Measuring The 1%: Economists Are Rethinking The Numbers On Inequality

The Economist, Measuring the 1%: Economists Are Rethinking the Numbers on Inequality:

An academic disagreement has big real-world implications

Over a decade before thousands of protesters gathered in Zuccotti Park in New York in 2011, a little-known researcher in France sat down to write about income inequality in a new way. “The focus of our study consists in comparing the evolution of the incomes of the top 10%, the top 1%, the top 0.5%, and so on,” Thomas Piketty wrote in a paper in 1998. With his long-term co-author, Emmanuel Saez, Mr Piketty pioneered the use of tax data over survey data, thereby doing a better job of capturing the incomes of the richest. He revealed that “the 1%” had made out like bandits at the expense of “the 99%”. His research gave Occupy Wall Street its vocabulary.

What followed was an explosion of research into the causes and consequences of a surge in inequality across the rich world. In “Capital in the Twenty-First Century”, a bestseller first published in 2013, Mr Piketty argued that under capitalism rising inequality was the normal state of affairs.

Mr Piketty’s research, and more like it, became part of the political discourse in America and much of the West. Two leading candidates for the Democratic nomination for the American presidency, Elizabeth Warren and Bernie Sanders, have proposed taxes on wealth to tackle inequality—pledges cheered on by Mr Saez and Mr Piketty’s other co-author, Gabriel Zucman. In a new book, “Capital and Ideology” (currently available only in French) Mr Piketty calls for a 90% tax on wealth, such is the scale of the inequality crisis. ...

Yet just as ideas about inequality have completed their march from the academy to the frontlines of politics, researchers have begun to look again. And some are wondering whether inequality has in fact risen as much as claimed—or, by some measures, at all.

It is fiendishly complicated to calculate how much people earn in a year or the value of the assets under their control, and thus a country’s level of income or wealth inequality. Some people fail to complete government surveys; others undercount income on their tax returns. And defining what counts as “income” is surprisingly difficult, as is valuing assets such as unquoted shares or artwork. Legions of academics, not to mention government officials and researchers in think-tanks, are devoted to unpicking these problems.

The conventional wisdom to have emerged from these efforts revolves around four main points. First, over a period of four to five decades the incomes of the top 1% have soared. Second, the incomes of middle-earners have stagnated. Third, wages have barely risen even though productivity has done so, meaning that an increasing share of gdp has gone to investors in the form of interest, dividends and capital gains, rather than to labour in the form of wages. Fourth, the rich have reinvested the fruits of their success, such that inequality of wealth (ie, the stock of assets less liabilities such as mortgage debt) has risen, too.

Each argument has always had its doubters. But they have grown in number as a series of new papers have called the existing estimates of inequality into question.

Start with top incomes. ... [A] recent working paper by Gerald Auten and David Splinter, economists at the Treasury and Congress’s Joint Committee on Taxation, respectively, reaches a striking new conclusion [Income Inequality in the United States: Using Tax Data to Measure Long-term Trends (presentation here)]. It finds that, after adjusting for taxes and transfers, the income share of America’s top 1% has barely changed since the 1960s (see chart 1) [more here].

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Capital Gains Taxation And Investment Dynamics

Sungki Hong (Federal Reserve Bank of St. Louis) & Terry S. Moon (University of British Columbia), Capital Gains Taxation and Investment Dynamics:

This paper quantifies the long-run effects of reducing capital gains taxes on aggregate investment. We develop a dynamic general equilibrium model with heterogeneous firms, which face discrete capital gains tax rates based on their firm size. We calibrate our model by targeting relevant micro moments as well as the difference-in-differences estimate of the capital elasticity based on the institutional setting and a policy reform in Korea. We find that the firm-size reform that reduced the capital gains tax rates from 24 percent to 10 percent for the affected firms increased aggregate investment by 2.6 percent and 1.7 percent in the short-run and in the steady state, respectively. Additionally, in a counterfactual analysis where we set the uniformly low tax rate of 10 percent, the aggregate investment rose by 6.8 percent in the long-run.

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Satterthwaite: Gender Belongs At The Center Of Tax Policy Debates About Inequality

Emily Satterthwaite (Toronto), A Do-Over For The Tax Unit (JOTWELL) (reviewing Margherita Borella (University of Torino), Mariacristina De Nardi (University College London) & Fang Yang (Louisiana State University), Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?):

There has been a surge in empirical literature examining gendered patterns of behavior and outcomes across numerous economic contexts, especially choices within and across families. Relatively little of it has focused explicitly on how the basic structure of our tax laws interacts with and influences such choices. Encouragingly, a recent working paper by Margherita Borella, Mariacristina De Nardi, and Fang Yang does exactly that.

Borella, De Nardi, and Yang (BD&Y) study two key policies within the U.S. tax-transfer system: joint income tax filing for married couples and access to Social Security benefits for spouses. The joint income tax filing rule means that a married secondary earner will owe income tax at the marginal rate established by “stacking” her income on her spouse’s income, which generally is a higher rate than would apply if the secondary earner was single. Social Security benefits also increase to account for an earner’s spouse, but do not increase to account for an earner’s unmarried partner.

Both of these policies are gender-neutral on face; however, the background conditions under which they operate are not. ...

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Brooks: The Ethical Tax Judge

Kim Brooks (Dalhousie University, Schulich School of Law), The Ethical Tax Judge, in Ethics and Taxation (Robert van Brederode ed., Springer 2020):

This chapter advances the claim that judges have an ethical obligation of competence that requires them to enhance their knowledge about language (in the context of statutory interpretation) and income tax law design and policy. It articulates some of the foundational understandings that support that competence and provides a simple hierarchy of approaches to interpreting income tax law. It concludes by contending that greater competence is not only more ethical but also advances other important societal goals fulfilled by the imposition of income tax systems. ...

Ultimately, judges should seek to interpret income tax legislation in a fashion that respects our interdisciplinary understanding of how words are used to express ideas and supports the effective functioning of income tax legislation.

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Herzfeld: US Tax Reform And EU ATAD: Can GILTI + BEAT = GLOBE?

