TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, November 19, 2015

McMahon: Gendering the Marriage Penalty

InfantiStephanie Hunter McMahon (Cincinnati), Gendering the Marriage Penalty, in Controversies in Tax Law: A Matter of Perspective (Anthony C. Infanti, ed. Ashgate 2015):

In 1969 Congress amended the Internal Revenue Code to create a marriage penalty. The penalty was not felt by all married couples: Only those couples in which spouses earned roughly equal amounts and who filed joint tax returns paid a penalty. Thus, the 1969 change in law had a gendered effect of discouraging some wives from earning income, but the alternative was not without its own gendered results. If gender marks the impact of the 1969 legislation, was gender what motivated the change in law? It would be easy to assume that at the end of the 1960s, a socially conservative legislature reacted to a developing women’s movement. From the legislative debates, sexism certainly pervaded congressional discussion of women’s role in the family and the economy. However, this only tells part of the story and does so by focusing on the result that remains of interest today. Economic forces were a larger part of the story.

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November 19, 2015 in Scholarship, Tax | Permalink | Comments (0)

NY Court: Ethics Rules Bar Whistleblower Suit By Former Vanguard Tax Lawyer Alleging Mutual Fund Giant Evaded $1 Billion in Taxes

VanguardFollowing up on my previous posts (links below): Philadelphia Inquirer, Danon Barred From Whistleblower's Cut in Vanguard NY Case:

A New York State Supreme Court justice has ruled that a former Vanguard Group tax lawyer cannot expect to collect a whistleblower's cut of potential back state taxes owed by the mutual-fund giant because he was employed by Vanguard at the time he secretly filed the complaint.

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November 19, 2015 in New Cases, Tax | Permalink | Comments (0)

NTA 108th Annual Conference on Taxation

Cover2The three-day National Tax Association 108th Annual Conference on Taxation kicks off today in Boston.  Today's highlights:

Alan Auerbach (UC-Berkeley), Presidential Address

Topics in Business Taxation:

  • Session Chair:  Diane Ring (Boston College)
  • Mirit Eyal-Cohen (Alabama), Taxing Economies of Scale
  • Shu-Yi Oei (Tulane) &  Diane Ring (Boston College), Regulation by Crowd
  • David Hasen (Colorado), Taxation and Innovation
  • Jacob Nussim (Bar-Ilan), Taxation and Innovation
  • Discussants:  Shu-Yi Oei (Tulane), Diane Ring (Boston College), Jacob Nussim (Bar-Ilan)

Charitable Giving of High-Income Households

  • Session Chair:  Jon Bakija (Williams)
  • Brian Galle (Georgetown), Law and the Problem of Restricted Spending Philanthropy
  • Brian Galle (Georgetown) & Benjamin Marx (Illinois), Do Private Foundation Donors Care About State Law?
  • Nicolas Duquette (USC), Philanthropy, Inequality, and the Income Tax: High-Income Households’ Charitable Giving 1917–2012
  • Jon Bakija (Williams) & Brian Raub (IRS), How Estate Taxation Affects Charitable Donations and Wealth Accumulation: Evidence from the Divergence in Estate Tax Rates across States After 2001
  • Discussants:  Yair Listokin (Yale), Chistine Exley (Harvard)

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November 19, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Chicago-Kent Symposium: Nonprofit Oversight Under Siege

Chicago-KentChicago-Kent hosts a symposium today on Nonprofit Oversight Under Siege:

The View from the U.S.:

  • Evelyn Brody (Chicago-Kent) & Marcus Owens (Loeb & Loeb, Washington, D.C.), Exile to Main Street: The I.R.S.’s Diminished Role in Overseeing Tax-Exempt Organizations 
  • Linda Sugin (Fordham), Politics, Disclosure, and State Law Solutions for 501(c)(4) Organizations
  • Lloyd Hitoshi Mayer (Notre Dame), Fragmented Oversight of Nonprofits in the United States: Does It Work? Can It Work?

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November 19, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Inaugural International Conference on Taxpayer Rights Concludes Today In Washington, D.C.


The two-day inaugural International Conference on Taxpayer Rights concludes today in Washington, D.C. (agenda):

The National Taxpayer Advocate of the Internal Revenue Service is convening the Inaugural International Conference on Taxpayer Rights in Washington, D.C. This ground-breaking conference will present panelists from around the world to explore how taxpayer rights globally serve as the foundation for effective tax administration.

Today's speakers include:

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November 19, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Clausing: The Effect Of Profit Shifting On The Corporate Tax Base In The U.S. And Beyond

Kimberly A. Clausing (Reed College), The Effect of Profit Shifting on the Corporate Tax Base in the United States and Beyond:

This paper estimates the effect of profit shifting on corporate tax base erosion for the United States. Using Bureau of Economic Analysis survey data on U.S. multinational corporations over the period 1983 to 2012, the analysis estimates the sensitivity of foreign incomes to tax burdens for major foreign direct investment destinations. Controlling for a host of other variables as well as country fixed effects, I find that taxable income is very sensitive to corporate tax rates. Estimates of tax sensitivity are used together with data on reported foreign income to calculate how much “extra” income is booked in low-tax countries due to profit shifting;

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November 19, 2015 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 924

IRS Logo 2Family Security Matters, Why Lois Lerner and the IRS Scandal Are Not Unique:

Bottom Line Up Front:  Political appointees run the nation's bureaucracies.  Former political appointees who are "burrowed" into the system bolster political ideology and decisions.  Furthermore, those who are hired and promoted by the appointee and/or former appointee in charge of an organization are most probably of similar political ilk.

