TaxProf Blog

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

Saturday, March 31, 2018

The 'Official' IRS Audit Rate Is 0.7%, But The 'Real' Audit Rate Is 6.2%

IRS Logo 2Forbes:  IRS Official Audit Rate Down But The "Real" Audit Rate Is The Problem, by Ashlea Ebeling:

The Internal Revenue Service audited only 0.6% of 2016 individual income tax returns, according to its 2017 Data Book released today. That means your chance of an official audit was about 1 in 160.

The National Taxpayer Advocate, an IRS watchdog, begs to differ. The way it defines “audit,” your chance of hearing from the IRS is more like 1 out of 16.

For fiscal year 2016, when the official IRS audit rate for individual income tax returns was 0.7%, the Advocate’s office found that the “unreal” audit rate was 6.2%.

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March 31, 2018 in IRS News, Tax | Permalink | Comments (3)

Friday, March 30, 2018

Lederman Presents Information Matters In Tax Enforcement At Duke

Lederman (2018)Leandra Lederman (Indiana) presented Information Matters in Tax Enforcement at Duke yesterday as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

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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March 30, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Marian's Is Corporate Tax Planning Good For Shareholders?

This week, Ari Glogower (Ohio State) reviews a new work by Omri Marian (UC-Irvine), Is All Corporate Tax Planning Good for Shareholders?, 52 U.C. Davis L. Rev. __ (2018). 

Glogower (2016)A common assumption is that tax planning by corporate managers benefits shareholders. Since corporate income is subject to “double taxation” at both the corporate and shareholder levels, tax-reduction strategies by corporate managers can reduce the entity-level tax, thereby increasing the after-tax corporate earnings available to the shareholders. 

Omri Marian’s new article challenges this conventional assumption by presenting a more nuanced understanding of the dynamic between corporate and shareholder-level tax effects. The work demonstrates how corporate tax planning may in fact disadvantage shareholders in many cases, and why certain shareholders may be unable to prevent it. 

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March 30, 2018 in Ari Glogower, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (2)

Tax Policy In The Trump Administration

Chris Pietruszkiewicz Named President Of University Of Evansville

Stetson Law School Dean (and Tax Prof) Chris Pietruszkiewicz has been named President of Evansville University:

The University of Evansville has appointed Christopher M. Pietruszkiewicz (petra-skev-ich) as the 24th president of the institution.

Pietruszkiewicz, who currently serves as dean and professor of law at Stetson University’s College of Law, was chosen for the position after an exhaustive nationwide search. The presidential search committee was led by UE trustee Sally Rideout, and the Board of Trustees elected Pietruszkiewicz in a formal vote on March 28.

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March 30, 2018 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

McCormack: America's (D)evolving Childcare Tax Laws

Shannon Weeks McCormack (University of Washington), America's (D)evolving Childcare Tax Laws, 53 Ga. L. Rev. ___ (2018):

Proponents have touted the ability of the Tax Cuts and Jobs Act (the TCJA) — enacted in the twilight of 2017 — to help American working families. But while the TCJA expanded some benefits available to parents with dependent children, these parental tax benefits may be claimed regardless of whether or to what extent childcare costs are incurred to work outside the home. To help working parents with these costs (which are often their largest expense), Congress might have turned to two other mechanisms in the tax law — the “child and dependent care credit” and the “dependent care exclusion.” While these childcare tax benefits are only available to working parents that pay for childcare, stringent limitations have kept many from recovering anything near their actual costs, particularly in the critical years before children reach school-age. As a result, the Code has been taxing families with different childcare needs inequitably. But the TCJA left these childcare tax laws untouched and thus did nothing to address this problem. By exploring critical junctures in their development, this Article seeks to understand how America’s tax laws have (d)evolved in this manner and, in doing so, situates some of TCJA’s alleged reforms into their historical context.

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March 30, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, March 29, 2018

Hemel Presents Sexual Harassment And Corporate Law Today At Brooklyn

HemelDaniel Hemel (Chicago) presents Sexual Harassment and Corporate Law, 118 Colum. L. Rev. ___ (2018) (with Dorothy Lund (Chicago)) at Brooklyn today as part of its Faculty Workshop Series:

The year 2017 marked an inflection point in the evolution of social norms regarding sexual harassment. While victims of workplace harassment had long suffered in silence, the surfacing of serious sexual misconduct allegations against Hollywood producer Harvey Weinstein encouraged many more victims to tell their personal stories of abuse. These scandals have spread beyond Hollywood to the rest of corporate America, leading to the departures of several high-profile executives as well as sharp stock price declines at a number of firms. In the past year, shareholders at four publicly traded companies have filed lawsuits alleging that corporate directors and officers breached their fiduciary duties and/or violated federal securities laws in connection with sexual harassment scandals at those firms. More such suits are likely to follow in the months ahead.

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March 29, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Herzig: Passover, Chametz, And Tax

David Herzig (Valparaiso), Does The Passover Tradition Of Selling Chametz Trigger Tax?:

Passover starts at sun-down Friday this year. As many of you already know, Passover is one of the most important Jewish festivals.

During Passover, the Jewish people remember how Moses led the people of Israel out of slavery by Egypt over 3000 years ago. Moses promised that God would send ten plagues on Egypt if the Pharaoh did not let the Israelites go free. The Pharaoh did not comply and the plagues were sent upon Egypt. After the last plague, the killing of the first born, the Pharaoh freed the people of Israel. (The holiday is known as Passover because God passed over the Israelite houses marked with lamb’s blood).

