TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, October 15, 2015

Oei Presents The Tax Lives Of Uber Drivers Today At Brooklyn

OeiShu-Yi Oei (Tulane) presents The Tax Lives of Uber Drivers: Evidence from Internet Discussion Forums (with Diane Ring (Boston College)) at Brooklyn today as part of its Faculty Workshop Series:

In this paper, we investigate the tax issues and challenges faced by ridesharing drivers by examining their interactions in three internet discussion forums: Reddit.com, Uberpeople.net, and the Intuit TurboTax AnswerXchange Forum. We subjected the data to quantitative analysis using descriptive statistics and qualitative content analysis, in order to generate a comprehensive description of what tax issues and concerns forum participants face, how taxes factor into their driving decisions, and how tax compliance and advising culture operates in the forums.

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October 15, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, October 13, 2015

Rees-Jones Presents Loss Aversion Motivates Tax Sheltering Today At Columbia

Rees-Jones 1Alex Rees-Jones (Pennsylvania) presents Loss Aversion Motivates Tax Sheltering: Evidence from U.S. Tax Returns at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

This paper presents evidence that loss aversion affects taxpayers as they file their annual tax returns. I model the decisions of a loss-averse tax filer who may use tax shelters to manipulate the "balance due" exchanged with the IRS. I use this model to derive distinguishing predictions of loss aversion which facilitate its identification and quantification in the field.

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October 13, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, October 12, 2015

Simkovic Presents The Knowledge Tax Today At USC

Simkovic 2Michael Simkovic (Seton Hall) presents The Knowledge Tax, 82 U. Chi. L. Rev. ___ (2015), at USC today as part of its Faculty Workshop Series:

Labor economists struggle to explain why the rates of return to higher education have remained much higher than the rates of return to other investments. This article proposes a novel explanation: distortionary taxation.

Economic theory suggests that when investments that are substitutes for one another are taxed inconsistently, investors are less likely to choose the investment option that is taxed more heavily. Unfavorable tax treatment of higher education relative to other forms of investment could create an undersupply of educated labor. This distortion would reduce economic growth and social welfare.

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October 12, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (3)

Schmalbeck Presents Subsidizing Big-Time College Sports Through The Income Tax Today At Loyola-L.A.

SchmalbeckRichard Schmalbeck (Duke) presents Subsidizing Big-Time College Sports through the Income Tax: The Ruling on the Field Should be Reviewed at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

The tax rules applying to the so-called “revenue sports”—football and men’s basketball—include two major unforced errors, one each by Congress and the IRS.

The IRS decided in 1980 that televised sports were no different than on-site events in terms of their relation to the exempt purposes of colleges and universities. As a consequence, the revenue generated by televised sports has never been regarded as derived from an unrelated trade or business, and hence not subject to the tax on such income.

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October 12, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, October 6, 2015

Stantcheva Presents Taxation And The International Mobility Of Inventors Today At Columbia

SSStefanie Stantcheva (Harvard) presents Taxation and the International Mobility of Inventors (with Ufuk Akcigit (Chicago) & Salomé Baslandze (Pennsylvania)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

This paper studies the effect of top tax rates on inventors' mobility since 1977. We put special emphasis on "superstar" inventors, those with the most and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors' locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors' counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. We find that superstar top 1% inventors are significantly affected by top tax rates when deciding where to locate.

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October 6, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, October 5, 2015

Dean Presents Social Enterprise And The Law Today At McGill

Dean (2015)Steven Dean (Brooklyn) presents Social Enterprise and the Law (Oxford University Press, 2016) (with Dana Brakman Reiser (Brooklyn)) at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series:

Social Enterprise and the Law explores how public and private law could be deployed to allow double bottom line ventures (those devoted simultaneously to profits for owners and promoting a social mission) to realize their potential. The book responds not just to the rise of the social enterprise phenomenon generally, but specifically to the emergence of an array of state law organizational forms designed to house social enterprises. As many Volkswagen owners have become all too aware, promises of social good from for-profit ventures can prove hollow. The hybrid organizational forms states have crafted heartily embrace the concept of blending the profit motive and social good but do surprisingly little to protect investors and entrepreneurs from finding themselves in the same position as the Volkswagen owners that “tried to buy a green, high-performance car and ended up being unwitting participants in a conspiracy to pollute the earth.” Ron Lieber, How VW Might Repay Aggrieved Diesel Owners, NY Times, Sept. 26, 2015, at B1 (quoting Ed Mierzwinski of U.S. PIRG).

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October 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Coelho Presents Responses To Financial Transaction Taxes In France And Italy Today At UC-Berkeley

Coehlo 2Maria Coelho (UC-Berkeley) presents Dodging Robin Hood: Responses to France and Italy's Financial Transaction Taxes at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar:

This paper looks at the effect of the introduction of financial transaction taxes in equity markets in France and Italy in 2012 and 2013, respectively, on asset returns, trading volume and market volatility. Using two natural experiments in an event study and difference-in-differences design, I identify bounds on elasticity estimates for three categories of avoidance channels: real substitution away from taxed assets, retiming (anticipation of transaction realizations and portfolio lock-in), and tax arbitrage (cross-platform and financial instrument shifting).

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October 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Homonoff Presents Behavioral Economics And Sin Tax Policy Design Today At Loyola-L.A.

