-Substance, the IRS, and Commodity Mutual Funds
- Danshera Cords (Albany), Collaborative Spaces: What Tax Can Learn About Developing Regulations
- Brian Frye (Kentucky), Solving Charity Failures
- Debbie Kearns (Albany), For Treasury Charity Starts at Home: Treasury’s New Interpretation of the Fiduciary Income Tax Charitable Deductions
Liberals and conservatives tend to disagree about the role of luck in financial success, the former thinking it plays a very big role, the latter thinking it plays a small role: that instead financial success is largely attributable to talent and hard work. Taken to its extreme, the second position is the one that was espoused by the radical libertarian Ayn Rand.
The economic significance of the disagreement has mainly to do with taxation. Taxing success that is attributable to pure luck does not have disincentive effects, and so is a cheap away of financing government. Taxing success that is attributable to hard work may induce a substitution toward leisure, reducing money incomes, and taxing financial success attributable to talent may induce some talented people to substitute activities that generate substantial nonpecuniary income (apart from leisure), which may not be socially as productive as business. Beyond the economic concern, however, is an ethical one that is particularly acute in a society, such as ours has become, in which there is great inequality of income and wealth.
I don’t find any merit to the celebration of the tycoon by Ayn Rand and her followers. I think that ultimately everything is attributable to luck, good or bad. ... In short, I do not believe in free will. ...
If this is right, a brilliant wealthy person like Bill Gates is not “entitled” to his wealth in some moral, Ayn Randian sense. But it would be ridiculous to infer from this that the government should take his wealth away from him and scatter it among the poor, on the theory that the only difference between Gates and a poor person is that one is lucky and the other is not. But the reason that it would be ridiculous is that it would have terrible incentive effects, not that it would violate some deep sense of human freedom.
The effects of heavy taxation of wealth may depend in part on the kind of luck that generated the wealth that is now to be taken away and given to someone else. There may be different effects from taxing wealth that results primarily from personal qualities, such as IQ and ambition, and taxing wealth that is unrelated to such qualities — inherited wealth, for example, or wealth obtained by winning a lottery, or, a subtler and more important example, wealth resulting from financial risk taking unguided by real insight (or, it hardly needs noting, from antisocial activities such as crime). Heavy taxation of earned wealth is likely to induce many able and energetic people to increase their leisure activities relative to productive work — but to induce other such people to increase their work effort relative to leisure in order to preserve or augment their wealth in the face of the heavy taxation. Heavy taxation of unearned wealth is more likely to have the second than the first effect, because, lacking talent, such people will have to work hard (to work, period — maybe they were living off their inherited or otherwise bestowed wealth and not working at all) in order to maintain a decent standard of living, lacking as they do the talent of the wealthy people who earned their wealth rather than having it fall into their laps. ...
So there is in my view nothing “unfair” about heavy taxation of wealth, but there are practical objections. One is that the wealthy have sufficient political influence to pepper any new tax law with loopholes that will enable wealthy persons to minimize their tax liability. Another is that the additional tax money raised will be squandered on unproductive governmental activities, including handouts that reduce recipients’ work incentives. This objection would disappear, however, if the proceeds of additional taxes on the wealthy were earmarked for reducing the federal deficit....
Federal tax law is riddled with deductions and exemptions that are loopholes in the sense that they have no social product. An example is the mortgage-interest deduction, which incentivizes people to own rather than rent their homes — and why encourage home ownership? Another example is the exemption of employer-paid employee health benefits from federal income tax, which encourages excessive expenditures on health care. Some taxes, such as the corporate income tax, cause distortions, as does treating dividends and interest differently by allowing interest but not dividends to be deductible by corporations. Reform of the tax code would be preferable to raising taxes on anyone, but the major loopholes and deductions and exemptions are sacred cows, leaving changes in tax rates and spending levels as the only feasible methods of achieving fiscal discipline.
I do not believe that differences in value judgments are the main source of the disagreement among economists over how much to tax individual with different levels of wealth and income. These value judgments include beliefs about how much of high incomes are due to good luck, whether high-income individuals “deserve” their incomes, or whether there is “free will”. Such considerations, however, may be more important among the general public since, for example, they may not want to tax heavily a Steve Jobs or Brad Pitt because they admire these (and some other) successful individuals and their accomplishments.
