TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Wednesday, December 10, 2014

Caron: Thomas Piketty and Inequality -- Legal Causes and Tax Solutions

Paul L. Caron (Pepperdine), Thomas Piketty and Inequality: Legal Causes and Tax Solutions, 64 Emory L.J. Online ___ (2015):

PikettyThomas Piketty's Capital in the Twenty-first Century has acted as an accelerant fueling the fiery public debate over increasing inequality in America and around the world. Piketty makes the provocative empirical claim that the rate of return to private capital inevitably exceeds the rate of economic growth (r > g) and thus leads to growing concentrations of wealth among the richest members of society. Piketty has spawned heated debates in newspapers, magazines, and blogs, which soon will continue in academic journals and law reviews. Shi-Ling Hsu is one of the first out of the gate with The Rise and Rise of the One Percent: Considering Legal Causes of Wealth Inequality, 64 Emory L.J. Online ___ (2015).

Hsu focuses on the interesting question of how law and legal institutions foster inflated returns on capital (Piketty's r). He also makes the important point that lawmakers often conflate Piketty's r with g (public economic growth), resulting in laws that boost the former with little discernible impact on the latter. The bulk of Hsu's argument is devoted to explaining how five areas of American law contribute to "the legal enrichment of the one percent": financial regulation, antitrust law, oil and gas subsidies, transition relief, and electric utility regulation. He concludes with a plea for greater federal funding of education to spur greater economic growth and bridge the deepening inequality chasm in America.

Hsu's essay is a significant contribution to what is certain to be an energetic debate over the implications of Piketty's work. The need to examine the impact of legal rules and institutions on both private capital returns and public economic growth will be an enduring contribution to future scholarship on the extent, consequences, and reduction of income and wealth inequality. I offer here two modest reactions to Hsu's essay: (1) recent inequality research has shifted the focus of high-end wealth concentration from the Top 1% to the Top 0.1% (and even the Top 0.01%), with important implications for the work of both Piketty and Hsu, including (2) the inquiry into whether policymakers should intervene before the fact to re-shape the distribution of the benefits and burdens of economic activity (Hsu's approach) or instead redistribute wealth after the fact (Piketty's approach).

In a recent essay, Joseph Bankman and I argued that tax scholars need to focus more of our work on how policymakers should address the federal government's unprecedented (and growing) fiscal imbalance. California Dreamin’: Tax Scholarship in a Time of Fiscal Crisis, 48 U.C. Davis L. Rev. 405 (2014). In Piketty terms, s (spending) > r (revenues). We proposed that California's recent tax increases on the wealthy should provide a template for the nation to bring r more into alignment with s.

Piketty's pioneering work provides added impetus for deploying the tax system in this effort. Increasing the tax burden on the wealthy would both raise revenue to meet the nation's spending needs and redistribute wealth to alleviate Gatsby-level inequality in America. Hsu’s proposed focus on the distributional impact of laws and legal institutions may prove to be helpful in the long run but a chimera in the short term as the nation's fiscal and inequality challenges demand solutions that only the tax system stands ready to provide. In short, raising taxes on the wealthy would both increase r (revenues) to better match s (spending) and decrease r (private capital returns) to better match g (public economic growth). 

December 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Manhire: Do Tax Audits Matter?

J. T. Manhire (U.S. Treasury Department), Do Audits Matter?: A Speculative Theory on the Relation between Tax Audits and Underreporting:

The theory expressed in this paper stems from the conviction that the underreporting rate is discoverable if one understands the relationship between the audit perspective of the tax authority and the underreporting perspective of the population filing individual income tax returns. This theory, if correct, allows for an approximation of the underreporting rate given only enforcement statistics.

After deriving the hidden measure, the paper then approximates the underreporting rate for the categories of individual income tax return filers regularly published by the tax authority and correlates the published audit rates with the approximated underreporting rates. In an attempt to answer the question, “do audits matter for voluntary compliance?,” this paper hypothesizes that a negative correlation between audit and underreporting rates suggests that those categories of tax returns have a hypersensitivity to the audit rate and any underreporting is perhaps intentional. A positive correlation suggests underreported tax is more a result of ignorance or mistake due to a complex tax code and its administration. At a system (non-individual) level, audits appear to matter for certain categories of tax return filers. For other categories, audits appear to have no effect on voluntary compliance rates.

These results can be instructive for tax administration policymakers. For example, as increased investment in enforcement against the categories of returns that suggest underreporting might be intentional could yield more significant compliance effects than enforcement against those categories that contain underreporting as a result of mistake or ignorance. At the same time, an investment in taxpayer education could possibly yield more significant compliance effects for taxpayers in the latter category.

December 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, December 9, 2014

California Offers Budgetary Lessons For U.S. Government

Stanford Report, California Offers Budgetary Lessons For U.S. Government, Stanford Professor Says:

Once the fodder of late-night comedians, California's budgetary strategy is actually one that national lawmakers might emulate, a Stanford tax scholar says.

Just two years ago, California's budget situation was among the worst in the nation, wrote Joseph Bankman, a law professor at Stanford University, in a new journal article [California Dreamin': Tax Scholarship in a Time of Fiscal Crisis, 48 U.C. Davis L. Rev. 405 (2014):]. The Golden State's annual budget deficits soared past $20 billion, its net asset deficit was more than $127 billion, and the state legislature seemed dysfunctional.

Then, pushed to the brink with very real fears of cutbacks in state services, schools and escalating college tuition, California voters approved Proposition 30 in November 2012.

"California voters defied the conventional political wisdom in resoundingly embracing Prop. 30 by an over-10 percent point margin, 55.4 percent to 44.6 percent," wrote Bankman and his co-author Paul Caron, a law professor at Pepperdine University. ...

