TaxProf Blog

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

Friday, December 1, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a recent working paper by Scott Dyreng (Duke), Martin Jacob (WHU- Otto Beisheim School of Management), Xu Jiang (Duke), and Maximilian A. Müller (WHU- Otto Beisheim School of Management), Tax Avoidance and Tax Incidence:

Scharff (2017)I’m writing this week’s SSRN Update with my browser open, constantly refreshing newspaper websites.  I assume I’m not alone.  I feel grateful to so many members of the tax community who have spoken and written about the current tax reform proposals and attempted to shed light on the myriad of changes (and tax avoidance strategies) likely to be created by the tax bills working their way through Congress at lightning speed. 

So much of our focus in the past weeks has been understanding what’s in the proposed legislation, and I assume there will be much more to be learned and written should some version of the current proposals become law, as is looking increasingly likely (or maybe not, as more news breaks).

In the meantime, as we ponder the potential impact of large corporate tax cuts and new opportunities for tax avoidance, a new paper by Scott Dyreng, Martin Jacob, Xu Jiang, and Maximilian A. Müller offers new insight on corporate decision making.  Their findings suggest that for at least some firms, the ability to shift the tax incidence away from shareholders reduces the incentive to engage in tax avoidance.

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December 1, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, November 17, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Kitty Richards, An Expressive Theory of Tax, 27 Cornell J.L. & Pub. Pol’y ___ (2018).

Speck (2017)In the early twentieth century, Joseph Schumpeter wrote that “[t]he spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history.” Following the money tells us more than just who has what; it yields insights into who we are, and what we want to be. Kitty Richard’s interesting and provocative article, An Expressive Theory of Tax, gives a framework for understanding these types of connections between tax law and society, as well as a number of examples “where what the tax code says is explicitly preferenced over what the code does.”

A significant accomplishment of Richards’s project is positive: thick description of “the values and desires that animate policy debates and legal opinions” in taxation. Richards analyzes the expressive aspects of public debates over the taxation of legal brothels in Nevada, the marriage penalties and bonuses doled out by the federal income tax, and the public policy exception for the deductibility of certain expenses. Furthermore, Richards claims that “cheap” talk of (frequently ineffective) incentives obscures the expressive inflection of debates over tax benefits for retirement savings, among other areas.

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November 17, 2017 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, November 10, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Orly Mazur (SMU) reviews a new work by Anthony Polito (Suffolk), Mandatory Passthrough Taxation for Non-Publicly Traded Businesses?, 36 Va. Tax Rev. 449 (2017).

Mazur (2017-2)Anthony Polito’s timely new work considers whether passthrough taxation should be made available to all non-publicly traded businesses, without regard to form of business entity, and whether such tax treatment should be mandatory. 

Currently, most closely held businesses (except for those organized in the corporate form) may elect to benefit from a single level of taxation, whereas corporate business entities and most publicly traded entities are taxed as C corporations and subject to double taxation. As a result, newly-formed, non-publicly traded entities are only subject to subchapter C by choice. So when would an entity voluntarily subject itself to the double taxation regime? As the Article explains, a business would elect corporate taxation over passthrough taxation when an “insider shelter” tax strategy is available: namely, when the tax burden on a taxable corporate entity is less than on a passthrough entity. 

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November 10, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Saturday, November 4, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft paper by Daniel Hemel (Chicago), Easy on the SALT: A Qualified Defense of the Deduction for State and Local Taxes.

Gamage (2019)Prompted — at least in part — by Congressional Republicans’ recently released tax reform proposals, Daniel Hemel has written a thoughtful new piece on the state and local tax (SALT) deduction. Although Hemel’s paper is currently in preliminary draft form, this draft is nevertheless well worth a read for anyone interested in taxation at either the federal or state levels in the United States.

Hemel thoughtfully reviews arguments both for and against the SALT deduction, concluding that “the case against the SALT deduction fails on its own terms, and that the status quo of partial deductibility offers a number of underappreciated advantages vis-à-vis the alternative of full repeal.”

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November 4, 2017 in David Gamage, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, October 27, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by Miranda Perry Fleischer (San Diego) and Daniel Hemel (Chicago), Atlas Nods: The Libertarian Case for a Basic Income, 2017 Wis. L. Rev. ___ .

Glogower (2016)How could a libertarian view—which generally believes in limited redistribution and limited government—ever support a basic income program (UBI), which redistributes tax revenues to the public through unconditional cash grants?

In their new work, Miranda Perry Fleischer and Daniel Hemel undertake a careful analysis of libertarian thought to identify the libertarian case for a UBI.  The work first identifies the particular strains of libertarianism that would sanction a UBI.  In particular, the authors argue that provision for a minimal level of material well-being is consistent with both minimal state libertarianism (for example, of Robert Nozick) as well as classical liberalism (for example, of Milton Friedman).  Furthermore, libertarians would generally favor cash over in-kind transfers, since the former preserve individual autonomy and choice.  The authors proceed to consider specific design choices for a UBI program from a libertarian perspective, and argue that a libertarian would prefer a grant that is not tied to work effort (due to a skepticism for state capacity to determine earning capacity) and would prefer an annual to a lump sum grant (since the latter will pay too much, or too little, depending on the recipient’s lifespan).

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October 27, 2017 in Ari Glogower, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, October 20, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a new article by Rebecca Morrow (Wake Forest), Government as Investor: The Case for Immediate Expensing, 105 Ky. L. Rev. ___ (2017).

Scharff (2017)In her forthcoming article, Government as Investor:  The Case for Immediate Expensing, Rebecca Morrow enters the thicket of existing academic and policy debates about how our tax system should treat business investment.  With clear writing and voluminous footnotes, she surveys the capitalization versus immediate expensing debate, and she emerges with some interesting suggestions for reforming our current system. 

Morrow’s chief insight is to focus on the federal government, rather than the taxpayer.  As she writes, “since the government already, by operation of immediate expensing tax policies, acts like an indirect investor in long-standing, expensive, and expanding ways, it should expressly acknowledge and begin to be deliberate about this role.” 

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October 20, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, October 6, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Orly Mazur (SMU) reviews a new draft article by Karen Burke (Florida), Exploiting the Medicare Tax Loophole.

