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Monday, November 26, 2012

TaxProf Blog Holiday Weekend Roundup

Sunday, November 25, 2012

WSJ: Year-End Tax Moves

WSJWeekend Wall Street Journal Tax Report:  Tax Moves to Make Now, by Laura Saunders:

The annual scramble to make smart tax moves before Dec. 31 is proving especially vexing this year. Congress still hasn't settled 2013 tax rates on income, investments, large gifts and estates. Deductions and other breaks are also in doubt, now that politicians from both parties are calling for cutbacks—although in different ways.

And huge questions remain unanswered even for the 2012 tax year. For example, the IRS on Nov. 13 warned lawmakers that if they don't act soon, the alternative minimum tax, which reduces the value of some tax breaks, will apply to 33 million households for 2012 rather than four million. More than 60 million people might not be able to file returns or receive refunds until late March, the IRS says, because it would have to reprogram computers.

Yet despite the uncertainties, advisers say year-end tax planning is possible. ... Here are moves to consider before year end, plus a few to avoid:

  • Make charitable gifts
  • If you want to donate IRA assets to charity, wait a bit longer
  • Make an extra mortgage payment, or pay down principal
  • Don't fret about the alternative minimum tax "patch" for 2012
  • Maximize contributions to employer-sponsored retirement plans
  • Evaluate stock options and restricted stock
  • Think twice before harvesting gains
  • Harvest capital losses, up to a point
  • Use up funds in a medical flexible-spending account
  • Accelerate medical expenses
  • Set up a health savings account for 2012
  • Write next semester's tuition checks before year end
  • Prepay state taxes
  • Make gifts up to $13,000 to relatives or friends
  • Contribute to 529 education savings accounts
  • Have a closely held business pay a dividend
  • Buy depreciable equipment for a closely held business

For more, see:

November 25, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

NY Times: Politics Complicates the Math in Ending Tax Breaks for Rich

New York Times:  Politics Complicates the Math in Ending Tax Breaks for Rich, by Annie Lowrey:

Whether to raise revenue through increasing tax rates or cutting loopholes has become a central sticking point in the negotiations on a major debt deal.

The White House has drawn one line in the sand: it argues that tax rates must go up on income above $250,000 a year, because reducing tax breaks for the affluent cannot on its own raise the $1.6 trillion in additional revenue it seeks. Congressional Republicans have drawn another line: they might accept higher revenue, but only through the reduction of tax breaks.

But is it even possible to raise $1.6 trillion from wealthy households without changing tax rates? Experts say it is. But doing so might be politically infeasible and hugely unpopular, because it would involve wiping out nearly every deduction, credit and preferential rate those affluent households claim. ... There would be no deduction for charitable giving, or close to none, angering wealthy donors and nonprofit directors. The home mortgage interest deduction would vanish, hurting the housing market just as it has started to turn around. Preferential tax treatment of capital gains and dividends would disappear, probably throwing the markets into a sell-off. The top 1 percent of earners might see their after-tax income fall as much as 19.8%, according to calculations by the Tax Policy Center.

(Hat Tip: Mike Talbert.)

November 25, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Top 5 Tax Paper Downloads

SSRNThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #5:

1.  [288 Downloads]  James Couzens, Andrew Mellon, the 'Greatest Tax Suit in the History of the World,' and Creation of the Joint Committee on Taxation and Its Staff, by George K. Yin (Virginia)
2.  [184 Downloads]  Rethinking FIRPTA, by David J. Herzig (Valparaiso)
3.  [172 Downloads]  Technological Innovation, International Competition, and the Challenges of International Income Taxation, by Michael J. Graetz (Columbia) & Rachael Doud (J.D. 2012, Yale)
4.  [160 Downloads]  Romney's Tax Plan Won't Work Like Reagan's Did, by Bruce Bartlett
5.  [111 Downloads]  The Judicial Taxation Revolution: From a Subject and Immigrant Society to a Mature Society, by David Gliksberg (Hebrew University of Jerusalem, Faculty of Law)

November 25, 2012 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

College Cuts Adjunct Faculty Hours to Avoid ObamaCare

CCAClogoHuffington Post:  CCAC Cuts Adjuncts' Hours to Avoid Obamacare Requirements:

Community College of Allegheny County will cut the hours some instructors to avoid paying for their health insurance coverage under new Affordable Care Act rules.

CCAC President Alex Johnson announced in an email to employees last week that the school would cut course loads and hours for some 200 adjunct faculty members and 200 additional employees. The Affordable Care Act -- nicknamed Obamacare -- classifies employees who work 30 hours or more per week as full-time, and CCAC would be required under the new law to provide employer-assisted health insurance to those employees. Instead, temporary part-time employees, such as clerical, computer, seasonal and other positions, will be limited to working 25 hours per week, and adjunct instructors will only be able to teach 10 credits per semester. Permanent part-time employees, already eligible for health care coverage, will be unaffected. The Pittsburgh-based college estimates the move will save it from spending an additional $6 million. 

(Hat Tip: Francine Lipman.)

November 25, 2012 in Legal Education | Permalink | Comments (20) | TrackBack (0)

Saturday, November 24, 2012

Fleischer: A Tax Crackdown Is Not Needed on Mortgage-Backed Securities

NY Times DealBookNew York Times DealBook:  Why a Tax Crackdown Is Not Needed on Mortgage-Backed Securities, by Victor Fleischer (Colorado):

Capitol Hill is poking around for tax revenue. One sleeping dog to let lie is the tax treatment of real estate mortgage investment conduits, or Remics.

These are the tax plumbing that allows the modern mortgage market to function. Most residential mortgages in the United States are securitized. This means that, as a method of financing the mortgages they originate, banks bundle together mortgages and sell them to a trust. The trust then issues securities to investors. The securities are backed by the mortgages held by the trust. The Remic rules allow the trust to be treated as a pass-through entity for tax purposes, avoiding the corporate tax in the same way that a mutual fund, pension fund or other investment conduit avoids an extra level of tax.

That is the theory. The collapse of the mortgage-backed securities market a few years ago exposed systematic failures in the transfer of title from the originator of the mortgages to the trusts. ...

Two professors at Brooklyn Law School, Bradley T. Borden and David J. Reiss, have argued that many purported Remics may not in fact qualify as such [Wall Street Rules Applied to REMIC Classification]. In many cases, they explain, mortgage originators failed to legally transfer mortgages into the trust. Instead, they argue, the failed Remics were probably taxable mortgage pools or perhaps publicly traded partnerships. This means that Remic investors would be subject to additional taxes and penalties.

The IRS began a review of the tax status of Remics last year, but it is unclear whether additional enforcement action is forthcoming. Mr. Borden and Mr. Reiss attribute this apparent nonenforcement to the so-called Wall Street Rule, part of the lore among tax lawyers that holds that after X million dollars of securities have been issued (and no one knows exactly what X is) and enough tax lawyers take the same position, the IRS will not intervene and blow up the deals.

What should the IRS do? Tax liability would probably fall on investors, who might then turn around and sue the mortgage originators, servicers, law firms and other intermediaries, further gumming up the market for mortgage-backed securities.

The Wall Street Rule is objectionable from a tax policy perspective when aggressive tax lawyers sanction a deal structure that contravenes the rules, or one that resides in a gray area but is contrary to what Congress intended.

I do not think that is the case here. The Remic rules are designed to prevent operating companies from avoiding the corporate tax. Banks and other financial institutions that originate mortgages should pay the corporate tax. Passive conduits should not. The lawyers failed here because they relied too quickly on a client’s representations about the status of mortgages in the trust, not because they were overly aggressive in their interpretation of the Internal Revenue Code.

Instead of going after old, failed Remics, additional IRS resources would be better put to use in policing the rules going forward for all types of securitization vehicles.

November 24, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Should the Top Marginal Income Tax Rate Be 73 Percent?

Tax AnalystsAparna Mathur, Sita Slavov & Michael R. Strain (all of the American Enterprise Institute), Should the Top Marginal Income Tax Rate Be 73 Percent?, 137 Tax Notes 676 (Nov. 5, 2012):

In this article, Mathur, Slavov, and Strain respond to the argument by Peter Diamond and Emmanuel Saez that the socially optimal top marginal income tax rate is around 73%, with a range from 54% to 80% [The Case for a Progressive Tax: From Basic Research to Policy Recommendations, 25 J. Econ. Persp. 165 (2011)]. The authors argue that Diamond and Saez’s analysis underestimates the distortive effect of a higher tax rate on real economic choices and embodies judgments about fairness that many Americans may find unacceptable. They also assert that Diamond and Saez’s underlying economic model cannot prudently be used as the basis for specific, real-world policy recommendations.

