Walker Presents Evolving Corporate Philanthropy Today At Florida

David I. Walker (Boston University; Google Scholar) presents Evolving Corporate Philanthropy at Florida today as part of its Marshall M. Criser Distinguished Faculty Workshop hosted by Yariv Brauner:

With the rise of corporate ESG initiatives and public benefit corporations, corporate philanthropy is evolving from an emphasis on cash contributions (contributional philanthropy) to an emphasis on adjusting operations to advance the public good (operational philanthropy). All forms of corporate philanthropy are controversial, but this article evaluates the impact of this evolution on the relative benefits and concerns of corporate philanthropy, arguing that the shift in emphasis towards operational philanthropy increases the comparative advantage of corporate philanthropy, increases agency costs, both simplifies and complicates shareholder primacy concerns, and increases the difficulty of prescriptively regulating corporate philanthropy through the tax code or otherwise. 

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Next Week’s Tax Workshops

Monday, March 18: David I. Walker (Boston University; Google Scholar) will present Evolving Corporate Philanthropy as part of the Florida Marshall M. Criser Distinguished Faculty Workshop. If you would like to attend, please contact Yariv Brauner. 

Tuesday, March 19: Jan Millard (IRS) will present Using Behavioral Insights in Notice Design to Improve Taxpayer Responses and Achieve Compliance Outcomes (with Anne Herlache (IRS), Alicia Miller (IRS, RAAS) & Michelle Theel (IRS, S&E PMO)) 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 20: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing Litigation Finance, 93 Geo. Wash. L. Rev. ___ (2024), as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Ben Alarie. 

Wednesday, March 20: Conor Clarke (Washington University; Google Scholar) will present Income Inequality and the Corporate Sector (with Wojciech Kopczuk (Columbia; Google Scholar)) as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please contact Natascha Fastabend. 

Thursday, March 21: Charles T. Clotfelter (Duke; Google Scholar) will present Better State Lotteries as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Larry Zelenak. 

Friday, March 22: Luís Carlos Calderón Gómez (Cardozo; Google Scholar) will present Taxation’s Limits, 119 Nw. U. L. Rev. ___ (2024), as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman. 

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Kim Presents Taxing The Metaverse Today At UCLA

Young Ran (Christine) Kim (Cardozo; Google Scholar) presents Taxing the Metaverse, 112 Geo. L.J. ___ (2024), at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh: 

The buzz surrounding the Metaverse has been growing steadily for the past couple of years, but the tax implications of this novel ecosystem remain fuzzy to most tax scholars. Such uncertainty is concerning, given the potential and momentum of this emerging technology. Although the Metaverse evolved from online video games focused only on user consumption, it now allows users to produce income and accumulate wealth entirely within the Metaverse. Current law seems to defer taxation of such until a realization or cash-out event. This paper challenges this approach.

This paper offers novel arguments justifying Metaverse taxation. Because economic activity within the Metaverse satisfies the Haig-Simons and Glenshaw Glass definitions of income, its exclusion will create a tax haven. Tax policy can also play an essential role in regulating the virtual economy. Furthermore, this emerging technology allows policymakers to modernize the tax system. 

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Pratt Presents Taxing Reparations Today At Northwestern

Katie Pratt (Loyola-L.A.; Google Scholar) presents Taxing Reparations at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Ari Glogower:

This Article explores the tax consequences of receiving reparations, including recovery of wrongfully taken property and receipt of money or nonmonetary benefits as reparations. The tax treatment of reparations can advance or undermine the remedial goals of reparations, yet reparation programs often ignore tax issues. Historical and contemporary reparation examples illustrate the significance of taxation for reparation programs. This Article analyzes the tax consequences of reparation examples under existing income tax rules and rationales and normative frameworks for both income tax rules and reparation programs. Parts I and II provide background and normative frameworks for reparations and the federal income tax. Part III introduces substantive and procedural income tax rules that are relevant in the context of reparations. These tax rules include the statutory exclusion for payments received on account of personal physical injury and an administrative doctrine known as the General Welfare Doctrine (GWD). Part IV analyzes the tax consequences of the receipt of various types of reparation remedies, including: payments for wrongful physical injury or death; payments for wrongful internment and incarceration; payments for forced labor; payments to survivors of state-sponsored involuntary sterilization; payments for wrongfully taken property; recovery of wrongfully taken property; and cancellation of indebtedness. The analysis demonstrates how application of existing tax law sometimes furthers – but often undermines – the remedial goals of reparations. 

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Alarie Presents Generative AI For Tax: Looking Back, Looking Ahead Today At Toronto

Benjamin Alarie (Toronto, Blue J Legal; Google Scholar) presents Generative AI For Tax: Looking Back, Looking Ahead at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

This article canvases the highlights of what has been going on with generative AI over this past year. It outlines the main developments ushered in by the large technology players for the development and commercialization of AI in 2023 and then, more importantly for the purposes of tax professionals, offers a quick rundown of some of the principal developments in the world of tax law specifically for generative AI in 2023, particularly regarding tax analysis. It then forecasts what lies ahead for generative AI in tax in 2024.

This exercise is inevitably somewhat fraught since AI technology is moving quickly, but my view is that it is better to hazard a fuzzy speculative view of what lies ahead than to be too timid to posit any view at all. To this end, the discussion outlines what we can expect in terms of developments from the tech giants and from the providers of tools that are most relevant to tax professionals.

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Barry Presents Tax And The Boundaries Of The Firm Today At Pepperdine

Jordan Barry (USC; Google Scholar) presents Tax and the Boundaries of the Firm (with Victor Fleischer (UC-Irvine; Google Scholar); reviewed by Tracey Roberts (Cumberland; Google Scholar) here) at Pepperdine today as part of its Tax Policy Workshop Series hosted by Deanna Newton:

One of the most fundamental questions of economics is how firms decide what to produce themselves (“make”) and what to purchase from other firms (“buy”). We analyze how income taxes distort firms’ decisions along this and related dimensions. Three main effects emerge.

