Paul L. Caron

Monday, March 31, 2014

Piketty: Capital in the Twenty-First Century

CapitalThomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.

A work of extraordinary ambition, originality, and rigor, Capital in the Twenty-First Century reorients our understanding of economic history and confronts us with sobering lessons for today.

The New Yorker, Piketty’s Inequality Story in Six Charts:

In this week’s magazine, I’ve got a lengthy piece about “Capital in the Twenty-first Century,” a new book about rising inequality by Thomas Piketty, a French economist, that is sparking a lot of comment and debate. (Brad DeLong has a useful summary of some early reviews.) I’ll go further into that discussion in future posts, but first I thought it might be useful to portray the gist of Piketty’s story in a series of charts.

  Chart 1

Chart 2

New York Times:  Q&A: Thomas Piketty on the Wealth Divide, by Eduardo Porter:

Income inequality moved with astonishing speed from the boring backwaters of economic studies to “the defining challenge of our time.” It found Thomas Piketty waiting for it.

A young professor at the Paris School of Economics, he is one of a handful of economists who have devoted their careers to understanding the dynamics driving the concentration of income and wealth into the hands of the few. He has distilled his findings into a new book, “Capital in the Twenty-First Century,” which is being published this week. In the book, Mr. Piketty provides a sort of unified theory of capitalism that explains its lopsided distribution of rewards.

Financial Times op-ed:  Save Capitalism From the Capitalists by Taxing Wealth, by Thomas Piketty

March 31, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Joint Tax Committee Releases Overview of the Federal Tax System as in Effect for 2014

Joint Tax CommitteeThe Joint Committee on Taxation has released Overview of the Federal Tax System as in Effect for 2014 (JCX-25-14) (Mar. 28, 2014):

This document ... provides a summary of the present-law Federal tax system as in effect for 2014.

The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

Continue reading

March 31, 2014 in Congressional News, Tax | Permalink | Comments (0)

College Return on Investment

President 'Crushed Hopes of Law School' by Rejecting Dean Candidates Approved by Faculty

Florida Logo (GIF)Gainesville Sun op-ed:  Failed dean search delivers a terrible blow to law school, by Michelle Jacobs (Florida):

I am a tenured full professor at the University of Florida Levin College of Law. I came to this institution in 1993, as both the college and the university were struggling to free themselves from the legacy of southern segregation.

Between then and now, the College of Law has experienced many tumultuous moments, particularly over diversity issues. These chaotic upheavals have rarely produced anything of value for our college. The same can be said of the current fiasco created by UF President Bernie Machen's act of failing our dean search.

An article in The Sun last week did not adequately reflect the depth of the anger and embarrassment our community is experiencing as a result of the rejection of two candidates we believed provided our college with an excellent opportunity to move forward. Machen could not give any concrete explanation for why the candidates forwarded to him, particularly University of Kentucky College of Law Dean David Brennen and former ambassador to New Zealand David Huebner, could not satisfy his criteria.

In an email sent to our faculty, he stated that he made his decision after consulting "stakeholders." These "stakeholders" could not have been anyone from our community who would have worked with the new dean. We suspect that these "stakeholders" were the individuals who tried to force Alex Acosta, dean of the Florida International University College of Law, upon our faculty.

Our faculty rejected him as unsuitable. Machen was quoted as saying he wanted a "visionary" to lead the law school. Where was his concern for visionary leadership when he reappointed our current dean six years ago, despite the fact it was clear he had absolutely no coherent vision for our college?...

Continue reading

March 31, 2014 in Legal Education | Permalink | Comments (12)

AEI Hosts Conference Today on The Economic Effects of Territorial Taxation

AEI LogoThe American Enterprise Institute hosts a conference today on The Economic Effects of Territorial Taxation (webcast):

As Congress deliberates business tax reform options, the international aspects often prove most complex. All Group of Eight countries other than the United States have territorial tax systems that exempt 95 to 100 percent of qualified dividends repatriated from foreign subsidiaries.

This half-day conference, cohosted by AEI and the International Tax Policy Forum, will explore the economic effects of territorial taxation. Panelists will use their international experience to examine the effects of international tax rules on base erosion and profit shifting, repatriation of foreign profits, and cross-border mergers and acquisitions and headquarters location. The conference will conclude with a luncheon address by Jason Furman, chairman of the White House Council of Economic Advisers.

Introductory Remarks:

  • Alex Brill, AEI
  • John Samuels, General Electric

Panel #1:  Base Erosion and Profit Shifting Under Worldwide and Territorial Taxation

  • Dhammika Dharmapala (Illinois)
  • Kevin Markle (University of Waterloo)
  • Alan D. Viard (American Enterprise Institute) (commentator)
  • Michael Graetz (Columbia) (moderator)

Panel II:  Repatriation of Foreign Profits in Japan, the U.K., and the U.S.

  • Sebastien Bradley (Drexel)
  • Peter Egger (ETH Zurich)
  • Fritz Foley (Harvard)
  • Rosanne Altshuler (Rutgers) (commentator)
  • Alan Auerbach (UC-Berkeley) (moderator)

Panel #3:  Home-Country Tax Effects on Mergers, Inversions, and Headquarters Location

  • Susan Morse (Texas)
  • Paul Oosterhuis (Skadden)
  • Johannes Voget (University of Mannheim)
  • James Hines (Michigan) (commentator)
  • Mihir Desai (Harvard) (moderator)

Luncheon Address:  Jason Furman (Council of Economic Advisers)

March 31, 2014 in Tax, Tax Conferences | Permalink | Comments (0)

Henderson Reviews The Lawyer Bubble and Tomorrow's Lawyers

BCWilliam D. Henderson (Indiana), Letting Go of Old Ideas, 112 Mich. L. Rev. ___ (2014) (reviewing Steven Harper, The Lawyer Bubble  (Basic Books 2013) and Richard Susskind, Tomorrow’s Lawyers (Oxford University Press 2013)):

Two recently published books apply a rigorous analytical lens to the same topic — the state of the legal profession — and come to dramatically different conclusions. Yet, what is more remarkable is the fact that the authors’ analyses neither overlap nor conflict with one another. One is backward-looking and filled with regret at the legacy we have squandered (Steven Harper’s The Lawyer Bubble); the other is forward-looking and bound to inspire a mix of fear and hope among its readers (Richard Susskind’s Tomorrow’s Lawyers).

Similarly, there’s been a lot of public handwringing in recent years over the state of the legal industry, with some arguing that we are in crisis and others countering that the real problem is overzealous critics. Those looking for a common narrative to unify and lead law practitioners and students must grapple with these two important books. In this review, I suggest that arriving at such an understanding requires each of us to do something uncomfortable and unnatural — let go of old ideas.

Bill blogs about his review on The Legal Whiteboard.

March 31, 2014 in Book Club, Legal Education, Scholarship | Permalink | Comments (0)

In Wake of 70% Enrollment Decline, La Verne Adopts Flat-Rate Law School Tuition Model

LaVerneNational Law Journal, La Verne Offers Flat-Rate Law School Tuition:

The University of La Verne College of Law is getting out of the tuition discounting game and rolling out what appears to be the first true flat-rate tuition system at an ABA-accredited law school.

Starting next fall, all Law Verne law students will pay $25,000 to attend full time and $19,600 to attend part-time—without the scholarships and discounts that many law schools have leaned on as they competed for a smaller pool of prospective students.