All Tax Analysts content is available through the LexisNexis® services.

November 24, 2012 in Scholarship, Tax | Permalink | Comments (4) | TrackBack (0)

Jurors Agree: University of Iowa Law School Discriminated Against Faculty Applicant Due to Her Conservative Views

Wagner 2Following up on my previous posts (links below) about Teresa Wagner's federal lawsuit:  Des Monies Register, Jurors Say They Saw Hiring Bias at University of Iowa; But University, Not Former Law Dean, Wronged Conservative Job Applicant:

A federal jury believed the University of Iowa’s law school illegally denied a promotion to a conservative Republican because of her politics, former jurors told The Des Moines Register.

However, jurors said they felt conflicted about holding a former dean personally responsible for the bias. They wanted to hold the school itself accountable, but federal law does not recognize political discrimination by institutions. “I will say that everyone in that jury room believed that she had been discriminated against,” said Davenport resident Carol Tracy, the jury forewoman.

Meanwhile, attorneys for Teresa Wagner on Tuesday filed a motion for a new trial in the case that scholars agree could have national implications in what some argue is the liberally slanted world of academia.

Des Moines Register editorial:  U of I Needs to Respect Diversity of Thought, Too:  The Claim of Political Bias in Hiring at the Law School Should Not End with the Deadlocked Jury:

The University of Iowa College of Law dodged a potential employment discrimination verdict in a case tried in Davenport last week. But the case could still come back to haunt the university.

Regardless of the outcome, this case raises questions about the hiring policies at the University of Iowa College of Law, and perhaps in the university as a whole. The U of I respects the goal of diversity for race, religion and gender, but it should show the same respect for diversity of political thought. 

This case involves a lawsuit filed by Teresa Wagner against the law school after she was turned down for a faculty position in the legal analysis, writing and research program. Wagner is a Republican who has worked for anti-abortion organizations. She alleged that she was passed over the position not because she lacked the qualifications but because she was blackballed by liberal members of the law school faculty.

The law school denied politics were involved in the decision not to hire her. The university claimed Wagner was turned down because she had performed poorly in an interview. ...

Some testimony in this case was troubling. Wagner was turned down despite enthusiastic praise for her interview performance by members of the faculty appointments committee and members of the law school administration. Not all on the faculty were supportive, however. Carolyn Jones, the law school dean at the time, said she rejected Wagner for a faculty position because of opposition within the faculty. According to testimony, Jones said “she always adopts the faculty’s recommendations.”

Faculty members testified that they opposed hiring Wagner because she had performed poorly in the job interview. But an associate dean expressed concern in an email that Wagner might be opposed by professors who “so despise her politics.”

Whether a new trial is justified for this case, it raises important questions that should ultimately be resolved by Iowa courts.

Prior TaxProf Blog coverage:

November 24, 2012 in Legal Education | Permalink | Comments (22) | TrackBack (0)

NY Times: Walmart's Acceleration of Dividend by Six Days Will Save Walton Family $180 Million in Taxes

Walmart LogoNew York Times:  Early Dividend for Wal-Mart Is Latest Move in Tax Tactics:

The Walton family, which founded Wal-Mart, could save as much as $180 million in federal income taxes after the huge retailer announced Monday that it would pay out its quarterly dividend on Dec. 27 instead of Jan. 2, as was scheduled.

The change will allow the family and other Wal-Mart shareholders to record the income this year, when the federal tax rate on dividends tops out at 15%. Next year, if the Obama administration and Republicans are unable to reach a compromise, that rate is set to jump sharply to 39.6%. High earners will have to pay an additional 3.8% on most investment income to help pay for the new federal health care law, bringing the total possible tax bite to 43.4%.

Wal-Mart is the biggest company to accelerate its dividend payments this year in anticipation of higher taxes next year, following such manufacturing companies as Leggett & Platt and Myers Industries. ...

Like several of the companies making these moves, Wal-Mart has board members who own a large portion of the company’s shares and who stand to benefit from the change. In Wal-Mart’s case, the Waltons own 48% of Wal-Mart’s stock, or 1.6 billion shares, and control three of the company’s 16 board seats. Steve Wynn, who owns about 10% of Wynn Resorts, is leading his company to issue a one-time dividend for $750 million this week.

Two recent studies [Michelle Hanlon (MIT) & Jeffrey L. Hoopes (Michigan), What Do Firms Do When Dividend Tax Rates Change? An Examination of Alternative Payout Responses to Dividend Tax Rate Changes; Markit, Spike in Special Dividends Projected for Q4 2012] ... found that companies where board members own a large percentage of the company’s shares have been more likely to make dividend maneuvers aimed at helping shareholders avoid higher taxes.

November 24, 2012 in Tax | Permalink | Comments (1) | TrackBack (0)

Friday, November 23, 2012

The New Yorker: Why We Pay Taxes

New YorkerJill Lepore, Tax Time: Why We Pay, The New Yorker, Nov. 26, 2012:

Both the Sixteenth Amendment, which granted Congress the right to levy an income tax, and the Federal Reserve will be a hundred years old in 2013. Hoopla is not anticipated. Not especially controversial a century ago, the tax and the bank lie at the core of a now popular account of American history in which 1913 was a disaster, the original “fiscal cliff.” ... In 1913, the income tax was introduced, not only to undergird the Treasury with a stable source of revenue, but also to answer populist rage at the growing divide between the rich and the poor. In 1913, the Bureau of Internal Revenue printed its first 1040: the form was three pages, the instructions just one. Taxes have got a lot hairier since then. Writer explains the attempts of business interests to fight back against the income tax. Helped by Andrew W. Mellon, the industrialist and philanthropist, among others, the business lobby succeeded in redefining American citizens as “taxpayers,” and began arguing that high tax rates were stifling the economy. Chronicles attempts by the conservative lobby to pass the Dresser Amendment, which would have capped the income tax rate at 25%; describes the failure of liberals to articulately defend their own tax policy.

(Hat Tip: Dorothy Brown.)

November 23, 2012 in Legal Education | Permalink | Comments (3) | TrackBack (0)

NY Times: LSAT Takers and Law School Enrollments Plunge Amidst Poor Placement Prospects

Following up on Tuesday's posts: 

New York Times:  Law School Admission Testing Plunges:

The number of people taking the Law School Admission Test ... offered in October fell sharply, down 16.4% from the year before, reaching its lowest level since 1999. ...

Source: Law School Admission Council

No wonder, then, that law schools are cutting the size of their entering classes. ...

[P]otential students seem to have wised up to the huge debt burden and poor job placement prospects. One recent paper actually suggests that law’s reputation for providing a risk-free career path has been a fiction for a long time. It notes that the legal market has become more crowded, with the ratio of the American population to American lawyers morphing to 252 to 1 in 2005 from 695 to 1 in 1951. The paper also estimated that, of the 1.4 million law graduates of the last 40 years, about 200,000 to 600,000 are not working as lawyers.