Fearing the Pharaoh might change his mind, the Israelites rushed out of the country without having time for their bread to rise. In the Exodus, the Jewish people had no leaven bread. So, during the remembrance of Passover, Jews eat unleavened bread, called Matzah, to honor the plight of their ancestors.

At this point, you may be asking yourself what does Passover have to do with tax?

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March 29, 2018 in Tax | Permalink | Comments (1)

Infanti Named Walthour Endowed Professor Of Law At Pittsburgh

Infanti (2016)Press Release:

The University of Pittsburgh School of Law has appointed ... Anthony C. Infanti as the Christopher C. Walthour, Sr. Endowed Professor of Law. ...

Anthony C. Infanti’s appointment as the Christopher C. Walthour, Sr. Professor of Law recognizes his eminence in the field of tax law and critical legal theory. Infanti’s influential scholarship has spanned the fields of federal income tax, corporate and international tax, and critical legal studies, with an emphasis on the intersection of tax law with sexual orientation, gender, and gender identity.

Infanti is also a consummate leader in many roles in legal education, serving as a member of and in multiple leadership roles with the American Bar Association’s Section on Taxation and the American Civil Liberties Union. His use of innovative and effective pedagogical methods has been recognized by the Law School’s Excellence in Teaching Award, the Chancellor’s Distinguished Teaching Award, and his appointment as a Fellow of the national Educating Tomorrow’s Lawyers Consortium.

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March 29, 2018 in Legal Education, Tax | Permalink | Comments (0)

Concordia Seeks To Hire A Tax VAP

Concordia Logo (2018)Concordia University School of Law is seeking candidates for full-time Visiting Assistant Professor positions either for the Fall 2018 semester or the 2018-2019 academic year.

The School of Law anticipates that the visitor(s) will teach up to two courses each semester and may teach in one or more of the following areas: taxation, wills, trusts and estates, criminal law, criminal procedure, evidence or in the clinical programs.  Visiting faculty provide instruction to law students, and may, based upon their interests and experience, provide service to the law school and University and engage with other professionals and the public to contribute to the intellectual exchange of ideas, to improve the law, and to educate the profession about the law.

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March 29, 2018 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

The IRS Scandal, Day 1788: Lois Lerner’s Last Laugh

Wall Street Journal:  Lois Lerner’s Last Laugh, by William McGurn:

Just after Labor Day 2016, when the U.S. presidential race was entering full swing, columnist George F. Will urged Congress to undertake a seemingly futile gesture: He wanted the House to impeach John Koskinen, commissioner of the Internal Revenue Service.

Mr. Koskinen had taken over as head of the IRS after it had been exposed for singling out for mistreatment conservative groups applying for tax-exempt status. He lied to Congress when he said he had produced all of Lois Lerner’s emails, allowed documents under subpoena to be destroyed, and generally behaved in a way that helped ensure there would be no hard consequences for the abuses. Though Mr. Koskinen had only a few months left on the job, Mr. Will argued that impeaching him might help Congress restore its much diminished standing as a coequal branch of government.

Not quite two years later, Congress continues to pay the price for letting Ms. Lerner and Mr. Koskinen ride freely into the sunset. Though the IRS and other federal agencies—including the State and Justice Departments, as well as the Federal Bureau of Investigation—are now headed by Trump rather than Obama appointees, they continue to spurn congressional oversight demands with near impunity. ...

Congress has its own ways of showing its displeasure, including cutting the budgets of recalcitrant agencies. Given budget rules, this would require the cooperation of some Democrats, who are unlikely to go along. Nevertheless, the power of the purse remains a tool Congress can use to make the executive branch pay a price for its actions.

Above all, there is impeachment. The constitutional power to remove officials from office for “treason, bribery or other high crimes and misdemeanors” is a writ far broader than anything a special counsel enjoys.

Then again, it’s not easy to impeach a federal official, and it shouldn’t be. As Mr. Will pointed out in his column calling for Mr. Koskinen’s impeachment, “no appointed official of the executive branch has been impeached in 140 years.” Mr. Koskinen was not impeached, and he and Ms. Lerner rode off into the sunset without having to answer for their actions and deceits.

Ask yourself this: Is it likely our federal agencies would be so haughty about Congress and its subpoenas if Mr. Koskinen had been impeached?

So instead of whingy calls for another special counsel, a Congress that behaved as a branch of government coequal to the presidency would use its own powers to force oversight on resisting federal officials. Even if this might ultimately include impeaching FBI Director Christopher Wray.

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March 29, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, March 28, 2018

Oei Presents Whose Tax Law Is It? Constituencies And Control In Statutory Drafting Today At Toronto

Oei (2018)Shu-Yi Oei (Boston College) presents Whose Tax Law Is It? Constituencies and Control in Statutory Drafting (with Leigh Osofsky (Miami)), 104 Iowa L. Rev. ___ (2018)), at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The 2017 tax reform produced legislation that many have derided as convoluted and unreadable, leading commentators to ask how such legislation came to pass. But there is little existing research about drafting practices that helps us contextualize such critiques.

In this Article, we conduct the first in-depth empirical examination of how drafters make tax law drafting decisions. We report findings from interviews with government counsels who participated in the tax legislative process over the past four decades. Our key finding was that the tax law is written for a small group of experts by a small group of experts: Most counsels did not consider statutory formulation or readability important, as long as substantive meaning was accurate. Many held this view because their intended audience was experts and software companies, not ordinary taxpayers or even Congress Members. When revising law, drafters preserve existing formulations so as to not upset settled expectations, even at the cost of increasing convolution. And the entire drafting process is controlled by a few tax law specialists, with little input on formulation decisions from Congress Members or other counsels.

