TaxProf Blog

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

Monday, July 23, 2018

Lesson From The Tax Court: Origin Of The Claim Test For §162

Tax Court (2017)Last week’s post involved taxpayers whose tax troubles arose from events related to the Great Recession. Those troubles resulted in litigation and a lesson about how the Tax Court applies an “origin of the claim” test in evaluating claimed §104(a)(2) exclusions.

This week’s post also involves a taxpayer whose life took a downturn during the Great Recession. Only this week we look at the more traditional application of the “origin of the claim” test when taxpayers seek to deduct litigation expenses. In Sky M. Lucas v. Commissioner, T.C. Mem.o 2018-80 (June 11, 2018) the IRS sent Mr. Lucas an NOD asserting a tax deficiency of $1.7 million for 2010. Part of that deficiency was due to the disallowance of about $3 million in legal and professional fees related to Mr. Lucas’ divorce litigation.  The multi-year litigation was a fight over some $47 million.  No wonder it was expensive. In the end, Mr. Lucas got to keep most of that.  Mr. Lucas thought he could deduct his litigation costs.  For a great lesson in how the Tax Court applied the origin of the claim test to deny him the deduction, see below the fold.

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July 23, 2018 in Bryan Camp, New Cases, Tax | Permalink | Comments (0)

Last Week's Ten Most Popular TaxProf Blog Posts

TaxProf Blog Weekend Roundup

Sunday, July 22, 2018

The Geometry Of Wealth: How To Shape A Life Of Money And Meaning

Geometry of WealthBrian Portnoy, The Geometry of Wealth: How To Shape A Life Of Money And Meaning (2018):

In The Geometry of Wealth, behavioral finance expert Brian Portnoy delivers an inspired answer based on the idea that wealth, truly defined, is funded contentment. It is the ability to underwrite a meaningful life. This stands in stark contrast to angling to become rich, which is usually an unsatisfying treadmill.

At the heart of this groundbreaking perspective,Portnoy takes readers on a journey toward wealth, informed by disciplines ranging from ancient history to modern neuroscience. He contends that tackling the big questions about a joyful life and tending to financial decisions are complementary, not separate, tasks.

These big questions include:

  • How is the human brain wired for two distinct experiences of happiness? And why can money"buy" one but not the other?
  • Are the touchstones of a meaningful life affordable?
  • Why is market savvy among the least important sources of wealth but self-awareness is among the most?
  • Can we strike a balance between pushing for more and being content with enough?

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July 22, 2018 in Book Club, Legal Education, Tax | Permalink | Comments (0)

22 Tax Profs File Amicus Brief: The Section 107 Housing Allowance For 'Ministers Of The Gospel' Violates The First Amendment's Establishment Clause

Ellen Aprill (Loyola-L.A.), Reuven Avi-Yonnah (Michigan), Linda Beale (Wayne State), Samuel Brunson (Loyola-Chicago), Neil Buchanan (George Washington), Patricia Cain (Santa Clara), Adam Chodorow (Arizona State), Mark Cochran (St. Mary's), Bridget Crawford (Pace), Jonathan Forman (Oregon), Gregory Germaine (Syracuse), David Herzig (Valparaiso), Benjamin Leff (American), William Lyons (Nebraska), Roberta Mann (Oregon), Lori McMillan (Washburn), Joel Newman (Wake Forest), Henry Ordower (St. Louis), Katherine Pratt (Loyola-L.A.), Daniel Schaffa (Richmond), Erin Scharff (Arizona State) & Theodore Seto (Loyola-L.A.), Amicus Curiae Brief of Tax Law Professors in Support of Appellees (Gaylor v. Mnuchin, Nos. 18-1277 & 18-1280, 7th Cir. :

Section 107 allows “ministers of the gospel” to exclude the value of housing benefits from income, whether provided in-kind or as a cash allowance, at a cost of approximately $9.3 billion in forgone taxes over a ten-year window. The trial court dismissed the challenge to Section 107(1), which excludes in-kind housing, on standing grounds, but that section remains relevant to the analysis of Section 107(2). Supporters argue that Section 107(2), which excludes cash allowances, comports with the First Amendment’s Establishment Clause because (1) it is part of a broad policy expressed in a number of provisions that exempts housing provided for the convenience of the employer and (2) tax exemptions do not subsidize religious actors. Alternately, they argue that Section 107(2) is permitted as an accommodation for religion because it equalizes treatment of different religious groups and avoids church/state entanglement. Finally, they claim that eliminating Section 107(2) would imperil other exemptions.

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July 22, 2018 in New Cases, Scholarship, Tax | Permalink | Comments (2)

The Top Five New Tax Papers

SSRN Logo (2018)There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with new papers debuting on the list at #4 and #5:

  1. [319 Downloads]  Introduction to Tax Policy Theory, by Allison Christians (McGill)
  2. [246 Downloads]   The International Provisions of the TCJA: A Preliminary Summary and Assessment, by Reuven Avi-Yonah (Michigan)
  3. [173 Downloads]   Rethinking Legal Taxonomies for the Gig Economy: Tax Law, Employment Law, and Economic Incentives, by Abi Adams, Judith Freedman & Jeremias Prassl (Oxford)
  4. [155 Downloads]   U.S. Tax Reform: Potential Impact on Europe and EU Corporations (Presentation Slides), by Reuven Avi-Yonah (Michigan)
  5. [147 Downloads]   Recent Developments in Federal Income Taxation: The Year 2017, by Bruce McGovern (South Texas) & Cassady Brewer (Georgia State)

July 22, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, July 21, 2018

Field: Tax Opinions And Probability Theory — Lessons From Donald Trump

Heather M. Field (UC-Hastings), Tax Opinions & Probability Theory: Lessons from Donald Trump, 156 Tax Notes 61 (July 3, 2017):

This report uses tax opinions rendered to Donald Trump’s enterprises in the early 1990s as a case study for examining the relevance of probability theory in multi-issue opinions in which each tax position must be correct for the desired benefits to be achieved. This report also makes recommendations for incorporating probability theory into tax opinion practice.

