TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 23, 2019

Kleiman Presents Tax Limits And Public Control Today At Pepperdine

KleimanAriel Jurow Kleiman (San Diego) presents Tax Limits and Public Control at Pepperdine today as part of our Tax Policy Workshop Series hosted by Dorothy Brown and Paul Caron:

Local governments are severely restricted in their ability to raise tax revenue, in part by state-level statutes that place caps on local tax rates and revenue. Many attribute the proliferation of these local tax limitations to entrenched antitax sentiment among U.S. taxpayers. This antitax narrative is attractive for its simplicity and explanatory power. It provides a clear mandate for those enacting tax limiting laws as well as a simple fiscal rubric for those evaluating the success of such limits—namely, lower taxes equals success. However, the explanatory power of the antitax narrative is limited. Perhaps most notably, it fails to explain why voters regularly approve tax increases, even in places with strict tax limitations. Using the lens of the 1970s Tax Revolt, this Article complicates the traditional antitax narrative surrounding tax limitations, offering evidence that voters also supported tax limits in order to increase public control and oversight of local government fiscal decisions.

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January 23, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kysar Presents Unravelling The Tax Treaty Today At Toronto

Kysar (2018)Rebecca Kysar (Fordham) presents Unravelling the Tax Treaty at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Coordination among nations over the taxation of international transactions rests on a network of some 2,000 bilateral double tax treaties. The double tax treaty is, in many ways, the roots of the international system of taxation. That system, however, is in upheaval in the face of globalization, technological advances, taxpayer abuse, and shifting political tides. In the academic literature, however, scrutiny of tax treaties is largely confined to the albeit important question of whether tax treaties are beneficial for developing countries. Surprisingly little consideration has been paid to whether developed countries, like the United States, should continue to sign tax treaties with one another, and no formal revenue or economic analyses of the treaties has been undertaken by the United States government. In fact, little evidence or theory exists to support entrance into tax treaties by the United States, and examination of investment flows indicates the treaties likely lose significant U.S. revenues. Additionally, they enable taxpayer abuse, stagnate domestic policy, and thwart reforms of the antiquated international tax system. These consequences are particularly problematic for the United States. Other nations, after all, have been able to supplement their revenues and pursue destination-based taxation through treaty-friendly VATs.

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January 23, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Columbia Journal Of Tax Law Publishes New Tax Matters: The Tax Treatment Of A Marijuana Business

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has published a new issue of its Tax Matters feature, with short pieces responding to a specific cutting-edge tax law issue:

Section 59A of The Tax Cuts and Jobs Act of 2017 created the new Base Erosion and Anti-Avoidance Tax, which denies deductions for payment made to foreign related persons. The BEAT has created a number of issues with regards to its relationship with international treaties and obligations.

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January 23, 2019 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 22, 2019

Stantcheva Presents Taxation And Innovation In The 20th Century Today At NYU

StanchevaStefanie Stantcheva (Harvard) presents Taxation and Innovation in the 20th Century (with Ufuk Akcigit (Chicago), John Grigsby (Chicago) & Tom Nicholas (Harvard)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

This paper studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We use three new datasets: a panel of the universe of inventors who patent since 1920; a dataset of the employment, location and patents of firms active in R&D since 1921; and a historical state-level corporate tax database since 1900, which we link to an existing database on state-level personal income taxes. Our analysis focuses on the impact of taxes on individual inventors and firms (the micro level) and on states over time (the macro level).

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January 22, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Denying Tax-Exempt Status To Discriminatory Private Adoption Agencies

Allison M. Whelan (Covington & Burling, Washington D.C), Denying Tax-Exempt Status to Discriminatory Private Adoption Agencies, 8 UC Irvine L. Rev. 711 (2018):

This Article ... and argues that the established public policy at issue here is the best interests of the child, which includes the importance of ensuring that children have safe, permanent homes. In light of this established public policy, which all three branches of the federal government have recognized and support, this Article ultimately argues that, consistent with the holding in Bob Jones, private adoption agencies that refuse to facilitate adoptions by same-sex parents, thereby narrowing the pool of qualified prospective parents and reducing the number of children who are adopted, act contrary to the established public policy of acting in the best interests of the child.

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January 22, 2019 in Scholarship, Tax | Permalink | Comments (1)

Morrow: Noncompetes As Tax Evasion

Rebecca Morrow (Wake Forest), Noncompetes as Tax Evasion, 96 Wash. U. L. Rev. 265 (2018):

Al Capone famously boasted of his criminal empire: “Some call it bootlegging. Some call it racketeering. I call it a business.” Treasury Agent Frank Wilson and Prosecutor George Johnson put Capone behind bars not by disputing his characterization and pursuing murder or assault or RICO charges, but by accepting it and enforcing its tax implications. Irrespective of their legality, Capone’s businesses were profitable, and Capone had not reported their profits for tax purposes. A simple application of bedrock tax law achieved what other legal routes failed to achieve and sent Capone to Alcatraz. The trick was to see the tax argument.

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January 22, 2019 in Scholarship | Permalink | Comments (0)

Monday, January 21, 2019

Columbia Journal Of Tax Law Publishes New Issue

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has published Vol. 10, No. 1:

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January 21, 2019 in Scholarship, Tax | Permalink | Comments (0)

Spring 2019 Law Review Article Submission Guide

SubmissionsNancy Levit (UMKC) & Allen Rostron (UMKC) have updated their incredibly useful document, which contains two charts for the Spring 2019 submission season covering 202 law reviews.