Mazur (2017-2)Employment taxes comprise an important source of federal tax revenue. Traditionally, only an individual’s earned income was subject to these taxes. However, with the introduction of Section 1411, the tax law now also subjects the unearned income of high-income individuals to a 3.8% Medicare tax (“Unearned Income Medicare Contribution”). Thus, the current law attempts to subject both the earned and unearned income of high earners to the Medicare tax. Unfortunately, not all high income taxpayers pay their fair share of this tax.

Karen Burke’s new work explains the various tax planning techniques that taxpayers currently use to avoid the 3.8% Medicare tax imposed on wages and net self-employment earnings and the 3.8% Medicare tax imposed by Section 1411 on unearned income. In particular, she illustrates how high-income owner-employees can avoid contributing to Medicare financing by providing services as an active limited partner of a state law limited partnership, by conducting business operations as an owner-employee of an S corporation, or by using tiers of entities to circumvent the employment tax rules. 

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October 6, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, September 29, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft article by Allison Christians (McGill Law), Buying in: Residence and Citizenship by Investment.

Gamage (2017)Want to buy yourself a citizenship?  According to Christians’s new draft article, doing so from Panama would cost you $5,000 USD, doing so from the United Kingdom would cost you $62,525 USD, and doing so from Singapore would cost you $1,794,000 USD.

Would this be worth the cost?  Christians discusses how some of these nations hope to attract wealthy citizens from other nations.  However, emigrating from the U.S. is harder to accomplish, at least from a tax perspective, due the U.S. practice of taxing its citizens on worldwide income.  Christians thus also discusses barriers to exit, again from a citizenship tax perspective. 

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September 29, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, September 22, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by Gladriel Shobe (BYU), Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs, 71 Vand. L. Rev. ___ (forthcoming 2018).   

Glogower (2016)Gladriel Shobe’s new work describes the evolution of Tax Receivables Agreements (TRAs) in IPOs, and evaluates the policy implications of these increasingly common agreements.

A TRA is contract entered into in connection with an IPO whereby the new public company agrees to pay the pre-IPO owners for the value of tax assets held by the historic company, which can offset the company’s future taxable income.  The most common such assets are depreciable asset basis and net operating losses (NOLs).  Under a TRA, the public company pays the pre-IPO owners for the value of these tax assets over a period of years following the IPO as the value is realized.

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September 22, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, September 15, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a new working paper by Leslie Book (Villanova), David Williams (Intuit) and Krista Holub (Intuit), Insights from Behavior Economics Can Improve Administration of the EITC.  

Scharff (2017)The problems of our dysfunctional Congress are legion. This dysfunction not only affect Congress’ ability to get the basic work of government done, but it shrinks the space available to have rational conversations about improving public policy. We see this in the debate over the Earned Income Tax Credit (EITC). The EITC retains bipartisan support. Nevertheless, it regularly comes under criticism for the high error rates in the program.

At the high end, the IRS estimates the overclaim percentage at a high of 39.1%, but even the IRS’s low estimate of 28.5% represents about $14 billion a year.  Conservative commentators use these estimates to argue the program is riddled with fraudLiberals, on the other hand, stress that the complexity of the program’s eligibility requirements makes inadvertent mistakes likely and note that methodological problems may lead the IRS to overstate the improper payment rate.  

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September 15, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, September 8, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Lee Anne Fennell and Richard McAdams (Chicago), Inverted Theories.

Speck (2017)Since the early 1960s, the interdisciplinary turn in legal scholarship has been marked by academic lawyers’ engagement with, and adoption of, theoretical work from economics, anthropology, and philosophy, among other fields. In an important new article, Lee Anne Fennell and Richard McAdams argue for a novel reconsideration of how certain of these theories are deployed by law professors. Specifically, Fennell and McAdams identify a category of theories in which a central (and typically normative) claim “takes center stage,” while implausible or stylized assumptions that qualify this claim are minimized. For this type of theory, the footnotes supersede the headline, but readers are just skimming the large print. Fennell and McAdams argue that we should “turn the spotlight” on these “untrue assumptions” by inverting these theories, putting the footnotes first and downsizing the headline. Doing so will lead to more fruitful inquiry, both in terms of the questions we ask and the answers we find.

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September 8, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, September 1, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Orly Mazur (SMU) reviews a new work by Brian Galle (Georgetown), How to Save Unemployment Insurance, forthcoming in the Arizona State Law Journal.

Mazur (2017-2)With the Labor Day Holiday upon us, what a perfect time to celebrate American workers by considering how best to provide workers with a source of relief in the event of involuntary unemployment. Brian Galle’s compelling new work does exactly that by analyzing and suggesting potential reforms that can help to save our unemployment insurance (UI) program.

The UI program is a form of social insurance that provides temporary income support to workers that lose their jobs through taxes collected by state and federal governments from employers. Unfortunately, as the recent Great Recession showed us, “the U.S. system of financing its unemployment insurance program is seriously dysfunctional.” After explaining the cause of the UI program’s failings, Galle makes a persuasive case that for any UI reform proposal to be effective, three factors need to be taken into account. 

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September 1, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, August 25, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft article by Zachary Liscow (Yale), Is Efficiency Biased?.

Gamage (2017)Anyone interested in how the methodology of law and economics accounts for distributive justice should stop whatever else they might be doing so that they can immediately read Zach Liscow’s new draft article. Indeed, I wish that this article had been available when I started my legal academic career, as Liscow’s article clarifies several puzzles that had been confounding me for over a decade.

The essence of Liscow’s critique is that efficiency-oriented analysis in law and economics relies on allocating legal entitlements based on willingness to pay. However, wealthier individuals will often have a greater willingness to pay for many legal entitlements as compared to poorer individuals—as a direct result of the fact that the wealthier individuals have more money.  

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August 25, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Friday, August 18, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by David Weisbach (Chicago), New View Integration, 71 Tax L. Rev. (forthcoming 2017). 

Glogower (2016)David Weisbach’s new work argues that integration methods eliminating the double tax on corporate earnings should focus on alleviating the double tax on new corporate equity, but not on old equity already invested in corporate form.  Limiting integration to new equity achieves all of the efficiency gains achieved through complete integration with respect to all equity, at a lower revenue cost.