First, intrafirm transactions allow firms to reduce their tax burdens, such as by shifting their income to lower-tax jurisdictions. This effect is inherent to an income tax. It makes firms bigger, encouraging them to “make” more and “buy” less. Second, implementing an income tax entails enacting many additional rules, none of which is inherent to an income tax. Many of these rules affect the boundary of the firm. Some expand it; others contract it. However, these expansions and contractions generally operate along different dimensions, and thus do not offset each other. Finally, income taxes encourage regulatory arbitrage transactions, which enable firms to achieve their desired tax treatment without changing the economic boundary of the firm. These transactions preserve the boundary of the firm, but also create complexity, opacity, and inefficiency.

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Next Week’s Tax Workshops

Monday, March 11: Jordan Barry (USC; Google Scholar) will present Tax and the Boundaries of the Firm (with Victor Fleischer (UC-Irvine; Google Scholar)) as part of the Pepperdine Tax Policy Workshop Series. If you would like to attend, please contact Deanna Newton. 

Wednesday, March 13: Katie Pratt (Loyola-L.A.; Google Scholar) will present Taxing Reparations as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Ari Glogower. 

Wednesday, March 13: Ben Alarie (Toronto, Blue J Legal; Google Scholar) will present Generative AI For Tax: Looking Back, Looking Ahead as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Ben Alarie. 

Thursday, March 14: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing the Metaverse 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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Schizer Presents Wealth Taxes Under The Constitution: An Originalist Analysis Today At Duke

David Schizer (Columbia) presents Wealth Taxes Under the Constitution: An Originalist Analysis (with Steven Calabresi (Northwestern)) at Duke today as part of its Tax Policy Seminar hosted by Larry Zelenak:

A federal wealth tax is high on the wish list of progressive icons like Elizabeth Warren and Bernie Sanders, but is it constitutional? This Article shows that it is a “direct tax,” which must be apportioned among the states. This means that the percentage of revenue collected in each state must match its percentage of the population. For instance, if two states each have three percent of the population, each must provide three percent of the revenue from a wealth tax. This leads to an unappealing outcome: if one state is less wealthy, it needs a higher tax rate to supply its share. To rescue wealth taxes from apportionment, distinguished commentators have offered a range of theories. For example, some treat apportionment as a mistake, while others dismiss it as a shameful protection for the institution of slavery.

But these commentators do not give the Framers enough credit. 

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Holderness Presents The Erosion Of State Tax Consensus In (Quad) Graphics Today At UCLA

Hayes Holderness (Richmond) presents The Erosion of State Tax Consensus in (Quad) Graphics at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Picture this: a state replaces one word in a tax assessment—“use” for “sales”—and in so doing upends decades of established practice and consensus regarding the taxation of interstate consumption. Absurd? Perhaps, but reality is stranger than fiction. North Carolina brought this situation into being when it assessed an out-of-state retailer, Quad Graphics, with a sales tax instead of a use tax.

Though both sales taxes and use taxes target the same thing—consumption—dormant Commerce Clause doctrine has traditionally provided that states cannot impose sales tax on sales that occur outside of their state (as Quad Graphics’ sales did). Instead, the states must rely on use taxes when whatever is sold is used within their boundaries. Further, use taxes must provide a credit for any sales taxes paid, meaning that states of sale are given taxing priority over states of use. By flipping the taxes, North Carolina not only bucked the doctrine, it also jumped the queue.

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Winchester Presents A Tax Policing Paradox Today At Wisconsin

Richard Winchester (Seton Hall; Google Scholar) presents A Tax Policing Paradox at Wisconsin today as part of its Business, Tax, and Compliance Colloquium hosted by Nyamagaga Gondwe:

If the government audits more taxpayers, that generally leads to higher levels of taxpayer compliance. However, this does not always happen. If the government audits taxpayers and fails to detect a specific form of tax evasion, taxpayer compliance will fall in two respects. The audited taxpayers will continue to engage in the practice that went unnoticed. In addition, as word spreads that the risk of detection or penalty is low, other taxpayers will start to engage in the same form of tax evasion.

There is one specific form of tax evasion that is unlikely to receive the scrutiny it deserves even as the Internal Revenue Service gears up to spend a huge injection of money to police taxpayers more frequently. It is often called the S corporation employment tax dodge and it works like this. If a closely held S corporation has an owner who also works for the firm, that individual can access the company’s earnings in two ways: as compensation for their work or as a distribution of profits. The main difference is that distributions are not subject to employment tax, while compensation is. So, the low-tax option is for the employee-owner to work for free and to cause the firm to pay them a distribution that is nothing more than disguised compensation.

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Satterthwaite Presents Taxing Nannies Today At Toronto

Emily Satterthwaite (Georgetown; Google Scholar) presents Taxing Nannies (with Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) & Shayak Sarkar (UC-Davis; Google Scholar)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

Nannies in the U.S. work long hours for low wages and risk retaliation if they complain. Informal, or “off the books,” work exacerbates their precarity, keeping it secret from state and federal tax agencies, as well as employment and labor agencies. Yet we have little understanding of how nannies navigate the tax reporting that renders them formal or informal.

This Article investigates nannies’ preferences for or against formal employment and tax reporting, the reasons behind such preferences, and how such preferences inform nannies’ relationships with their employers and legal institutions more broadly. The Article employs a multi-method research approach that includes an original and innovative survey of nannies and an analysis of nannies’ tax-related posts on the online forum Reddit. To supplement this research, the Article also discusses interviews with fifteen subject-matter experts regarding industry norms, common challenges nannies face, and policy reforms.

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Genadek Presents Newly-Available Individual-Level U.S. Tax Data (1969-1994) Today At Georgetown

Katie Genadek (Colorado; Google Scholar) presents Newly-Available Individual-Level U.S. Tax Data from 1969-1994 (with J. Trent Alexander (Michigan; Google Scholar), David Bleckley (Michigan), Jonathan Fisher (Washington Center for Equitable Growth; Google Scholar), Susan Hautaniemi Leonard (Michigan; Google Scholar) & Aristotle Magganas (UCLA)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Satterthwaite and Dayanand Manoli: 

This paper describes a series of linkable individual-level data from late-twentieth century federal income tax returns. The full universe Internal Revenue Service (IRS) Form 1040 files from 1969, 1974, 1979, 1984, 1989, and 1994 were held at the Census Bureau since originally being deliv ered by the IRS shortly after each year’s tax returns were processed. The data were recently made usa ble for research, and they are now available for request through the Census Bureau’s restricted data re search program. This paper discusses the provenance and composition of the files, assesses the cover age and quality of the data, and discussed potential uses of the data for research.

