Weekly SSRN Tax Article Review And Roundup: Speck Reviews Chaim's The Common Ownership Tax Strategy

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Danielle A. Chaim (Bar-Ilan; Google Scholar), The Common Ownership Tax Strategy, 101 Wash. U. L. Rev. 501 (2023).

Over the last decade-and-a-half, economists and corporate law scholars have unpacked the consequences of index-based mutual funds’ burgeoning ownership of equity in public companies. In The Common Ownership Tax Strategy, Danielle Chaim synthesizes and extends this literature as it applies to taxation. Chaim argues that mutual funds’ substantial stakes in broad swaths of companies—“diversified-yet-concentrated” ownership—facilitate a tax avoidance strategy that Chaim terms “corporate flooding.” Essentially, firms can simultaneously increase their overall tax avoidance, overwhelming the IRS’s enforcement capacities and driving down the odds that the IRS will detect abusive practices by any one firm. This rising tide of tax avoidance raises all mutual funds’ boats, and the costs are distributional: fund managers and their moderate- to upper-income clientele benefit.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews The TCJA: Sweeping Changes And An Uncertain Legacy By Gale, Hoopes & Pomerleau

This week, Sloan Speck (Colorado; Google Scholar) reviews William G. Gale (Brookings Institution; Google Scholar), Jeffrey L. Hoopes (North Carolina; Google Scholar) & Kyle Pomerleau (American Enterprise Institute), Sweeping Changes and an Uncertain Legacy: The Tax Cuts and Jobs Act of 2017, 39 J. Econ. Persp. __ (2024).

Soon after the President signed the Tax Cuts and Jobs Act in December 2017, the political push began to extend the law’s various time-limited individual and business tax provisions. This push for permanence promises to become more pressing as the 2024 election cycle unfolds—including partisan preparations to deploy the budget reconciliation process under potential majority control of both houses of Congress. The stakes are high: up to $4.6 trillion in foregone revenue, according to estimates by the Congressional Budget Office, as well as the shape and trajectory of the federal income tax system for years to come. A full understanding of these stakes requires context about the TCJA’s past, present, and possible futures. 

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Elkins's Rules, Standards, And The Value Of Certainty In Tax Law

This week, Sloan Speck (Colorado; Google Scholar) reviews David Elkins (Netanya; Google Scholar), Rules, Standards, and the Value of Certainty in Tax Law.

In Rules, Standards, and the Value of Certainty in Tax Law, David Elkins brings a fresh and engaging perspective to well-traveled debates about the choice between rules and standards in taxation. Elkins juxtaposes the doctrinal significance of standard-based antiabuse doctrines in U.S. tax law with the IRS’s relatively low audit rates for self-reported tax returns. This wedge, Elkins argues, has a lottery-like effect. The “inherent indeterminacy” of standard-based antiabuse doctrines allows taxpayers to “safely ignore them when taking positions” (18). If those positions are questioned by the IRS, the after-the-fact assertion of antiabuse doctrines effectively applies an alternative body of law to the unlucky (or unfortunate) taxpayers selected for audit, which presents moral, equity, and efficiency concerns. As a result, Elkins concludes that, “in general, standards have no role to play in the tax system, even simply as a complement to a rules-based structure” (id.). Elkins’s thesis challenges a long arc in tax law and scholarship that sees a meaningful—and perhaps essential—role for antiabuse doctrines in tax law.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Compliance And Anti-Abuse Reform To Tax The Rich By Fox, Liscow & Soled

This week, Sloan Speck (Colorado; Google Scholar)reviews new works by Edward G. Fox (Michigan; Google Scholar) & Zachary Liscow (Yale; Google Scholar), No More Tax-Free Lunch for Billionaires: Closing the Borrowing Loophole, 182 Tax Notes Fed. 647 (Jan. 22, 2024), and Jay A. Soled (Rutgers; Google Scholar), The Gift Tax and the Tax Gap, 182 Tax Notes Fed. 1047 (Feb. 5, 2024).

In the literature on taxing high-income and high-wealth individuals, loophole-closing and compliance loom large in enforcing equity across the tax system. And, under the Biden Administration, Congress and Treasury have given significant attention to enforcement and anti-avoidance initiatives aimed at the highest earners. In recent articles, Ed Fox and Zach Liscow detail the contours and stakes of closing the “borrowing loophole” for taxpayers with ultra-high net worth, and Jay Soled proposes enhanced information reporting—and associated penalties—for gifts to close the tax gap with respect to the federal gift tax. Taken together, these articles raise important questions about, first, which taxpayers matter when we talk about taxing the rich, and, second, how we should think about the intersections between tax compliance and anti-avoidance efforts, especially in the context of “simple reform measures” (Soled, 1047) that target current infirmities.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Circular Partnerships By Sanchirico & Shuldiner

This week, Sloan Speck (Colorado; Google Scholar) reviews Chris William Sanchirico (Penn; Google Scholar) & Reed Shuldiner (Penn), Circular Partnerships.

The current crisis in partnership tax enforcement is simultaneously well-established and difficult to define. Notwithstanding new tools (such as the centralized partnership audit regime), new funding (principally from the Inflation Reduction Act), and new initiatives (to audit certain very large partnerships using—as is au courant—artificial intelligence), the precise problems with tax partnerships, as deployed by sophisticated taxpayers and their advisors, remain relatively inchoate. In Circular Partnerships, Chris William Sanchirico and Reed Shuldiner deconstruct the emergent political and scholarly narrative surrounding tiered partnership structures with hook interests that may recursively cycle income earned by a parent partnership back through a subsidiary, possibly without end. Sanchirico and Shuldiner conclude that the problem of “trapped income” in partnership cycles, while difficult to untangle, almost certainly is overstated in current debates. Furthermore, Sanchirico and Shuldiner identify compliance issues inherent in circular partnerships, as well as opportunities for reform to more effectively target income that passes through partnership cycles.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Avi-Yonah's DSTs, Pillar One, And The Multilateral Tax Project

This week, Sloan Speck (Colorado; Google Scholar) reviews new works by Reuven Avi-Yonah (Michigan; Google Scholar) & Eran Lempert (Erdinast, Ben Nathan & Toledano, Israel), The Historical Origins and Current Prospects of the Multilateral Tax Convention, 15 World Tax J. 379 (2023).. 

