TaxProf Blog

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

Wednesday, March 7, 2018

ABA Defends Denial Of Cooley Law School's Request To Open New Location

Thomas Cooley Logo (2017)ABA Journal, Denial of Cooley Law's Request to Open New Location Is Reasonable, ABA Motion Argues:

Given that Western Michigan University Thomas M. Cooley Law School already admits students who don’t appear capable of finishing law school and being admitted to practice law, it was reasonable to deny the school’s request to open a new location that would likely bring in even more students, the American Bar Association argued in a March 2 federal court filing.

“Because Cooley is already improperly admitting students who do not ‘appear capable’ of completing law school and being admitted to the bar, nothing required defendants to approve Cooley expanding to admit yet more students,” the March 2 filing states.

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March 7, 2018 in Legal Education | Permalink | Comments (0)

Tax Policy Center Hosts Conference Today On Wealth Taxation, Entrepreneurship, And Philanthropy

Tax Polcy Center Logo (2017)The Tax Policy Center hosts a conference today on Wealth Taxation, Entrepreneurship, and Philanthropy (live webcast from 9:00-10:30am EST):

Entrepreneurs strengthen the economy directly by innovating and taking risks, and indirectly through their contributions to philanthropic organizations. The tax code affects entrepreneurial activity and can encourage or stifle an entrepreneur’s philanthropic giving. At this forum, scholars will discuss new research that examines how estate and inheritance taxes affect entrepreneurship and how income and estate taxes affect the very wealthy. A discussion will follow about giving patterns among wealthy entrepreneurs and ways entrepreneurs are engaging in philanthropy in the 21st century.

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March 7, 2018 in Conferences, Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, March 6, 2018

Philipps Presents Gendering The Analysis Of Tax Expenditures Today At NYU

PhilipsLisa Philipps (Osgoode Hall) presents Gendering the Analysis of Tax Expenditures: Bridging Two Solitudes in Canadian Fiscal Policy at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

This paper seeks to connect two fiscal policy files that have attracted significant scholarly and public interest in Canada since the 2015 election of a new federal government led by Prime Minister Justin Trudeau. Within a few months the government acted on an election promise by launching a Federal Review of Tax Expenditures. This was followed by a second, less anticipated announcement that it would undertake a gender-based analysis of budget measures. The federal budget of March 2017 included an inaugural Gender Statement, with a commitment to further develop this tool in future. Each of these projects carries important potential for fiscal reform but they have so far unfolded in parallel, conceptually isolated from one another. Our research considers what additional insights could be gained by bringing the two together. How might a gender analysis further illuminate the distributive impacts, behavioural effects and cost efficiency of tax expenditures? And what are the limitations of a gender budgeting exercise that focuses on direct spending measures, without equal attention to the revenue side of the budget and specifically tax expenditures? ...

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March 6, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Solomon Presents Drivers And Effects Of The 2017 Tax Act Today At Georgetown

SolomonEric Solomon (Ernst & Young) presents Drivers and Effects of the 2017 Tax Act at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by Lilian Faulhaber and Itai Grinberg:

Introduction
On December 22, 2017, the President signed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (P.L. 115-97), hereinafter called the 2017 Tax Act (or the Act). The 2017 Tax Act made substantial changes to the Internal Revenue Code, particularly lowering the corporate tax rate and revising the international tax provisions. In the words of Mark Prater, Deputy Staff Director and Chief Tax Counsel for the Senate Finance Committee, three important factors in the development of this Act were policy, process and politics.

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March 6, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Terry Smith, Distinguished Research Professor Facing Termination For Bullying Other Faculty Of Color, Sues DePaul For Discrimination

SmithABA Journal, DePaul Law Prof Who Defended Colleague in N-Word Controversy Sues School For Alleged Bias:

An African-American professor at DePaul University's College of Law is back in the news after coming to the defense of a white colleague over his controversial use of the N-word in class.

Terry Smith had backed Donald Hermannthe subject of student complaints for using the racial slur in a criminal law hypothetical about a white supremacist.

Smith told the Chicago Sun-Times that Hermann’s use of the N-word “was not gratuitous,” and that Hermann was perhaps the most progressive of his white colleagues.

Smith’s regard for Hermann does not extend to the law school and its dean. In a civil rights lawsuit filed last Wednesday in Chicago federal court, Smith claims the school retaliated against him because of his advocacy for racial diversity at the school. Among the defendants is law dean Jennifer Rosato Perea, Law360 reports in an article noted by Above the Law.

“For the better part of a decade,” the suit said, “Professor Smith has complained about an environment at the law school that is hostile to him. This has caused faculty to retaliate by freezing him out of the law school’s power structure.”

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March 6, 2018 in Legal Education | Permalink | Comments (0)

More Tax Profs Weigh In On South Dakota v. Wayfair

Following up on this morning's post, 60 Tax Profs File Amicus Brief Urging Supreme Court To Overrule Quill v. North Dakota:

Edward Zelinsky (Cardozo), The Political Process Case to Overturn Quill v. South Dakota:

By deciding to review Wayfair v. South Dakota, the US Supreme Court has thrust itself into the long and contentious debate about the proper tax treatment of internet sales. As I argue [The Political Process Argument for Overruling Quill, 82 Brook. L. Rev. 1177 (2017)], the Court should use this opportunity to overturn Quill v. North Dakota. In light of the relevant political process concerns, the Supreme Court should overrule Quill in the Court’s role as guardian of the states against federal commandeering. ...

