The Massive Triumph Of The Rich, Illustrated By Stunning New Data

Washington Post, The Massive Triumph of the Rich, Illustrated By Stunning New Data:

The triumph of the rich, which is one of the defining stories of our time, is generally described as largely the reflection of two factors. The first, of course, is the explosion of income among top earners, in which a tiny minority has vacuumed up a ballooning share of the gains from the past few decades of economic growth.

The second factor — which will be key to the 2020 presidential race — has been the hidden decline in the progressivity of the tax code at the top, in which the wealthiest earners have over those same decades seen their effective  tax rates steadily fall.

Put those two factors together, and they tell a story about soaring U.S. inequality that is in some ways even more dramatic than each is on its own.

A new analysis prepared at my request by Gabriel Zucman — the French economist and "wealth detector" who has become famous for tracing the hidden wealth of the super-rich — illustrates that dual story in a freshly compelling way.

The top-line finding: Among the bottom 50 percent of earners, average real annual income even after taxes and transfers has edged up a meager $8,000 since 1970, rising from just over $19,000 to just over $27,000 in 2018.

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Ari Glogower's Tenure Approved By Ohio State Law Faculty

Ari's recent publications include

• Progressive Tax Procedure (with Joshua Blank (UC-Irvine))
• A Constitutional Wealth Tax, 118 Mich. L. Rev. ___ (2020) (reviewed by Hayes Holderness (Richmond) here)
• The Progressivity Ratchet, 104 Minn. L. Rev. ___ (2020) (with David Kamin (NYU) (reviewed by Sloan Speck (Colorado) here)
• Taxing Inequality, 93 N.Y.U. L. Rev. 1421 (2018)
• The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation, 103 Minn. L. Rev. 1441 (2018) (lead co-author)

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NY Times: Finland Is A Capitalist Paradise — High Taxes Are Good For Business

New York Times, Finland Is a Capitalist Paradise: Can High Taxes Be Good For Business? You Bet.:

Two years ago we were living in a pleasant neighborhood in Brooklyn. We were experienced professionals, enjoying a privileged life. We’d just had a baby. She was our first, and much wanted. We were United States citizens and our future as a family should have seemed bright. But we felt deeply insecure and anxious.

Our income was trickling in unreliably from temporary gigs as independent contractors. Our access to health insurance was a constant source of anxiety, as we scrambled year after year among private employer plans, exorbitant plans for freelancers, and complicated and expensive Obamacare plans. With a child, we’d soon face overwhelming day-care costs. Never mind the bankruptcy-sized bills for education ahead, whether for housing in a good public-school district or for private-school tuition. And then there’d be college. In other words, we suffered from the same stressors that are swamping more and more of Americans, even the relatively privileged.

As we contemplated all this, one of us, Anu, was offered a job back in her hometown: Helsinki, Finland.

Finland, of course, is one of those Nordic countries that we hear some Americans, including President Trump, describe as unsustainable and oppressive — “socialist nanny states.” As we considered settling there, we canvassed Trevor’s family — he was raised in Arlington, Va. — and our American friends. They didn’t seem to think we’d be moving to a Soviet-style autocracy. In fact, many of them encouraged us to go. Even a venture capitalist we knew in Silicon Valley who has three children sounded envious: “I’d move to Finland in a heartbeat.”

So we went.

We’ve now been living in Finland for more than a year. The difference between our lives here and in the States has been tremendous, but perhaps not in the way many Americans might imagine. What we’ve experienced is an increase in personal freedom. Our lives are just much more manageable. To be sure, our days are still full of challenges — raising a child, helping elderly parents, juggling the demands of daily logistics and work.

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OECD: Trump’s Tax Cuts Push U.S. Tax Burden To Near World's Lowest

Wall Street Journal, Trump’s Tax Cuts Push U.S. Burden Lower in World:

President Trump’s 2017 tax cuts reduced the U.S. tax burden to one of the lowest among major world economies, according to a Thursday report [Revenue Statistics 2019] by an intergovernmental organization.

U.S. tax burdens dropped by the largest amount among those countries in 2018, and the U.S. now has lower taxes than all but three countries in the Organization for Economic Cooperation and Development, the report said.

