TaxProf Blog

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

Friday, March 23, 2018

Tax Policy In The Trump Administration

Friday, March 16, 2018

Tax Policy In The Trump Administration

Thursday, March 15, 2018

Kleinbard: Perversion Of The Tax Policymaking Process

Monday, March 12, 2018

NY Times: Tax Law’s Errors Upset Companies As Congressional Leaders Feud

New York Times p. 1:  Tax Law’s Errors Upset Employers As Leaders Feud, by Jim Tankersley & Alan Rappeport:

The legislative blitz that rocketed the $1.5 trillion tax cut through Congress in less than two months created a host of errors and ambiguities in the law that businesses big and small are just now discovering and scrambling to address.

Companies and trade groups are pushing the Treasury Department and Congress to fix the law’s consequences, some intended and some not, including provisions that disadvantage certain farmers, hurt restaurateurs and retailers and could balloon the tax bills of large multinational corporations.

While Treasury can clear up uncertainty about some of the murky provisions, actual errors and unintended language can be solved only legislatively — at a time when Democrats seem disinclined to lend votes to shoring up a law they had no hand in passing and are actively trying to dismantle.

On Thursday, the U.S. Chamber of Commerce sent the Treasury Department 15 pages of detailed requests for clarification on how the law affects multinational corporations, mutual fund investors and mom-and-pop pass-through entities.

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March 12, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Saturday, March 10, 2018

WSJ: State Corporate Tax Revenues Are Poised To Rise Because Of The New Federal Tax Law

EYWall Street Journal, Where Corporate Taxes Are Poised to Rise Because of Tax Overhaul: States:

The amount of income subject to corporate taxes on the state level will increase by 12% because of the federal-tax overhaul, which removed or limited tax breaks, according to a business-backed study [The Impact of Federal Tax Reform on State Corporate Income Taxes].

When the top federal corporate-tax rate was 35%, state corporate-tax rates ranging from 3% to 12% were relatively insignificant for many big companies. But now, with the federal rate at 21% and fewer breaks available, state corporate taxes are becoming increasingly important.

After the federal government limited deductions and changed foreign-tax rules late last year, state taxable income went up and state rates didn’t change.

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March 10, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, March 9, 2018

Tax Policy In The Trump Administration

NY Times: Blue-Collar Trump Voters Are Shrugging At Their Tax Cuts

New York Times, Blue-Collar Trump Voters Are Shrugging at Their Tax Cuts:

The white working-class voters in the industrial Midwest who helped put Mr. Trump in the White House are now seeing the extra cash from the tax cut, the president’s signature domestic policy achievement and the foundation for Republican election hopes in November.

But the result has hardly been a windfall, economically or politically. Other workers described their increase as enough for a week’s worth of gas or a couple of gallons of milk, with an additional $40 in a paycheck every two weeks on the high side to $2 a week on the low. Few are complaining, but the working class here is not feeling flush with newfound wealth.

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March 9, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, March 8, 2018

Harvard Economists: New Tax Law Will Cost Treasury $1.2 Trillion Over A Decade

Wall Street Journal, Tax Law Doesn’t Pay for Itself, Harvard Economists Find:

The recent changes to the U.S. tax law will increase economic growth modestly but not fast enough to pay for themselves, according to a new estimate from a pair of economists from different sides of the political spectrum. In other words, the additional government tax revenue generated by higher growth won’t be enough to offset the drop in revenue due to tax cuts.

The net cost to the Treasury, after accounting for economic growth, would be $1.2 trillion over a decade, according to the paper by the Harvard University economists, conservative Robert Barro and Jason Furman, who was an adviser to President Barack Obama.

Robert J. Barro (Harvard) & Jason Furman (Harvard), The Macroeconomic Effects of the 2017 Tax Reform:

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March 8, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, March 2, 2018

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)

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)

Wednesday, February 28, 2018

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)

Monday, February 26, 2018

NY Times: Washington’s Fight Over Taxes Is Only Just Beginning

New York Times, Washington’s Fight Over Taxes Is Only Beginning:

Never mind that “once in a generation” tax bill that just passed last year. Congress is headed for years more of big fights over taxes, particularly those for individuals.