Adam B. Thimmesch (Nebraska), A Unifying Approach to Nexus Under the Dormant Commerce Clause, 116 Mich. L. Rev. Online ___ (2018):

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March 6, 2018 in New Cases, Scholarship, Tax | Permalink | Comments (0)

60 Tax Profs File Amicus Brief Urging Supreme Court To Overrule Quill v. North Dakota

Sixty tax law professors and economists filed an amicus brief at the Supreme Court Monday urging the Justices to overrule the Dormant Commerce Clause holding of Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which bars states from enforcing sales taxes against retailers who lack a "physical presence" in the state. From the brief:

In Quill Corp. v. North Dakota, the Court emphasized that its dormant Commerce Clause analysis was based on “structural concerns about the effect of state regulation on the national economy.” 504 U.S. 298, 312 (1992). The Court was especially concerned about the effect of taxation on the mail-order industry, and it believed that maintaining the physical presence rule would “foster[] investment by businesses and individuals.” Id. at 315-18. It also believed that its rule would reduce compliance costs for businesses and individuals engaged in commerce across state lines. See id. at 313 n.6. For those reasons, the Court reaffirmed the physical presence rule first announced in National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967).

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March 6, 2018 in Ari Glogower, Daniel Hemel, David Gamage, David Herzig, Erin Scharff, New Cases, Orly Mazur, Sloan Speck, Tax Profs | Permalink | Comments (3)

Law Professors Are Paid Less, Work As Hard As Lawyers Do

Inside Higher Ed, ‘Poorly Paid’ Professors:

Professors earn about 15 percent less than others with advanced degrees, finds a study circulated Tuesday by the National Bureau of Economic Research.

The study, Why Are Professors 'Poorly Paid'?, uses data from the Current Population Survey to compare the salaries and other characteristics of those with Ph.D., Ed.D., J.D. or M.D. degrees. Those who reported their profession as "postsecondary teacher" were compared to everyone else. The study was conducted by Daniel S. Hamermesh, an economist at Barnard College.

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March 6, 2018 in Legal Education | Permalink | Comments (6)

Lucas: Voter Psychology And The Carbon Tax

Gary Lucas, Jr. (Texas A&M), Voter Psychology and the Carbon Tax, 90 Temple L. Rev. 1 (2017):

Economists across the political spectrum argue that a carbon tax is the most effective and economically efficient policy for addressing climate change. Voters, however, strongly oppose the carbon tax and instead favor “green” subsidies and command-and-control regulations. If carefully designed, these policies might complement a carbon tax, but by themselves, they will make global warming mitigation incredibly expensive and perhaps even infeasible. Moreover, if poorly designed, subsidies and regulations can be counterproductive.

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March 6, 2018 in Scholarship, Tax | Permalink | Comments (0)

Hollywood At Pepperdine: ABC's 'For The People' Goes To Law School

We

I had a blast attending a screening at Pepperdine of the pilot episode of the new ABC show, For the People. The show's creator (Paul William Davies) and three of the stars came to Pepperdine for the event (Susannah Flood, Wesam Keesh, and Regé-Jean Page).  Victoria Schwartz moderated the discussion, which included Chris Goodman and me.

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March 6, 2018 in Legal Education | Permalink | Comments (0)

Monday, March 5, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Wallace & Glogower's Shades Of Income

This week, Mirit Eyal-Cohen (Alabama) reviews Shades of Basic Income by Clint Wallace (South Carolina) & Ari D. Glogower (Ohio State).

Mirit-Cohen (2018)Clint Wallace and Ari Glogower wrote this timely article as we witness expanding enthusiasm for the idea of Universal Basic Income among researchers, policymakers, and representatives across the political range. The Article begins by providing the definition and fundamental pillars of the basic income concept. The concept, which was proposed more than two hundred years ago by Thomas Paine, encompasses direct and unconditional cash transfers that are “not of the nature of a charity but of a right “from a government to its adult citizens. The Article goes on to outline the shared traits and contrasts between basic income and features of the current progressive tax system such as the personal exemption and standard deduction. It differentiates basic income from other government transfer programs by emphasizing that basic income transfers money to beneficiaries (even those without taxable income), it is generally awarded to all designated adult citizens with minimal conditions for eligibility, and usually places no restrictions on the use of the grant. The Article uses four hypothetical taxpayers to exemplify these effects of basic income: low-income (income up to $1,000), lower-middle-income (income up to $30,000), upper-middle-income (income up to $80,000), and high-income (income above $180,000). Meant to illustrate a point, these examples could work similarly when using present day amounts to reflect these classes. The authors conclude there are many familiar analogues between the way the progressive tax and basic income designs work, which makes the concept of basic income, in their opinion, not so much the exotic policy tool that is claimed to be by some of its critics.

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March 5, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Oei & Ring Present Tax And Labor Law: New § 199A Today At BYU

Oei Ring (2018)Shu-Yi Oei (Boston College) & Diane Ring (Boston College) present The Other Labor Law? New IRC § 199A and the Impact of Tax on Workplace Arrangements at BYU today as part of its Tax Policy Colloquium Series hosted by Cliff Fleming and Gladriel Shobe:

As part of the 2017 tax reform, Congress enacted new IRC § 199A of the Internal Revenue Code. This new “qualified business income” (QBI) provision grants passthrough taxpayers, including qualifying workers who are independent contractors, a deduction equal to 20% of a specifically calculated base income amount. An important question is new Section 199A’s effects on work and labor markets, and specifically whether the new provision will give rise to a large-scale shift in the workplace, causing many workers to be reclassified as independent contractors.

