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Editor: Paul L. Caron
Pepperdine University School of Law

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Monday, August 12, 2013

McMillan: Tax Treaty Issues in Sun Capital 'Trade or Business' Ruling

Tax Analysys Logo (2013)Lori McMillan (Washburn),  Potential Treaty Issues Arise in the 'Trade or Business' Landscape, 140 Tax Notes 721 (Aug. 12, 2013):

Sun Capital [1st Cir. July 24, 2013] has added a new layer in the determination of what is a trade or business, when activity performed by members of the same group was attributed to a private equity fund. Funds can no longer be sure that merely because their income is passive, they will not be considered engaged in a trade or business.

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August 12, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 5, 2013

Johnston: Manufacturing Tax Break Gone Wild

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Manufacturing Tax Break Gone Wild, 140 Tax Notes 621 (Aug. 5, 2013):

A federal judge [United States v. Dean, No. 11-01977 (C.D. Cal. May 7, 2013).] has held that putting wrapped candy bars and wine bottles into gift baskets qualifies for a 2004 tax break for manufacturing. Johnston argues that the decision is too broad an interpretation of manufacturing for the purposes of the section 199 deduction.

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August 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Wednesday, July 31, 2013

Bergin: Saving Private IRS

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), Saving Private IRS, 140 Tax Notes 503 (July 29, 2013):

Bergin uses Mortimer Caplin's 97th birthday as an occasion to highlight the former IRS commissioner as an example of the hardworking and dedicated people who work at the nation's tax collection agency, and he calls on congressional critics of the IRS to take a more reasonable approach to funding and supporting tax administration.

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July 31, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, July 22, 2013

Faber: 'Ivory Tower' Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States

Tax Analysts Peter L. Faber (McDermott Will & Emery, New York), Taxes Play Major Role in Moving Out of State, 69 State Tax Notes 243 (July 22, 2013):

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes, State Tax Notes, July 8, 2013, p. 97 ... ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.  ...

The authors claim that they have been able to show the effect of taxes "while holding other conditions constant." How did they do that? Get real, folks. There are limits on what economists' computers can do. It is impossible to do this, no matter how many computer simulations one does. ...

My experience, and that of my SALT colleagues, is that taxes often play an important and decisive role in decisions to move from one state to another. Moreover, that is particularly the case for very wealthy individuals whose loss can be significant for a state. I am currently working with three wealthy individuals who have come to my firm for advice on how they can change their domicile from New York state to a low-tax state. When they do so, New York will lose between $70 million and $225 million in estate taxes (the variance will depend on which spouse survives the other). New York will also lose income taxes on their very substantial incomes. I assume that people in Ohio and other high-tax states are going through the same analysis. The issue with my clients is not whether to move, it is how to move so as to establish the change in legal domicile. We are going through the usual list of factors that the courts have considered in determining domicile (driver's license, club memberships, religious affiliations, civic activities, etc.). These people will move, and their moves will cost New York millions of dollars in taxes....

The economists can play all the number games they want to with their computers, their calculus, and their fancy equations, but they are still living in their ivory towers. The reality that my colleagues and I deal with every day is very different.

For a particularly timely example, consider yesterday's British Open champion Phil Mickelson:  Forbes: Phil Mickelson Wins British Open---And California Taxes It:

Prior TaxProf Blog coverage:

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July 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (13) | TrackBack (0)

Monday, July 15, 2013

Sullivan: Behind the GAO's 12.6% Effective Corporate Tax Rate

Tax Analysts Martin A. Sullivan (Tax Analysts), Behind the GAO's 12.6 Percent Effective Corporate Rate, 140 Tax Notes 197 (July 15, 2013):

On July 1 the Government Accountability Office made a lot of headlines when it released a study reporting that the average effective corporate tax rate in 2010 was only 12.6%. ... Although it is common knowledge that many U.S. multinationals have used tax planning to substantially reduce their tax bills, the GAO figure is surprisingly low. Other studies typically report average rates in the mid-20s. For example, 40 leading U.S. firms that recently formed a tax reform coalition had an average effective tax rate of 24% over the 2010-2012 period. The GAO itself (p. 28) cites eight prior studies using a variety of data, methods, and time periods, and the average rate of these studies was 28.4%, with a minimum of 22% and a maximum of 31.3%.

So what explains the difference between the GAO's 12.6 percent rate and other studies' rates? Mainly two items. First, the GAO did not include foreign taxes in the widely reported 12.6 percent figure. It did in fact provide a much more conceptually defensible measure that includes foreign taxes in the numerator and arrives at a worldwide rate of 16.9 percent as a result. The table below details the GAO calculation.

Figure 1

The second and more important reason for the GAO's low effective tax rate for 2010 compared with those found in other studies is that the effects of a recession are more dominant in 2010 than they are in other studies, which include both recession and non-recession years or no recession years at all. In 2010 the U.S. economy was still severely hobbled by the Great Recession. Figure 1 shows liability for all corporations from 1997 through 2010, as well as net and gross corporate tax receipts from 1997 through 2012. It shows that in 2010, corporate tax liabilities reported on tax returns used in the numerator of the GAO's effective tax rates were extraordinarily low in that year.