The IRS scandal was felt heavily by those of us who are retired from federal service.  After having spent decades within the bowels of federal bureaucracies - decades that, for us, were not defined at all by politics - the intentional targeting of Americans of ANY political persuasion came as a horrific shock. 

In our day, civil servants would NEVER have targeted political opponents of the ruling administration. Even if a rogue employee had tried, such actions would never have been tolerated.  Warnings against any defiance of the limitations imposed by the Hatch Act of 1939 kept virtually all civil servants from holding much more than personal political opinions expressed only in private.  Politics were certainly not discussed in the office, let alone acted upon.  Until recently, federal employees were decidedly "non-partisan."

The evidence surrounding the Lois Lerner case has shown us how different our government has become. The initial shock that came with revelations of the extent to which government officials within the IRS had been able to intervene in and delay the processing of specific tax-exempt requests (virtually all of which were from conservative organizations) gave way to outrage following testimony to Congress about the "loss" of emails and other files pertinent to the investigation.  When combined with the disreputable conduct associated with the VA, ATF, EPA, DoE, DoD, GSA, and the highest levels of the State Department, is it any wonder that Americans feel exasperated and retired federal workers feel estranged from the very government they had so long served? 

Question:  What has changed?  Answer:  The manner in which political appointees are filtered into the bureaucracies. ...

This is yet another dilemma that the next President will inherit.  If the process does indeed encourage institutionalized political bias, something must be done about it.  Hopefully the next administration will find a way to end the overt expression of bias by employees who see themselves as political avengers, and terminate the practice that gave us the IRS scandal.

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November 19, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (10)

Wednesday, November 18, 2015

Inaugural International Conference on Taxpayer Rights Kicks Off Today In Washington, D.C.


The two-day inaugural International Conference on Taxpayer Rights kicks off today in Washington, D.C. (agenda):

The National Taxpayer Advocate of the Internal Revenue Service is convening the Inaugural International Conference on Taxpayer Rights in Washington, D.C. This ground-breaking conference will present panelists from around the world to explore how taxpayer rights globally serve as the foundation for effective tax administration.

Today's speakers include:

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November 18, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Mazur: Transfer Pricing Challenges In The Cloud

CloudOrly Mazur (SMU), Transfer Pricing Challenges in the Cloud, 52 B.C. L. Rev. ___ (2016):

Cloud computing - the provision of information technology resources in a virtual environment - has fundamentally changed how companies operate. Companies have quickly adapted by moving their businesses to the cloud, but international tax standards have failed to follow suit. As a result, taxpayers and tax administrations confront significant tax challenges in applying outdated tax principles to this new environment. One particular area that raises perplexing tax issues is the transfer pricing rules. The transfer pricing rules set forth the intercompany price a cloud service provider must charge an affiliate using its cloud services, which ultimately affects in which jurisdiction the company’s profits are taxed. This Article argues that the fundamental features of cloud computing exacerbate some of the more difficult transfer pricing problems that already exist.

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November 18, 2015 in Scholarship, Tax | Permalink | Comments (0)

Elizabeth Warren Delivers Major Speech Today On International Corporate Tax Reform

National Press Club:

U.S. Senator Elizabeth Warren, D-Mass., will speak about corporate international tax reform at the National Press Club on Wednesday, Nov. 18.

The livestream begins at 1:00 p.m. ET: The text of the speech will be available here beginning at 12:40 p.m. ET.

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

November 18, 2015 in Tax | Permalink | Comments (3)

Church Of The Flying Spaghetti Monster Treated As 'Religion,' Adherent Issued Driver's License Photo Wearing A Colander

MassBoston Globe, Woman Allowed to Wear Spaghetti Strainer in Mass. License Photo:

A woman who identifies herself as a Pastafarian, a follower of a religion that teaches that an airborne “spaghetti monster” could have created the universe, has succeeded in her bid to wear a colander on her head in her driver’s license photo.

Lindsay Miller claims the spaghetti strainer is a sign of her devotion to the Church of the Flying Spaghetti Monster.

In August, the Lowell resident was denied a renewed license by the Massachusetts Registry of Motor Vehicles, she said, for wearing the metal cookware. ...

According to the RMV’s website, drivers are barred from wearing hats or head covers in their photos, unless the clothing items are “for medical or religious reasons.”

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November 18, 2015 in Tax | Permalink | Comments (9)

University Of New South Wales Issues Call for 2016 Tax Research Fellows

ATax (2015)The School of Taxation and Business Law (TBL) at the University of New South Wales, Australia, will offer three Research Fellowships ($5,000) in taxation, business law and related disciplines in 2015. Research Fellows normally spend four weeks working at TBL on a mutually agreed area of research. The application deadline is February 28, 2016.  See more details here.

Fellowship duties:

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November 18, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 923

IRS Logo 2Politico, Under the Radar:

President Barack Obama's public comments appearing to prejudge the outcome of Justice Department investigations don't affect the decisions in those inquiries, Attorney General Loretta Lynch said Tuesday.

In her first appearance before the House Judiciary Committee since taking office in April, Lynch was questioned by panel chairman Rep. Bob Goodlatte (R-Va.) about remarks Obama made last year declaring there was "not even a smidgen of corruption" in the IRS's handling of applications from nonprofit groups and a statement the president made last month that former Secretary of State Hillary Clinton's private email set-up posed no national security problem.

"With respect to the president's comments, they have no influence or bearing on how the department manages these matters," Lynch said.

Goodlatte tried a couple of times to get Lynch to comment on whether it was unwise for Obama to make such comments while an investigation was pending, but she declined to do so.

