Sugin Presents Proxy Taxes Today At San Diego

Linda Sugin (Fordham; Google Scholar) presents Proxy Taxes at San Diego today as part of its Tax Law Speaker Series:

This article offers a conceptual and theoretical framework for seemingly oddball and unprincipled provisions in the Internal Revenue Code, praising them for increasing progressivity and producing revenue.  “Proxy taxes” impose liability on taxpayers with ability to pay who are connected, in some way, to income earners who pay insufficient or no tax on that income.  Given the combination of rising income and wealth inequality and the political impossibility of raising taxes on income in a straightforward way, policymakers should embrace proxy taxes as a flexible solution to a pressing tax justice problem.  This article argues that proxy taxes contribute to a more comprehensive income tax system, despite their departure from classic income tax principles, and can also be more efficient than higher taxes imposed on income.

While accepting the corporate governance critiques in the literature, the article endorses §162(m)’s limit on the deduction for executive compensation as a great proxy tax on labor income. 

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Next Week’s Tax Workshops

Monday, February 27: Linda Sugin (Fordham; Google Scholar) will present Proxy Taxes as part of the San Diego Tax Law Speaker Series. 

Tuesday, February 28: Shu-Yi Oei (Duke; Google Scholar) will present Understanding Developing Country Tax Treaties with OECD Partners: A Multilevel Analysis as part of the UC-San Francisco Law Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan. 

Tuesday, February 28: Max Risch (Carnegie Mellon; Google Scholar) will present Trickle-Down Revisited as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Tuesday, February 28: John Guyton (IRS) will present Integrating Reward Maximization and Population Estimation: Sequential Decision-Making for Internal Revenue Service Audit Selection (with Peter Henderson (Stanford; Google Scholar), Ben Chugg (Carnegie Mellon), Brandon Anderson (IRS), Kristen Altenburger (Stanford; Google Scholar), Alex Turk (IRS), Jacob Goldin (Chicago; Google Scholar) & Daniel E. Ho (Stanford; Google Scholar)) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday, March 1: Jeremy Bearer-Friend (George Washington; Google Scholar) will present Poll Taxes, Revisited as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky.

Thursday, March 2: Martin Gilens (UCLA) will present Campaign Finance Regulations and Public Policy, 115 Am. Pol. Sci. Rev. 1074 (2021) (with Shawn Patterson, Jr. (Southern Oregon) & Pavielle Haines (Rollins College)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh. 

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Mason Presents Bounded Extraterritoriality Today At Duke

Ruth Mason (Virginia; Google Scholar) presents Bounded Extraterritoriality (with Michael Knoll (Penn)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Conclusion
It is easy to accept that federalism imposes limits on states’ entitlement to regulate too much. Vastly more difficult is describing the precise contours of any such limit. The challenge of this Article was to find a way of thinking about extraterritoriality that is not only simpler than what has come before, but also grounded in our Constitution’s structural federalism. To be successful, a conception of extraterritoriality must both give clear direction to courts and be sensitive to differences between nexus, extraterritoriality, and burdens. It must also answer the critics, who rightly argue that because extraterritorial effects are ubiquitous in commercial regulation, judicial attempts to root them out are unprincipled, overbroad, and unduly restrain states.

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Kim Presents Taxing Digital Platforms Today At Northwestern

Young Ran (Christine) Kim (Cardozo; Google Scholar) presents Taxing Digital Platforms (with Darien Shanske (UC-Davis; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky: 

Tax systems have been struggling to adapt to the digitalization of the economy. At the center of the struggles is taxing digital platforms, such as Google or Facebook. These immensely profitable firms have a business model that gives away "free" services, such as searching the web. The service is not really free; it is paid for by having the users watch ads and tender data. Traditional tax systems are not designed to tax such barter transactions, leaving a gap in taxation.

One response, pioneered in Europe, has been the creation of a wholly new tax to target digital platforms: The Digital Services Tax (DST). Though controversial, ten states have entertained imposing a DST, and Maryland actually did so. Maryland’s tax was immediately challenged, with the strongest argument against the tax being that it is preempted by the Internet Tax Freedom Act. 

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Mason Presents Bounding Extraterritoriality Today At Columbia

Ruth Mason (Virginia; Google Scholar) presents Bounding Extraterritoriality (with Michael Knoll (Penn)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer:

Conclusion
It is easy to accept that federalism imposes limits on states’ entitlement to regulate too much. Vastly more difficult is describing the precise contours of any such limit. The challenge of this Article was to find a way of thinking about extraterritoriality that is not only simpler than what has come before, but also grounded in our Constitution’s structural federalism. To be successful, a conception of extraterritoriality must both give clear direction to courts and be sensitive to differences between nexus, extraterritoriality, and burdens. It must also answer the critics, who rightly argue that because extraterritorial effects are ubiquitous in commercial regulation, judicial attempts to root them out are unprincipled, overbroad, and unduly restrain states.

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Next Week’s Tax Workshops

Tuesday, February 21: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Wednesday, February 22: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing Digital Platforms (with Darien Shanske (UC-Davis; Google Scholar)) as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, February 23: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak.

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Clausing Presents Capital Taxation And Market Power Today At Indiana

Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation And Market Power at Indiana-Maurer today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

In recent decades, market power has increased substantially, according to multiple measures that describe industry concentration, mark-ups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize capital income, making it important to distinguish between normal and above-normal returns to capital. The tax system taxes both types of returns to capital, but often imperfectly and incompletely. 

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van Dijk Presents Eviction and Poverty in American Cities Today At UCLA

Winnie van Dijk (Harvard, NBER) presents Eviction and Poverty in American Cities (with Robert Collinson (Notre Dame; Google Scholar), John Eric Humphries (Yale; Google Scholar), Nicholas Mader (Chapin Hall), Davin Reed (Federal Reserve Bank of Philadelphia; Google Scholar), Daniel Tannenbaum (Nebraska; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

More than two million U.S. households have an eviction case filed against them each year. Policymakers at the federal, state, and local levels are increasingly pursuing policies to reduce the number of evictions, citing harm to tenants and high public expenditures related to homelessness. We study the consequences of eviction for tenants using newly linked administrative data from two large cities.

