Friday, November 22, 2019
This week, Ariel Jurow Kleiman (San Diego) reviews a new work by Susan Morse (Texas), GILTI: The Co-operative Potential of a Unilateral Minimum Tax, 2019 Brit. Tax Rev. 512.
Cooperative is not a term often applied to the Tax Cuts and Jobs Act (TCJA). And yet, as Susan Morse explains in her recent article on “global intangible low-taxed income” (GILTI), the Act does have some cooperative potential. This potential arises from the new immediate tax on GILTI income—a subset of foreign income—earned by U.S.-parented multi-national corporations (MNCs). The presence of a mandatory tax removes incentives for countries to race to the bottom with ever-lowering tax rates, to the extent that they do so to attract U.S. MNCs. Moreover, by providing a foreign tax credit for 80% of foreign taxes paid, the law gives the “right of first refusal” to foreign jurisdictions. In a sense, the GILTI regime carves out a protected space for foreign countries to tax U.S.-parented MNCs, effectively creating a global tax floor of 13.125% (increasing to 16.4% in 2025).
November 22, 2019 in Ariel Stevenson, Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink
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Friday, June 28, 2019
This week, Ariel Jurow Kleiman (San Diego) reviews a new work by University of Toronto faculty members Benjamin Alarie, Anthony Niblett, and Albert Yoon, Data Analytics and Tax Law.
Whether you fear or celebrate big data likely depends on your background, biases, experiences, and, perhaps most importantly, which systems you imagine the data to be benefitting. Benjamin Alarie, Anthony Niblett, and Albert Yoon’s recent paper falls squarely on the celebrate side of the debate—at least in the context of tax administration—and persuasively invites the reader to join them there. In this brief essay, the authors explore how tax agencies and taxpayers can harness data analytics and machine learning to improve tax administration for both government and taxpayers.
For government, data analytics can narrow the tax gap by improving fraud detection. Specifically, tax agencies can mine taxpayer data to predict noncompliance ex ante, rather than uncovering the noncompliance ex post via audit. Such predictions can inform resource allocations, allowing tax agencies to shift resources to high-risk sectors and companies. Augmenting taxpayer data with information from other government agencies would improve these efforts.
June 28, 2019 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink
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Friday, May 10, 2019
This week, Ariel Jurow Kleiman (San Diego) reviews Determining an Asset's Tax Basis in the Absence of A Meaningful Transfer Tax Regime, a new work by Jay A. Soled (Rutgers) and Richard L. Schmalbeck (Duke), recently published in the Columbia Journal of Tax Law.
Ironically, although death and taxes are the only two certainties in life, the “death tax” is largely voluntary. (Forgive the controversial term—its purpose is rhetorical, not ideological.) With the estate and gift tax exemption up to $11.18 million per person, the tax’s voluntary nature is truer now than ever before. In their recent article, Jay Soled and Richard Schmalbeck argue that the transfer tax’s diminution will not only reduce estate and gift tax revenue, but will enable taxpayers to game the income tax as well.
The crux of the authors' argument rests on IRC § 1014(f), which requires that the stepped-up basis of property acquired from a decedent not exceed the property’s value that is reported for estate tax purposes. This rule creates two counterbalancing incentives for taxpayers appraising an estate’s assets. First, taxpayers will want to undervalue property to reduce estate tax burdens. Second, taxpayers will want to overvalue property to obtain a higher basis under § 1014. When weighing both, the estate tax’s pressures have typically dominated, largely because the tax cannot be deferred until later. Thus, a robust estate tax mitigates incentives for taxpayers to abuse the already generous § 1014 step-up in basis.
May 10, 2019 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink
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Friday, December 7, 2018
This week, Ariel Jurow Kleiman (San Diego) reviews a new work by Shu-Yi Oei (Boston College) and Diane M. Ring (Boston College), Tax Law’s Workplace Shift.
Practically speaking, the new § 199A goes live this coming filing season, when taxpayers witness the effect of the supersized pass-through business deduction. Tax experts predict all manner of distortion and gaming. In particular, many worry that the provision creates strong incentives for workers to shift from employee to independent contractor status. For some, this means abandoning crucial worker protections and increasing employment instability; for others, it may simply be tax gaming.