“The time has come to tell the truth about the cost of legal education,” La Verne law dean Gilbert Holmes said.

According to law school administrators, the change will lower the amount many students pay for their legal education. The new tuition will be $14,900 less than the existing $39,900 list price.

Second, the new system would eliminate the common practice of granting generous scholarships to applicants with high Law School Admission Test scores and undergraduate grade-point averages at the expense of lower-scoring students who might have a greater need for financial aid.

Finally, the flat-rate pricing is intended to make the Ontario, Calif., law school more appealing to prospective students. Many law schools have been hit by declining enrollments, but that reality has been especially dire at La Verne, which welcomed just 50 new students this fall, compared to 166 in 2010—a nearly 70 percent decline.

In addition, La Verne is contending with questions about its quality. The ABA in 2011 revoked the school’s provisional accreditation amid concern over low bar passage rates. The provisional accreditation was reinstated less than a year later, after the bar pass rate improved. ...

All new entering students will pay the $25,000 for each of the next three years. Already enrolled students will also pay $25,000—unless their existing scholarships would bring their bills below that mark, in which case they will continue to pay the lower rate.

Holmes, who has been dean at La Verne for less than a year, got the idea for flat-rate tuition from Washington University in St. Louis law professor Brian Tamanaha’s 2012 book, “Failing Law Schools.”

Inside Higher Ed, Law School Ends Discounts:

Holmes said ending tuition discounting is not for everyone, particularly law schools that are concerned about their rankings.

“I’ve spoken to other deans who have said, 'You know Gil, that’s a really a noble idea, but you’re kind of engaging in unilateral disarmament,' ” he said.

Holmes said law schools in states with only a few law schools — like New Mexico and West Virginia, which only have one law school, or Iowa, which has two — or with solid reputations could stop tuition discounting without losing many of the students they desire.

March 31, 2014 in Law School Rankings | Permalink | Comments (1)

More Depressing Law Student Loan News

U.S. News & World Report, Which Law School Graduates Have the Most Debt?:

The states of the 25 law schools with the highest average debt of 2013 graduates with debt:  California (10), Florida (4), New York (4), Washington, D.C. (3), Illinois (2), South Carolina (1), Vermont (1):


Law School (US News Rank)

Ave. Debt 2013 Grads With Debt

2013 Grads With Debt


Thomas Jefferson (Tier 2)




New York Law School (140)




American (72)




Cal-Western (Tier 2)




Northwestern (12)




Whittier (Tier 2)




Chicago (4)




Florida Coastal (Tier 2)




St. Thomas (FL) (Tier 2)




Miami (61)




NYU (6)




USC (20)




San Francisco (Tier 2)




Charleston (Tier 2)




Pepperdine (54)




Georgetown (13)




Catholic (107)




Golden Gate (Tier 2)




McGeorge (146)




Fordham (36)




Loyola-L.A. (87)




Columbia (4)




UC-Berkeley (9)




Vermont (129)




Stetson (93)



New America Education Policy Program, The Graduate Student Debt Review:


Wall Street Journal, Grad Students Driving the Growing Debt Burden:

 Huffington Post, Student Loan Crisis Is Making Inequality Worse: Experts:

Every month that Gregory Zbylut pays $1,300 toward his law school loans is another month of not qualifying for a decent mortgage.

Every payment toward their student loans is $900 Dr. Nida Degesys and her husband aren't putting in their retirement savings account.

They believe they'll eventually climb from debt and begin using their earnings to build assets rather than fill holes. But, like the roughly 37 million others in the U.S. saddled with $1 trillion in student debt, they may never catch up with wealthy peers who began life after college free from the burden.

The disparity, experts say, is contributing to the widening of the gap between rich and everyone else in the country. ...

Zbylut, an accountant-turned-attorney in Glendale, Calif. He's been chipping away at nearly $160,000 in student debt since graduating in 2005 from law school at Loyola University in Chicago. Now 48, the tax attorney estimates he could have $150,000 to $200,000 in a 401(k) had the money he's paid toward loans gone there.

"I'm sitting here in traffic. I've got a Mercedes behind me and an Audi in front of me and I'm thinking, 'What did they do that I didn't do?'" Zbylut said by cellphone from his Chevrolet. He's been turned down twice for the type of mortgage he needs to buy a home big enough for himself, the fiancee he would have married already if not for his debts and her 10-year-old son.

"I have more education and more degrees than my father, as does she than her parents, and yet our parents are better off than we are. What's wrong with this picture?" he said.

Matt Leichter, New America Foundation Discovers Law School Debt Disaster:

The point of the policy brief is to show that graduate and professional students are borrowing more than a few years ago and that their borrowing accounts for a large portion of total federal student loans (40 percent of the evil $1 trillion+ figure). Therefore, we should separate trends in college borrowing from post-college borrowing. As evidence, the NAF sampled a dataset of people who finished several types of graduate and professional programs in 2004, 2008, and 2012 and displayed their median, 75th percentile, and 90th percentile debt levels.

The tables the NAF provides are interesting for what they are, and along with data provided elsewhere they do show that typical grad students’ debt levels are growing more than undergrads’. However, the tables don’t really answer the questions the NAF is asking. If 40 percent of all student loans are owed by graduates and professionals, we’d want to know the distribution of that 40 percent aggregate by course of study. (How much of it went to med school students? Is it really as bad as those law school scambloggers say? Etc.) That way, we’d know if the growth seen in the tables is systemic as the NAF asserts or isolated to a handful of degree fields.

Update:  Above the Law, The Law Schools With The Most Heavily Indebted Graduates, by Staci Zaretsky:

As we’ve noted previously, going to a low-ranked law school is like “playing Russian Roulette with your financial future.” As you can see, the differences between having high debt from a T14 law school and high debt from a second-tier law school are quite stark in terms of employment outlooks. The odds aren’t on your side when you’ve got more than $180K in student debt and a less than 30 percent chance of securing employment as a lawyer. But once again, if you’re willing to bite that bullet, then by all means, please do.

March 31, 2014 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 326

IRS Logo 2Wall Street Daily:  Renegade Government Agency Silences Political Opponents, by Floyd Brown (President, Western Center for Journalism):

Congressman Darrell Issa, the Chairman of the House Oversight & Government Reform Committee, is hopping mad.

After months of waiting, the IRS still hasn’t provided his committee with the emails and documents that are necessary for Congress’ ongoing investigation.

Instead, the man Obama hired to clean up the IRS, John Koskinen, continues to stonewall the Committee. He answered questions during testimony and even had the chutzpah to say that providing the IRS documents and emails could take years. Several members were visibly angry.

The flash point was the issue of accessing Lois Lerner’s email. ... [T]he standoff continues. Lerner won’t testify, and the IRS won’t give Congress Lerner’s emails, which would reveal what she was doing and what she was telling the frontline IRS workers. It’s a shameful debacle.

Even more disheartening is that the man tasked with cleaning up the IRS has now turned into a cover-up artist. We expect the IRS to treat everyone the same, regardless of political views. The notion that certain people, like Catherine Engelbrecht, were targeted because of their political views is a frightening prospect.

