TaxProf Blog

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

Wednesday, October 17, 2018

Grewal: The Proposed SALT Regulations May Be Doomed

Andy Grewal (Iowa), The Proposed SALT Regulations May Be Doomed, 103 Iowa L. Rev. Online ___  (2018):

The IRS recently followed through on its promise to address state strategies designed to avoid the new state & local tax deduction limits. Although programs adopted by blue states sparked the IRS’s interest, the proposed regulations address both blue and red state programs. This has, predictably, led to IRS criticism from all sides. But the IRS was right to step in here. Revenue and policy concerns easily justify administrative guidance on the state strategies.

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

The TCJA Shifted The Benefits Of Tax Expenditures To Higher-Income Households

Howard Gleckman (TaxVox), The TCJA Shifted The Benefits Of Tax Expenditures to Higher-Income Households:

Until the Tax Cuts and Jobs Act (TCJA), people across the income distribution could say they benefited from the tax code’s many targeted tax benefits. But, according to a new analysis by the Tax Policy Center, the benefits of many itemized deductions have shifted from middle-income households to those with higher incomes.

Mortgage

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October 17, 2018 in Tax | Permalink | Comments (0)

Tuesday, October 16, 2018

Lederman Presents Information Matters In Tax Enforcement At San Diego

Lederman (2018)Leandra Lederman (Indiana) presented Information Matters in Tax Enforcement (with Joseph Dugan) at San Diego yesterday as part of its Tax Law Speaker Series hosted by Jordan Barry and Miranda Perry Fleischer:

Most legal and economics scholars recognize that the government needs information about taxpayers’ transactions in order to determine whether their reporting is honest, and that third-party reporting helps the government obtain that information. Yet, a recent paper by Professor Wei Cui [Taxation Without Information: The Institutional Foundations of Modern Tax Collection] asserts that “modern governments can practice ‘taxation without information.’” Cui’s argument rests on two premises: (1) “giving governments effective access to taxpayer information through third parties does not explain the success of modern tax administration” because, he argues, other important taxes, such as the value added tax (VAT), do not involve information reporting; and (2) modern tax administration succeeds because business firms are “sites of social cooperation under the rule of law,” fostering compliance. As this Essay argues, the literature demonstrates that Cui is wrong on both points.

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

The Top 3% Of U.S. Taxpayers Pay 50% Of Income Taxes

Bloomberg, Top 3% of U.S. Taxpayers Paid Majority of Income Taxes in 2016:

Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the charts below:

  • The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
  • The top 50 percent of all taxpayers paid 97 percent of total individual income taxes.

Bloomberg 1

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October 16, 2018 in Tax | Permalink | Comments (3)

Johnston: We Need A Tax Police To Go After The Likes Of Donald Trump

David Cay Johnston, We Need Tax Police – And They Should Go After the Likes of Donald Trump:

When the New York Times exposed decades of tax cheating and “outright fraud” by the sitting president, it prompted people to ask important questions about the corrupt practices of the Trump family. The answers are central to the future of America.

Where was the Internal Revenue Service? How did the Trumps get away with decades of schemes the Times said allowed them to evade close to a half-billion dollars of income and gift taxes? Is Donald Trump continuing these practices? Is that why he refuses to make his own tax returns public? Can anything be done about it?

I’m in a unique position to answer those questions. I am the Times’ former tax reporter, the journalist who has covered Trump longer than anyone else, more than 30 years. ...

Congress, which makes tax law, has never properly supported the IRS, which I like calling the Tax Police Department.

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October 16, 2018 in IRS News, Tax | Permalink | Comments (6)

Rozema: The Unrecognized Relationship Between Tax Law And Public Assistance

Kyle Rozema (Chicago), The Unrecognized Relationship Between Tax Law and Public Assistance:

Lawmakers enact tax laws to raise revenue, redistribute resources, and change behavior. The ability of a tax law to serve its goals depends on how individuals respond to the tax law, and how individuals respond to the tax law can depend on how it interacts with other laws. This article unearths unrecognized connections between the operations of tax law on the one hand and the voluntary nature of public assistance programs on the other.

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

Monday, October 15, 2018

Brockmeyer Presents Taxation, Information, And Withholding Today At UC-Berkeley

BrockmeyerAnne Brockmeyer (World Bank) presents Taxation, Information, and Withholding: Evidence from Costa Rica (with Marco Hernandez (World Bank)) at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

This paper studies the compliance effect of tax withholding on firms, which is commonly used in developing countries. While a growing literature argues that third-party reporting of tax liabilities is a key mechanism for ensuring tax compliance, and a reason why tax capacity grows along the development path, the literature has ignored the fact that third-party reporting is often associated with tax withholding. Withholding is irrelevant if the tax withheld is fully credited against a taxpayer’s liability, but can increase compliance in the presence of costly reclaim, low salience of enforcement or extensive margin compliance gaps.

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

Pomerleau Presents Indexing Capital Gains To Inflation Today At UC-Irvine

PomerleauKyle Pomerleau (Tax Foundation) presents Indexing Capital Gains to Inflation: Is It Worth It? at UC-Irvine today as part of its Tax Policy Colloquium Series:

Republican lawmakers and the Trump administration have reintroduced the idea of adjusting the basis of capital gains to inflation. Proponents of capital gains indexing argue that taxing individuals for an increase in the price level is unfair. They also argue that indexing capital gains would unlock capital, which would result in significant economic growth. It is true that indexing capital gains to inflation would increase the incentive to invest and results in a slight boost to the size of the economy. However, the effect would be much smaller than proponents argue. At the same time, it would reduce revenue and make the tax code slightly less progressive.