Figure 2

Putting all this together, it seems reasonable not to revise the consensus view that average worldwide effective corporate tax rates are somewhere in the mid- or upper 20s when we are not in the throes of a recession. It is important to keep in mind that these broad averages hide a lot of interesting detail. ...  It is also important to keep on the lookout for misleading effective tax rate calculations from advocacy groups. 

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July 15, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Tuesday, July 9, 2013

Christians: The Dubious Legal Pedigree of IGAs

Tax AnalystsAllison Christians (McGill), The Dubious Legal Pedigree of IGAs (and Why it Matters), 69 Tax Notes Int'l 565 (Feb. 11, 2013):

When Congress enacted the Foreign Account Tax Compliance Act in 2010, it made no mention of any internationally-agreed alternative to its enforcement, and Congress has made no authorization since then for the president to override FATCA’s statutory provisions by international agreement. Yet due to difficulties in implementing FATCA, Treasury has entered into several ‘‘intergovernmental’’ agreements (IGAs) to essentially bypass the hurdles, even going so far as to draft model IGAs with the intent of streamlining their enactment globally. This column examines the nature of these agreements and concludes that their legal pedigree is tenuous as a constitutional matter. It argues that this pedigree implicates the rule of law in two ways: first, if the IGAs are not "good" law in the U.S., then FATCA partners incur the risk of penalties should the statute they seek to override apply in default. Second, and more fundamentally, the IGAs violate the rule of law by ignoring established procedural requirements for binding the US internationally. This undermines the legal system in the US domestically as well as hurting U.S. credibility in the international community. The column concludes by arguing that there is no benefit to be had in skirting the normal legal process for concluding international agreements in the rush to implement FATCA. Instead of jeopardizing the important and complex project of global tax compliance with such a legally dubious procedure, the obvious and straightforward approach to making FATCA work internationally is to follow the normal treaty-making procedure, time-tested through 100 years of US tax treaty-making history.

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July 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 8, 2013

Sullivan: Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation

Tax Analysts Martin A. Sullivan (Tax Analysts), Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation, 140 Tax Notes 103 (July 8, 2013):

Like so many of its big pharma competitors, Pfizer is having trouble replacing its blockbuster drugs of decades past. The new-product pipeline is drying up, and competition from generic drug makers is relentless. ...  Like its drug business, Pfizer's tax situation is a jumble of events and trends that eludes easy interpretation. Look, for example, at its effective tax rate, shown in Figure 1. It is a roller coaster ride of ups and downs that on its own provides little information about where the company's tax burden has been or where it is going. Is Pfizer a high-tax or low-tax company? There are no easy answers to that question, just as there is no easy answer to whether Pfizer's future is promising or whether it is a sinking ship. This article investigates the factors behind Pfizer's volatile effective tax rate, its booked tax liability ($11.4 billion over the previous five years), and its actual cash payment to tax authorities for income tax ($21.7 billion over the same period). A comprehensive collection of Pfizer's tax data from 2005 through 2009 is at the end of the article.

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July 8, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 1, 2013

The Impact of Same-Sex Marriage on Federal and State Budgets

Tax AnalystsDiana Furchtgott-Roth (Senior Fellow, Manhattan Institute), Same-Sex Marriage Decisions Won't Affect Uncle Sam's Bottom Line, 140 Tax Notes 75 (July 1, 2013):

Furchtgott- Roth presents data to show that the Supreme Court decisions on the Defense of Marriage Act and California’s Proposition 8 are unlikely to affect federal or state budgets. ...

The nonpartisan Congressional Budget Office last estimated the effects of same-sex marriage in 2004. It concluded that federal recognition of samesex marriage would reduce the budget deficit by $500 million to $700 million a year between 2011 and 2014, or 0.016 percent of total federal spending of $3.7 trillion. [The Potential Budgetary Impact of Recognizing Same-Sex Marriages] ...

In a December 2012 paper, University of Michigan economist Adam Stevenson estimated an annual increase of $34 million in federal revenues, or 0.001 percent of federal spending, if same-sex marriage were legalized at the federal level. He estimated a lower revenue gain than the CBO did because he assumes that many gay spouses would change their labor force participation rates in response to the marriage penalty. [The Labor Supply and Tax Revenue Consequences of Federal Same-Sex Marriage Legalization, 65 Nat’l Tax J. 783 (Dec. 2012)] ...

140TN0075_Page_2

The effects of same-sex marriage on federal and state revenues appear to be minor because of the low incidence of those marriages; the Supreme Court decision therefore will not have major fiscal consequences on a regional or national level.

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July 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, June 24, 2013

Johnston: IRS Employees and Contractors: Separate and Unequal Standards of Performance and Integrity

Tax Analysts David Cay Johnston (Syracuse), Separate and Unequal Standards of Performance and Integrity, 139 Tax Notes 1571 (June 24, 2013):

The IRS relies heavily on contractors, but it does not hold them to anything close to the standards of performance and integrity required of its own employees.

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June 24, 2013 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 18, 2013

Ault: The OECD and Sources of International Tax Law

Tax Analysts Hugh J. Ault (Boston College), Some Reflections on the OECD and the Sources of International Tax, 70 Tax Notes Int'l 1195 (June 17, 2013):

This article is the revised text of a lecture held on May 2, 2013, at the Max Planck Institute.