For economists, differences in views on what the tax structure should be and on other policies mainly come down to different beliefs about how taxes and other policies affect behavior. For example, economists who support much greater taxes on higher income individuals believe that higher taxes will not much affect how hard these individuals work, their propensity to start businesses, or other kinds of behavior. On the other hand, other economists, including me, believe that high marginal tax rates not only discourage effort and other choices by those being taxed, but also affect the form in which they take their incomes. These adjustments include increases in non-taxable perquisites, such as greater use of a company’s plane, hiring expensive accountants and lawyers to search for loopholes in the tax code, converting income into capital gains when these gains are taxed at lower rates, and investing abroad if the income earned there is taxed at lower rates.
Unfortunately, the empirical evidence accumulated so far does not conclusively support either approach. That is, it is unclear how large is the effect of higher income taxes on the behavior of richer individuals. The relevant evidence is growing, but so far different perceptions of these effects prevent the resolution of the sharp differences in opinions among even a-political economists on the damage done by high marginal income tax rates.
The important point for our discussion is that beliefs about the importance of good or bad luck in determining high or low incomes is not usually the decisive source of differences in attitudes about tax rates and other public policies. For example, one may correctly believe that luck has a major role in determining the genes, education, and other opportunities of highly successful individuals, and yet believe as well that high tax rates on their income and wealth would induce major changes in their behavior. Conversely, one can believe that luck is unimportant in determining success, and at the same time believe that high tax rates on rich individuals would little affect their behavior. And, of course, various other combinations are possible about the relation between the role of luck in achievement and induced responses to taxes and other policies. ...
My conclusion is that even though luck plays a huge role in determining genes, family, education, and other determinants of success or failure, this does not imply very much about the desirable tax rates and other public policies.
New York Law School Law Review, 2011-2012 Law Review Diversity Report:
The New York Law School Law Review (NYLS) has issued the 2011-2012 Law Review Diversity Report, its second annual report examining female and minority student representation among law review membership and leadership nationwide. The report, based on research conducted in collaboration with Ms. JD, includes 2011–2012 results for the flagship law review or journal at 85 ABA-approved law schools. ...
The report includes information Ms. JD compiled from 35 law reviews at law schools ranked in the Top 50 by U.S. News & World Report, as well as information NYLS compiled from law reviews at 50 additional ABA-approved law schools that are ranked outside the Top 50, and a combined sample of all 85 responding law reviews. ...
Faculty diversity has a positive relationship to diversity of law review membership. The higher the percentage of full-time female faculty at a law school, the higher the percentage of female membership on its law review.
Women and minority students lag behind men in achieving the editor in chief (EIC) position. Overall, women held 43% of leadership positions on average, but just 31% of the EIC positions. These findings were similar among law reviews both at Top 50 law schools (32%) and at schools outside of the Top 50 (29%). Among the Top 50 law reviews, 15% of EICs identified as a person of color, compared to 4% of EICs at law reviews outside of the Top 50.
The low percentage of women EICs may foreshadow low percentages of women in leadership in the legal profession. When viewed in the context of female achievement in the legal profession (chart below), the results raise the question of whether the low percentage of female EICs (31%) is a precursor to the low percentages of women on state and federal benches, in law firm partnerships, and as general counsel of Fortune 500 companies.
- Above the Law, The Lovely Ladies of Law Review: Where Are The EICs?
- Ms. JD, Women on Law Review: A Gender Diversity Report
- National Law Journal, Women Lag in Top Law Review Jobs
Wall Stret Journal editorial: Romney's Tax Deduction Cap: An Idea to Finance Reform and Avoid Political Trench Warfare:
The Obama campaign and the press corps keep demanding that Mitt Romney specify which tax deductions he'd eliminate, but the Republican has already proposed more tax-reform specificity than any candidate in memory. To wit, he's proposed a dollar limit on deductions for each tax filer....
In an October 1 interview with a Denver TV station, Mr. Romney mentioned a cap of $17,000 and said "higher income people might have a lower number." His campaign stresses that these dollar amounts are "just illustrative" and that there are other ways to reduce deductions that in any case would have to be negotiated with Congress.
But details aside, the tax cap is a big idea, and potentially a very good one. The proposal makes economic sense to the extent that it helps to pay for lower marginal tax rates. ...
The idea may be even better politically. The historic challenge for tax reformers is defeating the most powerful lobbies in Washington that exist to preserve their special tax privileges. ... This is one reason President Obama wants Mr. Romney to be more specific: The minute he proposed to limit the mortgage-interest deduction, the housing lobby would do the Obama campaign's bidding by running ads against Mr. Romney's plan. Mr. Romney is right not to fall for this sucker play. By limiting the amount of deductions that any individual tax filer can take, Mr. Romney is avoiding this lobby-by-lobby warfare. ...