HomonoffTatiana Homonoff (Cornell) presents Behavioral Economics and Sin Tax Policy Design at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Recent evidence suggests consumers pay less attention to commodity taxes levied at the register than to taxes included in a good’s posted price. This suggests that policymakers should consider a largely overlooked feature of the tax — the tax’s salience — when designing the optimal tax policy. For example, if this attention gap is larger for high-income consumers than for low-income consumers, policymakers can manipulate a tax’s regressivity by altering the fraction of the tax imposed at the register. Using variation in cigarette tax rates, we find that all consumers respond to taxes that appear in cigarettes’ posted price, while only low-income consumers respond to taxes levied at the register. This suggests that a revenue-neutral shift toward register taxes would lessen the tax’s regressivity.

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October 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, September 29, 2015

Sanchirico Presents Tax Inertia And Business Tax Reform Today At Columbia

SanchiricoChris William Sanchirico (Pennsylvania) presents  Tax Inertia: A General Framework with Specific Application to Business Tax Reform at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

A surprising degree of bipartisan consensus has lately formed in the United States around two propositions of business tax reform: that something should be done about the “lockout” of US multinationals’ foreign earnings; and that the corporate income tax rate should be reduced. This paper questions whether these two propositions are really consistent.

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September 29, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, September 28, 2015

Osofsky Presents The Case For Categorical Nonenforcement Today At Northwestern

Osofsky (2016)Leigh Osofsky (Miami) presents The Case for Categorical Nonenforcement, 69 Tax L. Rev. ___ (2015), at Northwestern today as part of its Tax Colloquium Series:

Executive nonenforcement of the law is a hot-button issue. An important question that has surfaced in the debate about such nonenforcement is whether categorical, or complete, prospective nonenforcement of the law is legitimate. A variety of scholars and commentators have suggested that it is not. This Article contests such claims by applying theories of agency legitimacy to the realities of IRS nonenforcement of the tax law. Doing so reveals that, in some circumstances, categorical nonenforcement may actually increase the legitimacy of the IRS’s nonenforcement.

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September 28, 2015 in Colloquia, Structuring a Tax Workshop Series, Tax | Permalink | Comments (1)

Tazhitdinovaat Presents The Effect Of Firm Incentives On Labor Supply Responses To Taxes Today At UC-Berkeley

TazhitdinovaatAlisa Tazhitdinovaat (UC-Berkeley) presents Adjust Me if I Can't. The Effect of Firm Incentives on Labor Supply Responses to Taxes at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar:

Using administrative data, I show evidence of strong behavioral responses -- in the form of sharp bunching -- to a threshold that generates large discontinuous changes both in the marginal tax rates and in the total income and payroll tax liability of individuals in Germany. To calculate elasticities of earnings with respect to net-of-tax rate I extend the bunching method to frameworks with large kinks and notches. Sharp bunching translates into elasticity estimates that are an order of magnitude larger than has been previously estimated using the bunching approach. Elasticity point estimates range from 0.20 to 0.37 for women and from 0.09 to 0.25 for men, depending on the year. To explain the magnitude of the observed response, I focus on firm incentives. I show theoretically that in the presence of search costs, the magnitude of labor supply responses to taxes depends not only on the magnitude of tax changes, but also on the statutory incidence of taxes, the elasticity of substitution between the individuals working under different tax regimes and on the incidence of job search burden.

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September 28, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mehrotra & Thorndike Present New Deal Legislation & 20th Century Progressive Taxation Today at Loyola-L.A.

TMAjay Mehrotra (Indiana) & Joseph Thorndike (Tax Analysts) present New Deal Legislation and the Long 20th Century of Progressive Taxation at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Fiscal policy plays only a minor role in the concept of a New Deal “order” as developed by Steve Fraser and Gary Gerstle. But their essay collection grows out of a broader historiography that minimizes the substantive importance of New Deal taxation, treating the issue as a vehicle for symbolic politics rather than substantive reform. In fact, taxes were a crucial element of the New Deal order — and one of its most powerful and durable legacies.

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September 28, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Altshuler Presents Lessons The U.S. Can Learn From Other Countries’ Territorial Systems Today at McGill

AltshulerRosanne Altshuler (Rutgers) presents Lessons the United States Can Learn from Other Countries’ Territorial Systems for Taxing Income of Multinational Corporations (with Stephen Shay (Harvard) & Eric Toder (Urban Institute)) at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series:

The United States has a worldwide system that taxes the dividends its resident multinational corporations receive from their foreign affiliates, while most other countries have territorial systems that exempt these dividends. This report examines the experience of four countries – two with long-standing territorial systems and two that have recently eliminated taxation of repatriated dividends.

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September 28, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, September 21, 2015

Galle Presents Regulating Internalities Today At Loyola-L.A.

Galle (2016)Brian Galle (Georgetown) presents Regulating Internalities at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

An extensive existing literature examines the optimal design of tools for correcting externalities. This Article is among the first to extend that literature to the field of internalities, or harms that individuals do to themselves. I show that several pieces of conventional wisdom in the externality literature likely do not hold in the internality context. For example, moral hazard concerns lead prior commentators to overwhelmingly favor sticks over carrots. Yet moral hazard is likely not a concern for internalities, implying that other factors that have traditionally gotten little attention, such as income effects, may be important. I also show that internality regulation can in some contexts be a highly efficient source of revenue—again unlike the externality context, there may be a “double dividend” for internality-correcting taxes. And, finally, I address some standard concerns with the project of regulating internalities generally.

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September 21, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Schmalbeck Presents Ending The Sweetheart Deal Between Big-Time College Sports And The Tax System Today At BC

SchmalbeckRichard Schmalbeck (Duke) presents Ending the Sweetheart Deal between Big-Time College Sports and the Tax System at Boston College today as part of its Tax Policy Workshop Series hosted by James Repetti and Diane Ring:

This paper was prepared for a recent conference of the National Center for Philanthropy and Law, of the NYU Law School. The overall topic was “Tax Issues Affecting Colleges and Universities,” and I was asked to address specifically those issues relating to athletics. This paper considers two specific issues that have in common that they involve college ”revenue” sports, and are plagued by egregiously bad tax rules.