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Tax Prof Sharyn Fisk Named Director Of IRS Office Of Professional Responsibility

IR-2019-202, IRS Selects Longtime Tax Professional, Sharyn Fisk, to Lead the Office of Professional Responsibility (Dec. 9, 2019):

The Internal Revenue Service today announced the selection of Sharyn M. Fisk to lead the agency’s Office of Professional Responsibility (OPR).

Fisk has most recently been a professor of tax at the College of Business Administration at Cal Poly Pomona and active in the nation’s tax community in a variety of roles. She will assume leadership of OPR in early 2020.

“This is a critical position for the nation’s tax community. Sharyn Fisk is extremely well respected both internally at the IRS and throughout the tax professional communities. She has a strong set of skills and experience in many different settings that will serve the IRS well in this role,” said IRS Commissioner Chuck Rettig. “Taxpayers, the IRS and the tax community rely on this office to help uphold strong professional standards among tax professionals. We look forward to Ms. Fisk providing meaningful, fair and equitable guidance while also strengthening the oversight of tax professionals.”

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Over 750 Law Profs (And 10 Tax Profs) Declare Trump's Conduct 'Clearly Impeachable'

National Law Journal, Hundreds of Law Profs Declare Trump's Conduct 'Clearly Impeachable':

Hundreds of law professors from schools across the country published an open letter Friday declaring President Donald Trump’s conduct involving Ukraine as “clearly impeachable,” an assertion that comes after a daylong hearing earlier this week at which Republicans and Democrats sharply divided over their assessment of the president’s actions.

The letter, posted on the website Medium and sponsored by the government watchdog Protect Democracy, had been signed by [over 750 professors as of Monday morning].

The letter begins:

We, the undersigned legal scholars, have concluded that President Trump engaged in impeachable conduct.

We do not reach this conclusion lightly. The Founders did not make impeachment available for disagreements over policy, even profound ones, nor for extreme distaste for the manner in which the President executes his office. Only “Treason, Bribery, or other high Crimes and Misdemeanors” warrant impeachment. But there is overwhelming evidence that President Trump betrayed his oath of office by seeking to use presidential power to pressure a foreign government to help him distort an American election, for his personal and political benefit, at the direct expense of national security interests as determined by Congress. His conduct is precisely the type of threat to our democracy that the Founders feared when they included the remedy of impeachment in the Constitution.

Tax Prof signatories are:

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NY Times: Democrats Say Tax Increases Will Boost Economic Growth

New York Times, Could Tax Increases Speed Up the Economy? Democrats Say Yes:

Elizabeth Warren is leading a liberal rebellion against a long-held economic view that large tax increases slow economic growth, trying to upend Democratic policymaking in the way supply-side conservatives changed Republican orthodoxy four decades ago.

Generations of economists, across much of the ideological spectrum, have long held that higher taxes reduce investment, slowing economic growth. That drag, the consensus held, would offset the benefits to growth from increased government spending in areas like education.

Ms. Warren and other leading Democrats say the opposite. The senator from Massachusetts, who is a leading candidate for the Democratic presidential nomination, contends that her plans to tax the rich and spend the revenue to lift the poor and the middle class would accelerate economic growth, not impede it. Other Democratic candidates are making similar claims about their tax-and-spend proposals. Some liberal economists go further and say that simply taxing the rich would help growth no matter what the government did with the money.

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NY Times: California’s Cannabis Churches — From The Virgin Mary To Mary Jane As A Sacrament

New York Times, Inside the War for California’s Cannabis Churches:

Every Sunday, about two dozen people gather at a green cabin along the main drag of Big Bear, Calif., a small mountain town known for its namesake lake. They go there for Jah Healing Church services, where joints are passed around.

April Mancini, a founder of the church, said she was drawn to the idea of cannabis as a religious sacrament back in 2013, after she met a Rastafarian who was running the place as an unlicensed medicinal dispensary.

“I’m a Christian, so I wasn’t sure in the beginning,” Ms. Mancini said. “I didn’t want to go against God.”

But she said she studied the Bible for references to cannabis, and believed she found them in scriptures that mentioned kaneh bosem oil. (English-language Bibles usually render the term “kaneh bosem,” a component of an anointing oil mentioned in Exodus, as “fragrant cane” or “sweet calamus.”)