Mindy Herzfeld (Florida), Debate on the US Tax Reform and the EU ATAD: Can GILTI + BEAT = GLOBE?, 49 Intertax 504 (2019):

The OECD is moving forward with consideration of a minimum tax as part of its solution to taxation of the digital economy. Part of a template for such a minimum tax may be the version enacted by the United States in 2017 as an expansion of its Controlled Foreign Corporation (CFC) regime, known as Global Intangible Low Taxed Income (GILTI). But the OECD version will undoubtedly be different from the US iteration. It’s likely that it would also include some aspects of a minimum tax being proposed by other OECD members such as Germany and France, namely a tax on outbound payments, in addition to a CFC-type regime. The United States also enacted an outbound minimum tax in 2017, known as Base Erosion Anti-Abuse Tax (BEAT). The two-part minimum tax being pursued by the OECD — a minimum tax based on a CFC regime plus an outbound minimum tax that’s a variation on the BEAT — has been referred to as GLOBE (global anti erosion) (See S. Soong Johnston, Germany, France Explore GLOBE Proposal to Tax Digital Economy, 92 Tax Notes Int’l 782 (2018)).

This article summarizes the two features of the US 2017 tax reform (known as the Tax Cuts & Jobs Act (TCJA) ... that may be incorporated into a global minimum tax, namely GILTI and BEAT, from the perspective of how such provisions might be adapted to work in a global setting.

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Shanske & Gamage: States Should Conform To GILTI, Part 3

Darien Shanske (UC-Davis) & David Gamage (Indiana), States Should Conform to GILTI, Part 3: Elevator Pitch and Q&A, 94 State Tax Notes 121 (Oct. 14, 2019):

This essay argues that the states should conform to the post-2017 federal tax law's provision for Global Intangible Low-Taxed Income (or “GILTI”). This essay is directed at state legislators and their staffs and presents the argument as succinctly as possible. Our argument can be summarized in three sentences. First, states should conform to GILTI because there is significant evidence that profit shifting is substantially eroding their corporate tax bases. Second, GILTI is a tool for identifying shifted profits. Third, there are many legally and analytically sound ways to apportion GILTI income to a state. We also — briefly — counter the standard objections to state conformity with GILTI.

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Schizer Presents Getting More Out Of Nonprofit Subsidies: Measuring Success And Better Disclosure Today At Penn

David M. Schizer (Columbia) presents Getting More out of Nonprofit Subsidies: Challenges in Measuring Success and the Need for Better Disclosure at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

The U.S. nonprofit sector spends $2.54 trillion each year, and benefits from billions of dollars in tax subsidies. If this sector was a country, it would have the eighth largest economy in the world — behind Britain and France, and ahead of Brazil, Italy, Canada, and Russia. How can we encourage nonprofits to allocate resources more efficiently, so they pursue socially valuable missions with impactful and cost-effective programs? To answer these questions, this Article makes two contributions to the literature.

First, this Article breaks new ground in explaining why efficient resource allocation is harder at nonprofits. To account for this inefficiency, the literature invokes their inability to distribute profits; if no one can keep these profits, no one is motivated to maximize them. In contrast, this Article argues that inefficiencies can arise at nonprofits not only because charities cannot distribute profits but, more fundamentally, because they are not trying to earn profits to begin with. So instead of measuring success with profitability, which is fairly straightforward, nonprofits have to use proxies for social return that are hard to measure or unreliable (or both). This difficulty in tracking progress is familiar, but it has an important implication for governance that is new to the literature: when success is hard to measure, inefficient practices are less visible, and thus are harder to stop.

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Glogower & Kamin: Sheltering Income Through a Corporation

Ari D. Glogower (Ohio State) & David Kamin (NYU), Sheltering Income Through a Corporation, 164 Tax Notes 507 (July 22, 2019):

In this article, Glogower and Kamin respond to Michael S. Knoll’s recent argument that the Tax Cuts and Jobs Act creates “very close to a level playing field” between passthrough and corporate entities, and they explain why some high-income owners may achieve tax savings by using corporations.

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Johnson: Counterpoint: A Sur-Rebuttal To Professor Jensen On The Constitutionality Of An Unapportioned Wealth Tax

Calvin H. Johnson (Texas), Counterpoint: A Sur-Rebuttal to Professor Jensen on the Constitutionality of an Unapportioned Wealth Tax, 39 ABA Tax Times 1 (Nov. 2019):

The Constitution requires that direct taxes must be apportioned among the states by population. Under Hylton v. United States (1796), if apportionment is not reasonable, the tax is not direct and apportionment is not required. If the tax base per capita is equal among the states, then apportionment by population yields uniform rates across the states, which is a just rule.

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Lockwood Presents The Optimal Taxation Of Lotteries Today At UC-Berkeley

Benjamin B. Lockwood (Wharton) presents The Optimal Taxation of Lotteries (with Hunt Allcott (NYU) & Dmitry Taubinsky (UC-Berkeley)) at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

Publicly-administered lotteries in the U.S. collect more than $70 billion annually in revenues, and are alternatively viewed as either a regressive tax on consumers who misunderstand their low expected value, or as a sensible way to raise revenue for public goods while generating consumer surplus. We study optimal lottery policy as a question of optimal taxation, in which lotteries are a taxed good whose consumers may be subject to behavioral biases. We derive a new sufficient statistics formula for the optimal regulation of product attributes, which guides our empirical analysis. We then estimate key statistics using historical lottery sales, prize data, and a large new nationally representative survey. Our findings suggest demand is highly responsive to ticket price and the expected value of top prizes, but not to the expected value of smaller prizes. We also estimate the share of lottery consumption that can be attributed to behavioral biases.

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Blank Presents Progressive Tax Procedure Today At NYU

Joshua Blank (UC-Irvine) presents Progressive Tax Procedure (with Ari Glogower (Ohio State)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

Abusive tax avoidance and tax evasion by high-income and wealthy taxpayers pose unique threats to the tax system. These strategies undermine the tax system’s progressive features and distort its distributional burdens. Responses to this challenge generally fall within two categories: calls to increase IRS enforcement and proposals to target the specific strategies that enable tax avoidance and evasion by these taxpayers. For example, taxpayers who engage in certain tax shelter transactions or hold assets abroad face additional compliance obligations and potential tax penalties.

This Article presents the case for “progressive tax procedure” — means-based adjustments to the tax procedure rules as they apply to high-income and wealthy taxpayers. In contrast to the activity-based responses in current law, progressive tax procedure would tailor rules to the characteristics of the actors rather than their activities. Instead of focusing exclusively on specific potentially abusive activities, such as “reportable transactions,” progressive tax procedure would adjust tax procedure rules based on the taxpayer’s income or net assets. For example, a high-income taxpayer would face higher tax penalty rates or longer periods where the IRS could assess tax deficiencies than other taxpayers.