As we are often told, the corporate tax discourages investors from using the corporate form, and encourages corporations to retain earnings and to favor issuing debt over equity. Corporate integration would generally eliminate these inefficiencies by equalizing the tax rates on investments through corporations with the tax rates on investments outside the corporate sector. 

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August 18, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, August 11, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a recent article by Steven A. Bank (UCLA), When Did Tax Avoidance Become Respectable:

Scharff (2017)The title of Steven Bank’s recent article asks a provocative question: “When Did Tax Avoidance Become Respectable?” Interested readers may be relieved to know that Bank also addresses other questions, including whether tax avoidance is respectable. Bank marshals a fascinating dataset (tracking newspaper ads about tax advice over time) to show that tax avoidance became more acceptable over the 1950s and 1960s. He then explains this change by suggesting, among other factors, that unsustainably high tax rates in the post-war period eroded public confidence in the tax system.  

As Bank notes, 2016 brought with it news of several major tax scandals:  the Panama Papers, tax fraud investigations of the world’s biggest soccer players—players important enough that I’d even heard of them, and, of course, Donald Trump’s, shall we say, very aggressive tax planning.  As a tax academic, it felt at the time like there might be a real public fury over aggressive efforts to lower tax payments.  My Facebook feed certainly suggested outrage.  These were big stories, or at least so it seemed to me.  

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August 11, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Saturday, August 5, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Manoj Viswanathan (UC-Hastings), Tax Compliance in a Decentralizing Economy.

Speck (2017)In a compelling new work, Manoj Viswanathan connects two seemingly disparate hot spots in taxation, the gig economy and blockchain-based cryptocurrencies, to argue that increasing economic decentralization presents a significant and underappreciated threat to tax compliance. For Viswanathan’s paper, decentralization essentially reflects the rise of direct peer-to-peer transactions through virtual means, rather than through institutional intermediaries. Companies such as Airbnb and Uber match sellers of lodging and transportation to buyers, while cryptocurrencies such as Bitcoin allow secure transfers of value without banks. Independently, the gig economy and cryptocurrencies present serious issues for tax administration. When combined, Viswanathan argues, individuals could buy and sell entirely outside of taxing authorities’ traditional purview, which would enable rampant noncompliance. For Viswanathan, the solution is enhanced information reporting rules to account for decentralization, including incentives to disclose one’s own identity in transactions.

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August 5, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, July 28, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Orly Mazur (SMU) reviews a new work by Zachary Liscow (Yale Law School) and William Woolston (Stanford University, Department of Economics),  How Income Taxes Should Change During Recessions, Tax Law Review, Forthcoming.

Mazur (2017-2)Economic recessions, a frequent occurrence in our history, are destructive in many respects. They cause wide-spread unemployment, a decline in economic growth, sinking asset values, fear and uncertainty, among other economic and social costs. Although economists generally agree that increased government spending can spur economic growth during a recession and alleviate this burden, the current literature does not sufficiently address how to design the spending so that it maximizes social welfare during a recession.

In their recent article, Liscow and Woolston (hereinafter, “LW”) make an important contribution to the literature by recommending two ways to improve fiscal policy design during a recession in the context of labor income taxes and related policies. Specifically, LW propose that Congress should (i) increase effective subsidies on the non-employed and (ii) subsidize employers rather than employees during recessions.

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July 28, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, July 21, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft article by Regina Herzlinger (Harvard Business School) and Barak D. Richman (Duke Law), Evaluating Changes to the Income Tax Code to Create Consumer-Driven Health Insurance Competition.

Gamage (2017)The intersections between taxation and health policy have become increasingly important to political debates in Washington. A gorilla in the room for most of these discussions is the tax exclusion for employer provided health insurance. This exclusion has been widely criticized. Yet reformers have had little success in attempting to limit this exclusion.

In their new draft article, Herzlinger and Richman (hereinafter “HR”) model how reforming the exclusion for employer provided health insurance might affect employee pay and health care costs. HR argue for making changes to the tax laws surrounding the exclusion so that employees could choose to what extent they want to take advantage of the exclusion or instead receive increased take home pay (which would be taxable). HR estimate that giving workers this option would increase after-tax incomes by $46-48 billion annually, while reducing income inequality and “likely” controlling health care costs.

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July 21, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, July 14, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by Itai Grinberg (Georgetown), The New International Tax Diplomacy, 104 Geo. L.J. 1137 (2016).

Glogower (2016)Itai Grinberg’s fascinating and important new work addresses the thorny question of how best to coordinate and implement international tax norms.

International tax avoidance by multinationals has generated public attention across the globe, and ushered in a new era of cross-border coordination in the area of international tax law, most prominently through the OECD’s Base Erosion and Profit Shifting (BEPS) project.  Grinberg’s new work identifies, and evaluates, the BEPS project’s increasing reliance on the institutional and procedural frameworks used for coordinating international financial law, and considers the consequences of this approach for the overall success of the BEPS project.

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July 14, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, July 7, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a recently posted article by Manoj Viswanathan (Hastings), The Hidden Costs of Cliff Effects in the Internal Revenue Code.  

Scharff (2017)Early on in my federal income tax class, I usually spend a bit of time with my students on the idea of the marginal tax rate.   The point I stress to them is that even as you earn more money and your tax rate goes up, you still take home more money working an additional hour than not working that hour.  I sometimes get the sense many of my students hadn’t understood that prior to my class.  

Of course, there’s a caveat to this simple marginal tax story:  the high marginal rates that result from cliff effects, particularly those in tax and spending programs aimed at addressing low-income Americans.  While I usually talk about these cliff effects when discussing the Earned Income Tax Credit, Manjoj Viswanathan’s recent work reminds me that these income-based cliff effects are pervasive in the Code.

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July 7, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, June 30, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Edward Fox (NYU Center for Law, Economics, and Organization), Do Taxes Affect Marriage? Lessons from History.

HemelOne of my favorite teaching exercises in my Introductory Income Taxation class is to go through the New York Times wedding announcements from late December and early January, and to have students identify couples that got married on the “wrong” side of the New Year divide. Some single-earner couples that presumably receive a marriage bonus—e.g., an engineer marrying a grad student—nonetheless wed in early January, though they likely would have been better off accelerating their nuptials to December. Other couples that probably face a marriage penalty—e.g., two associates at the same law firm—wed in late December, though they likely would have been better off waiting a few more weeks. I ask my students, “What were these couples thinking?” The answer that I get is: “They were probably thinking about love and not about tax.”

