TaxProf Blog

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

Wednesday, January 17, 2018

Cauble: Itemized Deductions In A High Standard Deduction World

Emily Cauble (DePaul), Itemized Deductions in a High Standard Deduction World, 70 Stan. L. Rev. ___ (2018):

New tax legislation enacted in December 2017 exacerbates the extent to which various itemized deductions, such as the charitable contribution deduction and the home mortgage interest deduction, disproportionately benefit high income individuals.

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

Abreu & Greenstein: Embracing The Taxpayer Bill Of Rights

TBORAlice G. Abreu (Temple) & Richard K. Greenstein (Temple), Embracing the TBOR, 157 Tax Notes 1281 (Nov. 27, 2017):

When Congress codified the Taxpayer Bill of Rights (the “TBOR”) in 2015 the tax bar largely shrugged, but that is a mistake. Section 7803(a)(3) is not just another iteration of the phrase Congress used to christen legislation designed to reign in perceived IRS abuses in the 80’s and 90’s, when Congress enacted three different pieces of legislation that bore the name “Taxpayer Bill of Rights.” Despite their lofty titles, none of those enactments contained a single amendment to the Internal Revenue Code that used the word “right,” or employed the language of rights. By contrast, section 7803(a)(3) actually refers to “taxpayer rights” and lists ten items. Therefore, despite the claims of its promoters that the 2015 legislation simply restates rights already provided by the Code, the codification of the TBOR has the power to transform the tax practice and the relationship between taxpayers and the IRS. In this Article we explain why.

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

Christians: Trust In The Tax System — The Problem Of Lobbying

Building TrustAllison Christians (McGill), Trust in the Tax System: The Problem of Lobbying, in Building Trust in Taxation (Bruno Peeters, Hans Gribnau, Jo Badisco ed., 2017):

Fairness in the tax system seems unachievable when the well-advised free-ride on the many benefits of an organized global economy paid for by tax revenues extracted from others. While those publicly accused of ‘tax-dodging’ point to their full compliance with all applicable laws, they are substantially less forth-coming about their efforts to influence the shape of the law to their own benefit. All too often, tax policy appears to respond primarily to those with the resources to influence the policy-makers. As the system becomes increasingly unresponsive to legitimate policy goals and increasingly out of touch with justice — perceived and actual — public perceptions about the system understandably trend toward the cynical.

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

Baker & Raskolnikov: Harmful, Harmless, And Beneficial Uncertainty In Law

Scott Baker (Washington University) & Alex Raskolnikov (Columbia), Harmful, Harmless, and Beneficial Uncertainty in Law, 46 J. Legal Stud. 281 (2017):

This article examines the impact of four types of law-related uncertainty on the utility of risk-neutral agents. We find that greater legal or factual uncertainty makes agents worse off if enforcement is targeted (which means that greater deviations from what the law demands lead to a greater probability of enforcement) or if sanctions are graduated (which means that greater deviations from what the law demands result in higher sanctions). In contrast, agents are indifferent to changes in uncertainty about detection induced by variation in enforcement resources or to changes in uncertainty about sanctions arising from legally irrelevant factors. Finally, risk-neutral agents benefit from greater legal uncertainty if they act only on preapproval by a cautious regulator.

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

Tuesday, January 16, 2018

Prasad Presents Anti-Tax America: The Origins Of Our National Obsession With Tax Cuts Today At Georgetown

PrasadMonica Prasad (Northwestern) presents Anti-Tax America: The Origins of Our National Obsession with Tax Cuts, 24 J. Pol'y Hist. 351 (2012), at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by Lilian Faulhaber and Itai Grinberg:

The debt when Reagan entered office was just over $900 billion, not historically high in constant dollars or as a percent of GDP, but by the time Reagan left office it had almost tripled in nominal terms, and in percent of GDP it had gone from 33.4 percent to 51.9 percent. At the end of his term, the debt stood at $2.6 trillion, with a substantial portion of it contributed by Reagan's own policies: a mountain over 160 miles high in loose or tight bricks.

The irony is that the policy that accelerated the growth of that debt was the very policy Reagan was promoting in that first address, the Economic Recovery Tax Act of 1981 (ERTA). This tax cut remains the largest tax cut in American history. Of course, spending increases were also necessary to the creation of the new mountain of debt, but spending has increased many times over the course of the century. What was historically new was the policy of not raising taxes to match those spending increases.

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January 16, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Leiserson Presents Dynamic Scoring And Optimal Taxation Today At NYU

GregGreg Leiserson (Washington Center for Equitable Growth) presents Removing the Free Lunch from Dynamic Scores: Reconciling the Scoring Perspective with the Optimal Tax Perspective at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

Conventional estimates of the revenue effects of proposed tax legislation assume that the legislation would not change macroeconomic aggregates such as output, the capital stock, and employment. Dynamic estimates relax this assumption and—in the emerging consensus approach—replace it with two alternative assumptions. First, the macroeconomic analysis supporting dynamic estimates assumes future policy changes sufficient to address the fiscal imbalances that exist in CBO’s current-law baseline. These changes are assumed to take effect after the period for which economic results are reported. Second, in many but not all cases, the analysis assumes additional future policy changes that offset any change in the government’s present value fiscal position that the proposed legislation would cause, again taking effect after the period for which results are reported.