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March 5, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

McMahon: Tax Policy Elegy

ABA Tax LawyerMartin J. McMahon, Jr. (Florida), 2018 Erwin N. Griswold Lecture Before the American College of Tax Counsel: Tax Policy Elegy, 71 Tax Law. ___ (2018):

For over four decades there have been unrelenting calls to make the tax code “fair, simple, and efficient.” But despite nine major tax acts between 1969 and 2003, along with many less extensive tax acts, the refrain for a “fair, simple, and efficient” tax code has continued to be heard. This continuing plea is not surprising, because over the decades the tax system has evolved to ask the highest income earners to pay less in taxes, become ever more complex, and eschewed “efficiency” in favor of the allowance of an ever-increasing number of tax preferences. Tax act after tax act failed to produce a fair, simple, and efficient tax code. The recently enacted Tax Cuts and Jobs Act is simply another failure to enact tax reform that provides a fair, simple, and efficient tax code. The call for a “fair, simple, and efficient” tax code has become a mere trope. True “tax reform” entails revising the tax code better to meet normative tax policy criteria.

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March 5, 2018 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (1)

Rob Anderson And Rick Cupp Receive Pepperdine Faculty Scholarship Award

ACCongratulations to the recipients of the Dean’s Award for Excellence in Scholarship, announced at our 45th Annual Pepperdine Law School Dinner on  Saturday night:

The Dean makes the selection after considering the recommendation made by the Award Selection Committee, which consists of (1) the Associate Dean for Research and Faculty Development, and (2) two to four faculty members, selected by the Dean, who have strong national scholarly reputations. The Committee’s recommendation is based primarily upon the originality of the scholarly work and the importance of its contribution to the academic literature. This year's co-winners are:

Prior winners:

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March 5, 2018 in Legal Education | Permalink | Comments (0)

Lesson From The Tax Court: The Tax Lawyer's Wedding Toast

During the first week of teaching federal income tax I give a homework assignment where I ask students to compare the 2011 tax returns of Mitt Romney and Hillary Clinton. Students must decide who had the heavier tax burden. You can find these returns (and many more) on the Tax Analyst Tax History website. Here’s what we usually come up with in class:

  Total Income Taxable Income Tax     % of Total Inc. % of Taxable Inc.
Romney $13,709,608  $9,007,709  $1,912,529 14%    21%
Clinton $14,899,139  $11,628,845  $4,336,068 29%    37%

My students are surprised by this result. Although they had similar total incomes, Romney and Clinton paid hugely different amounts and percentages of taxes no matter how you measure tax burden. But there is nothing nefarious about it. It simply reflects Congressional choice to tax capital gains at a lower rate than ordinary income.

To get the lower tax rate the gain must come from a sale or exchange of something called a “capital asset” that has been held for more than one year. Romney’s income came mostly from sales or exchanges of capital assets while Clinton’s came mostly from her labor. That difference in source made the difference in tax. Whatever one thinks about Clinton’s speaking fees, they still resulted from her labor and so were taxed at significantly higher rates than Romney’s capital gain income, even though dollars derived from labor have the same purchasing power as dollars derived from capital.

This preferential tax treatment for capital gains over labor income is a subsidy whereby Congress shifts dollars from one set of taxpayers (those like Clinton) to another set of taxpayers (those like Romney). It’s a subsidy just like the Earned Income Tax Credit (EITC) except that the EITC shifts dollars from higher earning taxpayers to lower earning taxpayers. So who does Uncle Sugar love more? Why, folks like Romney!! In 2016 the federal government spent about $106 billion to subsidize taxpayers who, like Romney, received income from capital sales or exchanges. In comparison, it spent $63 billion on the EITC subsidy. You can see these figures in the JCT’s latest Estimates of Federal Tax Expenditures.

Congress does put some restrictions on this rate subsidy. For example, §1211 generally prevents taxpayers from deducting capital losses against ordinary income.  After all, if a gain from the sale or exchange of a capital asset gets a lower rate, then a resulting loss should not be able to shelter otherwise higher taxed gain but only similarly taxed gains.

So when taxpayers have gain from the sale of some kind of property held for more than one year, they really want that lower tax rate. They want their gains to be from the sale of a capital asset. Contrariwise, when taxpayers have losses from the sale of some kind of property, taxpayers would really like to deduct those losses from their ordinary income, the kind that gets taxed at a higher rate. They want those losses to be from the same of property that is not a capital asset.

So what the heck is a “capital asset”? That is the lesson in Sugar Land Ranch Development, LLC, Sugar Land Advisors, LLC, Tax Matters Partner v. Commissioner, T.C. Memo 2018-21 (February 22, 2018). There, the taxpayers were able to transform properties that did not qualify as capital assets before 2008 into properties that did qualify as capital assets when they sold the properties for a net gain in 2012. So they got the rate subsidy. How’d they do that? Details below the fold, along with the Tax Lawyer’s Wedding Toast.

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March 5, 2018 in Bryan Camp, New Cases, Tax | Permalink | Comments (2)

Law Professors As Plaintiffs

Robert M. Jarvis (Nova), Law Professors as Plaintiffs, 81 Alb. L. Rev. 145 (2018):

To date, it appears no one has systematically examined lawsuits brought by law professors.[Fn.10] Yet doing so provides a different way to look at the academy and obtain a sense of what it means to work and have a career as a law professor. What is particularly striking is how often the same three issues are at the root of these lawsuits: dissatisfaction with, and professional jealousy of, faculty colleagues; disagreements with, and distrust of, administrators; and a feeling that others are receiving better, and undeserved, treatment.
[Fn.10: Individual reporting of such lawsuits, on the other hand, occurs regularly on such web sites as Above the Law, Jonathan Turley, TaxProf Blog, The Faculty Lounge, and The Volokh Conspiracy.]