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Galle & Shay Present Admin Law And The Crisis Of Tax Administration Today At Duke

Brian Galle (Georgetown; Google Scholar)& Stephen Shay (Boston College; Google Scholar) present Admin Law and the Crisis of Tax Administration, 101  N.C. L. Rev. __ (2023) (reviewed by Blaine Saito (Northeastern; Google Scholar) here) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The IRS is struggling. Phone calls from confused taxpayers ring unanswered, paper returns pile up, aggressive tax filers are confident they are unlikely to be audited. Congress piles new responsibilities on the agency while (so far) slashing its budget to modern lows.

This is a strange time, then, to launch perhaps the largest-ever experiment in tax administration. Yet that is what some courts and the Trump White House, encouraged by some tax law scholarship, have begun. In at least four distinct ways, IRS and its regulatory partner the U.S. Treasury are now facing greater procedural obstacles to their efforts to guide and constrain the taxpaying public. 

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Smart Presents Distributionally Sensitive Cost Benefit Analysis Today At Toronto

Michael Smart (Toronto; Google Scholar) presents Distributionally Sensitive Cost Benefit Analysis at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

I review the case for and against the use of a distributionally weighted sum of gains and losses in cost-benefit analysis. I conclude that distributional weighting is logically consistent and ethically justified in cases where policy reforms have direct effects on inequality in pre-tax incomes of individuals. I show how distributional weights can be calculated for Canada using information on income inequality and effective tax rates in the income tax system. I apply distributional weights to evaluate a recent proposed merger with presumed anticompetitive effects in Canada’s telecommunications sector.

Concluding Remarks
The methods described here offer a robust, data-driven approach for determining how the potentially adverse distributional consequences of mergers could be taken into account in evaluating the efficiencies defence under Section 96 of the Competition Act. Examining effective tax rates by income group, I found that the Canadian tax system exhibits a relatively modest preference for redistribution from rich to poor, reflected in a distributional weight on the richest group that is about 30% lower than average.

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Doran Presents Executive Compensation And Corporate Governance Today At Georgetown

Michael Doran (Virginia; Google Scholar) presents Executive Compensation and Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

Over the past four decades, Congress has repeatedly used tax policy to address executive-compensation practices, most notably through golden-parachute penalty taxes (enacted in 1984), a $1 million cap on compensation deductions (enacted in 1993 and expanded in 2017), and penalty taxes on nonqualified deferred compensation (enacted in 2004). The critical assumptions underlying these efforts are, first, that certain features of executive pay represent a failure of corporate governance and, second, that tax policy can correct that failure. The first assumption may or may not be correct; the theoretical and empirical arguments about it remain unresolved. But the second assumption is increasingly untenable. Penalty taxes have been largely ineffective in changing executive-compensation practices in the ways that legislators intend; in many instances, they actually exacerbate the features of executive pay that concern Congress in the first place. 

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Choi Presents Subjective Costs Of Tax Compliance Today At UC-San Francisco

Jonathan Choi (Minnesota; Google Scholar) presents Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) at UC-San Francisco today as part of its Tax Policy Colloquium hosted by Manoj Viswanathan:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

These findings have important implications for theory and policy. From a theoretical perspective, these survey results call into question the nearly universal practice of using market wages to monetize the time that people spend on tax compliance work. 

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Gershon Presents Top Five Code Sections That Should Not Exist At Alabama

Richard Gershon (Mississippi) presented Top Five Code Sections That Should Not Exist at Alabama this week: 

As a fan of the strange and unusual, I am a fan of YouTube. YouTube channels often feature top 5’s. For example, the Top 5 Unknowns often features videos like "The Five Photos That Should Not Exist." I find it so interesting that even though those photos should not exist, they in fact do exist. Since every aspect of life eventually leads back to tax law, I realized that there are at least five sections of the Internal Revenue Code (IRC) that should not exist, but nevertheless do exist. In true YouTube style, this article will discuss each of these five sections in order from least compelling to most compelling and will include one honorable mention.

The sections I have chosen in this article are those that have always bothered me when I taught them in my tax classes. The article will address the flaws in policy, application, or both of each of the code sections discussed. So, turn out the lights and grab some popcorn because tax law is always entertaining.

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Next Week’s Tax Workshops

Tuesday, February 14: Jonathan Choi (Minnesota; Google Scholar) will present Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) as part of the UC-San Francisco Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan.

Tuesday, February 14: Michael Doran (Virginia; Google Scholar) will present Executive Compensation and Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday, February 15: Michael Smart (Toronto; Google Scholar) will present Distributionally Sensitive Cost Benefit Analysis as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

Thursday, February 16: Owen Zidar (Princeton; Google Scholar) will present The Health Wedge and Labor Market Inequality (with Amy Finkelstein (MIT; Google Scholar), Casey McQuillan (Ph.D. Candidate, Princeton), and Eric Zwick (Chicago; Google Scholar)) as part of the OMG Transatlantic Tax Talks. There is no registration required for this event. 

Thursday, February 16: Winnie van Dijk (Harvard, NBER) will present Eviction and Poverty in American Cities (with Robert Collinson (Notre Dame; Google Scholar), John Eric Humphries (Yale; Google Scholar), Nicholas Mader (Chapin Hall), Davin Reed (Federal Reserve Bank of Philadelphia; Google Scholar), Daniel Tannenbaum (Nebraska; Google Scholar)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

Thursday, February 16: Brian Galle (Georgetown; Google Scholar) & Stephen Shay (Boston College; Google Scholar) will present Admin Law and the Crisis of Tax Administration as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak.

Friday, February 17: Kimberly Clausing (UCLA; Google Scholar) will present Capital Taxation And Market Power as part of the Indiana-Maurer Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman.