July 21, 2018 in Scholarship, Tax | Permalink | Comments (1)

Tax Probe Of Trump Foundation Faces High Bar For Criminal Charges

Wall Street Journal, Tax Probe of Trump Foundation Faces High Bar for Criminal Charges, Experts Say:

New York state is investigating whether the Donald J. Trump Foundation violated tax laws, according to a senior Cuomo administration official, and legal experts say the bar for any resulting criminal charges is high.

The state Department of Taxation and Finance is leading the investigation, which is examining whether the foundation or its officers, including President Donald Trump, broke state tax laws by transferring assets or making misrepresentations to the state that might affect tax liability, the official said.

The state tax department could issue a criminal referral to either the New York state attorney general’s office or the Manhattan district attorney’s office, the official said. The office that got the referral would decide whether to prosecute. ...

Legal experts say charging tax crimes, such as fraud, carries a high bar because prosecutors must prove that a defendant intended to deceive or commit wrongdoing.

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July 21, 2018 in Tax | Permalink | Comments (1)

Friday, July 20, 2018

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Oei & Osofsky's Constituencies And Control In Statutory Drafting

This week, Ari Glogower (Ohio State) reviews a new work by by Shu-Yi Oei (Boston College) and Leigh Osofsky (North Carolina), Constituencies and Control in Statutory Drafting: Interviews with Government Tax Counsels, 104 Iowa L. Rev. __ (2019).

Glogower (2016)

How do stylistic drafting choices affect the administration and substance of the tax law? One might suppose that mere questions of style do not matter at all, as long as the provisions operate as intended. Shu-Yi Oei and Leigh Osofsky’s new work challenges this assumption, and sheds new light on the implications of these stylistic choices for the tax system. When it comes to drafting of tax statutes, it turns out, form may in fact matter.

The work begins by reviewing the process for the production of tax statutes, and the role of various cooks in the tax law kitchen, including House and Senate members, their legislative counsel, the House Committee on Ways and Means, the Senate Committee on Finance, the IRS and Treasury, the JCT, and outside interest groups and lobbyists. The work then provides a topography of the basic drafting choices these different actors face. 

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July 20, 2018 in Ari Glogower, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Same-Sex Married Tax Filers After Windsor And Obergefell

Robin Fisher (Office of Tax Analysis, U.S. Treasury Department), Geof Gee (Office of Tax Analysis, U.S. Treasury Department) & Adam Looney (Brookings Institution), Same-Sex Married Tax Filers After Windsor and Obergefell, 55 Demography 1423 (2018):

This article provides new estimates of the number and characteristics of same-sex married couples after U.S. Supreme Court rulings in 2013 and 2015 established rights to same-sex marriage. The U.S. Department of the Treasury and the Internal Revenue Service subsequently ruled that same-sex spouses would be treated as married for federal tax purposes. Because almost all married taxpayers file joint tax returns, administrative tax records provide new information on the demographic characteristics of married same-sex couples. This study provides estimates of the population of same-sex tax filers drawn from returns filed in 2013, 2014, and 2015, using methods developed by the U.S. Census Bureau to address measurement error in gender classification.

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July 20, 2018 in Scholarship, Tax | Permalink | Comments (0)

Tax Laws Are Holding Back California’s Housing Market

Bloomberg, These Tax Laws Are Holding Back California’s Housing Market:

Forty years ago last month, Californians passed Proposition 13, the property-tax limitation that helped spark a national tax revolt. It’s still popular. In a March survey by the Public Policy Institute of California, 57 percent of residents, and 65 percent of likely voters, said it had been mostly good for the state, with only 23 percent saying it had been mostly bad.

Prop 13 limited local property taxes to 1 percent of purchase price (or of the assessed value in 1975) and capped subsequent increases at 2 percent a year. It also required a two-thirds legislative majority for new state taxes and two-thirds voter approval for new local taxes.

The law enjoys continued support because it gives homeowners predictable expenses. You can’t get forced out of your home simply because it’s become valuable. You move when you’re ready.

That’s the theory, anyway.

There are, however, perverse effects, some of which have been amplified by the dramatic run-up in housing prices in the Bay Area and Southern California. Prop 13 doesn’t just allow people to keep their homes until they want to sell. It also encourages them to hang on long past the time when they would have otherwise moved on. This lock-in exacerbates California’s housing crisis. ...

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July 20, 2018 in Tax | Permalink | Comments (5)

Thursday, July 19, 2018

Four Blue States Sue To Block Trump Tax Law's $10,000 State & Local Tax Deduction Cap

Wall Street Journal, Democratic States Sue Trump Administration Over Tax Overhaul:

A coalition of states led by New York sued the federal government Tuesday, alleging that last year’s tax overhaul was politically motivated and designed to interfere with the rights of states to manage their finances. New Jersey, Connecticut and Maryland joined New York in the federal lawsuit filed in U.S. District Court in New York. The lawsuit takes aim at a part of the new tax law limiting federal tax deductions for state and local taxes to $10,000.

The plaintiffs said the new law raises the federal tax liability of millions of taxpayers in those states, making it more difficult for the states to maintain their taxation policies. The tax law also seeks to force the states to slash public spending, the plaintiffs said.

Wall Street Journal editorial, Albany’s Millionaire Tax Revolt:

The Republican tax bill is the law for 2018, but some progressives are mounting an insurrection against taxation without . . . loopholes for rich people. As a slogan it’s not the Boston Tea Party, but check out the revealing legal challenge from four states. ...