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March 5, 2018 in Legal Education, Scholarship | Permalink | Comments (2)

Schmalbeck, Soled & Thomas:  The Case For A Carryover Tax Basis Regime

Richard Schmalbeck (Duke), Jay A. Soled (Rutgers) & Kathleen DeLaney Thomas (North Carolina), Advocating A Carryover Tax Basis Regime (At Least for Now), 92 Notre Dame L. Rev. ___ (2017):

For close to a century, an important (but unfortunate) feature of the Internal Revenue Code has been a rule that the tax basis of any asset is made equal to its fair market value at death. Notwithstanding the substantial revenue losses associated with this rule, Congress has retained it for reasons of administrative convenience.

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March 5, 2018 in Scholarship, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, March 4, 2018

A Taxing Oscars: $100,000 Swag Bags Come With $50,000 Tax Bill

OscarsMoney, This Year's Oscar Swag Bags Could Come With a $50,000 Tax Bill:

Swag bags are a big perk of going to the Oscars. But movie stars who accept the goodies could owe a hefty tax bill. ...

For top-earning movie stars, the result could be a tax bill that eats up roughly half the value of the bag. While the recent Tax Cuts and Jobs Act lowered the top federal income tax rate, it still amounts to a hefty 37%. There’s also state income tax, which in California tops out 13.3%. In other words, movie stars who collect a gift bag worth $100,000 could end up owing $50,300 in state and federal taxes. ...

To be sure, stars have some options to avoid paying out of pocket for stuff they don’t really want, says San Francisco tax lawyer Robert Wood [Oscars $100K Swag Bag's Taxing Price Tag].

IRS, Gift Bag Questions and Answers:

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March 4, 2018 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

45th Annual Pepperdine Law School Dinner: Our Place In The World

Dinner

I was honored to speak last night at the 45th Annual Pepperdine School of Law Dinner at the Beverly Wilshire Hotel in Beverly Hills.  The theme of the dinner was Our Place in the World, which is particularly appropriate this year in light of the $8 million gift we received in September to support our global justice program (the largest single endowment gift in the law school's history).

In my remarks, I of course wove Hamilton clips into the tapestry of Pepperdine Law School's story:

  • Non-stop, to highlight Alexander Hamilton's scholarly work writing 51 of the 85 Federalist Papers to showcase our upcoming symposium on Federalism: Past Present, and Future as an example of the extraordinary scholarly work produced by our faculty.
  • My Shot, to show that Pepperdine is a "young, scrappy, and hungry" law school that has made enormous strides since our founding in 1970.
  • The Room Where It Happens, to describe the core of the Pepperdine student experience as what happens in the classroom, especially in the 1L year, as attested by our #6 ranking in best law professor-teachers by the Princeton Review from a nationwide survey of 20,000 law students (behind Virginia, Duke, Boston University, Stanford, and Chicago, and above Washington & Lee, Notre Dame, and Boston College).
  • I could not find an appropriate lyric in Hamilton, so I used photos and maps to illustrate how our 2Ls and 3Ls take what they are learning in the classroom and apply that knowledge in the real world helping real clients, as attested by our #5 ranking in practical training by the National Jurist (behind Northeastern, St. Thomas, Yale, and Arizona, and above UC-Irvine) and our #1 ranking (for 12 of the past 13 years) in alternative dispute resolution by U.S. News & World Report (above Ohio State, Harvard, and Missouri).
  • Right Hand Man, to share some very personal feelings about becoming dean ("Can I be real a second? Let my guard down and tell the people how I feel a second?").

I concluded by using Alexander Hamilton's words in The World Was Wide Enough and George Washington's words in Who Lives, Who Dies, Who Tells Your Story to reflect on U.S. District Court Judge Beverly Reid O’Connell ('90), who died on October 8 at the age of 52:

What is a legacy?
It’s planting seeds in a garden you never get to see

Let me tell you what I wish I’d known
When I was young and dreamed of glory
You have no control:
Who lives
Who dies
Who tells your story?

Here were my closing reflections on those verses:

Part of Judge O’Connell’s legacy, and the legacies of students, alumni, staff, faculty, and friends here tonight, are intertwined with the story of Pepperdine Law School.

The country and the world have never needed Pepperdine-trained lawyers, counselors, and peacemakers more.

We need your help to bring the very best students to our law school, provide them with a transformative legal education, and send them out into a hurting country and world to do their part to bring about peace, justice, and reconciliation.

So what is our place in the world?

My answer is everywhere.

The world will be a better place when we have more Pepperdine-trained lawyers in every corner of the globe.

Map

There was great karma last night, as Lin-Manuel Miranda was staying at the same hotel before his appearance at tonight's Oscars.  A member of the law school staff saw Lin in the lobby and invited him to stop by the dinner and meet Pepperdine's Hamilton-obsessed dean.  I took up the cause on social media:

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March 4, 2018 in Legal Education | Permalink | Comments (0)

Urged By Law School Deans, Federal Judges Revamp Clerk Hiring

National Law Journal, Urged by Law School Deans, Federal Judges Revamp Clerk Hiring:

Supported by a plea from more than 100 law school deans, an ad hoc group of federal appeals judges has reinstated a plan for recruiting future law clerks after their second year in law school, rather than basing the hires on first-year performance.

The new hiring plan, promulgated on Feb. 28, mirrors a policy that dated back to 2003 but collapsed in 2013 when fiercely competitive individual judges ignored the rules and pursued top first-year students for clerkships, some of whom went on to Supreme Court clerk positions. Former Ninth Circuit Judge Alex Kozinski famously flouted the earlier rules, once joking that he started recruiting clerks “at birth.”

