Paul L. Caron
Dean


Saturday, December 7, 2019

Harvard To Pay $50 Million Tax Due To Trump Tax Reform

Following up on my previous posts (links below):  Inside Higher Ed, $50 Million Tax Bill for Harvard:

Harvard 1Harvard University expects to pay $49.8 million in federal taxes as a result of the tax reform package passed in 2017.

Most of the tax bill, $37.7 million, comes from the Tax Cuts and Jobs Act’s new tax on net investment income -- the so-called endowment tax. The other $12.1 million is from a net investment income tax on operational revenues, unrelated business taxable income and excise taxes on executive compensation.

The nearly $50 million tax bill is still an estimate, Harvard said in its annual financial report for the fiscal year ending in June 2019, which the university released Thursday. The federal government hasn’t issued final guidance that would allow the exact amount of tax to be calculated, but accounting principles require Harvard to book expenses in the year they were incurred. ...

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December 7, 2019 in Tax, Tax News | Permalink | Comments (0)

ProPublica: How A Tax Break To Help The Poor Went To NBA Owner Dan Gilbert

ProPublica, How a Tax Break to Help the Poor Went to NBA Owner Dan Gilbert:

Pro PublicaAfter a lobbying effort, Dan Gilbert, billionaire founder of Quicken Loans, won special tax status for wealthy areas of downtown Detroit where he owns billions worth of property.

Billionaire Dan Gilbert has spent the last decade buying up buildings in downtown Detroit, amassing nearly 100 properties and so completely dominating the area, it’s known as Gilbertville. In the last few years, Gilbert, the 57-year-old founder of Quicken Loans and owner of the Cleveland Cavaliers, has also grown close to the Trump family.

Quicken gave $750,000 to Trump’s inaugural fund. Gilbert has built a relationship with Ivanka Trump, who appeared at one of his Detroit buildings in 2017 for a panel discussion with him. And, last year, he watched the midterm election returns at the White House with President Donald Trump himself, who has called Gilbert “a great friend.”

Gilbert’s cultivation of the Trump family appears to have paid off: Three swaths of downtown Detroit were selected as opportunity zones under the Trump tax law, extending a valuable tax break to Gilbert’s real estate empire.

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December 7, 2019 in Celebrity Tax Lore, Tax, Tax News | Permalink | Comments (0)

Friday, December 6, 2019

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Lawsky's Free Income Tax Problem Generator

Sarah Lawksy (Northwestern) has created a great free website that generates multiple-choice federal individual income tax practice problems in a variety of subject areas.  From the FAQ page:

Lawsky (2017)Q: What does this website do?
A: It generates multiple-choice federal individual income tax practice problems. The problems are a random selection of facts, names, and randomly (but thoughtfully) generated numbers about a range of basic tax topics. You can pick a particular topic, or you can have the website to pick both a topic and problem at random.

Q: Are the answers also random?
A: Mostly, no. The multiple-choice answers are based on mistakes people commonly make (though one random answer is usually thrown in there).

Q: What happens once I pick an answer?
A: If you pick a wrong answer, the website usually provides a substantive hint about what you did wrong. A right answer usually returns a full explanation. In many of the explanations of answers both right and wrong, there is a link to the relevant code section.

Q: Do the questions repeat?
A: Eventually--there are not an infinite number of problems--but there are a lot of different problems. Setting aside the numbers' changing, which doesn't necessarily provide conceptually different questions, different types of problems toggle a bunch of different facts and relationships between the numbers, all of which change the problem conceptually. For example, for like-kind exchanges, there are five different facts than can toggle (asset is personal use or business use, whether there is debt relief and whom that debt relief favors (someone who provides boot or not), etc.) and four different questions. For installment sales there are even more toggles; for unrestricted property as compensation, many fewer.

Q: What is this for?
A: Whatever you want. A professor can use to generate problems for teaching or to give students direct access to it; a student can use it to practice for tax class--whatever works for you. The website is free and is made available under a Creative Commons Attribution-Share Alike 4.0 license, which means, roughly, that you can share this or use it for any purpose, just so long as you give appropriate credit, distribute the material so other people can use it under the same terms, and don't create any additional restrictions.

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December 6, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Teaching | Permalink | Comments (0)

Thursday, December 5, 2019

Tax Prof Mildred Robinson, UVA's First Black Female Faculty Member, To Retire

Robinson

Professor Mildred Robinson Set To Retire:

Professor Mildred Robinson, a groundbreaking tax law instructor whose scholarship and community service have emphasized equity, will teach her last class at the University of Virginia School of Law at the end of this semester. She will retire this spring after almost 35 years on the faculty.

Robinson was UVA Law’s first African American female tenured professor. She was hired with tenure in 1985 from Florida State University.

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December 5, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Prof Moves, Tax Profs, Teaching | Permalink | Comments (0)

Wednesday, December 4, 2019

2L In Harvard Tax Clinic Argues Case In U.S. Court Of Appeals For The 7th Circuit

Harvard Law Today, Clinic Stories: Prepping for the U.S. Court of Appeals:

HarvardThrough Harvard Law School’s Federal Tax Clinic, students have the unique opportunity represent low-income taxpayers in disputes with the IRS, both before the IRS and in federal court. Working individually and in teams, they represent taxpayers involving examinations, administrative appeals collection matters, and cases before the United States Tax Court and federal district courts.