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Schütze Presents Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons Today At The Oxford-Virginia Legal Dialogues

Robert Schütze (Durham) presents Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons (from The Question of Competence in the European Union, Oxford University Press 2014) at the Oxford-Virginia Legal Dialogues today hosted by Tsilly Dagan and Ruth Mason: 

This chapter examines the internal market competence of the United States and the EU. It first considers the American internal market competence — the ‘Commerce Clause’ which allows Congress to regulate Commerce in several states and has been the chief competence to deregulate and re-regulate the American federal market. It then analyses the EU's internal market competence, showing that Article 114 TFEU has — like the US ‘Commerce Clause’ — been given an (almost) unlimited scope. Both the American and the European internal market powers have encountered some political and legal limits, and the chapter compares these constitutional limitations.

The Question of Competence in the European Union (Oxford University Press 2014):

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Morse Presents Old Regs At Boston College

Susie Morse (Texas; Google Scholar) presents Old Regs at Boston College as part of its Tax Policy Workshop hosted by Jim Repetti:

Old regs should not be subject indefinitely to administrative procedure challenge. Instead, we should leave them alone. The consensus case law view that applies the six-year limitations period under 28 U.S.C. § 2401(a) with accrual at the time of promulgation, strikes the right balance between accuracy and repose. It correctly reflects that all of the elements of the administrative procedure claim are in place at the time of the alleged error, when the regulation was promulgated. When -- as in tax -- claims can be delayed through no fault of any plaintiff, the solution is to make appropriate administrative and equitable adjustments.

Conclusion
The puzzle presented by administrative procedure challenges to old regs amounts to a classic tension in law: the tradeoff between accuracy and repose. The puzzle is solved by the default six-year limitations period of 28 U.S.C. § 2401(a), which, under a case law consensus, begins to run when the final agency rulemaking action is taken for administrative procedure claims. Tax provides a good text case for this argument because it is a somewhat more difficulty case, due to the fact that most opportunities to raise administrative procedure claims arise not as facial challenges, bur rather in enforcement cases – whether deficiency or refund -- where the pre-litigation tax procedure can be lengthy. 

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Bilicka Presents Organizational Capacity And Profit Shifting Today At UCLA

Katarzyna Anna Bilicka (Utah State; Google Scholar) presents Organizational Capacity and Profit Shifting (with Daniela Scur (Cornell; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh: 

Good organizational capacity drives productivity and potential taxable profits, but may also enable multinationals (MNEs) to more efficiently re allocate profits across tax jurisdictions, lowering actual taxable profits. We show that MNE subsidiaries with better organizational capacity report significantly lower profits and have a higher incidence of bunching around zero reported profitability in high-tax countries. This pattern is not present in low-tax countries. Further, responsiveness to corporate tax rate changes in terms of profit reporting is driven by firms with good organizational capacity. We show our results are consistent with profit-shifting behavior and rule out key alternative channels. JEL codes: M11, M02, H26, H32.

Conclusion
We show that the previously established link between organizational capacity and profitability has an important caveat: for multinationals, it only holds in low-tax countries. We document new patterns of reported profitability across countries taking into account heterogeneity in the quality of management of MNE subsidiaries, and propose that these patterns can be best attributed to profit shifting activities for those MNEs that can be classified as aggressive tax avoiders. We find that practices related to tractable and predictable production and MNE-aligned incentives are most likely to enable such actions. We rule out alternative explanations such as “real” performance differences, differential take-up of local tax incentives, the quality of information environment, or individual manager quality.

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Choi Presents Subjective Costs Of Tax Compliance Today At Northwestern

Jonathan Choi (Minnesota; Google Scholar) presents Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

These findings have important implications for theory and policy. From a theoretical perspective, these survey results call into question the nearly universal practice of using market wages to monetize the time that people spend on tax compliance work. 

Continue reading

Galle Presents Solving the Valuation Challenge: The ULTRA Method of Taxing Extreme Wealth Today At Columbia

Brian Galle (Georgetown; Google Scholar) presents Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth, 72 Duke L.J. ___ (2023) (with David Gamage (Indiana-Maurer; Google Scholar) & Darien Shanske (UC-Davis; Google Scholar)) (reviewed by Young Ran (Christine) Kim (Cardozo; Google Scholar) here) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer:

Recent reporting based on leaked tax returns of the ultra-rich confirms what experts have long suspected: for the wealthiest Americans, paying taxes is mostly optional. Some of the country's richest have reported annual incomes that would be modest for a school teacher, even as the share of wealth held by the top .1% is at its highest in nearly a century.

Experts have long understood that one problem sits at the root cause of many of the tax system's failures to reach the very rich: valuation. Because it is difficult to appraise complex or unique assets, modern tax systems instead wait until an asset is sold to impose tax. In combination with an American rule that wipes away income tax on inherited profits, and a highly porous estate tax system, this "realization" approach has deeply undermined U.S. efforts to tax extreme wealth.

This Article proposes a new approach: governments should take payments from the wealthy in the form of notional equity interests, which we call "ULTRAs," for unliquidated tax reserve accounts. 

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Lawsky Presents Coding The Code: Catala And Computationally Accessible Tax Law Today At Duke

Sarah B. Lawsky (Northwestern; Google Scholar) presents Coding The Code: Catala And Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022), at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

This Article describes a new programming language, Catala, created by a team of computer scientists and lawyers. Catala provides a tractable and functional approach to coding U.S. tax law that offers a more transparent formalization and could potentially hold the government more accountable than the current patchwork of forms, worksheets, and secret programs.

While this Article describes a particular programming language, key characteristics of this particular language could generalize to other programming languages that formalize the law. First, Catala is a domain-specific programming language designed specifically for formalizing tax law. In particular, Catala is structured using default logic, a nonstandard logic that represents the underlying structure of the U.S. tax code more accurately than does standard logic. This structure makes the computer code easier to read, easier to create, and easier to modify when the law changes. 