The first chart (pp. 1-52) contains information gathered from the journals’ websites on:

  • Methods for submitting an article (such as by e-mail, ExpressO, regular mail, Scholastica, or Twitter)
  • Any special formatting requirements
  • How to request an expedited review
  • How to withdraw an article after it has been accepted for publication elsewhere

The second chart (pp. 53-59) contains the ranking of the law reviews and their schools under six measures:

  • U.S. News: Overall Rank
  • U.S. News: Peer Reputation Rating
  • U.S. News: Judge/Lawyer Reputation Rating
  • Washington & Lee Citation Ranking
  • Washington & Lee Impact Factor
  • Washington & Lee Combined Rating

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January 21, 2019 in Legal Education, Scholarship | Permalink | Comments (0)

Sunday, January 20, 2019

The Top Five New Tax Papers

SSRN Logo (2018)There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the lit at #4 and #5:

  1. [370 Downloads]  Profit Shifting Before and After the Tax Cuts and Jobs Act, by Kimberly Clausing (Reed)
  2. [353 Downloads]  How Data Should (Not) Be Taxed, by Johannes Becker (University of Muenster), Joachim Englisch (University of Muenster) & Deborah Schanz (Ludwig Maximilian University of Munich)
  3. [230 Downloads]  The Proposed Section 163(j) Regulations, by David S, Miller, Sejin Park, Mani Kakkar & Sean Webb (Proskauer)
  4. [221 Downloads]  The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects, by Stephen Seiler (Stanford), Anna Tuchman (Northwestern) & Song Yao (Minnesota)
  5. [115 Downloads]  Cloudy with a Chance of Taxation, by Rifat Azam (Radzyner) & Orly Mazur (SMU) (review by Hayes Holderness (Richmond))

January 20, 2019 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 19, 2019

Ten Reasons To Prefer Tax Partnerships Over S-Corporations

Bradley T. Borden (Brooklyn), Ten Reasons to Prefer Tax Partnerships Over S-Corporations, N.Y. Bus. L.J. Vol. 22, No. 2, p 47, Winter 2018:

A fundamental choice for every business owner is the type of legal and tax entity the owner will use for the business. Because C-corporations are subject to an entity-level tax, owners of small businesses often face the choice of operating as an S-corporation or a tax partnership. To the uninitiated, the choice may appear to be trivial because both tax partnerships and S-corporations provide passthrough tax treatment (i.e., no entity-level tax). In fact, however, despite the passthrough nature of both tax partnerships and S-corporations, tax law treats them differently in many respects. This article identifies ten ways in which tax law treats the two types of tax entities differently, showing that in many situations, business owners will be better served by forming as tax partnerships. The article also identifies situations under which S-corporations provide the better tax alternative.

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January 19, 2019 in Scholarship, Tax | Permalink | Comments (0)

Friday, January 18, 2019

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Hemel's The State-Charity Disparity Under The 2017 Tax Law

This week, Mirit Eyal-Cohen (Alabama) reviews Daniel Hemel (Chicago), The State-Charity Disparity Under the 2017 Tax Law, 58 Wash. U. J.L. & Pol'y ___ (2019).

Mirit-Cohen (2018)This Article is especially timely in light of continuous efforts by states (recently by Connecticut, New Jersey, New York, and Oregon) to create state tax credits for charitable contributions to public education or public health. These tax credits reduce the state tax liability for Federal purposes and might be helpful in alleviating the effect of the new cap on individual state and local tax (“SALT”) deductions imposed by the Tax Cuts and Jobs Act of 2017 (and was also part of the 2016 Clinton tax proposal). While the IRS has allowed in the past such charitable contributions as deductible for Federal purposes, Treasury recently proposed regulation to reverse this trend requiring taxpayers to decrease their charitable contribution deduction by the value of SALT benefits received for their contribution, with a “de minimis” rule ignoring state tax benefits worth less than 15% of the donation.

Hemel makes a case against the disparity in the limitations on charitable contributions (up to 60% of AGI) compared to those placed on SALT payments ($10,000 cap a year).  He provides several justifications for removing such differential tax treatment. First, he points out to the fact that both public charities and state and local governments are primarily in the business of providing education, health, and social services. But more so, in Hemel’s eyes, the fundamental reasons for supporting charities such as promoting pluralism, creating positive externalities, and delivering specified knowledge, are equally if not more present in the case of state and local government organizations. SALT can be seen as simply the price of goods and services that state and local governments provide. Accordingly, from a measurement-of-income perspective, Hemel suggests that SALT should represent costs of services only up to a point, after which they constitute a reduction in consumption plus savings. Indeed, today this is encompassed somewhat in the Standard Deduction and will continue to do so with its exponential recent increase in 2018. Taking Hemel’s implicit analogy a step forward could be providing a differentiated Standard Deduction at the Federal level, adjusted for each state for its value worth of services. Ignoring issues of valuation and political brawl, this could be an efficient way to coordinate more equitably the services (measured via local taxes) of each state to their Federal deductibility. 

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January 18, 2019 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Chodorow Presents The Parsonage Exemption Today At Florida

ChodorowAdam Chodorow (Arizona State) presents The Parsonage Exemption, 51 U.C. Davis L. Rev. 849 (2018), at Florida today as part of its Tax Colloquium Series:

The parsonage exemption allows “ministers of the gospel” to exclude the value of housing benefits from income, whether received in-kind or as a cash allowance. Critics argue that the provision violates the First Amendment’s Establishment Clause, while supporters contend that it does not single religion out for a cognizable benefit. Alternately, supporters claim that it is a permissible accommodation for religion under the First Amendment’s Free Exercise Clause. This Article fills an important gap in the debate by offering a nuanced explanation of how the parsonage exemption and other housing provisions function within the tax code.