In this video, we follow Adeyemi “Yemi” Adediran ’21, a second year student in the Clinic, as he prepares to argue an appeal on behalf of a military veteran with PTSD in the United States Court of Appeals for the 7th Circuit, in Chicago. The veteran’s appeal to the Seventh Circuit centered on his eligibility for innocent spouse relief under the Internal Revenue Code. Over a three year period, the veteran’s wife embezzled $500K from the Appleton, Wisconsin Blood Bank—where she worked as a bookkeeper. She was arrested and sentenced to jail, but because the couple filed taxes jointly and embezzled money is taxable, they were both legally responsible for back taxes on the money.

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December 4, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Teaching | Permalink | Comments (0)

WSJ: Presidential Campaign Raises Stakes In Bloomberg v. IRS Tax Court Battle Over Disputed Software Deduction

Wall Street Journal, Bloomberg’s Firm Fights IRS in Court During White House Bid:

Bloomberg TaxMichael Bloomberg’s company is embroiled in a tax dispute with the government he wants to lead.

The case pits the Internal Revenue Service against Bloomberg LP over the financial-data company’s claim that it qualifies for a deduction for domestically produced software. The lawsuit in U.S. Tax Court centers on whether Bloomberg leases or licenses its flagship product as software to customers, which would allow it to get the deduction, or provides an online service, which wouldn’t.

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December 4, 2019 in New Cases, Tax, Tax News | Permalink | Comments (0)

Tuesday, December 3, 2019

Treasury Eases Minimum-Tax Burdens On U.S. Multinationals

IR-2019-194, Treasury, IRS Issue Final Regulations on New International Provision, the Base Erosion and Anti-Abuse Tax (Dec. 2, 2019)

IR-2019-193, Treasury, IRS Issue Final Regulations on the Foreign Tax Credit (Dec. 2, 2019)

Wall Street Journal, Treasury Eases Minimum-Tax Burdens on U.S. Multinationals:

U.S.-based multinationals will be less exposed to certain U.S. taxes after the Treasury Department issued new rules implementing two major pieces of the 2017 tax law.

The regulations, unveiled on Monday, will help ease the burden of two separate minimum taxes that were designed to put a floor under corporate tax collections. ...

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December 3, 2019 in IRS News, Tax, Tax News | Permalink | Comments (0)

Hemel: Preview Of Today's Supreme Court Oral Argument In Rodriguez Tax Refund Case

Daniel Hemel (Chicago), Argument Preview: Whose Refund Is It Anyway?:

Supreme Court (2018)Where’s my refund? Millions of Americans ask that question each spring as they await checks from the Internal Revenue Service for tax overpayments. The question takes on added significance if your refund exceeds $4 million and you are teetering on the edge of insolvency. This was the circumstance facing United Western Bank, whose eight-year wait for a $4 million refund gave rise to Rodriguez v. Federal Deposit Insurance Corp. On December 3, the Supreme Court will decide whether—and when—to bring that wait to an end. ...

[W]hat will the justices do? One possibility is that they will dismiss the case as improvidently granted (or “DIG it,” in Supreme Court speak). The reason for a DIG would be that the 10th Circuit’s decision doesn’t turn on federal common law at all, and so the question presented isn’t actually implicated. DIGs are disfavored, though, and the 10th Circuit may have said enough about Bob Richards to satisfy the justices that the federal-common-law issue is fair game. (The 10th Circuit noted that “[f]ederal common law … provides a framework for resolving this issue,” though it then added that federal common law directs it to start with the parties’ agreement, and it went on to interpret that agreement in light of Colorado law.)

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December 3, 2019 in New Cases, Tax, Tax News | Permalink | Comments (0)

Monday, December 2, 2019

NY Times: How Losing His Charity's Tax-Exempt Status Freed Jeffrey Epstein To Wildly Exaggerate His Philanthropy

Epstein

New York Times, Jeffrey Epstein’s Charity: An Image Boost Built on Deception:

Jeffrey Epstein’s foundation looked for all the world like a charitable powerhouse: On its websites and in its press releases, the foundation was described as a patron of hospitals, universities and film festivals, run by a global philanthropist.

The organization — known by various names, but usually called the J. Epstein Virgin Islands Foundation — wasn’t officially a charity for much of its existence, having lost its tax-exempt status in 2008.

But it worked to his advantage, helping improve the reputation of Mr. Epstein, a convicted sex offender.

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December 2, 2019 in Tax, Tax News | Permalink | Comments (1)

Sunday, December 1, 2019

How IRS Investigators Busted A Huge Online Child-Porn Site — And Why The IRS?

Wall Street Journal, How Investigators Busted a Huge Online Child-Porn Site:

Welcome to VideoThe call came in while two criminal investigators for the Internal Revenue Service sat at a Bangkok airport gate in July 2017, waiting for a flight.

A confidential source they knew from past investigations was offering a tip that a new website was selling child pornography in exchange for bitcoin. The website, the source said, appeared to have popped up in the wake of shutdowns of other dark-web marketplaces for illicit goods.

Investigator Chris Janczewski and his colleague, Tigran Gambaryan, who had been involved in previous probes involving bitcoin transactions, decided to dig in to the possible financial ramifications of the matter despite the fact that child pornography was outside the IRS’s usual bailiwick. But they quickly hit a logistical roadblock: Their office, like many others, blocked access to pornographic websites.

“This is uncharted territory for the IRS,” Mr. Janczewski said in an interview. “What do I do? Is there a special room that I am supposed to go into if I want to look at the website?” They turned for help to Department of Homeland Security investigators, since the agency had a history of dealing with child exploitation.