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

Glogower Presents A Constitutional Wealth Tax Today At Loyola-L.A.

Glogower (2016)Ari Glogower (Ohio States) A Constitutional Wealth Tax at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt:

A wealth tax could address rising inequality and more accurately tailor the tax system to taxpayers’ economic differences. These reasons to tax wealth may not matter, however, if a wealth tax is unconstitutional. This Article considers the possibilities for the design of a constitutional wealth tax. In particular, this Article argues that, if the Supreme Court were to find a traditional tax on wealth is foreclosed under the Constitution, Congress could instead tax wealth indirectly, by adjusting a taxpayer’s income tax liability on account of her wealth. This Article describes three methods for making this adjustment (collectively, “Wealth Integration” methods): A taxpayer’s wealth could affect her base of taxable income (the “Base Method”), the applicable rate schedule (the “Rate Method”) or the availability of credits against tax (the “Credit Method”).

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

Manhire Presents An Alternative Approach To Tax Gap Analysis Today In London

Manhire (2018)Jack Manhire (Texas A&M) presents Constraints on IRS Control: An Alternative Approach to Tax Gap Analysis, 12 Int’l J. L. & Pol. Sci. ___ (2018) at the World Academy of Science, Engineering, and Technology’s 20th International Conference on Tax Law and Regulations today in London, England.

A tax authority wants to take actions it knows will foster the greatest degree of voluntary taxpayer compliance to reduce the "tax gap." This paper suggests that even if a tax authority could attain a state of complete knowledge, there are constraints on whether and to what extent such actions would result in reducing the macro-level tax gap. These limits are not merely a consequence of finite agency resources. They are inherent in the system itself. To show that this is one possible interpretation of the tax gap data, the paper formulates known results in a different way by analyzing tax compliance as a population with a single covariate. This leads to a standard use of the logistic map to analyze the dynamics of non-compliance growth or decay over a sequence of periods.

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

White Americans Gain The Most From Trump’s Tax Cuts

New York Times, White Americans Gain the Most From Trump’s Tax Cuts, a Report Finds:

The tax cuts that President Trump signed into law last year are disproportionately helping white Americans over African-Americans and Latinos, a disparity that reflects longstanding racial economic inequality in the United States and the choices that Republicans made in crafting the law.

The finding comes from a new analysis of the $1.5 trillion tax cut using an economic model built by the Institute on Taxation and Economic Policy, a liberal think tank, and released in a joint report with Prosperity Now, a nonprofit focused on helping low-income Americans attain wealth and financial stability [Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide]. It is the first detailed analysis of the law to break down its effects by race.

White Americans earn about 77 percent of total income in the United States, but they are getting nearly 80 percent of the benefits of the individual and business tax cuts generated by the new law, the analysis found. African-Americans received about 5 percent of the benefits, despite earning 6 percent of the nation’s income. Latinos got about 7 percent, although their share of all income is 8 percent.

TCJA

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October 15, 2018 in Tax | Permalink | Comments (2)

Sunday, October 14, 2018

NY Times: Jared Kushner Paid No Federal Income Tax For Years

New York Times, Kushner Paid No Federal Income Tax for Years, Documents Suggest:

Over the past decade, Jared Kushner’s family company has spent billions of dollars buying real estate. His personal stock investments have soared. His net worth has quintupled to almost $324 million.

And yet, for several years running, Mr. Kushner — President Trump’s son-in-law and a senior White House adviser — appears to have paid almost no federal income taxes, according to confidential financial documents reviewed by The New York Times.

His low tax bills are the result of a common tax-minimizing maneuver that, year after year, generated millions of dollars in losses for Mr. Kushner, according to the documents. But the losses were only on paper — Mr. Kushner and his company did not appear to actually lose any money. The losses were driven by depreciation, a tax benefit that lets real estate investors deduct a portion of the cost of their buildings from their taxable income every year.

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October 14, 2018 in Tax | Permalink | Comments (6)

NY Times: It’s Getting Harder To Talk About God

GodNew York Times op-ed:  It’s Getting Harder to Talk About God, by Jonathan Merritt (author, Learning to Speak God From Scratch: Why Sacred Words Are Vanishing — And How We Can Revive Them (2018)):

More than 70 percent of Americans identify as Christian, but you wouldn’t know it from listening to them. An overwhelming majority of people say that they don’t feel comfortable speaking about faith, most of the time.

During the Great Depression, the playwright Thornton Wilder remarked, “The revival in religion will be a rhetorical problem — new persuasive words for defaced or degraded ones.” Wilder knew that during times of rapid social change, God-talk is often difficult to muster.

We may have traded 1930s-level poverty and hunger for a resurgence in racism, sexism and environmental cataclysm, but our problems are no less serious — or spiritually disorienting. While many of our most visible leaders claim to be religious, their moral frameworks seem unrecognizable to masses of other believers. How do we speak about God in times like these when God is hard to spot?

As a student of American Christianity and the son of a prominent megachurch pastor, I’ve been sensing for some time that sacred speech and spiritual conversation are in decline. But this was only a hunch I had formed in response to anecdotal evidence and personal experience. I lacked the quantitative data needed to say for sure.

So last year, I enlisted the Barna Group, a social research firm focused on religion and public life, to conduct a survey of 1,000 American adults. This study revealed that most Americans — more than three-quarters, actually — do not often have spiritual or religious conversations. ...