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March 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mann Presents How Do Corporate Tax Rates Affect Corporate Social Responsibility? Today In Australia

Mann (2018)Roberta Mann (Oregon) presents How Do Corporate Tax Rates Affect Corporate Social Responsibility?today at University of New South Wales:

A growing literature has developed on the topic of enforcement crowding out altruism. This literature may apply to the idea of corporate social responsibility. If the government requires social responsibility, by imposing a carbon price or by otherwise increasing tax liabilities to pay for social goods, does that reduce the corporate social response? Similarly, would reducing regulations and corporate tax liability increase the social response? The U.S. and Australia have significant differences in corporate taxation under 2017 law. Post-2017, the U.S. is moving closer to Australia in its corporate tax rate and also in its international tax system. In both the U.S. and Australia, corporations use tax strategies to reduce their effective tax rates (ETRs). Using a case study approach, we examine whether low corporate tax rates appear to encourage firms' investment in sustainability.

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March 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Pichhadze Presents Guide To Transfer Pricing: Lessons From Australia And New Zealand At Boston University

AdamAmir Pichhadze (Deakin Law School) presented Guide to Drafting and Interpreting Transfer Pricing Legislation: Lessons From Australia and New Zealand at Boston University yesterday as part of its Graduate Tax Program Speaker Series:

Countries around the world are undertaking legislative reforms in response to the OECD’s BEPS action plans. In his current research, part of which will be presented at the Boston University Law School’s Graduate Tax Program Lecture Series, Dr. Amir Pichhadze distills lessons from the legislative reform agenda which is currently undertaken by the New Zealand government and based on recent Australian case law.

As Pichhadze recently explained at the 30th Annual Australasian Tax Teachers Association, OECD member countries, as well as many non-member countries, have chosen to follow the OECD’s transfer pricing guidelines — an internationally coordinated relational (soft law) agreement on how to apply domestic transfer pricing laws.

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March 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Graetz Delivers Lecture On The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy Today At Temple

Graetz (2018)Michael J. Graetz (Columbia) delivers the 2018 Frank & Rose Fogel Lecture at Temple today at noon EST on The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy (livestream here):

In this lecture, Michael Graetz contends that the new tax law is unstable. This is hardly surprising because it was rushed through Congress in record time with only Republican votes and no ability for public comments on its changes. The new rules create significant new differences in tax burdens based on what kind of business is conducted, where goods and services are bought and sold, whether individual workers are employees or independent contractors, and where people live. Finally, although it was estimated to be a $1.5 trillion tax cut over ten years, it's actual cost is likely to be double that amount, producing unsustainable annual deficits and an unacceptable level of public debt.

March 28, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Find The Right Law School For A Tax Law Career

U.S. News & World Report, Find the Right Law School for a Tax Law Career:

Aspiring tax lawyers should target law schools where a significant proportion of recent alumni have tax law jobs, experts say.

Experts say aspiring tax lawyers who worry about whether they have the correct college major to get a job in the field should take comfort in the fact that their major doesn't matter.

"You don’t have to have an accounting degree to become a tax attorney, and in my opinion, you don’t even have to have a head for numbers," says Wayne Wilson, practice chair of the tax, benefits and wealth planning group at Dinsmore & Shohl LLP, a corporate law firm with offices in multiple U.S. cities. "It’s really just a matter of legal theory."

Although your college major won't determine whether you can have a tax law career, one thing which does influence your ability to pursue that career is whether you take tax law courses during law school, Wilson says. He says tax law employers are more likely to hire law school graduates with tax law courses on their transcripts.

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March 28, 2018 in Legal Education, Tax | Permalink | Comments (8)

Pols Use Economics The Way Drunks Use Lampposts

Wall Street Journal op-ed:  Pols Use Economics the Way Drunks Use Lampposts, by Alan S. Blinder:

The economy keeps chugging along. But beneath the surface economic policy makers are digging tunnels that could cave in.

By 2020, higher spending and tax cuts will push the federal budget deficit above 6% of gross domestic product—higher than it ever was in the Reagan years. Even deficit doves like me think that’s far too high absent a recession. President Trump may be taking the U.S. into a multifront trade war, against the advice of almost all economists. And America’s political leaders refuse to enact a carbon tax, the remedy for climate change that almost every economist favors.

Cases like these, in which the political system chooses virtually the opposite of what most economists recommend, are neither random nor rare. They exemplify what I call the Lamppost Theory of Economic Policy: Politicians use economics the way a drunk uses a lamppost—for support, not illumination. The Lamppost Theory is a source of unending frustration to economists, but its real harm comes when it leads the nation into terrible economy policies.

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March 28, 2018 in Tax | Permalink | Comments (0)

Tuesday, March 27, 2018

Jones Presents How Do Distributions From Retirement Accounts Respond To Early Withdrawal Penalties? Today At NYU

HarrisDamon Jones (Chicago) presents How Do Distributions from Retirement Accounts Respond to Early Withdrawal Penalties? Evidence from Administrative Tax Returns (with Gopi Shah Goda (Stanford) & Shanthi Ramnath (U.S. Treasury Department, Office of Tax Analysis)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

The design of retirement savings accounts must balance the long-term goal of retirement wealth accrual with the potential need for liquidity. Penalties (and exceptions) on pre-retirement withdrawals provide a possible lever for striking this balance. In the United States, penalties amount to 10 percent of withdrawn funds and several exceptions are available, including partial or full exemptions for the unemployed, disabled, or those incurring unreimbursed medical expenses. In this paper, we investigate how individuals respond to the removal of the 10 percent penalty imposed on Individual Retirement Account (IRA) withdrawals prior to the account holder turning 59 1/2. Our analysis employs rich tax records from the Internal Revenue Service (IRS) and develops new empirical techniques which allow us to use annual data to better understand patterns at higher levels of frequency. We find a large increase in withdrawals upon reaching age 59 1/2, implying an 80 percent increase in annual withdrawals on average among our population.