"I really don’t have a comment on the president’s expression of his view," Lynch said.

Washington Examiner, Gowdy on IRS Probe: How Much More Evidence Could You Need?:

Rep. Trey Gowdy blasted the Justice Department for stating last month that there was "no evidence" of criminal intent in the Internal Revenue Service's targeting of conservative groups.

"Never do you have direct evidence of intent," Gowdy, a former prosecutor, said during a House Judiciary Committee hearing Tuesday.

The South Carolina Republican cited numerous examples of "circumstantial evidence," all of which resulted in discrimination against Tea Party nonprofits, regardless of the tax agency's intent.

Gowdy noted Lois Lerner, former head of the IRS tax-exempt unit, had sent several emails that indicated she harbored a bias against conservatives.

Washington Examiner, Jordan Blasts Attorney General on IRS Investigation:

Rep. Jim Jordan pressed Attorney General Loretta Lynch Tuesday on why the head of the IRS has not faced consequences for misleading Congress about the status of documents.

"That sure looks like [IRS Commissioner] John Koskinen and the Internal Revenue Service concealed information and destroyed information," Jordan said after outlining a timeline that suggests employees under Koskinen deleted requested emails after he had promised to provide them to lawmakers.

The Ohio Republican noted IRS employees had erased back-up tapes containing the emails of Lois Lerner, former head of the tax agency's nonprofit unit, after receiving three separate preservation orders and two subpoenas for the tapes.

"With respect to the matter that you've raised, we did review the issues surrounding Ms. Lerner's emails and the backup tapes," Lynch told Jordan during a House Judiciary Committee hearing Tuesday. "We are looking for evidence of criminal intent."

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November 18, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, November 17, 2015

Hassett Presents The Response Of Deferred Executive Compensation To Changes In Tax Rates Today At Columbia

HassettKevin A. Hassett (American Enterprise Institute) presents The Response of Deferred Executive Compensation to Changes in Tax Rates (with Aspen Gorry (Utah State), Glenn Hubbard (Dean, Columbia Business School) & Aparna Mathur (American Enterprise Institute)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

Given the increasing use of stock options in executive compensation, we examine how taxes influence the choice of compensation and document that income deferral is an important margin of adjustment in response to tax rate changes. To account for this option in the empirical analysis, we explore deferral by estimating how executives’ choice of compensation between current and deferred income depends on changes in tax policy.

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November 17, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Polsky Comments On The Disguised Payments For Services Proposed Regs

Gregg D. Polsky (North Carolina), Comments on the Proposed Regulations on Disguised Payments for Services:

On July 23, 2015, the Internal Revenue Service (IRS) and Treasury Department (Treasury) issued proposed regulations under section 707(a)(2)(A) of the Internal Revenue Code (the Code) relating to disguised payment-for-services transactions between partnerships and partners. These are my comments on the proposed regulations.

My overall conclusions are as follows. I support the proposed regulations and urge that they be finalized as quickly as possible with some relatively minor clarifications. The proposed regulations are faithful to the statutory text, legislative purpose, and legislative history of section 707(a)(2)(A). Furthermore, the proposed regulations represent a very reasonable approach to the necessary task (given the clear statutory directive in section 707(a)(2)(A)) of distinguishing between disguised payments for services, on the one hand, and bona fide partnership allocations and distributions, on the other hand. I also support the positions explained in the preamble regarding the government’s view of the current scope of Rev. Proc. 93-27 and the stated intention to revise Rev. Proc. 93-27 to carve out profits interests received in lieu of fixed fees.

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November 17, 2015 in Scholarship, Tax | Permalink | Comments (0)

NY Times: After Outcry, Ireland Adjusts Its Corporate Tax Draw

New York Times, After Outcry, Ireland Adjusts Its Corporate Tax Draw:

In recent years, other European countries have accused the country of acting like an unfair low-tax haven. The European Commission, for example, is investigating whether Ireland gave Apple a preferential tax deal that broke the region’s tough state-aid rules. While lawmakers and the company have repeatedly denied wrongdoing, the country is already phasing out the most controversial loopholes.

Ireland has since turned to a new inducement: a low tax rate on revenue generated from patents and other intellectual property held in Ireland. Such an incentive — announced last month to be 6.25 percent, or half of the country’s corporate tax rate — could be most attractive to patent-heavy industries like technology and pharmaceuticals.

But many tax experts say the benefits will be significantly smaller than many had expected, particularly for global tech giants.

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November 17, 2015 in Tax | Permalink | Comments (0)

GAO: IRS Lacks Adequate Internal Controls

GAO LogoGovernment Accountability Office, IRS's Fiscal Years 2015 and 2014 Financial Statements (GAO-16-146):

In GAO’s opinion, the Internal Revenue Service’s (IRS) fiscal years 2015 and 2014 financial statements are fairly presented in all material respects. However, in GAO’s opinion, IRS did not maintain effective internal control over financial reporting as of September 30, 2015, because of a continuing material weakness in internal control over unpaid tax assessments. GAO’s tests of IRS’s compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements detected no reportable instances of noncompliance in fiscal year 2015.

The material weakness in internal control over unpaid tax assessments was primarily caused by financial system limitations and errors in taxpayer accounts that rendered IRS’s systems unable to readily distinguish between taxes receivable, compliance assessments, and write-offs in order to properly classify these components for financial reporting purposes. These deficiencies necessitated the use of a compensating estimation process to determine the amount of taxes receivable, the most material asset on IRS’s balance sheet. Through this compensating process, IRS made over $9 billion in adjustments to the 2015 fiscal year-end gross taxes receivable balance produced by its financial systems. To address this material weakness, in fiscal year 2015, IRS took a significant step in developing a long-term corrective action plan. However, the plan does not include milestones or related dates for most of the actions, so it is unclear when IRS will fully address the issues that cause significant inaccuracies in the unpaid tax assessments information maintained in its accounting systems.