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September 21, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Wednesday, September 16, 2015

Milligan Presents A Reset For The Child Tax Benefit System Today At Toronto

MilliganKevin Milligan (British Columbia) presents A Reset for the Child Tax Benefit System at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

There is a logical foundation for differential treatment of families with children under our tax system. However, trying to make good on this principle of special tax treatment for children has resulted in overwhelming complexity. For example, a family in British Columbia in 2012 had to assess its eligibility for ten separate child-focused tax measures. These benefits cross paths, conflict and confuse. The way forward, I suggest, is to rationalize the cornucopia of credits into one delivery method (I propose a refundable tax credit), to remove overlap by consolidating existing measures into fewer programs, and finally to impose a seriously simplified structure on the whole system.

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September 16, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Rosen Presents Artificial Intelligence And Predicting Tax Evasion Today at Cornell

RosenJacob Rosen (MIT) presents Tax Noncompliance Detection Using Co-Evolution of Tax Evasion Risk and Audit Likelihood at Cornell at 4:00 p.m. EST (live stream here) as part of its Joint Department of Information Science Colloquium Series:

We detect tax law abuse by simulating the co-evolution of tax evasion schemes and their discovery through audits. Tax evasion accounts for billions of dollars of lost income each year. When the IRS pursues a tax evasion scheme and changes the tax law or audit procedures, the tax evasion schemes evolve and change into undetectable forms. The arms race between tax evasion schemes and tax authorities presents a serious compliance challenge. Tax evasion schemes are sequences of transactions where each transaction is individually compliant. However, when all transactions are combined they have no other purpose than to evade tax and are thus non-compliant.

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September 16, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, September 14, 2015

Altshuler Presents Lessons The U.S. Can Learn From Other Countries’ Territorial Systems Today at Loyola-L.A.

AltshulerRosanne Altshuler (Rutgers) presents Lessons the United States Can Learn from Other Countries’ Territorial Systems for Taxing Income of Multinational Corporations (with Stephen Shay (Harvard) & Eric Toder (Urban Institute)) at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

The United States has a worldwide system that taxes the dividends its resident multinational corporations receive from their foreign affiliates, while most other countries have territorial systems that exempt these dividends. This report examines the experience of four countries – two with long-standing territorial systems and two that have recently eliminated taxation of repatriated dividends. We find that the reasons for maintaining or introducing dividend exemption systems varied greatly among them and do not necessarily apply to the United States. Moreover, classification of tax systems as worldwide or territorial does not adequately capture differences in how countries tax foreign-source income.

Theodore Seto (Loyola-L.A.) is the commentator.

September 14, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Zidar Presents State Taxes And Spatial Misallocation Today At UC-Berkeley

ZidarOwen Zidar (Chicago) presents State Taxes and Spatial Misallocation (with Pablo Fajgelbaumat (UCLA), Eduardo Morales (Princeton) & Juan Carlos Suarez Serrato (Duke)) at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

There is substantial dispersion in the distribution of tax rates across U.S. states, and proposals to reform state tax systems abound. What are the effects of the state tax structure on aggregate outcomes and the distribution of economic activity? We build a general-equilibrium model that accommodates several types of spatial interactions among states and realistic heterogeneity in state tax structures. We estimate key model elasticities from data on the distribution of economic activity and state finances from 1980-2010, and using the estimated model we measure the spatial misallocation caused by state taxes.

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September 14, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, September 8, 2015

Grinberg Presents Breaking BEPS: The New International Tax Diplomacy Today at Georgetown

GrinbergItai Grinberg (Georgetown) presents Breaking BEPS: The New International Tax Diplomacy at Georgetown today as part of its Faculty Workshop Series:

In the course of the G-20’s “Base Erosion and Profit Shifting” (BEPS) project, the field of international tax is adopting an institutional and procedural architecture for multilateral action that resembles that of international financial law. But will that architecture work in the international tax context?

This Article begins by illustrating that in the BEPS project international tax agreements are being reached through soft law instruments and procedures of the same type as those that characterize international financial law. It then draws lessons from the rich literature analyzing the implementation of international financial law to assess the enforceability of international tax agreements reached using those instruments and procedures. While this initial analysis is largely pessimistic, the Article then describes how model tax treaty law — although also a form of soft law — is highly effective, and differentiates the political economy of international tax law from the political economy of international financial law.

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September 8, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, September 1, 2015

Bankman Presents Using The 'Smart Return' To Reduce Tax Evasion At Alabama

Bankman (2014)Joseph Bankman (Stanford) presented Using the 'Smart Return' to Reduce Tax Evasion (with Clifford Nass (Stanford) & Joel Slemrod (Michigan)) at Alabama yesterday as part of its Faculty Colloquium Series:

Tax evasion costs government over 400 billion dollars a year. We suggest enforcement efforts can be strengthened by redesigning the tax return to take advantage of social psychology research, and industry experience with data-driven systems. To illustrate the potential of this approach, in this paper we propose three categories of changes that merit testing through pilot studies. The first involves changing the wording on existing returns to increase the psychological cost of evasion and increase the perceived expectation of detection. The second builds appeals to morality in the return itself through the use of a short phrase containing a "self-relevant" noun. The third uses on-line "conversational agents" to ask adaptive questions.