November 23, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

IRS Releases Fall 2012 SOI Bulletin

12fallbulThe IRS's Statistics of Income Division has released (IR-2012-97) the Fall 2012 SOI Bulletin (Vol. 32, No. 2), with these articles:

November 23, 2012 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

IRS Releases 2013 Standard Mileage Rates

IRS Logo The IRS has released (IR-2012-95) the standard mileage rates for 2013 (Notice 2012-72):

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:

  • 56.5 cents per mile for business miles driven [up 1 cent from 2012]
  • 24 cents per mile for medical or moving purposes [up 1 cent]
  • 14 cents per mile for charitable organizations [unchanged]

November 23, 2012 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, November 22, 2012

What Tax Profs Are Thankful For

Thanksgiving
  • Cass Brewer (Georgia State):  "I am thankful for having the most wonderful job in the world and a supportive family."
  • Bryan Camp (Texas Tech):  "This year I am thankful for my students, who view their law degree as something to be earned, not received, and who are determined to use their skills to make the world safer, cleaner, calmer, better."
  • Paul Caron (Cincinnati):  "I am thankful for my wonderful wife and children (and dog), terrific faculty colleagues and students at UC, Pepperdine, and USD, and special church communities in Cincinnati, Malibu, and San Diego."
  • Mark Cochran (St. Mary's):  "I'm thankful for my family, my colleagues, and college football."
  • Bridget Crawford (Pace):  "Tax Stories, zeroed-out GRATs, and Shamik Trivedi (writer for Tax Notes)."
  • Frank Doti (Chapman):  "As a law professor, having the greatest job in the world."
  • Cliff Fleming (BYU):  "I'm thankful that I continue to learn new things as my students come up with questions that I would never have thought of. But most important, although my wife of 48 years must have a test every three months to determine whether her cancer remission continues, the most recent test was favorable and so life is good for three more months. And there's reason to hope for the future. I'll settle for that. It's a bad idea to let fear rule your life."
  • David Hasen (Santa Clara):  "I'm thankful for my job, my wonderful friends and family, and, most of all, for the love of God poured out in Jesus Christ."
  • Sagit Leviner (SUNY-Buffalo):  "I am thankful for cotton candy country music when I need to clear my head, hot coco on a cold winter day, Obama serving for a second term, and the (need &) possibility for a different, more respectful & sustainable, future in the Middle East."
  • Francine Lipman (UNLV):  "I'm thankful for fabulous new faculty, administration and staff colleagues, and law students at UNLV. They have exceeded my highest expectations on every level. I feel so fortunate and thankful to be a member of your warm and wonderful community."
  • Jim Maule (Villanova):  [See here.]
  • David Pratt (Albany):  "Apart from the obvious (wife, kids etc):  Romney lost and the Supremes did not throw out the Affordable Care Act."
  • Walter Schwidetzky (Baltimore):  "Getting to be a Tax Prof."
  • Ted Seto (Loyola-L.A.):  "I am thankful for the TaxProf Blog, which makes my job a great deal easier than it otherwise would be."

November 22, 2012 in Legal Education, Tax | Permalink | Comments (0) | TrackBack (0)

WKRP in Cincinnati Thanksgiving Turkey Drop

"As God is my witness, I thought turkeys could fly.

(Hat Tip: Glenn Reynolds.)

November 22, 2012 in Legal Education, Tax | Permalink | Comments (5) | TrackBack (0)

Penn State to Operate Separate Law Schools (Like Rutgers, Arkansas)

Penn State LogoPenn State Dean Philip McConnaughay has abandoned plans to consolidate all first year students at its University Park campus and to funnel all international students to its Carlisle. Instead, Penn State will operate the two campuses as separate law schools by 2015:

The Dickinson School of Law will remain a single academic unit of Penn State, but each of our campuses will develop and implement separate identities, separate admissions policies, and separate educational programs, similar to Rutgers Law-Newark and Rutgers Law-Camden, or Arkansas Law-Fayetteville and Arkansas Law-Little Rock.

Dan Filler (Drexel) fears that this "might mark  the beginning of a  reputational divide between the two Penn State law schools," with Carlisle becomming a lower-ranked revenue-generator and University Park becomming its higher-ranked twin.

November 22, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Estrich: I Did Not Vote for Obama to Raise My Taxes

Susan Estrich (USC; National Campaign Manager, Dukakis for President), The Mandate To Raise Taxes on the “Rich”:

Within days of winning the election, President Obama announced that his victory gave him a mandate to raise taxes on the "rich."

Come again? This was a two-and-a-half-point election. It reflected a painfully divided electorate. The only mandate I saw was to unite a divided country.

I voted for Obama. ... I did not vote for Obama because I think I am paying too little in taxes.

Like many people I know, I am "rich" by Obama's standards. I pay more taxes, percentage wise, than Mitt Romney and Warren Buffett, because I earn virtually every penny of my income.

I work. And yes, all those deductions that allow the truly rich to not work, or at least to not work all the jobs I do, make me angry.

I am all for closing loopholes. I am all for ending deductions for things I don't even understand. But I am not for putting a low cap on deductions that would make it all but impossible for the charities I support to raise funds. I am not for putting a limit on the mortgage deduction that would mean, as a practical matter, that "middle class" (not rich) people in California would be priced out of the housing market, and the charities I support would not be able to raise what they need to survive.

And frankly, I don't think I'm alone. As a matter of fact, on this one, I don't think 51% of all Americans are to my "left" — if that's how you define the higher tax constituency.

Obama needs to be very careful. Yes, he was re-elected. But so were all those folks who blocked the extension of the Bush tax cuts if they excluded individuals and small businesses who make enough money to qualify as rich — but not enough to send their kids to college, or help their aging parents, or buy a home in a decent neighborhood.

We need to avoid going over the fiscal cliff. But Obama must also avoid the political cliff.

November 22, 2012 in Political News, Tax | Permalink | Comments (7) | TrackBack (0)

Wednesday, November 21, 2012

The New York Times Doesn't Understand Marginal Tax Rates

New York Times:  Investors Rush to Beat Threat of Higher Taxes:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.

Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.

Huffington Post:  The New York Times Reporters Do Not Understand How Marginal Tax Rates Work:

For whatever reason, an article titled Investors Rush to Beat Threat of Higher Taxes was published by The New York Times despite the fact that it contains a galling bit of stupidity, which could spread like a supervirus to the general public. ...

This is a stupidity as persistent as it is avoidable. Ms. Collins, chiropractor from Virginia, is among the many people of affluence who have somehow survived without understanding how marginal tax rates work. As always, I am obligated to provide the following paragraph from Dean Baker's post, "Marginal Tax Rates: How To Explain Them To A Five-Year-Old Child" (not its actual title, but still):

The tax system brackets give marginal rates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33%. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33% tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.

Reporters, when they come across someone in the wild who clearly does not understand how marginal tax rates work, are obligated to explain to such people that they are incorrect, and should never spread their ignorance to their readers ... -- [T]here are not "two sides" to this issue. You either understand how marginal tax rates work, or you do not, and reporters are absolutely allowed to point out who is right and who is wrong.

Visit NBCNews.com for breaking news, world news, and news about the economy

(Hat Tip: Linda Galler, Francine Lipman.)

Update #1:  The Daily Beast, Should People Who Make $250,000 a Year Worry About Obama's Tax Proposals?, by Megan McArdle:

Kevin Drum and Dave Weigel take off after rich people who don't understand that they only pay marginal tax rates on the extra dollars they earn above taxation thresholds. "This isn't true, of course. Obama is only proposing to raise tax rates on income over $250,000, so if your income goes up to $251,000, you only pay the higher rate on the extra $1,000. The tax bill on your first $250,000 stays exactly the same."

Their analysis is basically sound, except for the fact that it is not quite true. They have forgotten to look at deduction phaseouts, surtaxes, and the AMT, which are not taxes on marginal income. No matter what you have heard on the internet, there are in fact a lot of sizeable marginal inflection points for high earners....

I've put together a handy graphic showing you what income levels trigger deduction phaseouts or surtaxes. The red line shows you where the phaseout is complete--i.e., where the deduction completely disappears.

file

Update #2Glenn Reynolds (Tennessee):

In today’s freelance economy, will the impact of marginal rates on how hard people work be greater than in the past? I mean, if you have an old-fashioned full-time “job” paying X-dollars a year, you can’t easily cut back and lower your income. But if you’re a freelancer of some kind, it’s easy to say that once you’re paying 50% (or 40%) tax on your income you’d rather cut back and substitute more leisure time. With more people earning their living that way, and fewer in full-time jobs, I assume we’ll see a lot more of that than we would have, say, 20 or 30 years ago.