Continue reading

March 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, March 30, 2014

How Law Schools Goose Their U.S. News Ranking by Hiring Their Graduates

U.S. News 2015The Economist, NPR, and The Faculty Lounge report on how law schools can goose their U.S. News ranking through school-funded jobs.  Placement counts 18% in the current U.S. News methodology, and school-funded jobs are included.  William & Mary rose in the rankings this year from 33 to 24, due in large part to hiring 20.1% of the graduating class -- the second largest percentage among the 194 law schools ranked by U.S. News.  As a result, William & Mary's employed at 9 months figure (which accounts for 14% of the 18% placement weight) rose 17.2 percentage points this year, from 68.1% to 85.3%.  George Washington hired the largest percentage of their graduating class (22.6%), which helped increased their employed at 9 months rate to 91.0%; and Virginia hired the fourth largest percentage (15.1%), which helped increase their employed at 9 months rate to 97.3%.  The chart shows the impact of the school funded jobs in the two most significant placement categories:

  • Full time, long term, bar passage required
  • Full time, long term, bar passage required and J.D. advantage



G. Washington

William & Mary

FT LT Bar Required

Include School Funded  


94.9% (2)


81.0% (14)


73.5% (22)

FT LT Bar Required

Exclude School Funded


79.7% (11)


60.3% (76)


56.4% (94)

FT LT Bar Req’d + JD Advantage

Include School Funded


97.3% (1)


91.0% (9)


85.3% (18)

FT LT Bar Req’d + JD Advantage

Exclude School Funded


82.1% (17)


74.8% (49)


65.2% (99)

March 30, 2014 in Law School Rankings, Legal Education | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #2:

  1. [466 Downloads]  The Economics of Tax Law, by Daniel Shaviro (NYU)
  2. [361 Downloads]  Submission to Finance Department on Implementation of FATCA in Canada, by Allison Christians (McGill) & Arthur J. Cockfield (Queen's)
  3. [283 Downloads]  2012 Developments in Connecticut Estate and Probate Law by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid & Riege, Hartford))
  4. [273 Downloads]  As American as Apple Inc.: International Tax and Ownership Nationality, by Chris William Sanchirico (Pennsylvania)
  5. [170 Downloads]  Deferral and Exemption of the Income of Foreign Subsidiaries: A Review of the Basic Analytics, by Alvin C. Warren (Harvard)

March 30, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Wall Street Journal Tax Tips

March 30, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 325

IRS Logo 2Washington Examiner editorial:  Lois Lerner Could Go to Jail in Contempt Clash:

This may come as a shock to Lois Lerner, but the House of Representatives has the authority to jail her unless she changes her mind about refusing to answer questions about her role in the IRS scandal. Essentially, what is required for that to happen is for a House majority to vote for a motion holding her in contempt and House Speaker John Boehner to then direct the House sergeant at arms to arrest and confine her. Under the Constitution, the House can do that under its “inherent contempt” authority, which was initially exercised in 1795 during the First Congress and on multiple occasions thereafter. Lerner could be held until January 2015 when a new Congress is seated, which could issue another subpoena and throw her in the clink again if she still balks at testifying. 

According to a 2012 Congressional Research Service report, inherent contempt has the unique advantage that it doesn’t require “the cooperation or assistance of either the executive or judicial branches. The House or Senate can, on its own, conduct summary proceedings and cite the offender for contempt.” The prospect of an eight or nine month stretch in the congressional slammer might have a sobering effect on Lerner. On the other hand, neither the House nor the Senate has used this authority since 1935, according to the CRS report, because the process can be “unseemly” and time-consuming.

Plus, Lerner may be on solid ground in thinking Boehner and other House Republicans don't have the political spine to jail her. But just as the South's “massive resistance” in the 1950s to racial integration was doomed to fail because it could not be sustained over time, the Obama administration's comprehensive refusal since November 2010 to cooperate with legitimate congressional oversight by House committees may be sowing seeds of frustration that eventually undercut Lerner's calculation of how long she can keep silent. Chairman Darrell Issa of the House Committee on Oversight and Government Reform, and Rep. Jim Jordan, who heads that panel's oversight subcommittee, are patient individuals but perhaps not that patient.

Continue reading

March 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (9)

Saturday, March 29, 2014

Crane Presents When Is a Tax on Value (Not) a Tax on Income? at Washington University

CraneCharlotte Crane (Northwestern) presented When Is a Tax on Value (Not) a Tax on Income? An Exploration of the Puzzles in PPL v. Commissioner at Washington University yesterday as part of its International Tax Speakers Series hosted by Adam H. Rosenzweig:

This paper uses the issues raised by PPL v. United States (569 U.S. ___ (2013)) to explore whether an income tax can be distinguished from a wealth tax (or other tax on a single value) in a way that could be implemented, either for the purpose of defining those taxes for which the foreign tax credit was originally designed, or for the purpose of distinguishing income taxes from those tax instruments that remain beyond the reach of Congress even with the 16th amendment. It identifies two possible interrelated distinctions, that is, that an “income tax” must contain within its terms the criteria for ensuring that, should it be reimposed, proper allowance would be given for the initial imposition, and, if values are taxed without realization, later impositions must allow adjustment if those values will never be realized. (In simpler terms, unless a tax uses “basis” in a meaningful way, it is not an income tax.)

March 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Legal Education's Moment of Impact: How to Design Strategic Conversations That Accelerate Change

MomentsChris Ertel (Deloitte Consulting) & Lisa Kay Solomon (Innovation Studio), Moments of Impact: How to Design Strategic Conversations That Accelerate Change (Simon & Schuster, 2014), reviewed by Adrian Wooldridge (Management Editor, The Economist) in the Wall Street Journal, The Best 'Strategy Meetings' Unleash Fresh Thinking and Offer Maverick Views; The Worst Are Dull, Unstructured Time-Sucks:

Anybody who has anything to do with the corporate world will be only too familiar with "strategy meetings" in which senior managers try to lift their heads above the parapets and gaze over the competitive landscape. The organizers try do everything they can to shake people out of their "default settings." They hold the meetings off-site. They tell everyone to forget about corporate hierarchies and routine agendas. They bring in outside experts to talk about industry trends. They experiment with corporate games.

And the result of all this effort? More often than not a huge waste of time. Few management techniques have produced more toe-curling embarrassment than what the authors of "Moments of Impact" call "strategic conversations." Brain-storming sessions produce airy-fairy nonsense. Attempts to abandon hierarchy generate status hierarchy. The outside experts are nothing more than cliché-mongers. As for the corporate games, the less said the better.

And yet the need for wide-ranging discussions of strategy has never been greater. Many companies confront radical challenges that cannot be dealt with by business as usual....

Mr. Ertel and Ms. Solomon make several points that ought to be obvious but are clearly not, given the number of strategic conversations that go wrong. The first is that you need to define the purpose of your meeting. Are you trying to get a broad overview of industry trends? Or are you trying to make specific decisions? The second is that unstructured meetings are as dangerous as over-structured ones. Companies that are used to having tight agendas often throw agendas out of the window when they hold off-site meetings. But unstructured "brainstorming" sessions seldom produce any light.

"Moments of Impact" is at its best on the importance of promoting different perspectives. Businesses need to look at the world through as many disciplinary lenses as possible if they are to cope with the fast-changing threats that confront them. But day-to-day corporate life is all about fences and silos. Strategic conversations give companies a chance to examine their business models from the outside—and, as the authors put it, to "imagine operating within several different yet plausible environments."