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

Taite: A Critical Analysis Of The Capital Gains Tax Preferences

Phyllis Taite (Florida A&M), Saving the Farm or Giving Away the Farm: A Critical Analysis of the Capital Gains Tax Preferences, 53 San Diego L. Rev. 1017 (2016):

Over the years the topic of capital gain preferences has been thoroughly debated. Discussions range between whether the tax rates on capital gains should be raised, reduced, or repealed. Other discussions have centered on whether capital gains has an effect on the economy, and if so, how the research supports those assertions. It would be difficult to cover all aspects of the issues associated with capital gains taxes in one article; therefore this discussion will focus on capital gains as applied to individual income taxes.

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

Consumer Law As Tax Alternative

Rory Van Loo (Boston University), Consumer Law As Tax Alternative:

The law and economics paradigm has traditionally emphasized tax and transfer as the best way to achieve distributional goals. This Article explores an alternative. Well-designed consumer laws—defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions—can make markets more efficient and lessen inequality.

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

TaxProf Blog Holiday Weekend Roundup

Monday, January 15, 2018

Leviner Presents Public Opinion And Tax Justice Today At Hebrew University

Leviner (2018)Sagit Leviner (Ono Academic College) presents In the Eye of the Beholder: Public Opinion on Tax Justice at Hebrew University today as part of its Forum for Tax Law:

The tax system is one of the most influential of civic institutions of our time. Taxes often detract at least one third of our income and they present an immediate and consequential effect with respect to a broad array of actions we make daily, when we choose to get married, have kids, go to college, or buy a loaf of bread. And, even though tax cuts and reforms are accordingly appealing to many people, it is worth taking time to ponder over the consequences of such cuts and reforms.

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January 15, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lesson From The Tax Court: What Are They Thinking?

Tax Court (2017)I tell my students to be careful with personal pronouns, especially now that the pronoun “they” may properly refer to a singular antecedent. An unclear antecedent can confuse readers.

Today I may have confused you. When you read this post's title, you may have thought “they” refers to “Tax Court.” Maybe you thought this would be a critique of a Tax Court opinion like last week’s post. It’s not. Sorry.

The “they” in the title is deliberately ambiguous, however, because it points to two different antecedents, neither being the Tax Court. First, it points to three taxpayers whose cases were decided last week by the Tax Court. Each case has at least one fact that is so amazing it will leaving you shaking your head (or "SMH" in modern texting parlance) and asking yourself “what were they thinking.”

Second, “they” means Congress. For the past 8 years Congress has adopted a policy of “starving the beast” and forcing the IRS to reduce its workforce. I wrote about that a couple of years ago here. These cases teach us why that Congressional policy is a thoughtless one. 

Each of these three cases shows an educated middle-class taxpayer trying to game the tax system in ways that require significant human resources to combat. In two cases it took human IRS employees to spot the games and defeat them. In the third case, the taxpayer is “winning” his game, at least temporarily, thanks to the Collection Due Process provisions. It will likely take significant additional human effort to collect this taxpayer’s unpaid tax liabilities.

More below the fold.

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January 15, 2018 in Bryan Camp, New Cases, Tax, Tax Practice And Procedure | Permalink | Comments (2)

Sunday, January 14, 2018

Will Law Firm Partners In L.A. & NYC Move To Their Firms' Houston Or Miami Offices Because Of The New Tax Law?

Mark Herrmann (Vice President & Deputy General Counsel, Aon), Predictions For 2018 And Beyond: Taxes, M&A, Cordray For Veep, Etc.:

I considered predicting that, in 2018, a surprising number of partners would move from the New York, Chicago, San Francisco, and LA offices of big firms to those firms’ Houston or Miami offices. Here’s why:  As David Lat has noted, the new tax law will dramatically raise the taxes of rich law firm partners who live in states with high state and local taxes. (Those partners can currently deduct state and local taxes on their federal returns. Under the new law, that deduction is capped at $10,000. Partners who are making two or three million bucks (or more) a year are paying a lot more than $10,000 in state and local taxes, so their tax bill is going way up.)

How do you fix that? If you work at a firm with multiple offices, and if you have a national practice, move to an office located in a state with no income tax! Houston or Miami, here I come!

But, no. First, you’d have to take another bar exam if you moved — neither Texas nor Florida offers reciprocity. But Tennessee! Open an office in Memphis or Nashville, waive into the bar, and take advantage of extraordinarily low state taxes!

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January 14, 2018 in Tax | Permalink | Comments (4)

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)

The Top Five New Tax Papers

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #2. The #1 paper is #1 and the #2 paper is #2 among 13,309 tax papers in all-time downloads (see Brian Leiter (Chicago), 11 Tax Profs Blow Up The SSRN Download Rankings).

