TaxProf Blog

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

Friday, May 18, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Cauble's Superficial Proxies For Simplicity In Tax Law

This week, Mirit Eyal-Cohen (Alabama) reviews a new article by Emily Cauble (DePaul), Superficial Proxies for Simplicity in Tax Law:

Mirit-Cohen (2018)In her article, Cauble reminds us that tax laws are always a popular target for political rhetoric. She aims in this Article to derail the public discourse about the concept of tax simplification by highlighting the dangers of focusing solely on numeric metrics relating to volume in order to describe complexity. We often hear unsophisticated, superficial proxies of tax complexity such as word counts, page counts, number of regulations, and other metrics. For example, there is much commentary that points to the length of IRS publications or tax forms instructions as evidence of the intricate nature of tax law. According to Cauble, these often leave the public susceptible to policies under the appearance of simplification while their real purpose is much more than that. They enable politicians to advance provisions under the guise of achieving simplicity – a prospect with broad appeal - when the true effect of the proposal is something that would be much less popular. She exemplifies with the latest tax legislation that while the rhetoric around the proposal to remove some tax brackets may have portrayed it as a simplification move, in her opinion its real goal was to reduce progressivity. 

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May 18, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (2)

Friday, May 11, 2018

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Wallace's Centralized Review of Tax Regulations

This week, Ari Glogower (Ohio State) reviews a new work by Clint Wallace (South Carolina), Centralized Review of Tax Regulations, 70 Ala. L. Rev. __ (2018).

Glogower (2016)When and how should tax regulations be subject to centralized review by the White House Office of Management and Budget (OMB)? Clint Wallace’s new work considers these timely questions. 

The work begins by describing the somewhat unique role of tax regulations among agency actions. Executive Order 12,866 generally requires that “significant” regulatory actions by agencies must be reviewed by the OMB’s Office of Information and Regulatory Affairs (OIRA). This process generally includes, among other considerations, a cost-benefit analysis by OIRA, interagency review, and in some cases analysis of a rule’s distributional effects.

Tax regulations, however, which are developed by the IRS Chief Counsel’s Office and the Treasury Office of Tax Policy, have generally not been subject to substantive OIRA review. Until recently, tax regulations have historically been characterized as “interpretative” rules that merely effectuate congressional policy, but do not independently have the force and effect of law, and are consequently not subject to EO 12866.  

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May 11, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, May 4, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Luke's Captivating Deductions

This week, Sloan Speck (Colorado) reviews a new work by Charlene D. Luke (Florida), Captivating Deductions, 46 Hofstra L. Rev. __ (forthcoming 2018).

Speck (2017)Charlene Luke’s excellent article, Captivating Deductions, analyzes the tax treatment of captive insurance arrangements under current law and proposes reforms that would better align the treatment of such insurance arrangements with a normative Haig-Simons income tax base. Luke focuses on the treatment of insurance premiums from the insured’s perspective, rather than the special treatment afforded to insurance companies under the Code. For these insureds, captive insurance arrangements can convert non-deductible savings into deductible business expenses, with an added tax benefit if the insurance company can avoid current taxation on returns to any investments made with premiums received. Luke casts such (abusive) arrangements as “in substance, designer investment contracts,” and Luke’s reading of judicial and administrative guidance in this area as fundamentally misguided is undeniably correct.

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May 4, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 27, 2018

Weekly SSRN Tax Article Review And Roundup: Scharff Reviews Cauble's Accessible Reliable Tax Advice

This week, Erin Scharff (Arizona State) reviews a new article by Emily Cauble (DePaul), Accessible Reliable Tax Advice, 51 U. Mich. J. L. Ref. 589 (2018):

Scharff (2017)The U.S. legal system requires all parties, both sophisticated and unsophisticated, to navigate its shoals.  Sometimes the results are tragic, as preschoolers must represent themselves in immigration court. (John Oliver was quick to find some humor in this absurdity.)  But even in less extreme examples, non-experts can find themselves thwarted, confused, and frustrated in their attempts to comply with the law or assert their legal rights.  For example, victims of sexual harassment and discrimination in the workforce report difficulties navigating complex reporting processes.    Lawyers and other specialists provide guidance to a small subset of this population, but those without access to experts are quite obviously disadvantaged.

Tax law, of course, is a quintessential example of a complicated system of legal rules enforced against both sophisticated and unsophisticated parties.  Emily Cauble’s latest article, Accessible Reliable Tax Advice, explores the challenges confronting unsophisticated taxpayers as they prepare their returns and seek tax advice and offers some suggestions to improve the situation.