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November 17, 2015 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 922

IRS Logo 2The Hill, Republicans to Grill Lynch on Paris, IRS:

Attorney General Loretta Lynch is set to face tough questions from lawmakers Tuesday about the Justice Department’s role on issues ranging from the IRS to the response to the terrorist attacks in Paris.

Republicans will put Lynch on the hot seat during her first appearance before the House Judiciary Committee since replacing Eric Holder as head of the Justice Department. Her scheduled appearance last month was canceled because she was sick. ...

The GOP’s often tumultuous relationship with Holder could extend to Lynch after the DOJ elected last month not to prosecute Lois Lerner, the former Internal Revenue Service official accused of targeting the Tea Party. 

"She has a lot to answer for,” Oversight Committee Chairman Jason Chaffetz (R-Utah) told The Hill. 

"Everything from Lois Lerner and the IRS, to what’s happening with emails, to how they’re operating at the Department of Justice,” he said in an interview before her first scheduled hearing. "There’s such a wide swath of issues they’re involved with."

The DOJ’s abrupt end to its two-year probe of the IRS angered many Republicans, including previous Oversight Chairman Darrell Issa (R-Calif.) who accused Lynch of “white washing” the investigation.

“There are some obvious [questions],” Issa told The Hill last month. “Why they saw no violation at the IRS? Why they could close it out completely without any support for the [inspector general’s] recommendations?"

Issa said he has no intention of taking it easy on Lynch: “After she dismissed and white washed the investigation? Why?” he asked. “I think she made a grievous error.”

“She has to own that,” he added.

Goodlatte also (R-Va.) criticized the DOJ for dropping the investigation: “At every turn President Obama and administration officials have repeatedly and publicly undermined the investigation into the IRS’s targetting of conservative groups,” he said in a statement.

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November 17, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, November 16, 2015

Faulhaber Presents Designing R&D Credits And Patent Boxes In The Age Of BEPS Today At Loyola-L.A

FaulhaberLily Faulhaber (Georgetown) presents Tax Incentives for Innovation: Designing R&D Credits and Patent Boxes in the Age of BEPS at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

For decades, governments have turned to their tax codes to support research and development and innovation. In recent years, countries have added yet another tool to their repertoire of tax incentives for R&D: innovation boxes, sometimes referred to as patent boxes or IP boxes, which provide benefits to income from intellectual property. In response to the increasing number of innovation boxes, the forty-four OECD and G-20 member countries involved in the recent BEPS Project developed a requirement known as the nexus approach that places limits on the design of these tax incentives.

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November 16, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

NY Times: Blame Congress, Not Pfizer, For Tax Inversion

APFollowing up on my previous posts (links below):  New York Times, A Tax-Cutting Move That Pfizer Can Hardly Resist:

Give Pfizer, the giant drug maker, points for boldness and persistence: The company has bravely put “tax inversions” back in the headlines.

Pfizer, which already holds roughly $140 billion overseas and is quite skillful at minimizing its taxes, is considering a deal that could move its legal tax headquarters from New York to Dublin, where it could save bundles more.

This has drawn plenty of criticism, naturally. ...

The core problem is that, from a purely financial viewpoint, tax inversions make sense for companies like Pfizer. While rarely, if ever, paid in full, the 35 percent statutory corporate tax rate in the United States is higher than in other countries. Most important, the United States taxes the worldwide income of its domestic companies, while many major countries do not. Even though there are ways around that requirement, it is tempting for American companies to move their tax homes elsewhere.

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November 16, 2015 in Tax | Permalink | Comments (1)

G-20 To Adopt Corporate Tax Overhaul

WSJ 2Wall Street Journal, G-20 Leaders Set to Approve Overhaul of Corporate-Tax Rules:

A push to close international corporate-tax loopholes is expected to spur competition for lower rates overseas and increase pressure in Washington for a bipartisan deal to revamp the corporate-tax code.

Leaders from the Group of 20 largest economies, meeting in Turkey on Sunday and Monday, are set to give their final stamp of approval to a major overhaul of the international rules governing corporate taxes.

The change is aimed at preventing companies from using myriad tactics to shift profits among different jurisdictions to avoid taxation. Such practices cost governments between $100 billion to $240 billion in lost revenue each year, according to the Organization for Economic Cooperation and Development. ...

Stricter tax collection would mean governments could vie for investment and jobs mainly by lowering corporate tax rates—potentially shining a spotlight on the U.S. rate, which at 39% is much higher than that of other developed countries. ...

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November 16, 2015 in Tax | Permalink | Comments (0)

NY Times: The Tax Code Can Be Simpler, But Not Three Pages

CarlyNew York Times:  The Tax Code Can Be Simpler. But Not Three Pages, by Josh Barro:

All the Republican presidential candidates say they want to make the tax code simpler. But no candidate has been more aggressive about simplicity than Carly Fiorina, who says “our tax code needs to go from 73,000 pages down to about three pages.”

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November 16, 2015 in Political News, Tax | Permalink | Comments (1)

Iowa Tax Prof Andy Grewal's Role In The Pivotal Moment Of Saturday's Democratic Presidential Debate

Hillary 2016Washington Post, A Defensive Hillary Clinton Lost Last Night’s Debate:

The Des Moines debate will ultimately be remembered for just one moment: Clinton playing both the gender card and invoking the Sept. 11 attacks to defend her coziness with and campaign cash from Wall Street. 