This is a sure legal loser, not least because tax reform merely rewrote the federal tax code. Congress didn’t touch a single state statute. The plaintiff AGs claim their states were somehow politically targeted, but the federal law applies to all 50 states uniformly.

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July 19, 2018 in Tax | Permalink | Comments (6)

Banks Got A Trump Tax Bump

BanksBloomberg, Without Tax-Cut Boom, Banks Would Be Facing a Bust:

Here’s the latest sign of who’s benefiting in President Donald Trump’s economy: Without the tax cut, bank earnings growth in the second quarter would have been pretty close to zilch. Instead, the nation’s six biggest banks are set to report a 14 percent improvement in earnings in the April-to-June period. Nine of every 10 dollars of that increase is thanks to the tax cut. Just one dollar came from an actual improvement in operations.

That small gain, just $413 million out of an estimated $3.5 billion increase, is odd given how strong the economy appears to be. Just last year, investors seemed certain that a mixture of Trump’s deregulation and then proposed tax cuts would boost corporate America and banks in particular. And yet those tax gains haven’t translated into much more business for the banks.

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July 19, 2018 in Tax | Permalink | Comments (1)

Bankman, Hemel & Ventry: Why Filing Taxes Isn’t Easy

PostcardPolitico:  Why Filing Taxes Isn’t Easy, by Joseph Bankman (Stanford), Daniel Hemel (Chicago) & Dennis Ventry (UC-Davis):

The Trump administration unveiled a “postcard-sized” tax form late last month that will supposedly make it easier for Americans to do their own taxes. The move was nothing more than a publicity stunt—as a number of commentators noted, the administration achieved its postcard-sized ambitions only by requiring millions of Americans to submit supplementary worksheets that actually complicate the task of tax preparation.

The real action on tax filing right now is happening on the other end of Pennsylvania Avenue, where Congress is working hard to ensure that doing your taxes remains a time-consuming and expensive endeavor. The House of Representatives has passed two bills in recent weeks that seek to stop the IRS from simplifying the tax-filing process. One is pending in the Senate Finance Committee. The other cleared the Senate Appropriations Committee in late June, with a floor vote likely this summer.

At issue are two innovations that, if adopted by the IRS, would radically reduce the time and expense incurred in filing federal income tax returns. The first is free online tax preparation paired with electronic filing: The IRS could offer an easy-to-use product that assists you in completing your tax return, then allows you to submit your return online—all at a price of $0. A second and even more pioneering possibility is “pre-population”: the IRS could allow you to begin the filing process with an already filled-out return rather than making you enter each item of information from scratch.

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July 19, 2018 in Tax | Permalink | Comments (1)

Yin: How The Byrd Rule Might Have Killed the 2017 Tax Bill . . . And Why it Didn't

George K. Yin (Virginia), How the Byrd Rule Might Have Killed the 2017 Tax Bill . . . And Why it Didn't:

During debate on the 2017 tax bill that was once slated to become the “Tax Cuts and Jobs Act,” the number of stories referencing an arcane budget law known as the “Byrd rule” skyrocketed in publications as diverse as the New York Times and the weekly trade magazine, Tax Notes. Many of the references, however, dealt with minor effects of the rule, such as its role in removing the bill’s short title from the final legislation. This article briefly describes a much more important and little-known aspect of this little-known rule that might have—and perhaps should have—killed the bill altogether.

July 19, 2018 in Scholarship, Tax | Permalink | Comments (0)

OMB Seeks To Hire A Tax Policy Analyst

OMBThe Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) is seeking to hire a Policy Analyst with expertise in tax policy/administration.  See here and here.

As a Policy Analyst, GS-0301-14/15, your typical work assignments may include the following:

Policy analysts within the IP Branch are the core source of expertise on matters pertaining to the regulatory and information policies of Federal departments and agencies with tax policy/administration, financial, banking, consumer protection, and related missions. Policy analysts are responsible for:

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July 19, 2018 in Tax | Permalink | Comments (0)

Wednesday, July 18, 2018

Buchanan Reviews Abreu's The 2017 Tax Act: Requiem For Ability to Pay

Jotwell (Tax) (2016)Neil H. Buchanan (George Washington), The Ability-To-Pay Principle and the Counterintuitive Distributive Justice Analysis of Alimony Payments (JOTWELL) (reviewing Alice Abreu, Tax 2018: Requiem for Ability to Pay, 52 Loyola L.A. L. Rev. ___ (2018)):

The tax bill that Republicans in Congress passed, and that Donald Trump signed in December 2017, might end up being one of the shortest-lived tax laws in U.S. history. Not only are large elements of it explicitly temporary, but the political moment that led to its passage seems already to be passing, quite likely to be followed by a time when progressive tax policy will once again be politically viable.

However, even if this bill lapses or is repealed (in whole or in part), Alice Abreu provides an important contribution to our understanding of what just happened in Tax 2018: Requiem for Ability to Pay. The title of the article telegraphs the importance of the issue that she identifies as the most unfortunate aspect of the new tax law. Whereas objective analysts knew that the bill’s changes would make the tax system less progressive than it had been, Abreu explains that seemingly unrelated elements of the bill add up to a repudiation of the very idea of progressive taxation. ...

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July 18, 2018 in Scholarship, Tax | Permalink | Comments (2)

Treasury Department Restricts Donor Disclosure Requirement To § 501(c)(3) Groups

Treasury Department Logo (2017)Press Release, Treasury Department and IRS Announce Significant Reform to Protect Personal Donor Information to Certain Tax-Exempt Organizations:

The Treasury Department and IRS announced today that the IRS will no longer require certain tax-exempt organizations to file personally-identifiable information about their donors as part of their annual return.  The revenue procedure released today does not affect the statutory reporting requirements that apply to tax-exempt groups organized under section 501(c)(3) or section 527, but it relieves other tax-exempt organizations of an unnecessary reporting requirement that was previously added by the IRS.  