Continue reading

December 9, 2014 in Scholarship, Tax | Permalink | Comments (4)

Monday, December 8, 2014

Raskolnikov: Law and Economics of Variable Sanctions

Alex Raskolnikov (Columbia), Six Degrees of Graduation: Law and Economics of Variable Sanctions:

From parking tickets to tax fines and punitive damages, legal sanctions matter in people’s lives. Yet neither the legal nor the economics literature offers a comprehensive treatment of sanctions. Their practical complexity is not well-understood and their theoretical analysis is fragmented. This essay prepared for an edited volume addresses both limitations. On the practical side, I highlight the complexity of sanctions using tax law as a primary example. The complexity exists because sanctions may (and do) vary along six different dimensions: aggressiveness, magnitude, culpability, effort to comply, likelihood of detection, and offense history. These six degrees of sanctions graduation are distinct, potentially independent, but often intertwined in obscure and perplexing ways. On the theoretical side, I review the economics literature in search of the reasons underlying each degree (or axis) of graduation. I conclude that three graduation axes of great practical significance — aggressiveness, culpability, and offense history — are the least developed theoretically. Two other dimensions — the likelihood of detection and the effort to comply with the law — are more conceptually advanced, although the theory is still fairly removed from the enforcement realities. In contrast, economic analysis reveals a good grasp of the magnitude axis and a clear path to modeling the real-life features that have remained overlooked thus far. By highlighting the complexity of sanctioning regimes and emphasizing the related theoretical successes and shortcomings, this essay identifies fruitful areas of future research, some of which I pursue in related work.

December 8, 2014 in Scholarship, Tax | Permalink | Comments (2)

Manhire: Reconsidering the Tax Compliance Puzzle

Florida Tax ReviewJ. T. Manhire (U.S. Treasury Department), There Is No Spoon: Reconsidering the Tax Compliance Puzzle, 17 Fla. Tax Rev. 1 (2014):

For over 40 years theorists have sought the effects of tax audits on voluntary compliance rates by studying individual taxpayer motivations. Yet no single theory has produced a taxpayer incentive model that both comports with experience and explains the effects of audits on compliance. This quandary is often termed the “tax compliance puzzle.” Consequently, some theorists have called for more capacious models that make room for the panoply of individual compliance motivations. This Article proposes that a more complex model is unnecessary. To the contrary, complex compliance and enforcement data can result from extremely simple behavioral rules of individual taxpayers and government examiners interacting over time.

Continue reading

December 8, 2014 in Scholarship, Tax | Permalink | Comments (0)

Sunday, December 7, 2014

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5. The #1 paper is now #101 in all-time downloads among 10,560 tax papers:

  1. [1281 Downloads]  A Compendium of Private Equity Tax Games, by Gregg D. Polsky (North Carolina)
  2. [395 Downloads]  Obama Care Fails the Origination Clause: Why Sissel and Hotze Should Be Reversed, by Steven J. WIllis (Florida) & Hans G. Tanzler (Florida)
  3. [386 Downloads]  Trying Times 2014: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin (Utah) & Steven J. Small (Law Office of Stephen J. Small, Newton, MA)
  4. [262 Downloads]  A World Turned Upside Down: Reflections on the 'New Wave' Inversions and Notice 2014-52, by Reuven S. Avi-Yonah (Michigan)
  5. [219 Downloads]  Piketty in America: A Tale of Two Literatures, by Joseph Bankman (Stanford) & Daniel Shaviro (NYU)

December 7, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Friday, December 5, 2014

Weekly SSRN Tax Roundup

Continue reading

December 5, 2014 in Scholarship, Tax | Permalink | Comments (0)

Weekly Student Tax Note Roundup

December 5, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Newsweek Names Kleinbard's We Are Better Than This One of the Top Books of 2014

We Are Better Than This (2014)Newsweek,  Our Favorite Books of 2014: Newsweek Staff Picks:

We Are Better Than This: How Government Should Spend Our Money by Edward D. Kleinbard (Oxford University Press)

Americans feel the pain of an income tax system that raises twice as much as it actually does because of hidden spending through tax favors. This masterpiece on how we tax ourselves, and how Congress spends our money, explains why the mostly lightly taxed modern country feels so heavily burdened while offering workable solutions.

Drawing on insights from Adam Smith’s The Theory of Moral Sentiments, lawyer Edward D. Kleinbard shows how applying ancient financial and moral principles would make America happier, healthier and wealthier. Kleinbard spent two decades designing sophisticated tax avoidance strategies for rich clients before becoming a law school professor on a mission to expose the tax system’s flaws.

Continue reading

December 5, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Barton: The Decline and Rebirth of the Legal Profession

GlassBenjamin H. Barton (Tennessee), Glass Half Full The Decline and Rebirth of the Legal Profession (Oxford University Press, 2014):

The hits keep coming for the American legal profession. Law schools are churning out too many graduates, depressing wages, and constricting the hiring market. Big Law firms are crumbling, as the relentless pursuit of profits corrodes their core business model. Modern technology can now handle routine legal tasks like drafting incorporation papers and wills, reducing the need to hire lawyers; tort reform and other regulations on litigation have had the same effect. As in all areas of today's economy, there are some big winners; the rest struggle to find work, or decide to leave the field altogether, which leaves fewer options for consumers who cannot afford to pay for Big Law.

It would be easy to look at these enormous challenges and see only a bleak future, but Ben Barton instead sees cause for optimism. Taking the long view, from the legal Wild West of the mid-nineteenth century to the post-lawyer bubble society of the future, he offers a close analysis of the legal market to predict how lawyerly creativity and entrepreneurialism can save the profession.

Continue reading

December 5, 2014 in Book Club, Legal Education, Scholarship | Permalink | Comments (1)

Thursday, December 4, 2014

IRS Issues Call for Tax Statistics Research Proposals

IRS Logo 2The IRS Statistics of Income Division has issued a call for proposals for research projects with potential to make significant contributions to tax administration.

The call for proposals describes the details of the program and the application process. Although all submissions will be considered, topics identified as especially relevant to researchers include:

  • Tax administration in a global economy
  • Taxpayer needs and behavior, particularly the roles of information, complexity, salience, engagement, and compliance costs
  • Filing, payment, and reporting compliance measures, behaviors, and drivers
  • Benefit participation measures, behaviors, and drivers, particularly related to the Affordable Care Act
  • Taxpayer response to policy changes, particularly taxpayer responses to changes in incentives
  • The role of complex business structures in tax planning

The due date for research proposal application is December 15, 2014.

December 4, 2014 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Wells: Revisiting Section 367(d)

Florida Tax ReviewBret Wells (Houston), Revisiting Section 367(d): How Treasury Took the Bite Out of Section 367(d) and What Should Be Done About It, 16 Fla. Tax Rev. 519 (2014):

Section 367(d) seeks to prevent residual profits related to U.S. developed intangible assets from migrating out of the U.S. tax jurisdiction via the outbound contribution or transfer of intangibles to a foreign corporation. There has been a great hue and cry over the outbound migration of intangibles in recent years, which by implication has created significant agitation about whether section 367(d) is effective. For at least a decade, the Treasury Department and IRS have identified section 367(d) as an area in need of regulatory reform, and recent comments by government officials indicate that guidance may be forthcoming in the future. Concurrently, the Obama administration has proposed amendments to section 367(d) and the U.S. subpart F rules to address outbound migration of intangible value.