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March 27, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thomas Presents Taxing The Gig Economy Today At Georgetown

Thomas (2017)Kathleen Delaney Thomas (North Carolina) presents Taxing the Gig Economy, 166 U. Pa. L. Rev. ___ (2017), at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by Lilian Faulhaber and Itai Grinberg:

Due to advances in technology like mobile applications and online platforms, millions of American workers now earn income through “gig” work, which allows them the flexibility to set their own hours and choose which jobs to take. To the surprise of many gig workers, the tax law considers them to be “business owners,” which subjects them to onerous recordkeeping and filing requirements, along with the obligation to pay quarterly estimated taxes. This Article proposes two reforms that would drastically reduce compliance burdens for this new generation of business owners, while simultaneously enhancing the government’s ability to collect tax revenue.

First, Congress should create a “non-employee withholding” regime that would allow online platform companies such as Uber to withhold taxes for their workers without being classified as employers. Second, the Article proposes a “standard business deduction” for gig workers, which would eliminate the need to track and report business expenses.

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March 27, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

WSJ: New Tax On Overseas Earnings Hits Unintended Targets

Wall Street Journal, New Tax on Overseas Earnings Hits Unintended Targets:

A new tax aimed at overseas income earned by U.S. technology and pharmaceutical firms is hitting unexpected places. ...

In the past, the U.S. taxed corporate profits earned overseas at the domestic rate of 35%. Companies could avoid that tax by booking their income overseas and keeping it there. The new system in theory aims to lighten the overseas tax burden and target it more carefully.

Congress set a minimum tax known as GILTI, for Global Intangible Low-Taxed Income, of roughly 10.5% on a portion of corporate income earned overseas. GILTI is directed at trademarks and patents of technology and pharmaceutical firms, which are easy to transfer to low-tax foreign countries. It was supposed to create a floor on taxing those highly mobile profits, an assurance that companies would pay something while stopping short of the full U.S. tax rate. Without it, lawmakers worried, U.S. companies could have an even larger incentive to move intangible assets and profits offshore. ...

GILTI is hitting ... companies ... because of the way the new tax interacts with other provisions in the tax code, specifically the treatment of foreign tax credits that are supposed to prevent two countries from taxing the same income. When companies calculate the credits they receive for paying taxes overseas, the law typically requires them to assign some of their domestic expenses to foreign jurisdictions. The result for some companies is that, for U.S. tax purposes, their foreign income and foreign taxes look smaller than they actually are, shrinking their credits. That, in turn, could force them to pay the new minimum tax on top of their foreign tax bills.

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March 27, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Everyone Tries To Dodge The Tax Man, And It Keeps Getting Easier

538 (2015)FiveThirtyEight, Everyone Tries To Dodge The Tax Man, And It Keeps Getting Easier:

The bipartisan flirtation with avoiding taxes, through both legal and illegal means, threatens a tax system that is already bringing in historically low levels of revenue and that pays for everything from social security to military preparedness. Three foes in particular are enabling tax dodgers, making their ploys more common and more damaging: reduced support for the IRS, new incentives for people to become cheaters and widening partisan distrust.

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March 27, 2018 in IRS News, Tax | Permalink | Comments (3)

Containing Systemic Risk By Taxing Banks Properly

Mark Roe (Harvard) & Michael Troege (ESCP Europe), Containing Systemic Risk By Taxing Banks Properly, 35 Yale J. on Reg. ____ (2018):

Tax specialists normally don’t focus on financial stability and financial regulators and analysts typically do not focus on taxes. This is too bad because the corporate tax structure affects financial stability and does so significantly, as we analyze in this article.

The reason is simple: tax rules influence the capital structure choices of corporations in general and banks in particular, by allowing tax benefits to debt—principally the deductibility of interest—that equity lacks. Today, the corporate tax penalizes equity finance and subsidizes debt relative to equity. As a consequence, corporations overall use more debt than they would in a tax-neutral world.

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March 27, 2018 in Scholarship, Tax | Permalink | Comments (0)

Monday, March 26, 2018

Kleinbard Delivers Lecture On Fiscal Policy In An Age Of Inequality Today At BYU

Kleinbard (2015)Edward D. Kleinbard (USC) delivers the annual Bruce C. Hafen Lecture today on What’s a Government Good For?: Fiscal Policy in an Age of Inequality at BYU today:

The debate surrounding the Tax Cuts and Jobs Act demonstrated the intellectual bankruptcy of U.S. fiscal policy debate. The TCJA has serious flaws as a matter of narrow tax policy, but it is more fundamentally flawed when viewed through the proper policy lens, which is overall fiscal policy – the net of government taxing and spending. The TCJA greatly exacerbates already untenable budget deficits. Its tax prescriptions are even more regressive when the spending cuts contemplated by the legislation itself are reflected. And the law’s regressivity is compounded further when plausible financing paths for these large deficits are included in the analysis. In particular, the “dynamic” growth analysis whose tax ramifications were part of the debate leading up to the law was predicated on enormous cuts to future transfer payments, and confused GDP growth with enhanced welfare.