Nearly fifty years ago, Congress directed the IRS to collect donor information from charities that accept tax-deductible contributions.  That statutory requirement applies to the majority of tax-exempt organizations, known as section 501(c)(3) organizations, receiving contributions that can be claimed by donors as charitable deductions.  This policy provided the IRS information that could be used to confirm contributions to those organizations.

By regulation, however, the IRS extended the donor reporting requirement to all other tax-exempt organizations—labor unions and volunteer fire departments, issue-advocacy groups and local chambers of commerce, veterans groups and community service clubs.  These groups do not generally receive tax deductible contributions, yet they have been required to list the names and addresses of their donors on Schedule B of their annual returns (Form 990).

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July 18, 2018 in IRS News, Tax | Permalink | Comments (2)

Liscow: Are Court Orders Sticky? Evidence On Distributional Impacts From School Finance Litigation

Zachary D. Liscow (Yale), Are Court Orders Sticky? Evidence on Distributional Impacts from School Finance Litigation, 15 J. Empirical Legal Stud. 4 (2018):

Whether welfare analysis of legal rule changes should evaluate distributional outcomes as well as efficiency depends crucially on how much their distributional impacts stick. That is, do court mandates ultimately affect the distribution of taxes and spending or do legislatures offset the distributional consequences of those court orders with other changes? Little is known about this question. To offer insight into it, I use an event study methodology to show how state revenues and expenditures respond to court orders to increase funding for schools.

I find that the court orders’ distributional impacts do stick. The education spending is financed by tax increases that do not target the largest beneficiaries of the increased education spending, the poor and those with children.

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July 18, 2018 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, July 17, 2018

Democratic Criticism Of The 2017 Tax Act Grows More Incoherent

E21Brian Riedl (Manhattan Institute), Criticism of Tax Cuts Grows More Incoherent:

The 2017 Tax Cuts and Jobs Act (TCJA) remains controversial, with public opinion evenly split and many Democrats campaigning on repeal. However, the Democratic critique of the tax cuts has grown increasingly incoherent. The party excoriates the “tax cuts for the rich” while trying to tilt them even further to the wealthy. Democrats slam the deficit effect of the tax cuts while working to worsen budget deficits. In addition, they erroneously describe the law as a “middle-class tax hike” while proposing policies that would truly raise middle-class taxes. ...

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July 17, 2018 in Tax, Think Tank Reports | Permalink | Comments (2)

Ryznar: Homeownership As Savings

Margaret Ryznar (Indiana-Indianapolis), Homeownership as Savings, 159, Tax Notes 1145 (May 21, 2018):

This article suggests that housing is an important savings vehicle, proposing that the tax law should provide incentives for homeownership as it does for retirement savings.

July 17, 2018 in Scholarship, Tax | Permalink | Comments (0)

Would A Universal Basic Income Cure Poverty?

WSJ 2Wall Street Journal Book Review:  The Cure for Poverty?, by Edward Glaeser (Harvard) (reviewing Annie Lowrey, Give People Money (2018) & Andrew Yang, The War on Normal People (2018)):

The concept of a universal basic income, or UBI, has become part of the moral armor of Silicon Valley moguls who want a socially conscious defense against the charge that technology is making humanity obsolete. The logic of UBI runs that if every adult received $12,000 annually in free, unfettered cash, then we would not need to worry about an ocean of underemployed men who numb their feelings of worthlessness with computer games and opioids. The folly of UBI is that it sees a cash payment as a substitute for purpose and accomplishment and that it enables joblessness when we should be encouraging employment and job-creating innovation.

Two new books examining UBI are better than their subject deserves. Annie Lowrey’s “Give People Money” advances the general progressive case for UBI as a new link in the safety net. Andrew Yang’s “The War on Normal People” is squarely targeted at the techno-dystopians who see UBI as a response to a jobless future in America.

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July 17, 2018 in Book Club, Scholarship, Tax | Permalink | Comments (4)

LSU Seeks To Hire A Tax Prof

LSU Logo (2018)LSU Law School seeks to hire a tenure-track or tenured faculty member in business and commercial law, with particular attention in corporate, partnership, and other areas of tax law:

We may consider applications from persons who specialize in other areas as additional needs arise. Applicants should have superior academic credentials and publications or promise of productivity in legal scholarship, as well as a commitment to outstanding teaching. The Paul M. Hebert Law Center of LSU is an Equal Opportunity/Equal Access Employer and is committed to building a culturally diverse faculty. We particularly welcome and encourage applications from female and minority candidates.

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July 17, 2018 in Tax, Tax Prof Jobs | Permalink | Comments (0)

Puckett: Means-Testing 'Ability To Pay' In The Income Tax To Combat Wealth Inequality

James M. Puckett (Penn State), Improving Tax Rules by Means-Testing: Bridging Wealth Inequality and 'Ability to Pay', 70 Okla. L. Rev. 405 (2018):

The federal income tax can and should do more to address wealth disparities and income inequality. The income tax does not directly count wealth, and the realization rule and basis "step-up" at death exclude substantial amounts of income for the wealthy. The Constitution limits Congress's ability to tax wealth. Despite these serious challenges, this Article considers how to potentially bridge the gap between wealth and the income tax.

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July 17, 2018 in Scholarship, Tax | Permalink | Comments (2)

NYU Law Grad, Creator Of The Trump Resistance Manual, On The 'Hidden Privileges' Of Wealth

ForbesVox:  Like Kylie Jenner, I Was on a Forbes List. Here Are the Hidden Privileges That Made Me a “Success.”, by Aditi Juneja (J.D. 2017, NYU):

Gracing the cover of Forbes’s 60 Richest Self-Made Women issue this week was none other than Kylie Jenner, the 21-year old member of the Kardashian family dynasty and cosmetics mogul.