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March 4, 2018 in Legal Education | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list.

  1. [32,550 Downloads]  The Games They Will Play: An Update on the Conference Committee Tax Bill, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  2. [1953 Downloads]  Understanding the Tax Cuts and Jobs Act, by Sam Donaldson (Georgia State)
  3. [1030 Downloads]  Federal Income Tax Treatment of Charitable Contributions Entitling Donor to a State Tax Credit, by Joseph Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford) & Daniel Hemel (Chicago) et al.
  4. [703 Downloads]  Is New Code Section 199A Really Going to Turn Us All into Independent Contractors?, by Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College)
  5. [464 Downloads]  The Tax Lifecycle Of A Single Member LLC, by F. Philip Manns Jr. (Liberty) & Timothy M. Todd (Liberty)

March 4, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, March 3, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Tax Articles In The Louisiana Law Review

LSU Logo (2018)Jonathan D. Grossberg (American), Attacking Tax Shelters: Galloping Toward a Better Step Transaction Doctrine, 78 La. L. Rev. 369 (2017):

Since the beginning of the Internal Revenue Code, taxpayers have sought to lower their tax bills through creative tax planning. The step transaction doctrine is one of several tools used by the Internal Revenue Service and courts to challenge tax shelters and tax evasion. The step transaction doctrine provides that the courts may combine two or more allegedly separate steps in a multi-step transaction into a single step to better reflect the economic reality of the taxpayer’s actions. Derived from Supreme Court decisions in the 1930s, the doctrine deserves renewed scrutiny today because serious conceptual issues exist regarding the three current tests that courts use to determine when to combine various steps in a tax-motivated multiple-step transaction. This Article addresses two perennial themes in tax law: the role of judicial doctrines in a statutory system and the difficulty of taxing related-party transactions. This Article argues that courts should reformulate the binding commitment, interdependence, and end result tests as two objective tests: an objective test based on the law of offer and acceptance for arms-length transactions and an economic reality test for transactions between related parties. These new tests provide conceptual clarity and promote predictability while protecting the public treasury. The new tests borrow underlying concepts from contract and commercial law. The new tests demonstrate the fruitful possibilities of borrowing across areas of law. They also demonstrate that tax law shares similar concerns with other areas of law—a proposition that is sometimes doubted. This Article further contends that the step transaction doctrine, as reformulated, should be available for assertion by taxpayers in transactions between unrelated parties. Acknowledging the availability of the test for assertion by taxpayers will have the salutary effect of aligning the letter of the doctrine with its application.

Christine D. Allie (Delaware), Negating the Cost of “I Do”: Ending the United States Tax Code’s Family Penalty Through Permissive Joint Filing, 78 La. L. Rev. 499 (2017):

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March 3, 2018 in Scholarship, Tax | Permalink | Comments (0)

Give Students Who Complete Their 1L Year And Then Leave A Master’s Degree In Legal Principles

Joni Hersch (Vanderbilt), Increasing Diversity by a New Master’s Degree in Legal Principles, 67 J. Legal Educ. 86 (2017):

Students who leave their J.D. program before graduation leave emptyhanded, without an additional degree or other credential indicating that their law school studies had any professional, educational, or marketable value. The absence of such a credential combines with the substantial risks and costs associated with law school education to discourage risk-averse students from applying. The adverse impacts of these risks may be especially great for lower-income students who have fewer financial resources to draw on and less information about their fit with legal education and the legal profession. I propose that law schools award a master’s degree to students who successfully complete the 1L curriculum but leave before completing the full J.D. curriculum. My suggested name for this degree is master of legal principles (M.L.P.).

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March 3, 2018 in Legal Education, Scholarship | Permalink | Comments (4)

Epstein: The Constitutional Protection Of States Against Federal Taxation And Regulation

Richard A. Epstein (NYU), Dual Sovereignty Under the Constitution: How Best to Protect States Against Federal Taxation and Regulation, 49 Ariz. St. L.J. 935 (2017):

There is little doubt that the Framers of the United States Constitution had little awareness of the immense complexities that would creep into the constitutional system that they created in 1787 in Philadelphia. Their challenges were enormous given the necessity to determine the appropriate relationship of the states, both with each other and with the federal government. It is that last question that is the focus of this article, which asks the simple question of what level of protection states have from taxation and regulation by the federal government. ...

[T]he Supremacy Clause is said to fuel federal dominance of states on both matters of regulation and taxation, which leads to federal activities that are highly intrusive on the way in which states can conduct their own government affairs. The unfortunate efforts of the Obama-era Department of Labor to extend the reach of the FLSA over state agencies shows the limitless nature of the power, subject only to political restraints that often prove highly ineffective. The correct response is a return to the earlier constitutional principles, which worked well when in place. A constitution is intended to be an enduring document based on first principles of government. The older rules on intergovernmental immunity were honest efforts to reach the proper legal equilibrium. The recent rejection of these rules represents a major decline in the wisdom and effectiveness of modern American constitutionalism under its flawed progressive model.