November 21, 2012 in Tax | Permalink | Comments (51) | TrackBack (0)

Gliksberg: The Judicial Taxation Revolution -- From an Immigrant Society to a Mature Society

David Gliksberg (Hebrew University of Jerusalem, Faculty of Law), The Judicial Taxation Revolution: From a Subject and Immigrant Society to a Mature Society, 4 British Tax Rev. 553 (2012):

Tax discourse is a very significant component in every democratic society. Israel’s tax discourse has gained substantial standing in the public arena over the past two decades in all aspects, including the political, economic, social and cultural dimensions compared to its previous marginal position. The key factor leading to this tax revolution is the judicial activism of the Israeli Supreme Court (ISC) which has strengthened the link between the legal discourse and the tax discourse. Since the legal discourse is of the utmost importance within Israeli society, the tax discourse has been dramatically upgraded. The ISC has changed from being a passive factor to an active and influential key player. The article analyses the various factors which have contributed to this judicial revolution. The essence of the revolution and the various tools utilised to achieve its objectives are analyzed from legal, tax, social and historical perspectives. The revolution reflects the fact that the consciousness of Israeli society has freed itself from its subject and immigrant bonds and has matured, now viewing tax as a necessary part of its societal being. The Judicial revolution has evolved throughout a comprehensive change in the tax law interpretation rules, based on purposivism, coherence and constitutionalism, and has created a dynamic balance regarding basic issues, such as the status of equity and its equilibrium with efficiency which has dramatically affected the Israeli social order.

November 21, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Dean Presents A Hybrid Financial Instrument for Social Enterprise Today at Toronto

DeanSteven Dean (Brooklyn) presents Hunting Stag with FLY Paper: A Hybrid Financial Instrument for Social Enterprise (with Dana Brakman Reiser (Brooklyn)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

Social entrepreneurs and socially motivated investors share a belief in the power of social enterprise, ventures that pursue a “double bottom line” of profit and social good.  Unfortunately, they also share a deep mutual suspicion.  Recognizing that social ventures—just like traditional for- and nonprofit enterprises—need capital to flourish, this Article offers a financing tool to transform that skepticism into commitment.  Unlike the array of new entities that have emerged in recent years—including L3Cs, benefit corporations and flexible purpose corporations—the hybrid financial instrument it describes provides a robust and transparent solution to the puzzle that lies at the heart of every social enterprise: how to blend a profit motive with a social mission.  Recognizing their shared dilemma as an example of what economists call a stag hunt, FLY Paper strikes that elusive balance by allowing investors and entrepreneurs to credibly signal a reciprocal commitment to the pursuit of a dual bottom line.

November 21, 2012 in Colloquia, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Slate: Return of the 47% -- The Right’s Latest Tax Lie

HeritageSlate:  Return of the 47 Percent: The Right’s Latest Tax Lie, by Michael Lind (New American Foundation):

I am amused to report that my former colleagues at the Heritage Foundation have lost none of their willingness to sacrifice truth to propaganda. The Heritage Foundation has published an Index of Dependence on Government by William W. Beach and Patrick Tyrrell that seeks to bolster Mitt Romney’s theme that at least 47% of Americans are parasitic, government-dependent “takers” rather than “makers”:

Today, more people than ever before depend on the federal government for housing, food, income, student aid, or other assistance once considered to be the responsibility of individuals, families, neighborhoods, churches, and other civil society institutions. The United States reached another milestone in 2010: For the first time in history, half the population pays no federal income taxes. It is the conjunction of these two trends — higher spending on dependence-creating programs, and an ever-shrinking number of taxpayers who pay for these programs — that concerns those interested in the fate of the American form of government.

What caught my eye in this latest piece of Heritage agitprop was this sentence: The United States reached a milestone in 2012 — or the first time in history, half the population pays no federal income taxes.

This is not just wrong.  It is an error embarrassing enough to shame even a shameless propaganda mill like the Heritage Foundation.

Heritage implies that a majority of Americans paid federal income taxes throughout American history, presumably back to the 1790s. Nothing could be further from the truth. For much of American history, 100% of the population paid no federal income taxes, because there were none. And the federal income tax began to fall on the middle-class masses, not just the upper classes, only in the 1940s. ... According to the conservative Tax Foundation, which has a friendlier relationship with facts than does the Heritage Foundation, as recently as 1940 the percentage of those who filed (a group smaller than the working-age population) who owed federal income taxes was 49.4%. In that year, Republican presidential candidate Wendell Willkie missed the opportunity to sneer at “the 49%.”

It was only during World War II, with the institution of the income tax withholding system, that a majority of Americans became subject to federal income taxation. If it were accurate, the sentence in the Heritage Foundation’s “Index of Dependence on Government” would read: The United States reached a milestone in 2012 — for the first time since World War II, half the population pays no federal income taxes.

November 21, 2012 in Tax, Think Tank Reports | Permalink | Comments (7) | TrackBack (0)

Ralph Nader's Tax Reform Plan

NaderHuffington Post op-ed:  Tax What They Burn Before Tax What We Earn..., by Ralph Nader:

As America faces the so-called "fiscal cliff," let's turn our attention to our country's systemic tax problem. ... The tax code embodies all the essence of life: greed, politics, power, goodness, charity." With that sentiment in mind, any significant push toward fundamental tax reform has to start by chipping away at the corporatized, commercial Congress which uses tax breaks, deferrals, credits and exemptions as inventory to sell for campaign cash in increasingly costly campaigns. Until that happens, the metaphorical "brake lines" will remain faulty as America speeds toward increasingly more ominous fiscal cliffs.

(Many of these tax reform solutions are discussed in further detail in the first chapter, "Fundamental Tax Reform" of my latest book, The Seventeen Solutions: Bold Ideas for Our American Future.)

(Hat Tip: Francine Lipman.)

November 21, 2012 in Tax | Permalink | Comments (2) | TrackBack (0)

Raising the Bar on Law School Data Reporting

Christopher Polchin (J.D. 2013, Penn State), Comment, Raising The “Bar” on Law School Data Reporting: Solutions to the Transparency Problem, 117 Penn St. L. Rev. 201 (2012):

The difficult legal job market has brought attention to the reporting practices of law schools regarding their graduates’ employment data. Allegations have emerged that this employment data is highly misleading. This Comment outlines the nature of the law school reporting problem and the competitive environment that gave rise to it. In addition, this Comment examines possible solutions to the data problem, particularly the availability of civil remedies in tort for aggrieved students. Finally, this Comment addresses multiple alternatives that would provide increased clarity in law schools’ employment data.

November 21, 2012 in Legal Education, Scholarship | Permalink | Comments (3) | TrackBack (0)

Thanksgiving Travel Tip

Visit NBCNews.com for breaking news, world news, and news about the economy

November 21, 2012 in Legal Education, Tax | Permalink | Comments (1) | TrackBack (0)

ABA Committee Approves Changes in Law School Accreditation Standards

ABA JournalABA Journal, ABA Committee Approves Proposed Changes in Law School Accreditation Standards:

An ABA committee has voted to approve a package of proposed changes in the law school accreditation standards covering facilities, equipment, technology, libraries and information services.

The proposed changes, unanimously approved Friday by the Section of Legal Education and Admissions to the Bar's Standards Review Committee, will be presented to the section's governing council at its Nov. 30 meeting in Denver. ...

The proposed changes, contained in two chapters of the law school accreditation standards, are more stylistic than substantive. One chapter deals with law libraries and information resources. The other addresses law school facilities, technology and equipment. ...

Under the current standards, law schools are required to maintain a law library that is an "active and responsive force" in the educational life of the school. The standards also require schools to provide the library with "sufficient financial resources" to support the school's teaching, scholarship, research and service programs, and to keep the library abreast of changes in technology.

Those requirements have led some critics to suggest—wrongly, in the view of section officials—that the current standards have contributed to the high costs of a legal education by mandating expensive expenditures on things like extensive library collections, faculty scholarship requirements and low teaching loads.

Under the proposed standards, law schools would be required to provide the library with the resources necessary to carry out the school's program of legal education, accomplish its mission and support scholarship and research. Libraries also would be required to maintain a "core collection" of essential materials, either through ownership or through a particular means of reliable access.

The current standards also require law schools to have physical facilities adequate for their current program of legal education and for anticipated growth. The proposed changes would require law schools to have sufficient facilities, technology and equipment to enable them to operate in compliance with the standards and to carry out their program of legal education.

November 21, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Joel Slemrod Receives Daniel Holland Medal

Joel B. Slemrod (Michigan) received the Daniel M. Holland Medal for outstanding contributions to the study and practice of public finance at last week's National Tax Association 105th Annual Conference on Taxation:

(Hat Tip: Mary O'Keeffe.)