The problem with this particular cover, and more generally with magazine lists like these, is they often gloss over the role intergenerational wealth and access plays in success. This is especially true when that success is achieved at a young age. I should know. I was on the Forbes “30 Under 30” list this year for Law and Policy.

Lists like these — which fetishize achievement, particularly at a young age — erase the privilege and access that allow some of us to take career risks and be entrepreneurial in ways others can’t. They diminish the hard work done by people in more challenging circumstances and add to the myth that if you just work hard enough, you can pull yourself up by your own bootstraps. They ignore that some people have neither boots nor straps.

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July 17, 2018 in Legal Education, Tax | Permalink | Comments (4)

Monday, July 16, 2018

IRS Gives Green Light To Back-Door Roth IRAs For High-Income Taxpayers

Forbes, IRS Unlocks The 'Door' For High-Income Savers:

For years, there’s been a debate raging in the financial planning community surrounding something that’s colloquially become known as “The Back-Door Roth IRA.” Some practitioners (including myself) have been advocates of the planning strategy, which involves a two-step process that effectively enables certain high-income taxpayers to skirt the Roth IRA contribution income limits, viewing it as a clever technique to make the most of nonsensical rules. Other practitioners, however, have preached caution, and have largely encouraged their clients to avoid making such transactions out of concern that the IRS could disallow the move thanks to something known as “the step-transaction doctrine.”

Despite the uncertainty surrounding the somewhat popular strategy, the IRS had been relatively tight-lipped as to its official view on the matter… or at least it had been until this past Tuesday. Earlier this week, on a July 10th Tax Talk Today webcast, Donald Kieffer Jr., a tax law specialist with the IRS’s Tax-Exempt and Government Entities Division, gave the Back-Door Roth IRA it’s biggest vote of confidence yet. Here’s what Kieffer had to say about the strategy:

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July 16, 2018 in Tax | Permalink | Comments (5)

UC-Irvine Launches Graduate Tax Program

UCI Logo (2018)UCI Law Launches a New, Innovative Graduate Tax Program:

The University of California, Irvine School of Law is pleased to announce its Graduate Tax Program, a one-of-a-kind, practice-oriented Master of Laws (LL.M.) degree program led by renowned tax scholars Omri Marian, Joshua Blank and Victor Fleischer. True to the spirit of UCI Law’s cutting-edge approach to legal education, the Graduate Tax Program offers a unique tax curriculum emphasizing practice skills and featuring small class sizes and a collegial, supportive learning environment. The program will provide students with both the doctrinal depth and the experiential learning needed to practice tax law and to develop a deep understanding of the new tax law — enacted in 2017. The program will prepare graduate students for careers as tax attorneys, judges, tax administrators and policy advocates in the United States and abroad, and will also offer the opportunity for current practitioners to dramatically expand their tax knowledge and skills. The Program will begin accepting applications in August 2018 for admission to the inaugural class, with students matriculating in the fall of 2019.

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July 16, 2018 in Legal Education, Tax | Permalink | Comments (0)

Lesson From The Tax Court: An 'Origin of the Claim' Test For §104(a)(2) Exclusions

Tax Court (2017)Here at Texas Tech we require all law students to take the basic course in federal income tax. That is not because we are especially cruel, but rather because tax law touches so many other areas of practice that the faculty believes every student should have an introduction to tax. I must shape my course knowing that at least two thirds of the students do not want to become tax lawyers. One tack I take is to highlight tax issues that regularly come up in other practice areas such as family law and litigation.

A case from the Tax Court last week teaches a useful lesson about the intersection of tax with litigation practice.  Jacques L. French and Sherry L. French v. Commissioner, T.C. Summary Op. 2018-36 (July 12, 2018) involves taxpayers seeking to exclude a settlement payment under §104(a)(2), the section that allows taxpayers to exclude from gross income the amount of damages received because of personal physical injury or physical illness.

We usually think about the “origin of the claim” test in the §162 context, where courts use it to decide when taxpayers may deduct expenses associated with litigation. In fact, just this last week I saw another Tax Court opinion that involves this application of the origin of the claim test. I may blog that next week, unless something else catches my eye.

This week, however, I think it is useful to see how the Tax Court takes a very similar approach to deciding when a taxpayer can exclude a damage award under §104(a)(2). In both situations, it is the nature of the claim asserted in litigation that governs the potential exclusion or the potential deduction.  Looking at §104(a)(2) also allows me to give a shout out to the Tax Court's newest Special Trial Judge, Diana L. Leyden.  Her carefully constructed opinion shows us exactly how the Tax Court applies this “origin of the claim test” in the §104(a)(2) context. It makes for a nice lesson from the Tax Court.

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July 16, 2018 in Bryan Camp, New Cases, Tax | Permalink | Comments (0)

From Switzerland With Love: Surrey’s Papers And The Original  Intent(s) Of Subpart-F

Nir Fishbien (S.J.D. 2018, Michigan), From Switzerland with Love: Surrey’s Papers and the Original  Intent(s) of Subpart-F, 38 Va. Tax Rev. ___ (2018):

For the first time since 1913, and as part of the 2017 tax reform, Congress adopted a tax regime that exempted from U.S. taxation dividends from foreign subsidiaries. By doing so, Congress abandoned the general principle that U.S. residents should be subject to tax on all income “from whatever source derived.” This shift marked a good occasion for considering the reasons the United States taxed such dividends in the first place. In 1962, Congress enacted a new law, also known as ‘Subpart-F’, which subjected certain earnings of foreign subsidiaries of American parent corporations to current-base taxation. This was a deviation from the general tax principle of tax deferral, under which earnings of foreign subsidiaries are taxed only upon repatriation of these earnings (by a dividend, for example). The new legislation was the result of a political compromise. While Treasury supported a wide-scale elimination of tax deferral, Congress eventually adopted a much narrower law, eliminating tax deferral only in cases where it was abused by using it to avoid otherwise owed U.S. taxes.