Within eight months the duo, along with the DHS agents and counterparts in the U.K. and South Korea, had traced the financial trail of the largest online marketplace for child pornography they had ever encountered, comprising some 250,000 different videos.

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December 1, 2019 in IRS News, Tax, Tax News | Permalink | Comments (2)

Saturday, November 30, 2019

U.S. May Retaliate On Monday Against French Digital Tax

Bloomberg, U.S. May Retaliate on French Digital Tax Monday After Probe:

The U.S. will announce on Dec. 2 what retaliatory action, if any, it will take in response to a digital tax France instituted this year that will hit large American tech companies.

President Donald Trump and France's Emmanuel Macron had agreed in August to try and negotiate a compromise, but a 90-day deadline for talks expired this week without a resolution.

In a statement Wednesday, the U.S. Trade Representative's office said it would proceed with the investigation and announce its findings on Monday. At that time, it "also will announce any proposed action in the investigation."

New York Times, Trump’s Tax Truce With France Expires, but the Path Ahead Remains Unclear:

A brief truce in what had been an escalating battle between the United States and France over taxing digital services has expired, but President Trump gave no indication this week whether he planned to return to his threats to impose new tariffs on imported wine and other French products as a result.

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November 30, 2019 in Tax, Tax News | Permalink | Comments (1)

12 EU States Reject Move To Expose Companies' Tax Avoidance

The Guardian, 12 EU States Reject Move to Expose Companies' Tax Avoidance:

EU Logo (2016)Twelve EU countries, including Ireland, have blocked a proposed new rule that would have forced multinational companies to reveal how much profit they make and how little tax they pay in each of the 28 member states.

The proposed directive was designed to shine a light on how some of the world’s biggest companies – such as Apple, Facebook and Google – avoid paying an estimated $500bn a year in taxes by shifting their profits from higher-tax countries such as the UK, France and Germany to zero-tax or low-tax jurisdictions including Ireland, Luxembourg and Malta. ...

Other countries that have set themselves up as low-tax environments helping to shelter the profits of the world’s biggest companies were also among those that voted against. They include Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary, and Croatia. Sweden also voted against the proposed rule. ...

France, Spain and the Netherlands were among those voting for the proposals. Germany abstained. The UK, which had been one of the biggest supporters of tougher measures to tackle multinational tax avoidance, did not vote. ...

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November 30, 2019 in Tax, Tax News | Permalink | Comments (0)

Friday, November 29, 2019

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Thursday, November 28, 2019

Turn Off Your Phone For Thanksgiving

New York Times op-ed:  Turn Off Your Phone for Thanksgiving, by David Leonhardt:

Power OffThis week, Americans will endure flight delays, traffic jams and other logistical miseries to spend time with family and friends. And when the holiday weekend is ending, many will lament that they don’t get to spend enough time with those relatives and friends.

But during the weekend itself, these same lamenters will spend a lot of time ignoring the people around them and distractedly staring into their phones. They will get a notification and disappear down a digital rabbit hole of Facebook posts, text messages and fantasy-football updates. They will monitor the comments on the photos they just posted, instead of engaging with the human beings in those photos.

Many of us have a complicated relationship with our phones. We enjoy them in the moment. Yet when we reflect on all the time we spend looking at a tiny screen, we feel lousy about it. We pine for a less addictive relationship with the online world.

So let me make a suggestion for this Thanksgiving weekend: Turn off your phone, and keep it off for a full 24 hours. I predict you’ll be surprised by how much you’ll like it.

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November 28, 2019 in Legal Ed News, Legal Education, Tax, Tax News | Permalink | Comments (1)

Wednesday, November 27, 2019

Most Wealth Taxation Is Voluntary; We Need To Make It Mandatory

Washington Post op-ed:  Most Wealth Taxation on the Rich Is Essentially Voluntary. That Must Change., by Jared Bernstein:

As a result of the Democratic primary, we’re having a robust debate about taxing wealth. The debate invokes tricky technical and legal issues, but it’s an overdue one: There are good reasons the United States needs to start taxing wealth.

You may think we already tax wealth, but that’s mostly not the case. As my colleagues at the Center on Budget and Policy Priorities, Chuck Marr, Samantha Jacoby and Kathleen Bryant, point out in an important new paper [Substantial Income of Wealthy Households Escapes Annual Taxation Or Enjoys Special Tax Breaks], for the very wealthy, taxes are essentially voluntary.

How can that be, when the rest of us have taxes withheld from our paychecks every few weeks, and then often pay more when we file our income taxes every April? Because wealth accumulation isn’t taxed unless you decide to sell the asset, and even then, it’s taxed at a favorable rate, compared with regular income.

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November 27, 2019 in Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (4)

WSJ: What Fewer Billionaires Could Mean For The Rest Of Us

Wall Street Journal, What Fewer Billionaires Could Mean for the Rest of Us:

WSJ 2What does it mean for economic growth if scientists and entrepreneurs have less incentive to amass fortunes greater than $1 billion?

Steep taxes on the ultra-wealthy are, for some, not a means to an end but an end itself. They see the very existence of extreme wealth as inimical to economic growth, middle-class prosperity and democracy. “Every billionaire is a policy failure,” goes one progressive meme.