Here is the exchange that everyone is talking about:

  • Sanders attacks: “Let’s not be naive about it. Why, over her political career, has Wall Street been a major, THE major, campaign contributor to Hillary Clinton? You know, maybe they’re dumb and they don’t know what they’re going to get, but I don’t think so. … Why do they make millions of dollars of campaign contributions? They expect to get something! Everybody knows that!”
  • Clinton pulls out a rhetorical bazooka: “Wait a minute, he has basically used his answer to impugn my integrity. Let’s be frank here: … Not only do I have hundreds of thousands of donors, most of them small. And I’m very proud that for the first time a majority of my donors are women, 60 percent. So, I represented New York, and I represented New York on 9/11 when we were attacked. Where were we attacked? We were attacked in downtown Manhattan, where Wall Street is. I did spend a whole lot of time and effort helping them rebuild. That was good for New York. It was good for the economy and it was a way to rebuke the terrorists who had attacked our country.” ...

Clinton tried to walk it back: Later in the debate, as Twitter exploded, CBS presented her with an emblematic viewer tweet. University of Iowa law professor Andy Grewal wrote:


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November 16, 2015 in Political News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 921

IRS Logo 2The Press Enterprise editorial, IRS Scandal Does No Harm to Ruling Party, So No Foul:

Self-government can collapse when government doesn’t police itself — when abuses of power fester too long. That has happened with the investigation into the Internal Revenue Service’s unjustified 2010 audits of numerous nonprofit conservative groups, which sidelined many of them during President Obama’s 2011-12 re-election campaign.

In a letter to Congress, the Justice Deparment said it will file no criminal charges in the case, not even against Lois Lerner, the former director of the IRS’s Exempt Organizations Office. Yet in 2013, Ms. Lerner herself sparked the uproar, telling an American Bar Association meeting that IRS auditors “actually used case names on this list. They used names like Tea Party or Patriots, and they selected cases simply because the applications had those names in the title.”

Before a congressional investigation, Ms. Lerner invoked her Fifth Amendment right against self-incrimination.

Former House Oversight Committee Chairman Darrell Issa, R-Vista, conducted one of the investigations. He said in a statement, “The Justice Department's decision to close the IRS targeting investigation without a single charge or prosecution is a low point of accountability in an administration that is better known for punishing whistleblowers than the abuse and misconduct they expose.” He charged, “Giving Lois Lerner a free pass only reinforces the idea that government officials are above the law and that there is no consequence for wrongdoing.”

With the 2016 elections approaching, restoring clean, honest government should be voters’ top priority.

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November 16, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, November 15, 2015

The Top 5 Tax Paper Downloads

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

  1.  [384 Downloads]  Income Tax Deductions for Charitable Bequests of IRD, by Christopher R. Hoyt (UMKC)
  2.  [336 Downloads]  Big Data and Tax Haven Secrecy, by Arthur J. Cockfield (Queen's University)
  3.  [306 Downloads]  2014 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  4.  [204 Downloads]  Too Big to Tax? Vanguard and the Arm’s Length Standard, by Reuven Avi-Yonah (Michigan)
  5.  [173 Downloads]  2015 Trying Times: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin (Utah) & Steven J. Small (Law Office of Stephen J. Small, Newton, MA)

November 15, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 920

IRS Logo 2Harrison Daily editorial, Why Is No One Held Accountable?:

Never ever does anything serious seem to happen to government officials who fail to do their jobs properly, waste massive amounts of taxpayers' money, harm the innocent unfairly or even engage in criminal activities. It is happening again in the Internal Revenue Service scandal.

IRS officials in the section headed by Lois Lerner singled out conservative groups seeking tax-exempt status for special treatment. It included lengthy delays and sometimes, outright harassment.

Lerner herself was allowed to retire from the IRS — after refusing to testify at two congressional hearings. Then, investigators were told some of her official emails pertinent to the probe had been lost when her computer crashed, ever so conveniently.

Recently, the Justice Department announced it had concluded an investigation of the matter — and would be filing criminal charges against no one.

DOJ officials admitted they found "mismanagement, poor judgment and institutional inertia" that contributed to the IRS problem.

No one has received any substantial punishment for what happened. Lerner will enjoy her full pension. Those she left behind will continue to cruise through the IRS bureaucracy until they, too, retire.

Nowhere in the government — not at the IRS, the Department of Veterans Affairs, the Environmental Protection Agency or any of the other places where actions demand accountability has it occurred.

Why? More important, why does no one in Congress do anything about it?

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November 15, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, November 14, 2015

This Week's Ten Most Popular TaxProf Blog Posts

WSJ: Value-Added Tax Catches On In Republican Presidential Race

VATWall Street Journal, Value-Added Tax Catches On in Republican Presidential Race:

This year’s crop of Republican presidential candidates has pitched many ways to bust up the tax code, but one idea—converting to a value-added tax—has been anathema to both parties for decades despite being a staple worldwide.

Sens. Rand Paul of Kentucky and Ted Cruz of Texas want to replace the 78-year-old payroll tax, which is now dedicated to Social Security and Medicare, and the 106-year-old corporate income tax with a single levy. That new tax would be so big and broad-based that Mr. Cruz’s version would raise $25.4 trillion over the next decade and would become the federal government’s primary funding source, raising more than a reduced individual income tax.