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

March 29, 2014 in Book Club, Legal Education | Permalink | Comments (0)

Krugman and Mankiw Debate Optimal Tax Theory, Economic Models, and Civility

New York Times:  Wealth Over Work, by Paul Krugman (Princeton):

It seems safe to say that Capital in the Twenty-First Century, the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year — and maybe of the decade. Mr. Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to “patrimonial capitalism,” in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent. ...

Despite the frantic efforts of some Republicans to pretend otherwise, most people realize that today’s G.O.P. favors the interests of the rich over those of ordinary families. I suspect, however, that fewer people realize the extent to which the party favors returns on wealth over wages and salaries. And the dominance of income from capital, which can be inherited, over wages — the dominance of wealth over work — is what patrimonial capitalism is all about. 

To see what I’m talking about, start with actual policies and policy proposals. It’s generally understood that George W. Bush did all he could to cut taxes on the very affluent, that the middle-class cuts he included were essentially political loss leaders. It’s less well understood that the biggest breaks went not to people paid high salaries but to coupon-clippers and heirs to large estates. True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent — and the estate tax was completely eliminated. ...

This tilt of policy toward the interests of wealth has been mirrored by a tilt in rhetoric; Republicans often seem so intent on exalting “job creators” that they forget to mention American workers. ...

Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.

Not Class Warfare, Optimal Taxation, by Greg Mankiw (Harvard):

Today's column by Paul Krugman is classic Paul: It takes a policy favored by the right, attributes the most vile motives to those who advance the policy, and ignores all the reasonable arguments in favor of it.

In this case, the issue is the reduction in capital taxes during the George W. Bush administration. Paul says that the goal here was "defending the oligarchy's interests."

Really? As Paul well knows, there is a large literature in economics suggesting that an optimal tax system imposes much lower taxes on capital income than on wage income (or consumption).

New York Times:  Too Much Faith In Models, Capital Taxation Edition, by Paul Krugman (Princeton):

Yesterday I offered a rousing defense of the use of simplified models in economics. So maybe it’s appropriate that today I offer a caution: you should use models, but you should always remember that they’re models, and always beware of conclusions that depend too much on the simplifying assumptions. And I have a case in point, which ties into one of my other big concerns: the appropriate taxation of capital income.

Greg Mankiw is upset at my suggestion that the Bush administration was motivated by class interests in its determination to slash taxes on capital income and eliminate estate taxes. He wants us to know that it was all about optimal taxation, as dictated by economic theory.

Well, we could have a political discussion: How many people really, truly believe that George W. Bush chose to slash taxes on dividends and phase out the inheritance tax because Greg Mankiw and Glenn Hubbard told him that this was the conclusion from economic theory? Can we have a show of hands?

But let me instead point out that the case for zero or low taxation of capital income rests on very strong, very unrealistic assumptions — basically perfectly rational intertemporally optimizing agents, with dynasties behaving as if they were infinitely lived individuals. Question those assumptions, and the whole case falls apart. Don’t take my word for it — read Peter Diamond and Emmanuel Saez, who also point out that the intertemporal optimizing model of saving is in fact rejected by lots of evidence. ...

The point here is that the economic case for not taxing capital rests on a stylized model that we know does a bad job of capturing real behavior; the case for taxing capital rests on considerations of equity and concerns about excessive concentration of wealth that are very much grounded in real-world observation. You don’t have to be a know-nothing to argue that the second case trumps the first.

Using models without believing that they represent The Truth is hard; it’s very easy to fall off that tightrope one way or the other. But it’s what you have to do if you want to do useful economics.

Too Little Faith in People, Tax Policy Edition, by Greg Mankiw (Harvard):

Paul Krugman responds to my post about a recent column of his.  He is correct that not all economists agree that low capital taxation is desirable; he appropriately cites Diamond and Saez, who are on the high-capital-tax side of this debate. FYI, here is another recent paper, written in part as a response to Diamond and Saez, which finds that optimal rates of capital taxation, while positive, are quite low.

But that is not really the issue. If Paul had said "reasonable economists disagree, here are the arguments, and here is why I tend to favor one side rather than the other" I would not have objected.  Instead, in his original column, he wrote as if there were no reasonable arguments for the policy pursued by the Bush administration, and he attributed the most vile motives to those who advanced the policy.

This episode illustrates a fundamental difference between Paul and me.  I try not to assume the worst in other people, just because they disagree with me.

Continue reading

March 29, 2014 in Tax | Permalink | Comments (13)

The IRS Scandal, Day 324

Friday, March 28, 2014

George H.W. Bush Wins JFK Profile in Courage Award for Breaking 'No New Taxes' Pledge

JFKThe John F. Kennedy Presidential Library and Museum today named Former President George H. W. Bush this year’s recipient of the John F. Kennedy Profile in Courage Award "in recognition of the political courage he demonstrated as President when he agreed to a 1990 budget compromise which reversed his 1988 campaign pledge not to raise taxes and put his re-election prospects at risk."

And I'm the one who will not raise taxes. My opponent now says he'll raise them as a last resort, or a third resort. But when a politician talks like that, you know that's one resort he'll be checking into. My opponent won't rule out raising taxes. But I will. And the Congress will push me to raise taxes and I'll say no. And they'll push, and I'll say no, and they'll push again, and I'll say, to them, ‘Read my lips: no new taxes.’ 

“This year’s Profile in Courage Award recipients exemplify what President Kennedy most admired in public servants: extraordinary courage in serving the greater good,” said [Jack Schlossberg, President Kennedy’s grandson], who is a member of the Profile in Courage Award committee. “In his first term in office, President George H. W. Bush risked his reputation and ultimately his political career by forging an important compromise on the budget in 1990 that moved our country forward, and should not be forgotten. ...

In 1990, with the federal deficit at $200 billion and the Congressional Budget Office suggesting it could double, President Bush negotiated with congressional Democrats to enact a budget deal which included spending cuts and tax increases aimed at reducing the deficit by approximately $500 billion over the following five years. The 1990 bipartisan budget agreement set annual limits on discretionary spending by Congress on defense, domestic programs and international affairs. It also, for the first time, created “pay as you go” rules for entitlements and taxes. In order to reach the deal, Bush agreed to a tax increase as part of the compromise, and he was pilloried by conservatives for doing so. Although he recognized the 1990 budget deal might doom his prospects for reelection, he did what he thought was best for the country and has since been credited with helping to lay the foundation of the economic growth of the 1990s that followed.

New York Times, A Profile in Courage Prize for George Bush (the Other One), by Andrew Rosnethal:

The Republican Party did not much tolerate dissent from its ideological orthodoxy in 1990, as Mr. Bush learned the painful way. Now it doesn’t tolerate the slightest deviation. Mr. Norquist, who is still trying to cripple government by forcing Republicans to oppose any tax, no matter how small or sensible, was outraged by the Foundation’s choice.

He took to Twitter faster than you can say “no independent thinking.”


That tweet may be the ultimate tribute to Mr. Bush. He didn’t lie to anyone. He changed his mind because it was the right thing to do, and that’s what Mr. Norquist cannot tolerate.