  1. [44,130 Downloads]  The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  2. [29,508 Downloads]  The Games They Will Play: An Update on the Conference Committee Tax Bill, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  3. [574 Downloads]  The Senate Introduced a Pragmatic and Geopolitically Savvy Inbound Base Erosion Rule, by Itai Grinberg (Georgetown)
  4. [573 Downloads]  Tax Reform: Process Failures, Loopholes and Wealth Windfalls, by Stephen Shay (Harvard)
  5. [382 Downloads]  Once More, with Feeling: The 'Tax Cuts and Jobs' Act and the Original Intent of Subpart F, by Reuven Avi-Yonah (Michigan) & Nir Fishbien (S.J.D. 2018, Michigan)

January 14, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 13, 2018

This Week's Ten Most Popular TaxProf Blog Posts

NY Times: A Swiss Banker Helped Americans Dodge Taxes. Was It A Crime?

New York Times, A Swiss Banker Helped Americans Dodge Taxes. Was It a Crime?:

Diane Butrus, a business executive from St. Louis, wandered the streets of Zurich, looking for a bank that would help her keep $1.5 million hidden from America tax collectors.

One bank after another turned her down on that afternoon in 2009. They were worried about a United States crackdown on tax evasion and were no longer willing to shelter American money.

Finally, across the street from a city park, up a discreet elevator, seated in a luxurious conference room, Ms. Butrus found a banker ready to help. His name was Stefan Buck.

Mr. Buck said that his employer, Bank Frey, would be happy to take Ms. Butrus’s money, according to court documents and interviews with Mr. Buck and Ms. Butrus. He instructed her to wire the $1.5 million to Bank Frey. He told her that her name wouldn’t be attached to the new account. It would be known internally as Cardinal, an alias she chose in a nod to her favorite baseball team.

After that, Ms. Butrus contacted Mr. Buck via prepaid cellphones she picked up at a Walgreens drugstore. Every six months or so, she flew to Zurich to withdraw money directly from Mr. Buck. She would return to the United States secretly carrying just under $10,000 in cash — the cutoff for having to make a customs declaration.

The setup allowed Ms. Butrus to avoid paying tens of thousands of dollars in income taxes. And it wouldn’t have been possible without Mr. Buck and Bank Frey.

As much as chocolate and watches, Switzerland is known for bank secrecy. That made the country a destination for money that the wealthy wanted to hide. Last decade, it also made Swiss banks targets for an assault by the United States government, which was tired of Americans escaping taxes on money in offshore accounts.

Many banks came clean, divulging their clients to American authorities. Many Americans, including Ms. Butrus, searched for new places to park their money.

Bank Frey was among the very few to defy the legal onslaught. And Mr. Buck, a clean-cut and self-confident 28-year-old at the time he met Ms. Butrus, was the bank’s public face, responsible for landing and then managing American accounts.

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January 13, 2018 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Lipman: (Anti)Poverty Measures Exposed

Florida Tax Review  (2015)Francine J. Lipman (UNLV), (Anti)Poverty Measures Exposed, 21 Fla. Tax Rev. 256 (2017):

Few economic indicators have more salience and pervasive financial impact on everyday lives in the United States than poverty measures. Nevertheless, policymakers, researchers, advocates, and legislators generally do not understand the details of poverty measure mechanics. These detailed mechanics shape and reshape poverty measures and the too often uninformed responses and remedies. This Article will build a bridge from personal portraits of families living in poverty to the resource allocations that failed them by exposing the specific detailed mechanics underlying the Census Bureau’s official (OPM) and supplemental poverty measures (SPM). Too often, when we confront the problem of poverty, the focus is on the lives and behavior of those suffering the burdens of poverty and not on the inadequacy of resource allocations in antipoverty programs. The purpose of poverty measures should be to expose the effectiveness and failures of antipoverty programs so that they can be improved, not to scrutinize the lives and characteristics of those who are enduring these hardships.

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

Friday, January 12, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mehrotra's Taxation And The Modern Liberal State

This week, Sloan Speck (Colorado) reviews a new work by Ajay Mehrotra (American Bar Foundation; Northwestern), Fiscal Forearms: Taxation as the Lifeblood of the Modern Liberal State, in The Many Hands of the State: Theorizing the Complexities of Political Authority and Social Control (Kimberly Morgan & Ann Orloff eds., Cambridge University Press 2017).

Speck (2017)Ajay Mehrotra’s forthcoming book chapter, Fiscal Forearms, serves as a meditation on, and an expansion of, the important ideas advanced in his 2013 monograph, Making the Modern American State. Mehrotra, like the larger edited volume in which his chapter falls, starts from Bourdieu’s metaphor of the state divided into spending and fiscal spheres: a “left hand” comprised of (in Bourdieu’s words) the “social workers . . . which are the trace, within the state, of the social struggles of the past,” and a “right hand” made up of the ministers and technocrats at the treasury, as well as the public and private banks that underwrite the state. Mehrotra develops this metaphor, describing fiscal administration as “the forearms of the body politic” and taxation itself as “the lifeblood of the modern state.” More critically, Mehrotra challenges the claim that social struggle leaves an imprint only on the spending side of the ledger, showing through historical examples that taxation—and especially income taxation—is a contested concept deployed to construct relationships between state and citizen and in service of societal change.