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October 14, 2018 in Legal Education, Tax | Permalink | Comments (3)

The Top Five New Tax Papers

SSRN Logo (2018)This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

  1. [491 Downloads]  Compelled Subsidies and the First Amendment, by William Baude (Chicago) & Eugene Volokh (UCLA)
  2. [243 Downloads]  The Charitable Contribution Strategy: An Ineffective SALT Substitute, by Andy Grewal (Iowa)
  3. [208 Downloads]   The Death of the Income Tax (or, the Rise of America's Universal Wage Tax), by Edward McCaffery (USC)
  4. [194 Downloads]  Taxing the Robots, by Orly Mazur (SMU)
  5. [185 Downloads]  The International Provisions of the TCJA: Six Results after Six Months, by Reuven Avi-Yonah (Michigan)

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

Saturday, October 13, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Dexter Presents The Burgeoning Role Of Rigorous Formative Assessments Today In Tokyo

Dexter (2018)Bobby Dexter (Chapman) presents Beyond the Laptop Ban: The Burgeoning Role of Rigorous Formative Assessments at the Asian Conference on Education today in Tokyo:

We live in constantly-evolving learning environments that are perpetually fraught with actual and potential distractors in the form of messages, notifications, and the varied temptations of the information superhighway. Achieving meaningful and sustained student focus is an uphill battle. Attempts to compel concentration by restricting the use of electronic devices may achieve enhanced classroom focus, but there are no promises. Students routinely defy edicts (remaining “connected” in some way), and technology may be a critical or highly desirable tool with respect to the larger pedagogical effort. Moreover, without pre-emptive interruption management by the student, considerable distraction potential looms in every non-classroom learning venue (e.g., libraries, residences, transit vehicles, airports, etc.).

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October 13, 2018 in Colloquia, Legal Education, Tax | Permalink | Comments (1)

Only 5% Of Households Are Complying With Nanny Tax Rules

Wall Street Journal, You’re Not the Only One Who’s Not Paying Your ‘Nanny Tax’:

A number of prominent Americans have been caught neglecting to pay taxes on their child-care help. They’re not alone.

New research provides evidence of the massive underpayment of “Nanny Taxes” owed by employers and workers on the wages paid to household help such as child- and elder-care providers, maids and drivers.

According to economist Brian Erard, only 5% of 3.6 million American households that should be filing forms and paying federal taxes related to household help are doing so [Who is Minding the Nanny Tax?]. ...

Table 9

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October 13, 2018 in Tax | Permalink | Comments (4)

Friday, October 12, 2018

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Brunson's Paying for Gun Violence

This week, David Elkins (Netanya) reviews a new paper by Samuel D. Brunson (Loyola-Chicago), Paying for Gun Violence.

Elkins (2018)In Paying for Gun Violence, Professor Samuel Brunson notes that that although gun violence costs the United States many billions dollars annually, political and Constitutional restraints continue to prevent effective gun regulation. Against this background, he proposes a Pigouvian tax on guns, with the goal of forcing gun owners to internalize those costs. Under his proposal, the purchase of a firearm would be subject to an excise tax and the possession of a firearm would be subject to a property tax. He argues that while such a tax would not be barred by the second amendment, a federal property tax on guns would run afoul of the requirement that direct taxes be apportioned among the states in proportion to their populations. Therefore, he suggests that the tax be imposed not on the federal level but on the state level. He writes that while the tax is unlikely to result in any significant reduction of gun ownership, it will at least make society whole by compensating it for the damage cause by gun violence.

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October 12, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (5)

Tax Policy In The Trump Administration

Fleming Presents Real Worldwide V. Territorial Taxation After The TCJA In Vienna

FlemingJ. Clifton Fleming, Jr. (BYU) presents An Early Look at Real Worldwide v. Territorial Taxation After the TCJA today at the Institute for Austrian and International Tax Law of the Vienna University of Economics and Business:

In the run up to enactment of the 2017 Tax Cuts and Jobs Act (TCJA) one of the principal U.S. tax policy issues was how foreign source active business income of U.S. multinational enterprises (MNEs) should be taxed by the United States if the system of deferring U.S. tax on active income of a foreign subsidiary was ended. Should active foreign income be taxed under a territorial or exemption system—i.e. bear no residual U.S. tax—or should it be subjected to real worldwide taxation—i.e. current taxation at regular U.S. rates coupled with a credit for foreign income tax paid limited to the U.S. tax on the foreign-source income as measured for U.S. tax purposes.

The opposing sides were not without common ground. Both agreed that the existing U.S. system for taxing the foreign-source active-business income of U.S. MNEs was bad because it generally did not impose U.S. tax until the active income of foreign subsidiaries was repatriated, either through dividends or by sale of subsidiary stock at a price reflecting accumulated foreign-source income.

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October 12, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Liberal Suppression: Section 501(c)(3) And The Taxation of Speech

Liberal SuppressionMark Pulliam (Law & Liberty; Retired Partner, Latham & Watkins), Is Section 501(c)(3) a Form of Censorship?:

Columbia Law School Professor Philip Hamburger is a prodigious and iconoclastic legal scholar. ... Hamburger’s latest subject, in Liberal Suppression ([University of Chicago Press] 2018), is an inquiry into the legitimacy of restrictions on the political speech of non-profit organizations. [1] Section 501(c)(3) exempts religious, educational, and charitable organizations from federal income tax but denies them this exemption if they engage in campaign speech for or against any candidate for public office or devote a substantial part of their activities to propaganda or other attempts to influence legislation. Section 170(c) makes contributions to qualifying non-profits tax-deductible to the donor. According to Hamburger, these exemptions and deductions amount to “many billions of dollars annually.”