That tax battle is a byproduct of America’s polarized political climate and of the go-it-alone choices Republicans made to speed the 2017 law through Congress in less than two months.

It is already complicating tax planning for companies and workers around the country, particularly in high-tax states like New York, Maryland and California, where lawmakers are actively pursuing workarounds for some provisions of the new federal law that limit state and local income and property tax deductions.

It’s only going to get messier.

“This legal regime is very unstable; Congress has created many, many problems,” both in the substance of the bill and the exclusion of Democrats in enacting it, said Rebecca Kysar, a professor and tax expert at Brooklyn Law School. “All of those dynamics are going to make for a very uncertain landscape going forward.” ...

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February 26, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Sunday, February 25, 2018

New Tax Law Ignites White House Power Struggle

Treasury OMBFollowing up on last week's post, Tax Reform and IRS Resistance:  Politico, Tax Law Ignites White House Power Struggle:

A political battle over the fate of hundreds of regulations and other guidance for the new tax law may soon land on President Donald Trump’s desk, forcing him to choose between two of his favorite Cabinet members.

At stake is who has ultimate authority to shape the nuances of the tax cuts and other rules as part of the $1.5 trillion Republican tax overhaul: Treasury Secretary Steven Mnuchin and the IRS have that power now, but White House budget director Mick Mulvaney and some of his GOP allies in Congress want the Office of Management and Budget to have the final say.

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February 25, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Saturday, February 24, 2018

WSJ: Pass-Through Businesses Are Rethinking Their Status In Wake Of The New Tax Law

WSJWall Street Journal, Pass-Through Businesses Are Rethinking Their Status in Wake of Tax Law:

As business owners pore through the new tax law, many are asking themselves a fundamental question: Will changing how their company is structured cut their tax bills?

“This is one of the most pressing issues for taxpayers and business owners,” said Mark Everson, vice chairman of tax-consulting firm Alliantgroup LP. “They are looking carefully now at how they are legally organized.” 

For many entrepreneurs, the big question is whether to operate as a C corporation, which pays its own taxes to the Internal Revenue Service, or as a pass-through company, which pays tax through individual rather than corporate returns. Pass-through businesses include S corporations, sole proprietorships and limited liability companies.

The clock is ticking. Many business owners have until March 15 to make an election that would be retroactive to the beginning of 2018.

The rethinking of corporate structures is one byproduct of the new tax bill, which cuts the corporate tax rate to 21%, down from a top rate of 35%, though owners pay a second tax on profits distributed as dividends. ..,

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February 24, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, February 23, 2018

Tax Policy In The Trump Administration

Thursday, February 22, 2018

WSJ: New BEAT Tax Could Eliminate Benefit From Lower Corporate Tax Rate For Some Foreign Firms

WSJ 2Wall Street Journal, BEAT UP? U.S. Tax Provision May Sting Foreign Firms:

Executives around the world have embraced the overhaul’s big reduction in the federal corporate-tax rate—from 35% to 21%. Less-well-known provisions in the new code, however, could hurt some companies based outside the U.S. and doing business in the country.

One of the biggest potential threats is the base-erosion and anti-abuse tax. Dubbed BEAT, the levy could damp—or even completely offset—any gains that foreign multinationals such as SAP might otherwise expect from the reduction in the U.S. tax rate.

Here is how BEAT is designed to work: If a company generates more than $500 million in annual revenue in the U.S., and its American units make above a specified level of tax-deductible payments to related companies overseas, those units must pay a minimum tax on their U.S. profit after adding back in certain types of deductions. The minimum rate is 5% in 2018, but rises to 10% in 2019 and 12.5% in 2026.

Drafters of the tax law say the provision was meant to discourage companies from inappropriately channeling profit generated in the U.S. to lower-tax regimes.

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February 22, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

NY Times: Tax Overhaul Gains Public Support, Buoying Republicans

NYTNew York Times, Tax Overhaul Gains Public Support, Buoying Republicans:

The tax overhaul that President Trump signed into law now has more supporters than opponents, buoying Republican hopes for this year’s congressional elections.