Their proposals have drawn scant attention on the campaign trail, and are hardly revolutionary globally, as the U.S. is the only developed country without a value-added tax.

But some conservative critics are beginning to raise alarms. Adopting a broad tax on goods and services, they say, would make the sting of taxation less palpable and—eventually—let the U.S. adopt the revenue system that fuels the European social-welfare states.

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November 14, 2015 in Political News, Tax | Permalink | Comments (2)

NY Times: The Four Secrets To Sustaining High Job Performance

TonyNew York Times, The Secret to Sustaining High Job Performance, by Tony Schwartz (Author, The Way We're Working Isn't Working: The Four Forgotten Needs That Energize Great Performance):

How do you drive sustainably high performance in an era of relentlessly rising demand? ...

The typical solution – put in more hours – won’t work anymore. The vast majority of salaried employees are already doing that, and many of them are paying a price that they are finding less and less acceptable. They are exhausted and often overwhelmed, and they deeply want to invest time in their families and the rest of their lives.

But what if people could simply be more efficient and productive during the time they are at work? What if there’s a win-win solution for employers and employees? ...

We feel better and perform better when four core energy needs are met: sufficient rest, including the opportunity for intermittent renewal during the work day; feeling valued and appreciated; having the freedom to focus in an absorbed way on the highest priorities; and feeling connected to a mission or a cause greater than ourselves.

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November 14, 2015 in Book Club, Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 919

IRS Logo 2The Hill:  IRS Problems Extend Far Beyond its Commissioner, by Brandon Arnold (National Taxpayers Union):

Frustrations with the IRS have reached a boiling point, with a group of House Republicans now calling for the impeachment of IRS Commissioner John Koskinen. His ouster is probably well-deserved -- there is evidence to suggest that he misled Congress while under oath and may have broken other laws along the way.  While firing him might be prudent, the real problems with the IRS can’t be fixed by changing personnel. Congress can oust as many commissioners as it wants, but until the fundamental flaws at the increasingly roguish agency are fixed, individuals, families, businesses and non-profit groups will continue to be mistreated.

Consider for instance, the political targeting of groups categorized as non-profits under the Internal Revenue Code. It’s now clear that the IRS selectively harassed organizations for their ideological orientations, which were overwhelmingly conservative. This inconvenient fact effectively (and rightly) forced out Lois Lerner, the IRS honcho who presided over the mess. Lerner is gone, but has anything fundamentally changed at the agency that would prevent such actions in the future?

Sadly, no. After Lerner refused to testify before Congress on the matter, the Department of Justice opted to not pursue any charges against her. Now, it’s time for Congress to step in on behalf of all taxpayers – and there are plenty of things it can do.

One relatively low-hanging piece of legislative fruit would be passing H.R. 1104 -- a bill that would prevent the IRS from imposing gift taxes on contributions made to nonprofit groups. This has been a “sword of Damocles” that the IRS has been swinging over certain groups for years. Were the sword to fall, affected charitable groups would in essence be shuttered as few donors would be willing to pay taxes on contributions. Though much attention has been paid to the treatment of conservative groups under the current Obama administration, this threat imperils groups of all ideological viewpoints, which is why the bill easily passed the House with bipartisan support earlier this year. The Senate should act on it immediately. ...

All of this is not to say Congress shouldn’t necessarily impeach IRS Commissioner Koskinen. If he, in fact, broke the law he should be held accountable before the law. But the primary focus ought to be on fixing the numerous underlying problems at the IRS. The recent scandals present an opportunity to address some of these in a bipartisan fashion. It would be a shame if Congress was so distracted by Koskinen that it failed to do so.

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November 14, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, November 13, 2015

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

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November 13, 2015 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Fordham Hosts Symposium Today On We Are What We Tax

Fordham Law ReviewFordham hosts a two-day symposium on We Are What We Tax.  Here are today's speakers:

  • John Dzienkowski (Texas) & Robert Peroni (Texas), The Decline in Tax Adviser Professionalism in American Society
  • Ajay Mehrotra (Northwestern) & Julia Ott (The New School), A Brief History of the Capital Gains Tax Preference
  • Lisa Philipps (Osgoode Hall), Tax Policy as Performance: Personal Savings and the Constitution of Middle Class Identity
  • Martha McCluskey (SUNY-Buffalo), Framing Middle Class Insecurity: Tax and the Ideology of Unequal Economic Growth

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November 13, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Infanti: The Tax Perils Of Obergefell And Windsor

Anthony C. Infanti (Pittsburgh), Victims of Our Own Success: The Perils of Obergefell and Windsor, 76 Ohio St. L.J. Furthermore 79 (2015):

This short essay was spurred by the numerous celebrations of the Supreme Court’s recent decision in Obergefell v. Hodges legalizing same-sex marriage in all fifty states. Though the essay acknowledges the importance of both Obergefell and the Supreme Court’s earlier decision in United States v. Windsor, it highlights the significant perils that these decisions entail for the LGBT community. In the essay, I use tax as a lens for describing some of the lesser-known perils associated with these decisions in the hopes of making those perils more concrete and easily understood by a wide audience of (tax and nontax) readers.

November 13, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 918

IRS Logo 2Washington Post op-ed:  Skip the Investigations, Just Work to Win the White House, by Charles Krauthammer:

At a certain point you have to realize you can’t hit a fastball. House Republicans don’t quite get that they are hopeless at oversight hearings. They keep losing — and now the chairman of the House Oversight Committee has just introduced articles of impeachment against John Koskinen, the commissioner of the Internal Revenue Service.