Half of the BEPS 2.0 project stands on the precipice. As Reuven Avi-Yonah argues in a forthcoming article in Tax Notes, the multilateral convention to implement Pillar One is likely to fail. The United States must ratify the convention for it to take effect, and this outcome seems remote, given the United States’ historical behavior and current politics. Moreover, Canada threatens to end the OECD moratorium on digital services taxes (DSTs) in January 2024, and the United States may retaliate. The problem, however, isn’t clearly about DSTs, or trade wars, or Pillar One’s redistributive aims. Instead, as Avi-Yonah and Eran Lempert elaborate in a longer article in the World Tax Journal, the multilateral vehicle itself hinders the adoption of Pillar One.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Hemel's Phaseouts

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Daniel J. Hemel (NYU; Google Scholar), Phaseouts, 74 Tax L. Rev. __ (2024):

Since the transition from class tax to mass tax in the Second World War, the U.S. income tax system has applied income-based limitations to tax expenditures. In Phaseouts, Daniel Hemel explores why rational policymakers might prefer these benefits-specific limitations (which can be drafted as phaseouts or phase-ins, or as ceilings or floors) to “the more straightforward alternative” of an unrestricted benefit coupled with revenue-neutral rate adjustments across income levels (2). Phaseouts, of course, are legion in today’s Internal Revenue Code, and Hemel does his usual brilliant work in elucidating the contours and stakes of these pervasive provisions, even when deployed by a Congress less disinterested—and perhaps less rational—than one might prefer.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Claussen's Tax Intelligence

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Kathleen Claussen (Georgetown; Google Scholar), Tax Intelligence, 72 Duke L.J. Online 155 (2023).

The U.S. income tax system collects, alongside revenue, a vast trove of information about taxpayers’ assets, activities, and relationships. Kathleen Claussen, in a provocative essay, proposes that the federal government mobilize this wealth of tax information affirmatively to achieve foreign policy aims. Claussen differentiates her proposal from constructions of “tax policy as foreign policy,” such as those expertly explored by Ashley Deeks and Andrew Hayashi, by emphasizing “tax law for foreign policy” (165), in which tax reporting serves as intelligence gathering, and perhaps even explicitly as surveillance. Claussen situates her proposal within broader trends in foreign policy towards a “geoeconomics toolkit” of “unilateral economic tools” that align private actors with state-centric goals, and Claussen posits that tax may, in fact, help “normalize [this] otherwise exceptional toolkit” (160).

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews A Critical Evaluation Of The Qualified Small Business Stock Exclusion By Polsky & Yale

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Gregg D. Polsky (Georgia; Google Scholar) & Ethan Yale (Virginia; Google Scholar), A Critical Evaluation of the Qualified Small Business Stock Exclusion, 42 Va. Tax Rev. 353 (2023).

After 2017’s Tax Cuts and Jobs Act, some commentators predicted a renaissance in taxpayers’ use of the statutory exclusion for gain from qualified small business stock under § 1202. In 2015, Congress made permanent the provision’s 100 percent exclusion that emerged in the wake of the Great Recession, and the TCJA’s fourteen-point reduction in corporate rates heralded new benefits to bucking longstanding conventional wisdom that taxpayers should operate nonpublic companies as passthroughs. These predictions didn’t really come to pass, as Polsky and Yale observe in their magisterial exegesis of § 1202, A Critical Evaluation of the Qualified Small Business Stock Exclusion. 

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews U.S. International Tax Policy And Corporate America By Hanna & Wilson

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Christopher H. Hanna (SMU) & Cody A. Wilson (Gibson, Dunn & Crutcher, LLP), U.S. International Tax Policy and Corporate America, 48 J. Corp. L. 261 (2023).

Over the last decade, conversations about corporate tax reform in the United States have reflected a broad range of competing visions for cross-border business taxation. In U.S. International Tax Policy and Corporate America, Christopher Hanna and Cody Wilson argue that the Tax Cuts and Jobs Act in 2017 and the Inflation Reduction Act in 2022—each significant legislative changes to U.S. international taxation—may foreshadow a third major shift. Hanna and Wilson speculate that this next step could yield “a worldwide no-deferral system at a low corporate tax rate.” Potentially more surprising: this new regime could garner support from “Corporate America,” which Hanna and Wilson define as U.S.-based publicly traded corporations.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Do Corporate Taxes Impede Mergers?

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Erin Henry (Arkansas; Google Scholar), Jennifer Luchs-Nuñez (Colorado State; Google Scholar) & Steven Utke (Connecticut; Google Scholar), Do Corporate Taxes Impede Merger and Acquisition Activity? Evidence from Private Corporations (Feb. 9, 2023)

The intuition that business income taxes affect the rate and volume of merger and acquisition activity has a certain theoretical—and anecdotal—appeal. The empirical challenges to validating this intuition are, however, legion. M&A implicates myriad tax benefits and detriments, firms’ abilities to monetize these tax benefits varies, and study design and data collection present significant hurdles. In a recent paper, Erin Henry, Jennifer Luchs-Nuñez, and Steven Utke employ an innovative natural experiment and proprietary IRS data to address taxes’ role in M&A involving closely held corporations. The authors show that entity-level tax cuts operate principally at the intensive margin, leading buyers to pay moderately lower prices for targets and their assets. Consistent with other research, the authors find little aggregate effect at the extensive margin—on the overall number of acquisitions.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Yin’s Textualism, Tax Legislative History, And Stanley Surrey

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by George K. Yin (Virginia), Textualism, the Role and Authoritativeness of Tax Legislative History, and Stanley Surrey, 86 Law & Contemp. Probs. __ (2023).