November 21, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Thompson & Weisbach: Attributes of Ownership

Reid Thompson (Chicago) & David A. Weisbach (Chicago), Attributes of Ownership:

We examine the tax rules for ownership of fungible securities in light of three recent cases addressing this issue, Samueli, Calloway, and Anschutz. We argue that ownership has no economic basis under an income tax because under a pure income tax ownership would not be needed to measure income. Rather than acting as a bedrock principle based in economics, ownership in a realizationbased income tax acts as a default rule for assigning tax characteristics to positions. For example, ownership determine characteristics such as holding periods, eligibility for special tax benefits such as the dividends received deduction, counting toward control or as qualifying consideration for various purposes, and so forth. Each of these characteristics, which we label tax attributes, is motivated by different policy considerations. Given the wide variety of policies behind the various tax attributes, no single concept of ownership can be expected to be appropriate in all cases. Therefore, tax rules for each characteristic start with the default rule of ownership but modify the assignment of the attribute based on the relevant policy considerations. Viewing ownership, as a mere default for assigning tax attributes, we propose a simple and clear rule for ownership of fungible securities which produces results similar to those of current law and yet which avoid the problems created by the recent court decisions on ownership of fungible securities.

November 21, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Are States Powerless to Enforce Sales and Use Tax Obligations on Out-Of-Sale Retailers?

Geoffrey E. Weyl (J.D. 2013, Penn State), Comment, Quibbling With Quill: Are States Powerless in Enforcing Sales and Use Tax-related Obligations on Out-Of-Sale Retailers?, 117 Penn St. L. Rev. 253 (2012):

Part II of this Comment will discuss the history of sales and use taxes in the United States and will include a brief introduction to the “dormant” Commerce Clause. Part III will examine the relevant jurisprudence concerning the imposition of tax collection obligations on out-of-state companies, including the requirements of nexus under both the Due Process Clause of the Fourteenth Amendment and the Commerce Clause of the United States Constitution. Part IV will introduce the various Amazon laws and focus particularly on the recent laws passed in Illinois, Connecticut, Colorado, Oklahoma, and South Dakota, and discuss the related legal challenges. Part V will explore the effectiveness of the Amazon laws and the possibility that Congress will step in to resolve whether out-of-state retailers must collect and remit sales taxes to the states. Part VI will provide a conclusion to the issues presented in this Comment.

November 21, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Tuesday, November 20, 2012

Number of LSAT Test-Takers Falls 16.4%

The number of students taking the LSAT last month (the October test historically has the greatest number of takers) was down 16.4% from last year (and down 37.8% from 2009's all-time peak). There have not been this few LSAT test-takers in October since 1999.

Year June % Chg Oct. % Chg Dec. % Chg Feb. % Chg Total % Chg
2009–2010 32,595 12.6% 60,746 19.8% 50,444 15.6% 27,729 -1.3% 171,514 13.3%
2010–2011 32,973 1.2% 54,345 -10.5% 42,096 -16.5% 25,636 -7.5% 155,050 -9.6%
2011–2012 26,812 -18.7% 45,169 -16.9% 35,825 -14.9% 22,152 -13.6% 129,958 -16.2%
2012–2013 25,223 -5.9% 37,780 -16.4%            

Update: Matt Leichter, Some LSAT Tea-Leaf Reading:

November 20, 2012 in Legal Education | Permalink | Comments (6) | TrackBack (0)

A 'Buffett Tax' Resolution

BuffettThe Volokh Conspiracy:  A “Buffet Tax” Resolution, by David Bernstein (George Mason):

  1. Whereas, the U.S. government is in desperate need of revenue.
  2. Whereas, Warren Buffet is worth tens of billions of dollars, almost all of which is destined for private foundations and thus will completely escape federal tax.
  3. Whereas, Warren Buffet has publicly proclaimed that he is undertaxed.
  4. Resolved, the U.S. government should pass legislation that gifts to foundations in excess of a $20 billion lifetime exemption will hereinafter be taxed at 55%, the normal inheritance tax rate.  

November 20, 2012 in Tax | Permalink | Comments (2) | TrackBack (0)

Greg Mankiw: America Already Has a Flat Tax

N. Gregory Mankiw (Harvard University, Department of Economics), The U.S. Has a Flat Tax (in Effect):

The Congressional Budget Office has a new study of effective federal marginal tax rates for low and moderate income workers (those below 450% of the poverty line).  The study looks at the effects of income taxes, payroll taxes, and SNAP (the program formerly known as Food Stamps).  The bottom line is that the average household now faces an effective marginal tax rate of 30%.  In 2014, after various temporary tax provisions have expired and the newly passed health insurance subsidies go into effect, the average effective marginal tax rate will rise to 35%.

What struck me is how close these marginal tax rates are to the marginal tax rates at the top of the income distribution.  This means that we could repeal all these taxes and transfer programs, replace them with a flat tax along with a universal lump-sum grant, and achieve approximately the same overall degree of progressivity.

November 20, 2012 in Tax | Permalink | Comments (3) | TrackBack (0)

The Job Market for Law Grads Has Been Declining for a Long Time

Marc Gans (J.D. 2012, UCLA), Not a New Problem: How the State of the Legal Profession Has Been Secretly in Decline for Quite Some Time:

My goal was to provide an in-depth analysis of the job market for new law graduates over time, as well as the state of the legal field as a whole. Using historical records, I reached the following results:

  • Depending on which dataset is used, of the 1.4 million law graduates of the last 40-years, 200,000-600,000 are not working as attorneys.
  • Using NALP data, I calculate a True Employment Percentage (full-time, JD-required jobs excluding those who start their own practice) and find that it has been bad for a long time, not just recently. Over the last 25 years this percentage has averaged 68%, meaning 1 out of every 3 graduates couldn't find legal work. I also use regression to show that it is not correlated with bar passage rates.
  • Using this True Employment Percentage, I found that the ABA should have stopped accrediting law schools in the mid-1970's.
  • The ABA dataset shows that overall, these "newer" law schools have worse employment outcomes, especially for the most desirable jobs. For example, 16% of graduates of schools accredited before 1975 found employment in firms of 100 attorneys, while under 4% of graduates of schools accredited after this time did.
  • Income inequality for starting salaries has been widening dramatically. Over the last 16 years, the 75th percentile real starting salary has increased 73%, while the 25th percentile real starting salary has increased just 11% (almost all of it occurring before 2000).

November 20, 2012 in Legal Education | Permalink | Comments (14) | TrackBack (0)

Treasury & IRS Release 2012-13 Priority Guidance Plan

Treasury - IRSThe Treasury Department and IRS yesterday released the 2012-2013 Priority Guidance Plan:

The 2012–2013 Priority Guidance Plan contains 317 projects that are priorities for allocation of the resources of our offices during the twelve-month period from July 2012 through June 2013 (the plan year). The plan represents projects we intend to work on actively during the plan year and does not place any deadline on completion of projects. Projects on the 2012–2013 plan will provide guidance on a variety of issues important to individuals and businesses, including international taxation, health care, and implementation of legislative changes.

November 20, 2012 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Gerzog: Valuation Discounting and the Lottery Cases

Tax AnalystsWendy C. Gerzog (Baltimore), Valuation Discounting and the Lottery Cases, 137 Tax Notes 917 (Nov. 19, 2012):

The article describes the valuation discounting in [Dickerson v. Commissioner, T.C. Memo. 2012-60] and contrasts it with the discounting by circuit courts [Negron v. United States, 553 F.3d 1013 (6th Cir. 2009); Anthony v. United States, 520 F.3d 374 (5th Cir. 2008); Cook v. Commissioner, 349 F.3d 850 (5th Cir. 2003); Estate of Gribauskas v. Commissioner, 342 F.3d 85 (2d Cir. 2003); Shackleford v. United States, 262 F.3d 1028 (9th Cir. 2001)] in other lottery cases.

All Tax Analysts content is available through the LexisNexis® services.

November 20, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

51% of Law Schools Cut 1L Enrollment

KaplanKaplan Press Release (Nov. 19, 2012):

Responding to the reality that the toughest job market for new lawyers in 20 years may be the new normal for the foreseeable future, law schools are taking unprecedented steps to course correct.  According to Kaplan Test Prep’s 2012 survey of [123] law school admissions officers, 51% of law schools have cut the size of the entering class; 63% said the reason was the contraction of the job market in the legal industry.  And more cuts may be on the way; of the law schools that have not cut the size of their entering classes, 28% say they will likely do so for the current application cycle.