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January 18, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Issues Taxing Cryptocurrency And The Policy Behind A Safe Harbor For Exchanges And Users

Stan Sater (Tulane), Issues Taxing Cryptocurrency and the Policy Behind a Safe Harbor for Exchanges and Users

The U.S. federal tax framework for virtual currency remains ambiguous. In the face of emerging technology, the IRS has taken a cautious approach using a “best guess” tax treatment until the technology is sufficiently mature. In particular, for this rapidly evolving ecosystem, a careful regulatory approach is prudent. Regulations that are hastily written have the chance of stifling innovation or force companies to seek jurisdiction elsewhere. However, legal ambiguity and uncertainty in this wait and see approach may have a negative impact on startup investment and impact individuals honestly using the technology.

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January 18, 2019 in Scholarship, Tax | Permalink | Comments (0)

Thursday, January 17, 2019

Lawsky Presents Form As Formalization Today At Duke

Lawsky (2017)Sarah Lawsky (Northwestern) presents Form as Formalization at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

There are, roughly speaking, two approaches to applying computing to law, which can be thought of as a bottom up approach and a top down approach. The bottom up approach uses large amounts of data in some way—to make predictions, for example. Machine learning is one such approach; neural nets are another. This is generally seen to be the approach with the most potential, the one that leads to the “data driven future” of legal practice. The “top down” approach would derive conclusions from the law itself, after making the law legible to the computer in some way, perhaps through hand-encoding, perhaps through natural language processing or some similar approach to read the actual text of a statute or regulation.

The top-down approach, also sometimes called computational law, is generally considered to have much less potential. But even those whose dismiss computational law point to one example of success in encoding the law: TurboTax and similar tax compliance programs. Thus one finds enthusiastic references to creating “TurboTax for police complaints,”“TurboTax for copyright,” “TurboTax for immigration,” and so forth.

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January 17, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hayashi Presents Countercyclical Tax Bases Today At Indiana

Hayashi (2019)Andrew Hayashi (Virginia) presents Countercyclical Tax Bases at Indiana today as part of its Tax Policy Colloquium Series hosted by David Gamage:

Tax scholarship has tended to focus on the efficiency properties of different tax bases under assumptions about the macroeconomy that only sometimes hold, and has paid relatively little attention to how those bases operate in recessions. I show how different tax bases interact with household credit constraints and adjustment costs to either stabilize or aggravate economic shocks.

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January 17, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Holderness: Whither Substantial Nexus?

Hayes Holderness (Richmond), Whither Substantial Nexus?:

Hailed as a massive victory for coherence in defining the state tax jurisdiction standard of “substantial nexus,” the 2018 South Dakota v. Wayfair case fundamentally altered the state and local tax jurisprudence. However, the vagueness of the decision left the substantial nexus doctrine at a crossroads: it may wither away into meaningless platitudes or solidify into a coherent standard that meaningfully protects interstate commerce from undue state tax burdens. This Article guides the substantial nexus doctrine down the latter path by developing a robust theory of substantial nexus that focuses on the potential burden of tax compliance costs and explaining the substantial nexus standard that follows from that theory.

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January 17, 2019 in Scholarship, Tax | Permalink | Comments (0)

Is Texas v. U.S. Taxing for Obamacare?

Andrew L. Oringer (Hofstra), Is Texas v. U.S. Taxing for Obamacare?

We return to the land of the Fifth Circuit for a ruling by a Texas district court in Texas v. United States that the entirety of the Patient Protection and Affordable Care Act was rendered unconstitutional in its entirety by the Tax Cuts and Jobs Act of 2017. The ACA has survived two trips to the U.S. Supreme Court. Will it survive what looks to be a third?

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January 17, 2019 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, January 16, 2019

Mann Presents How Corporate Tax Rates Affect Corporate Environmental Social Responsibility Today In Australia

Mann (2018)Roberta Mann (Oregon) presents How Corporate Tax Rates Affect Corporate Environmental Social Responsibility at the Australasian Tax Teachers Association's 31st Annual Conference Tax on Innovation and Education: Tax in a Changing World (with Bill Butcher and Fiona Martin (University of New South Wales) (full conference program) today in Perth, Australia:

A growing literature has developed on the topic of enforcement crowding out altruism. This literature may apply to the idea of corporate social responsibility. If the government requires social responsibility, by imposing a carbon price or by otherwise increasing tax liabilities to pay for social goods, does that reduce the corporate social response? Similarly, would reducing regulations and corporate tax liability increase the social response?

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January 16, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Impact Of Soda Taxes: Pass-through, Tax Avoidance, And Nutritional Effects

Stephen Seiler (Stanford), Anna Tuchman (Northwestern) & Song Yao (Minnesota), The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects

We analyze the impact of a tax on sweetened beverages, often referred to as a “soda tax,” using a unique data-set of prices, quantities sold and nutritional information across several thousand taxed and untaxed beverages for a large set of stores in Philadelphia and its surrounding area. We find that the tax is passed through at a rate of 75-115%, leading to a 30-40% price increase. Demand in the taxed area decreases dramatically by 42% in response to the tax.

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January 16, 2019 in Scholarship, Tax | Permalink | Comments (1)

Johnson: Uniform Internet Sales Tax After Wayfair

Calvin H. Johnson (Texas), Don't Mess with Texas: Uniform Internet Sales Tax after Wayfair?, 90 State Tax Notes 625 (Nov. 12, 2018):

Johnson urges the Texas legislature, following the Supreme Court's Wayfair decision, to make internet sales into Texas subject to Texas sales tax, without adopting a multi-state uniform sales tax or otherwise modifying its sales tax.