The debate over the efficacy of section 367(d) to prevent IP migration is being waged along two fronts. As to the first front of this debate, the central question is whether a fatal loophole (a “goodwill loophole”) exists within the architecture of section 367(d) that allows the outbound migration of intangible value under the protective cloak of “goodwill” with the consequence that a substantial portion of the ongoing residual profits related to the transferred goodwill items escape the application of section 367(d)’s super royalty obligation. In Subparts II.A. through II.B., this Article addresses why this “goodwill loophole” that has received so much attention is nonexistent. All that is needed is for the courts to correctly apply section 367(d) as it should be applied, and once this is done the “goodwill loophole” should be defrocked of all of its purported cloaking capabilities.

Continue reading

December 4, 2014 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, December 3, 2014

Gamage Presents Analyzing the Optimal Choice of Tax Instruments Today at Harvard

Gamage (2014)David Gamage (UC-Berkeley) presents Analyzing the Optimal Choice of Tax Instruments: The Case for Levying (all of) Labor-Income Taxes, Value-Added Taxes, Capital-Income Taxes, and Wealth Taxes, 68 Tax L. Rev. ___ (2014), at Harvard today as part of its Tax Law, Policy and Practice Workshop Series hosted by Daniel Halperin and Stephen Shay:

Economic analyses of taxation have largely focused on the problems of labor-to-leisure and saving-to-spending distortions. Based on these analyses, the prior literature has generally treated labor-income and consumption taxes as being essentially equivalent, and has also treated capital-income and wealth taxes as being essentially equivalent. Further, based on these analyses, the dominant view in the prior literature has been that neither capital income nor wealth should be taxed.

This Article expands on these prior analyses by incorporating a variety of tax-gaming responses and also administrative and compliance costs. By doing so, this Article argues that it is probably optimal for governments to levy some version of (all of) labor-income taxes, value-added taxes, capital-income taxes, and wealth taxes.

Continue reading

December 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Aging of the American Law Professoriate

David Barnhizer (Cleveland State), The Aging of the American Law Professoriate:

RetireA recent (rather tasteless) article argued: “Professors approaching 70 … have an ethical obligation to step back and think seriously about quitting. If they do remain on the job, they should at least openly acknowledge they’re doing it mostly for themselves.” In The Forever Professors: Academics Who Don’t Retire Are Greedy, Selfish, and Bad For Students, the insensitive author added: “the number of professors 65 and older more than doubled between 2000 and 2011.” The author’s most intellectually savage comments were that: “faculty who delay retirement harm students, who in most cases would benefit from being taught by someone younger than 70, even younger than 65.” All I can say is “OMG!” how can these doddering demented cretins be so irresponsible as to do that to these innocent and needy young people?

Deans and law faculties are facing a situation where they can’t “reload”. The “aging” of the law school and general university tenure track professoriates has created a situation in which some have voiced concerns about what they see as a systemic blockage. The claim is that the refusal of senior faculty to retire is preventing academic institutions from hiring new and younger faculty, thus presumably inhibiting the fully oxygenated “intellectual blood flow” essential for the highest levels of performance by the collective “brain” of the academic institution. As I suggest in this brief analysis the claim that a main problem is the number of senior professors on university and law school faculties and that those older faculty members are somehow harming students is a disingenuous posturing masking other agendas.

Continue reading

December 3, 2014 in Legal Education, Scholarship | Permalink | Comments (2)

Avi-Yonah: The Rise and Fall of the Consumption Tax

Reuven S. Avi-Yonah (Michigan), The Rise and Fall of the Consumption Tax: A Historical Perspective:

This article will survey the great consumption vs. income tax debate from a historical perspective. The focus here is not on which tax base is better, but rather on how this debate evolved over time inside and outside legal academia. As we shall see, there was one point in which the consumption tax came close to being adopted - in 2005, when it was one of two alternatives recommended by the Bush tax reform panel. But the moment passed, and it seems unlikely to return.

December 3, 2014 in Scholarship, Tax | Permalink | Comments (0)

Call for Tax Papers: Yale/Stanford/Harvard Junior Faculty Forum

JuniorYale/Stanford/Harvard Junior Faculty Forum:

Yale, Stanford, and Harvard Law Schools announce the 16th session of the Yale/Stanford/Yale Junior Faculty Forum to be held at Harvard Law School on June 16-17, 2015 and seek submissions for its meeting.

The Forum’s objective is to encourage the work of scholars recently appointed to a tenure-track position by providing experience in the pursuit of scholarship and the nature of the scholarly exchange. Meetings are held each spring, rotating at Yale, Stanford, and Harvard. Twelve to twenty scholars (with one to seven years in teaching) will be chosen on a blind basis from among those submitting papers to present. One or more senior scholars, not necessarily from Yale, Stanford, or Harvard, will comment on each paper. The audience will include the participating junior faculty, faculty from the host institutions, and invited guests. The goal is discourse on both the merits of particular papers and on appropriate methodologies for doing work in that genre. We hope that comment and discussion will communicate what counts as good work among successful senior scholars and will also challenge and improve the standards that now obtain. The Forum also hopes to increase the sense of community among American legal scholars generally, particularly among new and veteran professors.

Continue reading

December 3, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (0)

Cauble & Polsky: The Problem of Abusive Related-Partner Allocations

Florida Tax ReviewEmily Cauble (DePaul) & Gregg D. Polsky (North Carolina), The Problem of Abusive Related-Partner Allocations, 16 Fla. Tax Rev. 479 (2014):

This Article highlights a flaw in the existing rules regarding partnership tax allocations that has not yet received sufficient attention by existing literature. Namely, the partnership tax allocation rules are implicitly premised on the assumption that partners are unrelated and, thus, transact with each other at arm’s length. As a result, related partners can and do devise tax allocation schemes that exploit the gap in the current partnership tax allocation rules to achieve unwarranted tax savings.