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January 12, 2018 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Tax Profs:

Other:

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January 12, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Apple Could Get A $4 Billion Boost From Tax-Law Quirk

Apple LogoBloomberg, Apple Could Get a $4 Billion Boost From Tax-Law Quirk:

Companies that stockpiled trillions of dollars offshore free of U.S. income tax may get one last break before paying up -- provided their fiscal years don’t follow the calendar year.

A timing quirk in the tax overhaul that President Donald Trump signed last month may be good news for companies such as Apple Inc., Microsoft Corp. and Cisco Systems Inc., all of which began their fiscal years before Jan. 1. Firms including Alphabet Inc., Amgen Inc. and General Electric Co. -- with fiscal years that began on Jan. 1 -- appear to be shut out of the benefit.

Apple alone, which disclosed an offshore cash hoard of $252 billion as of Sept. 30, may be able to lop more than $4 billion off a future tax bill, according to Stephen Shay, a tax and business law professor at Harvard Law School who wrote about what he called the “potential loophole” last month [Will Treasury Close Loophole In Treatment Of Deferred Foreign Income In The Tax Cuts And Jobs Act?]. He characterized the boon as a side effect of the speed with which congressional Republicans passed their tax bill.

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January 12, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

American College of Employee Benefits Counsel Student Writing Competition

ACBThe American College of Employee Benefits Counsel is sponsoring its 14th Annual Employee Benefits Writing Competition on any topic in the field of employee benefits law. The competition is open to any J.D. and graduate (L.L.M. or S.J.D) law students enrolled at any time between August 15, 2017 and August 15, 2018.

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January 12, 2018 in Legal Education, Tax, Teaching | Permalink | Comments (0)

The IRS Scandal, Day 1709: Victims Of IRS's Tea Party Bias — And Taxpayers — Deserve To See Lois Lerner's Testimony

IRS Logo 2Forbes, Victims Of IRS's Tea Party Bias — And Taxpayers — Must See Lois Lerner's Testimony, Lawyer Says:

Lois Lerner, formerly of the Internal Revenue Service when it discriminated against applicants for tax exemptions based on their viewpoints, claims Americans have no right to read statements she made under oath about why she did it.

Lerner, the former director of the IRS’s Exempt Organizations Division, wants U. S. District Judge Michael Barrett to maintain under seal a deposition she gave in June for a civil suit that victims brought in 2013. Unsealing it would place her safety in jeopardy, she says.

Her former IRS colleague, Holly Paz, seeks the same after they targeted groups with “tea party” names and groups that didn’t like how the government was run.

Among those opposed are the very plaintiffs who sued the IRS in Barrett’s Ohio court. Attorney Edward Greim, who represents the Norcal Tea Party Patriots, says a pending settlement in their case shouldn’t create a reason for the depositions to stay secret. “Class members must know the content of their testimony to consider the fairness of the settlement, and the public must have access to help ensure that similar conduct never occurs again,” he wrote in November. ...

He’s not alone. It was the Cincinnati Enquirer that moved to unseal the depositions on Oct. 25, the same day a proposed settlement was announced to the court. The state of Ohio and the Judicial Watch group in Washington have also moved for leave to argue for unsealing as friends of the court. ...

Lerner and Paz have said the release of their depositions “would expose them and their families to harassment and threat of serious bodily injury or even death.”

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January 12, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, January 11, 2018

Donaldson: Understanding The New Tax Law

Samuel A. Donaldson (Georgia State), Understanding the Tax Cuts and Jobs Act:

This manuscript summarizes key provisions of the so-called "Tax Cuts and Jobs Act" affecting United States individuals, small businesses, estates, and trusts. It does not cover changes made to pension and retirement accounts, provisions applicable only to certain industries, rules applicable to tax-exempt organizations, international tax reform, or repeal of the individual mandate under the Patient Protection and Affordable Care Act.

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January 11, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Economic Inequality Is About To Get Even Worse

Washington Post, Massive New Data Set Suggests Economic Inequality Is About to Get Even Worse:

The “endless inegalitarian spiral” may be coming for us sooner than we think.

In his best-selling 2014 book “Capital in the Twenty-First Century,” French economist Thomas Piketty warned that if the already rich were able to accumulate wealth faster than economies were able to grow, inequality would skyrocket in the coming decades, potentially destabilizing societies in the process.

Wealth, after all, is self-perpetuating. You put cash in a savings account, and it grows. You buy a home, and its value (typically) appreciates. You invest in the stock market and see an annual rate of return.

Work, on the other hand, isn't like that. If you don't have wealth and want to make money, you have to keep working. If the economy is strong enough, your wages will grow, and eventually you'll be able to build up some wealth of your own. And if your wages are increasing more quickly than wealth is growing, there's a chance that someday, you could catch up with the person who started off with a million-dollar trust fund.

Conversely, if your wages are growing more slowly than wealth is increasing, you'll never be able to catch up. You can work as hard as you want and save as much as you want, but you'll never close the gap with that lucky trust-funder. To use a baseball analogy, not only did they start on third base, they're also running faster than you are.

But inquiries into how fast wealth grows relative to the economy have been hampered by a lack of good, complete, comparable long-term data on the rates of return for various assets: stocks, bonds, real estate and the like. You'd want this to know what you'd expect a “natural” rate of return to be in an economy such as ours: How much would you expect home prices to appreciate over time? What about the expected return on the stock market over the decades? How about government bonds?