September 1, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Thursday, August 27, 2015

Prebble Presents Tax Papers In Amsterdam

Prebble (2015)John Prebble (Victoria University of Wellington) is presenting two tax papers in Amsterdam:

Aug. 27:   General Anti-Avoidance Rules and the Rule of Law at the International Bureau of Fiscal Documentation (IBFD)

Aug. 28Kelsen, the Principle of Exclusion of Contradictions, and General Anti-Avoidance Rules in Tax Law at the University of Amsterdam as the Opening Address to inaugurate a new Advanced Master’s Degree in International Tax Law.

August 27, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, August 24, 2015

Morse Presents Safe Harbors, Sure Shipwrecks Today At Indiana

Morse (2015)Susan C. Morse (Texas) presents Safe Harbors, Sure Shipwrecks at Indiana today as part of its Faculty Speaker Series:

Safe harbors and sure shipwrecks are rule-standard hybrids that appear throughout statutory, regulatory and case law. Safe harbors guarantee compliance, and also leave open the question of compliance for fact situations not described by the safe harbor. Sure shipwrecks provide a conclusive noncompliance result and also leave open the question of compliance outside the sure shipwreck. Safe harbors and sure shipwrecks produce asymmetric behavioral incentives for persons subject to them. Like bright-line rules, safe harbors encourage behavior to converge from both sides of the line drawn by the safe harbor. This is because of the advantage of a zero chance of liability within the safe harbor. Sure shipwrecks generally encourage convergence only from the noncompliant side of the line. Ex ante versus ex post policy making, overinclusion and underinclusion, interest group influence, and other factors also affect safe harbor and sure shipwreck policy making.

August 24, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, August 17, 2015

Simkovic Presents The Knowledge Tax Today At Loyola-L.A.

Simkovic 2Michael Simkovic (Seton Hall) presents The Knowledge Tax, 82 U. Chi. L. Rev. ___ (2015), at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Labor economists struggle to explain why the rates of return to higher education have remained much higher than the rates of return to other investments. This article proposes a novel explanation: distortionary taxation.

Economic theory suggests that when investments that are substitutes for one another are taxed inconsistently, investors are less likely to choose the investment option that is taxed more heavily. Unfavorable tax treatment of higher education relative to other forms of investment could create an undersupply of educated labor. This distortion would reduce economic growth and social welfare.

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August 17, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (12)

Wednesday, May 20, 2015

Chorvat Presents Expectations And Expatriations: A Long-Run Event Study Today at Oxford

Chorvat (Elizabeth) (2015)Elizabeth Chorvat (Illinois) presents Expectations and Expatriations: A Long-Run Event Study at the Oxford University Centre for Business Taxation today as part of its Research Seminar Series:

This paper represents the first event study of corporate expatriations since Desai and Hines (2002), and is the first study to link corporate expatriation behavior to intangibles. Utilizing a bootstrap methodology, the paper demonstrates that corporate expatriations – whether naked inversions or redomiciliations in the context of business combinations – generate statistically and economically significant excess returns on the order of 225% above market returns in the years following the inversion. Moreover, notwithstanding the public nature of the inversion announcement, which should be a signal of extraordinary future profits, there has historically been no price response to the signal. Because the tax cost of the inversion transaction is based on market price, their inability to send a credible signal of future profits provides corporate managers the opportunity to reorganize outside the U.S. at a reduced tax cost, if they believe that the benefits to expatriation outweigh the cost.

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May 20, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, May 19, 2015

Mason Presents Citizenship Taxation Today At Oxford

Mason (2015)Ruth Mason (Virginia) presents Citizenship Taxation, 88 S. Cal. L. Rev. ___ (2015), at the Oxford University Centre for Business Taxation today as part of its Research Seminar Series:

The United States is the only country that taxes its citizens’ worldwide income, even when those citizens live indefinitely abroad. This Article critically evaluates the traditional equity, efficiency, and administrability arguments for taxing nonresident citizens. It also raises new arguments against citizenship taxation, including that it puts the United States at a disadvantage when competing with other countries for highly skilled migrants. 

Citizenship taxation was originally designed to punish “economic benedict Arnolds” who fled the United States during the Civil War to avoid Civil War taxes and the draft. In the modern era, migrating from the United States is not the disloyal act of a wealthy few. Our global economy and our increasingly interconnected world create professional and personal opportunities that Americans can only claim by moving abroad. Concerns about a few high-profile, rich tax defectors who can be sanctioned with targeted anti-abuse regimes should not drive tax policy governing seven million Americans who reside abroad.

May 19, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, May 5, 2015

Polsky Presents Private Equity Tax Games Today At NYU

Polsky (2015)Gregg D. Polsky (North Carolina) presents A Compendium of Private Equity Tax Games at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

This paper will describe and analyze tax strategies, lawful and unlawful, used by private equity firms to minimize taxes. While one strategy — the use of “carried interest” — should by now be well understood by tax practitioners and academics, the others remain far more obscure. In combination, these strategies allow private equity managers to pay preferential tax rates on all of their risky pay (through carried interest), pay preferential tax rates on much of their non-risky pay (through management fee waivers and misallocations of their expense deductions), and push much of the residual non-risky pay down to their funds’ portfolio companies who, unlike the fund, can derive significant tax benefits from the resulting deductions (through monitoring fees and management fee offsets).

May 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, April 28, 2015

Schizer Presents Energy Tax Expenditures Today at NYU

Schizer (2016)David M. Schizer (Columbia) presents Energy Tax Expenditures: Worthy Goals, Competing Priorities, and Flawed Institutional Design at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Part I outlines the environmental, national security, and economic goals of energy tax expenditures.  Part II discusses how empirical uncertainty and heterogeneity complicate efforts to pursue these objectives.  Part III considers challenges that arise because of conflicts in our goals.  Part IV canvasses the political economy advantages of subsidies over Pigouvian taxes, and offers suggestions about how to make Pigouvian taxes more politically palatable.  Part V surveys five institutional design challenges that arise under currently law – most of which are more acute with subsidies than with Pigouvian taxes – and offers suggestions about how to mitigate them.  Part VI is the conclusion.