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Next Week’s Tax Workshops

Tuesday, March 5: Katie Genadek (Colorado-Boulder; Google Scholar) will present Newly-Available Individual-Level U.S. Tax Data from 1969-1994 (with J. Trent Alexander (Michigan; Google Scholar), David Bleckley (Michigan), Jonathan Fisher (Washington Center for Equitable Growth; Google Scholar), Susan Hautaniemi Leonard (Michigan; Google Scholar) & Aristotle Magganas (UCLA)) 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 6: Emily Satterthwaite (Georgetown; Google Scholar) will present Taxing Nannies (with Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Shayak Sarkar (UC-Davis; Google Scholar)) as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Ben Alarie. 

Thursday, March 7: David Schizer (Columbia) will present Wealth Taxes Under the Constitution: An Originalist Analysis (with Steven Calabresi (Northwestern)) as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Larry Zelenak. 

Thursday, March 7: Hayes Holderness (Richmond) will present The Erosion of State Tax Consensus in (Quad) Graphics 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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Zhang Presents Fiscal Citizenship And Taxpayer Privacy Today At Indiana

Alex Zhang (Emory; Google Scholar) presents Fiscal Citizenship and Taxpayer Privacy at Indiana today as part of its Colloquium on Tax Policy and Public Finance hosted by Leandra Lederman:

Inequality has reached record levels, and the public shares a common belief that the ultra-rich—while accumulating enormous capital—have not borne their fair share of tax burdens.  In response, commentators have called for transparency in the tax records of the wealthy and the powerful.  The most dramatic illustration was Trump’s tax returns.   The bitter fight ended with the House Ways and Means Committee obtaining those returns—under the quiet blessing of the Supreme Court—and releasing them to the public.  Less dramatic, but far more consequential, was the leak of ultra-wealthy taxpayers’ records to ProPublica in 2021.  Those records revealed that the richest Americans exploited loopholes and tax doctrine to reduce, often to zero, their income-tax liability.  The leak prompted lawsuits and congressional investigations over what some see as a major breach of the statutory guarantee of tax privacy. 

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Field Presents Tax Enforcement By The Private Sector: Deputizing Tax Insurers Today At Duke

Heather Field (UC-San Francisco; Google Scholar) presents Tax Enforcement by the Private Sector: Deputizing Tax Insurers, 99 Ind. L. J. ___ (2024), at San Diego today as part of its Tax Policy Seminar hosted by Larry Zelenak:

The IRS is outgunned when trying to ensure compliance by large corporations and other sophisticated taxpayers. The private sector can help. Private sector actors, such as financial institutions, employers, and whistleblowers, have been valuable allies in the IRS’s efforts to improve compliance and enforcement. This Article argues for using another, largely overlooked, private sector party—tax insurers—to expand the IRS’s enforcement abilities. Tax insurers insure sophisticated taxpayers’ uncertain tax positions (e.g., the tax-free treatment of a corporate spinoff or tax credits critical to a renewable energy project). For a premium, a tax insurer agrees to pay any additional taxes owed with interest and penalties (up to the policy limit) if an insured tax position is successfully challenged by a tax authority. The tax insurance industry has grown dramatically since the mid-2010s, but scholars and policymakers pay little attention to its enforcement-enhancing potential. 

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Schaffa Presents The Regressivity Of Complexity Today At UCLA

Daniel Schaffa (Richmond; Google Scholar) presents The Regressivity of Complexity at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh: 

This article argues that complexity in the tax system is regressive. The claim, in essence, is that complexity disproportionally creates burdens for those of lesser means and opportunities for those of greater means. Increases in complexity, thus, generally speaking, result in outcomes relatively less favorable for those of lesser means and relatively more favorable for those of greater means.

Intuitive as some may find this claim, it is not a standard conclusion in the tax complexity literature. It faces two related difficulties. The first is a series of counterclaims, including most notably that many of the features of the tax system that add progressivity also add complexity. The second difficulty is that there is no consensus definition of tax complexity, nor an accepted framework with which to analyze tax complexity, making definitive, general claims about tax complexity elusive.

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Raskolnikov Presents Law For The Rich At Cardozo

Alex Raskolnikov (Columbia) presented Law for the Rich, 109 Minn. L. Rev. ___ (2024), at Cardozo yesterday as part of its Faculty Workshop Series: 

With top incomes and wealth reaching historic highs, scholars and politicians have proposed new taxes and novel legal rules aimed at reversing the emergence of the new Gilded Age. Yet while new taxes target the rich directly by imposing greater burdens only on those with incomes or wealth above multi-million-dollar thresholds, none of the proposed legal reforms do anything of the sort. There appears to be no interest in changing property law, corporate law, antitrust law, or labor law, among others, to have special, more burdensome rules applicable only to the rich. This Essay asks: Why not? Why shy away from a separate law for the rich if one supports both progressive taxation and distributionally-informed legal rules in general?

This puzzle, it turns out, is surprisingly difficult to solve. Neither political philosophy nor economic analysis nor practical design considerations offer a plausible answer. Looking for clues outside of legal theory suggests that a separate law for the rich would be widely viewed as unfair because it imposes burdens that are obvious, highly concentrated, and possibly contrary to one of the fundamental elements of law itself. 

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Clarke Presents Income Inequality and the Corporate Sector Today At Northwestern

Conor Clarke (Washington University; Google Scholar) presents Income Inequality and the Corporate Sector (with Wojciech Kopczuk (Columbia; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Ari Glogower:

In recent decades, scholars have turned to tax data to study the distribution of United States income and wealth. In more recent years, the focus has expanded from information that appears on individual income tax returns to a broader set of data. This shift partly reflects the observation that what appears on individual tax returns is only a subset of “national income” — a subset that is subject to change as laws and incentives change. But the use of both individual tax data and national accounts data has been controversial, and one important piece of this controversy is the role of corporate income and the corporate sector. We provide a framework for thinking about the historical and conceptual relationship between income, inequality, and the corporate sector. We make several contributions. First, we assemble a variety of previously unused data to study the corporate sector and corporate income over the long run. Second, we survey and highlight the importance of long-run sectoral and legal changes — including some that have gone unappreciated in the last thirty years, such as the rise and fall of the so-called General Utilities doctrine — to the allocation of income between the individual and corporate sector and the study of inequality. 