Sen. Elizabeth Warren doesn’t go that far. Yet her tax plans are in the same spirit. Her wealth tax of up to 6% a year, coupled with several other levies, would serve to shrink the fortunes of many billionaires and multimillionaires. It would disincentivize the accumulation of fortunes above $1 billion much as a cigarette tax discourages smoking. (They are called “Pigovian” taxes, after the economist Arthur Pigou, who proposed using taxes to discourage undesirable behavior.) ...

But should they be taxed to the point that they are no longer billionaires? That’s a tougher case to make. In a 2016 book, economist Caroline Freund, now global director for trade at the World Bank, found that countries with a lot of billionaires per capita had higher incomes per capita. She also found a country’s share of the world’s billionaires, as compiled by Forbes, corresponded closely to its share of the world’s largest, most successful companies. While this doesn’t mean billionaires make an economy successful, it does show the two go hand in hand.

How a billionaire earns his or her fortune matters, of course. Some are “rent seekers,” meaning they skim off the productive efforts of others via corruption, royal prerogative or control of some valuable market or resource. ... Ms. Freund says countries with less self-made and more inherited wealth do seem to grow more slowly. ...

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November 27, 2019 in Tax, Tax News | Permalink | Comments (1)

Claims That Taxes On The Rich Will Slow Economic Growth Are Fundamentally Flawed

Josh Bivens (Economic Policy Institute), Analyses Claiming That Taxes On Millionaires and Billionaires Will Slow Economic Growth Are Fundamentally Flawed:

EPIIn recent weeks, a number of policy analyses [by the Penn Wharton Budget Model and the Tax Foundation] of progressive economic policies—a surtax on high-incomes, a wealth tax, and Social Security expansion—have claimed these policies would damage economic growth. Policymakers should give these analyses very little weight in debates about these issues, for a number of reasons.

First, and most important, is the fact that all of these analyses are grounded in an economic view of the world that sees growth as constrained by the economy’s productive capacity (or the supply side of the economy) and not by the spending of households, businesses and government (the economy’s demand side). These estimates have other problems too—they are not even particularly convincing supply-side estimates and even if the economy’s growth really was constrained by supply, these estimates would still be misleading about the effects of these policies on welfare. But the biggest reason why policymakers should give these analyses zero weight is because they assume that growth is almost never demand-constrained. ...

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November 27, 2019 in Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (0)

Tuesday, November 26, 2019

NY Times: Democratic Presidential Tax Plans Would Hit Blue States The Hardest

New York Times, How Democrats Would Tax High-Income Professionals (Not Just the Mega-Rich):

Moody’s data shows that higher taxes would be paid disproportionately in Democratic-leaning states.

Much of the Democratic primary race has focused on taxes aimed at the billionaire class — policies devised to reduce inequality and fund progressive goals on health care and education.

But there’s also a less discussed tax increase in leading Democratic policy proposals that would affect not just a tiny sliver of the ultra-wealthy, but also millions of high-income workers. For these people, many of them affluent professionals in Democratic strongholds, it would be the biggest tax increase in recent memory.

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November 26, 2019 in Tax, Tax News | Permalink | Comments (0)

Monday, November 25, 2019

Summers & Sarin: Funding The IRS Should Be The First Step In Tax Reform

Washington Post op-ed:  Yes, Our Tax System Needs Reform. Let’s Start With This First Step, by Lawrence H. Summers (Harvard) & Natasha Sarin (Pennsylvania):

While there’s plenty of disagreement about how the money should be used, almost everyone involved in public-policy debates agrees that it would be good if the federal government could collect more revenue without raising tax rates or reducing tax deductions or credits.

It should be indisputable that investment to make sure all citizens meet their tax obligations is desirable. Such investment would raise substantial revenue, as well as increase economic efficiency and help redress growing inequality: Our rough estimates suggest that at least 70 percent of the “tax gap”— defined as owed but uncollected taxes — comes from underpayment by the top 1 percent. This contributes to legitimate concerns that our tax system unfairly advantages the elite.

Our new analysis [Shrinking the Tax Gap: Approaches And Revenue Potential] suggests that better-focused audits, raising Internal Revenue Service enforcement to previous peak levels, investing in information technology and broadening earnings reporting could raise more than $1 trillion in the next decade, primarily from very high-income taxpayers. This well exceeds the revenue benefit of raising the top individual rate to 70 percent. ...

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November 25, 2019 in Tax, Tax News | Permalink | Comments (0)

Sunday, November 24, 2019

NY Times: Raise Billions From Billionaires? Tax Experts Say It’s Not That Simple

New York Times, Raise Billions From Billionaires? Tax Experts Say It’s Not That Simple:

One of the signature initiatives of Elizabeth Warren’s presidential campaign is a wealth tax that, she says, would pay for many of the programs she proposes, like government-paid health care and free college tuition. Bernie Sanders, one of her opponents in the Democratic race, has proposed his own version of a wealth tax that would collect, according to estimates, about $4 trillion over a 10-year period, or $500 billion more than Senator Warren’s plan.

But here’s the big question: Would the proposals, elegant in theory, work in practice?

Lawyers and advisers to the wealthy say there is no way the wealth taxes would collect anything close to the estimates, and they cite ample evidence of taxes that are reduced or eliminated through extensive and sometimes aggressive strategies. ...

Gabriel Zucman, an economics professor at the University of California, Berkeley, who was one of the lead advisers on the Warren and Sanders wealth tax proposals, begs to differ. He said in an interview that he had solutions for many of the concerns and criticisms of the plans, including how to value private companies and illiquid assets. ...