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June 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, June 17, 2013

Yin: Joint Tax Committee Should Investigate the IRS

Tax Analysts George K. Yin (Virginia), Former Chief of Staff Thinks JCT Should Investigate the IRS, 139 Tax Notes 1443 (June 107 2013):

House Ways and Means Committee Chair Dave Camp, R-Mich., has reportedly rejected use of a joint committee to investigate the IRS because such a committee would not be authorized to access confidential tax return information. Yet Camp already heads a joint committee (the Joint Committee on Taxation), which has that specific authority under sections 6103(f) and 8023. Moreover, the JCT was created for the express purpose of investigating the tax agency's administration of the tax laws, following a lengthy Senate investigation of corruption charges against the agency and possible favoritism towards companies associated with then-Secretary of the Treasury Andrew Mellon. Congress wanted a permanent organization to conduct future tax investigations, oversee the agency, and make sure it was administering the law in the manner Congress intended. Camp should make use of this valuable resource to streamline Congress's efforts and prevent the integrity of its investigation from being undermined by political squabbling.  

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June 17, 2013 in Congressional News, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 11, 2013

Johnston: IRS Management Culture Must Be Fixed

Tax Analysts David Cay Johnston (Syracuse), IRS Management Culture Must Be Fixed, 139 Tax Notes 1323 (June 10, 2013):

Serious problems in IRS management culture will only worsen as Congress focuses on trivia and ignores the problems created by conflicts in mission, law, and a lack of funds to do the work, especially training.

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June 11, 2013 in Tax, Tax Analysts | Permalink | Comments (31) | TrackBack (0)

Monday, May 20, 2013

Bergin: The IRS Is in Big Trouble

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), The IRS Is in Big Trouble, 139 Tax Notes 951 (May 20, 2013):

Bergin discusses the catastrophic ramifications of the IRS’s recent apology for mishandling the applications of conservative exempt organizations and how things might be worse for the agency now than they were after the 1998 restructuring act.

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May 20, 2013 in Tax, Tax Analysts | Permalink | Comments (4) | TrackBack (0)

Monday, May 13, 2013

Olson: Loving and Tax Return Preparation

Tax Analysts Nina E. Olson (National Taxpayer Advocate), More Than a 'Mere' Preparer: Loving and Return Preparation, 139 Tax Notes 767 (May 13, 2013):

Each year, tens of millions of taxpayers hire paid practitioners to prepare their Form 1040-series returns because of the overwhelming complexity of the tax code and the amount of money at stake. That has led to significant concerns about incompetent and unscrupulous preparers and their negative impact on taxpayers and compliance. The IRS and Treasury had developed and substantially implemented standards governing preparers when, in Loving v. IRS, a U.S. district court found that Treasury lacked the authority to issue the regulations. The government has appealed the case to the D.C. Circuit. The NTA believes that the district court’s decision in Loving is based in part on an outdated understanding of return preparation and filing. This report makes the case for preparer regulation generally, explains where the district court erred, and illustrates how problems in today’s tax system are directly analogous to the problem Congress sought to address in its original grant of regulatory authority to Treasury. 

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May 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, May 6, 2013

Maule: IRS-Prepared Tax Returns: A Theory That Doesn't Work in Practice

Tax Analysts James Edward Maule (Villanova),  IRS-Prepared Tax Returns: A Theory That Doesn't Work in Practice, 139 Tax Notes 684 (May 6, 2013):

Making taxpayers' lives easier is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS. Fooling around with the nation's primary source of revenue in this manner is unwise, unwarranted, and dangerous.

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May 6, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, April 29, 2013

Bergin: Real Transparency, Anyone?

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), Real Transparency, Anyone?, 139 Tax Notes 571 (Apr. 29, 2013):

In a recent op-ed, House Ways and Means Committee Chair Dave Camp, R-Mich., and Senate Finance Committee Chair Max Baucus, D-Mont., said they were dedicated to working on legislation to reform the tax system in "an open and transparent fashion." Taking them at their word, Bergin urges the taxwriters to do just that.

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April 29, 2013 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, April 26, 2013

Tax Analysts Hosts Conference Today on State Taxes and the Cloud

TAC_Cloud_topTax Analysts hosts a roundtable discussion on State Taxes and the Cloud at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

Please join us for a roundtable discussion in which we will consider how states are approaching the challenge of taxing cloud computing technologies, and what they should think about in doing so.

  • Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
  • Cara Griffith (Legal Editor, State Tax Notes)
  • Kelley Miller (Reed Smith)
  • Mark Nebergall (President, Software Finance and Tax Executives Council)
  • Dylan Waits (Managing Senior Policy Counsel, Washington Department of Revenue)

April 26, 2013 in Conferences, Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, April 19, 2013

Morse: Why FATCA Intergovernmental Agreements Bind the U.S. Government

Tax Analysts Susan Morse (UC-Hastings), Why FATCA Intergovernmental Agreements Bind the U.S. Government, 70 Tax Notes Int'l 245 (Apr. 15, 2013):

Susan Morse argues that U.S. bilateral intergovernmental agreements have binding legal force.