March 3, 2018 in Scholarship, Tax | Permalink | Comments (1)

Friday, March 2, 2018

President Trump To Name Michael Desmond IRS Chief Counsel

DesmondBNA is reporting that President Trump plans to appoint Michael J. Desmond IRS Chief Counsel and Treasury Department Assistant General Counsel:

After serving as a law clerk for a Federal judge in Los Angeles, Mike began his career in tax controversy as a Trial Attorney with the Attorney General’s Honors Program at the Tax Division of the U.S. Department of Justice. After the Justice Department, Mike worked at a boutique tax firm in Washington, D.C., where he was elected partner in 2004. In this capacity he represented clients ranging from Fortune 100 companies to partnerships and individuals. Mike returned to government in 2005, serving as Tax Legislative Counsel in the U.S. Department of Treasury through 2008. As Tax Legislative Counsel, Mike was the Department’s senior legal advisor on domestic tax issues, testifying before Congress and working with senior IRS officials including the IRS Commissioner and Chief Counsel on a broad range of tax policy, legislative and regulatory matters. Following his tenure at the Treasury Department, Mike spent several more years as a partner in a global law firm [Bingham McCutchen] before starting his own practice in January 2012.

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March 2, 2018 in IRS News, Tax | Permalink | Comments (0)

Olson Presents The State Of The IRS Today At Minnesota

Olson (2018)Nina Olson (National Taxpayer Advocate) presents The State of the IRS at Minnesota today as part of its Perspectives on Taxation Lecture Series hosted by Kristin Hickman:

Drawing from her 2017 Annual Report to Congress, Ms. Olson will talk about problems facing the IRS and the implications for tax compliance and enforcement, including:

  • IRS funding and personnel cuts
  • Declining audit rates
  • Flawed implementation of congressional mandates requiring the use of private debt collectors and the denial of passports to certain U.S. citizens with substantial tax debts

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March 2, 2018 in Colloquia, IRS News, Tax | Permalink | Comments (0)

Weekly Legal Education Roundup

Tax Policy In The Trump Administration

NY Times: Spreadsheets at Dawn — The New Tax Battle Is All About Data

New York Times, Spreadsheets at Dawn: The New Tax Battle Is All About Data:

The new Republican tax cut is providing a powerful weapon for the law’s supporters and detractors, as well as investors and analysts, who are mining data on how companies are spending their windfalls in a battle to sway the behavior of voters and executives alike.

In the two months since President Trump signed the $1.5 trillion tax bill into law, a vast arsenal of spreadsheets has begun to capture, in real time, the effect of the tax cut as it works its way through corporate balance sheets. Traders are compiling data to find value in a volatile stock market. Advocates of corporate responsibility are hoping to shame companies into passing more of their savings on to employees or charities. Partisans are using it to sway public opinion.

None of the data, as of yet, yield anywhere close to a full picture of how the tax cuts are flowing through corporate boardrooms and into the American economy. But that has not stopped politicians and organizations from using it to advance their goals.

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March 2, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

University Of Minnesota Study: Enhanced Individualized Feedback In One Core 1L Class Improves Student Performance In Other Classes

Minnesota LogoDaniel Schwarcz (Minnesota) & Dion Farganis (J.D. 2017, Minnesota), The Impact of Individualized Feedback on Law Student Performance, 67 J. Legal Educ. 139 (2017):

For well over a century, first-year law students have typically not received any individualized feedback in their core "doctrinal" classes other than their final exam grades. Although this pedagogical model has long been assailed by critics, remarkably limited empirical evidence exists regarding the extent to which enhanced feedback improves law students' outcomes. This Article helps fill this gap by focusing on a natural experiment at the University of Minnesota Law School.

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March 2, 2018 in Legal Education, Scholarship, Teaching | Permalink | Comments (2)

NY Times, WSJ: Who Wins From The Corporate Tax Cuts?

WSJWall Street Journal, Boom in Share Buybacks Renews Question of Who Wins From Tax Cuts:

U.S. companies are buying back their shares at an aggressive pace, stirring debates in Washington and on Wall Street about how savings from corporate tax cuts are being used and who benefits most.

Share buybacks announced by large U.S. companies have exceeded $200 billion in the past three months, more than double the prior year, according to a Wall Street Journal analysis of data for S&P 500 companies. Among the biggest: Cisco at $25 billion, Wells Fargo at about $21 billion, PepsiCo at $15 billion, AbbVie and Amgen at $10 billion apiece, and Alphabet Inc. at $8.6 billion.

Announced buybacks surged in December as lawmakers in Washington finished writing a bill to cut U.S. taxes by $1.5 trillion over a decade, and continued at a robust pace in January and February. ...

The early moves are spurring a political debate about whether the tax cut is working; the full answer won’t be fully understood for months or years as the new money moves through the economy. ...

House Minority Leader Nancy Pelosi (D., Calif.) has labeled bonuses “crumbs” compared with the size of the corporate tax cuts.

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March 2, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Hamilton At Pepperdine

Hamilton Lecture Photo

It was my pleasure to speak with Pepperdine alum ('90) Charles Eskridge (Quinn Emanuel, Houston) to students, staff, and faculty about each of the 46 songs in Hamilton.  We divided the workload as follows:  Charles covered 45 songs, I covered one song — can you guess which one?

For more on my obsession with interest in Hamilton, see here and:

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March 2, 2018 in Legal Education | Permalink | Comments (1)

Thursday, March 1, 2018

Gamage Presents Tax Reform To Help The Working And Middle Class Today At Illinois

Gamage (2019)David Gamage (Indiana) presents Tax Reform to Help the Working and Middle Class at Illinois today as part of its Faculty Workshop Series:

This project argues that future tax reform ought to be designed so as to provide much greater tax benefits for those in the working and middle class, both as compared to the law prior to the recent 2017 tax legislation and (especially) as compared to the new law after that recent legislation. This project will develop this argument both at the level of “why” and at the level of “how”. In doing so, this article will evaluate both policy and political feasibility. However, political feasibility will not be evaluated based on the current President or Congress. Instead, the political feasibility dimension will be evaluated primarily in terms of what might feasibly be campaigned on by candidates in upcoming election cycles and then later enacted if a new President and Congress—with different priorities—takes office in 2020 or in a subsequent election cycle.