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January 16, 2019 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 15, 2019

7th Annual NYU/UCLA Tax Policy Symposium: New Approaches To The International Tax Base

NYUUCLANYU/UCLA Tax Policy Symposium, New Approaches to Calculation and Allocation of the International Tax Base,  71 Tax L. Rev. 471-623 (2018)

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January 15, 2019 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The Making Of International Tax Law: Empirical Evidence From Natural Language Processing

Elliott Ash (ETH Zurich) & Omri Y. Marian (UC-Irvine), The Making of International Tax Law: Empirical Evidence from Natural Language Processing:

We offer the first attempt at empirically testing the level of transnational consensus on the legal language controlling international tax matters. We also investigate the institutional framework of such consensus-building. We build a dataset of 4,052 bilateral income tax treaties, as well as 16 model tax treaties published by the United Nations (UN), Organisation for Economic Co-operation and Development (OECD) and the United States. We use natural language processing to perform pair-wise comparison of all treaties in effect at any given year. We identify clear trends of convergence of legal language in bilateral tax treaties since the 1960s, particularly on the taxation of cross-border business income.

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January 15, 2019 in Scholarship, Tax | Permalink | Comments (0)

Monday, January 14, 2019

Leviner Presents Public Opinion And Tax Justice Today At Hebrew University

Leviner (2018)Sagit Leviner (Ono Academic College, Israel) presents In the Eye of the Beholder: Public Opinion on Tax Justice at the Hebrew University Faculty of Law today as part of its Tax Law Colloquium Series:

The tax system is one of the most influential of civic institutions of our time. Taxes often detract at least one third of our income and they present an immediate and consequential effect with respect to a broad array of actions we make daily, when we choose to get married, have kids, go to college, or buy a loaf of bread. And, even though tax cuts and reforms are accordingly appealing to many people, it is worth taking time to ponder over the consequences of such cuts and reforms.

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January 14, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Lesson From The District Court: OIC Rejection Is No Basis For Wrongful Collection Suit Under §7433

NJCourthousesAlas!  A closed Tax Court issued no opinions last week.  Curse that federal shutdown!  But the federal district courts did issue opinions.  The Administrative Office of the U.S. Courts website says they have enough money (from fees) to run through January 18th.  And their opinions teach lessons as well.

Today’s lesson comes from a lawsuit filed against the United States by Mr. Nicholas Morales, Jr. in 2017.  He sued under §7433, a statute that gives taxpayers a cause of action against the government when any IRS employee negligently, recklessly, or willfully "disregards" any statute or associated regulation in title 26 “in connection with any collection of Federal tax.”  His Complaint alleged that IRS employees had disregarded §7122 in refusing his Offer In Compromise.     

The Federal District Court for the District of New Jersey has issued two opinions in the case: Morales v. United States (Morales I) on March 26, 2018 and Morales v. United States (Morales II) on January 2, 2019.  Both opinions are marked “Not for Publication.”  They are not, however, marked “Not for Blogging”!  That’s a good thing because they actually make for a good basic lesson about the scope and limits of §7433.  You will find the lesson below the fold.

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January 14, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure | Permalink | Comments (0)

Public Debt And Low Interest Rates

Olivier Blanchard (MIT), Public Debt and Low Interest Rates (Video of American Economic Association Presidential Lecture (Jan. 4, 2019)):

The lecture focuses on the costs of public debt when safe interest rates are low. I develop four main arguments.

First, I show that the current situation in which, in the United States, safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers, that is the issuance of debt without a later increase in taxes may well be feasible. Put bluntly, public debt may have no fiscal cost.

Figure 1

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January 14, 2019 in Scholarship, Tax | Permalink | Comments (0)

Sunday, January 13, 2019

The Top Five New Tax Papers

SSRN Logo (2018)There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and a new paper debuting on the lit at #5:

  1. [397 Downloads]  Digital Battlefront in the Tax Wars, by Ruth Mason (Virginia) & Leopoldo Parada (Turin)
  2. [351 Downloads]  Profit Shifting Before and After the Tax Cuts and Jobs Act, by Kimberly Clausing (Reed)
  3. [326 Downloads]  How Data Should (Not) Be Taxed, by Johannes Becker (University of Muenster), Joachim Englisch (University of Muenster) & Deborah Schanz (Ludwig Maximilian University of Munich)
  4. [269 Downloads]  Beyond Notice-and-Comment: The Making of the § 199A Regulations, by Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina)
  5. [213 Downloads]  The Proposed Section 163(j) Regulations, by David S, Miller, Sejin Park, Mani Kakkar & Sean Webb (Proskauer)

January 13, 2019 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 12, 2019

The Impact Of Tax Reform On Home Ownership And Children

Margaret Ryznar (Indiana-Indianapolis) & Ryan Shouse, Tax Reform on Homeownership and the Impact on Children, 161 Tax Notes 211 (Oct. 8, 2018):

This article discusses several homeownership provisions modified by the Tax Cuts and Jobs Act, and how they affect children.

January 12, 2019 in Scholarship, Tax | Permalink | Comments (1)

Friday, January 11, 2019

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Expanded Worldwide Versus Territorial Taxation After The TCJA

This week, David Elkins (Netanya) reviews a new work by J. Clifton Fleming (BYU), Robert J. Peroni (Texas) & Stephen E. Shay (Harvard), Expanded Worldwide Versus Territorial Taxation after the TCJA, 161 Tax Notes 1173 (Dec. 3, 2018).