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Christians Presents Global Tax Reform And Mythical International Law Today At Georgetown

Allison Christians (McGill; Google Scholar) presents Global Tax Reform and Mythical International Law (with Tarcísio Diniz Magalhães (Antwerp; Google Scholar)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

Over the past several years, governments around the world have been debating how to design coordinated minimum taxes on large multinationals in a bid to end race-to-the-bottom global tax competition. The plans so far have been complex and intricate, but in virtually all respects the evolution of ideas has followed well-worn practices and approaches in tax and corporate law. Nevertheless, outspoken critics have emerged with arguments against change that are grounded in abstract and often ill-defined international law concepts—effectively, a mythology of general and/or customary norms meant to forestall forward momentum and cast doubt on the fundamental workability of global tax reform as it has been collaboratively developed to date. This Article examines the myths of international tax law and demonstrates that each purported impediment is either conceptually under-theorized or exaggerated in legal impact or both.

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Next Week’s Tax Workshops

Tuesday, February 7: Brian Galle (Georgetown; Google Scholar) will present Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth (with David Gamage (Indiana-Maurer; Google Scholar) & Darien Shanske (UC-Davis; Google Scholar)) (reviewed by Young Ran (Christine) Kim (Cardozo; Google Scholar) here) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Tuesday, February 7: Allison Christians (McGill; Google Scholar) will present Global Tax Reform and Mythical International Law (with Tarcísio Diniz Magalhães (Antwerp; Google Scholar)) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Tuesday, February 7: Sarah B. Lawsky (Northwestern; Google Scholar) will present Coding The Code: Catala And Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022), as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak. 

Wednesday, February 8: Jonathan Choi (Minnesota; Google Scholar) will present Subjective Costs of Taxation as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, February 9: Katarzyna Anna Bilicka (Utah State; Google Scholar) will present as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

Friday, February 10: Robert Schütze (Durham) will present Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons (from The Question of Competence in the European Union, Oxford University Press 2014) as part of the Oxford-Virginia Legal Dialogs. If you would like to attend, please contact Tsilly Dagan and Ruth Mason. 

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Gondwe Presents The Life-Saving Potential Of Direct Public Financial Assistance To Survivors Of Intimate Partner Violence Today At Indiana

Nyamagaga Gondwe (Wisconsin; Google Scholar) presents Emergency Exit: The Life-Saving Potential of Direct Public Financial Assistance to Survivors of Intimate Partner Violence at Indiana today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

Intimate partner violence (IPV) is viewed primarily as a class of criminal behavior in federal policy. But the criminal justice system operates through a model of individual accountability, which means that solutions to IPV in American communities focus on education (proactive) and incarceration (reactive) as interventions.

However, public health studies on IPV suggest that the kinds of physical violence that result in arrest should not be seen as the central issue in addressing IPV. Instead, those studies suggest that physical violence should be thought of as a tool for one partner in a relationship to exert coercive power and control over the other partner. Put another way, physical violence is just one of multiple tools an abuser will use to control their partner. Other tools include emotional abuse, psychological abuse, and economic abuse.

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Londoño-Vélez Presents Behavioral Responses To Wealth Taxation: Evidence From Colombia Today At UCLA

Juliana Londoño-Vélez (UCLA; Google Scholar) presents Behavioral Responses to Wealth Taxation: Evidence from Colombia (with Javier Avila-Mahecha (DIAN; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

We study behavioral responses to personal wealth taxes in Colombia using tax microdata (1993-2016) linked with the leaked Panama Papers, which shed light on offshoring to Colombia’s most relevant tax havens. We leverage variation from four reforms that modified the wealth tax design—tax duration and rate schedule—and introduced discrete jumps in the tax liability. Using bunching and difference-in-difference techniques, we obtain four key results. First, we find salient and compelling evidence that wealth tax hikes cause taxpayers to lower their reported wealth instantly—a reporting response that slashes, at most, one-fifth of tax revenue. Second, this response can persist even after the wealth tax no longer applies—i.e., “hysteresis”—reflecting taxpayers’ strategic avoidance behavior. Third, taxpayers misreport what authorities cannot cross-verify: they inflate (interpersonal) debt and underreport non-third-party-reported business assets. Lastly, the wealthiest taxpayers respond to wealth tax hikes by hiding assets in hard-to-track entities in tax havens.

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Clausing Presents Capital Taxation And Market Power Today At Toronto

Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation and Market Power at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

In recent decades, market power has increased substantially, as shown by measures that include industry concentration, mark-ups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize capital income, making it important to distinguish between normal and above-normal returns to capital. The tax system taxes both types of returns to capital, but often imperfectly and incompletely. 

Continue reading

Morse Presents APA Challenges To Old Tax Guidance And The Six-Year Default Limitations Period Today At Northwestern

Susie Morse (Texas; Google Scholar) presents Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

Old regs should not be subject indefinitely to administrative procedure challenge. Instead, we should leave them alone. The consensus case law view that applies the six-year limitations period under 28 U.S.C. § 2401(a) with accrual at the time of promulgation, strikes the right balance between accuracy and repose. It correctly reflects that all of the elements of the administrative procedure claim are in place at the time of the alleged error, when the regulation was promulgated. When -- as in tax -- claims can be delayed through no fault of any plaintiff, the solution is to make appropriate administrative and equitable adjustments.

Conclusion
The puzzle presented by administrative procedure challenges to old regs amounts to a classic tension in law: the tradeoff between accuracy and repose. The puzzle is solved by the default six-year limitations period of 28 U.S.C. § 2401(a), which, under a case law consensus, begins to run when the final agency rulemaking action is taken for administrative procedure claims. Tax provides a good text case for this argument because it is a somewhat more difficulty case, due to the fact that most opportunities to raise administrative procedure claims arise not as facial challenges, bur rather in enforcement cases – whether deficiency or refund -- where the pre-litigation tax procedure can be lengthy. 

Continue reading

Doran Presents Executive Compensation And Corporate Governance Today At Columbia

Michael Doran (Virginia; Google Scholar) presents Executive Compensation And Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer, Michael Love, Wojciech Kopczuk, and Alex Raskolnikov. 

