Tuesday, August 9, 2016
NYU Tax Law Review Publishes New Issue
The Tax Law Review has published a new issue (Vol. 69, No. 1 (Fall 2015)):
- Daniel Shaviro (NYU), The Crossroads Versus the Seesaw: Getting a "Fix" on Recent International Tax Policy Developments, 69 Tax L. Rev. 1 (2015)
- Harry Grubert (U.S. Treasury Department), Destination-Based Income Taxes: A Mismatch Made in Heaven?, 69 Tax L. Rev. 43 (2015)
- Leigh Osofsky (Miami), The Case for Categorical Nonenforcement, 69 Tax L. Rev. 73 (2015)
Two examples emphasized in Osofsky article are the non-taxation of frequent flyer miles and the low audit rates (.8%) of large partnerships.
1. The non-taxation of frequent flyer miles is easy to explain. It’s just too much of a hassle. You not only would have to keep track of them; you would have to give a dollar value. That dollar value could well be zero--- what if the employee receiving them is tired of air travel in his job and never goes by plane on vacation trips? Or what if he does go, but he would have been willing to give up his all his frequent flyer miles for $50 because he’d rather have the $50 cash and go by train? And you can’t use the cost to the employer, because the employer can’t use the frequent flyer miles. It would be like taxing the vacation value of an employee going to Paris on business. The employee can spend his evenings being a tourist. Some employees will value that a lot compared to working in Chicago; others will assign negative value to it. If you want to try to get objective about it, you could say that a night in Paris costs $1000, or whatever the cost of the flight is. But that would be silly.
2. Why aren’t partnerships audited? I could be way off base here, but since partnerships have flow-through taxation, isn’t it enough to audit the partners? In fact, I don’t see how you could audit a partner effectively without auditing the partnership. If I say my income is low because my partnership lost money last year, does the IRS just accept a letter from my partnership saying it lost money, without any checking? This would be particularly amazing if the partners were two large corporations in a joint venture, corporations so large they get audited every year as a matter of course. But maybe it’s true--- I don’t know.
The article does not say what might be done about the most interesting kind of categorical non-enforcement: refusal to enforce a tax law the President does not like. Obamacare is good for an example. Put aside the non-enforcement by President Obama of his own statute. Suppose in 2017 President Trump declares that he will not try to collect any of the “taxes” that enforce the health care mandates, because he doesn’t like the statute. The article says there is no judicial recourse for this kind of thing, and leaves it at that. But what is the use of talking about this and that justification for categorical nonenforcement if we aren’t going to require ANY justification? (not penalizing bad reasons means not requiring good reasons)
Personally I don’t know of a way to go to court to require enforcement, even if we repealed the Anti-Injunction Act, unless we change standing rules. Congress could do that, though. Perhaps the courts could change standing rules too, explicitly overruling precedent. Or perhaps a state prosecutor could prosecute the IRS Commissioner for malfeasance under some federal statute--- I don’t know criminal law well enough. And of course there’s impeachment. This sort of thing needs discussion.
This is my area of interest since I’ve filed suit against Citigroup for underpayment of New York taxes that was caused by federal nonenforcement. I didn’t see any way anybody could get the IRS to collect the federal taxes if the President doesn’t want to.
Posted by: Eric Rasmusen | Aug 9, 2016 1:49:16 PM