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July 16, 2018 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, July 15, 2018

Willamette Seeks To Hire A Tax Prof

WillametteWillamette University College of Law seeks applicants for up to two full-time, tenure-track faculty positions beginning in fall 2019:

While the focus of our search is for entry-level candidates, we also welcome applications from early-career lateral candidates. Our curricular interests include Business Associations, Commercial Law, and Health Law, as well as Trust & Estates, Property, Family Law, Tax, Torts, and Criminal Law. Applicants must possess strong academic credentials and a proven ability to produce thoughtful scholarship, as well as the skills necessary to communicate their expertise to colleagues and their students. The Faculty Appointments Committee will begin reviewing applications in the late summer and will continue to do so until the positions are filled. ...

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July 15, 2018 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

U.S. Government Revenues Fall In Wake Of GOP Tax Cut

WSJWall Street Journal, U.S. Government Revenues Drop in Wake of Tax Cuts:

Corporations taking advantage of new, lower tax rates reduced their payments to the federal government last month.

The Treasury Department on Thursday said government receipts fell 7% in June compared with the same month a year earlier, including a 33% drop in gross corporate taxes. Individual withheld and payroll taxes were down 5% from June 2017, while non-withheld individual taxes rose by 7%.

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July 15, 2018 in Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN Logo (2018)There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and a new paper debuting on the list at #5:

  1. [289 Downloads]  Introduction to Tax Policy Theory, by Allison Christians (McGill)
  2. [254 Downloads]  Higher Education Savings and Planning: Tax and Nontax Considerations, by Philip Manns (Liberty) & Timothy Todd (Liberty)
  3. [250 Downloads]  Code Sec. 1031 after the 2017 Tax Act, by Brad Borden (Brooklyn)
  4. [215 Downloads]   The International Provisions of the TCJA: A Preliminary Summary and Assessment, by Reuven Avi-Yonah (Michigan)
  5. [215 Downloads]   Rethinking Legal Taxonomies for the Gig Economy: Tax Law, Employment Law, and Economic Incentives, by Abi Adams, Judith Freedman & Jeremias Prassl (Oxford)

July 15, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, July 14, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Can Trump Enact A Second Tax Cut On His Own By Indexing Capital Gains?

Wall Street Journal op-ed:  Trump Alone Can Cut Taxes, by Kimberley A. Strassel:

What if President Trump had the authority—on his own—to enact a second powerful tax reform? He does. The momentum is building for him to use it.

In the halls of Congress, the corridors of the administration, and the nerve centers of activist groups, forces are aligning behind a plan: a White House order to index capital gains for inflation. It’s a long-overdue move—one that would further unleash the economy and boost GOP election prospects. And Mr. Trump could be the president bold enough to make it finally happen.

At President Reagan’s behest, Congress in the 1980s indexed much of the federal tax code for inflation. Oddly, capital gains weren’t similarly treated. The result is that businesses and individuals pay taxes on the full nominal amount they earn on investments, even though inflation eats up a good chunk of any gain. It’s not unheard of for taxes to exceed real gains after inflation. The result is significant capital distortion, as companies sit on buildings and property or investors sit on stock—rather than selling and thereby putting both assets and gains to more productive use.

Conservatives have understood this problem for decades, yet for decades they have been held hostage to a 1992 government brief. The paper by the Justice Department’s Office of Legal Counsel offered a few faulty arguments as to why the Treasury lacked the authority to make this regulatory change. Neither President Bush questioned it, but others have.

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July 14, 2018 in Tax | Permalink | Comments (10)

Ellen Aprill Receives ABA Outstanding Academic Award

Aprill (2016)The Nonprofit Organizations Committee of the ABA Business Law Section has awarded the Outstanding Academic Award for distinguished academic achievement in the nonprofit sector to Ellen P. Aprill (Loyola-L.A.):

Ellen Aprill is the John E. Anderson Chair in Tax Law at Loyola Law School in Los Angeles and is the founding director of its Tax LLM program. She has been a member of the Loyola Law School faculty since 1989.

Professor Aprill is one of the founders of the Loyola Law School Western Conference on Tax Exempt Organizations, considered by many to be the premier nonprofit law conference on the West coast. She has co-hosted this conference for twenty years and has been instrumental in bringing together leaders in government, academia and the nonprofit law bar each year for this conference.

Professor Aprill has written extensively on issues of nonprofit law and is a reliable source of knowledge both for her students and the public. 

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July 14, 2018 in Tax | Permalink | Comments (5)

Friday, July 13, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Christians's Introduction to Tax Policy Theory

This week, Sloan Speck (Colorado) reviews a new work by Allison Christians (McGill), Introduction to Tax Policy Theory (2018).

Speck (2017)In Introduction to Tax Policy Theory, Allison Christians fulfils the Herculean task set forth in her title with deft grace and critical perspective. Christians’s short paper first elucidates three general goals of taxation from the taxing authority’s perspective, which she describes as state-building, internal management, and negotiated expansion. Then, Christians juxtaposes these goals with three metrics well-known among tax policy aficionados: equity, efficiency, and administrative capacity (which easily could be “simplicity”). Out of this analysis, Christians calls for the tax policy community to think and reflect on fundamental questions of approach and methodology—and to acknowledge the “discrepancies and weaknesses” in conventional approaches to tax policy.