For those of us who love thinking about tax, this is all somewhat of a puzzle. Do people really make such momentous life decisions without considering the tax implications? Ed Fox seeks to answer that question in a creative new paper. His main finding is that, at least historically, tax incentives have had a quantitatively and statistically significant effect on marriage patterns. While anecdotes from the Times might lead us to believe that couples make marriage choices without considering the tax consequences, Fox’s study suggests that tax incentives do indeed affect the decisions of some couples to say “I do.”

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June 30, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Friday, June 23, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new article by Ari Glogower (Ohio State), Taxing Capital Appreciation, Tax Law Review, Vol. 70, No. 1, 2016.

Gamage (2017)Income and wealth inequality have been rising as issues of national concern.  One would think that these concerns should motivate tax reform proposals designed to address income and wealth inequality.  However, many leading tax law experts believe that the current structure of the U.S. income tax cannot support much higher tax rates at the high end.  As Avi-Yonah and Zelik have persuasively explained, the reason is that we are “trapped” by our realization and capital gains rules.

The realization rule—that gains are not taxed until realized by sale or similar transaction—has long been understood as the “Achilles heel” of the income tax.  The higher the tax rate on capital gains, the more that wealthy taxpayers are incentivized to delay realization of gains, and accelerate realization of losses, while borrowing to the extent that money is needed to fund consumption. Because of these sorts of realization games, economists estimate that the revenue maximizing tax rate on capital gains is probably in the range of between 28% and 32%.  Hiking the capital gains tax rate above this range would thus be expected to decrease revenues.

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June 23, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, June 16, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by Heather M. Field (UC-Hastings), A Taxonomy for Tax Loopholes, 55 Hous. L. Rev. __ (forthcoming 2018). 

Glogower (2016)Heather Field’s new work introduces a taxonomy of different types of “tax loopholes,” to guide policymakers and the public, and to promote analytic rigor in the public discourse over tax policy. 

Field first demonstrates that the term has no independent and consistent meaning, other than as a vague pejorative (except when used by some advisors and clients proud to “beat the system”). This nebulous terminology, Field argues, impedes meaningful tax policy analysis, and the prospects for tax reform.  In order to bridge the gap between loophole rhetoric and substantive tax policy analysis, Field subsequently introduces a taxonomy of loopholes, divided along two axes.  First, tax loopholes may be categorized by reference to their normative policy objections. 

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June 16, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Sunday, June 11, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a new working paper by Jay Soled (Rutgers) and James Alm (Tulane), W(h)ither the Tax Gap?, 92 Wash. L. Rev. 521 (2017).

Scharff (2017)In their thoughtful new article, W(h)ither the Tax Gap?, Jay Soled and James Alm make a persuasive case that several economic trends are likely to narrow the tax gap in the near future.  As they note, such progress on tax compliance could play a significant role in closing the deficit. 

In particular, Soled and Alm highlight three trends that they suggest make it more likely that tax authorities will be able to improve compliance in the coming years.  First, the increasing reliance on electronic payments makes it more difficult for would-be tax cheats to hide income.  These days, even taxicabs, convenience stores, and valet attendants accept credit cards.  (Not to accuse all of these occupations of cheating, but those paid in cash can more easily hide their earnings.)  Second, as Soled and Alm observe, as the use of cash declines, “[t]hose who use cash, especially large denomination notes, will likely be flagged as potential tax evaders.”

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June 11, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, May 26, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new work by Chris William Sanchirico (Penn), Optimal Redistributional Instruments in Tax Policy and Law & Economics: Survey and Assessment, in The Oxford Handbook of Law & Economics, Vol. 1: Methodology and Concepts 321 (Francesco Parisi, ed., 2017)

Glogower (2016)In his new work, Chris Sanchirico surveys the current literature on the optimal redistributional instruments, which seeks identify the most efficient policy tool(s) for redistribution.

Sanchirico identifies three broad strands in the literature.  First, the tax substitution argument generally holds that redistribution is best accomplished through a tax on labor earnings, because redistribution through any other policy can be substituted for redistribution through the labor income tax, at a lower cost.  As Sanchirico has argued in prior work, however, the assumptions about labor income taxation underlying the tax substitution argument could similarly be used to justify optimal redistribution through other policies or instruments.

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May 26, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Friday, May 19, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews an article by Darien Shanske (Davis), The (Now Urgent) Case for State-Level Monitoring of Local Government Finances (or, One Way to Protect Localities from Trump's 'Potemkin Villages of Nothing'), forthcoming in the NYU Journal of Legislation and Public Policy: 

Scharff (2017)Darien Shanske’s forthcoming article on local government financing suggests reforms that might protect local governments from their own bad decisions.   The fiscal challenges facing local governments are enormous, and Shanske persuasively argues localities are ill equipped to deal with these problems on their own.  And his proposal responds to the variety of fiscal problems facing cities. There are problems both with the ways cities spend their revenue and also their revenue streams.  Too often, we foucs on only one side of this problem.

At the time Shanske wrote the paper, he was particularly worried about the possibility of a federal infrastructure plan that would flood local governments with public-private partnership opportunities that would fail to deliver promised benefits.  As Shanske’s title alludes to, Larry Summers denounced such infrastructure spending as a “Potemkin Village [] of nothing.”

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May 19, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, May 12, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Fabio Gaertner (Wisconsin), Jeffrey Hoopes (North Carolina), and Edward Maydew (North Carolina), Shareholder Wealth Effects of Border Adjustment Taxation.

HemelWho wins and who loses from a border-adjusted cash flow tax like the one proposed by House Republicans? Fabio Gaertner, Jeffrey Hoopes, and Edward Maydew seek to shed light on that question by examining stock market reactions to news about the House Republicans’ plan. Their topline result is that on days when news events make a border-adjusted cash flow tax look more likely, share prices of firms in high-import industries perform worse than the rest of the market.