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Mehrotra Presents The Rise And Fall Of The 1970s National Value-Added Tax To Fund Education Today At Toronto

Ajay K. Mehrotra (Northwestern; Google Scholar) presents Nixon’s VAT: Lawyers, Economists, and the Rise and Fall of the 1970s National Value-Added Tax to Fund Education at Tornoto today as part of its James Hausman Tax Law and Policy Workshop hosted by Ben Alarie:

Conclusion
It is well-known by now that income and wealth inequalities have been soaring for the past half-century across the globe. Although some developing countries have seen a decrease in poverty and a rising middle class during that period, much of the world has experienced dramatic increases in within-country economic disparities. In the United States, the growing concentration of wealth has been particularly pronounced, especially at the top end of the socioeconomic spectrum. While the details of this increase have been debated recently by experts, most agree that both income and wealth inequality have increased significantly.

One prominent obstacle to addressing U.S. inequality has been the fractured nature of the modern American fiscal and social welfare state. The combination of a highly salient federal system of direct and progressive taxation and a more shrouded social welfare state has led to a unique type of political cognitive dissonance that, in turn, has helped perpetuate the myth of the “overtaxed” American—a myth that has been exploited by anti-statist politicians and lawmakers for decades.

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Brown Presents A Survey And Critique Of International Tax Governance Reform Today At Georgetown

Karen B. Brown (George Washington) presents A Survey and Critique of International Tax Governance Reform at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli: 

The most far-reaching international tax reform proposal in nearly one hundred years unfolded under the auspices of the Organisation for Economic Cooperation and Development (OECD) largely without input from the non-OECD nations in Sub-Saharan Africa. That area, hard hit by the multiple calamities of covid-19 and other devastating diseases, climate change, inflation engendered by wars waged inside and outside its confines, has been designated as key to the survival of the remainder of the world. The prospect of the future progression of tax reform without meaningful initial input from the Sub-Saharan region is untenable. A truly inclusive global tax governance will restore legitimacy and integrity to reform efforts.

Next Week’s Tax Workshops

Tuesday, February 27: Karen B. Brown (George Washington) will present A Survey and Critique of International Tax Governance Reform 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 28: Conor Clarke (Washington University; Google Scholar) will present Income Inequality and the Corporate Sector (with Wojciech Kopczuk (Columbia; Google Scholar)) as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Ari Glogower. 

Wednesday, February 28: Ajay K. Mehrotra (Northwestern; Google Scholar) will present Nixon’s VAT: Lawyers, Economists, and the Rise and Fall of the 1970s National Value-Added Tax to Fund Education as part of the Toronto James Hausman Tax Law and Policy Workshop. If you would like to attend, please contact Ben Alarie. 

Thursday, February 29: Heather Field (UC-San Francisco; Google Scholar) will present Tax Enforcement by the Private Sector: Deputizing Tax Insurers, 99 Ind. L. J. ___ (2024), as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Larry Zelenak. 

Thursday, February 29: Daniel Schaffa (Richmond; Google Scholar) will present The Regressivity of Complexity 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, March 1: Alex Zhang (Emory; Google Scholar) will present Fiscal Citizenship and Taxpayer Privacy as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman. 

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Mansour Presents Building Tax Capacity In Developing Countries Today At UCLA

Mario Mansour (IMF) presents Building Tax Capacity in Developing Countries (with Juan Carlos Benitez (IMF; Google Scholar), Miguel Pecho (IMF) & Charles Vellutini (IMF; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh: 

Tax capacity—the policy, institutional, and technical capabilities to collect tax revenue—is part of a deeper process of state building that is essential for achieving the sustainable development goals. This Staff Discussion Note shows that developing countries have made some progress in revenue mobilization during the past decades, but that much more is needed. It finds that a staggering 9 percentage-point increase in the tax- to-GDP ratio is feasible through a combination of tax system reform and institutional capacity building. Achieving this calls for a holistic and institution-based approach that focuses on improving policy, administration, and legal implementation of core taxes. The note offers practical lessons and guidance, based on IMF capacity-building experience in this area.

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Kim Presents Taxing The Metaverse Today At Pepperdine

Young Ran (Christine) Kim (Cardozo; Google Scholar) presents Taxing the Metaverse, 112 Geo. L.J. ___ (2024), at Pepperdine today as part of its Tax Policy Workshop Series hosted by Deanna Newton:

The buzz surrounding the Metaverse has been growing steadily for the past couple of years, but the tax implications of this novel ecosystem remain fuzzy to most tax scholars. Such uncertainty is concerning, given the potential and momentum of this emerging technology. Although the Metaverse evolved from online video games focused only on user consumption, it now allows users to produce income and accumulate wealth entirely within the Metaverse. Current law seems to defer taxation of such until a realization or cash-out event. This paper challenges this approach.

This paper offers novel arguments justifying Metaverse taxation. Because economic activity within the Metaverse satisfies the Haig-Simons and Glenshaw Glass definitions of income, its exclusion will create a tax haven. Tax policy can also play an essential role in regulating the virtual economy. Furthermore, this emerging technology allows policymakers to modernize the tax system. 

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Sarkar Presents Internal Revenue's External Borders Today At San Diego

Shayak Sarkar (UC-Davis; Google Scholar) presents Internal Revenue's External Borders, 112 Calif. L. Rev __ (2024) (reviewed by Blaine Saito (Ohio State; Google Scholar) here), at San Diego today as part of its Tax Law Speaker Series hosted by Miranda Fleischer: 

The mandate of tax agencies seems clear: to secure revenue for the government and ensure taxpayer compliance. Yet for decades, the Internal Revenue Service (IRS) has regularly facilitated violent immigration enforcement. Scholars and the public have paid significant attention to the state and local policing of immigration law. But the role of tax bureaucrats as generals—no mere foot soldiers—has largely been overlooked.

This Article corrects that oversight. Building on emerging critiques of the tax system, I first describe tax-agency leadership in immigration raids, holding the dry mechanics of agency procedures against stark examples of IRS complicity in civil rights violations. I then raise several concerns about tax-agency involvement in immigration enforcement. After describing the tax-law origins of immigration raids’ constitutional exceptionalism, I assess residual constraints on tax-agency involvement: taxpayer privacy, regulatory suppression, and civil rights liability.