I’m sympathetic to the GOP motive, given how the Obama IRS has consistently obstructed and misled Congress in the tax-exemption scandal. But impeachment is no ordinary move. No agency chief or Cabinet officer has been impeached since 1876. And even proponents admit there is no chance of Koskinen being removed from office, because the Senate will never convict.

Instead, says Committee Chairman Jason Chaffetz, the purpose is public education, “to demonstrate to the American people” that the IRS “will be held accountable” for violating the public trust.

I’m all for demonstrating malfeasance. But the GOP House has given a five-year display of its inability to successfully demonstrate anything. From Benghazi all the way back to Operation Fast and Furious, the impact of its hearings on public perception has been either zero or negative.

Take the IRS case. The Oversight Committee, led at the time by Darrell Issa, blew it, allowing the IRS’ Lois Lerner to deliver a statement proclaiming innocence and then claiming Fifth Amendment protection from having to answer any questions. Committee member Trey Gowdy nearly flew out of his seat to point out that she had just forfeited her immunity.

Too late. She got away with it. That failure is what brings us to impeachment today. But impeachment was never intended to be a mulligan. ...

In each of these cases [Benghazi, Planned Parenthood, Republicans had the facts and the argument. And yet in every one they failed. What makes them think that they will fare any better in the next iteration, the impeachment of a minor official in an expiring administration?

Chaffetz says that the purpose is to rein in the IRS. I’m all for that. You know how you do it? Win the presidency, appoint honest new IRS leadership and get your own Justice Department to do a real investigation.

It’s a harder road to accountability. But it gets you to where you want to go.

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November 13, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Thursday, November 12, 2015

NY Times: Why Do The Female Halves Of Academic Power Couples Get No Respect?

House of CardsNew York Times:  Even Famous Female Economists Get No Respect, by Justin Wolfers (Michigan):

Men’s voices tend to dominate economic debate, although perhaps this is shaped by how we talk about the contributions of female economists. This is easiest to see in how we discuss the work of economist power couples.

Remembering the journalistic cliché that one is an example, two is a coincidence and three is a trend, I figured it worth exploring how female economists are treated.

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November 12, 2015 in Legal Education, Tax | Permalink | Comments (0)

A Last Hurrah For Republican Tax Slashers

Financial Times op-ed:  A Last Hurrah for Republican Tax Slashers, by James Pethokoukis:

The Republican party’s raison d’être is cutting taxes. It may even be its divine commission. God put Republicans on earth to cut taxes, the conservative columnist, Robert Novak, once said, and failure to do that means “they have no useful function”.

Republicans should pray for a new purpose. Their standing with middle-class voters is little improved from 2012. If Hillary Clinton becomes the 45th US president, it would be the first time since 1948 that the Republicans have lost three consecutive elections. Their “supply-side” orthodoxy would merit much of the blame. Big tax cuts, particularly for the wealthiest, do not work in an age of high inequality and heavy debt. Republicans need an economic agenda that respects markets while also recognising the challenges facing America and its anxious middle class. ...

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November 12, 2015 in Political News, Tax | Permalink | Comments (1)

Soled & Thomas: Revisiting The Taxation Of Fringe Benefits

Jay A. Soled (Rutgers) & Kathleen DeLaney Thomas (North Carolina), Revisiting the Taxation of Fringe Benefits, 91 Wash. L. Rev. ___ (2015):

The receipt of workplace fringe benefits has become increasingly ubiquitous. As a result of their employment, employees often receive a cornucopia of fringe benefits, including frequent-flier miles, hotel reward points, rental car preferred status, office supply dollar coupons, cellular telephone use, home Internet service, and, in some instances, even free lunches, massages, and dance lessons. Technological advances and workforce globalization are important contributory factors to the popularity of what were, until the turn of this century, previously unknown fringe benefits.

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November 12, 2015 in Scholarship, Tax | Permalink | Comments (1)

Fordham Hosts Symposium Today On We Are What We Tax

Fordham Law ReviewFordham hosts a two-day symposium on We Are What We Tax.  Here are today's speakers:

  • Victor Fleischer (San Diego), Job Creationism: Entrepreneurship and Tax Policy
  • David Clingingsmith (Case Western) & Scott Shane (Case Western), How Individual Income Tax Policy Affects Entrepreneurship
  • Sloan Speck (Colorado), The Social Boundaries of Corporate Taxation

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November 12, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

IRS May Challenge Dell's Use Of Tracking Stock In Acquisition Of EMC To Avoid $9 Billion Tax Bill

Dell EMCFollowing up on my previous post, Dell's Use Of Tracking Stock In Acquisition Of EMC Will Save $10 Billion In Taxes:  Re/code, Dell’s EMC Deal Could Fall Apart on Tax Rule:

Michael Dell’s ambitious $67 billion plan to take over storage giant EMC may face a big tax burden that could complicate or derail the deal entirely.

Dell insiders are worried the company could end up being on the hook for a tax bill of up to $9 billion following a regulatory review, sources familiar with the matter told Re/code. The worries stem from Dell’s unusual proposal to use a new type of stock share to help pay for the acquisition. Their concerns are also rooted in EMC’s wildly successful investment in the software company VMware, the value of which has risen by tens of billions of dollars since EMC acquired it in 2003.

The combination of factors has some Dell execs concerned, sources said, that certain key aspects of the deal may not qualify for the sort of tax treatment they consider essential for the transaction — the biggest tech acquisition ever proposed — to succeed.

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November 12, 2015 in IRS News, News, Tax | Permalink | Comments (0)

'Marty Was Always My Best Friend': Ruth Bader Ginsburg's Love Story

RBGJezebel, 'Marty Was Always My Best Friend': Ruth Bader Ginsburg's Love Story:

RBG told me, “Marty was always my best friend.”