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April 19, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, April 8, 2013

Johnston: The Tax Police Budget Shrinks

Tax Analysts David Cay Johnston (Syracuse),  The Tax Police Budget Shrinks, 139 Tax Notes 211 (Apr. 8, 2013):

With the cuts under the budget sequestration, the IRS budget is down sharply from 2002 and is much too small to ensure the revenue collection necessary to sustain our democracy. 

IRS Budget Change Per Capita (in 2012 dollars)

Budget Cuts

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April 8, 2013 in IRS News, Scholarship, Tax, Tax Analysts | Permalink | Comments (6) | TrackBack (0)

Monday, April 1, 2013

Sullivan: U.S. Contract Manufacturing and Dave Camp's Option C

Tax Analysts Martin A. Sullivan (Tax Analysts), U.S. Contract Manufacturing and Dave Camp's Option C, 139 Tax Notes 10 (Apr. 1, 2013):

Martin A. Sullivan discusses how a recent proposal by Paul Oosterhuis could help the international tax reform discussion draft released by House Ways and Means Committee Chair Dave Camp, R-Mich.

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April 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 26, 2013

Johnston: Leaving a Big Nickel on the Table

Tax Analysts David Cay Johnston (Syracuse), Leaving a Big Nickel on the Table, 138 Tax Notes 1495 (Mar. 25, 2013):

David Cay Johnston writes that according to the Congressional Budget Office, the U.S. economy is growing at less than 95 percent of its potential, and he argues that the country is losing much more tax revenue as a result.

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March 26, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Friday, March 22, 2013

Smith: PPL -- How to Determine Whether a Foreign Tax is Creditable

Tax Analysts Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), PPL: How to Determine Whether a Foreign Tax is Creditable, 138 Tax Notes 1351 (Mar. 18, 2013):

PPL Corp. v. Commissioner presents the question whether the creditability of a foreign tax must be determined by applying the requirements of the § 901 regulations to the foreign statute’s formula for the tax or by applying those requirements to an algebraically equivalent reformulation of the statutory formula. The decision will likely turn on whether the Supreme Court agrees with PPL that tax law’s general substance-over-form principle authorizes reliance on an algebraic reformulation to determine whether a foreign tax is creditable for U.S. tax purposes.  

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March 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 19, 2013

A Potential Game Changer in E-Commerce Taxation

Tax AnalystsAndrew J. Haile (Elon), David Gamage (UC-Berkeley) & Darien Shanske (UC-Hastings, moving to UC-Davis), A Potential Game Changer in E-Commerce Taxation, 67 State Tax Notes 747 (Mar. 11, 2013):

In this essay, we evaluate recent legislative proposals for Congress to authorize state taxation of e-commerce. We argue that these proposals contain a potential game-changing innovation—the requirement that states provide remote sellers with “adequate software” for calculating use tax due within the state. Properly implemented, we explain how this innovation could force states to internalize the compliance costs of levying tax collection obligations on remote sellers, thereby incentivizing the states to simplify their sales and use tax statutes and resolving concerns about states overburdening interstate commerce.

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March 19, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, March 18, 2013

Sullivan: Dave Camp's Quiet Tax Revolution

Tax Analysts Martin A. Sullivan (Tax Analysts),  Dave Camp's Quiet Revolution, 138 Tax Notes 1294 (Mar. 18, 2013):

Martin A. Sullivan analyzes and applauds the latest discussion draft from House Ways and Means Committee Chair Dave Camp, R-Mich.

138TN1294_Page_2
138TN1294_Page_3

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March 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, March 11, 2013

Tax Profs Remember Christine Brunswick

Tax Analysts Tax Notes has reprinted our tribute in Tax Professors Remember Christine Ann Brunswick, 138 Tax Notes 1267 (Mar. 11, 2013):

Brunswick

Paul L. Caron ... shares the tributes posted by tax professors remembering Christine Ann Brunswick, former director of the American Bar Association Section of Taxation, who died last month:

  • Alice Abreu (Temple)
  • Ellen Aprill (Loyola-L.A.)
  • Paul Caron (Cincinnati & Pepperdine)
  • Cynthia Lepow (Loyola-New Orleans)
  • Francine Lipman (UNLV)
  • Roberta Mann (Oregon)
  • Deborah Schenk (NYU)

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March 11, 2013 in Obituaries, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 6, 2013

2003-2012 Tax Journal Rankings: NYU #1, Tax Notes #2

Here are the Washington & Lee tax law review combined rankings of the five major tax journals:

  • Florida Tax Review ("Florida")
  • Tax Law Review ("NYU")
  • Tax Lawyer ("ABA")
  • Tax Notes
  • Virginia Tax Review ("Virginia")

The rankings are based on the annual combined rankings in 2003-2012 among these five journals:by:

Rank

Journal

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

1.1

NYU

2

1

1

1

1

1

1

1

1

1

2.9

Tax Notes

4

3

3

2

2

2

5

3

2

3

3.0

Florida

3

4

4

4

3

3

2

2

3

2

3.1

Virginia

1

2

2

3

4

4

3

4

4

4

4.9

ABA

5

5

5

5

5

5

4

5

5

5

As I have previously noted, Tax Notes fares poorly in the Impact Factor category (citations/number of articles published) because W&L apparently counts as "articles" all of the advance sheet material in Tax Notes.