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March 26, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Ring Presents Leak-Driven Law Today At UC-Irvine

Ring (2017)Diane Ring (Boston College) presents Leak-Driven Law, 65 UCLA L. Rev. __ (2018) (with Shu-Yi Oei (Boston College)), at UC-Irvine today as part of its Tax Law and Policy Colloquium Series hosted by Omri Marian:

Over the past decade, a number of well-publicized data leaks have revealed the secret offshore holdings of high-net-worth individuals and multinational taxpayers, leading to a sea change in cross-border tax enforcement. Spurred by leaked data, tax authorities have prosecuted offshore tax cheats, attempted to recoup lost revenues, enacted new laws, and signed international agreements that promote “sunshine” and exchange of financial information between countries.

The conventional wisdom is that data leaks enable tax authorities to detect and punish offshore tax evasion more effectively, and that leaks are therefore socially beneficial from an economic welfare perspective. This Article argues, however, that the conventional wisdom is too simplistic.

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March 26, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Repetti Presents Tax Rates, Efficiency and Inequality Today At BYU

Repetti (2018)James R. Repetti (Boston College) presents Tax Rates, Efficiency and Inequality at BYU today as part of its Tax Policy Colloquium Series hosted by Cliff Fleming and Gladriel Shobe:

Traditionally, the great democracies of the western world assigned equal weight to distributive justice and economic efficiency in designing a tax system. In the past few decades, however, economic efficiency has dominated the debate about the best design of a tax system in politics and in analysis by legal academics. Discussions of progressive tax rates often focus on the adverse efficiency effects of high rates while ignoring benefits arising from a progressive rate structure’s reduced burden on lower income individuals. For example, many advocate low tax rates on investment income to reduce the efficiency effects of taxing savings.

In an attempt to increase efficiency, individual tax rates have decreased over the past 60 years. In 1956, the maximum statutory tax rate was 91%. Currently, the maximum tax rate is 37%. At the same time that tax rates were reduced, inequality increased, fueled in part by the declining tax rates.

There are several explanations for the intense focus on efficiency.

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March 26, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Boston College-Tulane Tax Roundtable

BC TulaneBoston College hosted the annual Boston College-Tulane Tax Roundtable on Friday:

James Alm (Tulane), Is the Haig-Simons Standard Dead? The Uneasy Case for a Comprehensive Income Tax
Discussant: Rebecca Kysar (Brooklyn)

Thomas Brennan (Harvard), Debt and Equity Taxation: A Combined Economic and Legal Perspective
Discussant: James Repetti (Boston College)

Heather Field (UC Hastings), Tax Lawyers as Tax Insurance
Discussant: Natalya Shnitser (Boston College)

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March 26, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lesson From The Tax Court: Why Labor Is Not Deductible, Or, Love’s Labor Lost

Tax Court (2017)I mow my own lawn. Most of the other houses in my neighborhood pay a lawn service to do that. But I’m too cheap to pay someone $40 to do what I can do perfectly well. To some economists, my act of mowing my own lawn is income to me. As the great economist Benjamin Franklin might say, the $40 saved is $40 earned. Thank goodness I do not have to count that imputed income as gross income!

The point is that my labor may have a market value. I could go into the lawn care business and others would pay. But until I actually get paid, how do you know whether my labor is worth $40 or $35 or $45? And when I labor instead at my desk at Tech Law, my labor is rewarded with a decent salary. But does the fact that I get paid for my labor mean that when I perform labor above and beyond—such as writing this blog post for example—such uncompensated labor is an expense? Have I “incurred” an expense that, if performed in the carrying on of my trade or business, is deductible under §162? That is the question posed by the case of James Edward Bradley Jr. and Margaret Letitia Hayes-Hunter v. Commissioner, T.C. Summary Op. 2018-13 (Mar. 19, 2018). There, Judge Panuthos teaches a seemingly simple lesson: a taxpayer may not deduct the value of the uncompensated labor they put into their business. Unpaid labor is not deductible.  Underneath this seeming simplicity, however, lies some interesting complexities.

More below the fold.

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March 26, 2018 in Bryan Camp, New Cases, Tax | Permalink | Comments (2)

Shaviro: Evaluating The New U.S. Pass-Through Rules

Daniel Shaviro (NYU), Evaluating the New US Pass-Through Rules, 2018 British Tax Rev. 49:

The pass-through rules that the US Congress enacted in 2017 — permitting the owners of unincorporated businesses in favored industries to escape tax on 20 per cent of their income — achieved a rare and unenviable trifecta, by making the tax system less efficient, less fair, and more complicated. It lacked any coherent (or even clearly articulated) underlying principle, was shoddily executed, and ought to be promptly repealed.

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March 26, 2018 in Scholarship, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, March 25, 2018

Wells:  Get With The BEAT

Bret Wells (Houston), Get With the BEAT, 158 Tax Notes 1023 (Feb. 18, 2018):

The United States, Europe, and a host of other nations have been grappling with the BEPS phenomenon for several years. The efforts have been fragmented and in some instances, chaotic. With the enactment of section 59A, the United States has taken a bold and decisive step toward protecting the U.S. tax base against inbound profit-shifting strategies. The BEAT protects the nation’s tax base by ensuring that the United States maintains its source country right to a 50-50 profit-split outcome, thus limiting the efficacy of excessive base erosion strategies. This outcome is consistent with existing U.S. treaty obligations, and other trading partners should consider adopting this unilateral approach in their own jurisdictions.