April 28, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, April 23, 2015

Crane Presents Uncovering A Meaning For 'Direct Tax' Today At Ohio State

CraneCharlotte Crane (Northwestern) presents Uncovering a Meaning for “Direct Tax” at Ohio State today in a tax colloquium sponsored its Law, Finance and Governance Program:

This paper argues that the references article I to “direct taxes” (which if “layed and collected” by Congress must be apportioned among the states) is a reference to taxes the burden of which can be traced to a particular location, and thus to a particular state. The paper looks to the history of the grant of the impost to the Confederation Congress to support this argument. It demonstrates that throughout the decade before 1787, those involved in financing the War distinguished the impost (which could not appropriately be credited to the state in which it was paid when reckoning whether that state had met its fiscal obligation to the Confederation) from those “direct taxes” (which should be so credited). This same distinction was embedded in the Constitution, to provide both for the final reckoning of those obligations of the states and for the ongoing support of the United States.

Erik Jensen (Case Western) is the discussant.

April 23, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, April 21, 2015

Albouy Presents The Optimal Taxation Of Housing Consumption Today At NYU

AlbouyDavid Albouy (Illinois) presents Should We Be Taxed Out Of Our Homes? The Optimal Taxation of Housing Consumption at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Optimal tax theory suggests that it is more efficient to tax housing as a consumption good than other forms of consumption as it is a complement to leisure and is produced more intensively from land, an inelastic factor, than other goods. This tax rate appears to be at least 50 percent higher than other forms of consumption, justifying high rates of property taxation, particularly in areas with inelastic housing supply. It may be efficient to offer a lump sum transfer to households who choose to live close to high-paying jobs, justifying infra-marginal subsidies to housing units in some high-price areas. Proximity to amenities may also influence optimal tax rates depending on whether they are substitutes or complements to labor supply or housing consumption.

April 21, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Monday, April 20, 2015

Field Presents Aggressive Tax Planning and the Ethical Tax Lawyer Today at Pepperdine

Field (2015)Heather Field (UC-Hastings) presents Aggressive Tax Planning and the Ethical Tax Lawyer at Pepperdine today as part of our Tax Policy Colloquium Series:

[H]ow should a tax planner, who wants to engage in “permissible tax planning” but not cross the line over into “unethical loophole lawyering,” exercise her discretion and judgment? This paper seeks to answer this question by drawing on both (a) the extensive literature on lawyering and professionalism and (b) the social science literature regarding factors that contribute to biased decision-making and unintentional lapses in judgment. The explicit incorporation of these strands of literature into the discourse on tax ethics helps each tax planner operationalize, on an individual basis and in a way that aligns with her values, both the general and tax-specific rules of professional conduct. The existing tax ethics literature primarily focuses either on how to comply with the rules governing practice or on how the rules should be improved. Thus, this paper contributes to the literature by focusing on the issues that the rules leave to the discretion of the tax practitioner (rather than on the issues that the rules address) and by approaching the discussion from a lawyering perspective20 (rather than from a policymaking perspective).

Specifically, this paper argues that a lawyer seeking to pursue a career as an ethical tax planner should identify and implement her philosophy of lawyering to help her make difficult discretionary decisions in a principled way, and when implementing that approach to lawyering, she should work to counteract the subtle factors that can skew her professional judgment. ...

Ultimately, this paper argues that an important part of being an ethical tax planner, particularly when dealing with contestable tax positions, includes being deliberate about how one approaches the task of giving tax planning advice and being self-aware about the ways in which one exercises judgment. By fleshing out the concept of ethical tax planning, I hope to give our students confidence and guidance as they embark on (hopefully, ethical) careers as tax planners, and I hope to ease the tension between tax academics’ scholarly work condemning aggressive tax planning and their classroom work, in which they often teach students how to use those same tax planning techniques. And perhaps this limited defense of the ethics of the tax planning profession can help to rehabilitate the public image of tax lawyers.

Update:  Post-presentation lunch:

Field

April 20, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, April 15, 2015

Shay Presents Designing a U.S. Minimum Tax on Foreign Business Income Today at Penn

Shay (2014)Stephen Shay (Harvard) presents Designing a U.S. Minimum Tax on Foreign Business Income (with Cliff Fleming (BYU) & Robert Peroni (Texas)) at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Chris William Sanchirico and Reed Shuldiner:

This paper continues an exploration of second best international tax reforms, in this case, how a U.S. minimum tax on foreign income earned by a controlled foreign corporation should be designed to protect the U.S. against erosion of its corporate income tax base and combat tax competition by low-tax intermediary countries. A minimum tax should be an interim tax that preserves the residual U.S. tax on foreign income. Such a tax would more effectively limit incentives to seek low-taxed foreign income while ameliorating pressure to retain excess earnings abroad. Corresponding changes should be made to the U.S. corporate residence definition, to the residence taxation of U.S. portfolio investors in foreign corporations and to the source taxation of foreign MNCs to reduce tax advantages under current law for investments in foreign corporations. These changes would reduce tax advantages for foreign parent corporate groups and incentives for U.S. corporations to expatriate as a consequence of increased U.S. taxation of foreign income.