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November 24, 2019 in Tax, Tax News | Permalink | Comments (2)

Friday, November 22, 2019

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Wednesday, November 20, 2019

Tax Court Chief Judge Maurice Foley Delivers Fogel Lecture Today At Temple

Fogel Lecture

Maurice Foley, Chief Judge of the U.S. Tax Court, delivers the Fall 2019 Frank & Rose Fogel Lecture at Temple today at Noon EST (livestream here).

November 20, 2019 in Tax, Tax News | Permalink | Comments (0)

Tuesday, November 19, 2019

Alice Abreu Named Inaugural Director Of Temple Center For Tax Law And Public Policy

Temple

The tax faculty at Temple University Beasley School of Law is delighted to announce the launch of Temple’s Center for Tax Law and Public Policy, with Professor Alice Abreu as the inaugural director. Temple’s Tax Center not only serves as a hub for the many tax-related activities at Temple, it affirms Temple’s commitment to leadership in tax education and scholarship.

Temple Tax Faculty

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November 19, 2019 in Legal Ed News, Legal Education, Tax, Tax News | Permalink | Comments (0)

Monday, November 18, 2019

NY Times: How FedEx Cut Its Tax Bill To $0

New York Times, How FedEx Cut Its Tax Bill to $0:

FedEx LogoIn the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

Four months later, President Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed, as Mr. Smith said businesses like his would.

Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.

NYT

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November 18, 2019 in Tax, Tax News | Permalink | Comments (3)

WSJ: Elizabeth Warren’s Plan Would Bring Tax Rates Over 150% For Some

Wall Street Journal, Elizabeth Warren’s Tax Plan Would Bring Rates Over 100% for Some:

WSJPresidential hopeful proposes wealth tax and levy on unrealized gains, a combination that could alter investing.

Democratic presidential candidate Elizabeth Warren has unveiled sweeping tax proposals that would push federal tax rates on some billionaires and multimillionaires above 100%.

That prospect raises questions for taxpayers and the broader economy that experts are starting to ponder: Under which circumstances would taxpayers have to pay those rates? How might that change their behavior? And would investment and economic growth suffer?

Potential tax rates over 100% could result from the combination of tax increases the Massachusetts senator proposes for the very top tier of investors. She wants to return the top income-tax rate to 39.6% from 37%, impose a new 14.8% tax for Social Security, add an annual tax of up to 6% on accumulated wealth and require rich investors to pay capital-gains taxes at the same rates as other income even if they don’t sell their assets.

Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all of Ms. Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%.

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November 18, 2019 in Tax, Tax News | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Saturday, November 16, 2019

NY Times: Warren's Tax Plan Would Dramatically Cut Billionaires' Wealth Over Time

New York Times, Warren Would Take Billionaires Down a Few Billion Pegs:

“Yes, billionaires will have to pay a little more,” Senator Elizabeth Warren said of the revised tax package she introduced recently, “six cents on each dollar.”

This modest-sounding proposal, though, would have a far-reaching impact on the wealthiest Americans when combined with her other tax plans — shrinking colossal fortunes over time and making it much more difficult to hand down multibillion-dollar legacies.

The tax bite for any individual would not equal the $100 billion that Bill Gates jokingly cited, but over time it would still sting, according to estimates by two economists who advised Ms. Warren. If her wealth tax had been in effect since 1982, for example, Mr. Gates, who had made his first billion dollars by 1987, would have had $13.9 billion in 2018 instead of $97 billion. Jeff Bezos, the world’s richest person, would have had $48.8 billion last year instead of $160 billion. ...

NYT 1

As for the 400 people who made it to Forbes magazine’s list of the country’s wealthiest people, each would have an average worth of $3.1 billion, down from the current $7.2 billion.

NYT 2

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November 16, 2019 in Tax, Tax News | Permalink | Comments (1)

Friday, November 15, 2019

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

New York Times, Trump Asks Supreme Court to Bar Release of His Tax Returns:

President Trump asked the Supreme Court on Thursday to bar his accounting firm from turning over eight years of his tax returns to Manhattan prosecutors.

The case, the first concerning Mr. Trump’s personal conduct and business dealings to reach the court, could yield a major ruling on the scope of presidential immunity from criminal investigations. ...

In their petition urging the Supreme Court to hear their appeal, Mr. Trump’s lawyers argued that he was immune from all criminal proceedings and investigations so long as he remained in office. But even if some federal investigations may be proper, the petition said, the Supreme Court should rule that state and local prosecutors may not seek information about a sitting president’s conduct. ...

Mr. Trump’s lawyers noted that the Supreme Court heard cases concerning claims of immunity from Presidents Richard M. Nixon and Bill Clinton. ... In the two earlier cases, United States v. Nixon in 1974 and Clinton v. Jones in 1997, both presidents suffered unanimous losses.

Last week, a unanimous three-judge panel of a federal appeals court in Manhattan ruled against Mr. Trump. The court, in a focused ruling, said state prosecutors may require third parties to turn over a sitting president’s financial records for use in a grand jury investigation.

Mr. Trump has fought vigorously to shield his financial records, and prosecutors in Manhattan have agreed not to seek the tax returns until the case is resolved by the Supreme Court. ...

On Thursday, Mr. Trump’s lawyers wrote that the proper way to address any misconduct by a sitting president is through impeachment proceedings. “Allowing a single prosecutor to investigate a sitting president through the issuance of criminal process no less invades Congress’s impeachment authority than the filing of a criminal charge,” they wrote.