Tax Notes is #1 by a wide margin in the number of citations in law reviews, with more than double the citations of its nearest competitor:

Rank

Journal

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

1.0

Tax Notes

1

1

1

1

1

1

1

1

1

1

2.9

ABA

4

3

4

4

3

3

2

2

2

2

3.0

NYU

3

4

3

3

2

2

3

4

3

3

3.1

Virginia

2

2

2

2

4

4

4

3

4

4

5.0

Florida

5

5

5

5

5

5

5

5

5

5

March 6, 2013 in Law Review Rankings, Legal Education, Scholarship, Tax, Tax Analysts, W&L Tax Journal Rankings | Permalink | Comments (0) | TrackBack (0)

Monday, February 25, 2013

Johnston: Income Inequality: 1 Inch to 5 Miles

Tax Analysts David Cay Johnston (Syracuse), Income Inequality: 1 Inch to 5 Miles, 138 Tax Notes 1007 (Feb. 25, 2013):

The average increase in real income reported by the bottom 90% of earners in 2011, compared with 1996, if measured at one inch, would extend almost five miles for the top 1% of the top 1%.

138TN1007_Page_2

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February 25, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (8) | TrackBack (0)

Friday, February 22, 2013

Tax Analysts Hosts Conference Today on The Federal Income Tax: Has It Run its Course?

Federal Income TaxTax Analysts hosts a roundtable discussion on The Federal Income Tax: Has It Run its Course? at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

Please join us for a roundtable discussion on whether the federal income tax, which celebrates its 100th birthday this year, can retain its role as a prime federal revenue source.
  • Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
  • Jared Bernstein (Senior Fellow, Center on Budget and Policy Priorities)
  • Robert Goulder (Editor in Chief of International Publications, Tax Analysts)
  • Michael J. Graetz (Professor of Tax Law, Columbia Law School)
  • Joseph J. Thorndike (Director of the Tax History Project, Tax Analysts)

February 22, 2013 in Conferences, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, February 18, 2013

Sullivan: Can States Swap Sales Taxes for Income Taxes?

Tax Analysts Martin A. Sullivan (Tax Analysts), Can States Swap Sales Taxes for Income Taxes?, 138 Tax Notes 789 (Feb. 19, 2013):

Among the 44 states with significant income tax revenue, only a few could repeal their income taxes, replace the lost revenue with sales taxes, and keep sales tax rates below 8% with their current sales tax base (or, for those without sales taxes, with a tax base equal in breadth to the average of other states). They are New Hampshire, Alaska, Montana, Hawaii, and Florida. Two more states, New Mexico and Alabama, might also be able to repeal their income taxes and keep sales tax rates below 8% if they aggressively expanded their sales tax base. In general, states where a tax swap is most likely have relatively low income tax collections and relatively low sales tax rates.

If states already had broad-based consumption taxes in place, a widespread phaseout of state income taxes might be a real possibility. Concerns about regressivity could be addressed with a sales tax rebate to low-income households. But as long as states rely on sales taxes that exclude most services and include business inputs, the difficulties in most states will be insurmountable and the desirability questionable.

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February 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 12, 2013

Johnston: Bermuda Robs Sacramento and Albany -- Who Knew?

Tax Analysts David Cay Johnston, Bermuda Robs Sacramento and Albany -- Who Knew?, 67 State Tax Notes 423 (Feb. 11, 2013):

Johnston writes about a report released by the U.S. Public Interest Research Group Education Fund that examines the revenue that is lost by each state to offshore tax havens.

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February 12, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, February 11, 2013

Johnston: Law and Order: Tax Squad

Tax Analysts David Cay Johnston, Law and Order: Tax Squad, 138 Tax Notes 759 (Feb. 11, 2013):

Johnston discusses why it is a bad idea to cut dollars from tax enforcement, and he is skeptical that declining numbers of criminal tax prosecutions are the result of increased voluntary compliance.

138TN0759_Page_2

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February 11, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Thursday, January 24, 2013

More on the Pepperdine/Tax Analysts Symposium: Tax Advice for the Second Obama Administration

Tax Symposium GraphicWilliam Hoffman, Globalization Poses New Challenges for Tax Reform, 2013 TNT 15-9 (Jan. 23, 2013):

The effects of globalization and international competition on the U.S. economy and the government's fiscal condition will require any tax reform effort made in the coming months to be much different from past efforts, panelists said January 18 during a conference cosponsored by Pepperdine University and Tax Analysts.

"There is no pot of gold from which to finance tax reform," Columbia Law School professor Michael Graetz said at the Malibu, Calif., conference, titled Tax Advice for the Second Obama Administration. Drafters of the 1986 reforms helped finance lower individual tax rates by repealing tax benefits for plants and equipment, limiting tax shelters, and equalizing rates for capital gains and income, Graetz said. That won't be possible this time. "Given internationalization of economic activity and increased competition from abroad, repeating the 1986 act's reliance on increased taxation of corporate income is not, in my view, possible," Graetz said. "Given the size of the national debt and projected increases in that debt for the near and long-term future, it seems essential for tax reform to be capable of producing additional revenues going forward." ...