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April 27, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 20, 2018

Weekly SSRN Tax Article Review And Roundup: Stevenson Reviews Sugin's Competitive Philanthropy

This week, Ariel Jurow Stevenson (NYU; moving to San Diego) reviews a new work by Linda Sugin (Fordham), Competitive Philanthropy: Charitable Naming Rights, Inequality, and Social Norms, 79 Ohio St. L. J. __ (2018).

StevensonDespite decades of research, experts have not reached a firm conclusion regarding whether and how much the charitable deduction increases giving. As Linda Sugin convincingly argues in her recent article, this uncertainty should not counsel towards abandoning the deduction, but rather embracing it for the key social functions it performs. Shifting the focus away from economic factors, Sugin explains that the charitable deduction is important for signaling the value of communal support and deconcentrating wealth at the top of the income distribution. Sugin’s article offers a timely and vital critique of the charitable deduction literature’s overly narrow focus on economic analysis, and suggests a novel policy solution directed at today’s pressing social problems.

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April 20, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 13, 2018

Weekly SSRN Tax Article Review And Roundup: Mazur Reviews Morse's Government-To-Robot Enforcement

This week, Orly Mazur (SMU) reviews a new work by Susan C. Morse (Texas), Government-To-Robot Enforcement, 2018 U. Ill. L. Rev. ___.

Mazur (2017-2)As Tax Day approaches, millions of people are using tax software, such as TurboTax, to prepare their tax returns. But what if you make a legal error on your tax return as a result of the tax preparation software? Under current law, the legal liability for the error is directly on you - the taxpayer.

In her new work, Susan Morse proposes to fundamentally change the way regulatory law is enforced. She proposes government-to-robot enforcement. Specifically, Morse argues that an automated law system, which is any machine that produces a legal determination, should be held directly liable for compliance errors made by its users. Therefore, if you use TurboTax to prepare your taxes and you correctly input your facts, but the system produces a return that understates your tax liability, you would not be directly liable for this error. Instead, if the error is discovered, the IRS would pursue enforcement against and impose liabilities directly on TurboTax.

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April 13, 2018 in Orly Mazur, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, April 6, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Satterthwaite's Smallness And The Value-Added Tax

This week, Mirit Eyal-Cohen (Alabama) reviews a new article by Emily Ann Satterthwaite (Toronto), On the Threshold: Smallness and the Value-Added Tax, 9 Colum. J. Tax L. ___ (2018) (also reviewed by Erin Scharff (Arizona State) here):

Mirit-Cohen (2018)In her article, Satterthwaite puts a powerful spotlight on the role of fairness in value-added taxation (“VAT”), which has gained much global traction and become one of the most dominant revenue instruments across the world. The VAT has been adopted by over 150 countries that comprise about 75% of the world’s population, and accounts for more than 20% of worldwide tax revenue raised. Satterthwaite utilizes this increasing global interest in the VAT as well as the growing appreciation of entrepreneurship and small businesses to address optimal VAT base and design issues. 

This Article examines one of the most important features of the VAT to small business and entrepreneurs—the exemption for businesses that meet the definition of a “small supplier.” Such exemptions relieve firms under a certain size (usually annual revenues) from the need to to register for and charge VAT at the point of sale. But what is the optimal VAT registration threshold? Satterthwaite begins to answer this question by exploring the economic literature that supports placing a higher floor and exempting a larger number of firms for efficiency reasons.

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April 6, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, March 30, 2018

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

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

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

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

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

Friday, March 23, 2018

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

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

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

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

Friday, March 16, 2018

Weekly SSRN Tax Article Review And Roundup: Scharff Reviews Satterthwaite's Smallness And The VAT

This week, Erin Scharff (Arizona State) reviews a new article by Emily Ann Satterthwaite (Toronto), On the Threshold: Smallness and the Value-Added Tax, 9 Colum. J. Tax L. ___ (2018):

Scharff (2017)Emily Satterthwaite’s latest article explores the ways tax law should reflect the needs (and especially the relatively high-compliance costs) of small businesses. Her focus is on Value-Added Taxes (VATs) and, in particular, on the VAT exemption threshold.  

Though there is widespread expert agreement that VATs should exempt small firms, there is significant variation in the VAT thresholds, particularly among developing countries. Further, exemption thresholds are often set much lower than what VAT experts have recommended for optimal efficiency. Satterthwaite’s article argues that this expert recommendation not only advances efficiency goals, but would also improve distributional equity.

Satterthwaite does yeomen’s work in making her argument accessible, particularly to U.S. readers who might be less familiar with the way VATs operate, and the first part of her article is an excellent and highly accessible introduction to VATs and its relative advantages over cascading turnover taxes and retail sales taxes. 