In Textualism, the Role and Authoritativeness of Tax Legislative History, and Stanley Surrey, George Yin uses Stanley Surrey’s writings to reflect on the edicts of new textualism as applied to tax statutes. Surrey, of course, is a foundational figure in postwar tax policy, and his lateral and longitudinal engagement, inside and outside of government, sheds light on virtually every iteration of tax legislation from the late 1930s through the early 1980s—just shy of the judiciary’s textualist turn, as led by Antonin Scalia. Although Yin’s speculations are emphatically counterfactual, his project ably bridges two eras in legal history, shedding light on what changed—and perhaps what was lost—as the last vestiges of the New Deal order yielded to the rise of modern conservatism.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews New Work On Form And Substance In Tax Cases By Gillis & Grewal

This week, Sloan Speck (Colorado; Google Scholar) reviews new work by Rory Gillis (Western; Google Scholar), The Limits of Legal Substance: Tax Avoidance and Equitable Remedies After Collins Family Trust, 66 Can. Bus. L.J. __ (2022), and Amandeep S. Grewal (Iowa; Google Scholar), When Is the Economic Substance Doctrine “Relevant” to a Transaction? (Aug. 17, 2022).

According to a well-traveled adage among tax experts, United States tax law looks to economic substance over legal form—except when it doesn’t. In new work, Rory Gillis and Andy Grewal explore the complex dynamics between form and substance in two very different contexts: a recent Supreme Court of Canada decision that denies equitable remedies to tax-motivated transactions gone wrong, and the statutory interpretation issues that may arise from the IRS’s recent relaxation of internal procedures with respect to audit-level application of the economic substance doctrine. Both Gillis and Grewal emphasize the fundamental challenges faced by courts in implementing appropriate understandings of form and substance in taxation.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Doran’s Executive Compensation And Corporate Governance

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Michael Doran (Virginia; Google Scholar), Executive Compensation and Corporate Governance (Aug. 25, 2022).

Some say that the definition of insanity is doing the same thing repeatedly and expecting different results. In Executive Compensation and Corporate Governance, Michael Doran illustrates Congress’s tendency to meet this definition, especially in policy areas that implicate big business. Doran starts from the observation that, while significant empirical uncertainty exists as to whether lavish executive compensation reveals a breakdown of corporate governance, Congress’s extensive deployments of tax policy to curtail executive pay generally have fared poorly. Indeed, Doran argues that these legislative efforts, which span four decades, may have harmed shareholders and workers—the precise constituencies that Congress intended to protect.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Klein’s The Corporate Tax Paradox

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Israel Klein (Ariel University; Google Scholar), The Corporate Tax Paradox, 42 Va. Tax Rev. __ (2022).

In The Corporate Tax Paradox, Israel Klein presents (and offers a resolution to) a puzzle: After the IRS began requiring certain corporate taxpayers to report uncertain tax positions in 2010, the net dollar value of these positions increased annually for large public companies, growing from $162 billion in 2013 to $241 billion in 2020. If the IRS has quantitative and qualitative information on these uncertain tax positions, why doesn’t it audit each and every one of them to conclusion? Alternatively, why do large public companies continue to report these uncertain (and, in Klein’s terminology, unsustainable) positions, if they’re required to be disclosed to both shareholders and the IRS?

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Galler's Tax Opinion Policies And Procedures

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Linda Galler (Hofstra), Tax Opinion Policies and Procedures, 75 Tax Law. 443 (2022).

In Tax Opinion Policies and Procedures, Linda Galler analyzes and discusses the results of a 2021 survey of tax professionals’ approaches to opinion practice. In this fourteen-question survey, the American College of Tax Counsel (ACTC) asked its limited membership of lawyers and accountants about their firms’ procedures for reviewing and issuing opinions. Although the ACTC survey’s results are more impressionistic than comprehensive, Galler notes that the survey “provides an excellent starting point” for establishing the current landscape of tax opinion practice (473). After detailing the form and function of tax opinions, as well as ethical considerations in opinion practice, Galler highlights the ACTC survey’s critical results and offers various recommendations for firms and future study.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Blue J's Use Of Machine Learning To Predict Tax Litigation Results

This week, Sloan Speck (Colorado; Google Scholar) reviews new works by: 

• Benjamin Alarie (Toronto; Google Scholar) & Stefanie Di Giandomenico (Blue J Legal), Timing Is Everything: The Step Transaction Doctrine in GSS Holdings, 174 Tax Notes Fed. 1849 (Mar. 28, 2022)
• Benjamin Alarie (Toronto; Google Scholar) & Christopher Yan (Blue J Legal), Using Machine Learning to Evaluate the Existence of a Trade or Business: Olsen, 174 Tax Notes Fed. 1231 (Feb. 28, 2022)
• Benjamin Alarie (Toronto; Google Scholar) & Bettina Xue Griffin (Blue J Legal), Using Machine Learning to Crack the Tax Code, 174 Tax Notes Fed. 661 (Jan. 31, 2022)

Since 2014, Ben Alarie and his team at Blue J Legal have worked to apply machine learning (ML) principles to the process of tax advising (among other areas of law). Through a series of articles in Tax Notes Federal, Alarie and his coauthors provide a window into their artificial intelligence prediction engine. Their commentary is crucial: big data has arrived in legal and accounting practice, and some degree of transparency may improve tax equity and administration. In addition, these articles yield important and interesting insights about various doctrines in tax law.

In winter 2022, Alarie and his coauthors gave us three short articles: a general review of ML’s potential in tax practice and two applications of Alarie’s ML model to existing controversies.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Parsons’ Tax’s Digital Labor Dilemma

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Amanda Parsons (Columbia), Tax’s Digital Labor Dilemma, 71 Duke L.J. __ (2022).