Most people’s knee-jerk reaction is that section 501(c)(3)’s restrictions are justified by the tax-exempt status such non-profit organizations applied for and received. Rejecting such preconceptions in his trademark fashion, Hamburger strongly disagrees. Although non-profits are free to express a wide range of opinions—even political opinions—outside of political contests, Hamburger views section 501(c)(3) as “an extraordinary abridgement of an essential freedom,” which ought to be considered unconstitutional. Inasmuch as the Supreme Court has unanimously upheld the lobbying restrictions in section 501(c)(3) [2], Liberal Suppressionis nothing if not ambitious, but is it persuasive? Realizing that his arguments may appear to be an “uphill struggle,” early on Hamburger asks readers to “hold their skepticism in abeyance.”

After reading the book, my skepticism remains stubbornly intact.

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October 12, 2018 in Book Club, Tax | Permalink | Comments (6)

WSJ: Massachusetts Gubernatorial Candidate Wants To Tax The Ivory Tower

MassWall Street Journal, Massachusetts Gubernatorial Candidate Wants to Tax the Ivory Tower:

Massachusetts is home to some of the best colleges and universities in the world—and some of the worst traffic jams.

A Democratic gubernatorial candidate is betting residents of the Bay State will be willing to tax the former to alleviate the latter.

Jay Gonzalez is building his long-shot campaign around a levy on the endowments of nine private schools that would create revenue to invest in public transportation and relieve Boston-area congestion, among other things. Boston drivers spend 14% of their time driving in congestion, the worst of any U.S. city, according to the INRIX, a transportation analytics company.

The 1.6% annual tax, which would be levied only on private, nonprofit schools with endowments that exceed $1 billion, would generate nearly $1 billion, including $563 million from Harvard University and $210 million from the Massachusetts Institute of Technology.

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October 12, 2018 in Tax | Permalink | Comments (8)

Thursday, October 11, 2018

Exclusionary Taxation

Shayak Sarkar (UC-Davis) & Josh Rosenthal, Exclusionary Taxation, 53 Harv. C.R.-C.L. L. Rev. ___ (2019):

Property tax assessments appear to be technocratic calculations. But they may be calculated to discriminate, even unintentionally. California’s constitutional limitations on property taxes, as first enacted by Proposition 13 in 1978, remain the poster child for the so-called “property tax revolt” of the late twentieth century. Such laws privilege preexisting homeowners by capping assessments at historic levels far below contemporary value. As property prices rise, beneficiary homeowners may even bequeath this taxpayer windfall to their descendants and immortalize these underassessments. Newer, increasingly diverse residents end up paying higher taxes because the law treats them with less regard than their more pedigreed neighbors. These tax policies are rationalized as providing “stability” to the existing residents. The aggrieved have found cold comfort in the Constitution, with the Supreme Court upholding the core of California’s system in the canonical Nordlinger v. Hahn.

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October 11, 2018 in Scholarship, Tax | Permalink | Comments (2)

Scharff: The Challenge Of Pricing Externalities Under State Law

Erin A. Scharff (Arizona State), Green Fees: The Challenge of Pricing Externalities Under State Law, 97 Neb. L. Rev. 168 (2018):

Policymakers at the state and local level are increasingly interested in using market-based pricing mechanisms as regulatory tools. For example, at the state level, several states have recently considered state-level carbon pricing, while at the local level, municipal governments are increasingly turning to stormwater remediation fees to pay for the treatment of municipal runoff required by the Clean Water Act.

These regulatory programs are inspired by the insight of English economist Arthur Pigou, who suggested governments could price social costs into market transactions by imposing a tax. Such policies, however, are frequently subject to state court litigation challenging them as unlawful taxes. State law restricts both state and local governments’ ability to enact taxes, but similar restrictions are often not in place to limit the enactment of regulatory actions or user fees. Unfortunately, state courts have struggled to appropriately classify these fees under existing state law doctrines.

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

The Mandatory Repatriation Tax Is Unconstitutional

Sean P. McElroy, The Mandatory Repatriation Tax Is Unconstitutional, 36 Yale J. Reg. 69 (2018):

In late 2017, Congress passed the first major tax reform in over three decades. This Essay considers the constitutional concerns raised by Section 965 (the “Mandatory Repatriation Tax”), a central provision of the new tax law that imposes a one-time tax on U.S.-based multinationals’ accumulated foreign earnings.

First, this Essay argues that Congress lacks the power to directly tax wealth without apportionment among the states. Congress’s power to tax is expressly granted, and constrained, by the Constitution. While the passage of the Sixteenth Amendment mooted many constitutional questions by expressly allowing Congress to tax income from whatever source derived, this Essay argues the Mandatory Repatriation Tax is a wealth tax, rather than an income tax, and is therefore unconstitutional.

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

More On The NY Times Trump Tax Blockbuster

Wednesday, October 10, 2018

Rosenberg Presents The Tax Cuts And Jobs Act And Investment Incentives Today At Penn

RosenbergJoseph Rosenberg (Tax Policy Center) presents The Tax Cuts and Jobs Act and Investment Incentives at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

This paper estimates the impact of the Tax Cuts and Jobs Act (TCJA) on incentives to invest in the US as measured by the marginal effective tax rate (METR)—a summary measure of the total federal tax burden on a hypothetical break-even investment. In the near term (2018 law), the TCJA reduces the overall marginal effective tax rate (METR) on new investments from 17 percent to 13 percent, a 4.1 percent increase in the aftertax return. In the longer-term (2027 law), the METR decreases from 19 percent to 17 percent, a 1.5 percent increase in the after-tax return.