March 28, 2014 in Tax | Permalink | Comments (2)

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 67, No. 2 (Winter 2014):

March 28, 2014 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

March 28, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

March 28, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

March 28, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Christians & Cockfield: The Implementation of FATCA in Canada

FATCAAllison Christians (McGill) & Arthur J. Cockfield (Queen's University), Submission to Finance Department on Implementation of FATCA in Canada:

The United States enacted a tax reform in 2010 known as the Foreign Account Tax Compliance Act (FATCA), which will impose an extensive third-party monitoring and disclosure regime on financial institutions around the world in an effort to “smoke out” American tax cheats and expose their undeclared foreign assets to the U.S. Internal Revenue Service (IRS). The flow of information from Canadian financial institutions directly to the IRS that is required by FATCA would violate a number of laws in Canada. Accordingly, the United States has requested changes to these laws. The Canadian government now seeks to accommodate these requests in the form of an “intergovernmental agreement” (IGA) with the United States, which will be enacted into law as the Canada–United States Enhanced Tax Information Exchange Agreement Implementation Act (the Implementation Act) pursuant to a proposal released for comment by the Department of Finance. The Department of Finance invited public comments on these documents. We examined the proposed Implementation Act and the IGA and we find that they raise a number of serious issues ranging from likely constitutional violations to violations of international law. We submit these comments in the hope that they will help lawmakers and the public understand that FATCA, while intended to catch tax evaders, is poised instead to impose serious and unjustified harms on people who live around the world as non-resident U.S. citizens and green card holders, as well as their family members and business associates.

March 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Northwestern Athletes May Face Big Tax Hit From Unionization Victory

NUESPN, Players Could Get Big Tax Bill:

Northwestern football players won the right to unionize on Wednesday, but the potential tax implications alone could immediately kill the idea.

Much of what was argued in the National Labor Relations Board testimony is in direct opposition to why scholarships aren't being taxed today.

"It appears like the case brought forward by the players focused on things other than the potential tax implications," said Garrett Higgins, a partner at O'Connor Davies in the firm's Exempt Organization Tax and Advisory Services group. "The fact that the players were not considered employees in the past is essentially the reason why their scholarship or parts of it weren't taxed before. The IRS may be able to make the argument that the scholarship is really payment for services, and therefore compensation, and is now taxable to the athlete." ...

If Northwestern players did form a union and they were taxed, it's not clear exactly what they would be paying tax on. If, for example, their entire scholarship was deemed taxable, the athletes would be paying at least $15,000 in federal tax alone on the $61,000-a-year scholarship. One athletic director in a major conference, who requested anonymity, speculated that the value the players received from the training table, travel and even coaching could be taxed.

Continue reading

March 28, 2014 in Legal Education | Permalink | Comments (6)

Tax LL.M. Program Rankings by Tax Hiring Authorities

Tax TalentFollowing up on my post on the new 2015 U.S. News Tax Rankings: TaxTalent asked U.S. corporate tax hiring authorities to rank the following programs:

  • Undergraduate Accounting
  • MS Tax
  • MAcc
  • MAcc Tax
  • MBA Tax
  • JD Tax
  • LL.M. Tax

For the LL.M. Tax Survey, respondents were asked to select up to five schools (out of 31) with LL.M. Tax programs that they hold in highest regard when hiring candidates.  Respondent Profile: 144 currently employed heads of corporate in-house tax departments.

2014 LLM

For the J.D. Tax Survey, respondents were asked to select up to five schools (out of 20) with JD Tax programs that they hold in highest regard when hiring candidates.  It is a bizarre list of 20 law schools, as it omits 14 of the 15 schools ranked in tax by U.S. News (Georgetown is the only school ranked by both U.S. News and Tax Talent.) 

March 28, 2014 in Law School Rankings, Legal Education, Tax, Tax Faculty Rankings, Tax Rankings | Permalink | Comments (5)

Feds Partner With TurboTax to Push Income-Based Repayment on Student Loan Borrowers, Despite Potential Hefty Back-End Tax Bite

TurboTax (2013)Politico:  Student Loan Debt Deal Comes With Tax Catch:

Millions of taxpayers struggling with student loan debt are being pitched what may seem like a dream come true this tax season: lower monthly payments and a chance to see a chunk of their debt disappear.

But there’s a catch: the potential for a huge tax bill down the road.

The new push from the Departments of Treasury and Education uses tax time to promote the opportunity for a borrower to have their entire debt repaid after 20 or 25 years. The agencies are partnering with TurboTax, the tax software used by more than 18 million Americans, to advertise the deal.

It’s part of an administration-wide effort to make college affordable, but consumer advocates worry that the tax-time pairing fails to fully disclose that the debt forgiveness counts as income and will likely lead to a bill from the Internal Revenue Service. Some even liken it to the too-good-to-be-true mortgages that played a role in the collapse of the housing market. ...

A new element of the program this year involves the marketing effort by TurboTax, sold by Intuit. Turbo Tax users will see information about loan repayment options and a link to the Department of Education website in a section of the program called “My Money Tools.”

March 28, 2014 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 323

Thursday, March 27, 2014

U.S. News Rankings: 2015 v. 2014 Changes in All 11 Categories for All 194 Law Schools

U.S. News 2015Brian Huddleston (Senior Reference Librarian, Loyola (New Orleans)) has compiled this wonderful 29-page color-coded chart showing the changes in this year's U.S. News Law School Rankings from last year's rankings in all eleven of the published U.S. News rankings categories for each of the 194 law schools:

  • Green:  school improved in category in this year's rankings
  • Red:  school declined in category in this year's rankings
  • Yellow:  school's performance in category in this year rankings is same as last year

Top 3

(Note that Brian uses 2014 to refer to the rankings released in March 2014, and 2013 to refer to the rankings released in March 2013. In usual rankings parlance, these are referred to as the 2015 rankings and the 2014 rankings.)

March 27, 2014 in Law School Rankings, Legal Education | Permalink | Comments (2)

Fleischer & Blank: Bitcoin and Notice 2014-21

NY Times Dealbook (2013)Following up on Wedmesday's TaxProf Blog op-ed, Omri Marian (Florida): Bitcoin and Notice 2014-21:  New York Times DealBook:  Taxes Won’t Kill Bitcoin, but Tax Reporting Might, by Victor Fleischer (San Diego):

Bitcoin is a digital representation of value, not a real currency, according to the latest pronouncement from the IRS.  The IRS on Tuesday released guidance indicating that Bitcoins and other so-called virtual currencies that do not have the status of legal tender in any jurisdiction would be treated as property, not currency, for tax purposes. The guidance also indicates that Bitcoin transactions are subject to the same information reporting and withholding requirements as similar transactions in dollars.

There were “no real surprises” in the guidance, according to Omri Marian, a University of Florida law professor who has written about the potential for Bitcoin to be used to evade taxes. The I.R.S. guidance follows similar action by taxation authorities in Japan, Canada and Australia. ...

From a business perspective, the most important aspect of the guidance may be buried in the plumbing. Payments made using virtual currency are now clearly subject to the same information and backup withholding requirements as other property transactions. ...

To the extent that Bitcoin’s success depends on anonymity and on avoiding the burden of government regulation, this I.R.S. guidance is an unwelcome blow. Bitcoin users are not accustomed to telling their counterparties who they are, let alone what their Social Security number is.

While some people may choose to ignore the I.R.S. guidance, more established digital economy merchants (like Etsy and eBay vendors) and settlement systems (like PayPal) will tend to comply.

Bitcoin cannot thrive in the underground economy alone, and unless its users pay taxes like other grown-ups, the I.R.S. guidance virtually ensures that it will be a passing fad. 