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Schön: Abuse Of Law In European Taxation

Wolfgang Schön (Max Planck), The Concept of Abuse of Law in European Taxation: A Methodological and Constitutional Perspective:

In two recent cases “T Danmark” and “N Luxembourg 1” the European Court of Justice delivered landmark judgments on the impact of the concept of “abuse of law” in the area of taxation. In these judgments the Court promoted the recurrent notion that “European law cannot be relied up-on for abusive or fraudulent ends” to the rank of a “general principle” of European law in matters of direct taxation. This has a profound effect on the legal framework for taxpayers and tax authorities as such a “general principle” has the power to override both secondary EU law and national tax legislation. According to the Court, it has to be applied irrespective of conflicting provisions in EU tax directives and without any explicit basis under domestic tax law.

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Osofsky: Constructing Doctrines For Modern Tax Legislative Realities

Leigh Osofsky (North Carolina), Constructing Doctrines For Modern Legislative Realities (JOTWELL) (reviewing Jesse M. Cross (South Carolina), The Staffer's Error Doctrine, 56 Harv. J. on Legis. 83 (2019)):

In recent years, legal scholars have begun to focus in earnest on the realities of the legislative process. Just to name a few topics, this research has included studies about congressional drafting and canons, agency involvement in legislative drafting, how legislative drafting has changed over time, how statutory drafters make discrete drafting decisions, and much more. Understanding these realities is essential to how we use, and make meaning of, the statutes that pervade our legal system.

Jesse Cross’s recently published article, The Staffer’s Error Doctrine, is an important contribution to this body of work. In this article, Cross provides a deep account of how Congress has come to rely upon what Cross calls a “staffer delegation model.” Cross explains that Congress has not always relied so extensively on congressional staff to draft legislation. Rather, Congress previously used a mix of committees and delegation to agencies. Cross argues that concern over executive power, along with expanded internal bureaucracy, has prompted Congress instead to increasingly turn to an army of congressional staffers to draft legislation. As Cross explores, members of Congress have acknowledged that this turn to staffers gives staffers not only clerical tasks, but also significant power to make policy through legislation. And, as Cross persuasively argues, this is a systematic byproduct of a Constitution that creates generalist legislators, notwithstanding a world that increasingly requires subject-matter experts to create good law. ...

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Lesson From The Tax Court: How The Court Reviews Whistleblower Office Decisions

Everyone, myself included, tends to refer to “the” IRS as if it is a sentient being.  We all know, however, that there is no such being.  Rather, the IRS is composed of many employees grouped together in different offices that perform different functions with various degrees of elan or despair.  It is the connections and coordination between these offices that make up “the” IRS.

Normally that distinction in not important.  But proved critical in last week’s case of Richard E. Lacey v. Commissioner, 153 T.C. No. 8 (Nov. 25, 2019).  There the Tax Court was asked whether it had jurisdiction to review the refusal of the IRS Whistleblower Office (WBO) to send whistleblower information to the Exam function.  The majority said yes.  The language of §7623(b)(4) gives the Tax Court jurisdiction to review any work product produced by the WBO.  Four Judges disagreed.  In their view, the statute does not permit review of decisions on whether or not to open exams in the first place, and that is true regardless of whether such decision is made by the WBO or by the relevant Exam function.  To the dissent, Tax Court review power turns on the functional nature of the work product and not the formality of the issuing office.   To the dissent, the IRS is the IRS.  To the majority, the IRS is sometimes discrete offices.

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The Top Five New Tax Papers

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

1. [336 Downloads]  The Arm's Length Standard Is Not the Problem, by Lorraine Eden (Texas A&M)
2. [296 Downloads]  Boiling Starbucks’ Roasting Down to the Essence of its Residual, by William Byrnes (Texas A&M)
3. [213 Downloads]  Implications for Apple in the Lower Court Rulings in Starbucks and Fiat, by Ruth Mason (Virginia)
4. [186 Downloads]  2018 Developments in Connecticut Estate and Probate Law, by Jeffrey Cooper (Quinnipiac) & John Ivimey (Reid and Riege, Hartford)
5. [149 Downloads]  An Empirical Study of Statutory Interpretation in Tax Law, by Jonathan Choi (NYU)

Weekly SSRN Tax Article Review And Roundup: Layser Reviews Education Has Been 'Dumbed Down' In Tax Reform

This week, Michelle Layser (Illinois) reviews Melanie McCoskey (Akron) and Doron Narotzki (Akron), Education Has Been “Dumbed Down” in Tax Reform, 22 Fla. Tax Rev. (2019)

This Thanksgiving, when my cousin raised the subject of gigantic college endowments, my mind went straight to tax (as it does). Coincidentally, I had just read an essay by Professors Melanie McCoskey and Doron Narotzki about recent tax law changes affecting higher education. So, about those college endowments.

The Tax Cuts and Jobs Act introduced a new excise tax on private colleges with large endowments (I.R.C. § 4968). The tax, which applies to colleges with endowments of at least half a million dollars per student, equals 1.4% of their net investment income. Relatively few colleges are hit by the tax, and the authors include a list of the 25 that were. There aren’t many shockers on the list, but some may be surprised to learn which schools are not listed. The bottom line: to get hit by this tax, a school’s endowment not only needs to be gigantic, but it needs to be really gigantic.

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Maynard Presents Converting Student Loans (And Other Aid Programs) To Cash Grants Today At Toronto

Goldburn P. Maynard Jr. (Louisville) presents Hold on to Your Student Loan . . . I’ll Take the Cash Instead at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The federal government has finally admitted what some knew and others suspected: the federal student loan program is veering into hot mess territory. At the end of January, the U.S. Department of Education’s (DOE) Office of Inspector General released its final audit report (OIG Report) regarding the cost of income-driven repayment (IDR) plans and loan forgiveness programs. The report gave a stark assessment: “Decision makers and others may not be aware of the growth in the participation in these IDR plans and loan forgiveness programs and the resulting additional costs. They also may not be aware of the risk that, for future loan cohorts, the Federal government and taxpayers may lend more money overall than is repaid from borrowers.“ Although federal student aid programs have been blessed by legislators and presidents and reauthorized over several decades the intricacies of their impact have been little known by those in Congress.

The OIG Report confirmed what scholars had warned about in previous years: the costs of the IDR and loan forgiveness programs had been vastly underestimated. Even more troubling is the fact that their benefits disproportionately accrue to borrowers with high incomes who attend expensive institutions. The intent of this federal program was both honorable and well-meaning, as most subsidies are, but the result should not be a surprise. Every policymaker worth her salt knows that government programs are subject to the law of unintended consequences. First developed by Robert K. Merton, the law of unintended consequences states that unanticipated or unintended effects invariably result from human action, most often government action in the form of legislation and regulation.