Continue reading

December 3, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, December 2, 2014

Weisbach Presents The Use of Neutralities in International Tax Policy Today at Columbia

WeisbachDavid Weisbach (Chicago) presents The Use of Neutralities in International Tax Policy at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

This paper analyzes the use of neutrality conditions, such as capital export neutrality, capital import neutrality, capital ownership neutrality, and market neutrality, in international tax policy. Neutralities are not appropriate tools for designing tax policy. They each identify a possible margin where taxation may distort business activities. Because these neutralities cannot be all satisfied simultaneously, however, they do not allow analysts to determine the appropriate trade-offs of these distortions, unlike deadweight loss measures used in other areas of tax policy. International tax policy should instead be tied directly to the reasons for taxing capital income, reasons which are derived from optimal tax or similar models.

December 2, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Driessen: Corporate Tax Fate May Hinge on Modeling Omission

Tax Analysys Logo (2013)Patrick Driessen (former revenue estimator, Joint Committee on Taxation and Treasury Department), Corporate Tax Fate May Hinge on Modeling Omission, 145 Tax Notes 1043 (Dec. 1, 2014):

By omitting corporate income, traditional distribution models overstate the U.S. corporate tax rate and overall tax progressivity. The prevailing capital gains realization approach could be replaced by an inclusive corporate income method that would correctly show corporate equity owners as more lightly taxed than capital gains realization models indicate. That replacement would accord with how the individual tax is modeled for distribution as well as with results from corporate tax studies conducted outside the distribution context. Augmenting corporate income in distribution models would also enable proper reflection of proposals, such as corporate integration, and provide a better perspective on how much corporate tax is borne by labor.

(Hat Tip: David Cay Johnston.)

December 2, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

2014 Tannenwald Tax Writing Competition Results

TannenwaldHere are the results in the 2014 Tannenwald Tax Writing Competition, sponsored by The Theodore Tannenwald, Jr. Foundation for Excellence in Tax Scholarship and the American College of Tax Counsel:

  • First Prize (tie) ($4,500):  Alex Levy (NYU), Believing in Life After Loving: IRS Regulation of Tax Preparers (Faculty Sponsor:  David Kamin)
  • First Prize (tie) ($4,500):  Mark C. Westenberger (Washington University), Tax-Exempt Hospitals and the Community Benefit Standard: A Flawed Standard and a Way Forward (Faculty Sponsor:  Cheryl Block)
  • Honorable Mention:  Nika Antonikova (San Diego), Real Taxes in Virtual Economies: What Does the IRS Say (Faculty Sponsor:  Brian Galle)
  • Honorable Mention:  Michael Daly (Georgetown University), Bound and Gagged: Making the Case for Congress Delegating Tax Policy to the Experts (Faculty Sponsor:  Tom Field)

December 2, 2014 in Legal Education, Scholarship, Tax, Teaching | Permalink | Comments (0)

Monday, December 1, 2014

Yagan Presents Capital Tax Reform and the Real Economy Today at UC-Berkeley

YaganDanny Yagan (UC-Berkeley) presents Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

Policymakers frequently propose to use capital tax reform to stimulate investment and increase labor earnings. This paper tests for such real impacts of the 2003 dividend tax cut -- one of the largest reforms ever to a U.S. capital tax rate -- using a quasi-experimental design and a large sample of U.S. corporate tax returns from years 1996-2008. I estimate that the tax cut caused zero change in corporate investment, with an upper bound elasticity with respect to one minus the top statutory tax rate of .08 and an upper bound effect size of .03 standard deviations. This null result is robust across specifications, samples, and investment measures. I similarly find no impact on employee compensation. The lack of detectable real effects contrasts with an immediate impact on financial payouts to shareholders. Economically, the findings challenge leading estimates of the cost-of-capital elasticity of investment, or undermine models in which dividend tax reforms affect the cost of capital. Either way, it may be di¢ cult for policymakers to implement an alternative dividend tax cut that has substantially larger near-term effects.

December 1, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Vanderbilt Symposium: The Role of Federal Law in Private Wealth Transfer

VandySymposium, The Role of Federal Law in Private Wealth Transfer, 67 Vand. L. Rev. 1531-2006 (2014):

December 1, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Zucman: Taxing Across Borders -- Tracking Personal Wealth and Corporate Profits

Gabriel Zucman (London School of Economics), Taxing Across Borders: Tracking Personal Wealth and Corporate Profits, 28 J. Econ. Perspectives 121 (Fall 2014):

This article attempts to estimate the magnitude of corporate tax avoidance and personal tax evasion through offshore tax havens. US corporations book 20 percent of their profits in tax havens, a tenfold increase since the 1980; their effective tax rate has declined from 30 to 20 percent over the last 15 years, and about two-thirds of this decline can be attributed to increased international tax avoidance. Globally, 8 percent of the world's personal financial wealth is held offshore, costing more than $200 billion to governments every year. Despite ambitious policy initiatives, profit shifting to tax havens and offshore wealth are rising. I discuss the recent proposals made to address these issues, and I argue that the main objective should be to create a world financial registry.

Figure 1

Continue reading

December 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

Gender Disparity in Law Review Citation Rates: Women Outperform Men

Christopher Anthony Cotropia (Richmond) & Lee Petherbridge (Loyola-L.A.), Gender Disparity in Law Review Citation Rates:

Gender disparity in scholarly influence – measured in terms of differential citation to academic work – has been widely documented. The weight of the evidence is that, in many fields of academic inquiry, papers authored by women receive fewer citations than papers authored by men. To investigate whether a similar gender disparity in scholarly influence exists in legal studies we analyze the impact of gender on citation to articles published in top 100 law reviews between 1990 and 2010. We find evidence of gender disparity in citation rates, but in surprising contrast to observations made in other disciplines, we observe that articles authored by women receive significantly more citations than articles authored by men.

Table 3

December 1, 2014 in Legal Education, Scholarship | Permalink | Comments (7)

Call for Papers: Taxing Racism

Call for Papers Taxing Racism: Racial Hoarding, Redistribution, and Contestations of ‘The Public’:

SociologyDuring the 1950s, ’60s, and ’70s, the Black Freedom Struggles pushed for minority inclusion into “mainstream” institutions, seeking integration in schools and housing as well as access to social safety net policies — all gains that would signify acceptance into larger society. As these preliminary steps toward inclusion occurred, we have witnessed large-scale reconfigurations in the very institutions that represented minority access to the public in these struggles. White racial resentment has seen expression in tax revolts, anti-welfare and “social entitlements” discourse, and the decimation of cities’ tax bases through white withdrawal to suburbs. The past few decades have also seen the growth of seemingly neutral tax policies at local, state and federal levels that privilege whites at the expense of blacks (and other people of color too). Through collective as well as corporate interests, whites have sought to lessen their tax obligations for those public services seen as disproportionately benefitting blacks. We have also seen the diversion and hoarding of public tax funds to private pockets in for-profit charter schools, economic development and “urban renewal,” and the growth of private prisons, all of which capitalize on the suffering of a racialized war against the poor.

