TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 2, 2013

Columbia Journal of Tax Law Publishes New Issue

Columbia The Columbia Journal of Tax Law has published its seventh issue (Vol. 4, No. 1):

  • Andrew P. Morriss (Alabama) & Lotta Moberg, Cartelizing Taxes: Understanding the OECD’s Campaign against “Harmful Tax Competition”, 4 Colum. J. Tax. L. 1 (2012):  "Formed in 1961 to promote global economic and social well-being, the Organisation for Economic Co-operation and Development (OECD) has become the collective voice of rich countries on international tax issues. After an initial focus on improving commerce through addressing double taxation issues, the organization shifted to a focus on restricting tax competition and increasing automatic exchanges of tax information. In this paper we analyze the reasons for this shift in policy focus. After describing the history of the OECD’s work on taxation, we examine the OECD’s project against “harmful tax competition” as it has played out since its launch in the 1990s. We analyze the mechanisms behind the project from a public choice perspective. While typical economic models portray tax competition as a prisoner’s dilemma between governments, a more powerful perspective is of the incentives of politicians and bureaucrats. We conclude that the project against tax competition is an example of the interplay between the interests of politicians and international bureaucrats. The OECD project illustrates the role that international organizations play in competition among interest groups."

  • Ilan Benshalom (Hebrew University), Taxing Cash, 4 Colum. J. Tax. L. 65 (2012): "The cash economy enables, or at least significantly simplifies, many tax evasion schemes. This is not surprising; after all, cash transactions can go unreported and therefore remain concealed from both regulators and creditors. The tax collector operates as both a creditor and a regulator, which means that cash transactions impose negative externalities on tax collection and administration. These externalities could be corrected through a relatively simple Pigovian tax that would be imposed, prior to cash-mediated transactions, every time cash was withdrawn from the financial system. Tax authorities would not collect any tax when cash would be deposited.

    This article argues that such a cash tax would make tax collection both easier and more accurate. If a cash tax were imposed, most of the legitimate economy would shift to non-cash exchange methods. In such a setting, cash transactions would be effectively limited to two categories: low-value transactions and transactions that benefit from the anonymity associated with cash. Transactions associated with tax evasion and other types of criminal activities likely comprise most of the latter category. Hence, because cash would comprise a relatively small portion of the formal economy’s turnover, there are good reasons to believe that cash owners operating in the underground economy would be unable to roll over most of the cash-tax burden. This means that most of the cash-tax incidence would fall on those who use cash to engage in tax evasion or other forms of unreported behaviors. Such a cash tax would therefore reduce the lack-of-tax benefit associated with cash-based tax evasion along with the inequities and inefficiencies associated with it. Furthermore, it would allow policymakers to comprehensively address the externalities associated with unreported transactions in the cash economy."

  • Michelle Lyon Drumbl (Washington & Lee), Decoupling Taxes and Marriage: Beyond Innocence and Income Splitting, 4 Colum. J. Tax. L. 94 (2012): "Fourteen years ago, members of Congress sympathetically listened as divorcees testified to their struggles to raise children while being pursued by the Internal Revenue Service for tax debts, often unknown to them, that were attributable to their ex-husbands’ income. Rather than adopting one of many proposals to end joint and several liability, Congress instead elected to expand the grounds on which these individuals could seek relief from such liability. Since that time, taxpayers have seen a steady expansion of the grounds for so-called “innocent spouse relief” that has evolved through a combination of legislative, administrative, and judicial action. Yet the process for relief remains time-consuming, inefficient, and unpredictable. The majority of initial requests for innocent spouse relief are denied. The taxpayer can appeal administratively and also seek judicial review if relief is denied, but sometimes will spend several years and untold resources in pursuit of a claim that may ultimately be unsuccessful. The process is also a questionable use of Internal Revenue Service personnel, in that it frequently calls upon these employees to address the most intimate aspects of a failed relationship, including spousal abuse, addictions, and mental health problems. These employees often must make a determination based upon a “he-said, she-said” presentation of the facts—an odd task for an agency charged with enforcing the revenue laws.

    This article visits the historic rationales for joint and several liability, both in light of the flawed relief process and also in the context of modern-day American society, in which married couples constitute only half of all households and cohabitation is increasingly more common. I conclude that Congress should eliminate the “married” filing statuses and require each married individual to file a separate return. If it did so, joint liability and the innocent spouse relief process would both cease to exist. The historical policy justifications for imposing joint and several liability are no longer rational in light of changed demographics and technological advances. Rather than an “unusual privilege,” which it was long said to be, filing jointly has become a risky conundrum, particularly for low-income taxpayers. As the nation debates tax reform, it is appropriate to rethink the policy of retaining the “married” filing statuses in light of the ways in which family structures, society, and the Internal Revenue Code have changed since joint and several liability was introduced in 1938.

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