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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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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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Miller, Webb & Koh: The Democratic Tax Proposals

David S. Miller, Sean Webb & Bowon Koh (Proskauer, New York), The Democratic Tax Proposals: 

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Paul Presents A Re-Examination Of The ‘Helen of Troy’ Regulations Today At NYU

Deborah L. Paul (Wachtell, Lipton, Rosen, and Katz, New York) presents Has Helen’s Ship Sailed? A Re-Examination of the ‘Helen of Troy’ Regulations at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

On January 5, 1994, Helen of Troy Corporation announced a special meeting of shareholders to vote upon an exchange agreement pursuant to which Helen of Troy Corporation would be acquired by Helen of Troy Limited. Helen of Troy Corporation was incorporated in Texas, while Helen of Troy Limited was organized in Bermuda. The Bermuda company was, in the words of the proxy, “formed to facilitate the change of domicile” of the Texas company.1 Three months later, on April 18, 1994, the Internal Revenue Service released Notice 94-462 causing shareholder gain to be recognized under Section 367(a) in outbound stock-for-stock transactions along the lines that Helen of Troy contemplated. The Internal Revenue Service (“IRS”) perceived a threat to the corporate tax base, stating that it had become “concerned that widely-held U.S. companies with foreign subsidiaries recently have undertaken restructurings for tax-motivated purposes.

The release of Notice 94-46 was a pivotal moment. Prior to that time, Section 367(a) had not expressly been used to protect against erosion of the domestic corporate tax base. By the same token, since that time, a host of protections against erosion of the domestic corporate tax base via corporate expatriations have been enacted or promulgated. The time is ripe to reexamine the role of Section 367(a) in protecting against corporate base erosion. ...

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Devereux & de la Feria: Designing And Implementing A Destination-Based Corporate Tax

Michael P. Devereux (Oxford) & Rita de la Feria (University of Leeds), Designing and Implementing a Destination-Based Corporate Tax:

The current international tax system based upon the principles of source and residence is no longer suited to a globalised world economy, and the fundamentals of the international tax system need to be re-examined. An R+F based cash-flow tax based on the principle of destination has been proposed as a suitable alternative to taxing corporations in an international setting. The aim of this paper is to discuss the legal and practical issues which would arise in the implementation of such a tax, namely how a destination-based tax could be effectively designed and implemented. For this purpose we draw on experiences with designing VAT systems worldwide. It is proposed that the destination principle should be implemented through use of the customers’ location as the main legal proxy.

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Forman: Fully Funded Pensions

Jonathan Barry Forman (Oklahoma), Fully Funded Pensions, 103 Marquette L. Rev. __ (2020):

At retirement, workers want to have enough income to support themselves throughout their retirement years. In that regard, financial planners often suggest that retiring workers should aim to replace 70 to 80 percent of their annual preretirement earnings. Social Security benefits typically replace around 35 percent of the typical worker’s preretirement earnings, and the purpose of this Article is to show how pensions could and should be designed to replace, say, 40 percent of the typical worker’s preretirement earnings throughout her retirement years. In particular, because so many public and private pension plans are underfunded, this Article is focuses on how to fully fund those pensions.

At the outset, Part II provides an overview of Social Security, pensions, annuities, and other lifetime income mechanisms. In particular, Part II explains how Social Security works, how traditional pensions work, and how newer 401(k) plans and individual retirement accounts (IRAs) work.

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Moon Presents Capital Gains Taxes And Real Corporate Investment Today At UC-Berkeley

Terry S. Moon (British Columbia) presents Capital Gains Taxes and Real Corporate Investment at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

This paper assesses the effects of capital gains taxes on investment by exploiting a unique institutional setting in Korea, where the capital gains tax rates vary by firm size. I use a difference-in-differences design that compares the outcomes of firms whose tax rates were reduced, due to an unanticipated reform in 2014, to the outcomes of unaffected firms. I find that firms whose capital gains tax rates dropped from 24 percent to 10 percent increased investment by 48 log points, with the implied medium-run elasticity of 2.6 with respect to the net of tax rate, and increased newly issued equity by 5 cents per dollar of lagged revenue. The effects of the tax cut were larger for firms that appeared more cash-constrained, suggesting that these firms faced a higher marginal cost of investment, and for firms that appeared to have more agency conflicts. Taken together, these findings are consistent with a class of the “traditionalview” models predicting that lower capital taxes spur equity-financed investment by increasing the marginal returns on investment.

Lesson From The Tax Court: The Scope And Standard Of Review In CDP Cases

Many Tax Court cases teach lessons about Collection Due Process (CDP).  The case of Norman Hinerfeld v. Commissioner, T.C. Memo. 2019-47 (May 2, 2019) (Judge Halpern), teaches a nice lesson about how the Tax Court reviews IRS CDP decisions.  It illustrates the difference between the concepts of “scope” of review and “standard” of review.  And it introduces readers to the wacky world of tax administrative law which, must to the consternation of those academics who like their law neat and tidy, is anything but neat and tidy.  More below the fold.

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The Top Five New Tax Papers

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

1. [308 Downloads]  The Arm's Length Standard Is Not the Problem, by Lorraine Eden (Texas A&M)
2. [289 Downloads]  Boiling Starbucks’ Roasting Down to the Essence of its Residual, by William Byrnes (Texas A&M)
3. [210 Downloads]  Implications for Apple in the Lower Court Rulings in Starbucks and Fiat, by Ruth Mason (Virginia)
4. [180 Downloads]  2018 Developments in Connecticut Estate and Probate Law, by Jeffrey Cooper (Quinnipiac) & John Ivimey (Reid and Riege, Hartford)
5. [180 Downloads]  An Empirical Study of Statutory Interpretation in Tax Law, by Jonathan Choi (NYU)

Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Morse's GILTI: The Co-Operative Potential Of A Unilateral Minimum Tax

This week, Ariel Jurow Kleiman (San Diego) reviews a new work by Susan Morse (Texas), GILTI: The Co-operative Potential of a Unilateral Minimum Tax, 2019 Brit. Tax Rev. 512.