The Kaplan survey also finds that 68% of law schools have already revamped their curriculum to make their students more “practice ready”; 5% say they’ve decided to so, but haven’t implemented the changes yet; 9% say they are considering making curriculum changes; and 18% say they have no plans to make curriculum changes.  Among the curriculum changes some schools have made or are considering making: more clinical work opportunities and giving students more opportunities to specialize in a specific field, which can give them a competitive edge in a field that values specialization.

Dan Filler (Drexel) has compiled this spreadsheet of 2011 and 2012 entering class sizes and 25%/median/75% GPAs and LSATs.

November 20, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

NY Times: Europe Seek More Taxes From U.S. Multinationals

Amazon-Starbucks-Google-LogoFollowing up on last week's post, Starbucks Pays Demi Taxes on Trenta Sales: New York Times, European Countries Seek More Taxes From U.S. Multinational Companies:

Google reported sales of more than $4 billion in Britain last year. It paid less than $10 million in taxes. Some tax collectors, lawmakers and competitors of Google in Europe say this is unfair.

As governments throughout the region seek to close gaping holes in their budgets, they are taking aim at United States multinational companies, especially Internet giants like Google and Amazon.com, which pay little or no taxes in Europe, despite generating billions of dollars in revenue on the Continent.

“Why on earth do you manipulate your accounts so that you get away with not paying corporation tax in the U.K.?” Margaret Hodge, a member of Parliament, asked representatives of Google, Amazon and Starbucks last week, during a heated committee hearing in London. ...

Google, Amazon, Starbucks and other American companies facing tax scrutiny say they are doing nothing wrong. They use complex accounting strategies to exploit national differences across Europe in corporate tax rates, which range from less than 10 percent to more than 30 percent, and loopholes that can reduce their effective European tax levies to almost nothing.

(Hat Tip: Ann Murphy, Mike Talbert.)

November 20, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

NLJ: Law Schools Brace for Supreme Court's Affirmative Action Ruling

National Law Journal:  Race's Role: Law Schools Brace for 'Fisher' Ruling:

Law school campuses have slowly grown more racially diverse during the past decade, to the point that minorities now account for 25% of law students nationally. But legal educators worry that the U.S. Supreme Court will use the closely watched Fisher v. Texas to curtail the use of affirmative action in college admissions and derail this modest progress.

"Even without a so-called affirmative-action ban, law schools aren't doing great in terms of diversity," said Vermont Law School professor Jackie Gardina, co-president of the Society of American Law Teachers (SALT). "Schools are still struggling to fill a class that is representative of the people who live in this country, and that's without a real roadblock from the Supreme Court. Would we move to 95% white if they were to ban it?"

Legal educators as a group consider affirmative action their most effective tool in boosting diversity, and they haven't been shy about expressing their support for it. A significant portion of the 73 amicus briefs backing the University of Texas' affirmative-action plan in Fisher were submitted by law professors or law school advocacy groups, including the Association of American Law Schools, the Law School Admission Council and SALT. Also participating were Martha Minow and Robert Post, deans at Harvard Law School and Yale Law School, respectively.

Chief Justice John Roberts Jr. famously declared in 2007: "The way to stop discrimination on the basis of race is to stop discriminating on the basis of race." But the amicus briefs argue that it would be virtually impossible to admit diverse law classes without taking at least some note of race. Minority applicants are less likely than whites to score high marks on the Law School Admission Test and achieve high grade-point averages, they said. And some of the amici argued that diversity in the classroom benefits all students by helping to break down stereotypes and expose them to different perspectives. Others argued that law schools have a moral imperative to help increase the number of minority lawyers in the United States.

Red: Total law School Enrollment; Blue: Minority Law School Enrollment

NLJ Chart

November 20, 2012 | Permalink | Comments (0) | TrackBack (0)

To Reduce Inequality, Tax Wealth, Not Income

Wealth TaxNew York Times op-ed:  To Reduce Inequality, Tax Wealth, Not Income, by Daniel Altman (NYU, Stern School of Business):

Whether you’re in the 99%, the 47% or the 1%, inequality in America may threaten your future. Often decried for moral or social reasons, inequality imperils the economy, too; the International Monetary Fund recently warned that high income inequality could damage a country’s long-term growth. But the real menace for our long-term prosperity is not income inequality — it’s wealth inequality, which distorts access to economic opportunities.  

Wealth inequality has worsened for two decades and is now at an extreme level. Replacing the income, estate and gift taxes with a progressive wealth tax would do much more to reduce it than any other tax plan being considered in Washington. ...

Trends in the distribution of wealth can look very different from trends in incomes, because wealth is a measure of accumulated assets, not a flow over time. High earners add much more to their wealth every year than low earners. Over time, wealth inequality rises even as income inequality stays the same, and wealth inequality eventually becomes much more severe. ...

American household wealth totaled more than $58 trillion in 2010. A flat wealth tax of just 1.5% on financial assets and other wealth like housing, cars and business ownership would have been more than enough to replace all the revenue of the income, estate and gift taxes, which amounted to about $833 billion after refunds. Brackets of, say, 0% up to $500,000 in wealth, 1% for wealth between $500,000 and $1 million, and 2% for wealth above $1 million would probably have done the trick as well.

(Hat Tip: Mike Talbert.)

November 20, 2012 in Tax | Permalink | Comments (4) | TrackBack (0)

Monday, November 19, 2012

Shanske Presents Property Tax Withholding Today at Loyola-L.A.

ShanskeDarien Shanske (UC-Hastings) presents Property Tax Withholding: What, How, Why Now? at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

The decline in the use of the general real estate property tax at the state and local level is well-known, as is the relation of this decline to the rise of revenue volatility. Yet is the relative decline of the property tax entirely inevitable, caused, for instance, by shifts in the property tax base? It seems too early to say for sure. After all, the taxes that have increased as the property tax has declined are collected much more efficiently. For instance, both the sales tax and the income tax utilize third parties, and the income tax also uses withholding. Related private charges, e.g., for a home alarm system or private school tuition, are also generally collected much more efficiently.

There is little reason that property taxes could not be withheld from income, especially in the vast majority of states with income taxes - indeed this is a service essentially already provided by many mortgage providers (through escrow). A property tax withholding regime instituted more broadly by state governments would not only smooth cash flows for both taxpayers and local governments, but administering the property tax along with the income tax could improve the property tax. Specifically, withholding in connection with income allows for the property tax to respond effectively to the liquidity and progressivity concerns that plague the property tax. For instance, circuit breaker-type protections could be instituted directly through the income tax. Such a regime would let “homevoters” respond directly to the relative merits of proposed projects without concern that they must insure themselves against future liquidity problems. Prima facie, this should lead to increased local funding of good projects. In short, states and localities have allowed a revenue source to wither because it is collected poorly even though it is one that could possibly significantly mitigate their revenue problems, particularly as to volatility.

Kirk Stark (UCLA) is the commenter.

November 19, 2012 in Colloquia, Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Twinkie Tax Policy: Deductibility of Advertising Food of 'Poor Nutritional Quality'

TwinkiesKay Bell and Kelly Erb rightly mock Rep. Dennis Kucinich for using the announcement by Hostess Brands that it is discontinuing the sale of Twinkies, Cupcakes, and Wonder Bread and laying off 18,500 workers to introduce H.R.6599:  "To amend the Internal Revenue Code of 1986 to protect children's health by denying any deduction for advertising and marketing directed at children to promote the consumption of food at fast food restaurants or of food of poor nutritional quality." As Kelly says:

Under the proposal, ads and marketing targeted at kids for fast food, “any food of poor nutritional quality” and “any brand under which the majority of products are food of poor nutritional quality” would result in the loss of tax breaks. Deductions associated with marketing those products would be disallowed, including travel, promotions and gifts.

It may be well-intentioned but it’s a terrible idea. The notion of what is “poor nutritional quality” is so subjective that it borders on the ridiculous. While an attempt is made to qualify what might constitute what’s considered unsuitable, it’s a recipe for disaster.