The political left should have a hard time opposing this because reducing deductions would hit high-income taxpayers the hardest. Out of the 140 million tax returns in 2009, the last year such data are available, only 45 million itemized their deductions. The non-itemizers, who take the standard deduction ($11,900 for joint filers in 2012), would be held harmless by the Romney cap. Most of these are lower- or middle-income earners. The nearby table shows that the dollar value of deductions rises with incomes. ...
Mr. Obama has also called for limiting tax deductions for high-income filers. His budgets have endorsed allowing them to take writeoffs at a rate of 28% instead of 35%. The big difference is that Mr. Romney wants to dedicate the revenue gain from capping deductions to cutting tax rates. Mr. Obama wants to use the money to pay for more spending.
The larger point is that Mr. Romney is serious about reform and has put on the table a serious idea for how to finance and achieve it. That's far more than Mr. Obama has proposed about anything in a second term.
- Center for American Progress, The Romney Tax Plan Still Doesn’t Add Up
- Tax Policy Center, How Much Money Can You Raise by Capping Deductions?
- Tax Foundation, Analysis of Romney's Tax Plan With and Without a $25,000 Cap on Itemized Deductions
- Tax Foundation, The Impact of Romney's Proposed $17,000 Deduction Cap
- Tax Vox Blog, How Much Revenue Would a Cap on Itemized Deductions Raise?
- Tax Vox Blog, The Real Lesson About Capping Itemized Deductions
- Tax Vox Blog, Understanding TPC’s Analysis of Limiting Deductions
Friday, October 19, 2012
The National Tax Journal has published Vol. 65, No. 3 (Sept. 2012):
- Kevin S. Markle & Douglas A. Shackelford, Cross-Country Comparisons of Corporate Income Taxes, 65 Nat'l Tax J. 493 (2012)
- John L. Mikesell & Justin M. Ross, Fast Money? The Contribution of State Tax Amnesties to Public Revenue Systems, 65 Nat'l Tax J. 529 (2012)
- Ergete Ferede & Bev Dahlby, The Impact of Tax Cuts on Economic Growth: Evidence from the Canadian Provinces, 65 Nat'l Tax J. 563 (2012)
- James A. Chyz & Oliver Zhen Li, Do Tax Sensitive Investors Liquidate Appreciated Shares After a Capital Gains Tax Rate Reduction?, 65 Nat'l Tax J. 595 (2012)
- Haydar Kurban, Ryan M. Gallagher & Joseph J. Persky, Estimating Local Redistribution Through Property-Tax-Funded Public School Systems, 65 Nat'l Tax J. 629 (2012)
- James Mirrlees, Stuart Adam, Tim Besley, Richard Blundell, et. al., The Mirrless Review: A Proposal for Systematic Tax Reform, 65 Nat'l Tax J. 655 (2012)
- Alan J. Auerbach, The Mirrless Review: A U.S. Perspective, 65 Nat'l Tax J. 685 (2012)
- Michael P. Devereux, Issues in the Design of Taxes on Corporate Profit, 65 Nat'l Tax J. 709 (2012)
- Clemens Fuest, Book Review -- The Indirect Side of Direct Investment, 65 Nat'l Tax J. 731 (2012)
Over the past 30 years, scholars and activists have called on the Chinese government to ease the registration and oversight rules governing non-governmental organizations (NGOs) and to increase funding for such organizations by, among other things, broadening the charitable deduction. While China has made significant progress in this regard, the government continues to throw up roadblocks for NGOs, suggesting that it has not fully embraced this path.
This article considers the extent to which the justifications for a broad charitable deduction adduced in the West make sense in China. The goal is to develop a normative basis consistent with Chinese values and interests that Chinese authorities would find compelling and which might lead to additional efforts to develop China’s civil sector. This article also considers the extent to which China’s political and social culture may affect such efforts, concluding that, even if China were to adopt Western-style laws governing NGOs and provide for a broad charitable deduction, China’s culture would shape both how government officials implement the laws and how the Chinese people respond to them, leading to a system of charity, but one with Chinese characteristics.