In Tax’s Digital Labor Dilemma, Amanda Parsons develops a compelling challenge to conventional frameworks for international tax reform by reconceptualizing traditional distinctions between consumers and workers in digital economy enterprises. Parsons generally agrees with the critics of the 1920s compromise: the historical allocation of taxing authority between source and residence countries fails in the world of today. Under longstanding international tax norms, market countries—in which an enterprise’s goods and services are consumed or used—receive little consideration and less tax revenue. Parsons, among many others, sees justice in transferring some measure of taxing authority to these market countries. The sticky question—and where Parsons shows her careful creativity—is how policymakers should address this shared goal.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Automated Government For Vulnerable Citizens — Intermediating Rights

This week, Sloan Speck (Colorado; Google Scholar) reviews a new paper by Sofia Ranchordás (University of Groningen) & Luisa Scarcella (University of Antwerp), Automated Government for Vulnerable Citizens: Intermediating Rights, 30 Wm. & Mary Bill Rts. J. ___ (2021).

In Automated Government for Vulnerable Citizens, Sofia Ranchordás and Luisa Scarcella survey the landscape of digital governmental services, concluding that, while these automated mechanisms may enhance convenience and efficiency for some, they inflict differential effects on vulnerable populations and often entrench existing disparities. Prominent in the authors’ analysis (and in governments’ digital transitions) is tax compliance: in particular, electronic return preparation and algorithmic enforcement. Ranchordás and Scarcella conclude by offering various prescriptions to ameliorate the digital revolution’s disproportionate harms and promote humanity—literal and metaphorical—in public administration.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Two New Papers By Kleiman And Widiss

This week, Sloan Speck (Colorado; Google Scholar) reviews new works by Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Revolutionizing Redistribution: Tax Credits and the American Rescue Plan, 131 Yale L.J. F. __ (2021) and Deborah A. Widiss (Indiana; Google Scholar), Chosen Family, Care, and the Workplace, 131 Yale L.J. F. __ (2021).

Historically, the American legal system has struggled to adequately recognize and accommodate individuals’ lived experiences of family and care relationships. Over the last two decades, however, there has been a veritable revolution in legislative, regulatory, and judicial positions regarding “nontraditional” family structures. In many ways, public and private responses to the COVID-19 pandemic accelerated and intensified this shift. In separate essays, Ariel Kleiman and Deborah Widiss explore and evaluate pandemic-era government actions in taxation and workplace leave (respectively) that implicate families and care, situating these most recent changes within larger narratives of social provisioning and asking how these changes should influence future policy. Both authors are optimistic but cautionary: we collectively face a tremendous opportunity to advance and cement more inclusive understandings of family and care. How this opportunity unfolds may establish the American welfare state’s trajectory for years to come.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews The Inequity Of Informal Guidance By Blank & Osofsky

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Joshua Blank (UC-Irvine; Google Scholar) and Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. __ (2022).

In The Inequity of Informal Guidance, Josh Blank and Leigh Osofsky recontextualize the IRS’s use of informal guidance as a social justice issue. Adding to the substantial literature on subregulatory guidance in tax law—as well as their own deeply researched work on simplexity, automated legal guidance, and the tax legislative process—Blank and Osofsky highlight the systemic inequities and access to justice issues created by what they describe as a “two-tiered system of [tax] law.” Through agents such as tax attorneys and other advisors, certain groups benefit from planning and structuring mediated by traditional bodies of formal authorities, which offer robust protections should any controversy arise. Others are left with informal guidance: IRS publications, FAQs, and online widgets that often provide a misleading gloss of the real stuff and always give limited support in audit or litigation. To remedy this systemic inequity, Blank and Osofsky propose a slate of reforms addressing the treatment of both formal and informal law.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Lawsky's Teaching Algorithms And Algorithms For Teaching

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Sarah Lawsky (Northwestern; Google Scholar), Teaching Algorithms and Algorithms for Teaching, 24 Fla. Tax Rev. ___ (2021).

In Teaching Algorithms and Algorithms for Teaching, Sarah Lawsky identifies and elaborates what she denotes as the “algorithm method” for teaching tax. A corollary or companion to the problem method, the algorithm method unpacks complex statutory language by “ask[ing] students to work through unambiguous problems that have right and wrong answers.” Although Lawsky’s terminology is novel and useful, she describes the algorithm method as fundamentally “unremarkable, uncontroversial, and common” in tax instruction. Her article carefully connects the algorithm method to in- and out-of-class learning in the context of “flipped” classrooms and her outstanding exercise-generating website, Lawsky’s Practice Problems. This context illustrates the importance of delineating and deploying the algorithm method in legal pedagogy.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mazur's Can Blockchain Revolutionize Tax Administration?

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Orly Mazur (SMU; Google Scholar), Can Blockchain Revolutionize Tax Administration?:

In Can Blockchain Revolutionize Tax Administration, Orly Mazur provides an excellent addition to the burgeoning academic commentary on blockchain technologies in tax administration. And Mazur is cautiously evangelical in her belief that blockchain offers real benefits compared to the current U.S. tax system. The stakes, for Mazur, are significant: there’s real promise that blockchain could bolster or unlock enforcement mechanisms that could help close the net tax gap. Mazur ably explores the potential benefits—and associated drawbacks—of deploying blockchain in the tax space.

Blockchain technology generally refers to data storage using a unified, secure, distributed ledger. Importantly, changes to the ledger do not rely on a trusted intermediary for approval. Instead, changes arise through an a priori consensus mechanism involving the various parties, known as nodes, that keep copies of the ledger. The term “blockchain” directly refers to a particular method for ensuring data integrity, in which a ledger is appended using time-stamped blocks of data that begin with a unique verification code (or hash) based on the prior block of data. 

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Cauble's Questions The IRS Will Not Answer

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Emily Cauble (DePaul), Questions the IRS Will Not Answer, 97 Ind. L.J. ___ (2021).

In Questions the IRS Will Not Answer, Emily Cauble provides an important analysis and critique of the Internal Revenue Service’s “no-rule” areas—topics on which the IRS will not, or ordinarily will not, issue private letter rulings. Cauble focuses on fact-intensive issues that fall into this prohibited space. Her motivating examples involve the classification of gifts under the Duberstein standard, the boundary between nondeductible personal outlays and deductible medical expenses under § 213, and intent-oriented aspects of the related party antiabuse rule for like-kind exchanges under § 1031(f). Fundamentally, however, Cauble’s approach is normative: she searches for, then evaluates, potential rationales for administrative reticence in giving private guidance in situations where the facts are likely determinative.