April 15, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, April 14, 2015

Eissa Presents The Technology of Tax Collection and Compliance Today at Georgetown

EissaNada Eissa (Georgetown) presents The Technology of Tax Collection and Compliance: Electronic Billing Machines and The VAT at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John BrooksItai Grinberg, and David Schizer:

The expansion of the tax base in developing countries is increasingly recognized as an important policy goal, as an increase in domestic revenue sources promises to reduce aid dependence and reduce distortionary consequences of taxes on externally traded goods. This paper analyzes the adoption rate and tax compliance impacts of an innovative program in Rwanda, which introduced Electronic Billing Machines to strengthen VAT compliance. To do so, we combine quarterly data on all VAT payments from 2012 through 2014q3 with data on EBM activation over the same period.

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April 14, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Zelenak Presents The Differing Income Tax Treatments of Marriage at Different Income Levels Today at NYU

Zelenak (2014)Lawrence Zelenak, (Duke) presents For Better And Worse: The Differing Income Tax Treatments of Marriage at Different Income Levels, 93 N.C. L. Rev. 783 (2015), at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Although both marriage penalties and marriage bonuses exist at all income levels under the federal income tax, the system is tilted toward penalties for lower-income couples, toward bonuses for middle-income couples, and back toward penalties for upper-income couples. This Article begins by explaining how the tax rules produce these differing treatments of marriage at different points in the income distribution. It then argues that the increase in recent decades in the social acceptability and prevalence of cohabitation makes tax marriage effects a more serious concern—in terms of both behavioral effects and fairness—than in earlier decades.

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April 14, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Thursday, April 9, 2015

Kahng Presents The Taxation of Women in Same-Sex Marriages Today at Fordham

Kahng (2015)Lily Kahng (Seattle) presents The Not-So-Merry Wives of Windsor: The Taxation of Women in Same-Sex Marriages, 101 Cornell L. Rev. __ (2015), at Fordham today as part of its Faculty Workshop Series:

In United States v. Windsor, the Supreme Court invalidated the Defense of Marriage Act definition of marriage as “between one man and one woman” and is now poised to recognize a constitutional right to same-sex marriage. Windsor cleared the way for same-sex couples to be treated as married under federal tax laws, and the Obama administration promptly announced that it would recognize same-sex marriages for tax purposes. Academics, policymakers, and activists lauded these developments as finally achieving tax equality between gay and straight married couples. This Article argues that the claimed tax equality of Windsor is illusory and that the only way to achieve actual equality is to eliminate taxation on the basis of marital status.

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April 9, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, April 8, 2015

Kane Presents A Defense of Source Rules in International Taxation Today at Penn

Kane (2015)Mitchell Kane (NYU) presents A Defense of Source Rules in International Taxation,  32 Yale J. on Reg. ___ (2015), at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Chris William Sanchirico and Reed Shuldiner:

The concept of “source” is central to the functioning of the current international tax system. To the extent the “source” of income is meant to reflect the spatial location of income, however, many academic commentators have come to regard the concept as completely incoherent. Further, that incoherence is viewed as a partial explanation of the perceived artificiality and frailties of current instantiations of source rules. In this essay I make three basic claims.

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April 8, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, April 7, 2015

Morse Presents Tax Savings for U.S. Headquartered, Non-U.S.-Incorporated Multinational Firms Today at Georgetown

Morse (2015)Susan C. Morse (Texas) presents Tax Savings for U.S. Headquartered, Non-U.S.-Incorporated Multinational Firms (with Eric J. Allen (USC)) at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John BrooksItai Grinberg, and David Schizer:

To summarize, we find that non-U.S.-incorporated profitable firms have better tax results compared to U.S.-incorporated profitable firms. Loss firms incorporated in tax havens tend to have worse tax results compared to U.S.-incorporated loss firms. This suggests that some non-U.S.-incorporated multinationals with efficient tax planning structures face the problem that their losses, as well as their profits, must be allocated to low-tax jurisdictions. Their transfer pricing and other tax planning strategies, in other words, may be sticky.

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April 7, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mills Presents Managerial Characteristics and Corporate Taxes Today at NYU

Mills 2Lillian Mills (Texas) presents Managerial Characteristics and Corporate Taxes at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Motivated by literature and anecdotal evidence, we identify a salient managerial characteristic that is associated with higher tax compliance. We find that managers with military experience pursue less aggressive tax planning than other managers, and pay an estimated $1-$2 million more in corporate taxes per firm-year. These managers also undertake less aggressive tax strategies with smaller reserves for uncertain tax benefits and fewer tax havens. However, they perform better in several gray areas in corporate reporting. We conclude that boards hiring these managers gain the benefit of less aggressive financial reporting that would require more governance to constrain.

April 7, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, April 6, 2015

Fleischer Presents Libertarianism and the Charitable Tax Subsidies Today at Pepperdine

MirandaMiranda Perry Fleischer (San Diego) presents Libertarianism and the Charitable Tax Subsidies at Pepperdine today as part of our Tax Policy Colloquium Series:

Although many Americans claim to subscribe to libertarian theories of justice, tax scholarship is largely silent about the interaction between libertarian principles and the structure of our tax system. This is not surprising, for what springs to mind when a legal academic hears the word “libertarianism” is Robert Nozick’s argument that taxation is slavery. If all taxation is indeed slavery, why bother analyzing libertarian principles for insights into our tax system? This dismissal, however, ignores the diversity of libertarian thought. To that end, this Article mines the nuances of libertarian theory for insights into one feature of our tax system: the charitable tax subsidies.