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November 15, 2019 in Tax, Tax News | Permalink | Comments (0)

Billionaires Are Bad For Democracy

New York Times op-ed:  Are Billionaires Bad for Democracy?, by Michael Tomasky:

I’m not expert enough to judge the wisdom of Senator Warren’s proposed wealth tax. ... So this column is not a brief for Ms. Warren’s wealth tax or for her candidacy — I don’t have a preferred candidate. Instead, I want to make a simple plea to the country’s billionaires: Multibillion-dollar fortunes are often called excessive and decadent. But here’s something they’re rarely called but ought to be: anti-democratic. These fortunes will destroy our democracy. ...

[A]ny democracy needs a robust and thriving middle class, and we have spent the last 30 or so years transferring trillions of dollars from the middle class to the people at the very top. Just one set of numbers, from the University of California, Berkeley economist Gabriel Zucman: The 400 richest Americans — the top .00025 percent of the population — now own more of the country’s riches than the 150 million adults in the bottom 60 percent of wealth distribution. The 400’s share has tripled since the 1980s.

This is carnage, plain and simple. No democratic society can let that keep happening and expect to stay a democracy. It will produce a middle and working classes with no sense of security, and when people have no sense that the system is providing them with basic security, they’ll make some odd and desperate choices. ...

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November 15, 2019 in Tax, Tax News | Permalink | Comments (8)

Thursday, November 14, 2019

RenTech’s Billion-Dollar Tax Cloud Darkens After IRS Ruling

Following up on my previous post, $6.8 Billion Hedge Fund Tax Dispute Moves to IRS Appeals Office:  Bloomberg, RenTech’s Billion-Dollar Tax Cloud Darkens After IRS Ruling:

RenaissanceA little-noticed decision by the Internal Revenue Service’s appeals unit may spell trouble for legendary investor Jim Simons, who’s embroiled in a multibillion-dollar tax dispute with the agency.

Reviewing the audit of an investment manager in Connecticut, the IRS Office of Appeals rejected a tax-avoidance maneuver involving so-called basket options. That’s the type of transaction at the heart of a separate, larger case involving Simons’s Renaissance Technologies hedge fund. The decision, made public in a court filing in May, could offer a preview of the tax agency’s reasoning in the Renaissance case.

The Renaissance dispute is one of the largest ever handled by the IRS, potentially involving about $6.8 billion in back taxes, according to an estimate by U.S. Senate investigators.

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November 14, 2019 in Tax, Tax News | Permalink | Comments (0)

Wednesday, November 13, 2019

The Happy, Healthy Capitalists Of Switzerland

New York Times op-ed:  The Happy, Healthy Capitalists of Switzerland, by Ruchir Sharma (Chief Global Strategist, Morgan Stanley):

FlagLike many progressive intellectuals, Bernie Sanders traces his vision of economic paradise not to socialist dictatorships like Venezuela but to their distant cousins in Scandinavia, which are just as wealthy and democratic as the United States but have more equitable distributions of wealth, as well as affordable health care and free college for all.

There is, however, a country far richer and just as fair as any in the Scandinavian trio of Sweden, Denmark and Norway. But no one talks about it.

This $700 billion European economy is among the world’s 20 largest, significantly bigger than any in Scandinavia. It delivers welfare benefits as comprehensive as Scandinavia’s but with lighter taxes, smaller government, and a more open and stable economy. Steady growth recently made it the second richest nation in the world, after Luxembourg, with an average income of $84,000, or $20,000 more than the Scandinavian average. Money is not the final measure of success, but surveys also rank this nation as one of the world’s 10 happiest.

This less socialist but more successful utopia is Switzerland.

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November 13, 2019 in Tax, Tax News | Permalink | Comments (5)

Tuesday, November 12, 2019

WSJ: Democratic Candidates’ Wealth Tax Plans Would Shake Up Billionaire Philanthropy; 'Red Hot Chili Peppers Tax Policy'

Wall Street Journal, Democratic Candidates’ Wealth Tax Plans Would Shake Up Billionaire Philanthropy:

The wealth taxes proposed by top Democratic presidential candidates might spark a short-term boom in billionaires’ donations to charity, as they accelerate gifts to avoid years of taxes eroding their fortunes.

Facing an annual tax that eats into returns and shrinks wealth, billionaires would have an incentive to move money out of their control—and out of the wealth-tax base. Otherwise, every year would see more of their money sent to the government for public projects and less to charities of their choosing.

“It’s a tax policy that the Red Hot Chili Peppers would love, because they want you to give it away now,” said Brian Galle, a law professor at Georgetown University.

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November 12, 2019 in Tax, Tax News | Permalink | Comments (1)

Tax Lessons From Trump's Move From New York To Florida

Following up on my previous post, NY Times: The Next Trump Legal Battle — Claiming Florida As His Legal Residence; 'It’s Hard For Mr. New York to Disavow His Residency':  

Wall Street Journal Tax Report, Not So Fast, Mr. Trump! Relocating to a Low-Tax State Is Hard to Do:

The President joins a long line of wealthy people who have left high-tax states like New York, Connecticut and California for low-tax states like Florida, Texas or Nevada. Among the latest is billionaire Carl Icahn, who has announced that he’s leaving his native New York for Florida.

The tax differences are clear. Florida, Texas and Nevada have neither income nor estate taxes, while New York and Connecticut have both. California doesn’t have an estate tax, but its top statutory income tax rate is the highest in the nation: 13.3%.