Cooperative is not a term often applied to the Tax Cuts and Jobs Act (TCJA).  And yet, as Susan Morse explains in her recent article on “global intangible low-taxed income” (GILTI), the Act does have some cooperative potential.  This potential arises from the new immediate tax on GILTI income—a subset of foreign income—earned by U.S.-parented multi-national corporations (MNCs).  The presence of a mandatory tax removes incentives for countries to race to the bottom with ever-lowering tax rates, to the extent that they do so to attract U.S. MNCs.  Moreover, by providing a foreign tax credit for 80% of foreign taxes paid, the law gives the “right of first refusal” to foreign jurisdictions.  In a sense, the GILTI regime carves out a protected space for foreign countries to tax U.S.-parented MNCs, effectively creating a global tax floor of 13.125% (increasing to 16.4% in 2025).

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NTA 112th Annual Conference On Taxation

Highlights of today's National Tax Association 112th Annual Conference on Taxation in Tampa (full program here):

Keynote: The Triumph of Injustice: Lessons for Distributional Tax Analysis
Emmanuel Saez (UC-Berkeley)

Plenary in Honor of Louis Kaplow (Harvard), 2019 Holland Award Recipient
Chair: Alvin Warren (Harvard)

• Alan Auerbach (UC-Berkeley)
• James Hines (Michigan)
• Stefanie Stantcheva (Harvard)
• David Weisbach (Chicago)

Empirical Studies of Wealth Taxes
Chair: Emmanuel Saez (UC-Berkeley)

• Mariona Mas Montserrat (Barcelona), Jose Maria Durán-Cabré (Barcelona), & Alejandro Esteller-Moré (Barcelona), Behavioral Responses to the (Re)Introduction of Wealth Taxes: Evidence from Spain
• Juliana Londono-Velez (UC-Berkeley) & Javier Avila-Mahecha (DIAN), Can Wealth Taxation Work in Developing Countries? Quasi-Experimental Evidence from Colombia
• Marius Brülhart (Lausanne), Jonathan Gruber (MIT), Matthias Krapf (Lausanne), & Kurt Schmidheiny (Basel), Behavioral Responses to Wealth Taxes: Evidence from Switzerland
• Floris Zoutman (Norwegian School of Economics), The Elasticity of Taxable Wealth: Evidence from the Netherlands
• Discussants: Ulrich Glogowsky (Munich), Emmanuel Saez (UC-Berkeley)

Alternatives to Wealth Taxation

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Burke Presents The Factitious Allure Of Passthrough Parity At Northwestern

Karen C. Burke (Florida) presented The Factitious Allure of Passthrough Parity at Northwestern on Wednesday as part of its Advanced Topics in Taxation Colloquium Series hosted by Herbert Beller, David Cameron, Charlotte Crane, Sarah Lawsky, Ajay Mehrotra, Philip Postlewaite, and Jeffrey Sheffield:

In 2017, Congress enacted § 199A, purportedly to maintain tax parity for corporate and noncorporate businesses. Despite concerns about mass conversions to the corporate form, upon closer examination § 199A appears largely to preserve the passthrough advantage, while raising issues concerning the relative tax efficiency of different passthrough types. Other factors, such as the use of partnerships to achieve an asset basis step-up with a single-level tax on sale of a business, are also likely to influence the choice of entity. Moreover, the 2017 Act encourages both corporate and noncorporate owner-managers to mischaracterize labor income as business income, thereby minimizing total income and employment tax exposure.

De La Feria Presents Tax Fraud And Selective Law Enforcement At Toronto

Rita De La Feria (University of Leeds School of Law) presented Tax Fraud and Selective Law Enforcement at Toronto yesterday as part of its James Hausman Tax Law and Policy Workshop Series:

This article presents a new conceptual framework for research into tax fraud. Informed by research approaches from across tax law, public economics, criminology, criminal justice, and regulatory theory, its proposed analytical framework assesses the effectiveness, and the legitimacy, of current approaches to combating tax fraud. The last decade has witnessed significant intensification of antitax fraud policy within Europe, with an upsurge in both legislative and administrative measures that purportedly target tax fraud. Using VAT as a case study, it is argued that these measures display a fundamental misunderstanding of the phenomenon of tax fraud, and in particular of the various costs it carries, by concentrating upon combating the revenue costs of fraud, rather than the fraud itself. Whilst measures deployed to combat revenue costs, and those deployed to combat the tax fraud, will often coincide, this will not always be the case. In those cases where they do not coincide prevalence is consistently given to enforcement measures addressing revenue costs, rather than combatting the fraud itself, even where the effect is to aggravate other costs of tax fraud, such as distortions to competition, or tax inequity, or to create an incentive to future non-compliance.

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NTA 112th Annual Conference On Taxation

Highlights of the opening day of the National Tax Association 112th Annual Conference on Taxation in Tampa (full program here):

Keynote: Tax Follies and Wisdom through the Ages
Joel Slemrod (Michigan)

Plenary: Capital and Wealth Taxation

• Jason Furman (Harvard)
• Beth Kaufman (Caplin & Drysdale)
• Henrik J. Kleven (Princeton)
• Wojciech Kopczuk (Columbia)

Law and Economics
Chair: Andrea Lopez-Luzuriaga (George Washington)

• Leigh Osofsky (North Carolina), Agency Legislative Fixes
• Sutirtha Bagchi (Villanova) & Matthew Fagerstrom (Villanova), Wealth Inequality and Democracy
• Clinton G. Wallace (South Carolina), Democracy-Enhancing Tax Policy
• Dylan T. Moore (Michigan), Optimal Political Finance Regulation
• Discussants: Joshua Blank (UC-Irvine), John R. Brooks (Georgetown)

New Principles for Optimal Taxation
Chair: Theodore Seto (Loyola-L.A.)

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Why Do People Tolerate Income Inequality?

Lucia Macchia (City, University of London), Anke C. Plagnol (City, University of London) & Nattavudh Powdthavee (Warwick Business School), Why Do People Tolerate Income Inequality?:

Across societies, the richest 1% now hold a larger percentage of national income than ever before. What’s puzzling is that the latest research on attitudes toward inequality suggests that citizens in more unequal countries are less concerned about income inequality than those in more egalitarian countries. If income inequality is overwhelmingly bad for most people in a society, why do they – especially those who live in the most unequal of places – still put up with it?

According to the latest work by Harvard sociologist Jonathan J. B. Mijs, this income inequality puzzle can be explained in part by evidence showing that people’s belief in meritocracy (i.e., that income differences stem from differences in effort, not in luck) often goes hand in hand with the level of income inequality in a society. It seems that people in the most unequal societies, irrespective of whether they are from the working class, the lower middle class, or the upper middle class, are more likely to believe that the rich are rich because they worked hard for their income, while the poor are poor because of a lack of trying.