In October 2017, Ms. Mancini filed paperwork with the state to incorporate the Jah Healing Kemetic Temple of the Divine. The newly registered church stopped requiring medical cards for marijuana for people 21 and over. Its teachings are largely Christian but borrow from a grab bag of religious traditions as varied as Rastafarianism, Buddhism and Judaism.

But before the year was up, the county sent the church a notice, accusing it of operating a dispensary. In April 2018, the county raided the church, confiscating the congregation’s sacrament in all its forms.

The resulting and continuing legal battle led Jah to ramp up efforts to establish itself as a church in the eyes of the law. ...

At the heart of this matter is a possibly unanswerable question: What is religion? And how do you prove faith?

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This Week's Ten Most Popular TaxProf Blog Posts

1. Wall Street Journal, The Impact Of The SAT Adversity Index On Median SATs — A School-By-School Analysis
2. Paul Levy, Why I Resigned In Protest From Penn Law's Board When A Conservative Professor Was Punished
3. Colleen Murphy, Christopher Ryan & Yajni Warnapala (Roger Williams), Law Students Who Handwrite Their Notes Outperform Laptop Users By One Grade (e.g., B + to A-), 68 J. Legal Educ. 207 (2019)
4. Karen Sloan (Law.com), LRW Professor's Lawsuit Alleges Discrimination In Non-Renewal Of Contract After Teaching At Wake Forest Law School For 19 Years
5. Wall Street Journal, New Lawyers Are Swimming in Debt
6. Karen Sloan (Law.com), California's Disappearing ABA Law Schools
7. WTXL & Tallahassee Democrat, Latest Developments In The Dan Markel Case: Garcia Appeals His First Degree Murder Conviction; 'What Do You Have To Do To Get A Death Sentence Around Here?'
8. New York State Bar Association, July 2019 New York Bar Exam Results
9. preLaw, Top Law Schools: Tax Law
10. Brian Leiter (Chicago), Are 'Transformative' Law School Naming Gifts Really Transformative?

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 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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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:

After 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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Tax Policy In The Trump Administration

• Bloomberg News, Biden’s Tax Plan Is Better Than It Looks
• Bloomberg News, How Warren Could Get a Wealth Tax Past the U.S. Supreme Court
• Bloomberg News, The Secret to America’s Low, Low Taxes
• Bloomberg Tax, Congressional Tax Writers Look for Opening to Move Legislation
• Common Dreams, New Analysis Details 'Aggressive' Tax Dodging of Six Silicon Valley Giants—Totaling Over $100 Billion

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Trump's Taxes And Tax Returns

• FiveThirtyEight, How Will The Supreme Court Rule In The Battle Over Trump’s Tax Returns?
• New York Times, Trump Loses Appeal on Deutsche Bank Subpoenas
• New York Times, Trump Again Asks Supreme Court to Bar Release of His Financial Records
• Politico, Court Deals Blow to Trump’s Bid to Keep Financial Records From Congress
• USA Today, Trump to Supreme Court: Take Case and Block House Committee From Tax Returns

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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:

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

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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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:

Through 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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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:

Michael 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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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)

• Final Regulations
• Proposed Regulations

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

• Final Regulations
• Proposed Regulations

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

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

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

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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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:

The 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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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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12 EU States Reject Move To Expose Companies' Tax Avoidance

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

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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Tax Policy In The Trump Administration

• Bloomberg News, Bloomberg Says He Should Pay More Taxes But Opposes Wealth Levy
• Bloomberg News, Bloomberg Says He Will Release Tax Returns: Campaign Update
• Bloomberg News, Ocasio-Cortez Skeptical Warren and Sanders Wealth Tax Could Pass
• Bloomberg News, IRS Says Millionaires Can Keep Estate Tax Benefits After 2025
• Bloomberg Opinion (Andreas Kluth), Stop Treating American Expats Like Tax Cheats

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Trump's Taxes And Tax Returns