Cauble presents—then largely rejects—eight reasons that might justify an administrative refusal to rule on fact-sensitive issues.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Repetti's Equity And Efficiency In A Progressive Income Tax

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by James R. Repetti (Boston College; Google Scholar), The Appropriate Roles for Equity and Efficiency in a Progressive Individual Income Tax, 23 Fla. Tax Rev. 522 (2020).

In The Appropriate Roles for Equity and Efficiency in a Progressive Income Tax, James Repetti offers a magisterial reappraisal of the relationship between equity and efficiency in U.S. tax policy. Repetti connects the decline in statutory income tax rates since the 1950s to a rising “focus on efficiency” at the expense of distributional concerns. For Repetti, this shift occurred, in part, because policymakers felt that efficiency offered “certainty” and “quantifiable” gains, while equity considerations seemed “intangible and unmeasurable.” These intuitions are illusory, however, as Repetti demonstrates through a comprehensive review of empirical literature in economics and other social sciences, including connections to Repetti’s prior work on taxation and democracy. Repetti joins other contemporary voices in advocating for a revival of traditional equity norms in policy debates—and perhaps even for a new preeminence of equality-oriented equity in the near term.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Nadler's Tax-Motivated Trading And Price Efficiency

This week, Sloan Speck (Colorado) reviews a new work by Hillel Nadler (Program on International Financial Systems), The Only Sure Alpha: Tax-Motivated Trading and Price Efficiency (Aug. 12, 2020).

In The Only Sure Alpha: Tax-Motivated Trading and Price Efficiency, Hillel Nadler examines tax-motived trading in financial instruments from a novel and compelling perspective: the ways in which tax rules affect the process of price discovery in otherwise well-functioning markets. Nadler argues that tax considerations may drive “noisy trading”—trading that moves prices away from an equilibrium based on non-tax information. Although markets (eventually) should resolve these deviations of price from fundamental value, Nadler notes that the noise itself may have significant and detrimental systemic effects. Transitions to equilibrium matter, and taxation may cause distortions that leave financial markets in a constant state of low-level flux.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Brunson's Georgia, The IRS, And The KKK

This week, Sloan Speck (Colorado) reviews a new work by Samuel D. Brunson (Loyola Chicago), Addressing Hate: Georgia, the IRS, and the Ku Klux Klan.

The Ku Klux Klan’s second iteration began at a time of transformation for the American fiscal state. As economists and politicians reoriented the federal tax system towards progressive income taxation, white ethnonationalists consolidated and organized around false and pernicious understandings of the historic hate group. In 1915, a new Klan emerged, claiming as many as four million members at its peak in 1924. As Sam Brunson argues in his important new article, Addressing Hate: Georgia, the IRS, and the Ku Klux Klan, the Bureau of Internal Revenue and the State of Georgia each played crucial roles in both facilitating the rise of the second Klan and hastening its formal demise in the mid-1940s. Brunson’s valuable work resonates in our current political climate, as contemporary supremacist groups claim privileges under state corporate law and the Internal Revenue Code. How we address these groups today should be informed by the important history that Brunson uncovers.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Business Loss Deductions And The Pandemic

This week, Sloan Speck (Colorado) reviews new works by Steven Hodaszy (Robert Morris), Why the Antipathy Toward Business Loss Deductions Is Misguided, 167 Tax Notes Fed. 1863 (Jun. 15, 2020), and Clint Wallace (South Carolina), The Troubling Case of the Unlimited Pass-Through Deduction, 87 U. Chi. L. Rev. Online (2020).

On July 27, Senate Republicans released their proposal for the next pre-election round of pandemic stimulus legislation. The HEALS Act, which comprises eight smaller bills, represents the Republican response to the House Democrats’ HEROES Act, which passed the lower chamber in mid-May. The differences between these two legislative projects are legion. One such difference involves the “excess business loss” rules in § 461(l)—a matter of particular concern to certain taxpayers, lobbyists, affinity groups, and their elected representatives, as well as recent scholarly work by Steven Hodaszy and Clint Wallace.

The next two paragraphs offer a brief synopsis of § 461(l), omitting most of the social and political context but including many of the eye-glazing technical bits. In December 2017, the legislation known as the Tax Cuts and Jobs Act added § 461(l) to the Internal Revenue Code, presumably as a revenue offset for a miniscule portion of the law’s mammoth tax cuts. As enacted, § 461(l) disallowed certain single-year business losses that exceeded $250,000 or $500,000 for single individuals and joint filers, respectively. This limitation applied after the passive activity loss rules in § 469 and the at-risk rules in § 465, and any excess loss was rolled into subsequent years’ net operating loss carryforwards under § 172, as modified by the TCJA. Two items of note: this version of § 461(l) applied to a relatively small number of relatively well-off taxpayers, and a number of commentators interpreted § 461(l) as targeting the real estate sector.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Gillis's Carbon Tax Shifts And Revenue-Neutrality

This week, Sloan Speck (Colorado) reviews a new work by Rory Gillis (Toronto), Carbon Tax Shifts and the Revenue-Neutrality Dilemma, 23 Fla. Tax Rev. 293 (2019).

In Carbon Tax Shifts and the Revenue-Neutrality Dilemma, Rory Gillis deconstructs the concept of revenue neutrality as applied to Pigouvian carbon taxes. These carbon taxes are, of course, price instruments, and their behavioral effects—the raison d’être of the taxing scheme—generally don’t depend on the specific use of any funds generated. But, as Gillis notes, the political viability of these carbon taxes often hinges on (typically vague) promises of “revenue neutrality,” which means (somewhat naïvely) that every dollar raised by a carbon tax will be offset by one dollar of tax cuts elsewhere. Gillis challenges this “standard definition” as “conceptually unclear,” then distinguishes two competing understandings of revenue neutrality.