Now a working paper, written by Federal Reserve Bank of San Francisco economist Òscar Jordà and others, purports to calculate just that: “The Rate of Return on Everything.”

After compiling this first-of-its-kind data set, Jordà's team makes a startling conclusion: If anything, Piketty's book underestimates the historical rate of return on wealth. “The same fact reported [by Piketty] holds true for more countries and more years, and more dramatically,” the researchers conclude.

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January 11, 2018 in Scholarship, Tax | Permalink | Comments (1)

What Law School Curriculum Committees Can Learn From Architecture Schools

Howard E. Katz (Cleveland State), What Law School Curriculum Committees Can Learn from Architecture Schools, 18 Transactions 622 (2016):

This article discusses the critical review ("crit") and the studio as the signature pedagogies of architecture schools, and suggests how that model might apply or help us to think about experiential education (both simulation and clinical instruction) in law schools.

January 11, 2018 in Scholarship, Tax | Permalink | Comments (0)

Cockfield: Examining Canadian Offshore Tax Evasion

Arthur J. Cockfield (Queen's University), Examining Canadian Offshore Tax Evasion, 65 Canadian Tax J. 651 (2017):

This article reviews academic and government studies that assess the magnitude of Canadian offshore tax evasion, as well as what tax-haven data leaks such as the Panama Papers have told us. This evidence, along with Canada’s historically poor performance in auditing, investigating, and prosecuting offshore tax cheats, calls for an ongoing and measured legal and policy response to inhibit offshore tax evasion.

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January 11, 2018 in Scholarship, Tax | Permalink | Comments (0)

Trump Administration Opts For Speed Over Accuracy In Implementing New Tax Law

Washington Post, Trump Administration Opts For Speed Over Accuracy in Implementing New Tax Law:

The Trump administration is pushing American businesses to withhold less in taxes from paychecks by February, aiming to quickly deliver the boost in take-home pay that Republicans promised their tax law would bring.

But the rush could expose millions of workers to the risk of underpaying taxes to the government now, which means they might owe more than they are expecting when they file tax returns in April 2019.

Business and taxpayers looking for clarity will be appealing to an Internal Revenue Service that, according to an internal watchdog report Wednesday, is underfunded and ill-prepared to answer basic questions. ...

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January 11, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Bach:  (Re)Viewing The American Social Welfare State

Florida Tax Review  (2015)Wendy A. Bach (Tennessee), Poor Support/Rich Support: (Re)Viewing the American Social Welfare State, 20 Fla. Tax. Rev. 495 (2017):

Since at least the 1970s a variety of scholars have redefined the U.S. social welfare state to include not only traditional benefit programs (for example Food Stamps and social security) but also a variety of tax benefits that are “hidden” or “submerged” forms of “welfare for the wealthy.” Including these benefits in the overall picture of U.S. social welfare provision reveals a system that is both larger in size than popularly believed and that, in addition to providing some support for the poor, distributes significant benefits regressively, to households with substantial wealth. Although a variety of scholars and policy analysts have described these outcomes, scholars have yet to focus on the ways in which structural inequality is written directly into the means of administration of U.S. social welfare programs. This article is the first to turn to those questions and to systematically demonstrate that those who are economically (and disproportionately racially) disadvantaged are offered a social welfare state that is meager, punitive and tremendously risky for those who receive its benefits.

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January 11, 2018 in Scholarship, Tax | Permalink | Comments (1)

Wednesday, January 10, 2018

National Taxpayer Advocate Delivers Annual Report To Congress; Discusses Tax Reform Implementation, Unveils 'Purple Book'

NTAIR-2018-03 (Jan. 10, 2018), National Taxpayer Advocate Delivers Annual Report to Congress; Discusses Tax Reform Implementation and Unveils “Purple Book”:

National Taxpayer Advocate Nina E. Olson today released her 2017 Annual Report to Congress, describing challenges the IRS will face as it implements the recently enacted tax reform legislation and unveiling a new publication, “The Purple Book,” that presents 50 legislative recommendations intended to strengthen taxpayer rights and improve tax administration.  The report also examines a wide range of other tax administration issues, including the IRS’s administration of the private debt collection program, the agency’s increasing emphasis on online taxpayer accounts, and its implementation of a recent law that would deny or revoke the passports of taxpayers with significant tax debts.

Implementation of Tax Reform Legislation
The National Taxpayer Advocate’s report says the reduction in IRS funding since FY 2010, approximately 20 percent in inflation-adjusted terms, has challenged the agency’s ability to perform the basic tasks of administering the tax system.  “As the National Taxpayer Advocate, I see daily the consequences of reduced funding of the IRS and the choices made by the agency in the face of these funding constraints,” Olson wrote in the preface to the report.  “These impacts are real and affect everything the IRS does.  Funding cuts have rendered the IRS unable to provide acceptable levels of taxpayer service, unable to update its technology to improve its efficiency and effectiveness, and unable to maintain compliance programs that both promote compliance and protect taxpayer rights.  ’Shortcuts’ have become the norm, and ‘shortcuts’ are incompatible with high-quality tax administration.” ...