Christians’s taxonomy of the goals of taxation is a major contribution, although certain to engender disagreement. Some dissention is inevitable when parsing all of human experience into three bins, each labeled with two words, and Christians presents her “imperfect” but “adequate” categories as poles, or touchstones, rather than as discrete silos.

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July 13, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

House Panel Passes $1,000 Tax Break For Gym Memberships, Exercise Classes: 'It Violates Every Principle Of Tax Policy'

Wall Street Journal, House Panel Passes Tax Break for Gym Memberships, Exercise Classes:

Taxpayers would be able to claim new breaks for gym memberships, exercise classes and other fitness expenses under a bipartisan bill advanced Thursday in the House of Representatives.

The bill would consider those costs as medical expenses for tax purposes, enabling people to use tax-advantaged health-savings accounts and flexible spending accounts to pay for them. The break would be capped at $500 a year for individuals and $1,000 for joint filers. It would reduce federal revenue by $3.5 billion over a decade.

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July 13, 2018 in Congressional News, Tax | Permalink | Comments (0)

Shanske: State Conformity And Tax Base Erosion

Darien Shanske (UC-Davis), States Should Conform to — and Improve — the New Federal Tax Provisions Meant to Counter Base Erosion:

The United States used to tax multinational corporations (MNCs) on the basis of their worldwide income, except that most foreign source income would only be taxed when actually repatriated to the United States. This structure naturally created considerable incentive to strip income out of the United States and then not to repatriate it.

Now, thanks to the TCJA, the United States is ostensibly only going to tax MNCs on their US source income. This shift to a so-called territorial system means, of course, that MNCs will continue to have incentive to shift income abroad in order to avoid US tax. The TCJA has two separate provisions meant to counter this: GILTI and BEAT. One question for the states is whether they should conform to these provisions. I think the answer is yes. I also think it is clear that states should improve these provisions when they adopt them.

There is a preliminary question as to whether states can — as a matter of federal constitutional law — conform to these provisions. I think the answer is again yes, but the details of the state law will matter a great deal. ...

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July 13, 2018 in Tax | Permalink | Comments (0)

Gianni: OECD BEPS (In)Action 1 — Factor Presence As A Solution To Tax Issues Of The Digital Economy

ABA Tax LawyerMonica Gianni (California State-Northridge), OECD BEPS (In)Action 1: Factor Presence as a Solution to Tax Issues of the Digital Economy, 72 Tax Law. ___(2018):

The Organisation for Economic Cooperation and Development (OECD) launched its project to address base erosion and profit shifting (BEPS) in 2013 with an Action Plan of 15 Actions. Action 1 encompasses identifying difficulties the digital economy poses for applying existing international tax rules and developing options to address them. Under current international tax rules, an enterprise generally is not taxed in a country in which it does not have a physical presence. With the economy having evolved so that business can be conducted over the internet with no physical presence in a country, companies have been able to avoid taxation in many jurisdictions from which they generate significant income. The OECD issued a final report on Action 1 in 2015 and a subsequent report in 2018, yet has failed to recommend a solution to address the physical presence issue. In effect, Action 1 has become Inaction 1. Countries and the European Union have grown impatient with the OECD and have taken matters into their own hands, with countries and the European Commission (EC) proposing or enacting legislation to address head on the issue of nontaxation of multinational digital companies, tax authorities assessing tax against multinational companies under the existing rules, and the EC bringing actions against countries for illegal state aid.

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July 13, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, July 12, 2018

$111 Billion In Tax Cuts For The Top 1%

Following up on yesterday's post, Tax Cuts Under Bush, Obama & Trump Have Increased Ineqality:  New York Times op-ed:  $111 Billion in Tax Cuts for the Top 1 Percent, by David Leonhardt:

More inequality? Yes, please. Federal tax policy in the 21st century has been like a tug of war. Thanks to President Trump, the rich are winning it once again.

The top-earning 1 percent of households — those earning more than $607,000 a year — will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000. That’s an enormous windfall. It’s more, in total dollars, than the tax cut received over the same period by the entire bottom 60 percent of earners, according to an analysis being published today.

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July 12, 2018 in Tax | Permalink | Comments (5)

Trump's Tariffs Will Erase His Tax Cut

Wall Street Journal op-ed:  Trump Plots to Erase His Tax Cut, by Karl Rove:

President Trump is justifiably proud of passing tax reform last December, telling audiences “because of our tax cuts, you can keep more of your hard-earned money.” He’s right: American taxpayers will save $75 billion this year and $189 billion next year, according to the Joint Committee on Taxation.

Yet the president’s tariffs on imports could negate much of the tax relief he’s been bragging about. These levies are not paid by foreign countries or companies. They are passed on to American consumers in the form of higher prices for either foreign or U.S.-made goods. ...

All these actions add up to $19 billion a year in new tariffs already levied or pending, and potentially up to $125 billion a year more from additional tariffs the administration has threatened. Most of this money will come from Americans’ family budgets, erasing a large share of their savings from the tax cut.

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July 12, 2018 in Tax | Permalink | Comments (0)

Millionaires Flee California After Tax Hike

CalifForbes, Millionaires Flee California After Tax Hike:

According to new research released by Charles Varner, associate director of the Stanford Center on Poverty and Inequality, California lost an estimated 138 high-income individuals following passage of the Proposition 30 income tax increase championed by Gov. Jerry Brown (D) and approved by Golden State voters in 2012.

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July 12, 2018 in Scholarship, Tax | Permalink | Comments (5)

Long-Ignored § 962 Could Let Wealthy Tap 21% Corporate Rate Under New Tax Law

Bloomberg, Tax Loophole From 1960s Could Let Wealthy Tap 21% Corporate Rate:

An obscure tax provision [§ 962] from the 1960s that was left untouched by President Donald Trump’s overhaul could let wealthy individual investors seize for themselves the largest corporate tax cut in U.S. history.