The growing public support for the law coincides with an eroding Democratic lead when voters are asked which party they would like to see control Congress. And it follows an aggressive effort by Republicans, backed by millions of dollars of advertising from conservative groups, to persuade voters of the law’s benefits.

That campaign has rallied support from Republicans, in particular. But in contrast with many other issues — including Mr. Trump’s job approval rating — it also appears to be winning over some Democrats. Support for the law remains low among Democrats, but it has doubled over the past two months and is twice as strong as their approval of Mr. Trump today.

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February 22, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Tuesday, February 20, 2018

KPMG Report On New Tax Law

Monday, February 19, 2018

Tax Reform And IRS Resistance

Wall Street Journal:  Tax Reform and IRS Resistance, by Kimberley A. Strassel:

With all the good news about the new Republican tax law, you may be surprised to learn that the fight isn’t over. Behind the scenes, reformers face a new challenge: Navigating the IRS swamp.

It’s a little-known fact that for 35 years the Internal Revenue Service has exempted itself from the most basic regulatory oversight. When the Labor Department or the Small Business Administration create “major” or “significant” rules or guidance, they are required to submit them for centralized review. That ensures regulations are consistent with the law and with White House priorities and that they’ve been analyzed for costs, benefits and flexibility.

But in 1983, the Treasury Department signed a memorandum with the Office of Management and Budget that largely exempted the IRS from submitting its rules to White House review via OIRA, the Office of Information and Regulatory Affairs. The memo still stands today. In the face of congressional attempts at oversight, the IRS issued a 1996 opinion claiming that tax statutes are in and of themselves responsible for any costs or inflexibility—that the IRS’s rules are, by definition, pure distillation of law. ...

[T]he IRS is already playing games with the GOP tax reform.

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February 19, 2018 in IRS News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

Friday, February 16, 2018

Tax Policy In The Trump Administration

Thursday, February 15, 2018

Reagan’s ‘Party Of Ideas’ Is Down To Just One: Tax Cuts

New York Times op-ed:  Reagan’s ‘Party of Ideas’ Is Down to Just One: Tax Cuts, by Mike Lofgren (author, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government (2017)):

It is a sign of our slide toward banana republic status when the president of the United States, leader of the world’s foremost democracy, publicly brands Democrats who failed to applaud his State of the Union address as un-American and treasonous. The largely partisan audience was fine with it.

What has become of the Republican Party, which I once served on Capitol Hill and which I now consider a dangerous extremist movement on a par with the ruling Fidesz party in neo-fascist Hungary? Where did its principles go? What became of Ronald Reagan’s “party of ideas”?

One by one, those ideas were tossed aside for expediency and power — except the tax cut. A time traveler from the Reagan era would no longer recognize the Republican Party, but most Republican politicians feel no embarrassment supporting policies they once condemned. ...

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February 15, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Wednesday, February 14, 2018

WSJ: The New Tax Law

Tuesday, February 13, 2018

Former Yale President: CEOs Should Invest Tax Cut Windfall In Workers' Human Capital, Not Bonuses And Buybacks

New York Times op-ed:  How C.E.O.s Should Spend Their Tax Cuts, by Richard Levin (Former President, Yale: Former CEO, Coursera):

Companies are wrestling with how to allocate the windfall from the recent tax act. It’s a nice problem to have.

Home Depot, JetBlue and Pfizer have announced plans to pass tax savings on to shareholders through stock buybacks. Apple, AT&T, Comcast, Verizon and Walt Disney are distributing one-time bonuses to their employees. BNY Mellon, FedEx and JPMorgan Chase are raising wages. Walmart and US Bancorp are giving bonuses and raising wages. Boeing, Southwest Airlines and Wells Fargo have increased their charitable donations. And a few companies, perhaps fewer than the White House expected, have joined with Amazon to announce ambitious programs of capital investment that will create jobs and increase productivity.

Neglected in the public discussion is yet another strategy, with large potential benefits for every company and for the nation as a whole: investing in human capital. Lost in the noise was Boeing’s announcement that it will spend $100 million on work force development, training and education, and Disney’s investment of $50 million to cover tuition payments for its hourly employees. ...