Elkins (2018)Like individuals who are citizens or residents of the United States, domestic corporations must report and pay U.S. tax on their worldwide income. However, exposure to U.S. worldwide taxation has always been more theoretical than real. Because under the Code corporate residence is determined almost exclusively by place of incorporation, avoiding U.S. tax on foreign-source earnings usually requires nothing more than operating abroad via a subsidiary registered in a foreign jurisdiction. As a foreign corporation, the subsidiary is liable for U.S. tax only on its U.S.-source income. This arrangement does not allow domestic corporations to completely escape tax on their foreign-source earnings. When the foreign subsidiary distributes its earnings to its domestic parent or when the domestic parent sells shares in the foreign subsidiary, the gain is in principle subject to U.S. tax. Thus, prior to the enactment of the 2017 Tax Cuts and Jobs Act (TCJA), the U.S. international corporate tax regime was in practice one of deferral.

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January 11, 2019 in David Herzig, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

North Carolina's Nonprofit Property Tax Exemption Conundrum

Thomas A. Kelley (North Carolina) & Christopher B. McLaughlin (North Carolina), North Carolina's Nonprofit Property Tax Exemption Conundrum, 96 N.C. L. Rev. 1769 (2018):

Disputes between nonprofit organizations and local governments over property tax exemptions have been on the increase in North Carolina and beyond. There are two paramount reasons. First, since the Reagan Revolution of the 1980s eliminated block grants and other sources of funding, local governments have struggled to pay their bills and have been compelled to look for new sources of revenue, including stricter application of property tax laws. Second, the nonprofit sector has been transformed by the rise of social entrepreneurship. Responding to the same financial pressures that have squeezed local governments since the 1980s, increasing numbers of nonprofit organizations have adopted feegenerating strategies that, in some cases, make them almost indistinguishable from for-profit enterprises. For local governments, the fact that some nonprofits act like for-profits makes it easier to claim that they do not deserve generous property tax exemptions.

The result is a property tax conundrum in North Carolina and beyond. Is it fair that governments’ financial books should be balanced on the backs of legitimate charities just because their operations include entrepreneurial elements? On the other hand, how are local governments supposed to fund needed services if they cannot collect taxes on property used for seemingly commercial activities?

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January 11, 2019 in Scholarship, Tax | Permalink | Comments (2)

Thursday, January 10, 2019

The Tax Lawyer Publishes New Issue

Locating Affordable Housing: The Legal System's Misallocation Of Subsidized Housing Incentives

Brandon Weiss (UMKC), Locating Affordable Housing: The Legal System's Misallocation of Subsidized Housing Incentives, 70 Hastings L.J. 215 (2018):

The primary goal of subsidized housing policy in the United States is to increase access to affordable housing for low-income households. Yet data show that states disproportionately award low-income housing tax credits to finance the development of projects in neighborhoods where there is already a relatively high number of housing units available at similar rent levels. Through a fifty-state study of state housing agency allocation rules, this Article evaluates the legal apparatus that facilitates this “misallocation problem.” I find that approximately seventy-five percent of states fail to make the provision of below-market rents a threshold requirement of receiving an award of low-income housing tax credits. As a result, locational choices often are dictated by private developers who are incentivized to develop where land is cheapest. I argue that states should revise their allocation rules to ensure that, as a default, tax credits are awarded to projects that offer at least a ten percent rent advantage as compared to the local private market.

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January 10, 2019 in Scholarship, Tax | Permalink | Comments (1)

Colinvaux: Taking State Tax Benefits Into Account For Charitable Deduction Purposes

Roger Colinvaux (Catholic), Failed Charity: Taking State Tax Benefits into Account for Purposes of the Charitable Deduction, 66 Buff. L. Rev. 779 (2018):

The Tax Cuts and Jobs Act (TCJA) substantially limited the ability of individuals to deduct state and local taxes (SALT) on their federal income tax returns. Some states are advancing schemes to allow taxpayers a state tax credit for contributions to a charity controlled by the state. The issue is whether state tax benefits are deductible as a charitable contribution for purposes of the federal income tax. Under a general rule of prior law — the full deduction rule — state tax benefits were ignored for purposes of the charitable deduction. If the full deduction rule is applied to the state workaround schemes, then the SALT limitation can successfully be avoided. This Article explains that after the TCJA, the legal basis for the full deduction rule is undermined.

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January 10, 2019 in Scholarship, Tax | Permalink | Comments (0)

The Need For Better Eligibility Regulations In The Public Service Loan Forgiveness Program

Federal Student AidGregory Crespi (SMU), The Public Service Loan Forgiveness Program: The Need for Better Eligibility Regulations, 66 Buff. L. Rev. 819 (2018):

People will start seeking tax-exempt debt forgiveness under the Public Service Loan Forgiveness (“PSLF”) program in October of 2017 after satisfying the requirements of 10 years of post-October 1, 2007 employment in a “public service job.” I estimate that eventually 200,000 people a year or more will obtain debt forgiveness under this program, at a total cost to the Treasury of $12 billion/year or more. Estimates are that up to one-quarter of all employment will qualify as a public service job.

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January 10, 2019 in Legal Education, Scholarship | Permalink | Comments (4)

Wednesday, January 9, 2019

Brennan Presents Distributed Deferral Today At Toronto

Brennan (2017)Thomas J. Brennan (Harvard) presents Distributed Deferral (with Daniel I. Halperin (Harvard)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

We show that a current tax on income is equivalent to a future tax levied on both the original income and the investment returns it earns, provided that the tax rate is constant and that neither the taxpayer nor the government is subject to certain investment or borrowing constraints. We then show that instead of deferring a tax to a single future point in time, the tax may be broken into components that are distributed periodically over time. There is not a unique method for distributing deferral, but we introduce examples of particular methods, including a “non-increasing” deferral method that taxes returns to the original income periodically but does not tax the original amount itself until it is no longer invested.