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March 16, 2018 in Erin Scharff, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Monday, March 5, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Wallace & Glogower's Shades Of Income

This week, Mirit Eyal-Cohen (Alabama) reviews Shades of Basic Income by Clint Wallace (South Carolina) & Ari D. Glogower (Ohio State).

Mirit-Cohen (2018)Clint Wallace and Ari Glogower wrote this timely article as we witness expanding enthusiasm for the idea of Universal Basic Income among researchers, policymakers, and representatives across the political range. The Article begins by providing the definition and fundamental pillars of the basic income concept. The concept, which was proposed more than two hundred years ago by Thomas Paine, encompasses direct and unconditional cash transfers that are “not of the nature of a charity but of a right “from a government to its adult citizens. The Article goes on to outline the shared traits and contrasts between basic income and features of the current progressive tax system such as the personal exemption and standard deduction. It differentiates basic income from other government transfer programs by emphasizing that basic income transfers money to beneficiaries (even those without taxable income), it is generally awarded to all designated adult citizens with minimal conditions for eligibility, and usually places no restrictions on the use of the grant. The Article uses four hypothetical taxpayers to exemplify these effects of basic income: low-income (income up to $1,000), lower-middle-income (income up to $30,000), upper-middle-income (income up to $80,000), and high-income (income above $180,000). Meant to illustrate a point, these examples could work similarly when using present day amounts to reflect these classes. The authors conclude there are many familiar analogues between the way the progressive tax and basic income designs work, which makes the concept of basic income, in their opinion, not so much the exotic policy tool that is claimed to be by some of its critics.

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March 5, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 23, 2018

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Aprill & Hemel's A Byrd's Eye View Of The Tax Legislative Process

This week, Ari Glogower (Ohio State) reviews a new work by Ellen P. Aprill (Loyola-LA) and Daniel Hemel (Chicago), The Tax Legislative Process: A Byrd's Eye View, 81 Law & Contemp. Probs. ___ (2018).

Glogower (2016)Ellen Aprill and Daniel Hemel’s timely and enlightening new essay described the effect of the Byrd Rule on tax legislation and policy since its adoption in 1985. Named for former Senator Robert Byrd (D-WV), the rule limits the scope of legislation that can be passed in the Senate by a simple majority through the budget reconciliation process.

The 1974 Congressional Budget Act allowed for the reconciliation process as a way for Congress to pass revenue-related legislation and avoid the threat of a “filibuster”—and specifically to avoid the supermajority requirement (now 60 votes) for cloture ending debate on a measure in the Senate. The Byrd Rule, in turn, limits the ability to pass additional measures through this process that are not revenue-related. In particular, the rule precludes provisions that are “extraneous” to the reconciliation instructions as specified in a budget resolution that must be passed first authorizing an increase in outlays or revenues up to a specified amount over a specified budget window.

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February 23, 2018 in Ari Glogower, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 16, 2018

Weekly SSRN Tax Article Review And Roundup: Scharff Reviews Shaviro's A Requiem For The Destination-Based Cash Flow Tax

This week, Erin Scharff (Arizona State) reviews a new working paper by Daniel Shaviro (NYU), Goodbye To All That:  A Requiem for the Destination-Based Cash Flow Tax.  

Scharff (2017)In teaching tax policy, I tend to focus on the core tax policy ideas of efficiency, fairness, and administrability, and I explicitly side step questions of government spending.  In thinking about the 2017 tax legislation, and, especially after reading Shaviro’s latest working paper, I question whether such debates can be so neatly self-contained.  The story Shaviro tells of the demise of the Destination-Based Cash Flow Tax (DBCFT) proposal is, in part, a story about what happens when tax policy gets debated in that vacuum.  Policy debates overly-focused on the right choice of tax instrument inherently obscure the debate about revenue sufficiency and the potential need for multiple tax instruments. 

I was privileged to hear Shaviro present an earlier draft of this paper at this fall’s National Tax Association conference, before we all were quite certain where the 2017 tax legislation was heading (or whether it would head anywhere at all.)  In the paper (as in the presentation), Shaviro is quite critical of the DBCFT proposal.  For Shaviro, the chief advantage of the DBCFT was the packaging of the idea as corporate tax reform, and its failure to be adopted in 2017 suggests “wholly discarding the DBCFT as a discussion vehicle for its underlying policy ideas.” 

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February 16, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 9, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Herzig's The Income Equality Case For Eliminating The Estate Tax

This week, Sloan Speck (Colorado) reviews a new work by David Herzig (Valparaiso), The Income Equality Case for Eliminating the Estate Tax, 90 S. Cal. L. Rev. 1143 (2017).