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

Tillotson Presents Give and Take: The Citizen-Taxpayer And The Rise Of Canadian Democracy Today At Toronto

Give and TakeShirley Tillotson (Dalhousie University) presents Give and Take: The Citizen-Taxpayer and the Rise of Canadian Democracy (University of British Columbia Press at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Can a book about tax history be a page-turner? You wouldn’t think so. But Give and Take is full of surprises. A Canadian millionaire who embraced the new federal income tax in 1917. A socialist hero, J.S. Woodsworth, who deplored the burden of big government. Most surprising of all, Give and Take reveals that taxes deliver something more than armies and schools. They build democracy.

Tillotson launches her story with the 1917 war income tax, takes us through the tumultuous tax fights of the interwar years, proceeds to the remaking of income taxation in the 1940s and onwards, and finishes by offering a fresh angle on the fierce conflicts surrounding tax reform in the 1960s.

Taxes show us the power of the state, and Canadians often resisted that power, disproving the myth that we have all been good loyalists. But Give and Take is neither a simple tale of tax rebels nor a tirade against the taxman. Canadians also made real contributions to democracy when they taxed wisely and paid willingly.

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

Zolt Presents Tax Treaties And Developing Countries Post-BEPS Today At Michigan

Zolt (2014)Eric M. Zolt (UCLA) presents Tax Treaties and Developing Countries: A Better Deal Post-BEPS? at Michigan as part of its Tax Policy Workshop Series hosted by Reuven Avi-Yonah:

Developing countries face tough choices about whether to enter into bilateral tax treaties with developed countries. Several benefits flow from entering into tax treaties. These include increased foreign direct and portfolio investments that may result if tax treaties reduce double taxation, create greater tax certainty for investors, and provide for a dispute resolution mechanism for tax controversies. But there are real costs for developing countries in entering into tax treaties with developed countries. Treaty provisions invariably result in developing countries yielding taxing rights with respect to economic activity taking place in their country.

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

Cui: Residence-Based Formulary Apportionment

Wei Cui (British Columbia), Residence-Based Formulary Apportionment: (In-)Feasibility and Implications, 71 Tax L. Rev. 551 (2018):

I examine one way of taxing international corporate income that has not previously been studied, “residence-based formulary apportionment” or RBFA. I first offer a new taxonomy of different ways of taxing corporate income by reference to individual shareholders, and distinguish what I call the “shareholder attribution” approach from integration, pass-through, and other approaches. I then argue that although traditional international legal norms had led international tax design to avoid taxing foreign corporations “unconnected” with the taxing jurisdiction (e.g. foreign corporations earning only foreign income), these legal norms have gone through substantial transformations in recent years. The exercise of jurisdiction over foreign corporations has vastly expanded in the sphere of international taxation, as has the extent of mutual assistance in tax collection. Consequently, the choice between taxing foreign corporations and taxing shareholders should be made mainly on administrative (including enforceability) grounds other than international legal norms.

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

IRS Internal Watchdog Faults Vigilance On Nonprofits' Political Activities

TIGTAWall Street Journal, IRS Internal Watchdog Faults Vigilance on Nonprofits' Political Activities:

The IRS is still struggling with its role policing nonprofit groups’ political activities, the tax agency's inspector general said in a new report [Review of the Processing of Referrals Alleging Impermissible Political Activity by Tax-Exempt Organizations (2019-10-006) (Oct. 4, 2018)].

The report included no allegations of political bias inside the Internal Revenue Service, but the inspector general found IRS officials aren't sending enough allegations of impermissible political activity—such as involvement in a partisan campaign—to the Political Activities Referral Committee of managers responsible for deciding whether to pursue enforcement.

Based on the inspector general's sample, more than 1,000 cases in 2015 and 2016 could have gone to the the three-person committee, the report said. The committee reviewed 19 high-profile cases.

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October 10, 2018 in IRS News, Tax | Permalink | Comments (0)

Tuesday, October 9, 2018

Infanti: Our Selfish Tax Laws

SelfishAnthony C. Infanti (Pittsburgh), Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves (MIT Press 2018):

Most of us think of tax as a pocketbook issue: how much we owe, how much we'll get back, how much we can deduct. In Our Selfish Tax Laws, Anthony Infanti takes a broader view, considering not just how taxes affect us individually but how the tax system reflects our culture and society. He finds that American tax laws validate and benefit those who already possess power and privilege while starkly reflecting the lines of difference and discrimination in American society based on race, ethnicity, socioeconomic class, gender, sexual orientation and gender identity, immigration status, and disability. Infanti argues that instead of focusing our tax reform discussions on which loopholes to close or which deductions to allow, we should consider how to make our tax system reflect American ideals of inclusivity rather than institutionalizing exclusion.

After describing the theoretical and intellectual underpinnings of his argument, Infanti offers two comparative case studies, examining the treatment of housing tax expenditures and the unit of taxation in the United States, Canada, France, and Spain to show how tax law reflects its social and cultural context. Then, drawing on his own work and that of other critical tax scholars, Infanti explains how the discourse surrounding tax reform masks the many ways that the American tax system rewards and reifies privilege. To counter this, Infanti urges us to work together to create a society with a tax system that respects and values all Americans.