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January 10, 2018 in IRS News, Tax | Permalink | Comments (4)

Shay: Will Treasury Close Loophole In Treatment Of Deferred Foreign Income In The Tax Cuts And Jobs Act?

Stephen E. Shay (Harvard), Treasury Can Close a Potential Loophole in the Treatment of Deferred Foreign Income in the Tax Cuts and Jobs Act – Will It Act?:

This paper points out a potential TJCA loophole allowing a reduction in aggregate foreign cash subject to the 15.5% rate unless Treasury takes steps to implement an anti-abuse rule. If Treasury does not act, aggressive taxpayers may be rewarded and cautious taxpayers may have incentives to make second-best uses of their offshore cash.

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January 10, 2018 in Scholarship, Tax | Permalink | Comments (0)

IRS Dodges Oversight, Refuses To Measure Economic Impact Of Its Rules

CACause of Action Institute, IRS Dodges Oversight, Refuses to Measure Economic Impact of its Rules:

Cause of Action Institute (“CoA Institute”) today released a groundbreaking investigative report, Evading Oversight: The Origins and Implications of the IRS Claim that its Rules Do Not Have an Economic Impact, that reveals how the IRS has developed a series of self-bestowed exemptions allowing the agency to evade several legally required oversight mechanisms. The report outlines in detail how the IRS created this exemption to exempt itself from three critical reviews intended to provide our elected branches and the public an opportunity to assess the economic impact of rules before they are finalized.

Read about the report in today’s Wall Street Journal [The IRS Evades Accountability—And Its Excuse Is Ridiculous], including suggestions for how the White House and Congress can work together to end this harmful practice.

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January 10, 2018 in Tax | Permalink | Comments (6)

Cryptocurrency & Robots: How To Tax And Pay Tax On Them

Sami Ahmed (J.D. 2017, Yale), Cryptocurrency & Robots: How to Tax and Pay Tax on Them, 68 S.C. L. Rev. ___ (2018):

New technologies, such as blockchain, cryptocurrency (e.g., Bitcoin), and artificial intelligence are rapidly changing how transactions occur in the United States. While scholars have started to examine how a number of areas of law should adapt, very little work has been done on what these changes mean for taxation. Yet these developments could have a huge impact on tax revenues. For example, some approaches to taxing transactions using cryptocurrency could result in these transactions being conducted abroad, beyond the reach of the U.S. taxing authorities. And if robots replace large segments of the labor force, this could drastically shrink federal and state income tax bases.

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January 10, 2018 in Scholarship, Tax | Permalink | Comments (1)

Crane Reviews Rosenthal & Austin's The Dwindling Taxable Share Of U.S. Corporate Stock

Jotwell (Tax) (2016)Charlotte Crane (Northwestern), Who Gets Taxed When A U.S. Corporation Pays Dividends? (JOTWELL) (reviewing Steven M. Rosenthal & Lydia S. Austin (Tax Policy Center), The Dwindling Taxable Share Of U.S. Corporate Stock, 151 Tax Notes 923 (May 16, 2016)):

The Dwindling Taxable Share Of U.S. Corporate Stock, written by Steven M. Rosenthal and Lydia S. Austin, analyzes the available data regarding the ownership of corporate stock in the United States. Over the history of the income tax, most business capital has been invested in corporations, so an assumption that the income taxation of business meant income taxation of corporations was a reasonable assumption. Similarly, most owners of domestic capital were assumed to be taxable individuals. ...

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January 10, 2018 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 9, 2018

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 71, No. 1 (Fall 2017):

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January 9, 2018 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

'America-Last Tax Policy': New Law May Drive Factories And Jobs Abroad

New York Times, Tax Law May Send Factories and Jobs Abroad, Critics Say:

In Indiana, Missouri and Pennsylvania, President Trump used the same promise to sell the tax bill: It would bring jobs streaming back to struggling cities and towns. “Factories will be pouring into this country,” Mr. Trump told a crowd in St. Charles, Mo., in November. “The tax cut will mean more companies moving to America, staying in America and hiring American workers right here.”

The bill that Mr. Trump signed, however, could actually make it attractive for companies to put more assembly lines on foreign soil.

Under the new law, income made by American companies’ overseas subsidiaries will face United States taxes that are half the rate applied to their domestic income, 10.5 percent compared with the new top corporate rate of 21 percent.

“It’s sort of an America-last tax policy,” said Kimberly Clausing, an economist at Reed College in Portland, Ore., who studies tax policy. “We are basically saying that if you earn in the U.S., you pay X, and if you earn abroad, you pay X divided by two.”

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January 9, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Bayern: An Unintended Consequence Of Reducing The Corporate Tax Rate

Shawn Bayern (Florida State), An Unintended Consequence of Reducing the Corporate Tax Rate, 157 Tax Notes 1137 (Nov. 20, 2017):

This article explains how a 20 percent corporate tax rate could be exploited to avoid individual income taxes. (It was printed in November 2017, when a 20 percent corporate tax rate was under consideration. Similar principles apply to a 21 percent tax rate, but to a lesser extent if the maximum individual rate is lowered to 37 percent.)