Over the past four decades, Congress has repeatedly used tax policy to address executive-compensation practices, most notably through golden-parachute penalty taxes (enacted in 1984), a $1 million cap on compensation deductions (enacted in 1993 and expanded in 2017), and penalty taxes on nonqualified deferred compensation (enacted in 2004). The critical assumptions underlying these efforts are, first, that certain features of executive pay represent a failure of corporate governance and, second, that tax policy can correct that failure. The first assumption may or may not be correct; the theoretical and empirical arguments about it remain unresolved. But the second assumption is increasingly untenable. Penalty taxes have been largely ineffective in changing executive-compensation practices in the ways that legislators intend; in many instances, they actually exacerbate the features of executive pay that concern Congress in the first place. 

Continue reading

Goldin Presents Measurement And Mitigation Of Racial Disparities In Tax Audits Today At Georgetown

Jacob Goldin (Chicago; Google Scholar) presents Measurement and Mitigation of Racial Disparities in Tax Audits at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli. 

Government agencies around the world use data-driven algorithms to allocate enforcement resources. Even when such algorithms are formally neutral with respect to protected characteristics like race, there is widespread concern that they can disproportionately burden vulnerable groups. We study differences in Internal Revenue Service (IRS) audit rates between Black and non-Black taxpayers. Because neither we nor the IRS observe taxpayer race, we propose and employ a novel partial identification strategy to estimate these differences. Despite race-blind audit selection, we find that Black taxpayers are audited at 2.9 to 4.7 times the rate of non-Black taxpayers. The main source of the disparity is differing audit rates by race among taxpayers claiming the Earned Income Tax Credit (EITC). Using counterfactual audit selection models for EITC claimants, we find that maximizing the detection of underreported taxes would not lead to Black taxpayers being audited at higher rates. In contrast, in these models, certain policies tend to increase the audit rate of Black taxpayers: (1) designing audit selection algorithms to minimize the “no-change rate”; (2) targeting erroneously claimed refundable credits rather than total under-reporting; and (3) limiting the share of more complex EITC returns that can be selected for audit. 

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Clausing Delivers Pugh Lecture Today At San Diego On The Future of International Tax Cooperation

Kimberly Clausing (UCLA; Google Scholar) delivers the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego today on The Future of International Tax Cooperation:

Kimberly Clausing holds the Eric M. Zolt Chair in Tax Law and Policy.

During the first part of the Biden Administration, Clausing was the Deputy Assistant Secretary for Tax Analysis in the US Department of the Treasury, serving as the lead economist in the Office of Tax Policy. Prior to coming to UCLA, Clausing was the Thormund A. Miller and Walter Mintz Professor of Economics at Reed College.

Her research studies the taxation of multinational firms, examining how government decisions and corporate behavior interplay in the global economy. She has published numerous articles in this area, and she is the author of Open: The Progressive Case for Free Trade, Immigration, and Global Capital (Harvard University Press, 2019).

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Next Week’s Tax Workshops

Monday, January 30: Kimberly Clausing (UCLA; Google Scholar) will present The Future of International Tax Cooperation as part of the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego. If you would like to attend, please RSVP here.

Tuesday, January 31: Jacob Goldin (Chicago; Google Scholar) will present Measurement and Mitigation of Racial Disparities in Tax Audits as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Tuesday, January 31: Michael Doran (Virginia; Google Scholar) will present Executive Compensation And Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Wednesday, February 1: Susan Morse (Texas; Google Scholar) will present Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Wednesday, February 1: Kimberly Clausing (UCLA; Google Scholar) will present Capital Taxation and Market Power as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

Thursday, February 2: Juliana Londoño-Vélez (UCLA; Google Scholar) will present Behavioral Responses to Wealth Taxation: Evidence from Colombia (with Javier Avila-Mahecha (DIAN; Google Scholar)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

Friday, February 3: Nyamagaga Gondwe (Wisconsin; Google Scholar) will present Emergency Exit: The Life-Saving Potential of Direct Public Financial Assistance to Survivors of Intimate Partner Violence as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman.

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Mason Presents Bibb Balancing Today At The OMG Transatlantic Tax Talks

Ruth Mason (Virginia; Google Scholar) presents Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

Courts and commentators have long understood dormant Commerce Clause doctrine to contain two types of cases: discrimination and undue burdens. This Article argues for a more nuanced understanding that divides undue burdens into single-state burdens—which arise from the application of a single state’s law alone—and mismatch burdens, which arise from legal diversity. Although the Supreme Court purports to apply Pike balancing in all undue-burden cases, we show that the Court’s approach in mismatch cases differs substantially. Specifically, unlike in single-state cases, balancing in mismatch cases involves an implicit and potentially problematic comparison by the Court between the challenged state’s regulation and those of other states. We label analysis in mismatch cases “Bibb balancing,” after the famous mudflaps case, and we show that mismatch cases present the Court with a more challenging set of issues than do other types of dormant Commerce Clause cases.

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Brauner Presents Taxation Of Information And The Data Revolution Today At Florida

Yariv Brauner (Florida; Google Scholar) presents Taxation of Information and the Data Revolution at Florida today as part of a celebration of his academic contribution and appointment to the Hugh Culverhouse Eminent Scholar Chair in Taxation hosted by Charlene Luke:

The digital revolution has put enormous demands on the law due to the huge, quick-moving social changes it has created. The reason tax law hasn't advanced as much as other legal fields in responding to these demands is likely because it combines the problem of taxing information with the more general issue of taxing intangibles. This essay makes the case that information is distinct and necessitates a distinctive policy and analysis. It initially argues that information cannot be taxed under the current international tax rules. Therefore, reform is required, and the paper demonstrates why it is vital right now. Finally, the article makes the case that reform is also feasible by outlining three potential reform routes and contrasting their benefits and drawbacks.