November 19, 2012 in Tax | Permalink | Comments (3) | TrackBack (0)

Henderson: How to Increase Your Law School's Academic Reputation in U.S. News

US News (2013)The Legal Whiteboard:  How to Increase Your Law School's Academic Reputation, by William D. Henderson (Indiana):

I have uncovered four factors that are associated with statistically significant increases and decreases of USN Academic Reputation.  To illustrate, consider the scatterplot below, which plots the 1993 ordinal rank of USN Academic Reputation against the 2012 ordinal rank [click on graph to enlarge].

Acadrep
BarFour sets of dot (Red, Blue, Orange, and Green), each representing distinctive shared features of law schools, are distinctly above or below the regression line.  These patterns suggests that changes in USN Academic Reputation over time are probably not the result of random chance. But we will get to significance of the Red, Blue, Orange, and Green dots shortly.  

The primary takeaway from the above scatterplot is that 2012 USN Academic Reputation is overwhelmingly a function of 1993 USN Academic Reputation.   Over 88% of the variation is explained by a school's starting point 20 years earlier.  ...

That said, the scatterplot does not show a perfect correlation; slightly less than 12% of the variation is still in play to be explained by influences other than starting position.  A small handful of schools have made progress over these 20 years (these are the school above the regression line) and a handful have fallen backwards (those below the line).

BarThe Red circles, Blue rectangles, Orange diamonds, and Green circles represent four law school level attributes.  The Reds have been big gainers in reputation, and so have the Blues. In contrast, the Oranges have all experienced big declines; and as as a group, so have the Greens.  When the attributes of the Red, Blue, Orange, and Green Schools are factored into the regression, all four are statistically signficant. (Red, p =.000; Blue, p = .001; Orange, p = .012; Green, p = .000) and the explained variation increases 4% to 92.3%.  As far as linear model goes, this is quite an impressive result. ...

RedChanged the Law School Name (average gain: +39.0) ...

BlueConservatives Welcome (average gain: +28.3) ...

    Name changes and conversativism are the factors associated with an increases in USN Academic Reputation.  What are negative factors?

    OrangeScandals and negative NY Times coverage (average drop: -24.3) ...

     

    GreenSchools in the Rust Belt (average drop: -13.0) ...

    After [considering] ... starting position, name changes, conservativism, scandals, and Rust Belt status, ... [t]he statistics suggests that there is really no variation left to explain. ... Law faculty are comprised of very smart people, yet we organize virtually all of our hiring, strategic plans, and marketing efforts in an effort to make gains in a reputational game that cannot be won. 

    November 19, 2012 in Legal Education | Permalink | Comments (6) | TrackBack (0)

    Ranchers, Farmers Brace for 'Death Tax' Impact of Fiscal Cliff

    November 19, 2012 in Tax | Permalink | Comments (1) | TrackBack (0)

    Google Law Review Rankings

    Google Scholar LogoFrom my friend and colleague Rob Anderson (Pepperdine), Google Ranks Law Reviews:

    Google has announced an enhancement to its Scholar Metrics that allows users to view citation rankings of journals in various categories. Among the rankings is Google's ranking of law reviews, as well as a number of specialty law reviews such as technology law and international law. The rankings are based on Jorge Hirsch's "h-index," which is an alternative to impact factor as a measure of a journal's importance.


    Law Reviewh1-indexh5-median
    1. Harvard 44 71
    2. Stanford 44 67
    3. Columbia 43 70
    4. Pennsylvania 41 70
    5. Michigan 38 65
    6. UCLA 38 59
    7. Texas 38 55
    8. Yale 38 53
    9. Georgetown 36 63
    10. Virginia 36 55
    11. California 35 45
    12. Minnesota 33 53
    13. Duke 33 52
    14. Chicago 33 44
    15. Northwestern 32 49
    16. Illinois 32 45
    17. Iowa 31 54
    18. Cornell 31 50
    19. J. Law & Econ. 30 51
    20. Notre Dame 30 45

    November 19, 2012 in Law Review Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

    SSRN Tax Professor Download Rankings

    SSRNSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through November 1, 2012) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

     

     

     

    All-Time Downloads

     

    Recent Downloads

    1

    Reuven Avi-Yonah (Mich.)

    27,520

    Reuven Avi-Yonah (Mich.)

    5382

    2

    Paul Caron (Cincinnati)

    20,865

    Richard Kaplan (Illinois)

    4132

    3

    Louis Kaplow (Harvard)

    19,700

    Adam Chodorow (Ariz. St.)

    3997

    4

    Vic Fleischer (Colorado)

    17,405

    Paul Caron (Cincinnati) 

    3231

    5

    James Hines (Michigan)

    16,863

    Katie Pratt (Loyola-L.A.)

    2673

    6

    Ted Seto (Loyola-L.A.)

    15,985

    Carter Bishop (Suffolk)

    2572

    7

    Richard Kaplan (Illinois)

    15,654

    Jen Kowal (Loyola-L.A.)

    2492

    8

    Dennis Ventry (UC-Davis)

    13,932

    Bridget Crawford (Pace)

    2451

    9

    David Walker (Boston U.)

    12,275

    Herwig Schlunck (Vand.)

    2319

    10

    Carter Bishop (Suffolk)

    12,253

    David Gamage (UCBerkeley)

    2230

    11

    David Weisbach (Chicago)

    12,147

    Ted Seto (Loyola-L.A.)

    2189

    12

    Chris Sanchirico (Penn)

    11,945

    Ed Kleinbard (USC)

    2184

    13

    Katie Pratt (Loyola-L.A.)

    11,806

    Louis Kaplow (Harvard)

    2150

    14

    Francine Lipman (UNLV)

    11,625

    James Hines (Michigan)

    1953

    15

    Robert Sitkoff (Harvard)

    11,476

    Wendy Gerzog (Baltimore)

    1939

    16

    Jen Kowal (Loyola-L.A.)

    10,727

    Erik Jensen (Case Western)

    1848

    17

    Herwig Schlunck (Vand.)

    10,673

    Dan Shaviro (NYU)

    1530

    18

    Ed McCaffery (USC)

    10,589

    David Weisbach (Chicago)

    1521

    18

    Bridget Crawford (Pace)

    10,517

    Brad Borden (Brooklyn)

    1501

    20

    Brad Borden (Brooklyn)

    10,369

    Heather Field (UC-Hastings)

    1444

    21

    Wendy Gerzog (Baltimore)

    9976

    Vic Fleischer (Colorado)

    1441

    22

    Dan Shaviro (NYU)

    9456

    Francine Lipman (UNLV)

    1417

    23

    Steve Bank (UCLA)

    9390

    David Walker (Boston U.)

    1349

    24

    Erik Jensen (Case Western)

    8513

    Allison Christians (McGill)

    1333

    25

    Michael Knoll (Penn)

    8392

    Christopher Hoyt (UMKC)

    1332

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

    Continue reading

    November 19, 2012 in Law School Rankings, Legal Education, Tax, Tax Prof Rankings | Permalink | Comments (0) | TrackBack (0)

    Brown: A Real World Approach to Law Faculty Diversity

    National Law Journal op-ed:  A Real World Approach to Diversity, by Dorothy A. Brown (Emory):

    Focus on work experience would lead to a more diverse faculty, better able to impart what students need to know.

    Law school faculty hiring has been in the news of late. The recent lawsuit against the University of Iowa College of Law over a charge of anti-conservative political bias in faculty hiring resulted in a partial jury verdict: a finding of no violation of the plaintiff's First Amendment claims and a hung jury on her due process and equal protection claims. The Association of American Law Schools (AALS) annual Faculty Recruitment Conference (affectionately known as the "meat market"), where prospective law faculty interviewed for jobs, recently concluded in Washington. As you are reading this, those same applicants are being flown all around the country for full-day interviews in the hopes that they will land a coveted tenure-track job.

    Just like the market for lawyers, the market for law faculty is extremely competitive. There are far more applicants than available slots. As our students struggle to get jobs, prospective law faculty struggle to get hired. ...

    Who gets hired as a law professor and therefore trains tomorrow's leaders is often a function of who their mentors were while they were in law school. The problem with that, however, is which students get mentored has a decided race and gender bias. The majority of law professors are white and male. The majority of new law teachers are white and male. The most recent data on the AALS website shows that 71% of all law professors who self-identified are white (two-thirds are men; one-third are women). To be sure, there are examples of cross-racial mentoring. However, experience teaches us that we tend to invest time in those who remind us of ourselves. ...