January 9, 2018 in Scholarship, Tax | Permalink | Comments (0)

Leiter: 11 Tax Profs Blow Up The SSRN Download Rankings

SSRN LogoBrian Leiter (Chicago), SSRN Download Rankings Now Measure Mentions in Newspapers:

The top 11 "most downloaded" law authors in the last 12 months are eleven tax professors who co-authored two papers on the recent tax overhaul, which garnered a prominent mention in The New York Times, leading to more than 70,000 downloads in the last month.  For 10 of these 11 tax professors, these two NYT-plugged papers constitute 95% or more of all their downloads. ... Farewell to SSRN downloads as a metric of any interest for at least a year!

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January 9, 2018 in Legal Education, Tax, Tax Prof Rankings | Permalink | Comments (0)

The IRS Scandal, Day 1706: Lois Lerner, Liberty, And Bureaucracy

IRS Logo 2Washington Times, Liberty Dies in Bureaucracy:

As Donald Trump finishes the first year of his presidency, the greatest political scandal story of the last generation is being mostly ignored.

In May 2013, then-IRS official Lois Lerner admitted the Internal Revenue Service had been targeting conservative groups in general, and Tea Party groups in particular. Mrs. Lerner was not trying to clear her conscience. The Treasury Department’s Inspector General was about to release a damning reporting on the politicization of the IRS and how that agency was targeting political opponents of the Obama regime.

Mrs. Lerner’s actions did not happen in a vacuum. Ninety-four percent of political contributions from IRS employees went to Hillary Clinton in the 2016 election. ...

If Republicans are serious about their commitment to liberty and freedom, there is only one option. The swamp must be drained. There must be a wholesale elimination of government departments and agencies. Civil service must be abolished and a lot of government workers need to be told to find other jobs.

If the Republican Party once again, haul up their freshly laundered white flag of surrender on the issue of a weaponized government that can be used against the enemies of the Democrats, America’s days as a free nation are over.

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January 9, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, January 8, 2018

8 Tax Profs: Full Deduction For Charitable Contributions Resulting In State Tax Credit

Joseph Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford), Daniel Hemel (Chicago), Darien Shanske (UC-Davis), Kirk Stark (UCLA), Dennis Ventry (UC-Davis) & Manoj Viswanathan (UC-Hastings), Federal Income Tax Treatment of Charitable Contributions Entitling the Donor to a State Tax Credit:

This paper summarizes the current federal income tax treatment of charitable contributions where the gift entitles the donor to a state tax credit. Such credits are very common and are used by the states to encourage private donations to a wide range of activities, including natural resource preservation through conservation easements, private school tuition scholarship programs, financial aid for college-bound children from low-income households, shelters for victims of domestic violence, and numerous other state-supported programs. Under these programs, taxpayers receive tax credits for donations to governments, government-created funds, and nonprofits.

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January 8, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (5)

Whitney Houston's Estate Settles Dispute With IRS Over Valuation Of Right Of Publicity

WhitneyFollowing up on my previous post, How Will I Know? IRS Claims Whitney Houston's Estate Undervalued Her Right Of Publicity By $11.5 Million:  Jennifer E. Rothman, Whitney Houston Estate Settles with IRS over Right of Publicity Valuation:

The Whitney Houston estate and the IRS have settled their dispute over the value of the Grammy award-winner’s estate. The more than $11 million dollar disagreement in the amount of taxes owed centered on the valuation of Houston’s intellectual property rights, and particularly the value of her postmortem right of publicity. The estate had claimed that Houston’s right of publicity was worth just under $200,000, while the IRS claimed that it was worth more than $11.7 million. A staggering difference.

The IRS and the estate ultimately settled with the estate agreeing to pay $2 million. The IRS had initially sought more than $11 million in taxes and penalties from the estate. The stipulation entered on December 26th did not specify what Houston’s right of publicity was ultimately valued at.

The stipulation and settlement yet again avoided a court determination of whether the right of publicity should be part of the estate in the first place. Like the Michael Jackson estate, the Houston estate did not contest the inclusion of the right of publicity in the estate’s property―something I think estates should more actively start doing.

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January 8, 2018 in IRS News, New Cases, Tax | Permalink | Comments (1)

Former IRS Ethics Attorney (And Georgetown Tax Adjunct) Pleads Guilty To Conspiracy To Distribute 500 Grams Of Meth

Jack VitayanonNew York Law Journal, Former IRS Attorney Pleads Guilty to Drug Conspiracy:

A former attorney with the IRS’ Office of Professional Responsibility pleaded guilty in the U.S. District Court for the Eastern District of New York to conspiracy to distribute over 500 grams of methamphetamine, the U.S. Attorney’s Office announced Friday.

Jack Vitayanon was arrested in February in Washington, D.C., on charges he conspired with people in Arizona and Long Island to distribute meth over a number of years.