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January 9, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fleming, Peroni & Shay: Expanded Worldwide Versus Territorial Taxation After The TCJA

J. Clifton Fleming (BYU), Robert J. Peroni (Texas) & Stephen E. Shay (Harvard), Expanded Worldwide Versus Territorial Taxation after the TCJA, 161 Tax Notes 1178 (Dec. 3, 2018):

In the run up to enactment of the 2017 Tax Cuts and Jobs Act (TCJA) one of the principal U.S. tax policy issues was how foreign-source, active-business income of U.S. multinational enterprises (MNEs) should be taxed by the United States if the system of deferring U.S. tax on active income of a foreign subsidiary was ended. Should active foreign income be taxed under a territorial or exemption system—i.e. bear no residual U.S. tax—or should it be subjected to expanded worldwide taxation—i.e. current taxation at regular U.S. rates coupled with a credit for foreign income taxes paid or accrued, but limited to the U.S. tax on the foreign-source income as measured for U.S. tax purposes.

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January 9, 2019 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 8, 2019

Hickman Reviews Wallace's Congressional Control Of Tax Rulemaking

Jotwell (Tax) (2016)Kristin Hickman (Minnesota), Bridging Exceptionalism and Anti-Esceptionalism With the JCT Canon (JOTWELL) (reviewing Clint Wallace (South Carolina), Congressional Control of Tax Rulemaking, 71 Tax L. Rev. 179 (2017)):

In its 2011 decision in Mayo Foundation for Medical Education and Research v. United States, the Supreme Court held that most if not all general authority Treasury regulations carry the force of law and, thus, are eligible for judicial review and deference under the Chevron standard. In reaching that conclusion, the Court reiterated its general presumption in favor of “maintaining a uniform approach to judicial review of administrative action” and, correspondingly, rejected “an approach to administrative review good for tax law only.” But the Court qualified that presumption at least a bit—noting the taxpayer’s failure to “advance[] any justification for applying a less deferential standard of review to Treasury Department regulations,” and thereby suggesting that good reasons for tax exceptionalism might exist on another occasion. With Congressional Control of Tax Rulemaking, Clint Wallace advocates at least some amount of tax exceptionalism in judicial review of Treasury/IRS regulatory interpretations of the Internal Revenue Code. Or does he? ...

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January 8, 2019 in Scholarship, Tax | Permalink | Comments (0)

Fleming: Customary International Law And Tax Rates

J. Clifton Fleming (BYU), To What Degree Does Customary International Law Require Accommodation of a Source Country's Right to Tax High, Tax Low, or Not Tax at All?:

If source country income tax exceeds residence country income tax, customary international law does not require a residence country to reimburse its residents for the excess even though failure to reimburse interferes with the source country's right to tax high.

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January 8, 2019 in Scholarship, Tax | Permalink | Comments (1)

Shobe: The Substance Over Form Doctrine And The Up-C

Gladriel Shobe (BYU), The Substance Over Form Doctrine and the Up-C, 38 Va. Tax Rev. (2018):

The Up-C is an increasingly popular form of IPO that generates significant tax benefits as compared to a traditional IPO. These tax benefits, which are the driving force behind the Up-C, have generally gone uncontested and are achieved by taking a form over substance approach to the Up-C for tax purposes. Governmental officials had never directly addressed the Up-C until recently when the SEC issued an interpretive letter (the Up-C Letter) condoning a substance over form approach to the Up-C for purposes of SEC Rule 144. As a result of the Up-C Letter, owners in an Up-C get the best of both worlds by inconsistently taking a form over substance approach for tax purposes and a substance over form approach for securities law purposes.

This Article analyzes whether this disparate treatment of the Up-C is justified from either a technical or policy perspective.

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January 8, 2019 in Scholarship, Tax | Permalink | Comments (0)

Simultaneous Equations For Simpler Tax Analysis

Libin Zhang (Roberts & Holland, New York), Simultaneous Equations for Simpler Tax Analysis, 161 Tax Notes 571 (Oct. 29, 2018):

The tax code limits some tax deductions to a fixed percentage of the taxpayer’s taxable income. When multiple income-based limitations apply to a taxpayer at the same time, without specified ordering rules, the IRS has solved simultaneous equations to give proper effect to all the limitations.

This Special Report in Tax Notes discusses the simultaneous equation solutions for some new income-based limitations introduced by the Tax Cuts and Jobs Act of 2017, which apply to net operating losses (NOLs), global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), business interest expense under section 163(j), and the section 199A passthrough business income deduction. No linear algebra is used in the report.

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January 8, 2019 in Scholarship, Tax | Permalink | Comments (1)

Monday, January 7, 2019

The Most Popular Tax Articles Of 2018

  1. 2,834 Downloads:  Joseph Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford), Daniel Hemel (Chicago), Darien Shanske (UC-Davis), Kirk Stark (UCLA), Dennis Ventry (UC-Davis) & Manoj Viswanathan (UC-Hastings), Federal Income Tax Treatment of Charitable Contributions Entitling the Donor to a State Tax Credit
  2. 2,524 Downloads:  Sam Donaldson (Georgia State), Understanding the Tax Cuts and Jobs Act
  3. 1,247 Downloads:  Dan Shaviro (NYU), Evaluating the New US Pass-Through Rules, 2018 British Tax Rev. 49
  4. 948 Downloads:  Shu-Yi Oei (Boston College) & Diane Ring (Boston College), Is New Code Section 199A Really Going to Turn Us All into Independent Contractors?
  5. 711 Downloads:  Brad Borden (Brooklyn), Choice-of-Entity Decisions Under the New Tax Act
  6. 651 Downloads:  Allison Christians (McGill), Introduction to Tax Policy Theory
  7. 613 Downloads:  Reuven Avi-Yonah (Michigan) & Martin Vallespinos (S.J.D. 2018, Michigan), The Elephant Always Forgets: US Tax Reform and the WTO
  8. 589 Downloads:  Reuven Avi-Yonah (Michigan), Beat It: Tax Reform and Tax Treaties
  9. 574 Downloads:  Allison Christians (McGill) & Laurens van Apeldoorn (Leiden), Taxing Income Where Value Is Created, 21 Fla. Tax Rev. ___ (2018)
  10. 572 Downloads:  Jim Repetti (Boston College), The Impact of the 2017 Act's Tax Rate Changes on Choice of Entity, 21 Fla. Tax Rev. ___ (2018)