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Next Week’s Tax Workshops

Monday, February 19: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing the Metaverse as part of the Pepperdine Tax Policy Workshop Series. If you would like to attend, please contact Deanna Newton. 

Monday, February 19: Shayak Sarkar (UC-Davis; Google Scholar) will present Internal Revenue's External Borders as part of the San Diego Tax Law Speaker Series. If you would like to attend, please contact Miranda Fleischer. 

Thursday, February 22: Mario Mansour (IMF) will present Building Tax Capacity in Developing Countries (with Juan Carlos Benitez (IMF; Google Scholar), Miguel Pecho (IMF) & Charles Vellutini (IMF; 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. 

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Kim Presents Taxing The Metaverse Today At Indiana

Young Ran (Christine) Kim (Cardozo; Google Scholar) presents Taxing the Metaverse, 112 Geo. L.J. ___ (2024), at Indiana-Maurer today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

The buzz surrounding the Metaverse has been growing steadily for the past couple of years, but the tax implications of this novel ecosystem remain fuzzy to most tax scholars. Such uncertainty is concerning, given the potential and momentum of this emerging technology. Although the Metaverse evolved from online video games focused only on user consumption, it now allows users to produce income and accumulate wealth entirely within the Metaverse. Current law seems to defer taxation of such until a realization or cash-out event. This paper challenges this approach.

This paper offers novel arguments justifying Metaverse taxation. Because economic activity within the Metaverse satisfies the Haig-Simons and Glenshaw Glass definitions of income, its exclusion will create a tax haven. Tax policy can also play an essential role in regulating the virtual economy. Furthermore, this emerging technology allows policymakers to modernize the tax system. 

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Bearer-Friend Presents How To Capitalize A Multi-Trillion Reparations Fund At Leiden

Jeremy Bearer-Friend (George Washington; Google Scholar) presented Paying For Reparations: How To Capitalize A Multi-Trillion Reparations Fund, 67 How. L.J. __ (2024) (reviewed by Blaine Saito (Ohio State; Google Scholar) here) at Leiden University yesterday: 

This Article proposes a novel approach to capitalizing a reparations fund worth trillions of dollars. Under the proposal, publicly-traded firms on U.S. exchanges would be required to remit shares of corporate equity to a reparations trust fund in lieu of cash tax payments. Under the terms of this proposal, our federal government could successfully capitalize a multi-trillion reparations fund in less than a year.

The primary contribution of this Article is to offer a unique financing structure for reparations—a national effort expected by all estimates to require trillions of dollars. The Article describes the features of the in-kind tax proposal, the myriad design choices that would be necessary to ensure effective implementation, and its analogs in the private sector for capitalizing a fund. The Article also evaluates the limitations of an in-kind tax proposal, ultimately concluding that in-kind remittance remains preferable to other tax policy options.

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Gale Presents Racial Aspects Of The Federal Income Tax Today At UCLA

William G. Gale (Brookings; Google Scholar) presents Racial Aspects of the Federal Income Tax (with Oliver Hall (Brookings) & John Sabelhaus (Brookings; Michigan; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Although it does not explicitly discriminate on the basis of race, the federal income tax can still generate racially disparate outcomes, because factors that affect tax liability may be correlated with race. In this paper, we explore how the federal income tax differentially affects Black and white tax units. We use data from eight waves of the Survey of Consumer Finances, a public-use triennial household survey that contains information on race, demographics, income, and wealth. We split the household data into tax units and apply the result to the National Bureau of Economic Research’s TAXSIM model to calculate tax liabilities. To measure household resources consistently over time and robustly with respect to tax law changes, and to analyze the racial implications of tax preferences, we develop a new income concept, “expanded income” (EI), which creates a very broad measure of household income by adding untaxed cash and non-cash income components to adjusted gross income (AGI). We obtain several results: White tax filing units have higher average income and thus face higher average tax rates. But even after controlling for income, white units are more likely to file as married, less likely to file as head of household, and have a greater share of their income in the form of capital income, which is often tax-preferred.

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Schmalbeck Presents Form Over Substance In Wealth Taxation Today At Duke

Richard L. Schmalbeck (Duke) presents Substance Over Form In Transfer Tax Adjudication, 55 Loy. L.A. L. Rev. 609 (2022) (with Jay Soled (Rutgers; Google Scholar)), at Duke today as part of its Tax Policy Seminar hosted by Larry Zelenak:

The elevated exemption level under the federal transfer tax system (now in excess of $24 million for a married couple) has opened up new and abusive tax-avoidance opportunities. In many areas of the tax law, the substance over form doctrine historically has been effective in controlling such abuses; however, for a myriad of reasons, transfer tax jurisprudence has been marred by the reluctance of courts to embrace this doctrine. In this analysis, we urge reconsideration of that posture.

Conclusion
For over a century, the nation has relied upon its transfer tax regime as a source of revenue and mitigation of wealth concentrations. However, its ability to fulfill its historic missions has been hampered by the fact that the judiciary has been reluctant to apply the substance over form doctrine to challenge a wide range of transfer taxmitigation schemes. The consequences of the judiciary’s inaction have been severe: utilization of these techniques significantly narrows the transfer tax base, enabling billions of dollars of wealth to pass free of transfer tax and allowing wealth concentrations to abound.

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Sarin Presents The Coming Fiscal Cliff: A Blueprint For Tax Reform In 2025 Today At Northwestern

Natasha Sarin (Yale; Google Scholar) presents The Coming Fiscal Cliff: A Blueprint for Tax Reform in 2025 (with Kimberly Clausing (UCLA; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Ari Glogower:

At the end of 2025, almost all of the individual, estate, and pass-through provisions of the Tax Cuts and Jobs Act (TCJA) will expire. This looming expiration creates an important opportunity to improve tax policy along multiple dimensions at the same time that TCJA provisions are evaluated for possible extension. In this paper, we suggest four key principles to guide tax policy choices in 2025: first, reforms should raise revenue on net, improving fiscal sustainability; second, reforms should respond to persistent inequalities by increasing the progressivity of the tax code; third, reforms should work to reduce tax-based inefficiencies in the code, and finally, reforms should address global collective action problems such as climate change and tax competition. Using these principles as a guide, we then evaluate possible TCJA extensions and consider a menu of revenue-raising reforms that together have the potential to raise about $3.5 trillion over the coming decade, while improving the progressivity and efficiency of the tax system.