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October 9, 2018 in Book Club, Scholarship, Tax | Permalink | Comments (0)

NY Times: Where In The World Is Denmark’s $2 Billion?

New York Times, Where in the World Is Denmark’s $2 Billion?:

As large as it is, the building would be easy to miss. Plain, gray and near a McDonald’s, it’s part of a generic office complex surrounded by a vast parking lot in a suburb of Copenhagen. “Danish Tax Agency” is stenciled in both English and Danish on a glass front door.

This outpost of SKAT, as the I.R.S. in Denmark is known, seems an improbable setting for what the authorities call one of the great financial crimes in the country’s history. For three years, starting in 2012, so much money gushed from an office here that it was as though the state had sprung a gigantic leak.

Prosecutors in Copenhagen say it was an elaborate ruse, one that ultimately cost taxpayers more than $2 billion — a spectacular sum for Denmark, the equivalent of a $110 billion loss in the far larger American economy.

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October 9, 2018 in Tax | Permalink | Comments (4)

NY Times: With Popularity Slumping, Macron Tries Tax Cuts For France’s Working Class

New York Times, Macron, With Popularity Slumping, Tries Tax Cuts for France’s Working Class:

As President Emmanuel Macron presses ahead with the most business-friendly overhaul of the French labor market in decades, his popularity with many of his countrymen has gone into a tailspin. Consumer confidence is falling. A nascent recovery is cooling off. Unemployment has been stuck above 9 percent for months. 

And then there was the encounter with the gardener.

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October 9, 2018 in Tax | Permalink | Comments (0)

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 October 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.)

176,646

Reuven Avi-Yonah (Mich.)

104,534

2

Dan Shaviro (NYU)

113,132

Daniel Hemel (Chicago)

101,579

3

David Gamage (Indiana)

109,012

David Gamage (Indiana)

96,359

4

Lily Batchelder (NYU)

106,906

Darien Shanske (UC-Davis) 

95,948

5

Daniel Hemel (Chicago)

106,213

Manoj Viswanathan (Hastings)

95,447

6

Darien Shanske (UC-Davis)

103,059

Dan Shaviro (NYU)

95,249

7

Cliff Fleming (BYU)

98,817

Lily Batchelder (NYU)

93,267

8

David Kamin (NYU)

95,623

David Kamin (NYU)

93,157

9

Manoj Viswanathan (Hastings)

95,655

Cliff Fleming (BYU)

93,050

10

Rebecca Kysar (Fordham)

94,914

Ari Glogower (Ohio State) 

92,782

11

Ari Glogower (Ohio State)

93,163

Rebecca Kysar (Fordham) 

92,627

12

Michael Simkovic (USC)

41,087

Gladriel Shobe (BYU)

23,052

13

D. Dharmapala (Chicago)

35,261

Jacob Goldin (Stanford)  

3,787

14

Paul Caron (Pepperdine)

34,742

Michael Simkovic (USC)

3,701

15

Louis Kaplow (Harvard)

30,264

Richard Ainsworth (BU)

3,580

16

Richard Ainsworth (BU)

25,717

Kirk Stark (UCLA) 

3,449

17

Ed Kleinbard (USC)

25,157

Joe Bankman (Stanford) 

3,384

18

Vic Fleischer (UC-Irvine)

24,875

D. Dharmapala (Chicago)

3,295

19

Jim Hines (Michigan)

23,983

Dennis Ventry (UC-Davis) 

3,010

20

Gladriel Shobe (BYU)

23,762

Omri Marian (UC-Irvine)  

2,496

21

Richard Kaplan (Illinois)

23,102

Ruth Mason (Virginia) 

2,463

22

Ted Seto (Loyola-L.A.)

22,944

Sam Donaldson (Georgia St.) 

2,437

23

Katie Pratt (Loyola-L.A.)

21,467

Hugh Ault (Boston College) 

2,241

24

Robert Sitkoff (Harvard)

20,999

Kyle Rozema (Chicago) 

2,226

25

David Weisbach (Chicago)

20,461

Brad Borden (Brooklyn)

2,123

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

Monday, October 8, 2018

Davis Presents Elective Egg Freezing And The Limits Of The Medical Expense Deduction At Kentucky

DavisTessa R. Davis (South Carolina) presented Freezing the Future: Elective Egg Freezing and the Limits of the Medical Expense Deduction, 106 Ky. L. Rev. ___ (2019), last Friday at Kentucky as part of its Faculty Speaker Series:

Section 213 of the Internal Revenue Code (the Code) allows a deduction for unreimbursed expenses for medical care. To qualify as medical care, an individual’s outlay must meet the statutory definition of “medical care” set forth in § 213. Specifically, an outlay must be for care that is either for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Many costs raise few interpretive challenges. When an individual receives chemotherapy, for example, the costs tied to that care clearly satisfy the disease prong of §213. But as medicine advances, emerging technologies test the breadth of the Code’s concept of medical care. 

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October 8, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Elkins Presents The Myth Of Corporate Tax Residence Today In Singapore

Elkins (2018)David Elkins (Netanya) presents The Myth of Corporate Tax Residence today at the at the Singapore Management University - Tax Academy Centre for Excellence in Taxation:

The issue of corporate residence has recently attracted a great deal of attention in both the popular press and in academic discourse, primarily because of the phenomenon of corporate inversions. The consensus among commentators is that the root of the problem is a flawed definition of corporate residence, and they have therefore proposed replacing the current definition, which relies upon place of incorporation, with another that relies upon control and management, home office, customer base, source of income, or the residence of shareholders.