In Gillis’s terms, “backwards-looking” revenue neutrality adheres to an enactment-year revenue baseline and effectively straightjackets future revenue increases. By contrast, “sideways-looking” revenue neutrality looks to a hypothetical—and frequently unknowable—current-year baseline calculated as if the carbon tax had never been promulgated. 

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Hayashi's Countercyclical Property Taxes

This week, Sloan Speck (Colorado) reviews a new work by Andrew T. Hayashi (Virginia), Countercyclical Property Taxes, Va. L. & Econ. Res. Paper No. 2020-04.

In Countercyclical Property Taxes, Andrew Hayashi argues that residential real property taxes have important—and counterintuitive—macroeconomic implications during recessions and subsequent recoveries. Although policymakers often tout property taxes as stable revenue sources when the economy stalls, Hayashi lucidly outlines how these tax instruments amplify both household risk and community risk by pressuring homeowners’ discretionary spending. As Hayashi highlights, the design features of property taxes that generate revenue stability are the very same elements that shift risk from government units to households and communities. For this reason, Hayashi suggests taking a fresh and more nuanced look at property tax relief during downturns, with an eye towards fairness and equity in addition to revenue.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Reversing The Fortunes Of Active Funds

This week, Sloan Speck (Colorado) reviews a new work by Adi Libson (Bar-Ilan) & Gideon Parchomovsky (Pennsylvania), Reversing the Fortunes of Active Funds (2020).

In Reversing the Fortunes of Active Funds, Adi Libson and Gideon Parchomovsky propose a novel, tax-oriented solution to a well-established and important problem in the literature on corporate governance: the rise of “passive” investment funds as substantial shareholders in publicly traded companies. Libson and Parchomovsky argue that these passive funds engage in limited oversight with respect to their massive stock holdings. Downward cost pressure discourages informed or engaged voting with one’s hands, and slavish fidelity to benchmark indices precludes voting with one’s feet. The result is that passive funds (and many retail investors, and perhaps society as a whole) free-ride on active funds’ efforts to monitor management. For Libson and Parchomovsky, the answer is a Pigouvian subsidy, administered through the income tax system, to these active funds—the reversal of fortune referenced in their article’s title.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mehrotra & Bayer's The Promise And Limits Of Fundamental Tax Reform

This week, Sloan Speck (Colorado) reviews a new work by Ajay K. Mehrotra (American Bar Foundation; Northwestern) & Dominic Bayer (J.D. 2020, Northwestern), The Promise and Limits of Fundamental Tax Reform: Contrasting the 1986 Tax Reform Act with the 2017 Tax Cuts and Jobs Act, 53 U.C. Davis L. Rev. Online 93 (2019).

In The Promise and Limits of Fundamental Tax Reform, Ajay Mehrotra and Dominic Bayer illuminate the possible future of the 2017 legislation known as the Tax Cuts and Jobs Act by comparing the law with the Tax Reform Act of 1986. Mehrotra and Bayer establish the political and policy roots of the 1986 Act, then trace the law’s piecemeal erosion over the next decade. Using this template, Mehrotra and Bayer conclude that the 2017 Act seems likely to unravel along similar lines.

Mehrotra and Bayer’s rigorous and informed discussion of the 1986 and 2017 Acts is a significant achievement. As the authors note, the press and politicians have connected these very different legislative initiatives in the popular imagination. Indeed, this juxtaposition might be the most bipartisan aspect of the more recent law: conservatives have trumpeted the 2017 Act as the spiritual successor to the 1986 Act, while liberals have condemned the 2017 Act as a betrayal of the fundamental principles embodied in the earlier legislation. Mehrotra and Bayer provide much-needed context and content to evaluate this category of claims.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Glogower & Kamin's The Progressivity Ratchet

This week, Sloan Speck (Colorado) reviews a new work by Ari D. Glogower (Ohio State) & David Kamin (NYU), The Progressivity Ratchet, 104 Minn. L. Rev. ___ (2020):

In The Progressivity Ratchet, Ari Glogower and David Kamin provide further reasons to dislike the headline business tax changes in the 2017 legislation commonly known as the Tax Cuts and Jobs Act, namely the “pass-through” deduction under § 199A and the general reduction in corporate tax rates to 21%. Glogower and Kamin argue that these poorly targeted tax preferences, coupled with private-sector tax gaming and political economy constraints, create the potential for what they term the “progressivity ratchet,” in which lawmakers cannot readily reverse revenue-losing tax preferences by raising nominal rates on high-earning taxpayers. To escape this predicament, Glogower and Kamin suggest restoring the relative penalty for operating in corporate solution, eliminating existing tax preferences, or better targeting those tax preferences that policymakers choose to keep.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Osofsky's Agency Legislative Fixes

This week, Sloan Speck (Colorado) reviews a new work by Leigh Osofsky (North Carolina), Agency Legislative Fixes, 105 Iowa L. Rev. __ (2020).

In Agency Legislative Fixes, Leigh Osofsky develops a framework for understanding and analyzing agency actions to correct technical and drafting errors in legislation. Osofsky motivates this framework primary through various examples from the December 2017 tax legislation known as the Tax Cuts and Jobs Act. In addition, Osofsky alludes to a number of other high-profile legislative mistakes in the Affordable Care Act, the Dodd-Frank Act, and elsewhere. Osofsky adeptly interweaves her tax-oriented story with academic work on legislation and administrative law, yielding a rich critique of Treasury’s current practices in handling gaps between Congress’s presumptive or purported intent and prevailing interpretations of statutory text, as enacted. Osofsky concludes by addressing several possible reforms, including an interesting proposal to adjust the revenue baseline in budget reconciliation to account for erroneous scores attributable to congressional mistakes.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Field's Tax Lawyers As Tax Insurance

This week, Sloan Speck (Colorado) reviews a new work by Heather Field (UC-Hastings), Tax Lawyers as Tax Insurance, 60 Wm. & Mary L. Rev. __ (2019).