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Clausing Presents Capital Taxation And Market Power Today At UC-Irvine

Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation and Market Power at UC-Irvine today as part of its Tax Policy Colloquium hosted by Natascha Fastabend:

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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Bruckner Presents The Small Business Tax Literacy Project: Keys To Unlocking Small Business Capital & Compliance Today At Georgetown

Caroline Bruckner (American-Kogod; Google Scholar) presents AI and the Modern Tax Agency: Adopting and Deploying AI to Improve Tax Administration (with Collin Coil (American-Kogod)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

The use of Artificial intelligence (AI) was  the biggest technology trend of 2023, prompting significant news coverage, business developments, and regulatory changes. Although AI tools have been adopted rapidly by millions of users, governments have been slower to develop AI capabilities.   More specifically, tax agencies have shown recent interest in using AI as part of their modernization plans, hoping that the technology will enhance the taxpayer experience and facilitate operations. However, deploying AI to improve tax administration comes alongside risks, including bias, unethical usage, lack of transparency, and potential breaches of taxpayer privacy.

To address challenges and opportunities for using AI to support efficient and effective tax administration, the IBM Center for the Business of Government and the American University Kogod Tax Policy Center (KTPC) recently convened a roundtable discussion that included tax agency leaders and experts from the U.S. and around the world.  Roundtable participants focused on opportunities and challenges of using AI in tax administration to improve taxpayer experience, streamline processes, and address tax compliance and enforcement. While discussing AI’s potential to facilitate tax agency functions and interactions with taxpayers, discussants also explored related ethical and governance questions.

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Next Week’s Tax Workshops

Tuesday, February 13: Caroline Bruckner (American-Kogod; Google Scholar) will present AI and the Modern Tax Agency: Adopting and Deploying AI to Improve Tax Administration (with Collin Coil (American-Kogod)) 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 14: Natasha Sarin (Yale; Google Scholar) will present The Coming Fiscal Cliff: A Blueprint for Tax Reform in 2025 (with Kimberly Clausing (UCLA; Google Scholar)) as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Ari Glogower.

Wednesday, February 14: Kimberly Clausing (UCLA; Google Scholar) will present Capital Taxation and Market Power as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please contact Natascha Fastabend. 

Thursday, February 15: Richard L. Schmalbeck (Duke) will present Substance Over Form In Transfer Tax Adjudication, 55 Loy. L.A. L. Rev. 609 (2022) (with Jay Soled (Rutgers; Google Scholar)) as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Larry Zelenak. 

Thursday, February 15: William G. Gale (Brookings Institute; Google Scholar) will present Racial Aspects of the Federal Income Tax (with Oliver Hall (Brookings Institute) & John Sabelhaus (Brookings Institute, Michigan; 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 16: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing the Metaverse,112 Geo. L.J. ___ (2024) as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman. 

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Goldin Presents Measuring And Mitigating Racial Disparities In Tax Audits Today At Duke

Jacob Goldin (Chicago; Google Scholar) presents Measuring and Mitigating Racial Disparities in Tax Audits (with Hadi Elzayn (Stanford; Google Scholar), Evelyn Smith (Michigan), Thomas Hertz (U.S. Treasury), Arun Ramesh (Chicago), Robin Fisher (U.S. Treasury) & Daniel E. Ho (Stanford)) at Duke today as part of its Tax Policy Seminar hosted by Larry Zelenak:

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.

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Zhang Presents Fiscal Citizenship And Taxpayer Privacy Today At UCLA

Alex Zhang (Emory; Google Scholar) presents Fiscal Citizenship and Taxpayer Privacy at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Inequality has reached record levels, and the public shares a common belief that the ultra-rich—while accumulating enormous capital—have not borne their fair share of tax burdens.  In response, commentators have called for transparency in the tax records of the wealthy and the powerful.  The most dramatic illustration was Trump’s tax returns.   The bitter fight ended with the House Ways and Means Committee obtaining those returns—under the quiet blessing of the Supreme Court—and releasing them to the public.  Less dramatic, but far more consequential, was the leak of ultra-wealthy taxpayers’ records to ProPublica in 2021.  Those records revealed that the richest Americans exploited loopholes and tax doctrine to reduce, often to zero, their income-tax liability.  The leak prompted lawsuits and congressional investigations over what some see as a major breach of the statutory guarantee of tax privacy. 

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Gómez Presents Taxation's Limits Today At Northwestern

Luís Calderón Gómez (Cardozo; Google Scholar) presents Taxation's Limits at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Ari Glogower:

Countless pages have been devoted to the question of why should everyone pay tax, yet its obverse has gone largely unnoticed: why should some people and organizations not pay tax? Our tax system exempts from ordinary income taxation a wide and diverse array of people and organizations engaged in significant economic activity—from parents providing childcare services for their family, to consular activities and charities operating animal shelters—seemingly without a convincing explanation. Perhaps as a result of the dizzying diversity of activities that have been exempted from tax, scholars and policymakers have eluded comprehensively or coherently justifying our exemption regimes.

This Article develops a novel normative theory that rationalizes and justifies our current tax exemption regime. Rather than conceiving exemptions as subsidies or individual deviations from a normative base explainable by ordinary politics, the Article argues that exemptions are best understood as mapping the “limits” of tax. 

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Edwards Presents Private Merger Negotiation Responses To Ongoing Tax Legislation Today At Toronto

Alexander Edwards (Toronto; Google Scholar) presents Private Merger Negotiation Responses to Ongoing Tax Legislation (with Shane Heitzman (USC; Google Scholar), Sandy Klasa (Arizona) & Maximilian Todtenhaupt (Norwegian School of Economics)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

Target valuation is the cornerstone of merger negotiations and hinges on expectations of future after-tax cash flows. But how do buyers and sellers adapt to expectation and incentive differences with respect to tax policies under development? Focusing on major corporate tax reform legislation in 2017 (i.e., TCJA) and using hand-collected data on private merger negotiations, we examine the contemporaneous impact of tax policy developments on those negotiations. For deals negotiated during tax legislation, the deal premium increases in the target’s expected gain from tax reform. Bidders and targets meet soon after key legislation events, especially when the target’s expected gain from reform is high. 