Our latest research, however, offers an additional explanation for the income inequality puzzle. We find that people put up with high levels of inequality for two reasons:

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Thomas: The Modern Case For Withholding

Kathleen DeLaney Thomas (North Carolina), The Modern Case for Withholding, 53 UC Davis L. Rev. 81 (2019):

Who is responsible for paying taxes to the government? Currently, the answer depends on one’s employment status. Employees enjoy the luxury of not having to think about tax remittance during the year because their employers withhold taxes from their paychecks. Non-employees, on the other hand, face a much more onerous system. They must keep track of and budget for taxes during the year, make quarterly remittances to the IRS, and may face penalties for failing to do so. Although this regime has been in place for many decades, there are several reasons why reform may be in order.

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Phillips & Nelson Present Macroeconomic Effects Of Reducing OASI Benefits Today At Penn

Kerk Phillips (CBO) & Jaeger Nelson (CBO) present Macroeconomic Effects of Reducing OASI Benefits: A Comparison of Seven Overlapping-Generations Models at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

In this paper we evaluate the effects of a reduction in Social Security’s Old-Age and Survivors Insurance (OASI) benefits using seven different quantitative general equilibrium overlapping-generations (OLG) models. We compare the effects of an anticipated one-third reduction in OASI benefits beginning in 2031 on an economy that maintains currently scheduled benefits. We find many of the models generate qualitatively similar results concerning budgetary and macroeconomic aggregates; however, the magnitude of the effects varies owing to the models’ structure and calibration strategies.

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Kim Presents The Digital Services Tax: A Cross-Border Variation Of The Consumption Tax Debate? At Vienna

Young Ran (Christine) Kim (Utah) presented The Digital Services Tax: A Crossborder Variation of Consumption Tax Debate at the University of Vienna yesterday as part of its Faculty Workshop Series hosted by Sabine Kirchmayr-Schliesselberger (University of Vienna) and Neil Buchanan (Florida):

As highly digitalized business models, such as Google, Amazon, and Facebook, have been mainstreamed in the economy, the traditional profit allocation and nexus rules of taxation are further strained. Traditionally, profit is allocated to market countries when the business has physical presence there. However, highly digitalized business models can generate profits in market countries without physical presence. Thus, market countries, especially the EU, have started imposing a digital services tax (“DST”) on the gross revenue generated in jurisdictions with highly digital business models, which has ignited heated debate across the globe.

DST is criticized as “ring-fencing,” or segregating, certain digital business models, because it arguably imposes a disguised corporate income tax on the profits of only certain digital firms, which discriminates against American tech giants. However, while DST is politically driven, the criticism is largely based on practical concerns and focused on the imminent impact, such as who is the winner and loser in the short term, rather than considering DST theoretically. More importantly, there is little discussion of the consumption tax aspect of the DST. DST is a turnover tax, which is a subcategory of consumption tax levied on the gross revenue of a firm. However, strangely, there is little discussion of the theoretical value of DST as a consumption tax.

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Tax Progressivity And Top Incomes: Evidence From Tax Reforms

Enrico Rubolino (University of Essex) & Daniel Waldenstrom (Paris School of Economics), Tax Progressivity and Top Incomes: Evidence from Tax Reforms:

We study the link between tax progressivity and top income shares. Using variation from large-scale Western tax reforms in the 1980s and 1990s and synthetic control method esti- mation, our results suggest that reductions in tax progressivity had large and lasting positive impacts on top income shares. The effects are largest within the top percentile while being almost zero in the lower half of the top decile, and they seem mainly related to cuts in top marginal tax rates. The results are robust to different model specifications, placebo tests in time and space and controlling for other simultaneous institutional reforms. Searching for mechanisms, we observe that the share of capital income of total income in the top income percentile increased after the reforms, which indicates that tax avoidance behavior related to the management of capital incomes could lie behind some of the observed effects.

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Crawford: SSRN And The (Arbitrary) Determination Of 'Scholarly' Merit

Bridget J. Crawford (Pace), SSRN and the (Arbitrary) Determination of 'Scholarly' Merit, 22 Green Bag 2d 201 (2019):

This article, published in the Green Bag, investigates and critiques SSRN’s (lack of clear) criteria for classification of material as a “scholarly paper” or “other paper.” In the former category appear to be “scholarly research papers,” bibliographies, briefs filed before some courts, some (but not all) teaching materials, and some (but not all) articles published in the Green Bag, for example. In the latter category are data tables, summary book reviews, opinion pieces, advocacy and satirical papers. “Other papers” are internet-searchable but are not displayed on the author’s SSRN page. Downloads of “other papers” are not included for purposes of SSRN’s various rankings.

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Bankman Presents Mr. Smith Gets An Education: Why It Is So Hard To Get Easy Tax Filing Today At NYU

Joseph Bankman (Stanford) presents Mr. Smith Gets an Education: Why it is so Hard to get Easy Tax Filing at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

I magine that one day, you get a note in the mail from Visa saying that starting next month, Visa will no longer be sending itemized bills (or indeed, any bills at all) to its cardholders. Instead, it will be the responsibility of every Visa cardholder to keep a record of all purchases, and refunds charged or credited to their account during the month, along with late payments and late fees, interest accruing on unpaid balances, and then tote it all up at the end of the month to figure out how much they owe Visa. If cardholders inadvertently omit some charges and pay Visa too little, you’re informed, Visa will assess interest and penalties on the underpayment.

Why on earth would Visa do such a thing?, you wonder. After all, Visa already has all that information in its computers, which can automatically calculate from that information the net amount you owe. Why should individual cardholders duplicate that effort, at considerable annoyance and expense to themselves, and with the dead certainty of errors?