    A couple of weeks ago New York University School of Law announced that it had revamped its third-year program. NYU wants its law graduates to be trained to be "collaborative problem solvers who are able to function effectively in teams and are prepared to lead those teams." Very little in the current FAR helps a prospective employer find future academics who have those skills and can impart them to their students. That is a problem. In fact, if a law professor gets hired who actually has a 21st century skill set, it likely was not intentional. Here's the $64,000 question: With NYU making changes to its third-year curriculum to create 21st-century-ready graduates, are they going to change who they hire? How can they teach what they don't know? ...

    The good news is that roughly half of all entry-level teachers get their jobs through the meat market — which means that half do not. Therefore if law schools want to bypass the meat market they can make changes themselves. All they have to do is let it be known that they want to hire people with experience in successfully working in teams and who care about teaching collaborative learning skills. Those schools will not have to wait long for the right kind of candidates to apply for jobs. However, I'm not holding my breath.

    (Hat Tip: Francine Lipman.)

    November 19, 2012 in Legal Education | Permalink | Comments (3) | TrackBack (0)

    Tax Consequences of the Florida Marlins - Toronto Blue Jays Trade

    MarlinsWall Street Journal:  These Marlins' Tax Bills Are Headed Way North:

    The five Miami Marlins players headed to the Toronto Blue Jays [right: RHP Josh Johnson, LHP Mark Buehrle, SS Jose Reyes, Utility man Emilio Bonafacio, catcher John Buck] are going to one of the world's most cosmopolitan cities to play for a team that figures to be far better than their old one. But for them, the move also comes at a price: a steep tax hike.

    Florida has no state income tax. Ontario, on the other hand, is about to impose a new, higher tax rate on the rich. As a result, the trade will cost the five players a combined $8.4 million in lost income, according to an analysis by Robert Raiola, the sports and entertainment group manager at Fazio, Mannuzza, Roche, Tankel and LaPilusa, a New Jersey-based tax, accounting and advisory firm. ...

    For the purpose of these calculations, Raiola assumed 5% agent fees; that 43% of players' income would be subject to Canadian taxes (subtracting road games and spring training); a 49.53% combined tax rate for Canada and Ontario; a 40.5% U.S. tax rate; and assumed the players have established residency in Florida with the Marlins. Raiola also factored in a partial foreign tax credit that the players can use on their U.S. returns, along with so-called "jock taxes," in which some states require visiting athletes to pay state income tax for each game they play there.

    WSJ Chart

    November 19, 2012 | Permalink | Comments (2) | TrackBack (0)

    FactCheck.org: The Tax Cliff and the IRS's Enforcement of ObamaCare

    FactCheck LogoFacts Falling Off the Fiscal Cliff:

    In press conferences on the so-called fiscal cliff, House Speaker John Boehner greatly exaggerated the negative effect on the economy of raising taxes on upper-income individuals.

    • Boehner erred when he said that “the problem with raising tax rates on the wealthiest Americans is that more than half of them are small-business owners.” That’s incorrect. Boehner’s spokesman said the speaker simply misspoke, but Boehner is a repeat offender with this bogus claim.
    • Boehner repeatedly cited an Ernst & Young analysis to claim that raising taxes on upper-income earners would “destroy nearly 700,000 jobs in our country.” But that analysis assumes revenue from the taxes would be used “to finance a higher level of government spending,” even though Obama would use the added revenue to reduce the deficit. The analysis also takes an extremely long view: Only “two-third to three-quarters of the long-run effect” is expected to occur within a decade.
    • Boehner said raising taxes on those making over $250,000 “would slow our economy.” But according to a recently released report by the nonpartisan Congressional Budget Office, the effect on the economy would be “relatively small.”

    The “fiscal cliff” is shorthand for a $560 billion mix of tax hikes and deep spending cuts that are scheduled to kick in at the end of 2012. The Congressional Budget Office warned that absent intervention by federal legislators, the confluence of tax hikes and spending cuts “will lead to economic conditions in 2013 that will probably be considered a recession.” President Barack Obama and congressional Democrats have advocated that the George W. Bush tax cuts be allowed to expire for those making over $250,000. In a press conference on Nov. 9, Boehner said he believes a tax hike on the wealthy would harm an already fragile economy.

    Boehner has got a point — some small-business owners will see taxes go up, and the CBO projects some restraint on economic growth as a result. But he and other Republicans exaggerate this greatly, even to the point of making statements that are downright false sometimes.

    ObomaCare Form_Page_1Group’s ‘Obamacare Tax Form’ Evades Facts:

    A conservative group misleads taxpayers on the Affordable Care Act and the IRS’s future role in enforcing it. Americans for Tax Reform posted a “projected” IRS tax form on its website that claims to “help families and tax specialists prepare” for new tax provisions under the health care law. But ATR makes several false claims:

    • The group claims taxpayers will have to disclose “personal identifying health information” to the IRS to prove they have insurance. It quotes an IRS official who said taxpayers will report their “insurance information.” But the official also said the agency will not collect “any personal health information.”
    • ATR says employers must offer preventative coverage that includes “abortion and hair loss treatment.” That’s not true. The law requires smaller insurance plans to cover preventative services, but states decide if those services include abortion. Even then, each state must have at least one plan that does not cover abortion.
    • The group says failing to comply with the law could result in “interest against your property.” The law specifically bans the IRS from filing liens and levies against persons who fail to pay the tax for lacking insurance.
    • ATR claims taxpayers can apply for a waiver from the health care law. That’s false. The government has given temporary waivers to some companies — not taxpayers — regarding one provision of the law, which involves benefit caps.

    ATR says it created the tax form — just days before the presidential election — as a ”service to the public.” Our public service is to correct the record.

    November 19, 2012 | Permalink | Comments (4) | TrackBack (0)

    TaxProf Blog Weekend Roundup

    Sunday, November 18, 2012

    PrawfsBlawg Debate: Reforming Legal Education's Finances

    PrawfsblawgMatt Bodie (St. Louis) hosted a five-part series on the law school financial crisis on PrawfsBlawg last week:

    Reforming Legal Education's Finances: Let's Debate Specifics.  This fall a lot of law schools are talking about finances. While the blawgosphere and even the national press have addressed the basic market changes driving these discussions, I have not seen a lot of specifics about the difficult financial choices at stake. Next week, I'll be posting a series of questions comparing different strategies for dealing with the new market realities. The intent of these questions is to get folks talking about the costs and benefits of different approaches, so we may have a better handle of how to address them at our own institutions.

    Reforming Legal Education's Finances: Questions for the Week.  This week PrawfsBlawg will be hosting an open forum on legal education's finances. Each day we'll have a fresh set of alternatives to debate as we consider ways to reform law school spending. ... [T]he intent of these questions is to pose these issues not in the abstract, but in contrast with other possibilities. The hope is to get people talking about the costs and benefits of different avenues for actual change as schools face hard choices.

    1. Is it better to cut tuition or class size?
    2. If tuition is to be cut, is it better to cut the sticker price or to increase aid to students? And if increasing aid to students, should it be through merit scholarships or loan repayment assistance?
    3. If a school is cutting costs, is it better to cut positions or to cut salaries?
    4. If faculty salaries are to be cut, is it better to have an across-the-board cut or cuts based on different principles?
    5. Should the faculty be responsible for implementing a cost-cutting plan or is that better left to the administration?

    November 18, 2012 in Legal Education | Permalink | Comments (6) | TrackBack (0)

    Top 5 Tax Paper Downloads

    SSRNThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and a new paper debuting on the list at #5:

    1.  [269 Downloads]  James Couzens, Andrew Mellon, the 'Greatest Tax Suit in the History of the World,' and Creation of the Joint Committee on Taxation and Its Staff, by George K. Yin (Virginia)
    2.  [256 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)
    3.  [164 Downloads]  Rethinking FIRPTA, by David J. Herzig (Valparaiso)
    4.  [154 Downloads]  Romney's Tax Plan Won't Work Like Reagan's Did, by Bruce Bartlett
    5.  [142 Downloads]  Technological Innovation, International Competition, and the Challenges of International Income Taxation, by Michael J. Graetz (Columbia) & Rachael Doud (J.D. 2012, Yale)

    November 18, 2012 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)