Tax professors and professionals presented research and offered their take on business and international tax matters, estate and gift taxes, income and wealth inequality, and the balance between fairness and growth during a one-day symposium organized by Pepperdine University law professor Paul Caron, author of TaxProf blog, and Tax Analysts. Most participants agreed that if there is any big reform coming, high- and middle-income earners will likely see their taxes rise -- although the former will have more opportunities than the latter to escape the burden. ...

"The 800-pound gorilla in the room is wealth," said Edward McCaffery of the University of Southern California Gould School of Law. [Distracted from Distraction by Distraction: Reimagining Estate Tax Reform ] "I think we have to go after wealth. I don't think any major tax reform in America has gone after wealth. What we're doing is shoring up the income tax as a wage tax, or maybe making it more progressive, but we're not getting at wealth at all. And I think we have to do something." ...

Several speakers took aim at the $5 million estate tax exemption and the section 1014 rule regarding stepped-up basis on death. "The $5 million exemption for estate and gift [taxes], and especially for generation-skipping transfer taxes, makes no sense at all," said Grayson M.P. McCouch of the University of San Diego School of Law. [Who Killed the Rule Against Perpetuities?] "By opening a $5 million exemption, coupled with unlimited basis stepped up at death, we have basically just opened up a huge giveaway to not even the middle class but to more than 99% of decedents to just escape the basic income tax . . . and we've pulled away what used to be a substantial countervailing tax that offset the benefit of that step. And that, I think, is hard to defend." One possible reform would be to prospectively curtail the $5 million exemption, at least for long-term trusts, McCouch said.

McCaffery called for repeal of the stepped-up basis rule. In 2010, he said, taxpayers had the option of either no estate tax and a carryover basis or a $5-million-per-person exemption and a stepped-up basis. "The overwhelming majority of decedents chose the latter," he said. "Stepped-up basis is very big, very important, [and] it's always been linked to the estate tax."

Joseph J. Thorndike, director of Tax Analysts' Tax History Project and a contributing editor of Tax Notes, said the estate tax might be "irrelevant" for revenue and progressivity purposes (as Caron argued in a paper coauthored with James Repetti of Boston College [Occupy the Tax Code: Using the Estate Tax to Reduce Inequality]), but it's likely not yet dead politically. The estate tax addresses wealth inequality indirectly, while "efforts to address inequality head on -- as in 'these people are just too damn rich and other people are too damn poor' -- are historically not successful in the United States," he said. 

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January 24, 2013 in Conferences, Legal Education, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Tuesday, January 22, 2013

Pepperdine/Tax Analysts Symposium Wrap-Up: Tax Advice for the Second Obama Administration

Symposium Photo

Thanks to everyone who participated in Friday's Pepperdine/Tax Analysts Symposium on Tax Advice for the Second Obama Administration. By any measure, it was spectacular success. We smashed attendance records, as Pepperdine had to open two overflow rooms to handle the crowds. Over 600 people have watched the video of the event:

Each and every one of our tax academics, practitioners, journalists, and authors did a first-rate job:

  • Keynote Address:  Michael Graetz (Columbia)
  • Papers:  Reuven Avi-Yonah (Michigan), Steve Bank (UCLA), Dorothy Brown (Emory), Karen Burke (San Diego/Florida), Paul Caron (Cincinnati/Pepperdine), Allison Christians (McGill), Francine Lipman (UNLV), Ed McCaffery (USC), Grayson McCouch (San Diego/Florida), Susan Morse (UC-Hastings), Jim Repetti (Boston College), Kirk Stark (UCLA), Marty Sullivan (Tax Analysts), Eric Zolt (UCLA)
  • Commentators:  Bruce Bartlett (former Deputy Assistant Treasury Secretary for Economic Policy), Bob Goulder (Tax Analysts), David Miller (Cadwalader), Michael Schler (Cravath), Joe Thorndike (Tax Analysts)
  • Moderators:  Tom Bost (Pepperdine), David Brunori (Tax Analysts), Paul Caron (Cincinnati/Pepperdine), Khrista Johnson (Pepperdine)
  • Luncheon and Closing Addresses:  David Cay Johnston (author and journalist)

The papers will be published in the Pepperdine Law Review (Volume 40, Issue 5 (May 2013)), and I will of course post the links on TaxProf Blog as soon as they are available. In the meantime, seven of the papers are available in draft form on SSRN.

My special thanks to Deanell Tacha (Dean of Pepperdine Law School) and Chris Bergin (President of Tax Analysts) who agreed to co-sponsor the symposium. As Dean Tacha pointed out at Friday's dinner, the challenges facing legal education demand that we find creative ways to partner with other organizations. I believe that this symposium is a wonderful example of the benefits possible with such partnerships.

This is the third symposium I have organized, and I have participated in many others. I join the many speakers who began their remarks by praising the Pepperdine Law Review students for pulling off the best-run symposium that any of us have ever attended.  Many, many students provided tireless and cheerful service, but I want to give particular shout-outs to Editor in Chief Margot Parmenter and Symposium Editor Michael Wood.