Gaertner, Hoopes, and Maydew contribute to a fast-growing literature on the trade balance effects of border-adjusted cash flow taxation. I imagine that most readers of this blog have been following that debate, but for those who haven’t, a brief primer: A pure cash flow tax would tax businesses on revenues minus expenses. A border-adjusted cash flow tax allows an exemption for revenues from exports but denies a deduction for the cost of imports. 

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May 12, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, May 5, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Daniel Hemel (Chicago), The Federalist Safeguards of Progressive Taxation, 93 N.Y.U. L. Rev. ___ (2017):

Glogower (2016)In his new work, Daniel Hemel considers the distributional consequences of federalism doctrines protecting states from congressional overreaches.  Hemel argues that the anti-commandeering doctrine (which prevents Congress from compelling states to administer federal programs), the anti-coercion doctrine (which prevents Congress from effectively compelling states to administer federal programs through coercive offers) and the sovereign immunity doctrine (which prevents Congress from abrogating state sovereign immunity) all provide the states with valuable entitlements, that can be bargained away in exchange for federal funding.  In other words, states can choose to cooperate with federal government programs, instead of refusing on the basis of these doctrines, but the federal government will have to pay.  

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May 5, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 28, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews an article by Susanna Camic Tahk (Wisconsin), The New Welfare Rights, Brooklyn L. Rev. (forthcoming):  

Scharff (2017)Susannah Camic Tahk’s previous work has explored the “tax war on poverty,” as she calls it.  In her forthcoming article, Camic Tahk considers a potential upside of federal poverty policy’s shift from direct spending to refundable tax credits: the significant procedural protections afforded taxpayers.  Camic Talk’s article compares these taxpayer rights to the failure of War on Poverty lawyers to instantiate a “new property right” in welfare benefits and persuasively argues that these taxpayer rights rest on much more solid legal footing.  Camic Tahk’s article further suggests the ways that a taxpayer rights framework offers opportunities for improving the ways low income taxpayers interact with the IRS.

Camic Tahk’s paper begins by recounting the aspirations of the Great Society poverty law lawyers.  Drawing on accounts by historians and political scientists as well as legal academics, Camic Tahk explains how the hopes of these reformers were raised when Goldberg v. Kelly expanded due process rights, and how their hopes were dashed by the Eldridge v. Matthews balancing test.  Subsequent legislative changes, most prominently the passage of the Personal Responsibility and Work Opportunity Act (“PRWORA,” or, more commonly, welfare reform) further struck a blow to the idea that recipients might have due process claims when denied government benefits.  As Camic Tahk explains, post-welfare reform court decisions saw the PRWORA as explicitly attempting to avoid the entitlement language that would make benefits subject to Goldberg’s expansive endorsement of due process rights.

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April 28, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 21, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new article by Richard Schmalbeck (Duke), Jay Soled (Rutgers), and Kathleen DeLaney Thomas (North Carolina), Advocating A Carryover Tax Basis Regime, 93 Notre Dame L. Rev. (forthcoming 2017).

HemelCandidate Donald Trump’s campaign platform contained a cryptic line regarding the tax treatment of assets transferred at death: “The Trump Plan will repeal the death tax, but capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms.” Some read that to mean Trump would treat death as a realization event; others interpreted it to mean that Trump would allow inheritors to defer capital gains tax until they sold the inherited asset, but with carryover rather than stepped-up basis. No one was quite sure how the $10 million exemption would work. Would it apply to the first $10 million in transferred assets or the first $10 million in capital gains? (Unless the decedent’s basis is zero, those two things aren’t the same.)

To help us sort through these alternatives, Richard Schmalbeck, Jay Soled, and Kathleen DeLaney Thomas have produced an excellent article arguing for a carryover basis regime and against any exemption. Soled, Thomas, and James Alm of Tulane have published two shorter pieces in Tax Notes advocating a carryover basis regime limited to marketable securities. (See Soled, Alm & Thomas, A New Carryover Tax Basis Regime for Marketable Securities, 154 Tax Notes 835 (Feb. 13, 2017); Soled, Alm & Thomas, Trump and a Populist Agenda?, 154 Tax Notes 1131 (Feb. 27, 2017).) Soled, Thomas, and Alm also have condensed their argument into an op-ed for The Hill, distilling a complicated issue of tax law into clear language comprehensible to nonlawyers.

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April 21, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Friday, April 14, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a recent article by David P. Hariton (Sullivan & Cromwell), Planning for Border Adjustments: A Practical Analysis, Tax Notes, February 20, 2017.

Gamage (2017)The House Republicans’ proposal for a destination-based cash-flow tax (DBCFT) continues to inspire fascinating discussions among tax policy experts.  Important advances in our knowledge about how destination-based taxes can work, or fail to work, are occurring in real time through these discussions.  This will be my third blog entry praising a recent piece of scholarship as one of the best analyses of the DBCFT to date (see here and here for my previous entries).  Nevertheless, I hope I retain credibility in declaring Hariton’s new article to be essential reading for anyone hoping to understand how the DBCFT, or any other similar proposal reliant on federal-level border adjustments, might work in practice.

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April 14, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 7, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Shu-Yi Oei (Tulane), The Offshore Tax Enforcement Dragnet

Glogower (2016)In the late 1980’s, the tuna-eating public grew concerned with the ensnarement of dolphins in tuna nets.   Fisheries responding by changing harvest methods to avoid dolphin bycatch, and affixing “dolphin-safe tuna” labels to tuna cans.  The reassured public returned to their tuna sandwiches with clear consciences, evidently untroubled by the incongruity of canning and consuming one majestic ocean-dweller, while safeguarding another.  One wonders if an alternate society, with different preferences, would feel just as strongly about the ethics of eating tuna-safe dolphins.

Similarly, the U.S. government flings its net over the seas, and drags tax avoiders out of the murky depths of foreign financial institutions.  Shu-Yi Oei’s new work argues that FATCA and other initiatives designed to prevent offshore tax evasion by wealthy tax-avoiders have ensnared unintended bycatch, including recent immigrants to the U.S. who still hold assets in their home country, Americans expats living (and saving) abroad, and “accidental Americans” unaware of their U.S. citizenship.

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April 7, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 31, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a new working paper by Ben Meiselman (Michigan), Ghostbusting in Detroit:  Evidence on NonFilers from a Controlled Field Experiment.