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Schizer Presents Wealth Taxes Under The Constitution: An Originalist Analysis Today At Georgetown

David Schizer (Columbia) presents Wealth Taxes Under the Constitution: An Originalist Analysis (with Steven Calabresi (Northwestern)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

A federal wealth tax is high on the wish list of progressive icons like Elizabeth Warren and Bernie Sanders, but is it constitutional? This Article shows that it is a “direct tax,” which must be apportioned among the states. This means that the percentage of revenue collected in each state must match its percentage of the population. For instance, if two states each have three percent of the population, each must provide three percent of the revenue from a wealth tax. This leads to an unappealing outcome: if one state is less wealthy, it needs a higher tax rate to supply its share. To rescue wealth taxes from apportionment, distinguished commentators have offered a range of theories. For example, some treat apportionment as a mistake, while others dismiss it as a shameful protection for the institution of slavery.

But these commentators do not give the Framers enough credit. 

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Jurow Kleiman Presents Taxing Nannies Today At Pepperdine

Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) presents Taxing Nannies (with Shayak Sarkar (UC-Davis; Google Scholar) & Emily A. Satterthwaite (Georgetown; Google Scholar)) at Pepperdine today as part of its Tax Policy Workshop Series hosted by Deanna Newton:

Nannies in the U.S. work long hours for low wages and risk retaliation if they complain. Informal, or “off the books,” work exacerbates their precarity, keeping it secret from state and federal tax agencies, as well as employment and labor agencies. Yet we have little understanding of how nannies navigate the tax reporting that renders them formal or informal.

This Article investigates nannies’ preferences for or against formal employment and tax reporting, the reasons behind such preferences, and how such preferences inform nannies’ relationships with their employers and legal institutions more broadly. The Article employs a multi-method research approach that includes an original and innovative survey of nannies and an analysis of nannies’ tax-related posts on the online forum Reddit. To supplement this research, the Article also discusses interviews with fifteen subject-matter experts regarding industry norms, common challenges nannies face, and policy reforms.

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Next Week’s Tax Workshops

Monday, February 5: Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) will present Taxing Nannies (with Shayak Sarkar (UC-Davis; Google Scholar) & Emily A. Satterthwaite (Georgetown; Google Scholar)) as part of the Pepperdine Tax Policy Workshop Series. If you would like to attend, please contact Deanna Newton.  

Tuesday, February 6: David Schizer (Columbia) will present Wealth Taxes Under the Constitution: An Originalist Analysis (with Steven Calabresi (Northwestern)) 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 7: Luís Calderón Gómez (Cardozo; Google Scholar) will present Taxation's Limits as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Ari Glogower.  

Wednesday, February 7: Alexander Edwards (Toronto; Google Scholar) will present Private Merger Negotiation Responses to Ongoing Tax Legislation (with Shane Heitzman (USC; Google Scholar), Sandy Klasa (Arizona) & Maximilian Todtenhaupt (Norwegian School of Economics))  as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Ben Alarie. 

Thursday, February 8: Jacob Goldin (Chicago; Google Scholar) will present Measuring and Mitigating Racial Disparities in Tax Audits (with Hadi Elzayn (Stanford; Google Scholar), Evelyn Smith (Michigan), Thomas Hertz (U.S. Treasury), Arun Ramesh (Chicago), Robin Fisher (U.S. Treasury) & Daniel Ho (Stanford)) as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Larry Zelenak. 

Thursday, February 8: Alex Zhang (Emory; Google Scholar) will present Fiscal Citizenship and Taxpayer Privacy 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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Schaffa Presents Two Papers On Tax Complexity Today At Indiana

Daniel Schaffa (Richmond; Google Scholar) presents two papers at Indiana-Maurer today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

The Regressivity of Complexity:

This article presents evidence suggesting that complexity in the US tax system is regressive. This should be taken into consideration when designing policy. In particular, when there are several policies that would have similar outcomes, excepting complexity, the least complex one is likely to be the most progressive.

Moreover, this article makes two advances to the analysis of complexity. First, the effect of complexity is not a well-defined concept in the absence of counterfactual analysis. Without a clear statement of a counterfactual, it is not possible to attribute to complexity any effect. Second, the comprehensions of many players are instrumental to determining outcomes within the tax system, and, thus, an analysis that does not consider how complexity changes outcomes in the tax system vis-à-vis the comprehension of all of these players is incomplete—although perhaps intentionally so to avoid the intractability of accounting for comprehension comprehensively. As a final point, while progressivity is the outcome focused on in this article, the insights and analysis developed here applies to other outcomes of the tax system, including social welfare, deadweight loss, economic activity, and the tax gap.

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Barry Presents Tax And The Boundaries Of The Firm Today At UCLA

Jordan Barry (USC; Google Scholar) presents Tax and the Boundaries of the Firm (with Victor Fleischer (UC-Irvine; Google Scholar); reviewed by Tracey Roberts (Cumberland; Google Scholar) here) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

One of the most fundamental questions of economics is how firms decide what to produce themselves (“make”) and what to purchase from other firms (“buy”). We analyze how income taxes distort firms’ decisions along this and related dimensions. Three main effects emerge.

First, intrafirm transactions allow firms to reduce their tax burdens, such as by shifting their income to lower-tax jurisdictions. This effect is inherent to an income tax. It makes firms bigger, encouraging them to “make” more and “buy” less. Second, implementing an income tax entails enacting many additional rules, none of which is inherent to an income tax. Many of these rules affect the boundary of the firm. Some expand it; others contract it. However, these expansions and contractions generally operate along different dimensions, and thus do not offset each other. Finally, income taxes encourage regulatory arbitrage transactions, which enable firms to achieve their desired tax treatment without changing the economic boundary of the firm. These transactions preserve the boundary of the firm, but also create complexity, opacity, and inefficiency.