In response to this concern, Shu-Yi Oei and Diane Ring offer a measured analysis of § 199A’s likely impact on worker classification. The authors avoid brash forecasting and instead consider various factors that affect the likelihood of such a shift, including incentives and guardrails built into § 199A, protections existing under the labor law, and current employment trends. In addition to quelling the direst doomsday predictions, the article provides a useful normative framework for those assessing outcomes under the new law.
December 7, 2018 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink
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Friday, September 14, 2018
This week, Ariel Jurow Kleiman (San Diego) reviews a new work by David J. Shakow (Penn), The Tao of The DAO: Taxing an Entity that Lives on a Blockchain, 160 Tax Notes 929 (Aug. 13, 2018).
Much as governments have struggled for centuries to harness income flows transcending national borders, today governments face the novel challenge of taxing income flows that transcend the boundaries of the tangible world. Specifically, blockchain technology has enabled cyberspace-based financial arrangements that trigger seemingly endless tax and regulatory quandaries. (See, e.g., here and here.) David Shakow tackles one such quandary in his recent Tax Notes article, considering the tax treatment of income earned through a blockchain entity known as a decentralized autonomous organization (DAO).
Shakow’s article begins with a mercifully clear explanation of the formation, structure, and eventual demise of a specific DAO, called “The DAO.” Formed in 2016 on the Ethereum blockchain platform, The DAO collected $150 million to invest in startup enterprises. Under The DAO’s terms, anonymous investors would vote on which enterprises to invest in and would share in the profits. All transactions occurred without the need for human involvement via the operation of “smart contracts” recorded in the Ethereum blockchain. Human interveners were only necessary to confirm the identities of startup companies that submitted proposals for investment by The DAO.
September 14, 2018 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink
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Friday, August 10, 2018
This week, Ariel Jurow Kleiman (San Diego) reviews a new essay by Reid K. Weisbord (Rutgers), Postmortem Austerity and Entitlement Reform, 71 Stan. L. Rev. Online 132 (2018).
As readers know well, Social Security and Medicare are on a path to eventual insolvency, and entitlement reform is inevitable. For the most part, reform proposals tend to exist within the familiar bounds of tax hikes or benefit cuts. In his new essay on the topic, Reid K. Weisbord offers a bold reform proposal that includes elements of both, but is somehow not exactly either.
Weisbord starts by dismissing the possibility of a broad-based tax increase to fund entitlements. A tax increase is unlikely in the near future, he argues, because history has witnessed a long-term trend of steadily declining tax rates in the United States. In addition, he notes, U.S. citizens are tax averse, often failing to recognize the connection between tax payments and valued public services. Under such conditions, cutting benefits may be politically more palatable than raising taxes. However, cutting benefits harms individuals who relied on Social Security and Medicare in planning for old age. To solve this dilemma, Weisbord proposes a novel policy of “postmortem austerity.”
August 10, 2018 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink
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Friday, June 1, 2018
This week, Ariel Jurow Stevenson (NYU; moving to San Diego) reviews a new work by John R. Brooks (Georgetown), The Case for More Debt: Expanding College Affordability by Expanding Income-Driven Repayment, 2018 Utah L. Rev. ___:
Commentators routinely excoriate student debt for a litany of social ills, such as worsening financial instability and inequality and causing debtors to delay important activities such as marriage, having children, and saving for retirement. Given such damning accusations, constructing a humane, pro-student argument for expanding student debt may seem a daunting task. However, John Brooks artfully manages to do just that in his recent essay, The Case for More Debt. In it he provides a winning argument that more debt, not less, would improve education outcomes and offer needed support to low- and middle-income students.
Brooks focuses on federally-financed student loans that are eligible for income-driven repayment (IDR) programs. To lay the foundation for his argument, he deftly summarizes the various IDR program structures—each with its own acronym and set of complex lending terms. Although each program is slightly different, they share several essential features, including that 1) the borrower need only repay a fixed percentage of discretionary income, and 2) after a certain number of years the unpaid portion is fully forgiven. Taken together, Brooks reasons, these attributes of IDR transform such borrowing from true debt into something more akin to a tax.
June 1, 2018 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink
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