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Parsons Presents The Shifting Economic Allegiance Of Capital Gains Today At Columbia

Amanda Parsons (Colorado; Google Scholar) presents The Shifting Economic Allegiance Of Capital Gains, 26 Fla. Tax Rev. ___ (2023), at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by Wojciech Kopczuk, Michael Love,  Alex Raskolnikov, and David Schizer:

Technological advances and the digitalization of the global economy have created an economic environment beyond the imagination of the original designers of the international tax system. Much scholarly attention has been paid to the question of how these economic transformations should affect which country is able to tax a multinational company’s income. But which country should be able to tax capital gains income from the sale of that company’s shares is an important and overlooked question.

This Article answers this question. It concludes that taxing authority over capital gains income must be reallocated to the countries in which companies conduct business. In our modern, digitalized economy, this reallocation is necessary to align international sourcing rules with international tax law’s underlying principles.

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Sarkar Presents Capital Migration Today At UC-San Francisco

Shayak Sarkar (UC-Davis; Google Scholar) presents Capital Migration at UC-San Francisco today as part of its Center on Tax Law' Tax Policy Colloquium hosted by Heather Field and Manoj Viswanathan:

Money moves, while migrants linger. If humans face borders, capital and corporations are purportedly “borderless.” Yet what precisely renders capital and reliant businesses foreign, the designation underlying migration?

This Article unpacks capital migration and the responses it elicits. It does so by parsing capital and corporate migration’s intersection with human migration as well as identifying conceptual parallels. As a first parallel, the citizenship binary is insufficient to understand both human and capital migration, as international tax law illustrates. Second, on the recurrent question of federalism, states, alongside the federal government, possess tax authority over foreign capital and corporations. As I argue, just as immigration tax federalism permits nonuniformity, so might capital and corporate tax federalism under the Foreign Commerce Clause.

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Choi Presents Subjective Costs Of Taxation Today At Florida

Jonathan H. Choi (Minnesota; Google Scholar) presents Subjective Costs of Taxation at Florida today as part of its Marshall M. Criser Distinguished Faculty Workshop:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

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Nam Presents Just Taxation Of Crime: Should The Commission Of Crime Change One's Tax Liability? At Indiana

Jeesoo Nam (USC; Google Scholar) presented Just Taxation of Crime: Should the Commission of Crime Change One's Tax Liability? at Indiana-Maurer last Friday as part of its Tax Policy Colloquium hosted by Leandra Lederman:

The tax law treats criminals differently from non-criminals. Should it? Under the public policy doctrine, for example, various tax deductions are disallowed if they are closely tied to criminal activity. Criminal activity is, in multiple ways, tax disadvantaged compared to non-criminal activity.

This Article considers a variety of possible justifications. (1) The tax disadvantage provides an incentive not to commit crime. (2) The tax disadvantage helps to bring deserved punishment to the criminal. (3) Criminals have given up their right not to be taxed. (4) Criminals have taken an unfair advantage and so must be stripped of that unfair advantage. (5) Criminals deserve to bear the costs that they culpably and wrongfully created.

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McCaffery Presents The Paradox Of Taxing The Rich Today At Florida

Edward McCaffery (USC; Google Scholar) presents The Paradox of Taxation the Rich at Florida today as part of its Tax Colloquium Series hosted by Charlene Luke:

In the Summer of 2021, stories broke across the mainstream American media that the wealthiest Americans, such as Jeff Bezos and Elon Musk, were paying no income taxes, perfectly legally, under the simple tax-planning advice to Buy, Borrow, Die. By the Fall, politicians were running out proposals to address the embarrassment, such as Senator Ron Wyden’s “Billionaire’s Tax.” Yet just a year later, in the Summer of 2022, as President Joe Biden and his fellow Democrats were trying to salvage some semblance of Biden’s once-ambitious “Build Back Better” agenda prior to the Congressional midterm elections, came word that little would be done to reverse course on recent and longstanding American tax policy: There would be only modest and largely symbolic tax increases on the rich, and no change at all to any of the planks of Buy, Borrow, Die.

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Next Week’s Tax Workshops

Monday, January 23: Jonathan H. Choi (Minnesota; Google Scholar) will present Subjective Costs of Taxation as part of the Florida Marshall M. Criser Distinguished Faculty Workshop. If you would like to attend, please RSVP here. 

Tuesday, January 24: Shayak Sarkar (UC-Davis; Google Scholar) will present Capital Migration as part of the UC-San Francisco Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan.

Tuesday, January 24: Amanda Parsons (Colorado; Google Scholar) will present The Shifting Economic Allegiance Of Capital Gains as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer.

Wednesday, January 25: Susie Morse (Texas; Google Scholar) will present Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, January 26: Jan Brueckner (UC-Irvine; Google Scholar) will present Taxes and Telework: The Impacts of State Income Taxes in a Work-from-Home Economy (with David R. Agrawal (Kentucky; Google Scholar)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark or Jason Oh. 

Thursday, January 26: Ruth Mason (Virginia; Google Scholar) will present Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) as part of the OMG Transatlantic Tax Talks. No RSVP is required for this event. 

Thursday, January 26: Yariv Brauner (Florida; Google Scholar) will present Taxation of Information and the Data Revolution as part of a celebration of his academic contributions and appointment to Hugh Culverhouse Eminent Scholar Chair in Taxation. If you would like to attend, please contact Charlene Luke.

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Toronto Workshop Today On The Tax Policy Implications Of Collins Family Trust

Jeffrey Trossman (Blakes), Amanda Heale (Osler), Michael Lubetsky (Davies), Timothy Fitzsimmons (PwC) present Perspectives On Tax Law & Policy: The Collins Family Trust at Toronto today as part of the James Hausman Tax Law and Policy Workshop:

This issue of Perspectives is devoted to a discussion of the policy implications of the recent SCC decision in Attorney General of Canada v. Collins Family Trust (2022 SCC 26).

Collins involved two taxpayers who each implemented a plan in 2008 and 2009 that aimed to protect corporate assets from future creditors without creating any income tax liability. The plan was based on the CRA’s longstanding and widely accepted administrative policy on the attribution rule in subsection 75(2) of the ITA. This policy was undermined in 2011 when the TCC decided Sommerer (2011 TCC 212; aff’d 2012 FCA 207) on a basis contrary to the longstanding policy. The CRA then proposed to reassess the taxpayers in Collins on the basis of the new interpretation, even while simultaneously arguing at the FCA that the new interpretation was incorrect. The FCA confirmed the TCC decision, however, and the CRA reassessed the taxpayers’ 2008 and 2009 taxation years in accordance with the new interpretation of subsection 75(2).