Scharff (2017)As Ben Meiselman notes in the introduction to his new study of taxpayer compliance, there’s no marginal cost to making a tax authority’s written communication to a taxpayer more persuasive. In an era of likely increasing austerity in tax enforcement budgets at all levels of government, finding low-costs methods to increase compliance will become all the more important.  Field experiments have produced some information about effective messages, and Meiselman’s study adds to this research, but as I discuss after reviewing the paper’s findings, Meiselman’s account also raises questions about Detroit’s capacity to operate an income tax.

In the spring and early summer of 2016, Detroit sent both a postcard and a certified letter to 7,142 suspected “ghosts,” 2014 federal taxpayers with Detroit addresses who had failed to file a Detroit income tax return for that tax year.  A control postcard informed taxpayers that they would receive a letter in a few days about filing a tax return, and the subsequent letter informed the taxpayer that Detroit’s records indicated that she was a resident of Detroit and did not file a city tax return in 2014.

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March 31, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 24, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Wei Cui (University of British Columbia), Taxation Without Information: The Institutional Foundations of Modern Tax Collection.

HemelWei Cui’s new paper, Taxation Without Information: The Institutional Foundations of Modern Tax Collection, challenges the now-conventional wisdom that effective tax collection depends upon third party reporting. Cui suggests that effective tax collection in fact depends upon the existence of business firms for whom compliance with the law—tax as well as non-tax—is the norm. Cui argues that this insight should lead us to rethink our assumptions not only about modern tax collection, but also about modern business firms: “we should stop thinking of business firms as ‘fiscal intermediaries,’” Cui writes, and instead “conceive of firms as sites of social cooperation under the rule of law” (p. 3).

Cui’s paper is ambitious, important, and—I think—largely right. He has persuaded me that third party reporting is not nearly as integral to tax collection as I previously believed. If there is a weak point in his argument, it is this: the evidence he produces in support of his “social cooperation” theory is equally consistent with the claim that business firms facilitate legal compliance precisely because they fail to engender close cooperation among their members.

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March 24, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 17, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft article by John R. Brooks (Georgetown), The Definitions of Income, 71 Tax L. Rev. __ (forthcoming).

Gamage (2017)The question of “what is income” is often the starting point for law school tax courses. This question has also been the subject of a number of great debates in tax legal scholarship over the past century. Assessing some of these debates, Brooks argues that “income is not a pure, external concept, but actually a constructed concept that necessarily embodies policy, and therefore political, goals.” As Brooks explains, this conclusion echoes and builds on the arguments of prior giants of tax legal scholarship—especially Boris Bittker.

Brooks’s article makes valuable contributions in summarizing and assessing the intellectual history of debates over the “what is income” question.

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March 17, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 10, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by J. Clifton Fleming, Jr. (BYU), Robert J. Peroni (Texas) and Stephen E. Shay (Harvard), Defending Worldwide Taxation With a Shareholder-Based Definition of Corporate Residence 2016 BYU L. Rev. 1681 (2017).

Glogower (2016)Fleming, Peroni, and Shay’s new work proposes a shareholder-based test for determining corporate residence.  Under this test, a foreign corporation would be treated as a U.S. tax resident for a taxable year if 50% or more of its shares were beneficially owned by U.S. residents at the end of the preceding year.  The corporation will be treated as presumptively satisfying this test if its shares are traded on a U.S. market or are marketed to U.S. investors.  The presumption can be rebutted by either the corporation or the IRS, with evidence that the U.S. beneficial ownership of the shares is in fact below the 50% threshold.  Finally, corporations organized under U.S. law would remain domestic residents, as under current law, regardless of the shareholder composition.

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March 10, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 3, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (Arizona State) reviews a new article by Andrew Hayashi (Virginia) and Daniel Patrick Murphy (Virginia), Savings Externalities in a Second-Best World (Virginia Law and Economics Research Paper No. 2017-03):

Scharff (2017)We live in a brave new world of indefinitely low interest rates.  When I teach my basic tax students classic tax shelter cases, they are often shocked by the interest rates then available to the taxpayer. For many of my students, who began college well after 2008, the idea of significant interest income from a savings account is quite foreign. 

Hayashi and Murphy’s fascinating new paper explores the ways this new world of the Lower Zero Bound might affect our appraisal of savings incentives in the tax code and beyond, and along the way, they make a case for considering macroeconomic consequences of tax policy more broadly, following some recent work by Yair Listokin, among others.

Their paper begins by providing a concise overview of two traditional justifications for tax-induced savings and savings default interventions.  As they write, “private savings are invested by institutions where they are deposited and investment leads to increased economic growth, which is good for everyone.”  The second justification is rooted in the now familiar behavioral economic insight that many of us are grasshoppers, and not ants.  (Those reading carefully might note the paper’s second footnote is a citation to Aesop, which always makes me wonder how classical economic assumptions ruled for so long.) 

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March 3, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 24, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new working paper by David M. Schizer (Columbia), Subsidies and Nonprofit Governance: Comparing the Charitable Deduction with the Exemption for Endowment Income (Columbia Univ. Sch. of Law, Ctr. for Law & Econ. Studies, Working Paper No. 558, 2017).

HemelDavid Schizer’s new paper offers a fresh take on two long-running debates in tax law: should we allow a deduction for charitable contributions, and should we exempt the passive investment income of charities from tax? Schizer’s central claim is that the exemption (but not the deduction) distorts donors’ decisions as to the timing of charitable contributions—and, specifically, that the exemption inefficiently encourages donors to accelerate their giving. This post summarizes Schizer’s argument and then offers a reason why the deduction, at least in its current form, might distort donors’ decisions as to the timing of charitable contributions in the opposite direction.

The tax exemption for passive investment income earned by charities “creates an important inconsistency,” writes Schizer: “If donors keep an investment, their return (generally) is taxable. But if they donate the investment to charity, the return is no longer taxed” (p. 16). This gives the donor “a tax incentive to transfer assets to charities, and thus to give up control of these resources” (p. 20). That “can have two unfortunate effects,” according to Schizer: “it can erode the motivation and ability of charities to change with the times, and also can impede the ability of donors to monitor the performance of managers.” And while acknowledging that endowments might be desirable under some circumstances, Schizer writes that “it is hard to see why the tax law should put a thumb on the scale” (p. 24). 