Exploring the nuances of libertarian theory yields some surprising results. Some strands of libertarian thought suggest that the charitable tax subsidies are in and of themselves illegitimate. These strands of libertarianism forbid not only redistribution but also anything except the most minimal provision of public goods needed to protect life and property, such as defense. Yet several other strands do see a role for the state to engage in a varying amount of redistribution or to provide varying amounts of public goods. On one spectrum are interpretations that admit that the state should play a role in providing public goods (strictly defined) and/or provide a provide a safety net to the very poorest but no more, and on the other is an interpretation of left-libertarianism that might support something akin to our current structure.

Update:  Post-presentation lunch:

Fleischer Lunch

April 6, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, April 2, 2015

Hickman Presents Treasury's Retroactivity Today at Northwestern

Hickman 2014 2Kristin Hickman (Minnesota) presents Treasury's Retroactivity at Northwestern today as part of its Tax Colloquium Series hosted by Lawrence Zelenak:

In Bowen v. Georgetown University Hospital, the Supreme Court described retroactivity as "not favored in the law" and generally rejected allowing federal administrative agencies to adopt regulations "altering the past legal consequences of past actions."  Unlike most regulatory agencies, Treasury and the IRS are expressly authorized by Congress to adopt regulations with precisely such primary retroactive effect.  Specifically, IRC § 7805(b) grants Treasury and the IRS the power to backdate tax regulations under a variety of circumstances.  Preliminary analysis shows that Treasury and the IRS utilize this authority regularly with little judicial oversight for abuse of discretion.  Using empirical data, this article will explore more fully Treasury and IRS utilization of the authority to adopt retroactively effective regulations interpreting the Internal Revenue Code.

April 2, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Lederman Presents Does the IRS Need Reform? Or Does IRS Oversight? Today at DePaul

LedermanLeandra Lederman (Indiana) presents Does the IRS Need Further Reform? Or Does IRS Oversight? at DePaul today as part of its Faculty Workshop Series:

The IRS has a difficult mission and sometimes has failed quite publicly. It last underwent a major structural reform in the late 1990s, in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998. The restructuring imposed major costs on the IRS’s tax collection mission. The reform was spurred in part by horror stories solicited by Congress, to which the IRS could not respond for fear of disclosing confidential taxpayer information. More recently, the IRS did not respond effectively to accusations that it inappropriately scrutinized and delayed the tax-exemption applications of right-wing organizations. Numerous Congressional committees held hearings regarding the alleged targeting, and Congress’s rhetoric was quite partisan.

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April 2, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, March 31, 2015

Hayashi Presents Phantom Income and the Simple Economics of Paying In Kind Today at Georgetown

HayashiAndrew T. Hayashi (Virginia) presents Taxing Committed Consumption and the Simple Economics of Paying in Kind at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John BrooksItai Grinberg, and David Schizer:

This article explores the effects of taxing committed consumption, that is, consumption which can only be adjusted at a cost. Two examples of committed consumption, housing services from homeownership and future consumption from savings, make up a significant share of many households’ consumption profile. In the presence of adjustment costs, the form in which a tax is remitted—whether the tax is paid “in kind” or not—affects both behavioral responses to and welfare effects of the tax. My analysis quantifies and evaluates these effects, which have been introduced in many tax policy contexts under the heading of taxpayer liquidity concerns. These concerns have shaped tax law and loom large in current debates about wealth taxation, tax accounting, and mark-to-market reforms, but have not been analyzed for their welfare effects.

March 31, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oei Presents Can Sharing Be Taxed? Today at NYU

OeiShu-Yi Oei (Tulane) presents Can Sharing Be Taxed?, 93 Wash. U. L. Rev. ___ (2016) (with Diane M. Ring (Boston College)), at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

The past few years have seen the rise of a new model of production and consumption of goods and services, often referred to as the “sharing economy.” Fueled by startups such as Uber and Airbnb, sharing enables individuals to obtain rides, accommodations, and other goods and services from peers via the Internet or mobile application in exchange for payment. The rise of sharing has raised questions about how it should be regulated, including whether existing laws and regulations can and should be enforced in this new sector or whether new ones are needed.

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March 31, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, March 30, 2015

Thomas Presents User-Friendly Taxpaying Today at Indiana

Thomas (2015)Kathleen DeLaney Thomas (North Carolina) presents User-Friendly Taxpaying at Indiana today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

Our income tax system is notoriously complex. The sheer volume of the tax code, along with the technical nature of its provisions, means that many individuals don’t fully understand the tax rules that apply to them. This Article refers to this type of tax complexity as “substantive complexity.” Although many commentators have argued for reforms that would simplify the substance of our tax laws, others have argued that substantive complexity is necessary if we want to tax each person according to his or her individual circumstances.

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March 30, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mehrotra Presents Corporate Taxation and the Regulation of Early 20th Century American Business Today at Indiana

MehrotraAjay K. Mehrotra (Indiana) presents Corporate Taxation and the Regulation of Early Twentieth-Century American Business (with Steven A. Bank (UCLA)) at Indiana today as part of its Ostrom Political Theory and Policy Analysis Workshop Series:

In the early twentieth century, the taxation of modern business corporations became increasingly important to the development of American democracy. During that time, governments at all levels began to view business corporations not only as sources of badly needed public revenue, but also as potentially dangerous wielders of concentrated economic power. To combat the growing dominance of corporations, many fiscal reformers sought to use corporate taxation as a mode of regulatory governance. This paper explores the motives and intentions of fiscal reformers during critical junctures in the development of early twentieth-century U.S. corporate taxation. It seeks to explain how changing historical conditions shaped corporate tax law and policy. More specifically, this paper investigates why activists at certain times turned to taxation as a mode of corporate control, and why at other times they used tax policy to promote corporate growth. By focusing on the pivotal ideas and actions of key political economists, social commentators, and lawmakers, this paper attempts to answer the question: why did reformers see taxation as a viable form of public control over corporate power?