All these examples allude to broader themes on the racialized meaning of the public itself. If struggles between power and resistance over taxation can reveal anything to scholars of race, it may be that the whole notion of the public is a politically contested battleground in which racial groups assert and defend their collective interests. Taxation can be either a democratizing social force or a site for the reproduction of inequality and racial repression; perhaps even both. Open-ended questions of the public, what constitutes it, who defines it, and whom it should serve all represent contentious matters of racial politics that manifests in conflicts over taxation. Yet what we know of the public as a racially-contested concept has been one subject that remains relatively unexplored by academics generally and sociologists specifically.

This special issue fills this theoretical and empirical gap by uniting a discussion of contemporary racial trends in taxation, with special attention paid to racially-motivated revisions of the public, all with the intent of generating broader hypotheses about race and belonging in the modern era. Preferred approaches will be sociological in nature, but interdisciplinary orientations will be considered. Papers that use a variety of theoretical and methodological approaches are welcomed. Manuscripts may include, but are not limited to the following themes:

  • Property Tax Revolts, White Backlash, and Education Finance
  • “The 47 Percent,” the “Food-Stamp President,” and Racial Redistribution
  • The Earned Income Tax Credit: When Tax Policy becomes “Welfare”
  • Tax Increment Financing, Urban Growth Regimes, and Transforming “Inner-cities”
  • Tax Exemptions, White Flight, and Segregation Academies
  • The “Death” Tax, Growing Wealth Disparity, and the Racial Politics of Deservingness
  • Fiscal Cliffs, BIG Government, and the Racial State
  • Business Tax Breaks in Overtaxed Black Cities
  • Brownfield Redevelopment and School Tax Capture
  • Court Fines and Fees, Government Finance in Ferguson, Missouri

Continue reading

December 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

Sunday, November 30, 2014

The Research Productivity of New PhDs in Economics: The Surprisingly High Non-success of the Successful

John P. Conley (Vanderbilt) & Ali Sina Önder (Bayreuth), The Research Productivity of New PhDs in Economics: The Surprisingly High Non-success of the Successful:

We study the research productivity of new graduates from North American PhD programs in economics from 1986 to 2000. We find that research productivity drops off very quickly with class rank at all departments, and that the rank of the graduate departments themselves provides a surprisingly poor prediction of future research success. For example, at the top ten departments as a group, the median graduate has fewer than 0.03 American Economic Review (AER)-equivalent publications at year six after graduation, an untenurable record almost anywhere. We also find that PhD graduates of equal percentile rank from certain lower-ranked departments have stronger publication records than their counterparts at higher-ranked departments. In our data, for example, Carnegie Mellon's graduates at the 85th percentile of year-six research productivity outperform 85th percentile graduates of the University of Chicago, the University of Pennsylvania, Stanford, and Berkeley. These results suggest that even the top departments are not doing a very good job of training the great majority of their students to be successful research economists. Hiring committees may find these results helpful when trying to balance class rank and place of graduate in evaluating job candidates, and current graduate students may wish to re-evaluate their academic strategies in light of these findings.

Table 2

Continue reading

November 30, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (2)

Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads on SSRN is the same as last week's list.  The #1 paper is now #115 in all-time downloads among 10,535 tax papers:

  1. [1176 Downloads]  A Compendium of Private Equity Tax Games, by Gregg D. Polsky (North Carolina)
  2. [390 Downloads]  Obama Care Fails the Origination Clause: Why Sissel and Hotze Should Be Reversed, by Steven J. WIllis (Florida) & Hans G. Tanzler (Florida)
  3. [372 Downloads]  Trying Times 2014: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin (Utah) & Steven J. Small (Law Office of Stephen J. Small, Newton, MA)
  4. [240 Downloads]  A World Turned Upside Down: Reflections on the 'New Wave' Inversions and Notice 2014-52, by Reuven S. Avi-Yonah (Michigan)
  5. [229 Downloads]  A White Paper on Executive Action to Restore Trust in the Internal Revenue Service by Rebuilding Field Operations, by Frank Wolpe (Bentley)

November 30, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 29, 2014

Burk: The Evolving Market for New Lawyers in the 21st Century

Bernard A. Burk (North Carolina), What's New About the New Normal: The Evolving Market for New Lawyers in the 21st Century, 41 Fla. St. U. L. Rev. 541 (2014):

Everyone agrees that job prospects for many new law graduates have been poor for the last several years; there is rather less consensus on whether, when, how or why that may change. This article analyzes historical and current trends in the job market for new lawyers in an effort to predict how that market may evolve.

The article derives quantitative measurements of the proportion of law graduates over the last thirty years who have obtained initial employment for which law school serves as rational substantive preparation (“Law Jobs”). In comparing entry-level hiring patterns since 2008 with those in earlier periods, a significant development emerges: While other sectors of the market for new lawyers have changed only modestly during the Great Recession, one sector — the larger private law firms colloquially known as “BigLaw” — has contracted six times as much as all the others. Though BigLaw hiring has historically accounted for only 10%-20% of each graduating class, it is responsible for over half the entry-level Law Jobs lost since 2008.

While some observers predict a return to business as usual as the economy recovers, this article is skeptical of that account. The article identifies significant structural changes in the way that the services traditionally provided by BigLaw are being produced, staffed and priced that diminish BigLaw’s need for junior lawyers both immediately and in the longer term. These observations suggest that entry-level BigLaw hiring, and thus the market for new lawyers overall, will remain depressed below pre-recession levels well after demand for the services BigLaw has traditionally provided recovers. At the same time, new lawyers’ job prospects may nevertheless improve as the contraction in the legal academy now underway reduces the number of new graduates competing for work.

Chart

November 29, 2014 in Legal Education, Scholarship | Permalink | Comments (2)

Friday, November 28, 2014

Weekly SSRN Tax Roundup

Wednesday, November 26, 2014

Hoenig: What's Wrong With Trafficking in NOLs?