In Tax Lawyers as Tax Insurance, Heather Field explores the issuance of tax legal opinions as a form of de facto insurance against the risks of an adverse tax determination by governmental authorities. Field moves beyond the conventional framing of tax opinions as “insurance” against penalties, instead casting opinion practice as providing “a limited and conditional indemnity” to clients by way of the opinion writer’s malpractice insurance. Field contrasts this informal insurance with the burgeoning market in formal tax insurance policies, giving particular attention to intersections and entanglements that complicate the broader question of how individuals and firms address tax-related risk. Field argues that thinking about tax opinions through the lens of insurance yields insights into the value and limitations of transactional lawyering, among other things.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Abramowicz & Blair-Stanek's Contractual Tax Reform

This week, Sloan Speck (Colorado) reviews a new work by Michael Abramowicz (George Washington) & Andrew Blair-Stanek (Maryland), Contractual Tax Reform, 61 Wm. & Mary L. Rev. ___ (2019).

In Contractual Tax Reform, Michael Abramowicz and Andrew Blair-Stanek develop an innovative proposal that would allow private intermediaries to offer alternative tax regimes to subsets of taxpayers. These intermediaries would target specific taxpayers with algorithms developed using artificial intelligence, and these taxpayers then would be able to opt into the particular alternative tax regime offered by the intermediary. The catch is that the overall tax revenue from the intermediary’s customers can’t be less than they would pay, in the aggregate, under the regular tax system. Assuming that internalities aren’t material, this arrangement is Pareto efficient: only taxpayers who prefer the alternative tax regime would choose the intermediary, and total tax revenue would not fall. Everyone’s better off, and no one’s worse off.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Pratt's Tax Deductions for Fertility Treatment Costs

This week, Sloan Speck (Colorado) reviews a new work by Katherine Pratt (Loyola—LA), The Curious State of Tax Deductions for Fertility Treatment Costs, 28 S. Cal. Rev. L. & Soc. Just. ___ (2019).

In The Curious Case of Tax Deductions for Fertility Treatment Costs, Katie Pratt elaborates the patchwork and unsatisfying treatment of assisted reproductive technologies (ARTs) under the current law governing deductions for medical expenses under § 213. Specifically, Pratt details recent court decisions in Magdalin, Longino, and Morrissey that severely circumscribe the scope of “medical care”—and thus the deductibility of related expenses—in the ART context. To some extent, Pratt’s argument illustrates the complications that flow from enacting a C- statute, then subjecting it to a variety of D+ interpretations. Hard facts may make bad law, but, at least in Magdalin and Morrissey, the facts aren’t the primary problem. Pratt appropriately concludes by proposing reasonable amendments to the statutory definition of “medical care” that would recognize the current landscape with regard to ARTs.

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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).

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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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Shaheen's Income Tax Treaty Aspects Of Nonincome Taxes

This week, Sloan Speck (Colorado) reviews a new work by Fadi Shaheen (Rutgers), Income Tax Treaty Aspects of Nonincome Taxes: The Importance of Residence, 71 Tax L. Rev. 583 (2018).

In Income Tax Treaty Aspects of Nonincome Taxes: The Importance of Residence, Fadi Shaheen argues that, in any transition from an income tax to a nonincome tax, a critical gating consideration is how that nonincome tax interplays with the concept of residence in bilateral tax treaties based on the U.S. and OECD models. In defining the scope of nonincome taxes, Shaheen lists the usual suspects—consumption and cash flow taxes such as VATs, the flat tax, and the DBCFT—as well as newer varieties, such as equalization and turnover taxes on digital transactions. One of Shaheen’s important insights is that a person’s tax residence, a primary criterion to claim treaty benefits, depends on the taxes to which that person is subject. For a newly introduced nonincome tax, the problem is larger than just whether the treaty applies to the tax instrument. Instead, the issue is that the nonincome tax may preclude persons in the relevant contracting state from claiming any treaty benefits at all. In this sense, nonincome taxes may trigger tax treaty Armageddon, rather than some milder form of dislocation that is cabined to the nonincome tax’s direct reach.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Cauble's Taxing Selling Partners

This week, Sloan Speck (Colorado) reviews a new work by Emily Cauble (DePaul), Taxing Selling Partners, 94 Wash. L. Rev. ___ (2019).

In Taxing Selling Partners, Emily Cauble ably details various shortcomings and inconsistencies in the taxation of sales of partnership interests, then proposes a concrete and clear remedy to these myriad problems. Specifically, Cauble examines four scenarios in which the sale of a partnership interest yields a tax result different from the sale of that partnership’s assets. Two of these scenarios draw on longstanding issues involving partner-partnership divergences in holding period and use, while the other two scenarios engage changes in law from December 2017. The first of these changes closes a loophole involving sales of partnership interests by non-U.S. persons—a fix that Cauble argues is incomplete. The other change limits the availability of excess business losses, though, as Cauble notes, not necessarily on transfers of partnership interests. To solve these problems, Cauble advocates aligning the tax consequences of sales of interests and assets by, more or less, looking through to assets when an interest is sold.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Haneman's The Home Mortgage Interest Deduction

This week, Sloan Speck (Colorado) reviews a new work by Victoria J. Haneman (Creighton), Retrenchment, Temporary-Effect Legislation, and the Home Mortgage Interest Deduction (2018).