January 7, 2019 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Field: Complicity By Referral

Heather M. Field (UC-Hastings), Complicity by Referral, 31 Geo. J. Legal Ethics 77 (2018):

Providing a legal referral to a prospective client after declining a proffered matter may seem relatively uncontroversial. Indeed, a lawyer who provides a legal referral, even for an aspiring law-breaker, would be quite unlikely to be subject to any professional sanctions or legal liability as a result. Yet, by providing a legal referral to a potential law-breaker, the lawyer advances the prospective client’s highly questionable goals and becomes complicit in the client’s efforts to circumvent the law. Thus, this article argues that the decision to offer a legal referral is much more morally fraught than previously understood. In response, this article provides guidance about the parameters that should govern a lawyer’s decision about whether and to whom a lawyer should give legal referrals, particularly for matters where clients seek to achieve questionable (or worse) objectives.

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January 7, 2019 in Legal Education, Scholarship | Permalink | Comments (0)

Pepperdine Tax Policy Workshop Series (Spring 2019)

Pepperdine Law LogoHere is the schedule for the Spring 2019 Pepperdine Tax Policy Workshop Series I am co-hosting with Dorothy Brown, our Straus Distinguished Visiting Professor of Law:

I will of course blog each professor's paper on the day of their presentation. Southern California professors and practitioners are welcome to attend any of the sessions (10:30 a.m. - 12:00 p.m.), as well as lunch with our speaker and students (12:00 pm - 1:15 pm) — just let me know.

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January 7, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lesson From The Tax Court: The Cheeky' Way To Avoid The Fraud Penalty

Tax Court (2017)Courts and commentators often tout the voluntary nature of the United States tax system.  In one sense, the claim is true.  The tax determination process ultimately rests on taxpayers disclosing their financial affairs and paying what they owe---through withholding or otherwise---without overt government compulsion.  It is voluntary just like stopping one's car at a red light---at midnight with no traffic---is voluntary.  It takes each citizen's disciplined self-enforcement of the legal duty to keep both the tax and transportation systems running smoothly.

But saying the system is voluntary is also misleading.  The discipline of self-reporting and payment cannot be divorced from the constant coercive threat of discovery and the resulting civil or criminal sanctions.  It's Bentham’s Panopticon.  Congress weaves together civil and criminal penalties to enforce the legal duties to report and pay taxes.  It leaves the ever unpopular IRS to swing the net.  By my count, Chapter 68 of the Tax Code contains 48 separate civil penalty provisions to catch out taxpayers.

Today’s lesson concerns the §6663 fraud penalty.  On December 26, 2018, the Tax Court issued its opinion in Richard C. Mathews v. Commissioner, T.C. Memo 2018-212.  The decision was a holiday gift to a pro se taxpayer who was contesting deficiencies (and fraud penalties) assessed well after the normal three year limitation period had expired.  The IRS relied on the fraud exception in §6501(c)(1) but was unable to convince Judge Vasquez that the taxpayer had the necessary fraudulent intent.  This was likely a surprising result to the IRS because the taxpayer had: (1) lied to IRS agents; (2) massively unreported gross receipts for the two years at issue and many years before that; and (3) been convicted of the §7206 crime of subscribing to false tax returns for the years at issue.  To find out how the taxpayer dodged the fraud penalty bullet, read on.

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January 7, 2019 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure | Permalink | Comments (1)

Sunday, January 6, 2019

A Catholic Perspective On Law School Diversity Requirements

Teresa Stanton Collett (St. Thomas), A Catholic Perspective on Law School Diversity Requirements:

“Diversity” is a polarizing concept in American politics. I argue that under current legal education guidelines and policies, it is a concept that is Ill-defined, clumsily implemented, and often justified on grounds that have been rejected by the US Supreme Court. My quarrel is not with the underlying perception that cultural pluralism is increasing both here and abroad, nor with the idea that such pluralism can be the entry point to a more just and peaceful world. My quarrel is with the legal academy’s embrace of what others have called “check-the-box diversity” with little to no attention to viewpoint diversity and authentic dialogue. This is evidenced by both the development of a grievance culture on campus as well as a dangerous refusal to engage ideas and arguments that differ from the dominate liberal worldview. Sadly there is little to no evidence that Catholic law schools differ from their secular counterparts in this area.