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February 24, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (2)

Friday, February 17, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new piece by Michael Graetz (Columbia), The Known Unknowns of the Business Tax Reforms Proposed in the House Republican Blueprint, Columbia Law and Economics Working Paper No. 557.

Gamage (2017)How should we evaluate the House Republicans’ proposals for adopting a destination-based cash-flow tax (“DBCFT”)?  This is among the most important tax policy question currently facing the United States.  Yet this question is difficult to analyze, in part, because of uncertainty about what the proposed DBCFT might turn out to be if implemented.

To survey this quagmire, Graetz offers what is essentially just a list of questions, presented on PowerPoint slides printed to PDF.  Nevertheless, I found Graetz’s work to be by far the most helpful document for understanding the House Republicans’ DBCFT proposal that has been made available to date.

To highlight just a couple points raised by Graetz’s list of questions: 

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February 17, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 10, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Chris Sanchirico (Penn), Business Investment in the Tax Reform Blueprint

Glogower (2016)Since its release last June, the business tax provisions of the GOP House’s tax reform plan (“the reform plan”) have garnered intense interest, and improbably trending hashtags.  Much of the focus has centered on the border adjustment, which taxes imports but exempts exports, and its implications for the dollar and trade agreements.  (For example, Problems with Destination-Based Corporate Taxes and the Ryan Blueprint, by Reuven Avi-Yonah (Michigan/UC-Irvine) and Kimberly Clausing (Reed)).  Sanchirico’s new work, in contrast, examines two other related provisions in the reform plan: immediate expensing for business investments, and disallowance of a deduction for a business’ net interest expenses.

The conventional wisdom, as reflected in the reform plan, is that businesses would prefer the reform package of expensing plus interest non-deductibility to current law, which generally allows accelerated depreciation and interest deductions. Sanchirico’s work challenges this assumption, as well as the related arguments that the reform package will incentivize investment and encourage more efficient investment and financing decisions. 

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February 10, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 3, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (ASU) reviews reviews a new essay by Sas Ansari (Osgoode Hall) and Lorne Sossin (Osgoode Hall), Legitimate Expectations in Canada:  Soft Law and Tax Administration

Scharff (2017)How exactly do non-experts understand tax law, and what is the role of the tax administrator in disseminating information about the law to (non-expert) taxpayers?  These are two critically important questions for tax administration.  While tax lawyers pride themselves on their mastery of the complex, often highly technical language of the Internal Revenue Code, lawyers are typically the last line of defense when it comes to income tax compliance.  Most taxpayers won’t even consult an accountant for tax advice. 

Recent work has brought renewed attention to these questions. For example, Shu-Yi Oei and Diane Ring have explored how Uber and Lyft drivers navigate tax questions, and Josh Blank and Leigh Osofsky have criticized the ways IRS taxpayer publications describe tax law.  

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February 3, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 27, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new article by Michael Doran (Virginia), Uncapping Executive Pay, 90 S. Cal. L. Rev. (forthcoming 2017).

HemelMichael Doran’s scholarship on the taxation of executive pay is consistently insightful, and his latest article on section 162(m) is no exception. That provision, enacted in 1993, disallows a deduction for amounts paid to CEOs and other top officers of publicly traded corporations in excess of $1 million unless such compensation is “performance-based.” Doran convincingly argues that section 162(m) has done little to stem the rise of CEO compensation and that it has not caused corporations to tie pay to performance in a meaningful way. And while I am less sure than Doran that section 162(m) should be scrapped, Doran certainly makes a strong case for getting rid of the provision.

According to Doran, section 162(m) has proven to be a failure for at least three reasons. First, firms can skirt the $1 million limit by paying CEOs in stock options or by tying compensation to performance goals that are easily met. Second, the provision applies only to current employees—and so does not impose any constraints on nonqualified deferred compensation paid out to former CEOs. And third, corporations can ignore the cap, pay their CEOs more than $1 million outright, and simply forgo the deduction for amounts over $1 million paid. Indeed, more than a quarter of publicly traded corporations in 2013 blew through the cap and gave up the deduction.

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January 27, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 20, 2017

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new article by Linda Sugin (Fordham), Invisible Taxpayers, 69 Tax L. Rev. 617 (2016).

Gamage (2017)Linda Sugin’s new article engages with important problems related to the taxpayer standing doctrine.  Sugin persuasively and powerfully critiques what she calls “the broad no-taxpayer-standing rule” that prevents most taxpayers from accessing the court system to challenge tax benefits awarded to other taxpayers.  As Sugin explains, “the broad no-taxpayer-standing rule” operates even when important constitutional values are at stake and even when tax benefits are awarded through administrative discretion rather than by an act of Congress. 

Sugin partially rests her analysis on arguing that tax fairness consists of more than just economic fairness.  As she elaborates:

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January 20, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 13, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Omri Marian (UC-Irvine), The Other Eighty Percent: Private Investment Funds, International Tax Avoidance, and Tax-Exempt Investors, BYU L. Rev (forthcoming 2016).

Glogower (2016)Omri Marian’s new work highlights the role of private investment funds (“PIFs”) in international tax planning and avoidance by PIF-controlled multinational enterprises (“MNEs”).  Marian argues that PIFs active in cross-border investments can take advantage of tax planning opportunities unavailable to purely domestic funds, and provides evidence that PIF-controlled MNEs are more likely to engage in aggressive planning.  Consequently, income earned by PIFs can more readily escape taxation entirely, in both the source jurisdiction where investments are made, and in the residence jurisdiction of investors and managers.   

This groundbreaking work lies at the intersection of two literatures, on cross-border tax planning by MNEs, and on the taxation of PIFs, and fills critical gaps in both.  The MNE literature, Marian notes, generally focuses on tax planning by corporate MNEs, particularly in industries with mobile IP such as technology and pharmaceuticals, but not on the role of investor and PIFs in MNE tax planning.  Marian’s work also calls for (and makes significant strides towards) a broader account of the full scope PIF tax planning activities, beyond traditional areas of concern such as manager compensation and carried interest. 