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February 13, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (4)

Saturday, February 10, 2018

AT&T, Other Companies Play Tax Arbitrage In Paying Worker Bonuses In Response To Trump Tax Cuts

AT&T LogoBloomberg:  AT&T, Walmart Bolster Their Tax Savings in Paying Worker Bonuses, by Lynnley Browning:

The surprise bonuses that corporations like Walmart and AT&T are bestowing upon rank-and-file American workers are currying favor with the public and President Donald Trump.

But there’s another perk — the companies can use the payouts to minimize their tax bills.

It’s no secret that companies are allowed to deduct most compensation expenses from their taxable income as a cost of doing business. There’s a wrinkle this year, though — since the corporate tax rate was slashed to 21 percent from 35 percent, big firms that account for the expense in 2017 stand to save tens of millions of dollars more in taxes than if they book the expense in 2018.

“That’s a big tax arbitrage play,” said Len Burman, a co-founder of the Urban-Brookings Tax Policy Center and a former senior Treasury tax official. ...

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February 10, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, February 9, 2018

Tax Policy In The Trump Administration

Number Of Americans Renouncing Their U.S. Citizenship Fell In 2017, The First Decline In Five Years

International Tax Blog, 2017 Fourth Quarter Published Expatriates – First Annual Decrease in Five Years:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2017.


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February 9, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (5)

How The Trump Tax Cuts Handed GM A $5 Billion Loss

GM Logo (2018)Bloomberg:  How a Tax Cut Handed GM a $5 Billion Loss, by Megan McArdle:

General Motors Co. had a pretty good quarter in the last months of 2017. Sales of its SUVs surged, surpassing those of competitors like the Ford Escape and fueling fat gross margins. Looking ahead to 2018, the company forecasts strong earnings. And of course it’s staring at a healthy tax cut, courtesy of the administration of President Donald Trump and Republicans in Congress.

Naturally, when the time came to do its earnings call, the company reported a $5.15 billion loss for the quarter.

Actually, if you know a bit about accounting, this is entirely natural. In lowering the company’s corporate taxes, the government suddenly made the ability to avoid those taxes less valuable.

Between 2005 and 2008 (when the government stepped in to bail it out), GM lost roughly $80 billion. These are gruesome numbers. But that grim cloud had a silver lining: Those staggering losses created something called an “NOL carryforward.” ...

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February 9, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Tuesday, February 6, 2018

The New Tax Law Summarized In One Interactive Page

Tax lawyers at the Texas law firm Jackson Walker (including 2016 Pepperdine graduate Brady Cox) have produced a fantastic 233-page PowerPoint presentation, 2018 Tax Reform: What You Need to Know Now.  The presentation summarizes the entire TCJA in a single interactive page that allows users to click on relevant portions and go to the detailed slides on that topic:


February 6, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Sunday, February 4, 2018

NY Times: The Republican Tax Act Could Turn Texas Blue

Texas 3New York Times Sunday Review, The Republican Tax Act Could Turn Texas Blue:

Every major policy overhaul has unanticipated consequences, and the Tax Cuts and Jobs Act will be no exception. One tantalizing possibility for this one: The Republican tax overhaul helps Democrats in the midterm and 2020 elections by bringing forward the date at which a few critical states — Georgia and possibly even Texas — flip from red to blue.

How might this happen? It stems from the new caps on the home mortgage interest and state and local tax deductions. Restrictions on building have pushed up the costs of housing in expensive coastal blue-state cities like San Francisco, Los Angeles and New York City. High income and property taxes piled onto exorbitant rents and mortgage payments amount to cost-of-living force fields that already deflect talented workers to relatively affordable red-state cities, like Phoenix, Houston, Atlanta and Charlotte, N.C.

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February 4, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Saturday, February 3, 2018

NY Times: The Economic Impact Of The Trump Tax Cuts

New York Times:  Trump Tax Cuts and the Economy: Time Will Tell, Maybe, by James B. Stewart:

Most presidents will at some point benefit from a surging economy and stock market, but none has claimed more credit for them than Donald J. Trump, as he did again during this week’s State of the Union address. Among the highlights:

  • “$8 trillion and more” in stock market gains.
  • “2.4 million new jobs” created since his election.
  • “Over 3 million workers have gotten tax-cut bonuses” and “rising wages.”
  • All thanks to “the biggest tax cuts and reforms in American history.”