The taxpayers petitioned the BC Supreme Court for orders rescinding the transactions involved in the plan, under the doctrine of equitable rescission. The orders were granted and subsequently upheld by the BC Court of Appeal. By an 8-1 majority, however, the SCC reversed the BC Court of Appeal and set aside the orders. 

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Elkins Presents Embracing Tax Avoidance At Hebrew University

David Elkins (Netanya, visiting NYU 2021-2023; Google Scholar) presented Embracing Tax Avoidance at Hebrew University this week as part of its Tax Colloquium: 

Tax avoidance attracts a great deal of attention from both academics and policymakers. To combat the phenomenon, Congress has enacted numerous statutory provisions that either deny beneficial treatment when one of the taxpayer’s principal purposes was tax avoidance or attempt to dissuade taxpayers from engaging in tax avoidance by making it more difficult, more inconvenient, or riskier to do so. Courts have developed a series of overlapping doctrines to police and limit tax avoidance. The regulations expound on both the judicial and statutory themes, creating an elaborate network of rules that clarify in often excruciating detail when taxpayers are viewed as having engaged in tax avoidance and that attempt to deny such taxpayers the benefits they seek.

This article argues that the traditional response to tax avoidance has prevented us from appreciating the gifts that it has to offer. Rather than devoting our limited legislative, administrative, judicial, and academic resources to waging what is likely an unwinnable war, we should instead embrace tax avoidance for the invaluable insight it affords into the innermost workings of the tax system.

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Miethe Presents Offshore Ownership Of Real Estate In The U.K. Today At The OMG Transatlantic Tax Talks

Jakob Miethe (Munich, visiting UC-Berkeley) presents Homes Incorporated: Offshore Ownership of Real Estate in the U.K. (with Niels Johannesen (Copenhagen; Google Scholar) & Daniel Weishaar (Munich; Google Scholar)) today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

Ownership of real estate through offshore corporations creates opportunities for tax evasion and money laundering and may have a range of undesirable effects on housing markets. In this paper, we study offshore ownership of real estate in the United Kingdom by combining several data sources: administrative data from the land register, a comprehensive transaction database and a handful of offshore data leaks. In the first descriptive part of the paper, we show that the market share of offshore corporations has increased over time and varies strongly across market segments: around 1% overall, but more than 10% for top-end properties. For the subsample of properties where offshore data leaks allow us to trace ownership through the offshore corporation to the ultimate owners, we find that most have ties to Africa, Asia and the Middle East, but that the largest ‘foreign’ investor country is the United Kingdom itself. 

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Next Week’s Tax Workshop

Thursday, December 15:  Jakob Miethe (Munich, visiting UC-Berkeley) presents Homes Incorporated: Offshore Ownership of Real Estate in the U.K. (with Niels Johannesen (Copenhagen; Google Scholar) & Daniel Weishaar (Munich; Google Scholar)) as part of the OMG Transatlantic Tax Talks Series:

More than 90% of real estate held from abroad in England is owned via secrecy jurisdictions. This study sheds light on the motives of these investment and analyzes their impact on house prices. We combine high quality administrative land register data with leak data on foreign ownership of shell companies. In a first step, we exploit tax policy changes and transparency shocks and show that both tax avoidance and secrecy are important motives of foreign real estate investors.

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Repetti Presents International Tax Policy, Manufacturing, And U.S. National Interests Today At Boston College

James Repetti (Boston College; Google Scholar) presents International Tax Policy, Manufacturing, and U.S. National Interests at Boston College today as part of its Tax Law Policy Workshop hosted by Hugh Ault, Ray Madoff, Beverley Moran, Shuyi Oei, Diane Ring, and Steve Shay:

Two tax regulations that permit U.S. multinational enterprises (MNEs) to use foreign contract manufacturers and to disregard their wholly owned foreign subsidiaries have created significant tax incentives for MNEs to move manufacturing outside the U.S. These tax incentives have contributed to the loss of 5 million manufacturing jobs, the closure of more than 91,000 plants, and a decline in domestic production since 1997. These declines have increased inequality and political instability, and have decreased U.S. national security and research and development efforts to improve production techniques. Given these harms, it makes little sense to allow these incentives to remain in our tax system.

This article proposes two amendments to the regulations to reduce or eliminate the tax incentives for offshoring.

First, MNEs should not be allowed to use foreign contract manufacturers to qualify for the manufactur-ing exception in subpart F. Second, U.S. MNEs should not be permitted to disregard their foreign entities.

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Next Week’s Tax Workshop

Tuesday, December 6: James Repetti (Boston College; Google Scholar) will present International Tax Policy, Manufacturing, and U.S. National Interests as part of the Boston College Tax Law Policy Workshop:

Two tax regulations that permit U.S. multinational enterprises (MNEs) to use foreign contract manufacturers and to disregard their wholly owned foreign subsidiaries have created significant tax incentives for MNEs to move manufacturing outside the U.S. These tax incentives have contributed to the loss of 5 million manufacturing jobs, the closure of more than 91,000 plants, and a decline in domestic production since 1997. These declines have increased inequality and political instability, and have decreased U.S. national security and research and development efforts to improve production techniques. Given these harms, it makes little sense to allow these incentives to remain in our tax system.

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Kleiman Presents Impoverishment By Taxation And How American Governments Impoverish Their Own Today At NYU

Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) presents the following papers at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Daniel Shaviro: 

Impoverishment by Taxation, 170 U. Pa. L. Rev. ___ (2022)

Viewed in the aggregate, the U.S. fiscal system is progressive, reduces inequality, and cuts poverty. The system improves on market outcomes by transferring income from rich to poor. Yet this bird’s eye view rings hollow on the ground, where millions of low-income taxpayers across the United States are made poor or poorer by paying their state and federal taxes. In truth, while the U.S. fiscal system may be broadly equalizing and poverty reducing, for many struggling households, it is impoverishing.