Speck (2017)David Herzig’s forthcoming article, The Income Equality Case for Eliminating the Estate Tax, has a bombshell for a title, juxtaposing two ideas—income equality and estate tax elimination—that at first blush may seem in tension. Herzig, however, spends much of his excellent article carefully explicating and emphasizing the interaction between the estate tax and the income tax, both in historical terms and as a current area of policy concern. Essentially, Herzig argues that estate tax planning enables income tax avoidance among high-income and high-wealth households. Giving these households a choice between tax instruments guarantees lower revenues from a group that should pay more under a progressive tax system. From this deep and nuanced framework, Herzig draws a series of policy prescriptions. Only after teasing out the political impediments to an ideal solution does Herzig turn to estate tax repeal as a possible second-best outcome—and a potential improvement on today’s patchwork agglomeration of estate, gift, and income tax rules.

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February 9, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, February 2, 2018

Weekly SSRN Tax Article Review And Roundup: Mazur Reviews Cockfield's How Countries Should Share Tax Information

This week, Orly Mazur (SMU) reviews a new work by Arthur J. Cockfield (Queen’s University), How Countries Should Share Tax Information.

Mazur (2017-2)Arthur Cockfield’s new work examines how tax authorities can better share tax information. In recent years, exchange of information (EOI) between countries has dramatically increased as governments worldwide have sought to protect their tax base from offshore tax evasion, international money laundering and aggressive international tax avoidance. Recent initiatives have ranged from the United States’ unilateral enactment of the Foreign Account Tax Compliance Act to the promotion of bilateral tax information agreements to multilateral efforts to share tax information, such as the common reporting standard and country-by-country reporting. Despite significant progress in this area, it remains questionable how effective these EOI reforms have been in practice.

In his new work, Cockfield persuasively argues that the current international tax regime will likely limit the effectiveness and fairness of these EOI initiatives. 

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February 2, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 26, 2018

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Goldin's Tax Benefit Complexity And The EITC

This week, Ari Glogower (Ohio State) reviews a new work by Jacob Goldin (Stanford), Tax Benefit Complexity and Take-Up: Lessons from the Earned Income Tax Credit.

Glogower (2016)Jacob Goldin’s new work examines methods to increase taxpayer take-up of tax benefit programs such as the Earned Income Tax Credit (EITC). Although it is hard to determine the precise number of households that potentially qualify for the EITC, the IRS estimates that only around 80% of qualifying taxpayers claim the benefit, leaving a take-up gap of around 5 million households. The EITC significantly reduces poverty in the U.S., and therefore increasing take-up could direct more financial support to the taxpayers who can benefit from it the most.

The work considers the barriers that taxpayers face in claiming benefits such as the EITC, and the most effective ways to overcome these barriers. In short, Goldin argues that the government should focus on incentivizing taxpayers to file tax returns—and reducing filing costs—rather than increasing general awareness of the existence of specific tax benefit programs.

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January 26, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 19, 2018

Weekly SSRN Tax Article Review And Roundup: Scharff Reviews Federal Tax Treatment Of Charitable Contributions For State Tax Payments

This week, Erin Scharff (Arizona State) reviews a working paper by Joe Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford), Daniel Hemel (Chicago), Darien Shanske (Davis), Kirk Stark (UCLA), Dennis Ventry (Davis), & Manoj Viswanathan (Hastings), Federal Income Tax Treatment of Charitable Contributions Entitling Donor to a State Tax Credit.   

Scharff (2017)One of the most important lessons I learned in law school is that legal rules are often less ideological than the context from which they emerge.  It is a lesson I’ve thought about repeatedly this past year, as questions about state standing to sue the federal government and the validity of nationwide injunctions are raised by new parties against a new administration.  I hadn’t, however, seriously considered the way such lessons might apply to substantive tax law.

Of course, it was foolish to think that tax law would be immune from this larger trend.  In response to the 2017 tax legislation’s dramatic curtailment of the state and local tax deduction, several scholars and policymakers have been exploring the possibility that high tax states might want to offer state tax credits for charitable donations made to the state.  As someone long skeptical of my state’s use of charitable tax credits, I’ve find this sudden progressive interest in state tax credits bemusing and intriguing.

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January 19, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration, Weekly SSRN Roundup | Permalink | Comments (1)

Friday, January 12, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mehrotra's Taxation And The Modern Liberal State

This week, Sloan Speck (Colorado) reviews a new work by Ajay Mehrotra (American Bar Foundation; Northwestern), Fiscal Forearms: Taxation as the Lifeblood of the Modern Liberal State, in The Many Hands of the State: Theorizing the Complexities of Political Authority and Social Control (Kimberly Morgan & Ann Orloff eds., Cambridge University Press 2017).