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March 30, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, March 25, 2015

Schön Presents Neutrality and Territoriality in European Tax Law Today at Penn

SchoenWolfgang Schön (Max Planck) presents Neutrality and Territoriality: Competing or Converging Concepts in European Tax Law? at Pennylvania today as part of its Tax Law and Policy Workshop Series hosted by Chris William Sanchirico and Reed Shuldiner:

This article presents an analysis of the ECJ case law on the interaction between the fundamental freedoms and national tax systems. It pleads for a strict application of a unilateral neutrality principle based on non‐discrimination and rejects those strands of the judicature which apply an overall perspective to the taxation of cross‐border events by two (or more) involved states. The article criticizes the emerging trend in the ECJ’s jurisprudence to stress the territorial demarcation of Member States’ taxing rights and supports a sophisticated application of the concept of “coherence” in order to reconcile the requirements of neutrality with the territorial limitations of taxing power.

March 25, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, March 24, 2015

Osofsky Presents The Case for Categorical Nonenforcement Today at NYU

Osofsky (2015)Leigh Osofsky (Miami) presents The Case for Categorical Nonenforcement at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Executive nonenforcement of the law is a hot-button issue. An important question that has surfaced in the debate about such nonenforcement is whether categorical, or complete, prospective nonenforcement of the law is legitimate. A variety of scholars and commentators have suggested that it is not. This Article contests such claims by applying theories of agency legitimacy to the realities of IRS nonenforcement of the tax law. Doing so reveals that in some circumstances categorical nonenforcement may actually increase the legitimacy of the IRS’s nonenforcement. Categorical nonenforcement can serve as a particularly salient means of communicating nonenforcement decisions, which may lead to greater political accountability, increasing the legitimacy of nonenforcement under the political accountability theory of agency legitimacy. Also owing to its ability to make enforcement decisions particularly salient, categorical nonenforcement may yield greater public deliberation, increasing the legitimacy of nonenforcement under the civic republican theory of agency legitimacy. Categorical nonenforcement also can serve as a practical (though perhaps not legally enforceable) means for high-level officials to commit the agency to a policy of nonenforcement, which may increase the legitimacy of nonenforcement under the nonarbitrariness theory of agency legitimacy. Categorical nonenforcement, of course, may not always be legitimacy enhancing, nor does this Article attempt to claim that it is. Rather, this Article fundamentally claims that viewing nonenforcement through the lens of agency legitimacy may help apply core values of democratic governance, which are obscured or missed by the existing analyses, to agencies’ inevitable, systematic nonenforcement of the law.

March 24, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Monday, March 23, 2015

Polsky Presents Private Equity Tax Games Today at Pepperdine

Polsky (2015)Gregg D. Polsky (North Carolina) presents A Compendium of Private Equity Tax Games at Pepperdine today as part of our Tax Policy Colloquium Series:

This paper will describe and analyze tax strategies, lawful and unlawful, used by private equity firms to minimize taxes. While one strategy — the use of “carried interest” — should by now be well understood by tax practitioners and academics, the others remain far more obscure. In combination, these strategies allow private equity managers to pay preferential tax rates on all of their risky pay (through carried interest), pay preferential tax rates on much of their non-risky pay (through management fee waivers and misallocations of their expense deductions), and push much of the residual non-risky pay down to their funds’ portfolio companies who, unlike the fund, can derive significant tax benefits from the resulting deductions (through monitoring fees and management fee offsets). 

Update:  Post-presentation lunch:

Lunch

March 23, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, March 19, 2015

Schizer Presents Taxes, Subsidies, and Energy Innovation Today at Northwestern

SchizerDavid M. Schizer (Columbia) presents Taxes, Subsidies, and Energy Innovation at Northwestern today as part of its Tax Colloquium Series hosted by Lawrence Zelenak:

Part I outlines the environmental, national security, and economic goals of our energy subsidies. Part II considers how conflicts among these goals, as well as empirical uncertainty, undermine efforts to pursue them effectively. Part III demonstrates why poorly crafted subsidies increase overall demand for energy, and also require the government to pick winners. This Part also shows that the real problem is not so much using subsidies instead of taxes, but using “proxy” policies in lieu of “results-based” policies. Part IV focuses on “demand reduction” subsidies, analyzing challenges in funding energy efficiency and alternative energy. Part V considers “supply enhancement” strategies, exploring problems with subsidizing oil production. Part VI considers how the traditional tax policy issues of distribution, excess burden, and revenue apply to energy subsidies. Part VII is the conclusion.

March 19, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Singhal Presents Firm Misreporting and Limits to Tax Enforcement Today at UCLA

Singhal (2015)Monica Singhal (Harvard) presents Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement (with Paul Carrillo (George Washington) & Dina Pomeranz (Harvard)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Jason Oh and Alexander Wu:

Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature has argued that the use of third party information to verify taxpayer self-reports is critical for tax enforcement and the growth of state capacity. However, there may be limits to the effectiveness of third party information if taxpayers can substitute misreporting to less verifiable margins. We present a simple framework to demonstrate the conditions under which substitution will occur and provide strong empirical evidence for substitution behavior by exploiting a natural experiment in Ecuador. We find that when firms are notified by the tax authority about detected revenue discrepancies on previously filed corporate income tax returns, they increase reported revenues, matching the third party estimate when provided. Firms also increase reported costs by 96 cents for every dollar of revenue adjustment, resulting in minor increases in total tax collection.

March 19, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)