Tax Analysys Logo (2013)Mark Hoenig (Weil, Gotshal & Manges, New York), Trafficking in Net Operating Losses: What's So Bad?, 145 Tax Notes 919 (Nov. 24, 2014):

Hoenig examines the almost century-long history of Congress’s efforts to allow tax losses and limit their transfer. He explores the rationale for those efforts, assesses the system now in place, and asks whether an alternative set of rules might better serve policy and the economy.

November 26, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tuesday, November 25, 2014

Alarie Presents Policy Preferences and Expertise in Canadian Tax Adjudication Today at Columbia

AlarieBenjamin Alarie (Toronto) presents Policy Preferences and Expertise in Canadian Tax Adjudication, 62 Canadian Tax J. ___ (2014) (with Andrew Green (Toronto)), at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

Both taxpayers and governments struggle to stay on top of the various complex sources of tax law and to apply them in a myriad of different contexts. Given the potential for confusion and disagreement (not to mention the sometimes very large financial stakes involved) it would make sense to have a process for taxpayers to appeal government decisions to an expert body that can provide authoritative, reasoned and rational solutions to tax disputes. For this reason Canada, like the United States, has a specialized tax court dedicated to hearing appeals from decisions of the tax administration. Yet there is some evidence in both Canada and the US that judges in tax cases may be influenced by their own personal policy preferences or other factors extraneous to the “true” legal merits in deciding appeals from decisions of the tax administration. This paper examines in more detail appeals from tax assessments in Canada to understand the relative influence of judicial tax expertise and the policy preferences of judges on appeals to the Tax Court of Canada and the Federal Court of Appeal.

Our analysis reveals three main results: (1) policy preferences of judges matter, but not that much; (2) resources matter — a lot; and (3) there are dynamics relating to affirmation of appeals that are difficult to explain, although a desire to avoid the apprehension of bias is possible.

Continue reading

November 25, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax Farming: Experimental Evidence on Performance Pay for Tax Collectors

Adnan Q. Khan (London School of Economics), Asim I. Khwaja (Harvard) & Benjamin A. Olken (MIT), Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors:

Performance pay for tax collectors has the potential to raise revenues, but might come at a cost if taxpayers face undue pressure from collectors. We report the first large-scale field experiment on these issues, where we experimentally allocated 482 property tax units in Punjab, Pakistan into one of three performance-pay schemes or a control. After two years, incentivized units had 9.3 log points higher revenue than controls, which translates to a 46 percent higher growth rate. The scheme that rewarded purely on revenue did best, increasing revenue by 12.8 log points (62 percent higher growth rate), with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions. Further analysis reveals that these revenue gains accrue from a small number of properties becoming taxed at their true value, which is substantially more than they had been taxed at previously. The majority of properties in incentivized areas in fact pay no more taxes, but do report higher bribes. The results are consistent with a collusive setting in which performance pay increases collector's bargaining power over taxpayers, who either have to pay higher bribes to avoid being reassessed, or pay substantially higher taxes if collusion breaks down.

(Hat Tip: Bruce Bartlett.)

November 25, 2014 in Scholarship, Tax | Permalink | Comments (1)

Monday, November 24, 2014

Akron Tax Journal Publishes New Issue

Akron LogoThe Akron Tax Journal has published Volume 29 (2014):

November 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Grewal: How King v. Burwell Jeopardizes the 2014-15 ACA Enrollment Season

Andy Grewal (Iowa), How King v. Burwell Jeopardizes the 2014-2015 ACA Enrollment Season:

Commentators have expressed concern that a government loss in King v. Burwell, which addresses whether taxpayers can enjoy tax credits for policies purchased on federal exchanges, will lead to a "death spiral." Because consumers will no longer enjoy tax credits, they would stay away from the federal exchanges, which would lead to higher prices, which would discourage more consumers, and so on.

Continue reading

November 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Sunday, November 23, 2014

Top 5 Tax Paper Downloads

Saturday, November 22, 2014

USC Book Panel Discussion on Kleinbard's We Are Better Than This

Kleinbard Flyer

Prior TaxProf Blog coverage:

Continue reading

November 22, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Friday, November 21, 2014

Hickman Presents Treasury's Retroactivity Today at Miami

Hickman 2014 2Kristin Hickman (Minnesota) presents Treasury's Retroactivity at Miami today as part of its Legal Theory Workshop Series hosted by Leigh Osofsky:

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.

November 21, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

November 21, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

California’s Tax Hikes Versus Kansas’ Tax Cuts: Early Results Now In

Tax Justice Network, California’s Tax Hikes Versus Kansas’ Tax Cuts: Early Results Now In:

From a new paper by Paul Caron of Pepperdine University and Joseph Bankman of Stanford University:

The conventional wisdom in California two years ago was that raising taxes on the wealthy would harm the economy and doom any politician who dared touch this third rail. Instead, the public embraced this approach at the ballot box and, after enjoying the fruits of an economic turnaround, appears poised to reward the Governor with a landslide re-election.

LafferIt seems that the absurd Laffer Curve, which is often used to make the ridiculous proposition that tax cuts increase revenue, didn’t work in this case. Now in Kansas, they went the other way. ... “Kansas’ budget problems keep getting worse. . . . state revenues dropped 11 percent in the fiscal year 2014 (which ended in June) after the tax cuts took effect. But that may not even be the whole picture. A close look at the state’s new revenue projections makes clear they are highly optimistic, even after this week’s cut in the forecast.”

Back to the Caron / Bankman paper, which does an unusual and welcome thing for academics.

Get this: it urges scholars to take their heads out of the sand and get stuck into the real world. In fact, this is the central argument of the paper (which is entitled California Dreamin’: Tax Scholarship in a Time of Fiscal Crisis [48 U.C. Davis L. Rev. 405 (2014)]).

We have found that the need for more revenue is a common conversation topic among tax scholars. However, it is not a common topic in tax scholarship. Indeed, it is not even clear that it “qualifies” as scholarship, as that term is commonly defined. In law, at least, highly praised scholarship is generally marked by a masterful description of the law that suggests the need for change.

Quite so, and strong and unusual medicine.

Now here is some discussion that we at TJN and quite a few others have been saying for years. It’s worth quoting at length.