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January 8, 2018 in IRS News, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, January 7, 2018

The IRS Scandal, Days 1601-1700

January 7, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

This Week's Ten Most Popular TaxProf Blog Posts

Some Taxpayers Forgo Benefits Of Itemizing Due to Filing Costs

Youssef Benzarti (UCLA), How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs (NBER Working Paper No. 23903):

This paper uses a quasi-experimental design and a novel identification strategy to estimate the cost of filing income taxes. First, using U.S. income tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo tax savings to avoid compliance costs, which provides a revealed preference estimate of the compliance cost of itemizing. I find that this cost increases with income, consistent with a higher opportunity cost of time for richer house- holds. Second, using my estimates and estimates of the time required to file other schedules, I estimate the cost of filing federal income taxes. I find that this cost has been increasing since the 1980’s and has reached 1.2% of GDP in the most recent years.

NBER

NBER Digest, Some Taxpayers Forgo Benefits of Itemizing Due to Filing Costs:

The total cost of taxpayers' compliance with the U.S. tax system may exceed 1 percent of GDP.

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January 7, 2018 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Baby

My favorite photo at #AALS2018:  Eva Rana-Gamage:

Tax Prof Baby

January 7, 2018 in Legal Education, Tax | Permalink | Comments (1)

Saturday, January 6, 2018

Polsky: The New Libel Tax

Gregg Polsky (Georgia), The Libel Tax: The New Law Taxes People for Winning Defamation Claims:

President Donald Trump’s new tax law has been roundly criticized for spending $1.5 trillion largely for the benefit of big corporations and extremely wealthy individuals, for further complicating the tax code, and for lacking intellectual or policy coherence. Lost in all of this valid criticism has been scrutiny of the large number of technical flaws in the law that will haunt innocent and unsuspecting taxpayers for years to come while simultaneously providing windfalls for more sophisticated taxpayers and their advisors.

One ironic example of such a technical flaw is a change that will punish people like Summer Zervos. The former Apprentice contestant has sued Trump for defamation, based on his claim that she was lying when she accused him of making unwanted sexual advances.

The new tax bill denies defamation plaintiffs like Zervos any deductions for their attorney’s fees and costs, even when their claims succeed. The result is likely to be extremely high tax rates on defamation awards. In fact, this new tax burden on defamation plaintiffs would in some cases make it more expensive to sue someone who has defamed you than to just ignore them. ...

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January 6, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

AALS Tax Section Panel: Tax Legislation In The 115th Congress

Tax Panel
The AALS Section on Taxation put on a fantastic program yesterday on Tax Legislation in the 115th Congress:

  • Lily L. Batchelder (NYU)
  • Victor Fleischer (San Diego)
  • Susan Morse (Texas)
  • George K. Yin (Virginia)
  • Lawrence A. Zelenak (Duke)

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January 6, 2018 in Conferences, Legal Education, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5. The #1 paper is #1 among 13,282 tax papers in all-time downloads:

  1. [42,622 Downloads]  The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  2. [541 Downloads]  The Senate Introduced a Pragmatic and Geopolitically Savvy Inbound Base Erosion Rule, by Itai Grinberg (Georgetown)
  3. [519 Downloads]  Tax Reform: Process Failures, Loopholes and Wealth Windfalls , by Stephen Shay (Harvard)
  4. [358 Downloads]  Once More, with Feeling: The 'Tax Cuts and Jobs' Act and the Original Intent of Subpart F, by Reuven Avi-Yonah (Michigan) & Nir Fishbien (S.J.D. 2018, Michigan)
  5. [152 Downloads]  Macroeconomic Modeling of Tax Policy: A Comparison of Current Methodologies, by Alan Auerbach (UC-Berkeley), Itai Grinberg (Georgetown), Thomas Barthold (Joint Committee on Taxation), Nicholas Bull (Joint Committee on Taxation), Gavin Elkins (Tax Foundation), Pamela Moomau (Joint Committee on Taxation), Rachel Moore (Joint Committee on Taxation), Benjamin Page (Tax Policy Center), Brandon Pecoraro (Joint Committee on Taxation) & Kyle Pomerleau (Tax Foundation)

January 6, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Friday, January 5, 2018

Weekly SSRN Tax Article Review And Roundup: Mazur Reviews Barry's Taxation, Innovation, And The Sharing Economy

This week, Orly Mazur (SMU) reviews a new work by Jordan Barry (San Diego), Taxation and Innovation: The Sharing Economy as a Case Study.

Mazur (2017-2)Innovation drives economic growth. Thus, encouraging innovation is a worthwhile and necessary endeavor. However, the tools we currently use to promote innovation are not always effective at reaching this desired result. So what can we do to improve the growth of innovation in the United States? Jordan Barry’s new work contributes to the existing literature on this important topic by considering the relationship between the U.S. federal income tax system and innovation.

Barry uses the sharing economy as the focal point of his paper to demonstrate that tax policy is a questionable tool for encouraging innovation. As Barry explains, the growth of our current economy relies significantly on the research and development activities of relatively small and new companies. But the majority of these companies do not take advantage of tax policies that are designed to achieve the goal of encouraging innovation. (For another recent work that uses empirical evidence to demonstrate this phenomenon, see Susan Morse and Eric Allen’s, Innovation and Taxation at Start-Up Firms, 69 Tax L. Rev. 357 (2016)). Moreover, these tax incentives often can lead to unexpected results that may not align with sound policy.

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