The measure — signed into law by President John F. Kennedy — was designed to prevent Americans from indefinitely shielding themselves from taxes by keeping investments offshore. It forced them to pay taxes annually on these investments, but gave them the option to have that income taxed at the corporate rate instead of at individual rates.

But that all changed in December, when Trump’s tax law slashed the corporate rate to 21 percent — 16 percentage points lower than the top federal individual income tax rate.

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July 12, 2018 in Tax | Permalink | Comments (2)

Wednesday, July 11, 2018

The Fed: GOP Tax Cuts May Not Boost Economic Growth

Federal Reserve Bank of San Francisco, Fiscal Policy in Good Times and Bad:

Recent U.S. federal fiscal policy has taken a decidedly procyclical turn, driven primarily by the large and front-loaded tax cuts enacted by the 2017 Tax Cuts and Jobs Act. Many analysts have forecast large increases in GDP growth over the next two to three years as a result. However, recent research finds that the effects of fiscal stimulus on overall economic activity are much smaller during expansions than during downturns. This suggests these forecasts may be overly optimistic.

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July 11, 2018 in Gov't Reports, Tax | Permalink | Comments (1)

Tax Cuts Under Bush, Obama & Trump Have Increased Ineqality

Institute on Taxation and Economic Policy, Federal Tax Cuts in the Bush, Obama, and Trump Years:

Since 2000, tax cuts have reduced federal revenue by trillions of dollars and disproportionately benefited well-off households. From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans, as illustrated in Figure 1. The cumulative impact on the deficit during this period is $5.9 trillion, including interest payments.

ITEP

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July 11, 2018 in Tax, Think Tank Reports | Permalink | Comments (1)

SSRN Tax Professor Rankings

SSRN Logo (2018)SSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  This ranking includes downloads from two 30- and 35-page papers by 12 tax professors on the new tax legislation that garnered a lot of media attention (including the New York Times and Washington Post) and generated a massive amount of downloads (the papers are the most downloaded papers over the past 12 months across all of SSRN and the most downloaded tax papers of all-time by over 200%).  See Brian Leiter (Chicago), 11 Tax Profs Blow Up The SSRN Download Rankings. (For some reason, Mitchell Kane (NYU) — the twelfth academic co-author of the two papers — is not included in the SSRN download rankings (although the downloads are included on his individual author page)).  Here is the new list (through July 1, 2018) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

168,172

Reuven Avi-Yonah (Mich.)

97,797

2

Dan Shaviro (NYU)

106,514

Daniel Hemel (Chicago)

94,022

3

David Gamage (Indiana)

101,928

David Gamage (Indiana)

89,780

4

Lily Batchelder (NYU)

100,987

Darien Shanske (UC-Davis)

89,152

5

Daniel Hemel (Chicago)

97,845

Dan Shaviro (NYU)

88,898

6

Darien Shanske (UC-Davis)

95,894

Manoj Viswanathan (Hastings)

88,702

7

Cliff Fleming (BYU)

92,935

Lily Batchelder (NYU)

87,653

8

David Kamin (NYU)

89,279

Cliff Fleming (BYU)

87,424

9

Rebecca Kysar (Brooklyn)

89,044

Ari Glogower (Ohio State)

86,895

10

Manoj Viswanathan (Hastings)

88,797

David Kamin (NYU)

86,891

11

Ari Glogower (Ohio State)

87,238

Rebecca Kysar (Brooklyn)

86,790

12

Michael Simkovic (USC)

40,328

Gladriel Shobe (BYU)

23,066

13

D. Dharmapala (Chicago)

34,673

Michael Simkovic (USC)

3,605

14

Paul Caron (Pepperdine)

34,532

Richard Ainsworth (BU)

3,594

15

Louis Kaplow (Harvard)

29,943

D. Dharmapala (Chicago)

3,417

16

Richard Ainsworth (BU)

24,937

Jacob Goldin (Stanford)

2,794

17

Ed Kleinbard (USC)

24,870

Omri Marian (UC-Irvine) 

2,629

18

Vic Fleischer (UC-Irvine)

24,707

Kirk Stark (UCLA)   

2,435

19

Jim Hines (Michigan)

23,855

Hugh Ault (Boston College)

2,386

20

Gladriel Shobe (BYU)

23,644

Ruth Mason (Virginia)

2,358

21

Richard Kaplan (Illinois)

22,968

Sam Donaldson (Georgia St.)   

2,349

22

Ted Seto (Loyola-L.A.)

22,824

Kyle Rozema (Chicago)  

2,325

23

Katie Pratt (Loyola-L.A.)

21,304

Joe Bankman (Stanford) 

2,290

24

Robert Sitkoff (Harvard)

20,558

Stephen Shay (Harvard)

2,151

25

David Weisbach (Chicago)

20,341

Dennis Ventry (UC-Davis)

2,036

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

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July 11, 2018 in Legal Education, Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Krugman: Trump, Tariffs, Tofu And Tax Cuts

New York Times op-ed:  Trump, Tariffs, Tofu and Tax Cuts, by Paul Krugman:

According to early indications, recent U.S. economic growth was full of beans.

No, seriously. More than half of America’s soybean exports typically go to China, but Chinese tariffs will shift much of that demand to Brazil, and countries that normally get their soybeans from Brazil have raced to replace them with U.S. beans. The perverse result is that the prospect of tariffs has temporarily led to a remarkably large surge in U.S. exports, which independent estimates suggest will add around 0.6 percentage points to the U.S. economy’s growth rate in the second quarter.

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July 11, 2018 in Tax | Permalink | Comments (0)