In recent years, legal tax scholars have made normative claims based on those arguments. However, those normative claims are quite limited and explicitly apolitical . . . . writing about the fiscal crisis, in contrast, throws the scholar directly into the political world. . . . Legal tax scholars who write on this subject run the risk of being dismissed as political, or lacking requisite knowledge.

Unfortunately, scholars in allied fields face similar problems. Economists are also reluctant to write on subjects so entwined with politics and often have less knowledge of specific tax provisions than legal tax scholars. Political scientists lack economic sophistication and knowledge of the tax law, and know less about the politics of tax preferences than either lawyers or economists. The fiscal crisis thus falls between at least three disciplines. As a result, scholars in each of those disciplines are reluctant to write on a subject they believe is central to the nation’s health.

They cite honourable exceptions, such as this highly recommended book by Ed Kleinbard [We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014)], if you’re interested in the U.S. tax system.

And they conclude:

Two years ago, both California and the nation were imperiled by long- term, structural, budget imbalances. California has reduced that peril by raising (already high) personal tax rates on the wealthy. The political success of that approach suggests that at the national level, Americans might be willing to support higher rates to maintain government services and move toward fiscal solvency.

November 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

Viard: Moving Away From the Realization Principle

Tax Analysys Logo (2013)Alan D. Viard (American Enterprise Institute), Moving Away From the Realization Principle, 145 Tax Notes 847 (Nov. 17, 2014):

Viard describes the realization principle’s flaws and the federal tax system’s incremental movement toward mark-to-market taxation.

November 21, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Thursday, November 20, 2014

Polsky: A Compendium of Private Equity Tax Games

Gregg D. Polsky (North Carolina), A Compendium of Private Equity Tax Games:

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).

November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Zelinsky: The Giving Pledge and Reform of the Estate Tax Charitable Deduction

Giving PledgeEdward A. Zelinsky (Cardozo), Why the Buffett-Gates Giving Pledge Requires Limitation of the Estate Tax Charitable Deduction, 16 Fla. Tax Rev. 393 (2014):

The Buffett-Gates Giving Pledge, under which wealthy individuals promise to leave a majority of their assets to charity, is an admirable effort to encourage philanthropy. However, the Pledge requires us to confront the paradox that the federal estate tax charitable deduction is unlimited while the federal income tax charitable deduction is capped. If a Giving Pledger leaves his wealth to charity, the federal fisc loses significant revenue since the Pledger thereby avoids federal estate taxation as charitable bequests are deductible without limit for federal estate tax purposes. Despite its laudable qualities, the Giving Pledge is a systematic (albeit inadvertent) threat to the estate tax base.

Continue reading

November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Harvey: Corporate Tax Aggressiveness -- Recent History and Policy Options

J. Richard (Dick) Harvey (Villanova), Corporate Tax Aggressiveness -- Recent History and Policy Options, 67 Nat'l Tax J. 831 (2014):

This paper examines corporate tax aggressiveness from the 1990s to 2014. The paper also discusses various public indicia of corporate tax aggressiveness and analyzes selected data from 21 public companies. Finally, the paper discusses several policy options for further reducing corporate tax aggressiveness, including: (1) improvements to the IRS whistleblower program, (2) increased transparency, and (3) changes to the penalty structure surrounding aggressive tax positions. 

November 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Pepperdine/Tax Analysts Symposium Papers: Tax Reform in a Time of Crisis

TaxSymposiumHeaderHere are links to the eleven published papers from the Pepperdine/Tax Analysts Symposium on Tax Reform in a Time of Crisis (Jan. 17, 2014):

Thanks to the paper commentators:  Donald Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel), Nancy Staudt (Dean, Washington University), and Eric Zolt (UCLA)

November 20, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (2)

Sander: The Mismatch Critique of Law School Affirmative Action and Its Opponents

MismatchRichard Sander (UCLA), Mismatch and the Empirical Scholars Brief, 48 Val. U. L. Rev. 555 (2014):

In April 2013, the Valparaiso University Law Review held a symposium on diversity in legal education, commemorating the contributions of Justice Randall Shepard and featuring a number of distinguished speakers. I was invited to participate in a panel on Fisher v. University of Texas, a then-pending Supreme Court case that seemed likely to revise the rules under which universities can consider race in higher education admissions. The conference organizers generously allowed me to participate by videoconference, as did my co-panelist Professor Eboni Nelson. They and I agreed that my talk should explore some of the empirical issues that might frame how the Supreme Court viewed Fisher.

I approached the event with some concern. I had been the bête noire of many diversity advocates ever since 2005, when the Stanford Law Review published my long analysis and critique of law school affirmative action programs. I had advanced, and since steadfastly defended, something called “the mismatch hypothesis,” which postulated that very large preferences--racial or of any other kind--may undermine student learning, because professors tend to teach to the middle of their class, and students far below the middle will have trouble keeping up and advancing as concepts build day by day. Critiques of my essay had been many, but I had answered them, and an increasingly broad array of other scholars had published articles that found other strong evidence of mismatch in a wide variety of academic contexts. Certainly, the evidence for mismatch was mixed--at least in some contexts--and social scientists who found evidence of mismatch never argued--to my knowledge--that the existence of mismatch should preclude affirmative action policies. But just as certainly, universities tended to completely ignore the mismatch problem, and this was quite disturbing. The Supreme Court's decision to review the Fifth Circuit's holding in Fisher--and to thus reconsider the constitutionality of university racial preferences--increased the level of interest and anxiety about mismatch research.

Lawyer and journalist Stuart Taylor, Jr., had joined forces with me to write a broadly accessible book on the effects of racial preferences, called Mismatch, which appeared in October 2012. That, along with two briefs that Stuart and I wrote as amici curiae to the Court on Fisher, helped to elevate the mismatch hypothesis to a prominent place in the public discussion of Fisher. The New York Times, The Economist, the Wall Street Journal, and NPR's All Things Considered all ran prominent articles on mismatch, generally treating it as, at the very least, an idea to be reckoned with seriously. The general tone was well-captured by The New York Times' David Brooks, who wrote: “[A]ffirmative action programs ... perpetrated some noteworthy wrongs .... The evidence on this is hotly disputed, but Richard Sander and Stuart Taylor Jr. make a compelling case ....”