It goes without saying that the gorgeous Pepperdine campus and Malibu weather provided a wonderful setting, but I knew it would be the people of this special law school who would make this a truly memorable experience for our guests. My lasting memory from the symposium will be the two "after-parties" my wife and I hosted at our home, where these leading lights of the tax world shared food, drink, conversation, and true community -- an unfortunately all too rare event in our hectic lives.

January 22, 2013 in Conferences, Legal Education, Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, January 14, 2013

Johnston: The Fiscal Cliff Tax Deal Makes Deficit Worse

Tax Analysts David Cay JohnstonDeficits, Schmeficits, 138 Tax Notes 237 (Jan. 14, 2013)

Johnston argues that the fiscal cliff compromise will make it harder to solve the United States’ long-term deficit and debt problems.

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January 14, 2013 in Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Monday, January 7, 2013

2012 Tax Person of the Year: Tax Policy Center

Tax AnalystsPerson of the Year: Tax Policy Center, 138 Tax Notes 7 (Jan. 7, 2013):

The Urban-Brookings Tax Policy Center is the 2012 Tax Notes Person of the Year, for the indelible mark it made on the presidential campaign; nine other contenders for the title round out the feature.

  • Tanara Ashford (Deputy Assistant Attorney General, Tax Division, Justice Department)
  • Erskine Bowles (Co-chair, National Commission on Fiscal Responsibility and Reform)
  • Bryan T. Camp (Professor, Texas Tech University School of Law)
  • Elizabeth A. Copeland (Partner, Strasburger Price Oppenheimer Blend)
  • Manal Corwin (Assistant Secretary of the Treasury for International Tax Affairs)
  • Scott D. Michel (President, Caplin & Drysdale)
  • John G. Roberts Jr. (Chief Justice of the United States)
  • Mitt Romney (Republican Party Nominee for President)
  • Dean A. Zerbe (Zerbe, Fingeret, Frank & Jadav)

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January 7, 2013 in Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Thursday, January 3, 2013

Sullivan: Double Disappointment With the Fiscal Cliff Deal

Tax Analysts Martin A. Sullivan (Tax Analysts),  Double Disappointment With the Deal, Doc 2013-46 (Jan. 3, 2013):

Martin A. Sullivan discusses the downsides of the fiscal cliff compromise.

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January 3, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, December 27, 2012

2012 Year in Review: State & Local Taxes

Tax AnalystsShonda Humphrey (Tax Analysts), A Year in Review of State and Local Tax Legal Developments, 66 State Tax Notes 991 (Dec. 24, 2012):

Well, 2012 is winding down, and what a year it was. ... In the state and local tax area, there were some noteworthy legal developments.

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December 27, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 26, 2012

Bartlett: U.S. Taxes and Government Benefits in an International Context

Tax Analysts Bruce Bartlett, U.S. Taxes and Government Benefits in an International Context, 137 Tax Notes 1429 (Dec. 24, 2012):

Bruce Bartlett reviews new international data on taxes and healthcare spending as a share of GDP in OECD countries and suggests that Americans' antipathy to taxes may be a function of the modest benefits they receive from government in contrast to those in high-tax countries.

137TN1429_Page_1

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December 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, December 17, 2012

Sullivan: Why the SALT Deduction Is Always Under Attack

Tax Analysts Martin A. Sullivan (Tax Analysts), Why the SALT Deduction Is Always Under Attack, 137 Tax Notes 1267 (Dec. 17, 2012):

Martin A. Sullivan argues that policymakers shouldn't be so quick to curtail or eliminate the deduction for state and local taxes.

[T]he history of the 1986 act can still teach us about the next tax reform effort. Among the most relevant lessons is that among the big three itemized deductions—the mortgage interest deduction, the deductions for charitable contributions, and the deduction for state and local taxes — the last is by far the one Congress is most likely to cut. As shown in Figure 1, the deduction cost the government $62 billion in 2010, and a lot of that revenue is from upper-income households. That is an attractive pile of cash, especially if the mortgage interest and charitable deductions are off the table.

Figure 1. Distribution of Tax Benefits From the Deduction for State and Local Taxes in 2010 (from a total of $62.4 billion)

TN

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December 17, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (5) | TrackBack (0)

Monday, November 26, 2012

Sullivan: Deduction Caps Can Raise Marginal Rates, Cut Economic Growth

Tax Analysts Martin A. Sullivan (Tax Analysts), Deduction Caps Can Raise Marginal Rates, Cut Economic Growth, 137 Tax Notes 939 (Nov. 26, 2012):

Long-run job creation through tax cutting is a two-step process. The first step is to lower marginal tax rates. Then those lower marginal rates increase taxpayers’ willingness to invest and seek employment. Most of the unending argument about the effect of taxes on job creation centers on step two — that is, the responsiveness of saving and labor supply to changes in marginal tax rates.

Despite all the effort, there is still enough uncertainty about the empirical research that both proand antitax partisans can cite plausible estimates to support their views. This article sidesteps the highly politicized component of the debate about the economic effects of taxes and instead focuses on step one, the oft-neglected arithmetic of the effects of tax reform on marginal rates.