That remarkable intimacy had survived Marty’s bout with cancer in law school, and RBG’s two diagnoses, a decade apart. Cancer had left them alone long enough to be together for the nearly sixty years they had been best friends. But it came back. In 2010, doctors said Marty had metastatic cancer.

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November 12, 2015 in Obituaries, Tax | Permalink | Comments (1)

The Latest Tax Lure From Abroad for U.S. Firms: Innovation Boxes

Wall Street Journal op-ed:  The Latest Lure From Abroad for U.S. Firms—Innovation Boxes, by Denis Hughes (Stonepeak Infrastructure Partners):

The recent merger talks between New York-based Pfizer and Dublin-based Allergan are the latest signal that America’s approach to taxing international profits is luring U.S. companies to relocate abroad, or merge with foreign companies. Unfortunately, the situation is about to get significantly worse.

The U.S. corporate tax rate, 35%, is the highest in the industrialized world. That’s a significant blow to America’s competitiveness. And many countries combine lower corporate rates with other incentives to lure companies to their shores.

One such incentive is known as the “innovation box,” under which income earned from a company’s intellectual property (such as patents) is taxed at a lower rate—typically between 5% and 15%. Several countries have enacted innovation boxes (aka patent boxes), including the United Kingdom, France, China, Spain, the Netherlands, Italy and Belgium. ...

[T]he U.S. Congress needs to create an innovation box in this country.

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November 12, 2015 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 917

IRS Logo 2Albany Times Union editorial, The IRS Scandal Lives On:

It’s been more than two years since allegations surfaced that the Internal Revenue Service targeted tea party groups seeking tax-exempt status with extra scrutiny. Now the Justice Department has closed the case without any criminal charges. But the controversy seems unlikely to end anytime soon.

And that’s too bad, because the problem at the heart of the IRS’ effort – the widespread abuse of tax-exempt status – hasn’t gone away. 

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November 12, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, November 11, 2015

Marian: The State Administration Of International Tax Avoidance

Omri Y. Marian (UC-Irvine), The State Administration of International Tax Avoidance:

In November of 2014, hundreds of advanced tax agreement (ATAs) issued by Luxembourg’s Administration des Contributions Directes (Luxembourg’s Inland Revenue, or LACD) to multinational corporate taxpayers (MNCs) were made public. Using an original dataset generated from a hand-coded sample of 172 leaked documents, the Article explores LACD administrative practices in issuing ATAs. The analysis demonstrates how a jurisdiction can be made a tax-haven by administrative practices, rather than by state law. LACD cannot be reasonably viewed – as some have suggested in LACD’s defense – a passive player in MNCs’ tax avoidance schemes. Rather, LACD is best described as a manufacturer of tax arbitrage opportunities. Specifically, even when the tax laws of the jurisdictions of residence (i.e., investors) and source (i.e., investment) are harmonized, LACD produced regulatory instruments that were intended to artificially create legal differences between the tax laws of the source and residence jurisdictions. MNCs could then exploit the manufactured tax differences to their advantage. LACD collected a fee that was functionally linked to the amount of taxes avoided by MNCs in the other jurisdictions.

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November 11, 2015 in Scholarship, Tax | Permalink | Comments (0)

Seven Former IRS Commissioners Call For Restoring IRS Budget Cuts

IRS Logo 2Seven former IRS Commissioners  have written this joint letter to the leaders of Congress’s appropriations committees urging them to reconsider proposed cuts in the IRS's budget:

The appropriations reductions for the IRS over the last five years total $1.2 billion, more than a 17% cut from the IRS appropriation for 2010.  None of us ever experienced, nor are we aware of, any IRS appropriations reductions of this magnitude over such a prolonged period of time.

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November 11, 2015 in IRS News, Tax | Permalink | Comments (0)

Legal Enforcement and Corporate Behavior: An Analysis Of Tax Aggressiveness After An Audit

Jason DeBacker (Middle Tennessee), Bradley Heim (Indiana) & Anh Tran (Indiana) & Alexander Yuskavage (U.S. Treasury Department), Legal Enforcement and Corporate Behavior: An Analysis of Tax Aggressiveness After an Audit, 58 J.L. & Econ. 291 (2015):

Contrary to common expectations, legal enforcement may increase subsequent corporate misbehavior. Using Internal Revenue Service and financial statement data, we find that corporations gradually increase their tax aggressiveness for a few years following an audit and then reduce it sharply. We show that this U-shaped impact is consistent with strategic responses on the part of firms and with Bayesian updating of audit risk. This adverse effect on corporate behavior calls for a reexamination of both the theory and policy of legal enforcement.

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November 11, 2015 in Scholarship, Tax | Permalink | Comments (0)

Taxes, Lawyers, And The Decline Of Witch Trials

Noel D. Johnson & Mark Koyama (both of George Mason University, Department of Economics), Taxes, Lawyers, and the Decline of Witch Trials in France, 57 J.L. & Econ. 77 (2014):

This paper explores the rise of the fiscal state in the early modern period and its impact on legal capacity. To measure legal capacity, we establish that witchcraft trials were more likely to take place where the central state had weak legal institutions. Combining data on the geographic distribution of witchcraft trials with unique panel data on tax receipts across 21 French regions, we nd that the rise of the tax state can account for much of the decline in witch trials during this period. Further historical evidence supports our hypothesis that higher taxes led to better legal institutions.

November 11, 2015 in Scholarship, Tax | Permalink | Comments (1)