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January 6, 2019 in Legal Education, Scholarship | Permalink | Comments (2)

The Top Five New Tax Papers

SSRN Logo (2018)There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the lit at #2:

  1. [331 Downloads]  Profit Shifting Before and After the Tax Cuts and Jobs Act, by Kimberly Clausing (Reed)
  2. [304 Downloads]  Digital Battlefront in the Tax Wars, by Ruth Mason (Virginia) & Leopoldo Parada (Turin)
  3. [303 Downloads]  How Data Should (Not) Be Taxed, by Johannes Becker (University of Muenster), Joachim Englisch (University of Muenster) & Deborah Schanz (Ludwig Maximilian University of Munich)
  4. [259 Downloads]  Beyond Notice-and-Comment: The Making of the § 199A Regulations, by Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina)
  5. [203 Downloads]  The Digital Services Tax: A Conceptual Defense, by Wei Cui (British Columbia)

January 6, 2019 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 5, 2019

This Week's Ten Most Popular TaxProf Blog Posts

Interest Dilution And Damages As Contribution-Default Remedies In Failing LLCs And Partnerships

Bradley T. Borden (Brooklyn) & Thomas E. Rutledge (Stoll Keenon Ogden, Louisville, KY), Interest Dilution and Damages as Contribution-Default Remedies in Failing LLCs and Partnerships:

Interest dilution often appears as a contribution-default remedy in LLC operating agreements and limited partnership agreements. Entities adopt interest-dilution remedies to create a financial incentive for members to fulfill their contribution obligations. That incentive generally would not exist in a failing arrangement because members will hesitate to throw good money after bad, so, if the only contribution-default remedy is interest dilution, members of a failing LLC or partnership may be able to avoid making additional contributions to the entity. To enforce a contribution obligation, the entity agreement must allow for damages as a remedy. This article discusses three recent cases (two from Kansas and one from Delaware) that identify situations in which the entity agreement limits contribution-default remedies to interest dilution and those that provide for damages as a possible remedy.

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January 5, 2019 in Scholarship, Tax | Permalink | Comments (0)

Friday, January 4, 2019

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Shay's U.S. International Tax Reform

This week, Sloan Speck (Colorado) reviews a new work by Stephen Shay (Harvard), The US International Tax Reforms: Competition and Convergence, Pay-Offs and Policy Failures, 46 Intertax 905 (2018).

Speck (2017)In The US International Tax Reforms: Competition and Convergence, Pay-Offs and Policy Failures, Steve Shay explains and analyzes, for an international audience, the December 2017 changes in U.S. international tax law. Shay casts these changes not as “fundamental” reform, but rather as a headline domestic corporate tax rate cut coupled with an agglomeration of international revenue raisers and incentives. Overall, these changes largely represent a reshuffling of the deck (perhaps after scribbling furiously on several cards with Magic Marker), as well as a missed opportunity. Nowhere does the new law squarely address the taxation of foreign sellers into domestic markets—“the most important defect” in current international tax law, according to Shay.

Shay begins by deftly summarizing the political context of the December 2017 changes, with particular attention to the relative unimportance of international tax policy, writ large, compared to the budgetary machinations necessary to usher the bill through the reconciliation process. 

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January 4, 2019 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Hemel: The State-Charity Disparity Under The 2017 Tax Law

Daniel Hemel (Chicago), The State-Charity Disparity Under the 2017 Tax Law, 58 Wash. U. J.L. & Pol'y ___ (2019):

Since December 2017, several states have enacted laws granting state tax credits for charitable contributions that go toward public education or public health. One purpose of these laws is to allow individuals to claim federal charitable contribution deductions for payments that simultaneously serve to reduce those individuals’ state tax liabilities and to support programs that state governments would otherwise fund. The strategy adopted by these states — if effective — would mitigate the impact of the $10,000 cap on individual state and local tax deductions imposed by the December 2017 tax law. The U.S. Treasury Department and the Internal Revenue Service (“IRS”) have proposed, but not yet finalized, regulations aimed at shutting down that strategy.

The ongoing debate regarding state charitable credit programs and the proposed Treasury regulations raise a number of interesting legal questions — some of which may be addressed at subsequent stages of the rulemaking process, others of which will likely be resolved by litigation. Rather than trying to answer any of those questions, this Essay — an edited transcript of remarks at the Washington University Journal of Law & Policy-Missouri Department of Revenue 2018 Symposium on State & Local Taxation — focuses instead on a separate, though related, question, a question that is implicated by the charitable credit debate but that will linger long after any litigation is resolved. That is: Why should federal tax law allow more favorable treatment to charitable contributions than to state and local tax payments? What are the essential differences between non-governmental charities and sub-national governments, or between contributions and tax payments, that justify this lack of parity?

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January 4, 2019 in Scholarship, Tax | Permalink | Comments (1)

Thursday, January 3, 2019

Clausing: Open — The Progressive Case For Free Trade, Immigration, And Global Capital

OpenKimberly Clausing (Reed College), The Progressive Case for Free Trade, Immigration, and Global Capital (Harvard University Press 2019):

With the winds of trade war blowing as they have not done in decades, and Left and Right flirting with protectionism, a leading economist forcefully shows how a free and open economy is still the best way to advance the interests of working Americans.

Globalization has a bad name. Critics on the left have long attacked it for exploiting the poor and undermining labor. Today, the Right challenges globalization for tilting the field against advanced economies. Kimberly Clausing faces down the critics from both sides, demonstrating in this vivid and compelling account that open economies are a force for good, not least in helping the most vulnerable.

A leading authority on corporate taxation and an advocate of a more equal economy, Clausing agrees that Americans, especially those with middle and lower incomes, face stark economic challenges. But these problems do not require us to retreat from the global economy. On the contrary, she shows, an open economy overwhelmingly helps. International trade makes countries richer, raises living standards, benefits consumers, and brings nations together. Global capital mobility helps both borrowers and lenders. International business improves efficiency and fosters innovation. And immigration remains one of America’s greatest strengths, as newcomers play an essential role in economic growth, innovation, and entrepreneurship. Closing the door to the benefits of an open economy would cause untold damage. Instead, Clausing outlines a progressive agenda to manage globalization more effectively, presenting strategies to equip workers for a modern economy, improve tax policy, and establish a better partnership between labor and the business community.

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January 3, 2019 in Book Club, Scholarship, Tax | Permalink | Comments (1)