Since the president has frequently complained that the media denies him credit for any of this, I thought it only fair to assess the degree to which the undeniably strong economy, low unemployment and surging stock market are because of Mr. Trump’s achievements, notably his sweeping tax bill.

It turns out that’s no easy task, especially since Mr. Trump has only been president for a year, and the tax legislation is little more than a month old. Economists are still debating the impact on the economy of Ronald Reagan’s 1986 tax reform legislation more than 30 years after its passage.

“It’s not like chemistry or physics where you can do a controlled experiment and change one variable,” said Joel Slemrod, professor of economics and public policy at the University of Michigan, and co-author of a seminal study of the economic impact of the 1986 tax reform act [The Economic Effects of the Tax Reform Act of 1986; see also CBO, Economic Impacts of the Tax Reform Act of 1986: Short-Run and Long-Run Perspectives]. “We can never be entirely sure because we don’t know what would have happened without the tax act.”

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February 3, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, February 2, 2018

Tax Policy In The Trump Administration

Georgetown Hosts Conference Today On Can An Internationally Competitive Tax System Protect Its Tax Base?

Georgetown (2016)The Georgetown Institute of International Economic Law and International Tax Policy Forum host a conference today on  Can an Internationally Competitive Tax System Protect Its Tax Base?:

Recent International Measures to Limit Tax Base Erosion

  • Mihir Desai (Harvard) (moderator)
  • Calum Dewar (PwC)
  • Mike Williams (Director, Business and International Tax, HM Treasury)

Economic Consequences of Limiting Base Erosion with Inbound Investment

  • Michelle Hanlon (MIT) (moderator)
  • Jennifer Blouin (Wharton)
  • Michael Devereux (Oxford)

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February 2, 2018 in Conferences, Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Wednesday, January 31, 2018

NY Times: Corporate Tax Cuts Are Raising Pay Of Bosses, Not Workers

New York Times editorial, Are Corporate Tax Cuts Raising Pay? Yes, for Bosses:

Recent announcements by Apple, Walmart, AT&T, Starbucks and other businesses that they are giving workers raises, repatriating foreign profits and investing in the United States because of the tax bill Congress passed last year are clearly music to the ears of President Trump and Republican lawmakers. But these statements are also cleverly designed public relations spin that tells us little about the actual long-term economic impact of the tax law.

Let’s put some context around these corporate proclamations. The economy is humming, with the unemployment rate at 4.1 percent. This is, of course, very good news. But beware the spin: Regardless of what’s in the tax overhaul, businesses have an incentive to raise wages to retain and attract workers because of the tight job market. It is also very much in the political interest of companies to attribute to the new tax law the changes they make to salaries or investment plans. That’s a surefire way to win favor with Mr. Trump, a notorious sucker for flattery. And it is a way to deflect attention from the insidious aspects of the tax law: It will add about $1.5 trillion to the federal deficit over 10 years, and many poor and middle-class families will pay more taxes over time.

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January 31, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Tuesday, January 30, 2018

‘Repeal And Replace’ The Trump Tax Cuts

Wall Street Journal op-ed:  ‘Repeal and Replace’ the Trump Tax Cuts, by Jason Furman (Harvard):

Everyone who debated last year’s tax law can agree that it won’t be the last word. The legislation addressed almost none of the “tax extenders,” temporary tax breaks that Congress typically reauthorizes every year. Some of the law’s key provisions expire after 2022 or 2025.

More important, the tax cuts put the country on an unsustainable fiscal trajectory, with next year’s deficit set to hit 5% of gross domestic product, a record outside of major wars and recessions or their aftermath. Finally, anything widely known as the “Trump tax cuts” is politically unstable given that Democrats will eventually take back power.

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January 30, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Saturday, January 27, 2018

NY Times: Bonuses Aside, New Tax Law’s Trickle-Down Impact On Workers Is Not Yet Clear

New York Times, Bonuses Aside, Tax Law’s Trickle-Down Impact Not Yet Clear:

There are good ways to start measuring how much the Trump tax cuts might be helping American workers. Tracking the bonus announcements flowing from corporations is not one of them.

