Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Flanagan's Reframing Taxigration

This week, Hayes Holderness (Richmond) reviews Jacqueline Lainez Flanagan (UDC), Reframing Taxigration, 87 Tenn. L. Rev. ___ (2020):

If asked to name one of the top (non-impeachment) hot-button political issues of the day, one might very well pick tax or immigration. Tax and immigration probably would not come to mind, but as Jacqueline Lainez Flanagan argues in Reframing Taxigration, maybe it should. Immigrants regularly interact with federal, state, and local tax systems, and those interactions offer an unexpected avenue for immigration reform. Flanagan’s draft article begins to make the case that that avenue should be pursued.

Despite popular anti-immigrant rhetoric, immigrants—documented or not—contribute to federal, state, and local governments through the payment of income, payroll, sales, and other taxes. It makes sense that immigrants would be subject to these tax laws given their activities in the United States; for example, they earn income, make wages, and purchase goods here. Immigration or citizenship status should not affect tax liability from this point of view, though such status might affect tax liability under a more transactional view of taxation. If taxes are justified as payment for the benefits one receives from the government, then perhaps immigrants should be subject to lower taxes than full citizens who receive more benefits from the federal and state governments.

Though Flanagan does not directly argue for a shift to a benefits-provided justification for the taxation of immigrants, she does advocate for federal and state governments to provide more benefits and protections to immigrants, particularly undocumented ones. Her argument here is straightforward: undocumented immigrants contribute to the economic health of the nation and could contribute even more if they are afforded basic protections from exploitation based on the fear of deportation. In effect, she advocates for shifting the economic gains derived from the labor of undocumented immigrants from private employers to public governments. This shift would be achieved through taxation.

Of course, this argument is not really about tax law; it is about immigration law. If undocumented immigrants are provided better working conditions and stronger protections from exploitation, they will be more productive and generate greater economic gains. Society can take its cut of those gains through the tax laws already in place. Those who currently employ undocumented immigrants may lose out to some degree, but society at large will be better off.

So what about tax law? Where does it come into play? Flanagan argues that tax law offers a path to reform of the immigration law; specifically, reforming tax administration to make it more welcoming to undocumented immigrants could spur substantive immigration reforms. To this end, Flanagan proposes that the tax law be shorn up to protect the personal information of undocumented immigrants who file tax returns from being used for non-tax (i.e., deportation) purposes, alleviating obvious concerns of these taxpayers.

Providing more protections to undocumented immigrants for filing tax returns should set off a chain of reactions. As word of the protections spreads among immigrant communities, more and more immigrants will file their taxes in a documentable way. This will lead to more verifiable information about the contributions of undocumented immigrants to the public fisc, which in turn should soften the rhetoric around immigration reform. When undocumented immigrants are understood to be productive members of society, society can be convinced to provide them the protections they need to remain or grow in their productivity.

Flanagan is careful to describe her argument as focusing only on the economics of immigration reform and as intended only to advance the discourse surrounding immigration reform by introducing the tax system’s potential role in such reform. However, some issues may be worth addressing in more depth. First, immigration reform can be difficult, but so can tax reform. The economic case for bringing more undocumented immigrants into the tax system is strong, but tax law is often about more than economics. Some may oppose expanding protections for undocumented immigrants who file tax returns because such an action might symbolize governmental acquiescence of those immigrants’ place in society. In other words, Flanagan’s proposal might be viewed as putting the cart before the horse and may encounter resistance for that reason from those unwilling to provide undocumented immigrants greater protections.

Additionally, the proposal might lead to unintended consequences by tying immigration reform too closely to taxation. If the goal is to demonstrate that undocumented immigrants are productive members of society worthy of more governmental protections and benefits, then immigration reforms might focus too heavily on the most economically productive immigrants to the detriment of other immigrants. Flanagan recognizes this concern in passing, but the proposal would benefit from a more thorough examination of this potential outcome.

That said, Reframing Taxigration offers an intriguing analysis of the relationship of tax law and immigration law. Flanagan moves past traditional concerns about how the tax law affects individual immigrants to examine how the tax law can be used to affect the rights of all immigrants. She is to be lauded for exposing a potential path forward for immigration reform, and for confirming, once again, that nothing lies beyond the reach of tax.

Here’s the rest of this week's SSRN Tax Roundup:

• Armenak Antinyan (Wenlan School of Business) & Zareh Asatryan (ZEW), Nudging for Tax Compliance: A Meta-Analysis, ZEW - Centre for European Economic Research Discussion Paper No. 19-055
• Jennifer Blouin (UPenn) & Leslie Robinson (Dartmouth), Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?
• Ike Brannon (Jack Kemp Foundation), The Positive Revenue and Economic Impact of Section 179D The Commercial Buildings Energy-Efficiency Tax Deduction
• Elena Derby (Georgetown, JCT), Does Growing Up in Tax-subsidized Housing Lead to Higher Earnings and Educational Attainment?
• David Elkins (Netanya), A Critical Reassessment of the Role of Neutrality in International Taxation, 40 Nw. J. Int’l L. & Bus. 1 (2019)
• Andrés Erosa (Universidad Carlos III de Madrid) & Beatriz González (Banco de Espana), Taxation and the Life Cycle of Firms, Banco de Espana Working Paper No. 1943
• Johann Hattingh (Cape Town), Legal Considerations Arising from the Use of Memoranda of Understanding in Bilateral Tax Treaty Relations, Contemporary Tax Issues (International Bureau for Fiscal Documentation) (G. Maisto, Ed.) (forthcoming)
• Daniel Klein (Mannheim), Christopher Ludwig (Mannheim), & Christoph Spengel (ZEW), Ring-Fencing Digital Corporations: Investor Reaction to the European Commission’s Digital Tax Proposals, ZEW - Centre for European Economic Research Discussion Paper No. 19-050
• Suresh Kumar Oad Rajput (Sukkur IBA University) & Jahanzeb Marwat (Sukkur IBA University), Tax Avoidance And Earning Management In Pakistan
• Michael Maizels & William E. Foster (Arkansas), The Gallerist’s Gambit: Financial Innovation, Tax Law, and the Making of the Contemporary Art Market, 42 Colum. J. L. & the Arts (2019)
• John A. Townsend, Burden of Proof in Tax Cases: Valuation and Ranges - an Update, The Tax Lawyer (forthcoming 2020)
• Marius van Oordt (African Tax Institute) & Richard Krever (Western Australia), Legal Uncertainty in the South African VAT, Tax Simplification: An African Perspective (Pretoria: Pretoria University Law Press, Chris Evans, Riël Franzsen and Elizabeth (Lilla) Stack, Eds) (2019)
• Dennis J. Ventry (UC-Davis), False Claims in Fight Over California's False Claims Act, Tax Notes State (Nov. 4, 2019)