• Bloomberg Tax, Trump Triumphs as California Court Blocks Tax Return Law
• The Hill, DOJ Urges Supreme Court to Side With Trump in Ongoing Legal Battle Over Tax Returns
• The Hill, Where Things Stand in Court Fights Over Trump Tax Returns
• National Law Journal, US Supreme Court Blocks House Subpoena Seeking Trump Financial Records
• New York Times, Supreme Court Temporarily Blocks Disclosure of Trump’s Financial Records

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Turn Off Your Phone For Thanksgiving

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

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

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

What 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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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:

In 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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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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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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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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Tax Policy In The Trump Administration

• Bloomberg News, Alexandria Ocasio-Cortez Plans Bill to Boost Top Individual Tax Rate to 59%
• Bloomberg Opinion (Noah Smith), Making Rich People Poor Isn’t the Answer
• Bloomberg Opinion (Michael Strain), Soak-the-Rich Taxes Are Unethical and Unwise
• Center on Budget and Policy Priorities, Bills Aim to Curb Opportunity Zone Abuses
• CNN, Elizabeth Warren's Wealth Tax Will Make Income Inequality Worse, Not Fix It

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Trump's Taxes And Tax Returns

• CNBC, Supreme Court Temporarily Halts Court Order Requiring Accountants to Turn Over Trump’s Tax Returns to Congress
• The Hill, California High Court Strikes Down State Law Targeting Trump Tax Returns
• The Hill, Manhattan DA Asks Supreme Court to Let Them Enforce Subpoena for Trump Tax Returns
• The Hill, Senate Aides Met With Tax Return Whistleblower
• National Law Journal, Calif. Supreme Court Strikes Down Law Requiring Trump to Reveal Tax Returns

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

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).

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

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.

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

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

In 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.

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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:

Presidential 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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TaxProf Blog Weekend Roundup

Saturday:

• This Week's Ten Most Popular TaxProf Blog Posts
• Harvard 1Ls: Elite Law Schools Shortchange Students By Veering Left
• NY Times: Warren's Tax Plan Would Dramatically Cut Billionaires' Wealth Over Time
• July 2019 California Bar Exam Pass Rate Increases 9 Percentage Points (7 For CA ABA-Accredited Law Schools)

Sunday:

• The 22 Law School Naming Gifts ($3 Million - $125 Million)
• NY Times: Warren Wealth Tax Would Slow Economic Growth By 13% According To Penn Wharton Budget Model
• Black Male Lawyers In California Are Four Times More Likely To Be Disbarred Than White Male Lawyers
• The Top Five New Tax Papers

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. ...

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.

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Tax Policy In The Trump Administration

• Henry Aaron (Brookings Institution), To Reduce Inequality, Tax Inheritances
• Bloomberg News, Carried Interest Tax Rules Slated for 2020, Official Says
• Bloomberg News, Charles Schwab Joins Chorus of Billionaires Opposing Wealth Tax
• Bloomberg Opinion (Noah Smith), France Tried Soaking the Rich. It Didn’t Go Well.
• Business Insider, Here's How Much Smaller the Top 11 Billionaires' Fortunes Would've Been If Bernie Sanders' or Elizabeth Warren's Proposed Wealth Taxes Had Been Around Since 1982

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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.

• Bloomberg News, Trump Asks High Court to Block N.Y. Subpoena for Tax Returns
• National Law Journal, John Roberts' Supreme Court Just Got Its First Trump Tax Returns Case
• Cass Sunstein (Harvard), Trump Tax Case Should Be an Easy Supreme Court Call
• Wall Street Journal, Trump Asks Supreme Court to Block New York Subpoena for Tax Records
• Washington Post, Trump Asks Supreme Court to Shield His Tax Returns From Prosecutors, Setting Up Historic Separation-of-Powers Showdown

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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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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:

A 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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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):

Like 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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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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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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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.

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

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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Tax Policy In The Trump Administration

• Bloomberg News, Democrats Worried Over Wealth Tax Design Other Plans to Tax the Rich
• Bloomberg News, IRS Auditors are Watching Companies That Owe Offshore Profit Tax
• Bloomberg News, Taxing the Ultra-Wealthy Forces Democrats to Get Creative
• Bloomberg News, Warren’s Wealth Tax Could Drive Billionaires to Funds She Hates
• Bloomberg Opinion (Brian Chappatta), Could Canceling Student Loans Be a Tax Cut 2.0?

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