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March 25, 2018 in Scholarship, Tax | Permalink | Comments (0)

After Retiring From The IRS At 58, Dorothy Steel Started Acting At 88 And Hit It Big At 92 In 'Black Panther'

SBPWashington Post, She Started Acting at 88. Four Years Later, She’s Recognized Everywhere for ‘Black Panther.’:

Dorothy Steel’s mind was made up. She had only been acting for three years and didn’t want to audition for some “comic strip” movie she had never heard of. At 91, Steel told herself there was no way she could learn how to speak with an African accent that the role required.

In late November 2016, Steel asked her agent to kindly decline the invitation, and went about her day.

When her 26-year-old grandson, Niles Wardell, called, Steel casually mentioned the offer. Wardell was stunned. This is not just comics, he told his grandmother, this is “Black Panther.” This is a big deal. When she still wasn’t convinced, he decided to turn the tables on the woman who has been his source of wisdom.

“My grandson said to me, ‘You’re always talking about stepping out on faith. I either want you to man up or shut up,’ ” Steel recalled, laughing at the memory.

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March 25, 2018 in IRS News, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #3, #4, and #5:

  1. [438 Downloads]  Choice-of-Entity Decisions Under the New Tax Act, by Bradley Borden (Brooklyn)
  2. [293 Downloads]  The Elephant Always Forgets: U.S. Tax Reform and the WTO, by Reuven Avi-Yonah (Michigan) & Martin Vallespinos (S.J.D. 2018, Michigan)
  3. [248 Downloads]  Explaining Choice-of-Entity Decisions by Silicon Valley Start-Ups, by Gregg Polsky (Georgia)
  4. [217 Downloads]  The Impact of the 2017 Act's Tax Rate Changes on Choice of Entity, by Jim Repetti (Boston College)
  5. [197 Downloads]  Country-by-Country Reporting and the International Allocation of Taxing Rights, Michelle Hanlon (MIT)

March 25, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, March 24, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Galle: Mistaken Precedent And The Meaning Of 'Gift'

Brian Galle (Georgetown), Can I Return This? Mistaken Precedents and the Meaning of “Gift”:

What happens when the Supreme Court gets its own precedents wrong? And not in the new Roberts-court “anxiety of influence” style, where the Court deliberately misreads an old case in order to avoid admitting that it is overruling that case. I mean, what if the Court says that it aims to continue a prior interpretation, but its description of that old practice is inaccurate? Which law governs in the next case? If that is too hard to think about in the abstract, consider the law of gifts.

Most tax students can tell you that a transfer is a “gift” that can be excluded from income if it is given out of “detached and disinterested generosity” (DADG). This is a curious rule. Say Jared works for his father-in-law. When Jared receives a $1,000 check from FIL Don on his anniversary, which happens to also be the anniversary of his employment, does he have income, or not? Worse, say that Stormy works in a trade in which she often has intimate relations with others for money. She strikes up a friendly conversation with a client and they agree to meet again for drinks, where he pays. Income? From a tax policy perspective, these questions are nonsense: as Henry Simons argued, all gifts are income, because “ability to pay” depends on your resources, not their source.

For all that the DADG standard looks indefensible as a policy approach, it seems required by the Supreme Court’s decision in the famous Dubersteincase. But what if I told you that everything you learned in your Federal Income Tax course (about Duberstein) was wrong?

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March 24, 2018 in Scholarship, Tax | Permalink | Comments (4)

Stewart: Expert Discourse And The Politics Of Tax Reform

Miranda Stewart (Australian National University), 'Waiting for Consensus of the Experts?' Expert Discourse and the Politics of Tax Reform:

Tax reform is deeply political. There is now a significant body of political and economic research by political scientists and sociologists, concerning fiscal politics or sociology, in particular addressing taxation in democracies. At the same time, we take for granted, nowadays, that the deployment of a body of expertise is required in the formulation, legislation and application of tax policy and law. In this context, it is often said that politics is an obstacle to tax reform, so that tax reform will be most successful where a space is created in the political process for experts to do their work. Yet, it is clear that tax reform processes dominated by experts may also fail. This paper attempts to develop a theory of the role of tax experts that can help explain the more complex and situated outcomes of tax reform processes.

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March 24, 2018 in Scholarship, Tax | Permalink | Comments (1)

Friday, March 23, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Hasen's Rules, Standards And Detection

This week, Sloan Speck (Colorado) reviews a new work by David Hasen (Florida), Rules, Standards and Detection (2018).

Speck (2017)David Hasen’s paper, Rules, Standards and Detection, develops a formal economic model to explore and quantify the interrelationship of detection with the choice between rules and standards. Hasen deploys his highly tractable model toward two principal ends. First, Hasen’s model reveals that compliance costs have severe effects on parties’ responsiveness to regulators’ increased efforts at detection. Hasen finds that, when compliance costs are high, enforcement plays second fiddle to adjustments to legal rules in terms of fostering good behavior. By contrast, when compliance costs are low, audit becomes a more potent factor in encouraging compliance. Second, Hasen elaborates an important qualification of his first point. Under a view of regulation as ameliorating negative externalities, low compliance costs imply that the social costs of noncompliance also are small. Although the magnitude of these costs depends on the specific facts at issue (and, in particular, on the relevant elasticities of supply and demand), these considerations temper the broader point that compliance dollars are best spent in low-cost situations.

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March 23, 2018 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Marian: Is All Corporate Tax Planning Good For Shareholders?