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March 1, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Ring Presents Silos And First Movers In The Sharing Economy Tax Debates Today At Indiana

Ring (2017)Diane Ring (Boston College) presents Silos And First Movers In The Sharing Economy Debates at Indiana today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

Over the past few years, a significant global debate has developed over the classification of workers in the sharing economy either as independent contractors or as employees. While Uber and Lyft have dominated the spotlight lately, the worker classification debates extend beyond ridesharing companies and affect workers across a variety of sectors. Classification of a worker as an employee, rather than an independent contractor, can carry a range of implications for worker treatment and protections under labor law, anti-discrimination law, tort law, and tax law, depending on the legal jurisdiction. The debates, at least in the United States, have been incomplete due to the failure of policy makers and advocates to consider the scope and interconnectedness of the worker classification issues across the full sweep of legal arenas. There is time, however, to remedy the incompleteness of these policy conversations before worker classification decisions ossify and path dependence takes hold.

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March 1, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Dyreng Presents Tax Avoidance And Tax Incidence Today At Duke

DyrengScott Dyreng (Duke) Tax Avoidance and Tax Incidence (with Martin Jacob (WHU–Otto Beisheim School of Managemen), Xu Jiang (Duke) & Maximilian A. Müller (WHU–Otto Beisheim School of Managemen)) at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

We examine corporate tax avoidance in a setting where shareholders might not bear the entire economic burden of the corporate tax because the firm’s market power allows it to pass the burden to workers or consumers. Depending on the model conditions, tax avoidance increases or decreases in market power. Using empirical analyses, we find that high market power firms avoid less tax than low market power firms. We also find empirical support for the model conditions underlying this result.

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March 1, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Knoll Presents What Is Tax Discrimination And How Can It Be Prevented? Today At UCLA

KnollMichael Knoll (Pennsylvania) presents What Is Tax Discrimination and How Can It Be Prevented? A Simple Solution to a Complex Problem (with Ruth Mason (Virginia)) at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh and Kirk Stark:

Numerous tax discrimination cases are working their way through the judicial systems of the European Union and the United States. Prior cases, which have forced many states to change long-standing tax policies, have attracted intense criticism from commentators and even jurists for being unprincipled and illogical. In a series of articles we have written over the last several years, we have developed a straight-forward approach to tax discrimination that courts can use to resolve tax discrimination claims and that states can use to design and implement tax systems that raise revenue without discriminating.

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March 1, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

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March 1, 2018 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

Should Law Schools Shift Scholarship Money From Merit (LSAT & UGPA Medians) To Need?

Deborah Jones Merritt (Ohio State) & Andrew Merritt, Agreements to Improve Student Aid: An Antitrust Perspective, 67 J. Legal Educ. 17 (2017):

Law schools tie much of their scholarship money to LSAT scores and undergraduate grades. By awarding substantial discounts to students with above-median indicators, schools attempt to climb the U.S. News ranking ladder. This practice, as many educators recognize, reduces access to legal education for low-income and minority students. As a result, many schools would like to shift at least some of their scholarship funds to need-based awards. Schools, however, struggle to make that change unilaterally; they worry about losing ground in the rankings race.

Could law schools act collectively to reform their scholarship practices? Could the ABA reshape those practices by adopting an accreditation standard that limits the award of “merit” based aid?

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March 1, 2018 | Permalink | Comments (3)

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March 1, 2018 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

Dagan: International Tax Policy — Between Competition And Cooperation

International TaxTsilly Dagan (Bar-Ilan University, Israel), International Tax Policy: Between Competition and Cooperation (Cambridge University Press 2017):

Bringing a unique voice to international taxation, this book argues against the conventional support of multilateral co-operation in favour of structured competition as a way to promote both justice and efficiency in international tax policy. Tsilly Dagan analyses international taxation as a decentralised market, where governments have increasingly become strategic actors. While many of the challenges of the current international tax regime derive from this decentralised competitive structure, Dagan argues that curtailing competition through centralisation is not necessarily the answer. Conversely, competition—if properly calibrated and notwithstanding its dubious reputation—is conducive, rather than detrimental, to both efficiency and global justice. International Tax Policy begins with the basic normative goals of income taxation, explaining how competition transforms them and analysing the strategic game states play on the bilateral and multilateral level. It then considers the costs and benefits of co-operation and competition in terms of efficiency and justice.

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March 1, 2018 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Anxiety Psychoeducation For Law Students: A Pilot Program At Stanford & Yale

Stanford YaleIan Ayres (Yale), Joseph Bankman (Stanford), Barbara Fried (Stanford) & Kristine Luce (Stanford), Anxiety Psychoeducation for Law Students: A Pilot Program, 67 J. Legal Educ. 118 (2017):

Many law students experience anxiety, which can impair academic performance and reduce quality of life. The authors developed a brief psychoeducation program designed to help law students cope with anxiety. The program was based on the cognitive behavioral model of anxiety and was offered to first-year students at Stanford and Yale Law School. Class attendance was voluntary and consisted of two one- to two-hour meetings. Student response was measured by anonymous online surveys. Virtually all the students thought the material was worthwhile and should be taught as a part of the curriculum. Students reported using many of the techniques described to reduce anxiety, and many students reported a decline in anxiety. Student comments were almost uniformly positive.