In Retrenchment, Temporary-Effect Legislation, and the Home Mortgage Interest Deduction, Victoria Haneman assesses the tax legislation enacted in December 2017 as it relates to a favorite target of tax policy opprobrium, the home mortgage interest deduction (MID). Haneman argues that the 2017 changes that affected the MID are, at their core, regressive. For this purpose, the relevant provisions are the doubling of the standard deduction and the limitation of deductible mortgage interest on new loans to principal amounts of $750,000 instead of $1 million. (Presumably, one also could include the effective limitation of deductible mortgage interest on old loans to principal amounts of $1 million instead of $1.1 million.) Notwithstanding Haneman’s dim view of the 2017 changes, she sees brightness at the end of the tunnel: As enacted, these changes sunset after 2025, forcing legislators to reconsider the MID and perhaps repeal it wholesale. Although Haneman wisely doesn’t guarantee that dawn will bring an enlightened legislature, she sees value in opening a “window of opportunity” through which the rays of genuine tax reform could shine. Finally, Haneman proposes replacing the MID with a limited tax credit for homeownership based on the purchase price of a taxpayer’s home.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Konrad's The Market For Corporate Tax Avoidance Advice

This week, Sloan Speck (Colorado) reviews a new work by Kai A. Konrad (Max Planck Institute for Tax Law and Public Finance), Dynamics of the Market for Corporate Tax-Avoidance Advice (2018).

Kai Konrad’s outstanding paper, Dynamics of the Market for Corporate Tax-Avoidance Advice, advances a formal economic model that explores the interactions between private-sector experts and public administrators in the struggle over tax compliance. In broad brush, these interactions are familiar: first, expert tax advisors develop a new tax-avoidance technique, which they sell to clients. Then, other advisors learn of and copy the technique, and avoidance runs rampant. Finally, outraged legislators or regulators shut down the technique. Tax shelters are born in obscurity, enter a promiscuous adolescence, and die young—the James Deans of the Internal Revenue Code. One of Konrad’s principal innovations is to explicitly model the delay between the promulgation of a particular tax avoidance technique and its denouement through government intervention. For virtually all reasonable delays, Konrad’s model yields “a permanent innovation/regulation loop”—stable equilibria with cycles of private-sector tax avoidance (ranging from moderate to obscene) and public-sector crackdowns (which may absorb significant resources). Both periods impose potentially significant social costs, which reinforces how pernicious tax avoidance likely is.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Hasen's Rules, Standards And Detection

This week, Sloan Speck (Colorado) reviews a new work by David Hasen (Florida), Rules, Standards and Detection (2018).

David Hasen’s paper, Rules, Standards and Detection, develops a formal economic model to explore and quantify the interrelationship of detection with the choice between rules and standards. Hasen deploys his highly tractable model toward two principal ends. First, Hasen’s model reveals that compliance costs have severe effects on parties’ responsiveness to regulators’ increased efforts at detection. Hasen finds that, when compliance costs are high, enforcement plays second fiddle to adjustments to legal rules in terms of fostering good behavior. By contrast, when compliance costs are low, audit becomes a more potent factor in encouraging compliance. Second, Hasen elaborates an important qualification of his first point. Under a view of regulation as ameliorating negative externalities, low compliance costs imply that the social costs of noncompliance also are small. Although the magnitude of these costs depends on the specific facts at issue (and, in particular, on the relevant elasticities of supply and demand), these considerations temper the broader point that compliance dollars are best spent in low-cost situations.

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60 Tax Profs File Amicus Brief Urging Supreme Court To Overrule Quill v. North Dakota

Sixty tax law professors and economists filed an amicus brief at the Supreme Court Monday urging the Justices to overrule the Dormant Commerce Clause holding of Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which bars states from enforcing sales taxes against retailers who lack a "physical presence" in the state. From the brief:

In Quill Corp. v. North Dakota, the Court emphasized that its dormant Commerce Clause analysis was based on “structural concerns about the effect of state regulation on the national economy.” 504 U.S. 298, 312 (1992). The Court was especially concerned about the effect of taxation on the mail-order industry, and it believed that maintaining the physical presence rule would “foster[] investment by businesses and individuals.” Id. at 315-18. It also believed that its rule would reduce compliance costs for businesses and individuals engaged in commerce across state lines. See id. at 313 n.6. For those reasons, the Court reaffirmed the physical presence rule first announced in National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967).

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mehrotra's Taxation And The Modern Liberal State

This week, Sloan Speck (Colorado) reviews a new work by Ajay Mehrotra (American Bar Foundation; Northwestern), Fiscal Forearms: Taxation as the Lifeblood of the Modern Liberal State, in The Many Hands of the State: Theorizing the Complexities of Political Authority and Social Control (Kimberly Morgan & Ann Orloff eds., Cambridge University Press 2017).

Ajay Mehrotra’s forthcoming book chapter, Fiscal Forearms, serves as a meditation on, and an expansion of, the important ideas advanced in his 2013 monograph, Making the Modern American State. Mehrotra, like the larger edited volume in which his chapter falls, starts from Bourdieu’s metaphor of the state divided into spending and fiscal spheres: a “left hand” comprised of (in Bourdieu’s words) the “social workers . . . which are the trace, within the state, of the social struggles of the past,” and a “right hand” made up of the ministers and technocrats at the treasury, as well as the public and private banks that underwrite the state. Mehrotra develops this metaphor, describing fiscal administration as “the forearms of the body politic” and taxation itself as “the lifeblood of the modern state.” More critically, Mehrotra challenges the claim that social struggle leaves an imprint only on the spending side of the ledger, showing through historical examples that taxation—and especially income taxation—is a contested concept deployed to construct relationships between state and citizen and in service of societal change.

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Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Kitty Richards, An Expressive Theory of Tax, 27 Cornell J.L. & Pub. Pol’y ___ (2018).

In the early twentieth century, Joseph Schumpeter wrote that “[t]he spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history.” Following the money tells us more than just who has what; it yields insights into who we are, and what we want to be. Kitty Richard’s interesting and provocative article, An Expressive Theory of Tax, gives a framework for understanding these types of connections between tax law and society, as well as a number of examples “where what the tax code says is explicitly preferenced over what the code does.”

A significant accomplishment of Richards’s project is positive: thick description of “the values and desires that animate policy debates and legal opinions” in taxation. Richards analyzes the expressive aspects of public debates over the taxation of legal brothels in Nevada, the marriage penalties and bonuses doled out by the federal income tax, and the public policy exception for the deductibility of certain expenses. Furthermore, Richards claims that “cheap” talk of (frequently ineffective) incentives obscures the expressive inflection of debates over tax benefits for retirement savings, among other areas.

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