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November 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, November 5, 2012

Johnson: Tax Reform and the Presidential Election

Tax Analysts Calvin H. Johnson (Texas), Tax Reform and the Presidential Election, 137 Tax Notes 676 (Nov. 5, 2012):

Johnson describes the tax plan of Republican presidential nominee Mitt Romney as aggressively promising tax cuts for the richest taxpayers. Although Romney promises no increase in the deficit or tax increases for middle-income earners, it is impossible for him to keep all three promises. Johnson argues that the wealthy will need to share in the closing of the deficit because that is where the money is. Wealth is distributed unevenly in this country: One-third is held by the top 1%, and 58% is held by the richest 5%. Taking a needed dollar from the rich does less harm to the sum of human happiness than taking it from the poor.

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November 5, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, October 29, 2012

Sullivan: The Employer Healthcare Exclusion's Role in Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), The Employer Healthcare Exclusion's Role in Tax Reform, 137 Tax Notes 462 (Oct. 29, 2012):

Martin A. Sullivan discusses how the exclusion for employer-provided health insurance might be affected by proposals for tax reform.

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October 29, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Monday, October 22, 2012

Sullivan: How Much Deficit Reduction for a Grand Bargain?

Tax Analysts Martin A. Sullivan (Tax Analysts), How Much Deficit Reduction for a Grand Bargain?, 137 Tax Notes 339 (Oct. 22, 2012):

Martin A. Sullivan writes about $3.4 trillion of deficit reduction that will be needed over the next 10 years to put the federal budget on a sustainable course.

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October 22, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Friday, October 12, 2012

Tax Analysts Hosts Conference Today on Taxes and the Poor

TaxesTax Analysts hosts a roundtable discussion today on Taxes and the Poor at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

  • Christopher E. Bergin (President and Publisher, Tax Analysts)
  • David Brunori (Executive Vice President, Tax Analysts)
  • Scott A. Hodge (President, Tax Foundation)
  • Chuck Marr (Director of Federal Tax Policy, Center on Budget and Policy Priorities)
  • C. Eugene Steuerle (Institute Fellow, Urban Institute)

October 12, 2012 in Conferences, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, October 8, 2012

Sullivan: The Hypocrisy of Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), The Hypocrisy of Tax Reform, 137 Tax Notes 119 (Oct. 8, 2012):

Martin A. Sullivan argues that despite their saying that tax reform is needed, lawmakers often let politics muck up the tax code.

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October 8, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 2, 2012

Christians: Measuring a Fair Share

Tax AnalystsAllison Christians (McGill), Measuring a Fair Share, 68 Tax Notes Int'l 95 (Oct. 1, 2012):

Allison Christians discusses the difficult policy considerations that go into defining what constitutes an individual's fair share when it comes to paying taxes.

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October 2, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, October 1, 2012

Jackel: Tax Aggressiveness and Tax Meekness

Tax AnalystsMonte A. Jackel (Monte A. Jackel Federal Tax Advisory Services, Washington, D.C.), The Aggressive and the Meek, 137 Tax Notes 1365 (Sept. 18, 2012):

In this now-monthly column on current tax policy and issues, Jackel examines the state of the tax practice in taking either aggressive or conservative positions on a tax matter. He also discusses the conundrum facing those who comment on government-proposed guidance and are forced to choose between client interests and sound tax policy.

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October 1, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, September 24, 2012

Solomon: Corporate Inversions: A Symptom of Larger Tax System Problems

Tax Analysts Eric Solomon (Ernst & Young, Washington, D.C.), Corporate Inversions: A Symptom of Larger Tax System Problems 67 Tax Notes Int'l 1203 (Sept. 23, 2012):

The enactment of § 7874 in 2004 substantially curtailed inversion activity by U.S. corporations. Nevertheless, some U.S. corporations have inverted and other corporations have considered inverting, although recent temporary regulations have made avoiding the application of § 7874 more difficult. This article examines why U.S. corporations engage in inversions and continue to consider them. Inversion activity is a symptom of problems in the U.S. international tax system that need to be addressed.

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September 24, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 18, 2012

Johnson: The 'No Surplusage' Canon in State and Local Tax Cases

Tax AnalystsSteve R. Johnson (Florida State), The 'No Surplusage' Canon in State and Local Tax Cases, 65 State Tax Notes 793 (Sept. 17, 2012):

Previous installments of this column have examined numerous canons or conventions of statutory interpretation in their application to state and local tax controversies. This installment considers another canon: the precept that courts should prefer interpretations that render no part of a statute superfluous. ... The first part below describes the canon generally. The second part identifies the reasons advanced for the precept, the objections lodged against it, and the limitations on it. The third part gives examples of the canon in state and local tax cases, both cases in which its assertion was successful and cases in which its use failed.

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September 18, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, September 17, 2012

Sullivan: President Romney's Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), President Romney's Tax Reform, 136 Tax Notes 1365 (Sept. 18, 2012):

In economic analysis, Martin A. Sullivan discusses the options available to Mitt Romney if the Republican presidential nominee is determined to propose revenue-neutral tax reform.

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September 17, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)