For Americans considering similar moves, and for Mr. Trump himself, tax specialists have a warning: Be careful, because states left behind can subject leavers to intrusive audits and sometimes lawsuits that drag on for years.

Forbes, Tax Lessons From Trump’s NY to Florida Move…For Californians:

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November 12, 2019 in Tax, Tax News | Permalink | Comments (0)

Monday, November 11, 2019

The Truth About Income Inequality

Wall Street Journal op-ed:  The Truth About Income Inequality, by Phil Gramm & John F. Early:

Never in American history has the debate over income inequality so dominated the public square, with Democratic presidential candidates and congressional leaders calling for massive tax increases and federal expenditures to redistribute the nation’s income. Unfortunately, official measures of income inequality, the numbers being debated, are profoundly distorted by what the Census Bureau chooses to count as household income.

The published census data for 2017 portray the top quintile of households as having almost 17 times as much income as the bottom quintile. But this picture is false. The measure fails to account for the one-third of all household income paid in federal, state and local taxes. Since households in the top income quintile pay almost two-thirds of all taxes, ignoring the earned income lost to taxes substantially overstates inequality.

The Census Bureau also fails to count $1.9 trillion in annual public transfer payments to American households. The bureau ignores transfer payments from some 95 federal programs such as Medicare, Medicaid and food stamps, which make up more than 40% of federal spending, along with dozens of state and local programs. Government transfers provide 89% of all resources available to the bottom income quintile of households and more than half of the total resources available to the second quintile.

WSJIn all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles.

America’s system of data collection is among the most sophisticated in the world, but the Census Bureau’s decision not to count taxes as lost income and transfers as gained income grossly distorts its measure of the income distribution. As a result, the raging national debate over income inequality, the outcome of which could alter the foundations of our economic and political system, is based on faulty information.

The average bottom-quintile household earns only $4,908, while the average top-quintile one earns $295,904, or 60 times as much. But using official government data sources on taxes and all transfer payments to compute net income produces the more complete comparison displayed in the nearby chart. ...

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November 11, 2019 in Tax, Tax News | Permalink | Comments (2)

Sunday, November 10, 2019

Bloomberg Tax Podcast With Sam Brunson: When Religion Tangles With Tax Law

Btax

Bloomberg Tax Podcast: When Religion Tangles With Tax Law: Things to Consider:

In the U.S., religious practices have an unclear relationship to the tax code. Sam Brunson, a professor at Loyola University Chicago School of Law, has an idea to give some structure to the way policy makers deal with that relationship.

Congress historically writes religious accommodations into the tax code on a case-by-case basis: A group of people appears with a specific tax problem, and lawmakers decide whether to write a fix.

But what if there were a framework that would help them consider the problems consistently and fairly? Brunson proposes such a framework in his book, God and the IRS: Accommodating Religious Practice in United States Tax Law.

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November 10, 2019 in Book Club, Tax, Tax News, Tax Scholarship | Permalink | Comments (0)

Friday, November 8, 2019

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Hemel & Kysar: The Warren/Sanders Wealth Taxes Would Raise Zero Revenue Because They Are Unconstitutional

New York Times op-ed:  The Big Problem With Wealth Taxes, by Daniel Hemel (Chicago) & Rebecca Kysar (Fordham):

Senator Elizabeth Warren unveiled a new wealth tax proposal last week that she says will raise — along with her previously announced wealth tax plan — $3.75 trillion over the next decade. Senator Bernie Sanders says his wealth tax will yield $4.35 trillion over the same period.

We fear these figures are vast overestimates. The likeliest outcome is that a wealth tax will raise exactly zero dollars. The problem, alas, is the Constitution. The Warren and Sanders plans run headlong into more than two centuries of precedent that cast doubt on the constitutionality of wealth taxation.

We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts and strongly support higher taxes on the affluent. We are heartened that prominent Democratic presidential candidates are taking the problem of wealth inequality very seriously. We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.

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November 8, 2019 in Tax, Tax News | Permalink | Comments (1)

Thursday, November 7, 2019

Carried Interest Warning From Court May Be Trouble For Treasury

Bloomberg Tax, Carried Interest Warning From Court May Be Trouble for Treasury:

A recent court case meant to clarify the definition of a corporation intensifies questions about the tax treatment of carried interest, a prized perk for private equity and hedge fund managers [Charleston Area Medical Ctr. v. United States (Fed. Cl. Oct. 17, 2019)].

The IRS argued for a broad definition of the term “corporation” in the case. But the legal issue that could come up in the future is whether it’s reasonable for Treasury regulations to interpret the term more narrowly in the carried interest context, affecting who can qualify for the treatment.

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November 7, 2019 in New Cases, Tax, Tax News | Permalink | Comments (0)

NY Times: Trump Tax Return Case Confronts Supreme Court With A Momentous Choice

New York Times, Trump Tax Return Case Confronts Supreme Court With a Momentous Choice:

Richard M. Nixon and Bill Clinton sustained unanimous losses when they sought to withhold evidence, suggesting that President Trump may face an uphill fight.

In a matter of days, President Trump will ask the Supreme Court to rule on his bold claim that he is absolutely immune from criminal investigation while he remains in office. If the court agrees to hear the case, its decision is likely to produce a major statement on the limits of presidential power — and to test the independence of the court itself.