Those announcements, which include $2,500 in stock grants for Apple employees, up to $1,000 for certain workers at Walmart and $1,000 bonuses for Bank of America employees, are both real money and smart marketing. President Trump and top Republican lawmakers have praised many of the companies that are disclosing tax-cut-fueled bonuses and wage hikes.

For the most part, though, they are not indicative of the windfalls that companies are reaping from the $1.5 trillion tax law — and how much of that money that might trickle through to workers in the years to come.

Companies are acknowledging this in their fourth-quarter earnings reports and other financial disclosures, which earmark just a sliver of their future tax savings for direct and indirect investments in workers.

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January 27, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, January 26, 2018

Tax Policy In The Trump Administration

Thursday, January 25, 2018

Goldin Presents Complexity And Take-up Of The Earned Income Tax Credit Today At UCLA

Goldin (2017)Jacob Goldin (Stanford) presents Complexity and Take-up of the Earned Income Tax Credit at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh and Kirk Stark:

Tax benefits like the Earned Income Tax Credit (EITC) represent an important source of income to their recipients, but millions of those who are eligible to claim tax benefits fail to do so. One possible explanation is that the rules governing most tax benefits are extraordinarily complex. I consider efforts to increase tax benefit take-up in light of this complexity. A key fact in thinking about this issue is that the vast majority of tax filers today prepare their taxes with assisted preparation methods (APMs) like software or professional assistance. Because APMs eliminate most of the barriers to claiming tax benefits for which one is eligible, I ague that efforts to increase benefit take-up should focus on inducing benefit-eligible individuals to file a tax return using an APM. In contrast, efforts aimed at increasing awareness of a benefit (of the type widely employed by governments and nonprofits) are less likely to be successful, except to the extent they themselves induce an increase in tax filing.

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January 25, 2018 in Colloquia, Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Apple's Bogus Claim That The GOP Tax Cut Is Making It Spend More In The U.S. Is Just A PR Sop To Trump

Apple LogoLos Angeles Times:  Apple's Bogus Claim That the Tax Cut Is Making It Spend More in the U.S. Is Just a PR Sop to Trump, by Michael Hiltzik:

To hear the White House tell it, Apple's big announcement last week that it would increase jobs and make billions in new investments in the United States is proof positive that the big tax cut President Trump signed in December is working. ... If anything, Apple's announcement proves just the opposite. It underscores Apple's success at having gamed the U.S. tax system for more than a decade before finally browbeating Republicans in Congress to do its bidding. The announcement bristles with exaggerations and misrepresentations about what the company really is promising. It glosses over the fact that the billions in overseas earnings it's "bringing home" as a result of the tax legislation were pretty much here all the time. ...

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January 25, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (8)

GOP Tax Cuts May Not Be Driving Corporate Generosity To Workers

Tax Reform WorksWashington Post, Economics May Not Be Driving Corporate Generosity:

Republicans have been touting the number of companies handing out employee bonuses and pay raises — such as Walmart and Bank of America — as a surprising sign that the Trump administration’s tax cuts are working their economic magic faster than anyone expected.

“It really is unbelievable to see just how many companies have stepped up,” House Majority Whip Steve Scalise (R-La.) told Fox Business. White House chief economic adviser Gary Cohn described it as “not even something we expected to see.” President Trump has tweeted eight times on the topic, calling the bonuses “an unexpected new source of ‘love.’ ”

And they’ve been keeping careful count, too. Staffers in Scalise’s office constantly update a running list of which companies have joined in, under the headline “Tax Reform Works.”

But a deeper look at the list of approximately 200 companies shows that more than economics is probably at play, with business experts and analysts saying that alternative motivations are likely to be behind the sudden flood of corporate generosity. One major Republican donor owns 11 of the firms on the list. Several companies are contending with problems with regulators in Trump’s administration. And so many companies have settled on the $1,000 bonus figure that it appears, to some, to be just as much about a public relations push as anything else.