Omri Y. Marian (UC-Irvine), Is All Corporate Tax Planning Good for Shareholders?, 52 U.C. Davis L. Rev. ___ (2018):

Does corporate tax planning benefit shareholders? The prevalent assumption is that it does, because lower corporate tax burden translates to enhanced shareholder value. In this article, I explain why this common perception is sometimes incorrect in practice. In many cases, successful (and legal) corporate tax planning schemes are not Pareto-optimal: some shareholders may see a net benefit, while others experience a net loss. Moreover, in certain instances it is reasonable to expect that legal corporate tax planning will be Kaldor-Hicks inefficient. Meaning, the financial losses incurred by some shareholders exceed the gains to others.

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March 23, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, March 22, 2018

Satterthwaite Presents Electing Into A Value-Added Tax Today At Indiana

SatterthwaiteEmily Satterthwaite (Toronto) presents Electing into a Value-Added Tax: Evidence from Ontario Micro-Entrepreneurs at Indiana today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

Across countries, value-added tax (VAT) statutes typically recognize the disproportionate burden of VAT compliance for smaller firms by exempting “small suppliers” (defined as businesses with annual revenues less than a specified registration threshold) from the obligation to register for, collect, and remit VAT on their sales.  But most input-credit-style VATs also offer small suppliers a curious choice: they can elect into the VAT by voluntarily registering.  Because VAT paid on inputs is refundable for registered firms, small suppliers have stronger incentives to voluntarily register as they (1) purchase more of their inputs from registered firms (the “input channel”) or (2) sell more of their output to registered firms (the “customer channel”).  In theory, these “formality chain effects” can improve the efficiency of a VAT.  In practice, however, many VATs feature registration thresholds that are far lower in dollar terms than recommended by economists.  Where a registration threshold is very low, might microenterprises’ high VAT compliance costs weaken their incentives to voluntarily register, thereby undermining the policy rationale for offering the election?  This paper uses qualitative and quantitative research methods to explore the relevance of the formality chain effect theory in the context of a low registration threshold.

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March 22, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Morse: Government-To-Robot Enforcement

Susan C. Morse (Texas), Government-to-Robot Enforcement, 2018 U. Ill. L. Rev. ___:

Automated legal systems occupy a central place in the administration of most regulatory regimes. Examples include TurboTax, wage and hour software, and self-driving cars. These systems produce results which invite examination and adjudication on a centralized, ex post basis. This is revolutionary. It means that the content of law, which technically applies to individual regulated parties, is determined centrally by interactions between the government and firms that make automated legal systems. I call this trend government-to-robot enforcement.

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March 22, 2018 in Scholarship, Tax | Permalink | Comments (0)

Brunson Named Georgia Reithal Professor Of Law At Loyola-Chicago

BrunsonSam Brunson (Loyola-Chicago) has been named Georgia Reithal Professor of Law. His recent publications include:

  • A Diachronic Approach to Bob Jones University: Religious Tax Exemptions after Obergefell, __ Ind. L.J. __ (forthcoming)(with David J. Herzig)
  • Taxing Utopia, 47 Seton Hall L. Rev. __ (forthcoming) [draft]
  • Dear IRS, It Is Time to Enforce the Campaigning Prohibition. Even Against Churches, 87 U. Colo. L. Rev. 143 (2016) [article]
  • Tax Exemption, Public Policy, and Discriminatory Fraternities, 35 Va. Tax Rev. 116 (2015) (with David J. Herzig) [draft]
  • The Taxation of RICs: Replicating Portfolio Investment or Eliminating Double Taxation? 20 Stan. J.L. Bus. & Fin. 222 (2015) [draft]

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March 22, 2018 in Colloquia, Tax | Permalink | Comments (0)

Johnson: Marinello – Curbing Abusive Exercise Of Prosecutorial Discretion In Tax Crimes Cases

Johnson (Steve)TaxProf Blog op-ed:  Marinello – Curbing Abusive Exercise of Prosecutorial Discretion in Tax Crimes Cases, by Steve R. Johnson (Florida State):

On Wednesday, March 21, by a vote of seven to two, the U.S. Supreme Court decided Marinello v. United States, No. 16-1144.  Marinello is an important tax crimes decision.  It also is instructive at many points with respect to statutory interpretation, an enterprise fundamental to all areas of tax, civil as well as criminal.

But the core of the case transcends the particular statute at issue and the respective merits of various canons of statutory interpretation.  The questions at the base of Marinello are as fundamental as one can get: the proper relationship between the people and their government and the proper relationships among the three branches of government.  In my view, the Marinello dissent had the better of the technical argument as to statutory construction but missed much of the larger picture.  The Marinello majority had a better sense of the whole and moved the needle in the right direction, but it produced an ill defined “rule” through dubious reasoning.  So, two — not three — cheers for the Marinello decision.

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March 22, 2018 in New Cases, Tax | Permalink | Comments (3)

NY Times: Think Cryptocurrency Is Confusing? Try Paying Taxes On It

New York Times, Think Cryptocurrency Is Confusing? Try Paying Taxes on It:

The room was full of stressed-out cryptocurrency traders. And for once, they weren’t nervous about the price of Bitcoin, or the roller coaster swings of the virtual currency markets.

No, the subject of this gloomy affair was taxes. Specifically, how — and whether — to pay them.