Katherine Pratt (Loyola-L.A.) presents A Constructive Critique of Public Health Arguments for Anti-Obesity Soda Taxes and Food Taxes, 86 Tul. L. Rev. ___ (2012), today at the Annual Scientific Meeting of the Australian and New Zealand Obesity Society:
This Article constructively critiques the two arguments that public health advocates have made in support of anti-obesity soda taxes or junk food taxes. Part I discusses and critiques the first argument, an economic “externalities” argument that government should tax soda or junk food to internalize the disproportionately high health care costs of obesity. Part I also explores alternative economic “internalities” arguments for food or soda taxes, with a focus on incomplete information, bounded rationality, and bounded willpower. Part II discusses and critiques the second argument made by public health advocates, that government should adopt anti-obesity measures to improve population-wide health. This Part considers the appropriate scope of public health law interventions with respect to behavioral risk factors (e.g., diet), comments on empirical evidence offered by public health advocates to support proposed soda taxes, and cautions public health advocates to consider possible unintended consequences of anti-obesity proposals.
Obesity policy debates present a conflict of fundamental values, such as health, fairness, efficiency, and autonomy. Part III attempts to reconcile these values and responds to the “personal responsibility” objection to soda taxes and food taxes. Part IV considers various factors that would affect behavioral responses to proposed soda taxes and food taxes and addresses concerns that such taxes would be regressive and thus unfair to low-income consumers. This Part also explores the tax design implications of the literature on tax salience and on asymmetric paternalism and libertarian paternalism. Park V suggests the way forward for public health advocates, including a proposal to enact a tax on nutritionally poor foods and drinks, paired with a salient benefit. This Part also recommends enactment of a federal system of food classification, based on nutrient profiling methods, along with a federal system of “front-of-package” nutritional labeling.
Iowa Law Prof: School Retaliated Against Me for Testifying That Liberal Bias 'Corrupts Everything School Touches'
Following up on Monday's post, Federal Trial Begins Today in Unsuccessful Republican Faculty Candidate's Discrimination Complaint Against Iowa Law School:
A University of Iowa law professor who testified on behalf of a conservative colleague alleging she wasn't hired because of her conservative viewpoints says the school is retaliating by falsely suggesting he was under investigation for sexual misconduct.
Mark Osiel [Aliber Family Chair in Law], a 20-year veteran of the university, testified Tuesday at the federal trial of law school writing center employee Teresa Wagner, a Republican who says she was repeatedly passed over for teaching jobs because of her conservative views and activism. ...
While Osiel was on the witness stand, assistant attorney General George Carroll said that Osiel had recently faced a misconduct investigation after someone complained about hearing sexual grunting noises coming from his office at the law school. Carroll argued that information was relevant because it went to Osiel's credibility.
Osiel, 57, testified that the noises were from him taking part in exercises suggested by doctors to treat medical ailments. ... "Raising this issue, which is legally irrelevant to the testimony that I was providing, shows how low the university will stoop in retaliating against its employees of 20 years," said Osiel. ...
In an email Thursday, Osiel said he has been subjected to "unwarranted, unsubstantiated accusations of harassment" by the university. He said he was considering legal options, including a lawsuit for defamation and intentional infliction of emotional distress. He said his medical records would prove that he had arthritis in his hip and that physical therapists at University of Iowa Hospitals and Clinics required him to perform certain exercises.
Des Moines Register: U of I Concedes at Trial Key Evidence Was Erased:
The University of Iowa erased a video that would have been key to resolving a dispute between it and an employee who believes she was illegally passed over for promotion because of her conservative political views, it admitted in federal court here on Tuesday.
The school hired Teresa Wagner as a part-time staffer at the Iowa College of Law Writing Resource Center in 2006. She applied for a full-time instructor’s position in the fall of that year, but claims the job went to a lesser qualified candidate with liberal views.
Wagner, an Iowa law school graduate, has previously worked for the National Right to Life Committee and the Family Research Council. The committee opposes abortion and the council opposes same-sex marriage.
The university denies politics played a part in the decision. It says Wagner didn’t get the job largely because she said during a presentation to faculty in January 2007 that she was unwilling to teach legal analysis, which was included in the job description. Testifying before a jury here on Tuesday, Wagner denied making that statement.
A video of her presentation would have resolved the issue, both sides acknowledged. However, the university erased the video shortly after Wagner was denied the job. ...
Also testifying Tuesday was Mark Osiel, a U of I law professor who hired Wagner to help edit two research projects. Osiel called Wagner a “superlative writer” and compared her to tenured professors.
Osiel said he believes the university was disabled by liberal bias. “It corrupts everything it touches,” he said of the school’s liberal leanings, calling them “unconstitutional and morally indefensible.”