This Article offers a new way to measure taxation of low-income households in the United States, presenting a concept called fiscal impoverishment.

Taxpayers are fiscally impoverished when they are made poor or poorer by paying state and federal taxes, after accounting for the offsetting cash or near-cash public benefits they receive. Distinct from the aggregate and anonymous measures by which we typically assess our tax and transfer system, fiscal impoverishment is dynamic and individualized. It highlights individual human dignity and implicates the economic responsibilities of the state vis-à-vis low-income taxpayers.

 

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Wilking Presents Tax Incidence With Heterogeneous Firm Evasion Today At Boston College

Eleanor Wilking (Cornell) presents Tax Incidence with Heterogeneous Firm Evasion: Evidence from Airbnb Remittance Agreements at Boston College today as part of its Tax Policy Workshop hosted by Hugh Ault, Ray Madoff, Beverley Moran, Shuyi Oei, Jim Repetti, Diane Ring, and Steve Shay:

How does the obligation to remit affect consumption tax incidence? In classical tax theory, assigning the responsibility to transfer tax revenue to the government has no effect on which party bears the economic burden of a consumption tax. I explore this prediction in the context of agreements between city governments and a large digital platform firm that shifted the obligation to remit hotel taxes from independent renters to the platform firm itself. Using variation in the location and timing of these agreements, I identify a substantial increase in advertised tax-inclusive rental prices—a violation of remittance invariance—but comparatively modest declines in completed reservations. A contemporaneous increase in hotel tax revenue collections suggests that the policy was an effective tax increase, assessed on previously non-compliant renters. I explore heterogeneity in pass through of this effective tax increase using several proxies for renter price-setting sophistication. Pass-through was lowest among full-space, frequent renters who likely faced smaller optimization frictions relative to more amateur renters. My results indicate that shifting the remittance obligation to the platform increases after-tax prices and raises revenue, suggesting that consumers bear a greater share of the tax burden when the remittance obligation is shifted to a party with fewer evasion opportunities.

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Vella Presents Pillar 2’s Impact On Tax Competition Today At UC-Irvine

John Vella (Oxford) presents Pillar 2’s Impact on Tax Competition (with Michael P. Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)) at UC-Irvine today as part of its Tax Policy Colloquium: 

The Two-Pillar Solution agreed by 137 countries on 8 October 2021 has been hailed as “historic” and a “a once-in-a-generation accomplishment for economic diplomacy.” To a significant extent, this is due to the expected impact of Pillar 2 (essentially a global minimum tax) on tax competition among states. This paper examines Pillar 2’s impact on tax competition. It builds on a short policy brief released by the authors in January 2022 in which the main incentives created by Pillar 2 that are relevant to tax competition were first identified.

The paper is divided into 7 sections. Section 1 introduces the paper. Section 2 discusses Pillar 2’s objectives: addressing profit shifting and tax competition. Section 3 discusses the Top-Up Tax calculation under Pillar 2, with a particular focus on the “Substance Based Income Inclusion” and the “Qualified Domestic Minimum Top-up Tax” (QDMTT) variables. Section 4 sets out three main conclusions on Pillar 2’s impact on tax competition. 

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Next Week’s Tax Workshops

Monday, November 28: John Vella (Oxford) will present Pillar 2’s Impact on Tax Competition (with Michael P. Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)) as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please contact Natascha Ryan Fastabend.

Tuesday, November 29: Eleanor Wilking (Cornell) will present Tax Incidence with Heterogeneous Firm Evasion: Evidence from Airbnb Remittance Agreements as part of the Boston College Tax Policy Workshop. If you would like to attend, please contact Jim Repetti.

Tuesday, November 29: Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) will these two papers as part of the NYU Tax Policy and Public Finance Colloquium:

• Impoverishment by Taxation, 170 U. Pa. L. Rev. ___ (2022)
• Asking Too Much: How American Governments Impoverish Their Own

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Morse Presents APA Challenges To Old Tax Guidance And The Six-Year Default Limitations Period Today At UC-Irvine

Susan Morse (Texas; Google Scholar) presents Out of Time? APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period at UC-Irvine today as part of its Tax Policy Colloquium:

 The government has begun to raise the six-year limitations period under 28 U.S.C. § 2401(a) to defend against administrative procedure challenges to old tax regulations. This defense should work. The tradeoff between accuracy and repose in these cases is solved by the six-year limitations period of 28 U.S.C. § 2401(a), which begins to run when guidance issues for such administrative procedure claims. One complication in tax is that most opportunities to raise administrative procedure claims arise in deficiency or refund cases, where the pre-litigation tax procedure can be lengthy and outside the control of the plaintiff. The solution is to make appropriate equitable, administrative and perhaps legislative adjustments to ensure that the limitations period works appropriately in the tax context.

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Next Week’s Tax Workshop

Monday, November 21: Susan Morse (Texas; Google Scholar) will present Out of Time? APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period as part of the UC-Irvine Tax Policy Colloquium:

The government has just begun to raise the six-year limitations period under 28 U.S.C. § 2401(a) to defend against administrative procedure challenges to old tax guidance. This defense should work. The tradeoff between accuracy and repose in these cases is solved by the six-year limitations period of 28 U.S.C. § 2401(a), which begins to run when guidance issues for such administrative procedure claims. One complication in tax is that most opportunities to raise administrative procedure claims arise in deficiency or refund cases, where the pre-litigation tax procedure can be lengthy and outside the control of the plaintiff. But the solution is not to hold the limitations period open indefinitely. That would give no weight to the value of repose. Instead, the right solution is to temper the effect of the limitations period with appropriate adjustments, including equitable tolling and estoppel and administrative practices, such as waiving the limitations period with respect to tax returns filed within six years of the issuance of challenged guidance.

If you would like to attend, please contact Natascha Ryan Fastabend. 

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