Yet at law school events during the 2012-2013 academic year, when I was invited to speak about any aspect of Fisher, a strangely repetitive pattern emerged. Regardless of whether the topic at hand was mismatch, or some entirely different part of the affirmative action issue, panel members who disliked my mismatch research would start to recite from a document known as the Empirical Scholars Brief. This document, they would suggest, was the definitive refutation of Richard Sander, the other “mismatch” researchers, and all that we were taken to represent. Often they would distribute copies of the Empirical Scholars Brief to the audience, like revivalists passing out the Gospel of St. James. But--and this was the oddest part--these panelists were never interested in engaging or debating any of the claims that were actually in the Empirical Scholars Brief (which I will sometimes, as shorthand, refer to as the “ESB”). One panelist, at an AALS panel in a large ballroom, disclaimed any intention of getting into the details. “I'm not a trained quantitative empiricist,” she said, “instead I'm compelled to rely on critiques by other empiricists.” Pretty much exactly the same thing happened at the Valparaiso symposium. Professor Nelson began our panel with a very thoughtful discussion of the “deference” issue--that is, when and to what degree the Supreme Court should defer to the educational judgment of universities in evaluating their diversity programs. Professor Sumi Cho followed with some rather discursive remarks on the importance of diversity. I then spoke about some of my empirical findings on university behavior--a sort of empirical comment on some of the same issues Professor Nelson had raised. When we finished, and the question and answer portion began, Professor Cho distributed a copy of the ESB to the audience, with the standard comment that the audience could better evaluate my comments if they knew what other social scientists thought of my work. With my time up, and on my remote monitor, I was not in a very good position to respond to and engage the ESB claims. I encouraged anyone in the audience to ask me to discuss any specific claim they could identify, but there were no takers. It felt to me like a completely non-substantive, ad hominem, and unfair attack.

It therefore seems appropriate to take the opportunity afforded by the written version of the symposium to provide the sort of thoughtful engagement that I would have liked to provide the live symposium audience. What follows is an assessment--though it may sound more like an expose--of the “Empirical Scholars Brief.” The thrust of my analysis is that the ESB is not just substantively wrong, but it is also a deeply dishonest document that relies on outright falsehoods and misleading claims to support an argument, which should be embarrassing to its signatories, and is entitled to no substantive weight in discussions of mismatch and affirmative action.

Richard Sander (UCLA), The Stylized Critique of Mismatch, 92 Tex. L. Rev. 1637 (2014):

Continue reading

November 20, 2014 in Legal Education, Scholarship | Permalink | Comments (7)

Wednesday, November 19, 2014

Raskolnikov Presents Rational Decisions Under Legal Uncertainty Today at Washington University

RaskolnikovAlex Raskolnikov (Columbia) presents Rational Decisions Under Legal Uncertainty at Washington University today as part of its Faculty Workshop Series:

Law is full of rules that are neither clear nor socially optimal. How do rational actors respond to these rules? What are the implications of these responses? These deceptively simple questions have no answers in law and economics. This paper offers a model of rational decisionmaking under legal uncertainty and explores its implications by combining formal economic analysis with a practical understanding of the market for legal advice. The model produces a number of intuitive, realistic results. It demonstrates why rational actors take uncertain positions even if these positions are highly likely to be detected. It suggests that most of these positions will have a better than a fifty-fifty chance of being sustained. And it allows us to investigate a popular but controversial view that greater legal certainty does not necessarily lead to greater compliance. The model’s analysis both refutes the obvious explanation for this view and offers an alternative one. When detection uncertainty is taken into account, the model confirms that the standard damages multiplier works when legal rules are ambiguous. At the same time, the model raises difficult questions about the meaning of compliance when rules are uncertain, the normative significance of various types of uncertainty, and the challenges of assessing private responses to legal uncertainty outside of the familiar confines of the optimal deterrence theory.

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hayashi Presents Phantom Income and the Simple Economics of Paying In Kind Today at Texas A&M

HayashiAndrew Hayashi (Virginia) presents Phantom Income and the Simple Economics of Paying In Kind at Texas A&M today as part of its Business Law Seminar:

Modern tax instruments impose cash taxes on non-cash bases. Property taxes, income taxes, gift taxes and estate taxes all must be paid in cash, even though income, gifts and estates only sometimes take the form of cash, and property never does. If it is costly to convert the tax base into cash, taxpayers may suffer from liquidity problems that require them to make painful adjustments to their savings or consumption. Although concern about taxpayer liquidity has shaped tax law and looms large in current debates about wealth taxation, tax accounting, and mark-to-market reforms, the economic factors that influence the welfare costs of cash tax collection have not been explored in a rigorous way. In this paper I present an economic analysis of the liquidity problem, identifying the factors that determine the welfare costs of cash tax collection. I apply this analysis to the property tax and to the taxation of income that accrues before it is received, sometimes called “phantom income.”

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Macnaughton Presents Income Splitting and Anti-Avoidance Legislation Today at Toronto

AlanAlan Macnaughton (Waterloo) presents Income Splitting and Anti-Avoidance Legislation: Evidence from the Canadian “Kiddie Tax” (with Andrew Bauer (Illinois)  & Anindya Sen (Waterloo)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

We examine whether “kiddie tax” legislation in Canada, effective as of 2000, deters income splitting between parents and minor children by taxing at the top marginal rate certain types of non-labour income received by children. OLS estimates based on cross-province and time-series data reveal that the share of dividend income reported by children aged 19 and under declines by 86% after the introduction of this anti-avoidance rule. The estimates also reveal that the share of capital gains (income not covered by the legislation) reported by minor children increases by 70% in the post-legislation period, suggesting that parents are switching to an alternative income splitting technique. However, the latter percentage effect is on a small base, and thus the decrease in dividend income is much larger than the increase in capital gains income. Hence, our analysis suggests that the “kiddie tax” is an effective method to deter income splitting.

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Blank Presents Reconsidering Corporate Tax Privacy Today at Rutgers

BlankJoshua D. Blank (NYU) presents Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at Rutgers-Newark today as part of its Faculty Colloquium Series:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy protections, should be publicly accessible. The ongoing global discussion of base erosion and profit shifting by multinational corporations has generated calls for greater tax transparency. Throughout this debate, participants have focused exclusively on the potential reactions of a corporation’s managers, shareholders and consumers to a corporation’s disclosure of its own tax return information. There is, however, another perspective: how would the ability of a corporation’s stakeholders and agents to observe other corporations’ tax return information affect the corporation’s compliance with the tax law?

Continue reading

November 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)