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March 22, 2018 in Tax | Permalink | Comments (0)

Wednesday, March 21, 2018

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review (2017)The Pittsburgh Tax Review has published Vol. 15, No. 1 (2017):

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March 21, 2018 in Scholarship, Tax | Permalink | Comments (0)

Stewart: Redistribution Between Rich And Poor Countries

Miranda Stewart (Australian National University), Redistribution Between Rich and Poor Countries:

The topic of redistribution between rich and poor countries opens a can of worms. This paper first inquires into what we mean by some of these words and second, considers the role of taxation in redistribution. It briefly considers the various modes of redistribution to address poverty and inequality, including the role of taxation, within a country before turning to consider modes of redistribution between rich and poor countries. The paper then turns to consider whether we are asking the right question. Should the question, really, be about redistribution between rich and poor people? In an increasingly global and digital era, how might we reconsider the role of taxation in achieving this?

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March 21, 2018 in Scholarship, Tax | Permalink | Comments (0)

Taxing & Zapping Marijuana: Blockchain Compliance In The Trump Administration

Richard Ainsworth (Boston University) & Brendan Magauran, Taxing & Zapping Marijuana: Blockchain Compliance in the Trump Administration:

On January 4, 2018, the Trump Administration through Attorney General Sessions rescinded an Obama-era policy that discouraged federal prosecutors from bringing charges in all but the most serious marijuana cases under the federal Controlled Substances Act, as well as under the Bank Secrecy Act. Federal law is at odds with state law in the majority of states on the legalization and subsequent state taxation of marijuana. Twenty-eight states and the District of Columbia have at least partially legalized marijuana. Eight of these states have legalized both medicinal and recreational use. With limited exceptions, legalized sales of marijuana are taxed.

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March 21, 2018 in Scholarship, Tax | Permalink | Comments (0)

2019 U.S. News Tax Rankings

U.S. News 2019Here are the new 2019 U.S. News Tax Rankings, along with last year's ranking:

2019 Rank Tax Program 2018 Rank
1 NYU 1
2 Georgetown 2
3 Florida 3
4 Northwestern 4
5 Virginia 5
6 Harvard 8
7 Boston University 8
8 Loyola-L.A. 6
9 UCLA 7
10 Michigan 14
11 Texas 12
12 Columbia 10
13 Boston College 20
14 USC 15
15 Yale 18
16 San Diego 11
17 Indiana (Maurer) 23
17 Univ. of Washington 20
19 Duke 16
19 Stanford 23
19 Chicago 19
19 Penn 16
23 Miami 12
24 Villanova 20
25 Alabama n/r
25 UC-Berkeley n/r
25 Denver 25

Here are the biggest upward moves:

  • +7:  Boston College (#13)
  • +6:  Indiana (#17)
  • +4:  Michigan (#10), Stanford (#19)
  • +3:  Yale (#15), U. Washington (#17)
  • +2:  Harvard
  • Alabama (#25) and UC-Berkeley (#25) were unranked last year

Here are the biggest downward moves:

  • -11:  Miami (#14)
  • -5:  San Diego (#16)
  • -4:  Villanova (#24)
  • -3:  Penn (#19), Duke (#19)
  • -2:  Loyola-L.A. (#8), UCLA (#9), Columbia (#12)
  • Washington University (#26 last year) is unranked this year

Here are the rankings of the graduate tax programs, along with last year's rankings.

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March 21, 2018 in Law School Rankings, Legal Education, Tax | Permalink | Comments (1)

NY Times: A Curveball From The New Tax Law — It Makes Baseball Trades Harder

New York Times, A Curveball From the New Tax Law: It Makes Baseball Trades Harder:

As President Trump congratulated the World Series champion Houston Astros at a White House ceremony last week, he also heaped praise on himself and congressional Republicans for passing a sweeping tax cut last year. He hailed Representative Kevin Brady of Texas, the House’s chief tax writer and an Astros superfan, as “the king of those tax cuts.”

What he did not mention is that the new tax law Mr. Brady helped draft, and which Mr. Trump signed, levies a large new tax on the Astros, and similar franchises across professional sports.

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

The Marital Wealth Gap

Erez Aloni (British Columbia), The Marital Wealth Gap, 93 Wash. L. Rev. ___ (2018):

Married couples are wealthier than people in all other family structures. The top 10% of wealth holders are, in great proportion, married. Even among the wealthiest households, married couples hold significantly more wealth than others. The Article identifies this phenomenon as the “Marital Wealth Gap,” and critiques the role of diverse legal mechanisms in creating and maintaining it. Marriage also contributes to the concentration of wealth because marriage patterns are increasingly assortative: wealth marries wealth. The law entrenches or even exacerbates these class-based marriage patterns by erecting structural barriers that hinder people from meeting across economic strata.

Table 1

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March 21, 2018 in Scholarship, Tax | Permalink | Comments (6)

Tuesday, March 20, 2018

De Simone Presents Repatriation Taxes And Foreign Cash Holdings: The Impact Of Anticipated Tax Reform Today At NYU

De Simone (2018)Lisa De Simone (Stanford) presents Repatriation Taxes and Foreign Cash Holdings: The Impact of Anticipated Tax Reform (with Joseph Piotroski (Stanford) & Rimmy Tomy (Chicago)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

We examine whether anticipation of a repatriation tax reduction affects the amount of cash U.S. multinational corporations (MNCs) hold overseas. We find that U.S. MNCs most likely to benefit from a repatriation tax reduction accumulated significant cash holdings once Congress proposed legislation, at the expense of reduced shareholder payouts, relative to firms unlikely to benefit. This behavior was accompanied by complementary activities designed to maximize expected tax benefits. We contribute to the literature on how firms respond to taxinduced incentives, provide a new explanation for U.S. MNC cash holding growth, and raise questions about the consequences of U.S. tax reform.

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