Tax presentations at today's Junior Faculty Forum at Richmond (program):
Blaine Saito (Northeastern), The Levels of Tax Coordination, 38 Ga. St. U. L. Rev. ___ (2022) (reviewed by Hayes Holderness (Richmond) here):
The United States implements much of its social policy through the income tax laws. The Code is rife with tax expenditures for education, housing, community economic development, retirement savings, and health care to name a few. But the IRS is not an agency with expertise in any of these areas and developing such expertise would draw resources away from its core tax administration mission. Commentators have thus called for a series of changes from turning these tax expenditures into outlays for these programs or to divest the IRS/Treasury of most of the administration of social policy tax expenditures. Yet, given American politics and the institutional structure of the federal government, these moves are both unlikely to occur and unwise.
This Article suggests a different and more promising route. It argues that agency coordination between the IRS/Treasury and other federal agencies, called tax coordination, would improve administration, management, and potential outcomes of these social policy tax expenditures. Drawing on the well-established literature in administrative law and public administration regarding agency coordination, this article shows the benefit of tax coordination. It then presents case studies where the IRS works with other agencies to administer certain tax measures for social policy. Finally, it employs insights from the public administration literature to recommend institutional and managerial changes that would make tax coordination successful.
Hayes Holderness (Richmond), Ordering Remote Work:
The COVID-19 pandemic and resulting government responses thrust an age-old state and local tax question back into the spotlight: between two states connected to an interstate activity—an origin state and a market state—which should have taxing priority? The U.S. Supreme Court has never quite been comfortable answering that question, though individual Justices have made compelling arguments one way or the other. While the issue of ordering rules for taxing priority has traditionally been associated with sales and use taxes, a recent controversy between New Hampshire and Massachusetts regarding the income taxation of remote workers highlights that the issue is not limited to those taxes. This Article examines how the experience of the sales and use tax jurisprudence can provide insight for developing the ordering rules in the case of personal income taxes.
Daniel Schaffa (Richmond), The Regressivity of Complexity:
The United States tax code is famously complex. To comply with it, taxpayers must record and process vast amounts of information while interpreting statutes, regulations, revenue rulings, cases, and other sources of law that are replete with ambiguities. There is no doubt that all this complexity has an enormous impact on taxpayer outcomes. In this article, I examine the effect of complexity on the progressivity of the tax system. To do so, I decompose the distributional effect of the tax system into two parts—a baseline effect and a complexity effect. The baseline effect is the distributional effect assuming (1) no ambiguities, (2) complete comprehension, and (3) no compliance costs. The complexity effect is the difference between the total effect and the baseline effect—it is the effect of ambiguities, incomplete comprehension, and compliance costs on after-tax distributions.
I argue that, holding the baseline effect constant, the larger the complexity effect, the more regressive the tax system. Complexity systematically biases the tax regime in favor of those with substantial means. For taxpayers with high tax risk tolerance, high tax literacy, and access to tax expertise, complexity is a boon that creates opportunities for tax planning, ambiguities for taxpayers to take advantage of, and weaknesses in enforcement for taxpayers to exploit. For taxpayers with low tax risk tolerance, minimal tax literacy, and little access to tax expertise, complexity is bane that leads to forfeited tax opportunities and missteps that result in costly entanglements with the tax enforcement agency. Since financial means strongly correlate with tax-risk tolerance, tax literacy, and access to tax expertise, I conclude that complexity tends to make a tax system less progressive. Not every change in the tax system that makes it more complex will also make it more regressive. However, when there are several policy alternatives which all have the same baseline effect, the simplest one will lead to the most progressive tax system.