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Li Presents Arbitration Of International Tax Disputes At Boston College

Jinyan Li (Osgoode Hall) presented Arbitration of International Tax Disputes: A Rich Countries’ Game Ill-fit for Belt & Road Countries (with Nathan Jin Bao (Gowling WLG, Toronto), Sean Shanghua Hu & Wayne Wei Hu)) at Boston College yesterday  as part of its Tax Policy Workshop Series hosted by Shu-Yi Oei, Jim Repetti, and Diane Ring:

Tax arbitration is considered by many to be an effective way of resolving tax disputes under tax treaties by pressuring the competent authorities to reach an agreement in a timely manner. Since its first adoption in the 1989 Germany-United States Tax Treaty, arbitration has been included in over 200 bilateral tax treaties, Article 25 of the OECD Model and United Nations Model (Alternative B) and Part VI of the Multilateral Instrument (MLI). Developing countries have generally resisted using arbitration out of sovereignty and other concerns. In this paper, the authors argue that arbitration, especially the “last best offer” or “baseball” style arbitration is a game for the rich countries. Drawing on existing literature and preliminary empirical research on tax disputes between Belt and Road Countries (about 130 countries participating in the China-led Belt and Road Initiative, purportedly representing over one half of the world population and 1/3 of global GDP), the authors explain that baseball arbitration is ill-fit for these countries for several reasons.

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Sarin & Summers: Shrinking the Tax Gap — Approaches And Revenue Potential

Natasha Sarin (Penn) & Lawrence H. Summers (Harvard), Shrinking the Tax Gap: Approaches and Revenue Potential:

Between 2020 and 2029, the IRS will fail to collect nearly $7.5 trillion of taxes it is due. It is not possible to calculate with precision how much of this “tax gap” could be collected. This paper offers a naïve approach. The analysis suggests that with feasible changes in policy, the IRS could aspire to shrink the tax gap by around 15 percent in the next decade—generating over $1 trillion in additional revenue by performing more audits (especially of high-income earners), increasing information reporting requirements, and investing in information technology. These investments will increase efficiency and are likely to be very progressive.

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Tax Justice Is Gender Justice: Advancing Gender And Racial Equity By Harnessing The Power Of The U.S. Tax Code

The Atlantic, Tax the Patriarchy:

The Rube Goldberg mess of the United States tax code picks winners and losers as it raises trillions of dollars for the federal government. It advantages unearned income over earned income. It advantages big, mortgaged homes over little, rented apartments. It advantages the richest of the rich over the merely rich. And, in many cases, it advantages men over women.

That last claim is the contention of three new reports produced by the National Women’s Law Center and several other research and advocacy groups. They analyze the tax code through the lens of gender and conclude that many provisions reflect, amplify, and entrench long-standing disparities between men and women.

But it need not be so. The tax code has profound power to close the gender wage-and-wealth gap, as well as to support equality in the workplace and help families thrive at home. As the country debates taxing billionaires out of existence, it might consider taxing the patriarchy out of existence, too.

National Women's Law Center, Tax Justice Is Gender Justice: Advancing Gender and Racial Equity by
Harnessing the Power of the U.S. Tax Code:

The tax code sets the rules that shape our economy, reflecting and perpetuating notions of who and what our society values. It’s an opportunity to fight inequality. But today’s tax code contains outdated and often biased assumptions about family structures, marriage, participation in the paid workforce, and more that work together to perpetuate structural barriers against women, families with low incomes, and people of color. The tax code can be a barrier for realizing gender justice – but it can also be a tool. It’s time we take advantage.

Ariel Jurow Kleiman (San Diego), Amy Matsui (National Women’s Law Center) & Estelle Mitchell (National Women’s Law Center), The Faulty Foundations of the Tax Code: Gender and Racial Bias in Our Tax Law:

This report ... examines the outdated assumptions and gender and racial biases embedded in the U.S. tax code. It highlights tax code provisions that reflect and exacerbate gender disparities, with particular attention to those that disadvantage women with low incomes, women of color, members of the LGBTQ community, people with disabilities, and immigrants.

• Examined policies include the joint filing of spousal income, treatment of informal caregiving, incentives for business formation and wealth accumulation, and IRS enforcement patterns. 
• Although perhaps facially neutral, many of these policies likely provide disproportionate benefit to men, may heighten pressure for women to leave the formal labor market, and reflect biased assumptions about gender, race, and family structure. 
• This report offers recommendations for better data and analysis so that policymakers, advocates, and the public can fully understand the impact of the current tax code and proposed tax policies.

Katy Milani (Roosevelt Institute), Melissa Boteach (National Women’s Law Center), Steph Sterling, (Roosevelt Institute) & Sarah Hassmer (National Women’s Law Center), Reckoning With the Hidden Rules of Gender in the Tax Code: How Low Taxes on Corporations and the Wealthy Impact Women’s Economic Opportunity and Security:

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Rubolino Presents Can Local Governments Implement A Progressive Income Tax? Today At UC-Berkeley

Enrico Rubolino (University of Essex) presents Can Local Governments Implement a Progressive Income Tax? at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

This paper studies the effects of local income taxation on taxable income and within-country migration, using data from tax returns and all transfers of fiscal residence since the early 2000s in Italy. Over this period of tax decentralization, regions and municipalities have been granted greater power to set different tax rates across income brackets. Municipalities switching from a flat to a progressive income tax schedule experience a drop in their tax base, mostly due to a reduction in the income share held by the top percentile. This effect translates into a net-of-local tax taxable income (population stock) elasticity of 0.83 (0.74). Moving the fiscal residence from high- to low-tax places is the main driver of this response: a 1 percent increase in the net-of-tax differential within a province-pair raises outmigration by 1.6 percent. Despite the threat of repelling wealthy residents, these estimates imply that the benefit of additional revenues from adopting a progressive income tax significantly exceeds the cost of foregone income tax revenue due to tax-induced mobility.

Blank Presents Progressive Tax Procedure Today At Loyola-L.A.

Joshua Blank (UC-Irvine) presents Progressive Tax Procedure (with Ari Glogower (Ohio State)) today at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto:

Abusive tax avoidance and tax evasion by high-income and wealthy taxpayers pose unique threats to the tax system. These strategies undermine the tax system’s progressive features and distort its distributional burdens. Responses to this challenge generally fall within two categories: calls to increase IRS enforcement and proposals to target the specific strategies that enable tax avoidance and evasion by these taxpayers. For example, taxpayers who engage in certain tax shelter transactions or hold assets abroad face additional compliance obligations and potential tax penalties.

This Article presents the case for “progressive tax procedure” — means-based adjustments to the tax procedure rules as they apply to high-income and wealthy taxpayers. In contrast to the activity-based responses in current law, progressive tax procedure would tailor rules to the characteristics of the actors rather than their activities. Instead of focusing exclusively on specific potentially abusive activities, such as “reportable transactions,” progressive tax procedure would adjust tax procedure rules based on the taxpayer’s income or net assets. For example, a high-income taxpayer would face higher tax penalty rates or longer periods where the IRS could assess tax deficiencies than other taxpayers.

