Wednesday, December 21, 2016
Hayes Holderness (Visiting Assistant Professor, Illinois) has accepted an entry-level tenure track position at Richmond:
His two most recent articles are:
- The Unexpected Role of Tax Salience in State Competition for Businesses, 84 U. Chi. L. Rev. ___ (2017): "Competition among the states for mobile firms and the jobs and infrastructure they can bring is a well-known phenomenon. However, in recent years, a handful of states have added a mysterious new tool to their kit of incentives used in this competition. Unlike more traditional incentives, these new incentives — which this Article brands “customer-based incentives” — offer tax relief to a firm’s customers rather than directly to the firm. The puzzle underling customer-based incentives is that tax relief provided to the firm’s customers would seem more difficult for the firm to capture than relief provided directly to the firm — strange, as a state’s primary goal is to subsidize the firm’s investment in the state. After examining the emergence of this new form of incentive, this Article offers a novel explanation for their use and potential for success. Specifically, it argues that the effects of predictable consumer biases, particularly with respect to the salience of the tax relief provided by the incentives to consumers, cause customer-based incentives to differ substantively from traditional incentives in ways that are beneficial to both firms and states. Customer-based incentives thus present an example of how taxpayer behavior can influence the substantive effects of tax provisions, even causing two provisions with the same substantive goal to differ on the ground. Taking these behavioral effects into account provides opportunities to increase the effectiveness of tax provisions."
- Taking Tax Due Process Seriously: The Give and Take of State Taxation, 19 Fla. Tax Rev. ___ (2017): "As the Internet has increased the ease and amount of interstate transactions, the states have struggled to require “remote vendors” — vendors without a physical presence in the taxing state — to collect or pay taxes. The states are attempting to overcome these struggles by lowering Commerce Clause limitations on their jurisdiction to tax, but meaningful limitations on such jurisdiction imposed by the Due Process Clause await the states. The Due Process Clause requires that state actions be fundamentally fair, and, to meet this standard, a state must provide a person with a benefit and the person must indicate acceptance of that benefit before the state can require the person to collect or pay taxes. These requirements limit the states’ jurisdiction to tax certain remote vendors; thus, the states must take the Due Process Clause seriously if they wish to fully solve their remote vendor issues."
Hayes recently published A Carrier in the Coal Mine Anticipating a New Age for State and Local Economic Development Incentives on the Illinois Law Review Blog (citations omitted): "Recently, the Trump administration touted a deal reached with Carrier Corporation under which Carrier will receive $7 million worth of incentives from Indiana for retaining roughly 800 jobs in the state rather than moving those jobs to Mexico. The incentives provided by Indiana are a classic example of state and local tax incentives for economic development—state offerings designed to encourage the recipient to engage in in-state activities. See Hayes R. Holderness, The Unexpected Role of Tax Salience in State Competition for Businesses, 84 U. Chi. L. Rev. __ (2017) (comparing traditional incentives to a new form of incentive, the “customer-based incentive”). Many commentators have observed that the incentives from Indiana are likely inconsequential for Carrier and have surmised that what really drove Carrier to retain the jobs was the favor curried with the President-elect. Whatever motivated Carrier, the Trump administration’s actions may signal a new age for state and local tax incentives for economic development, where the Federal government encourages their use as tools in the international competition for businesses. What might this age bring? The Trump administration’s apparent endorsement of the tax incentives provided by Indiana to Carrier indicates a willingness to promote the use of state and local tax incentives to keep businesses on American soil. It is too early to know precisely what the President-elect’s position with respect to the use of such incentives is, but in his speech regarding the Carrier deal, he stated that businesses “can leave from state to state, and they can negotiate good deals with the different states, and all of that. But leaving the country is going to be very, very difficult.” This type of attitude towards state and local economic development incentives ignores the economic harms of such incentives to states as well as their constitutional infirmity. Further, if the Trump administration pushes states and localities to provide tax incentives to keep their businesses from relocating abroad, it may spark legal battles among the states and among the international community, potentially destroying this tool."