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March 1, 2018 in Legal Education, Scholarship | Permalink | Comments (0)

Hasen: Rules, Standards And Detection

David Hasen (Florida), Rules, Standards and Detection:

Regulators can adjust penalties to compensate for incomplete monitoring of rule-governed regulated parties, but these adjustments often are unavailable when regulated parties are subject to legal standards. Incomplete monitoring consequently invites greater noncompliance under standards than under rules. A similar logic may apply to the use of complicated rules instead of simple ones.

This paper develops a model that clarifies some of the specific tradeoffs that regulators face in designing standards regimes under incomplete monitoring.

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March 1, 2018 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, February 28, 2018

Prichard Presents China, International Taxation And The Global System Today at Toronto

MunkWilson Prichard (Toronto) presents China, International Taxation and the Global System (with Martin Hearson (London School of Economics)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

There has been mounting interest in China’s role in shaping global economic governance, but conclusions have been guided by a small set of empirical cases. We offer an analysis of Chinese engagement with the reform of international tax rules, in order to shed light on the broader factors shaping Chinese global governance strategies. We argue that China has pursued a dual track strategy: it has adopted a cooperative and moderately reformist position at the OECD, but has pushed a potentially more radical agenda at the UN, and through domestic policy positions that quietly – but substantially — challenge OECD conventions. In doing so if has rhetorically signalled a desire to represent broader developing country interests, yet in practice appears guided primarily by narrower national interests, which often — but not always — overlap with those of developing countries more broadly.

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February 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

McMahon Presents Tax As Part Of A Broken Budget Process Today At Indiana

McMahonStephanie McMahon (Cincinnati) presents Tax as Part of a Broken Budget: Good Taxes are Good Cause Enough at Indiana today as part of its Faculty Workshop Series:

The federal budget is a myth.  Despite being a myth, Congress uses the budget to limit its choices by linking its revenue-raising and spending powers and to threaten itself and the public with the federal debt ceiling.  Through its self-imposed limits, Congress puts tremendous pressure on how it defines its budget.  The budget process generally assumes its tax provisions will raise revenue when the law becomes effective.  However, many tax provisions are not self-executing.  The Treasury Department and the IRS as a bureau of the department must create guidance to operationalize the Internal Revenue Code.  Consequently, limiting the production of tax guidance that implements tax statutes is problematic because their projected revenue is used to balance the budget.Nevertheless, guidance is under attack on the grounds that its issuance fails to comply with the Administrative Procedure Act (APA). 

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February 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Tyranny Of Metrics

MetricsFollowing up on my previous post, The Tyranny Of Metrics: 'Not Everything That Is Important Is Measurable, And Much That Is Measurable Is Unimportant':  Inside Higher Ed, 'The Tyranny of Metrics':

These days colleges boast about their admissions rankings, their graduation rates, their faculties’ achievements and much more. Many say that the statistics are a tool to promote accountability and improvement.

Jerry Z. Muller disagrees. His new book, The Tyranny of Metrics (Princeton University Press 2018), critiques not only higher education but many parts of society that rely on metrics.

"Gaming the metrics occurs in every realm: in policing, in primary, secondary and higher education; in medicine, in nonprofit organizations; and, of course, in business," Muller writes. "And gaming is only one class of problems that inevitably arise when using performance metrics as the basis of reward and sanction. There are things that can be measured. There are things that are worth measuring. But what can be measured is not always what is worth measuring; what gets measured may have no relationship to what we really want to know."

Q: Some colleges, government agencies and businesses promote tools to evaluate faculty productivity -- number of papers written, number of citations, etc. What do you make of this use of metrics?

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February 28, 2018 in Book Club, Legal Education | Permalink | Comments (1)

Aprill: Tax Status of Public Universities

Ellen P. Aprill (Loyola-L.A.), Tax Status of Public Universities, 154 Tax Notes 539 (Jan. 22, 2018):

New section 4960 imposes a 20% excise tax on certain organizations not subject to income tax if any their five highest paid employees have annual compensation above $1 million. (It also imposes the tax on “excess parachute payments,” as defined in the statute.) In December, 2017, I wrote a blog post arguing that, whatever the Congressional intent, the language of the statute did not reach states and their political subdivisions or their integral parts. The blog post emphasized state universities, although the reasoning applied to other governmental entities as well. Professor Douglas Kahn of University of Michigan took issue with my position on the basis that the new section does apply to section 501(c)(3) organizations. This piece is my response to him.

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February 28, 2018 in Scholarship, Tax | Permalink | Comments (1)

Median Private Law School Tuition Discount: 28% (Average Scholarship: $20,129)

Which Schools Are Discounting Tuition the Most?, Nat'l Jurist, Vol. 27, p. 13, Winter 2018:

The National Jurist analyzed ABA grant and scholarship data, using the number of scholarships per school, the percentage of students receiving scholarships and the scholarship amount at the 25th, 50th and 75th percentiles to estimate an average grant amount. With an average, it then determined the average tuition discount per school.

The median private law school discounted tuition by 28.3 percent, with an average scholarship of $20,129. That was up from 25.4 percent from two years earlier and significantly higher than 2010, when it was an estimated 16 percent.

Here are the 20 private law schools with the highest tuition discounts:

NJ Top 20

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February 28, 2018 in Law School Rankings, Legal Education | Permalink | Comments (2)

NY Times: Trump’s Tax Cuts In Hand, Companies Spend More On Themselves Than On Wages

New York Times, Trump’s Tax Cuts in Hand, Companies Spend More on Themselves Than on Wages:

President Trump promised that his tax cut would encourage companies to invest in factories, workers and wages, setting off a spending spree that would reinvigorate the American economy.

Companies have announced plans for some of those investments. But so far, companies are using much of the money for something with a more narrow benefit: buying their own shares.

Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.

But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans. ...

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February 28, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)