Update:  Tax Vox Blog, You Could Owe Capital Gains Taxes When You Spend Bitcoin, by Steven Rosenthal

March 27, 2014 in IRS News, Tax | Permalink | Comments (0)

Suffolk Offers Three Year J.D./Tax LL.M. Degrees

Sufolk Law SchoolSuffolk University Law School is launching a new Tax LL.M. Program in May 2015 that will permit Suffolk students to earn J.D. and Tax LL.M. degrees in three years:

The heart of the program is an intensive 12-credit, 10-week summer program that allow Suffolk Law students to obtain a tax LLM and a JD in the same three-year period (day students) or four-year period (evening students) required for obtaining only a law degree. At graduation, successful students would receive both a JD and LLM degree.

In addition to the summer session, tax LLM students must take an additional eight credits of required courses and six credits of electives.

The tax LLM program also will be available for students who have already completed law school at Suffolk or elsewhere. These students will generally need to take tax courses in addition to the intensive summer to have the same total tax law education as Suffolk students simultaneously obtaining a JD and tax LLM.

The National Jurist quotes Associate Dean Anthony Polito, Faculty Director of the Tax LL.M. Program:  "Compared to the J.D. program, the only additional classes would be those in the summer session, so law students could graduate with J.D. and LL.M. degrees for about half the cost of attending a separate LL.M. program."

Suffolk joins other law schools like Boston UniversityLoyola-L.A. Northwestern, and Washington University that offer three-year J.D./Tax LL.M. programs. Other law schools (like Georgetown, NYU, and San Diego) offer seven-semester J.D./Tax LL.M. programs.

March 27, 2014 in Legal Education, Tax | Permalink | Comments (1)

ABA Releases Online Guide to Law Schools, Stops Publishing LSAC-ABA Guide


The ABA Section of Legal Education and Admissions to the Bar has released the new online Official Guide to ABA-Approved Law Schools:

The online Official Guide succeeds the ABA-LSAC Official Guide to ABA-Approved Law Schools publication and provides the ABA data charts previously posted on the Law School Admission Council website.

Standard 509 (Required Disclosures) of the ABA Standards and Rules for Approval of Law Schools sets out the consumer information that each ABA-approved law school must publish. Included in the required disclosures are admissions data; tuition and fees, living costs, and financial aid; conditional scholarships; enrollment data, including academic, transfer, and other attrition; numbers of full-time and part-time faculty, professional librarians, and administrators; class sizes for first-year and upper-class courses, and number of seminar, clinical, and co-curricular offerings; employment outcomes; and bar passage data.

On the new Official Guide page, data charts can be generated for each ABA-approved law school through the Standard 509 Information Reports and Employment Summary Reports drop-down menus. Links to all of the ABA-approved law schools allows users to access the ABA Required Disclosures posted by schools as required by Standard 509.

The Official Guide page also includes links to other ABA information previously included in the ABA-LSAC Official Guide:

  • Legal Education Statistics
  • Bar Admissions
  • Post-JD and Non-JD Programs
  • Pre-Law Information
  • Pro Bono Legal Services
  • Student Loan Repayment
  • The ABA Accreditation Process

March 27, 2014 in Legal Education | Permalink | Comments (0)

George Mason Law Prof Tyler Cowen Pepper Sprayed in Class by Intruder

CowenABA Journal, Law Prof Is Pepper Sprayed During Lecture by Man Who Demands a Citizen’s Arrest:

A George Mason University law professor [and blogger] was pepper sprayed during class by a man who jumped onto the professor’s desk and demanded a citizen’s arrest.

WJLA identifies the professor as Tyler Cowen. He was teaching a unit on vigilantism, so some students may have thought the attack was staged, the broadcast station says. and CBSDC also have reports on the incident. ...

Cowen and the suspect did not know each other,police said. Medics briefly treated the professor and the students for breathing issues. Cowen declined to be taken to the hospital, WJLA says.

(Hat Tip: Jeff Baker.)

March 27, 2014 in Legal Education | Permalink | Comments (0)

Caron & Repetti: Revitalizing the Estate Tax: Five Easy Pieces

TaxSymposiumHeaderPaul L. Caron (Pepperdine) & James R. Repetti (Boston College), Revitalizing the Estate Tax: Five Easy Pieces, 142 Tax Notes 1231 (Mar. 17, 2014) (Symposium on Tax Reform in a Time of Crisis):

In a previous article, we argued that contrary to the state of the law over 35 years ago — when George Cooper wrote his seminal article on the estate tax (A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161 (1977)) — taxpayers today generally ‘‘can reduce the value of assets subject to transfer tax in many instances only if they are willing to assume the risk that the reduction may be economically real and reduce the actual value of assets transferred to heirs or, alternatively, in narrow situations if they are willing to incur some tax risk.’’ (The Estate Tax Non-Gap: Why Repeal a Voluntary Tax?, 20 Stan. L. & Pol’y Rev. 153 (2009)) In another article, we documented the dramatic increase in income and wealth inequality over the past 30 years and the accompanying adverse social consequences and long-term negative effect on economic growth. (Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L. Rev. 1255 (2013)) We argued that tax policy historically has played an important role in reducing inequality and that the estate tax is a particularly apt reform vehicle in light of the role of inherited assets among the very rich and the adverse economic effects of that inherited wealth. In this article, we advance five estate and gift tax reform proposals that would generate needed revenue, reduce inequality, and contribute to economic growth: (1) disallow minority discounts when the transferred asset or business is controlled by family before and after the transfer; (2) maintain parity between the unified credit exemption amounts for the estate and gift taxes; (3) reduce the wealth transfer tax exemptions to $3.5 million, increase the maximum tax rate to 45 percent, and limit the generation-skipping transfer tax (GSST) exemption period to 50 years; (4) restrict the ability for gifts made in trust to qualify for the gift tax annual exclusion; and (5) impose a lifetime cap on the amount that can be contributed to a grantor retained annuity trust (GRAT).

March 27, 2014 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0)

Brennan Presents Smooth Retirement Accounts at Boston College

BrennanThomas J. Brennan (Northwestern) presented Smooth Retirement Accounts at Boston College yesterday as part of its Tax Policy Workshop Series hosted by James Repetti and Diane Ring and funded by the Paulus Endowment for Tax Programs:

I introduce the concept of “smooth retirement accounts” (SRAs) to provide a method for taxing retirement savings evenly over time. I contrast this with the back-loaded taxation of traditional accounts, and I use lifetime utility maximization models to demonstrate that future non-linear and uncertain tax brackets can distort savings incentives and portfolio allocations for traditional account holders. I also contrast SRAs with the front-loaded taxation of Roth accounts, and I argue that SRAs would bring a reasonable portion of retirement account taxes into the current budget window without leading to the extreme result of Roth accounts that leave no tax receipts beyond the year of contribution. Because SRAs can eliminate investment and savings distortions for taxpayers, as well as help set government budgetary incentives correctly, I recommend that they be created by Congress as a replacement for the current choices of Roth and traditional accounts.

March 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax Analysts Hosts Conference Today on Is It Time For a Taxpayer Bill of Rights?