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January 13, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 6, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (ASU) reviews a new paper by Jeffrey L. Hoopes (UNC), Leslie A. Robinson (Dartmouth), and Joel B. Slemrod (Michigan), Public Tax-Return Disclosure.

Scharff (2017)Calls for corporations to pay their fair share of taxes assume that corporations aren’t ponying up the way they should. But when it comes to individual companies, it can be hard to know what they are paying at all.

As a step toward reforming the system, reformers have called for increasing the public disclosure of corporate tax-return information. Jeffrey Hoopes, Leslie Robinson, and Joel Slemrod suggest reformers hope disclosure will achieve two goals. First, making this information public might limit tax evasion. Second, such disclosures might also provide information useful to investors.

As a result of reforms enacted in 2013, the Australian Tax Office (ATO) began releasing tax-return data (total income, taxable income, and tax payable) for about two thousand of Australia’s largest firms, as defined by income in 2015. The initial disclosures were all released on two specific dates. For large multinational corporations and Austrialian-owned public corporations, the ATO released tax information on December 17, 2015.

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January 6, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, December 30, 2016

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Eric J. Allen (Southern California) and Susan C. Morse (Texas), The Effective Income Tax Experience of U.S. and Non-U.S. Multinationals.

HemelAs our incoming President likes to remind us, the United States has the highest corporate tax rate in the world. Well, not quite the highest—the United Arab Emirates beats us with a 55% rate. But according to data from the Organisation for Economic Co-operation and Development, the U.S. corporate income tax rate is approximately 15 percentage points above the average among other OECD member countries.

Yet as readers of this blog no doubt know, statutory rates can be misleading measures of true tax burdens. In a newly posted paper, Eric Allen and Susan Morse seek to determine whether U.S. multinational corporations actually pay more than their foreign counterparts—and if so, how much more. Allen and Morse focus on multinational firms that have a “material U.S. presence” (e.g., more than a quarter of sales in the United States). Allen and Morse ask: Controlling for the location of sales (among other factors), what is the effect of having a non-U.S. parent on the multinational firm’s effective tax rate? They separately analyze firms in profit years and firms in loss years.

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December 30, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, December 23, 2016

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (UC-Berkeley, moving to Indiana) reviews a new article by Reuven Avi-Yonah (UC-Irvine) and Kimberly A. Clausing (Reed), Problems with Destination-Based Corporate Taxes and the Ryan Blueprint.

Gamage (2017)The House Republicans’ plans to reform the U.S. corporate tax have been the talk of tax policy town, as of late.  Based to at least some extent on the work of my soon-to-be-former colleague Alan Auerbach, the reforms being discussed would transform the corporate tax into a destination-based cash-flow form of taxation.   

Avi-Yonah and Clausing’s draft article critiques these plans.  As they conclude (p. 16):

“The Ryan Blueprint destination based cash-flow tax is not ready for prime-time. No other country had adopted a similar tax, and as the above analysis makes clear, there are myriad issues that would need to be worked through before any such tax were adopted. These issues are not small: the plan is incompatible with trade rules in a manner which harms our trading partners, it is incompatible with our treaty obligations, it is unlikely to put an end to income shifting, it generates political problems due to large numbers of companies that would experience adverse tax treatment changes, and it is likely to generate large revenue losses. In addition, there are important issues surrounding how exporters with losses would be handled (which could lead to inefficient mergers, etc.), how financial firms would be handled, and how U.S. state corporate tax systems would be affected.”  

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December 23, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, December 16, 2016

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Donald Marron (Urban Institute), Goldilocks Meets Private Equity: Taxing Carried Interest Just Right, 31 Tax Policy and the Economy (Urban Institute & Brookings Institution Tax Policy Center, 2016).

Glogower (2016)Policy debates over carried interest reform generally focus on the benefits to the carry recipient: the fund manager.  Marron’s article takes a fresh look at the issue by instead considering the tax consequences of the carried interest payment to the fund’s other investors.  

Like other advocates of carried interest reform, Marron argues that current law, which taxes carried interest at a preferential rate to the extent paid from the fund’s capital gains and qualified dividends, undertaxes managers for their labor on behalf of the fund (in Marron’s terminology, the “Labor Services View”).  The preferential treatment of carried interest also presents an arbitrage game, whereby a fund’s nontaxable investors can pass the benefits of preferential tax rates to the managers, while capturing a portion of this benefit by paying the managers less (the “Joint Tax View”). 

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December 16, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (2)

Friday, December 9, 2016

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Edward D. Kleinbard (USC), The Right Tax at the Right Time.

HemelEdward Kleinbard’s newest paper lays out the case for a “Dual Business Enterprise Income Tax,” or “Dual BEIT,” as an alternative to the existing patchwork of federal taxes on business income. Readers familiar with Kleinbard’s past work know that he is a powerful analyst and a crystal-clear writer, and this paper is no exception. For reasons I explain below, I am not sure that a Dual BEIT is the “right tax” for our time, but all can agree that Kleinbard’s proposal is an important contribution to the business tax policy debate.

In a prior paper, Kleinbard explained why he thinks the United States should tax capital income annually at a flat rate; the latest installment explains why he thinks a Dual BEIT is the best way to achieve that result. In brief, a Dual BEIT would consist of a flat-rate entity-level tax on profits and a flat-rate investor-level tax on “normal returns.”

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December 9, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, December 2, 2016

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (UC-Berkeley, moving to Indiana) reviews a new article by Walter Hellerstein (Georgia), Taxing Remote Sales in the Digital Age: A Global Perspective, 65 American University Law Review 1195 (2016).

Gamage (2017)Walter Hellerstein’s new article represents comparative legal scholarship at its best.  Hellerstein’s article analyzes the OECD’s recently issued International VAT/GST Guidelines so as to discuss the lessons for the design and reform of U.S. state-level retail sales taxes.  In doing so, the article argues that U.S. retail sales taxes (RSTs) should tax remote sales and should do so based on the destination principle.  The article then analyzes how RSTs should be reformed so as to best accomplish these goals.

Hellerstein is persuasive in arguing that RSTs should tax remote sales. His article offers important guidance for how RSTs should ideally be reformed. But how can we get there in light of the politically and judicially imposed constraints that currently confront U.S. state governments? I would rank the most plausible paths to reform as follows:

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December 2, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)