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January 25, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Monday, January 22, 2018

Four Ways Law Firms Could Game The New Tax Law (But Probably Shouldn’t)

Following up on my previous posts (links below):, 4 Ways Law Firms Could Game the New Tax Law (But Probably Shouldn’t):

As businesses everywhere take stock of the new U.S. tax law, both law firms and individual lawyers are asking: What’s in it for us?

Despite the uncertainty that remains about the law, “the gains are just too large” not to explore tax-saving tricks, said New York University tax professor Daniel Shaviro.

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January 22, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

WSJ: Small Colleges Take Big Hit From New Endowment Tax

WSJ 2Wall Street Journal, Which Colleges Will Have to Pay Taxes on Their Endowment? Your Guess Might Not Be Right:

The Juilliard School, New York’s magnet for aspiring artists, is bracing for a 1.4% tax on income from its $1 billion endowment. Three miles away, Columbia University and its $10 billion endowment will remain untouched for now.

A college-endowment tax, enacted in December in the Tax Cuts and Jobs Act signed by President Donald Trump, is causing confusion and frustration at schools across the country, which rely on the previously tax free-earnings when setting their budgets.

Small liberal arts colleges will likely be hit disproportionately because many have sizable endowments but limited enrollment. The tax applies only to private schools with at least 500 students and at least $500,000 of investments per student. ...

The wealthiest schools, such as Harvard and Princeton University, will definitely pay, while the smallest and least wealthy schools won’t.

Some wealthy universities will probably avoid the tax in the near-term. Columbia, New York University, the University of Southern California, Vanderbilt University and Johns Hopkins University all have endowments over $3 billion. But their endowments fall below the $500,000-per-student threshold because they have so many students, federal data show. ...

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January 22, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Sunday, January 21, 2018

The Big Winners In Apple's Tax Bonanza: Shareholders

Apple LogoFollowing up on Thursday's post, Apple To Pay $38 Billion In Taxes To Bring Cash Hoard Back To U.S. And Build U.S. Campus:  Wall Street Journal, Apple’s Big Cash Winners: Shareholders:

Apple announced a $38 billion tax windfall for the U.S. government this week, but the biggest beneficiary of the company’s response to tax-system changes will likely be its shareholders.

The tech giant’s plan to bring back to the U.S. most of its $252.3 billion in overseas cash holdings is expected to lead to a large increase in share buybacks and dividends, say analysts, tax experts and investors. Of broader benefit to investors, the change in tax law should boost Apple’s bottom line by cutting its effective tax rate. It also could prompt the company to ramp up acquisitions and research-and-development spending to reduce its iPhone dependency, an abiding concern of some shareholders. ...

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January 21, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Saturday, January 20, 2018

Holderness:  The Next Tax Reform — Internet Sales Tax

The Hill op-ed:  The Next Tax Reform: Internet Sales Tax, by Hayes Holderness (Richmond):

On Jan. 12, the U.S. Supreme Court decided to hear the case of South Dakota v. Wayfair. If you haven’t been following along, this is a big deal and may affect households across the country — it’s about internet sales taxes.

The Wayfair case pits the “Kill Quill” movement  against internet retailers. As riveting as it sounds, this isn’t a new Quentin Tarantino film about sales taxes. The Kill Quill movement is a group of state tax administrators, brick-and-mortar retailers and their allies, whose goal is to overturn the ruling in the 1992 Supreme Court case of Quill Corp. v. North Dakota. With the current court agreeing to hear the Wayfair case, Quill looks to be on its last breath.

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January 20, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, January 19, 2018

Weekly SSRN Tax Article Review And Roundup: Scharff Reviews Federal Tax Treatment Of Charitable Contributions For State Tax Payments

This week, Erin Scharff (Arizona State) reviews a working paper by Joe Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford), Daniel Hemel (Chicago), Darien Shanske (Davis), Kirk Stark (UCLA), Dennis Ventry (Davis), & Manoj Viswanathan (Hastings), Federal Income Tax Treatment of Charitable Contributions Entitling Donor to a State Tax Credit.   