The thesis of this article is that the concept of tax residence is inapplicable to corporations. Residence in tax law delineates the boundaries of distributive justice, and whereas corporations cannot be parties to a scheme of distributive justice, corporate residence is a misnomer. The incongruity of corporate residence along with the fact that residence is a fundamental concept in international taxation is one reason that the current international tax regime has proven unviable.

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October 8, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

WSJ: Tax Cuts Provide Limited Boost To Workers’ Wages

WSJWall Street Journal, Tax Cuts Provide Limited Boost to Workers’ Wages:

U.S. companies are putting savings from the corporate tax cut to use, but only a fraction of it is flowing to employees’ wallets, new data show.

In the months after the December tax-code overhaul that lowered the corporate rate to 21% from 35%, dozens of companies such as Walmart Inc. and FedEx Corp. announced one-time bonuses and wage increases for hourly workers. Those moves earned praise from the Trump administration as evidence the cuts were quickly reaching many Americans.

Now, various surveys indicate that most companies aren’t passing the money directly to employees.

A new survey of 152 companies by executive-recruitment firm Korn Ferry International revealed 14% were putting part of their tax-cut savings into base salary increases. A poll of 1,500 companies by consulting firm Mercer LLC showed 4% are redirecting tax savings to budgets for bigger paychecks in the coming year. And in a survey of more than 1,000 companies published by human-resources consulting firm Aon PLC, 99% said the tax cuts weren’t prompting them to increase minimum wages.

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October 8, 2018 in Tax | Permalink | Comments (2)

2019 Tannenwald Tax Writing Competition

Tannenwald (2013)The Theodore Tannenwald, Jr. Foundation for Excellence in Tax Scholarship and American College of Tax Counsel are sponsoring the 2019 Tannenwald Tax Writing Competition:

Named for the late Tax Court Judge Theodore Tannenwald, Jr., and designed to perpetuate his dedication to legal scholarship of the highest quality, the Tannenwald Writing Competition is open to all full- or part-time law school students, undergraduate or graduate. Papers on any federal or state tax-related topic may be submitted in accordance with the Competition Rules.

Prizes:

  • 1st Place:  $5,000, and publication in the Florida Tax Review
  • 2nd Place:  $2,500
  • 3rd Place:  $1,500

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October 8, 2018 in Legal Education, Tax, Teaching | Permalink | Comments (0)

Lesson From The Tax Court: What Is A 'Liability' For §108 Purposes?

Tax Court (2017)To qualify for the insolvency exclusion in §108(a) one has to be insolvent.  Section 108(d)(3) defines insolvency as "the excess of liabilities over the fair market value of assets."  But nothing in the Code or Regulations defines the term "liabilities."  The recent case of Richard Bryan Jackson and Nora Irene Jackson v. Commissioner, T.C. Summ. Op. 2018-43 (Sept. 17, 2018), teaches a lesson about the meaning of that word. 

In February, I wrote about Discharge of Indebtedness (DOI) Income.  I called it “The Phantom of The Tax Code.”  Readers will recall that when a taxpayer obtains a loan, the loan proceeds are not reportable as gross income, but it is not entirely clear why.  The most common reason given is that the borrowed funds do not represent a increase in wealth because they are offset by the obligation to repay.  I call this the balance sheet theory.  The logic of this theory means that when the obligation to repay is discharged or relieved by the creditor, that discharge increases the taxpayer’s wealth to the extent that it frees the taxpayer from the obligation.  I go into more detail in my February post.

Section 108(a) reflects this balance sheet theory by allowing taxpayers to exclude DOI from gross income when they are insolvent but limiting the exclusion to the amount of the insolvency at the time of the discharge. For example, if a taxpayer is discharged from $10,000 of debt at a time when the taxpayer is insolvent by $6,000, then the taxpayer can exclude $6,000 of the DOI from income but must report the remaining $4,000 as gross income. 

Today’s lesson is about what types of obligations count as liabilities for purposes of determining insolvency. It turns out that not every obligation to pay someone is a liability.  To see why, read on!

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October 8, 2018 in Bryan Camp, New Cases, Scholarship, Tax | Permalink | Comments (0)

Call For Panelists: AALS Hot Topics Program On Trump And Taxes

AALS (2019)Diane Klein (La Verne) seeks tax professors interested in joining a panel proposal for a Hot Topics panel on Trump and Taxes at the AALS Annual Meeting in New Orleans (Jan. 2-6, 2019). The recent New York Times story about the Trump family empire implicates a variety of tax and estate-planning issues. Panelists are sought with interest and expertise in any or all of the following: estate/gift tax (current and historical perspectives), real estate and taxation, corporate tax, tax minimization, New York taxes, family tax planning — or any other tax issue that may be relevant. Proposals are due October 19, 2018, so please contact Prof. Klein at  by October 12, 2018, with a description of your contribution.

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October 8, 2018 in Conferences, Legal Education, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 7, 2018

Maynard: Five Lessons From The NY Times Investigation Of Trump's Family Fortune

Baltimore Sun op-ed:  Trump's Family Wealth: A Case Study in How to Work the System, by Goldburn P. Maynard Jr. (Louisville):

By any reasonable metric the New York Times special investigation into the Trump family’s dynastic wealth accumulation is a “YUGE DEAL.” Yes, a substantial part of the revelations undercut the Trumpian self-made myth. That in itself is newsworthy and important, but it is not the reason I could not stop reading this story at 1 in the morning. (I’m from New York, so I’ve been clued into Trump exaggerations for decades.) The investigation is much more important as an approachable case study of how wealth is built in the United States and a reality check on the myth of the self-made individual. ...