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Gillis Presents The Prospectivity Requirement In Taxation Today At Toronto

Rory Gillis (Western; Google Scholar) presents Two Conceptions of the Rule of Law’s Prospectivity Requirement in Taxation at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie: 

Amidst growing concerns over income inequality and public sector finances, governments across the developed world have re-embraced “retrospective taxes”, taxes that have an effective date preceding their enactment date. Among other examples, governments have introduced retrospective excess profits taxes in Canada, Italy, Greece, Luxembourg, the Netherlands and Spain, and retrospective remedial taxes on long-established tax planning arrangements in the UK. Taxes of this sort are routinely condemned in tax scholarship and practice for breaching Fuller and Raz’s prospectivity requirement, which provides that laws should only apply on a going forward basis. This claim, however, obscures an important difference between Fuller and Raz’s conceptions of prospectivity in taxation. Fuller endorses a “compliance conception” in which retrospective taxes on past transactions are permissible so long as taxpayers are provided with a future payment window to comply with their new obligation. Raz, in contrast, endorses a much less permissive “reliance conception” in which taxes on past transactions are problematic, even with a future payment window, because they disrupt reliance interests in pre-existing law.

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Grana Presents Income Visibility And The Compliance Response To Declining Audit Coverage Today At Georgetown

Jess Grana (MITRE) presents Income Visibility and the Compliance Response to Declining Audit Coverage (with Alexander McGlothlin (MITRE), Alan Plumley (IRS, RAAS) & Daniel Rodriguez (IRS, RAAS)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

IRS audit rates have fallen for over a decade due to declining resources. In addition to loss of direct revenue, decreased enforcement likely results in increased noncompliance, as well. We contribute to a small literature on the “comprehensive” indirect effects of IRS enforcement on voluntary compliance across the general taxpayer population. Using microdata from random audits conducted for research purposes, we find that noncompliance increases on certain line items as overall audit rates decline. Put another way, a one percentage point increase in audit rates decreases misreporting of wage and salary income by 5.1 percent; this effect grows to a 21.8 percent drop in misreporting of income subject to much less information reporting. Notably, we do not find a discernable deterrence effect for income subject to little or no information reporting. 

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Next Week’s Tax Workshops

Tues, January 30: Jess Grana (MITRE) will present Income Visibility and the Compliance Response to Declining Audit Coverage (with Alexander McGlothlin (MITRE), Alan Plumley (RAAS) & Daniel Rodriguez (RAAS)),  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, January 31: Rory Gillis (Western; Google Scholar) will present Two Conceptions of the Rule of Law’s Prospectivity Requirement in Taxation as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Ben Alarie. 

Thursday, February 1: Jordan Barry (USC; Google Scholar) will present Tax And The Boundaries Of The Firm (with Victor Fleischer (UC-Irvine; 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 2: Daniel Schaffa (Richmond; Google Scholar) will present The Regressivity of Complexity & Towards An Understanding of Tax Complexity as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman. 

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Sugin Presents Proxy Taxes Today At Florida

Linda Sugin (Fordham; Google Scholar) presents Proxy Taxes at Florida today as part of its Tax Colloquium Series hosted by Yariv Brauner:

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.

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Naidu Presents Economic Policy And Partisan Realignment Today At UCLA

Suresh Naidu (Columbia; Google Scholar) presents “Compensate the Losers?” Economic Policy and Partisan Realignment in the US (with Ilyana Kuziemko (Princeton) & Nicolas Longuet-Marx (Columbia; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

We argue that the Democratic Party’s evolution on economic policy helps explain partisan realignment by education. We show that less-educated Americans differentially demand “predistribution” policies (e.g., a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions), while more-educated Americans differentially favor redistribution (taxes and transfers). This educational gradient in policy preferences has been largely unchanged since the 1940s. We then show the Democrats’ supply of predistribution has declined since the 1970s. We tie this decline to the rise of a self-described “NewDemocrat” party faction who court more educated voters and are explicitly skeptical of predistribution. Consistent with this faction’s growing influence, we document the significant growth of donations from highly educated donors, especially from out-of-district, who play an increasingly important role in Democratic (especially “New Democrat”) primary campaigns relative to Republican primaries. 

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Nam Presents Luck Egalitarian Redistribution: What Should We Do About Addiction? Today At Northwestern

Jeesoo Nam (USC; Google Scholar) presents Luck Egalitarian Redistribution: What Should We Do About Addiction? at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Ari Glogower:

Suffering from substance use disorder is a material disadvantage. Drug addiction is the cause of many serious harms, often harms to the addicted person.

But when it comes to the issue of redistributing benefits and burdens in our society, many think that the disadvantage of being addicted requires no corrective redistribution because addicted people brought that disadvantage on themselves by choosing to use recreational drugs. Those who hold this view might prefer that redistributive welfare benefits that we ordinarily give to the less fortunate be withheld from drug users.

Is that view right?

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Oh Presents How Does The Corporate Tax Distort Choice Of Corporate Governance? Today At Pepperdine

Jason Oh (UCLA) presents How Does the Corporate Tax Distort Choice of Corporate Governance? at Pepperdine today as part of its Tax Policy Workshop Series hosted by Deanna Newton:

To what extent does the tax system distort the organizational governance of business entities? For non-publicly traded entities, the connection between tax treatment and governance is weak. Decisions regarding tax and governance can be made independently because of flexible modern LLC statutes and the check-the-box regime. If a business wants corporate governance but partnership tax, it can form as an LLC and adopt corporate-like governance. If a business wants non-corporate governance but corporate tax, it can choose its governance structure and check-the-box to be treated as a corporation.

However, for publicly-traded entities, the choice of tax and governance remains linked. The tax rules require that publicly-traded entities generally be taxed as corporations. There are narrow exceptions for master-limited partnerships and certain investment companies like RICs and REITs. This Article explores important governance and tax puzzles related to publicly-traded entities.

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Next Week’s Tax Workshops

Monday, January 22: Jason Oh (UCLA) will present How Does the Corporate Tax Distort Choice of Corporate Governance? as part of the Pepperdine Tax Policy Workshop Series. If you would like to attend, please contact Deanna Newton. 

Wednesday, January 24: Jeesoo Nam (USC; Google Scholar) will present Luck Egalitarian Redistribution: What Should We Do About Addiction? as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Ari Glogower. 

Thursday, January 25: Suresh Naidu (Columbia; Google Scholar) will present “Compensate the Losers?” Economic Policy and Partisan Realignment in the US (with Ilyana Kuziemko (Princeton) & Nicolas Longuet-Marx (Columbia; 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, January 26: Linda Sugin (Fordham; Google Scholar) will present Proxy Taxes as part of the Florida Tax Colloquium. If you would like to attend, please contact Yariv Brauner. 

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