Scharff (2017)One of the most important lessons I learned in law school is that legal rules are often less ideological than the context from which they emerge.  It is a lesson I’ve thought about repeatedly this past year, as questions about state standing to sue the federal government and the validity of nationwide injunctions are raised by new parties against a new administration.  I hadn’t, however, seriously considered the way such lessons might apply to substantive tax law.

Of course, it was foolish to think that tax law would be immune from this larger trend.  In response to the 2017 tax legislation’s dramatic curtailment of the state and local tax deduction, several scholars and policymakers have been exploring the possibility that high tax states might want to offer state tax credits for charitable donations made to the state.  As someone long skeptical of my state’s use of charitable tax credits, I’ve find this sudden progressive interest in state tax credits bemusing and intriguing.

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January 19, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration, Weekly SSRN Roundup | Permalink | Comments (1)

Tax Policy In The Trump Administration

The Effect Of A Government Shutdown On The IRS: Not What You Think

Machines are cheap. Humans are expensive. The IRS depends upon both to administer the fiendishly complex tax code that Congress tirelessly re-scrambles every year. This year is, of course, much, much worse. And everyone seems at least aware that a government shutdown will hurt the IRS’s ability to implement the new law. Here’s a recent WaPo article on the subject.

But the effect of a government shutdown on IRS operations is worse than is being reported.  More below the fold.

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January 19, 2018 in Bryan Camp, IRS News, Miscellaneous, News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (6)

NY Times: Saying You Want To Reform the Tax Code? Easy. Doing It? Less So.

New York Times, Saying You Want to Reform the Tax Code? Easy. Doing It? Less So.:

It read like a maddening instruction manual for a do-it-yourself piece of furniture, with page after page of bare-bones guidance — and plenty of room for confusion.

If taxpayers and lawmakers were expecting that a new 37-page reportwould provide a definitive road map of how New York State might sidestep the effects of President Trump’s new federal tax plan and its sharp reduction in the deductibility of state and local taxes, they instead got a view of just how complicated this is.

The report, released this week, laid out at least a half-dozen ways New York could rewrite its tax code, with no indication of which option legislators might pursue. There was a potpourri of progressive rates, wage credits and tax-withholding schemes, with officials cautioning that all the options would require further study. No bills have been drafted.

The possibilities included completely replacing the state income tax with an employer-side payroll tax; introducing a new progressive payroll tax in addition to the existing income tax, with tax credits to make up the difference; or designing a payroll tax only for wage earners above a certain income threshold — the taxpayers most likely to be hurt by the federal tax plan in the first place. Some versions would be mandatory. Others would be opt-in.

More than anything, the report illustrated how difficult it may be to turn academic theory into real policy, serving as a cautionary guide to other states contemplating similar options. And it underscored the political challenges that lie ahead for Gov. Andrew M. Cuomo, as he seeks to sell a new payroll tax that could slightly reduce workers’ wages, even though the net payout, after taxes, would remain the same.

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January 19, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Thursday, January 18, 2018

Apple To Pay $38 Billion In Taxes To Bring Cash Hoard Back To U.S. And Build U.S. Campus

New York Times, Apple, Capitalizing on New Tax Law, Plans to Bring Billions in Cash Back to U.S.:

Apple, which had long deferred paying taxes on its foreign earnings and had become synonymous with hoarding money overseas, unveiled plans on Wednesday that would bring back the vast majority of the $252 billion in cash that it held abroad and said it would make a sizable investment in the United States.

With the moves, Apple took advantage of the new tax code that President Trump signed into law last month. A provision allows for a one-time repatriation of corporate cash held abroad at a lower tax rate than what would have been paid under the previous tax plan. Apple, which has 94 percent of its total cash of $269 billion outside the United States, said it would make a one-time tax payment of $38 billion on the repatriated cash.

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January 18, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Sunday, January 14, 2018

Zelinsky: Taxation And Religion In 2018 — The Parsonage Allowance And The Johnson Amendment

Edward A. Zelinsky (Cardozo), Taxation and Religion in 2018:

2018 will be an interesting year for those concerned about the intersection of taxation and religion. Two important issues – the constitutionality of the parsonage allowance and the future of the Johnson Amendment – are primed for further controversy in the year ahead.

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January 14, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)