TA ConfTax Analysts hosts a roundtable discussion on Taxpayers and the IRS: Is It Time For a Taxpayer Bill of Rights? at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

On January 9, 2014, National Taxpayer Advocate Nina E. Olson released the 2013 Annual Report to Congress, urging the IRS to implement administratively a comprehensive, principle-based TBOR. That proposal, comprising 10 rights modeled on the U.S. Constitution's Bill of Rights, is designed to strengthen the IRS’s ability to serve taxpayers. However, the lack of resources needed to implement these rights could prevent the IRS from proceeding. The speakers and the conversation that follows will provide a historical perspective on prior legislation, discuss recommendations for adopting a TBOR, and debate the timing and politics involved in its implementation.

  • Nina E. Olson (National Taxpayer Advocate)
  • Christopher S. Rizek (Caplin & Drysdale, Washington, D.C.)
  • Alan J. Wilensky (Former Acting Assistant Secretary for Tax Policy, U.S> Treasury Department)
  • Moderator:  Christopher E. Bergin (President and Publisher, Tax Analysts)

March 27, 2014 in Tax, Tax Analysts, Tax Conferences | Permalink | Comments (0)

ABA Releases Notice & Comment on Proposed Changes to Law School Accreditation Standards

ABA Logo 2The ABA Section of Legal Education and Admissions to the Bar has released this 56-page notice and comment on:

  • Interpretation 305-3 (Study Outside the Classroom)
  • Interpretation 503-3 (Admission Test)
  • Standard 505 (Granting of J.D. Degree Credit for Prior Law Study)
  • Chapter 8 (Council Authority, Variances, and Amendments)
  • Definitions Rules of Procedure 

Among the changes, the ABA would allow law schools (1) to waive the LSAT for up to 10% of the entering class (and thus goose their U.S. News ranking); and (2) to give academic credit for paid externships.  See Dan Filler (Drexel), ABA Seeks Comments On New LSAT, Externship Accreditation Rules.  Comments are due by Friday, April 18, 2014.  A hearing on the proposed changes will be held in St. Louis on Friday, April 25, 2014.

March 27, 2014 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 322

Continue reading

March 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, March 26, 2014

Soled Presents Basis, Pass-Through Entities, and Taxpayer Noncompliance Today at Duke

SoledJay A. Soled (Rutgers) presents Tax Basis Determinations, Pass-Through Entities, and Taxpayer Noncompliance (with James Alm (Tulane)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

In the United States, one of the most popular ways to conduct business is to use a pass-through entity such as a partnership, limited liability company, or S corporation. Investor taxpayers in such pass-through entities commonly hold their ownership interest for years or decades. Over this lengthy period of time, a taxpayer’s tax basis in the entity is subject to constant annual adjustments, which generally have no immediate tax consequences.

However, when the pass-through entity investment is later sold or liquidated, tax basis determinations are of critical importance, and these determinations enable taxpayers to calculate their concomitant gains or losses. At this pivotal juncture, accurately determining taxpayers’ tax bases in these investments is highly unlikely, and the IRS’s ability to detect taxpayers’ tax basis reporting inaccuracies is virtually nonexistent.

This analysis examines the phenomenon of taxpayers who do not know their tax basis in pass-through entity investments and the consequences associated with such ignorance. Also provided are projected revenue losses associated with taxpayers purposefully or inadvertently inflating the tax basis that they have in their pass-through entity investments.

Continue reading

March 26, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Gamage Presents A Framework for Analyzing the Optimal Choice of Tax Instruments Today at UC-Irvine

Gamage (2014)David Gamage (UC-Berkeley) presents A Framework for Analyzing the Optimal Choice of Tax Instruments, 68 Tax L. Rev. ___ (2014), at UC-Irvine today as part of its Faculty Colloquium Series

What mix of policy instruments should governments employ to raise revenues or to promote distribution? The dominant answer to this question in the tax theory and public finance literatures is that (with limited exceptions) governments should rely exclusively on a progressive consumption tax. Thus, among other implications, the dominant view is that governments should not tax capital income or wealth, and that legal rules should not be designed to promote distribution.

In contrast, this Article argues that governments should make use of a number of tax and non-tax policy instruments to raise revenues and to promote distribution. Furthermore, this Article argues that governments may have much greater capacity to raise revenues and to promote distribution at lower efficiency costs than is generally recognized. Whereas the existing theoretical literature focuses on a small number of distortionary costs that result from taxation (in particular, on labor-to-leisure and saving-to-spending distortions), this Article analyzes the implications of taxpayers engaging in a diverse variety of tax-gaming responses. To the extent that taxpayers respond to different tax instruments through different forms of tax gaming, this Article demonstrates that governments can raise revenues and promote distribution more efficiently by employing a variety of different policy instruments.

Continue reading

March 26, 2014 in Scholarship, Tax | Permalink | Comments (0)

Edgar Presents Corrective Taxation, Leverage, and Compensation in a Bloated Financial Sector Today at Toronto

EdgarTim Edgar (Osgoode Hall) presents Corrective Taxation, Leverage, and Compensation in a Bloated Financial Sector at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The financial crisis of 2007–2009 reinvigorated academic and policymaking interest in the design of prudential regulatory regimes governing the financial sector as a policy instrument intended to moderate financial instability. The crisis also motivated interest in the role of taxation as a complement to these regimes. Yet in practice, the use of tax instruments has been modest. This article considers three tax instruments that could serve this complementary role. Political economy considerations aside, it is suggested that the use of bank leverage taxes by policymakers as the tax instrument of choice is unsurprising. As recognized in the literature, however, a corrective taxation case can be made for an increase in the rate of such taxes as an instrument to eliminate the availability of cheap debt for systemically important institutions. Although returns to risk taking is a potentially robust tax base, the weak behavioral properties of this tax instrument have apparently diminished its appeal for policymakers, while a revenue-raising imperative that might otherwise motivate its adoption is muted considerably by the adoption of a bank leverage tax. Perhaps somewhat surprisingly, the tax literature does not consider the case for an excise tax on bonus and performance-based compensation as an instrument to alter the structure of compensation. This may be attributable, in part at least, to redundancy where regulatory regimes can be used to impose constraints with similar intended effects.

March 26, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Deans Push ABA to Force Law Schools to Disclose LSAT, GPA Data of Transfer Students

U.S. News 2015Washington Post:  Law School Deans Push ABA About Transfers, by Catherine Ho:

A growing group of law school deans are pressing the American Bar Association’s accrediting agency to require law schools to make public the LSAT scores and undergraduate grade-point averages of transfer students.

At issue is what many legal educators say is an effort by some schools to keep the data hidden in order to inflate their credentials for rankings purposes.

Because U.S. News and World Report’s law school rankings look at the median LSAT scores of first-year students, but not the LSAT scores of transfer students — which are typically lower — critics contend the practice allows the schools to game the system.

The ABA’s accrediting council has yet to officially vote on the proposal, but at a March 14 meeting, members indicated they did not think the LSAT scores and undergraduate GPA of transfer students is “relevant consumer information” that needs to be disclosed, said Barry Currier, managing director of the ABA Section of Legal Education and Admissions to the Bar. ...

Law schools have long disclosed how many transfer students they admit every year, per an ABA accreditation standard. But they do not have to disclose much detail about those students, even though they are required to collect the information.

At the meeting, the council did accept a recommendation that schools should start disclosing the first-year law school grade-point average of their transfer students, which schools the transfer students came from and how many came from each school. ...

