Paul L. Caron

Saturday, January 28, 2023

Jan Brueckner And Blaine Saito Present Tax Papers At UCLA

Jan Brueckner (UC-Irvine; Google Scholar) presented Taxes and Telework: The Impacts of State Income Taxes in a Work-from-Home Economy (with David R. Agrawal (Kentucky; Google Scholar)) at UCLA this week as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Jan bruecknerThis paper studies the interstate effects of decentralized taxation and spending when individuals can work from home (WFH). Because WFH decouples population and employment, the analysis of tax impacts on state populations, employment levels, wages and housing prices is radically different than in the standard model where individuals live and work in the same state. Which state can tax teleworkers—leading to either source or residence taxation—matters for tax impacts under WFH. Our main findings, which pertain to the employment and wage effects of WFH, show that a shift from a non-WFH economy to WFH reduces employment and raises the wage in high-tax states, with larger effects under source taxation. Once WHF is established, an increase in a state’s tax rate either reduces employment further while raising the wage (source taxation) or leaves the labor market unaffected (residence taxation). We show that only the residence-taxation equilibrium is efficient.

Blaine Saito (Northeastern; Google Scholar) presented Public Tax Actors at UCLA last week:

Blaine-saitoThe U.S. federal tax system is failing to promote values of democracy and egalitarianism. Powerful interests like the wealthy and multinational entities (MNEs) have bent the tax system to their whim. Meanwhile disadvantaged groups and the working class have little voice or input in the development of tax policy, even as taxation serves as the foundation of the state and touches almost every aspect of people’s lives. The result then is a system that further entrenches these interests.

This article seeks to intervene to restore democratic values to taxation. It advances the idea of democratic equality as a guiding value for the tax system, as it encompasses many of the various concepts scholars involved in the intersection of tax and democracy have raised. The idea is that taxation should aid in providing people with access to capabilities to participate in all aspects of civil society and that in developing policies everyone should be treated with equal regard. Under its current structure, the tax system fails.

This failure is particularly noticeable in the developing Treasury Regulations and guidance. Not only are these interests the only ones who comment, but many of them have access to Treasury and the IRS prior to the development of a Notice of Proposed Rulemaking. Many proposals to fix this problem lack regard for democratic values. Furthermore, the system is captured both in traditional and nontraditional ways such as information capture, whereby only certain voices produce reams of information for regulatory decisions, and cultural capture, whereby the people working are more culturally aligned and interact more regularly with people who represent already well-off interests.

The intervention proposed is to create a grant program to develop tax capacity in a broad range of civil society organizations. Drawing from parallels in state utility rate hearings and the superfund, which provide similar types of payments, these grants would go to groups ranging from local organizations to large national organizations. These grants could then help connect new constituencies to the development of Treasury Regulations. Additionally, Treasury and the IRS should seek to engage all grant recipients actively, seeking input not only through comments, but even during the development of regulatory priorities. Such a program could help advance democratic equality in the tax system as well as improve the overall outcomes of taxation.

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