Speck (2017)Ajay Mehrotra’s forthcoming book chapter, Fiscal Forearms, serves as a meditation on, and an expansion of, the important ideas advanced in his 2013 monograph, Making the Modern American State. Mehrotra, like the larger edited volume in which his chapter falls, starts from Bourdieu’s metaphor of the state divided into spending and fiscal spheres: a “left hand” comprised of (in Bourdieu’s words) the “social workers . . . which are the trace, within the state, of the social struggles of the past,” and a “right hand” made up of the ministers and technocrats at the treasury, as well as the public and private banks that underwrite the state. Mehrotra develops this metaphor, describing fiscal administration as “the forearms of the body politic” and taxation itself as “the lifeblood of the modern state.” More critically, Mehrotra challenges the claim that social struggle leaves an imprint only on the spending side of the ledger, showing through historical examples that taxation—and especially income taxation—is a contested concept deployed to construct relationships between state and citizen and in service of societal change.

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January 12, 2018 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, January 5, 2018

Weekly SSRN Tax Article Review And Roundup: Mazur Reviews Barry's Taxation, Innovation, And The Sharing Economy

This week, Orly Mazur (SMU) reviews a new work by Jordan Barry (San Diego), Taxation and Innovation: The Sharing Economy as a Case Study.

Mazur (2017-2)Innovation drives economic growth. Thus, encouraging innovation is a worthwhile and necessary endeavor. However, the tools we currently use to promote innovation are not always effective at reaching this desired result. So what can we do to improve the growth of innovation in the United States? Jordan Barry’s new work contributes to the existing literature on this important topic by considering the relationship between the U.S. federal income tax system and innovation.

Barry uses the sharing economy as the focal point of his paper to demonstrate that tax policy is a questionable tool for encouraging innovation. As Barry explains, the growth of our current economy relies significantly on the research and development activities of relatively small and new companies. But the majority of these companies do not take advantage of tax policies that are designed to achieve the goal of encouraging innovation. (For another recent work that uses empirical evidence to demonstrate this phenomenon, see Susan Morse and Eric Allen’s, Innovation and Taxation at Start-Up Firms, 69 Tax L. Rev. 357 (2016)). Moreover, these tax incentives often can lead to unexpected results that may not align with sound policy.

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January 5, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Friday, December 22, 2017

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Hasen's The Tax Treatment Of Gifts

This week, Ari Glogower (Ohio State) reviews a new work by David Hasen (Florida), How Should Gifts Be Treated Under the Federal Income Tax?, 2018 Mich. St. L. Rev. __ (forthcoming). 

Glogower (2016)David Hasen’s new work revisits the question of how gifts should be treated under the income tax.  His essential point:  It depends.

Consider the simple case of donor A making a gift to donee B. There are three plausible treatments under the income tax: (1) single donor tax (no deduction to A and B excludes), which is the treatment under current law, (2) single donee tax (A deducts and B includes), and (3) double tax (no deduction to A and B includes). 

How is one to choose? Hasen argues that there is no clear answer, because there is no clear normative definition of income that would suggest one answer or another. Rather, the income definition, and its implication for the proper taxation of gifts, will depend upon one’s normative views on the purpose and shape of the tax system.

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

Friday, December 8, 2017

Weekly SSRN Tax Article Review And Roundup: 12 Tax Profs Highlight Flaws Of GOP Tax Plan

This week, David Gamage (Indiana) discusses a new report, The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation

Gamage (2019)The House and Senate Republicans’ tax bills are now headed to conference.  This may well turn out to be the most substantial new tax legislation since 1986. It threatens to be overwhelming to even list the ways in which these bills might transform important aspects of the U.S. economy. 

Given the massive scale and importance of this legislative effort, it is imperative that the new legislation be considered carefully and deliberately. Unfortunately, Republican leadership is currently rushing to meet a self-imposed deadline of passing this legislation before December 22nd.

I agree with some of the policy goals underlying these bills, and disagree with others. Yet whatever one thinks of these broad policy goals, draftsmanship is also important. Without careful drafting, tax law provisions can easily have numerous unintentional harmful effects.

Led by the primary drafters of Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn), and Darien Shanske (UC-Davis), this new report explains some of the “games, roadblocks, and glitches” in these bills.  Nine other signatories also joined as signatories and secondary drafters of this report, and—full disclosure—I am one of these additional co-drafter/signatories.

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December 8, 2017 in Scholarship, Tax, Tax Policy in the Trump Administration, Weekly SSRN Roundup | Permalink | Comments (0)

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)