In the Washington area, the law schools with the most transfer students in 2013 were Georgetown (122 transfer students in, seven transfers out); George Washington (93 transfers in, 22 transfers out); and American (68 transfers in, 89 transfers out). Other area schools saw less transfer activity: George Mason (12 transfers in; 11 transfers out); Catholic (eight transfers in, 23 transfers out); Howard (five transfers in, four transfers out); and the University of the District of Columbia (five transfers in, 12 transfers out). ...

Continue reading

March 26, 2014 in Law School Rankings, Legal Education | Permalink | Comments (3)

NYU Hosts Symposium on Tax and Corporate Social Responsibility

NYU Logo (2013)The NYU Journal of Law & Business and the NYU Graduate Tax Program hosted a symposium yesterday on Tax and Corporate Social Responsibility:

From the enactment of the corporate excise tax in 1909 to the present, the corporate tax in the United States has generated intense debate. Topics at the center of this debate have ranged from the fundamental purpose of the tax to moral obligations of corporations to pay tax to tax transparency and accountability. This half-day symposium will continue the discussion by addressing two questions: Should corporations pay tax? And should corporate tax returns be public?

Panel #1:  Should Corporations Pay Tax?

Panel #2:  Should Corporate Tax Returns Be Public?

  • Moderator:  David Kamin (NYU)
  • Presenter:  Joshua Blank (NYU), Reconsidering Corporate Tax Privacy
  • Discussants:  Allison Christians (McGill), Reuven Avi-Yonah (Michigan), Peter Barnes (Duke)

March 26, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax Prof Lateral Moves


Despite a decline in the number of lateral moves this year, there is a healthy number of lateral tax moves beginning in Fall 2014 (although less than last year):

I will update this list as part of my annual April compilation of tax moves.

March 26, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Yin: Reforming (and Saving) the IRS by Respecting the Public’s Right to Know

TaxSymposiumHeaderGeorge K. Yin (Virginia), Reforming (and Saving) the IRS by Respecting the Public’s Right to Know (Symposium on Tax Reform in a Time of Crisis):

The current controversy involving possible political targeting by the IRS in administering the exempt organization (EO) tax laws is simply the latest in a long succession of similar allegations spanning at least five decades. This article proposes to address the problem through increased transparency of the IRS’s administrative actions involving EOs. Greater transparency responds directly to the public’s frustration in not being able to monitor the agency and gain confidence that the laws are being applied in an even-handed manner.

Continue reading

March 26, 2014 in Scholarship, Tax, Tax Conferences | Permalink | Comments (1)

Marian: Bitcoin and Notice 2014-21

BitcoinTaxProf Blog op-ed:  IRS Makes Sense of Bitcoin Taxation: Initial Reaction to Notice 2014-21, by Omri Marian (Florida):

Over the past few months, the IRS has been under tremendous pressure to issue guidance on the taxation of Bitcoin transactions. The National Taxpayer Advocate, the Government Accountability Office, elected officials and taxpayers have all pressed the IRS to explain the tax consequences of transactions involving the increasingly popular virtual currency. The IRS delivered yesterday – just in time for tax season – by issuing Notice 2014-21 (the “Notice”).

Continue reading

March 26, 2014 in IRS News, Tax | Permalink | Comments (2)

Deans Respond to TaxProf Blog Posts on Faculty Layoffs

Appalachian LogoAppalachian Law School to Lay Off 63% Of Its Faculty? (Mar. 23, 2014):

  • Jackie Pruitt (Appalachian):  I want to take this opportunity to provide corrected numbers on the changes happening at the Appalachian School of Law that you recently discussed on your blog. I believe that your calculations relied on three numbers that are difficult to predict at this time: the number of total students at the school and in our incoming Fall 2014 class; the student faculty ratio; and the number of faculty members needed to provide a quality legal education to a smaller community of students.

DenverDenver to Slash Ten Junior Faculty Positions Through Voluntary Buyouts (Mar. 25, 2014):

  • Martin Katz (Denver):  Not sure if it is worth correcting on TaxProfBlog, but there is an inaccuracy in the report by Above the Law. I am not sure where Above the Law gets the idea that “junior faculty members are expected to self-select out of their own jobs – for cash.” The voluntary buy-out package will not be available to junior faculty members.
  • Dan Rodriguez (Northwestern; President, AALS): 

    That law schools are looking to manage their costs by taking close looks at their faculty labor force seems entirely sensible.  It is hardly the harbinger of disaster; and, like the press releases that are attached to these proposals, these are important messages to the wider community of students and alumni that the law schools are looking at constructive ways of preserving strong academic programs and high quality in their student bodies.

    These should be welcome developments.  Folks like our friends at Above the Law, who are habitually cranky about law school decisionmaking and the motivations of academic leaders, should say:  “Hurray.  It’s about time law schools take a hard look at costs.”  But, instead, the headline of the day is essentially “Law Schools are Crashing Around Us.  Witness the Scramble to ‘Kick Out’ Faculty Members.”  Think I am exaggerating?  Here’s a link to a post by the sober Pepperdine Law professor and influential blogger, Paul Caron.

    Take a breath, doomsayers.  Have some perspective.  This is evidence of adaptation, not desperation.  And you are not helping the general situation, IMHO!

See also Brian Leiter (Chicago), Dean Rodriguez (Northwestern) on Hysteria About Law Schools

Update #1:  Above the Law has updated its post:  The law school explained to TaxProf Blog that the voluntary buyouts will not be available to junior (i.e., tenure-track) faculty members.

Update #2:  Brian Leiter (Chicago), What Is REALLY Going on at Denver (Contrary to ATL's Fabrications)


March 26, 2014 in Legal Education | Permalink | Comments (6)

The IRS Scandal, Day 321

Tuesday, March 25, 2014

Weinzierl Presents Revisiting the Classical View of Benefit-Based Taxation Today at NYU

Ent496493Matthew C. Weinzierl (Harvard Business School) presents Revisiting the Classical View of Benefit-Based Taxation at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

This paper explores how the persistently popular "classical" logic of benefit based taxation, in which an individual's benefit from public goods is tied to his or her income-earning ability, can be incorporated into modern optimal tax theory.  If Lindhal's methods are applied to that view of benefits, first-based optimal pollicy can be characterized analytically as depending on a few potentially estimable statistics, in particular the coefficient of complementarity between public goods and innate talent. Constrained optimal policy with a Pareto-efficient objective that strikes a balance -- controlled by a single parameter -- between principle and the familiar utilitarian criterion can be simulated using conventional constraints and methods.  A wide range of optimal policy outcomes can result, including those consistent with existing policies.  To the extent that such on objective reflects the mixed normative reasoning behind prevailing policies, this model may offer a useful approach to positive optimal tax theory.

March 25, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Denver to Slash Ten Junior Faculty Positions Through Voluntary Buyouts

DenverAbove the Law reports today that the University of Denver, Sturm College of Law (#68 in U.S. News) is "planning to slash 10 tenure-track positions due to additional class size cuts. The kicker is that junior faculty members are expected to self-select out of their own jobs — for cash, of course."  Above the Law quotes Denver Dean Martin Katz:

[W]e will be offering voluntary buy-outs to certain tenure-line faculty as a way to reduce the size of our faculty, and thus our expense base. Our plan calls for us to maintain our current 10:1 student-faculty ratio, which is important to the quality of the legal education we provide, particularly in our Experiential Advantage Curriculum.

UpdateDeans Respond to TaxProf Blog Posts on Faculty Layoffs

March 25, 2014 in Legal Education | Permalink | Comments (8)