[H]ere are five lessons on wealth that the Trump family can teach every American:

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October 7, 2018 in Tax | Permalink | Comments (1)

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 paper debuting on the list at #5:

  1. [483 Downloads]  Compelled Subsidies and the First Amendment, by William Baude (Chicago) & Eugene Volokh (UCLA)
  2. [241 Downloads]  The Charitable Contribution Strategy: An Ineffective SALT Substitute, by Andy Grewal (Iowa)
  3. [203 Downloads]   The Death of the Income Tax (or, the Rise of America's Universal Wage Tax), by Edward McCaffery (USC)
  4. [187 Downloads]  Taxing the Robots, by Orly Mazur (SMU)
  5. [158 Downloads]  The International Provisions of the TCJA: Six Results after Six Months, by Reuven Avi-Yonah (Michigan)

October 7, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, October 6, 2018

This Week's Ten Most Popular TaxProf Blog Posts

The Tax Implications Of Student-Athlete Insurance Policy Payouts

Kathryn Kisska-Schulze (Clemson) & Adam Epstein (Central Michigan), The Claim Game: Analyzing the Tax Implications of Student-Athlete Insurance Policy Payouts, 25 Jeffrey S. Moorad Sports L.J. ___ (2018):

Prior to the 2016-2017 season, quarterback Deshaun Watson accepted two $5 million insurance policies paid for by Clemson University to protect him against a career-ending injury while playing college football, as well as the potential loss-of-value he might suffer should an injury prompt a drastic drop in the NFL draft. An interesting question regarding insurance premiums paid for by universities on behalf of student-athletes is whether such payouts are taxable. The Internal Revenue Code (IRC) dictates the tax consequences of disability payouts based on who pays for a disability policy - an individual or their employer. As student-athletes are not employees of their universities, there is no clear guidance as to the tax consequences of proceeds received from an insurance policy when the party paying for part or all of the premium is not their employer. This article analyzes the tax consequences of payouts received by student-athletes under various parameters associated with premium payments.

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

Friday, October 5, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Cauble's Taxing Selling Partners

This week, Sloan Speck (Colorado) reviews a new work by Emily Cauble (DePaul), Taxing Selling Partners, 94 Wash. L. Rev. ___ (2019).

Speck (2017)In Taxing Selling Partners, Emily Cauble ably details various shortcomings and inconsistencies in the taxation of sales of partnership interests, then proposes a concrete and clear remedy to these myriad problems. Specifically, Cauble examines four scenarios in which the sale of a partnership interest yields a tax result different from the sale of that partnership’s assets. Two of these scenarios draw on longstanding issues involving partner-partnership divergences in holding period and use, while the other two scenarios engage changes in law from December 2017. The first of these changes closes a loophole involving sales of partnership interests by non-U.S. persons—a fix that Cauble argues is incomplete. The other change limits the availability of excess business losses, though, as Cauble notes, not necessarily on transfers of partnership interests. To solve these problems, Cauble advocates aligning the tax consequences of sales of interests and assets by, more or less, looking through to assets when an interest is sold.

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October 5, 2018 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

The Tyranny Of The Top Journals In Tenure Decisions

James J. Heckman (Chicago) & Sidharth Moktan (Chicago), Publishing and Promotion in Economics: The Tyranny of the Top Five (NBER Working Paper No. 25093 Sept. 2018):

This paper examines the relationship between placement of publications in Top Five (T5) journals and receipt of tenure in academic economics departments. Analyzing the job histories of tenure-track economists hired by the top 35 U.S. economics departments, we find that T5 publications have a powerful influence on tenure decisions and rates of transition to tenure. A survey of the perceptions of young economists supports the formal statistical analysis. Pursuit of T5 publications has become the obsession of the next generation of economists. However, the T5 screen is far from reliable. A substantial share of influential publications appear in non-T5 outlets. Reliance on the T5 to screen talent incentivizes careerism over creativity. 

Chronicle of Higher Education, How Much Does Publishing in Top Journals Boost Tenure Prospects? In Economics, a Lot:

For academics on the tenure track, the pressure to publish at all costs and in the top journals in their field is immense. That’s because meeting that professional standard matters — a lot. ...

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October 5, 2018 in Scholarship, Tax | Permalink | Comments (2)

NY Times: Hobbled by Budget Cuts, The IRS Brings Fewer Tax Fraud Cases; Provided You’re Not An Associate Of President Trump, There May Never Be A Better Time To Be A Tax Cheat

New York Times, Hobbled by Budget Cuts, the I.R.S. Brings Fewer Tax Fraud Cases:

Tax evasion is at the center of the criminal cases against two associates of the president, Paul Manafort and Michael D. Cohen. The sheer scale of their efforts to avoid paying the government has given rise to a head-scratching question: How were they able to cheat the Internal Revenue Service for so many years?

The answer, researchers and former government auditors say, is simple. The I.R.S. pursues fewer cases of tax evasion than it did less than 10 years ago. Provided you’re not a close associate of President Trump, there may never be a better time to be a tax cheat.

Last year, the I.R.S.’s criminal division brought 795 cases in which tax fraud was the primary crime, a decline of almost a quarter since 2010. “That is a startling number,” Don Fort, the chief of criminal investigations for the I.R.S., acknowledged at a New York University tax conference in June.

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October 5, 2018 in IRS News, Tax | Permalink | Comments (5)