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Lesson From The Tax Court: Whistleblowers Don't Get To Work The Case

You can't bring a Qui Tam action against a tax cheat.  You can blow the whistle, but it's not the same.

Qui Tam actions are lawsuits brought by private parties on behalf of the federal government against those who have defrauded the government.  Congress has long allowed such actions.  The current rules are found in 31 U.S.C. §3730.  That statute permits private parties to enforce the provisions of the immediately preceding statute, 31 U.S.C. §3729, known as the False Claims Act.

The False Claims Act, however, explicitly excludes actions against tax cheats from its scope.  See §3729(d).  That means private parties cannot bring Qui Tam actions to enforce the tax laws.  Instead, to help the IRS enforce the tax laws, Congress has created a whistleblower program, codified in §7623.  It permits individuals who report wrong-doing to the IRS to “receive as an award at least 15 percent but not more than 30 percent of the proceeds collected...”  In FY18, the Whistleblower Office's Report To Congress said that the program resulted in collection of over $1.44 billion, at a cost (of awards) of $312 million (about a 21% award rate). 

The recent case of Vincent J. Aprunzzese v. Commissioner, T.C. Memo. 2019-141 (Oct. 21, 2019)(Judge Vasquez) teaches the difference between a Qui Tam action and whistleblowing.  There, the whistleblower argued that he was due a larger award because the IRS could have collected much more based on the information he gave.  The Tax Court rejected the argument.  The case also shows why allowing Qui Tam actions for tax would not be a good idea: you don’t want private parties working the audits.  Details below the fold.

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NY Times: Warren Wealth Tax Would Slow Economic Growth By 13% According To Penn Wharton Budget Model

New York Times, Warren Wealth Tax Could Slow Economy, Early Analysis Finds:

Senator Elizabeth Warren’s proposed wealth tax would slow the United States economy, reducing growth by nearly 0.2 percentage points a year over the course of a decade, an outside analysis of the plan estimates.

The preliminary projection from the Penn Wharton Budget Model, which was unveiled on Thursday in Philadelphia, is the first attempt by an independent budget group to forecast the economic effects of the tax that has become a centerpiece of Ms. Warren’s campaign for the Democratic presidential nomination.

The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt, annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade.

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The Top Five New Tax Papers

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5. The #1 paper is #81 among 14,713 tax papers in all-time downloads:

1. [2,405 Downloads]  Taxing the Rich: Issues and Options, by Lily Batchelder (NYU) & David Kamin (NYU)
2. [289 Downloads]  The Arm's Length Standard Is Not the Problem, by Lorraine Eden (Texas A&M)
3. [281 Downloads]  Boiling Starbucks’ Roasting Down to the Essence of its Residual, by William Byrnes (Texas A&M)
4. [207 Downloads]  Implications for Apple in the Lower Court Rulings in Starbucks and Fiat, by Ruth Mason (Virginia)
5. [175 Downloads]  2018 Developments in Connecticut Estate and Probate Law, by Jeffrey Cooper (Quinnipiac) & John Ivimey (Reid and Riege, Hartford)

Flanagan: Reframing Taxigration

Jacqueline Lainez Flanagan (University of the District of Columbia), Reframing Taxigration:

Tax compliance by undocumented immigrant workers could and should be the architectural centerpiece of immigration reform. Analyzing this premise using broad economic frameworks and examining corresponding mechanisms in U.S. tax and immigration systems, this article seeks to reframe “taxigration” to signify tax filing as a threshold condition to legalization.

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Call For Papers: Indiana Symposium On Social Equality in the Sharing Economy

Call for Participation: 2020 Social Equality in the Sharing Economy Symposium:

The “sharing economy,” also known as the “gig” or “on-demand” economy, is transforming the way people work, eat, commute, and travel by seamlessly connecting suppliers and consumers via app-based technology platforms.  It provides flexible income earning opportunities for one side and convenience and low prices for the other. However, it also creates a dizzying array of policy problems for communities of all sizes—from tax evasion and pollution to price discrimination, worker precarity, and violent protests.  The Indiana Journal of Law and Social Equality (IJLSE), in collaboration with Indiana University’s Kelley School of Business and the Ostrom Workshop, is hosting a symposium on February 13th and 14th at the Maurer School of Law in Bloomington, Indiana to offer and debate solutions to these complex and fast-moving set of challenges.

Designed to stimulate interdisciplinary research and collaboration, as well as to amplify existing research, the Social Equality in the “Sharing Economy?” Symposium will consist of a series of keynotes, panel discussions, and paper presentations from a range of voices.

We invite original paper submissions from all relevant disciplines for the Symposium.

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Blank Presents Progressive Tax Procedure Today At San Diego

Joshua Blank (UC-Irvine) presents Progressive Tax Procedure (with Ari Glogower (Ohio State)) today at San Diego as part of its Tax Law Speaker Series:

Discussions of progressive taxation in the United States—and of whether the rich pay enough in taxes—generally focus on the structure of the substantive tax law, such as the marginal rates, income brackets, deductions, and credits under the federal income tax. Despite recent reports of tax avoidance and noncompliance by high-income taxpayers, these discussions have not focused on the structure of the tax procedure rules, which govern the Internal Revenue Service’s administrative responsibilities and taxpayers’ compliance obligations.

This Article presents the case for a new system of “progressive tax procedure.” Currently, tax procedure rules—such as tax penalties and the statute of limitations—typically apply in a uniform manner to all taxpayers, irrespective of their income. Under progressive tax procedure, in contrast, these rules would vary depending on the taxpayer’s income. For example, a high-income taxpayer would face higher tax penalty rates or longer periods where the IRS could assess tax deficiencies.

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McCoskey & Narotzki: Education Has Been 'Dumbed-Down' in Tax Reform

Melanie McCoskey (Akron) & Doron Narotzki (Akron), Education Has Been 'Dumbed-Down' in Tax Reform, 22 Fla. Tax Rev. ___ (2019):

With promises of “Make America Great Again” and tax reform for “middle-class” Americans, the current federal government administration has implied that the average American would become more prosperous under this tax system. It is no surprise that most middle-class Americans view a college education as a requirement for achieving a better life. However, under the TCJA, education has not fared well, and in reality, students from many low- and moderate-income families will face reduced scholarships from elite schools, thereby reducing diversity on these campuses. Other proposed changes to education in the original tax bill, which were later removed, are also addressed as they may hint to which direction this may go and face legislative changes in the future.