Mr. Trump has been the subject of countless investigations and lawsuits since he took office, including a 22-month inquiry by Robert S. Mueller III, the special counsel appointed to look into his campaign’s ties to Russia. But the new case, concerning an investigation by Manhattan prosecutors into hush-money payments to two women who said they had affairs with Mr. Trump, will be the Supreme Court’s first chance to consider the president’s arguments that he is beyond the reach of the justice system.

The case concerns a subpoena to Mr. Trump’s accounting firm, Mazars USA, from the office of the Manhattan district attorney, Cyrus R. Vance Jr., a Democrat. On Monday, the federal appeals court in Manhattan rejected Mr. Trump’s request to block the subpoena, which seeks eight years of his personal and corporate tax returns.

The appeals court’s ruling was narrow and modest, hewing closely to the circumstances of the dispute before it. If the Supreme Court adopted the lower court’s reasoning, it would answer only the question of whether state prosecutors may require third parties to turn over a sitting president’s financial records for use in a grand jury investigation.

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November 7, 2019 in Tax, Tax News | Permalink | Comments (1)

Wednesday, November 6, 2019

WSJ: Tax Cuts For The Wealthy Make Inequality Worse

Wall Street Journal op-ed:  Tax Cuts for the Wealthy Make Inequality Worse, by Alan S. Binder (Princeton):

Here’s a short test of your value judgments. (There’s no right answer.) If free markets start dishing out increasingly unequal pretax incomes, should the government ignore it, mitigate it by making the tax system more progressive, or exacerbate it by making the tax system less progressive?

The question isn’t hypothetical. And you may be surprised to learn that the U.S. political system has given a clear answer: Exacerbate it. ...

[I]ncome inequality in America now stands at, or just a tad below, its all-time high. The essential fact is that inequality has been rising for almost 40 years.

What about tax progressivity? Two economists at the University of California, Berkeley, Emmanuel Saez and Gabriel Zucman, just published an important new book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. Perhaps the most stunning finding: “For the first time in the past hundred years, the working class today pays higher tax rates than billionaires.”

Chew on that for a moment. You may remember Warren Buffett bemoaning that he paid a lower average tax rate than his secretary. Apparently, he wasn’t alone. ...

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November 6, 2019 in Tax, Tax News | Permalink | Comments (1)

Call For Student Tax Papers: 2020 Chris Bergin Award for Excellence In Writing

Tax Notes 2

Christopher E. Bergin Award for Excellence in Writing:

The Christopher E. Bergin Award for Excellence in Writing recognizes superior student writing on unsettled questions in tax law or policy. It is named in honor of the late Christopher E. Bergin, former president and publisher of Tax Analysts and longtime editor of Tax Notes Federal. The award, given annually, epitomizes the qualities that Chris championed.

No one cared more than he did about clear, precise writing about taxation, and he instilled that passion in our whole staff.
Cara Griffith, Tax Analysts President and CEO

To learn more about Christopher E. Bergin, click here.

Eligibility: Must be enrolled in an accredited undergraduate or graduate program during the academic year.
Topic: Submissions should focus on an unsettled question in federal, state, or international tax law or policy.
Evaluation: Our editorial staff blindly evaluates entries on originality, readability, organization, reasoning, and overall quality of content.
Due Date: June 30, 2020

Click here for competition guidelines.

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November 6, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Scholarship | Permalink | Comments (0)

Tuesday, November 5, 2019

Brunson: Taxing Student Athletes

Sam Brunson (Loyola-Chicago), Taxing Student Athletes: An Explainer:

NCAA LogoAbout a month ago, California Governor Newsom signed the Fair Pay to Play Act, which allowed California college athletes to be paid for the use of their image, name, and likeness. Other states, including Illinois, have proposed similar legislation. And today, the NCAA caved; though its concession is not entirely clear, it looks like the NCAA has paved the way to allow NCAA athletes to make money off of their image.

For some reason, this has provoked backlash by Senator Burr of North Carolina. On Twitter, he announced that he plans on introducing legislation that would tax college athletes who accepted payment for the use of their image, etc., on their scholarships.

The ensuing discussion following his tweet has evinced a lot of misunderstanding of what’s going on here, what the current tax treatment of scholarships is, and what “double taxation” means, among other things. So I thought I’d do a quick explainer: ...

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

Clausing Leaves Reed College For UCLA Law School

Kimberly Clausing, Thormund A. Miller and Walter Mintz Professor of Economics at Reed College, has accepted an offer to join the faculty at UCLA Law School. Her most recent publication is Open: The Progressive Case for Free Trade, Immigration, and Global Capital (Harvard University Press 2019):

Clausing (2017)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.

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November 5, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Prof Moves | Permalink | Comments (2)

2019 Christopher Bergin Award For Excellence In Tax Writing

Benjamin M. Satterthwaite (J.D. 2019, South Carolina; LL.M. (Tax) 2020, Florida), Nash Bargaining Theory and Intangible Property Transfer Pricing, 164 Tax Notes 2275 (Sept. 30, 2019):

Tax NotesThis article was the winning entry in Tax Analysts’ annual student writing contest and received the 2019 Christopher E. Bergin Award for Excellence in Writing. [Honorable Mention: Daniel Pessar (Harvard)]

In this article, Satterthwaite proposes a transfer pricing framework for unique intangibles that integrates the economic fundamentals of John Nash’s bargaining theory with the “realistic alternatives” language of amended sections 367(d) and 482.

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November 5, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Scholarship, Teaching | Permalink | Comments (0)