AEI Hosts Panel Discussions Today On The Tax Cuts And Jobs Act

The American Enterprise Institute hosts a panel discussion today on Trump’s Tax Reform Happened: Now What? A Panel Discussion on the Tax Cuts and Jobs Act (live stream at 2:00 - 4:00 pm EST here):

At the end of 2017, the passage of the Tax Cuts and Jobs Act (TCJA) brought the most sweeping overhaul of the US tax code in decades. At the time, projected effects and opinions were diverse and relatively uncertain, even among leading thinkers in the field. Now more than a year and half since its enactment, we are asking top tax experts from across the ideological spectrum to answer a variety of questions about this major tax overhaul — such as the impact on households, the corporate rate, the impact on inequality, deficit effects, long-term growth, and more.

• Alex Brill (AEI), Pro-family Tax Policy: The Case of the Tax Cuts and Jobs Act
• Leonard E. Burman (Syracuse), The Pro-Growth Argument for Progressive Tax Reform That Was Missing from TCJA
• Kimberly Clausing (Reed College), The Tax Cuts and Jobs Act Was Never About Workers
• Dhammika Dharmapala (Chicago), The Consequences of the Tax Cuts and Jobs Act’s International Provisions: The Early Empirical Evidence
• Jason Furman (Harvard Kennedy School), 'Not Much’: What Macroeconomic Data Say About the Impact of the Tax Cuts and Jobs Act
• William G. Gale (Brookings Institution), A Fixable Mistake: The Tax Cuts and Jobs Act
• Mindy Herzfeld (Florida), The Tax Cuts and Jobs Act: Lessons For the Future
• R. Glenn Hubbard (Columbia), The Tax Cuts and Jobs Act and Investment: Progress, Not Perfection

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Wallace Presents Democracy-Enhancing Tax Policy Today At Loyola-L.A.

Clint Wallace (South Carolina) presents Democracy-Enhancing Tax Policy at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto: 

This paper contests the pervasive notion that democratic governance and good tax policy (however defined) are in conflict, and places the impulse to avoid or constrain democratic forces in tax policy making as a symptom of a more fundamental challenge: a lack of attention to the actual and potential role of taxation in promoting a flourishing democratic community. 

I offer two theoretical arguments in response to this notion and impulse. First, I argue that democracy demands broad participation in tax policy making. This point connects tax scholarship with an important element of democratic theory, the principle of affected interests. Second, I argue that an inclusive tax policy process should have as a central goal non-domination, both in decisionmaking procedures and in substantive policies. This argument is grounded in theoretical work on competitive models of democracy, which recommends a fluid, iterative decisionmaking process, open to challenge and subject to revision, with conditions that promote democratic legitimacy. 

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Wong Presents The Financial Burden Of Property Taxes Today At UC-Berkeley

Francis Wong (Ph.D. Economics 2020, UC-Berkeley) presents The Financial Burden of Property Taxes at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

Financial hardship resulting from rising property tax burdens is a common complaint among homeowners, but very little evidence exists evaluating its quantitative importance. Standard frictionless models do not allow for financial strain generated by property taxation because under normal conditions liquid housing wealth sufficiently covers the cost of property taxes. This paper leverages a novel merge between property records, mortgage servicing data, and credit bureau data to demonstrate that relatively small increases in property taxes lead to increases in mortgage default and decreases in consumption. Event study estimates around the month in which homeowners' monthly property tax payments are increased to reflect their new property assessment imply that a $100 monthly tax increase leads to a 1% increase in mortgage delinquency and reduces auto consumption by $28. Moreover, homeowners generally do not draw on their home equity to pay property tax bills. These results contradict the predictions of standard models and imply the existence of important frictions in property taxation.

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Taxing The “Rich” Won’t Pay For Politicians’ Promises

Manhattan Institute, Issues 2020: Taxing the “Rich” Won’t Pay for Politicians’ Promises:

The Narrative

"I believe that we should be asking the very wealthiest people in this country to start paying their fair share of taxes. That way, we will not only lower the deficit, but we will bring in enough revenue to invest in our economy and create the millions of new jobs we desperately need."[1]
— Bernie Sanders

"My vision for Medicare-for-All does not include a middle-class tax hike. I’m not prepared to do that."[2]
— Kamala Harris

"If we have enough money to pay for tax breaks for corporations. We have enough to invest in Medicare-for-All, Green New Deal and cancel student debt."[3]
— Ilhan Omar

Reality

Politicians claim that agendas costing approximately $40 trillion over 10 years can be financed mostly by taxing wealthy families and corporations. Essentially, they promise a European-style welfare state without Europe’s burdensome taxes on middle- and lower-income earners. This is not possible.

Combining popular proposals to tax the wealthiest Americans and corporations would likely raise $3.9 trillion over the decade. This revenue could not even eliminate half the $15.5 trillion budget deficit that is already projected over the next decade, much less pay for $40 trillion in more spending. The overwhelming majority of new tax revenue to finance such expenditures would have to be raised from the middle- and lower-income earners.

Key Findings

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100th Lesson From The Tax Court: The Role Of Innocence In § 6015 Spousal Relief

Author's Note:  This is my 10oth Lesson published on TaxProfBlog.  I continue to be very grateful to Paul for this opportunity.  I have learned loads from the cases and I enjoy sharing what I learn. 

Editor's Note:  I am very grateful to Bryan for the great work he has done on these weekly posts. Bryan has developed a huge following among tax academics and practitioners: his Lessons From The Tax Court are invariably among the most popular posts each week, and cumulatively have been viewed 2.6 million times (26,000 page views per post).

Section 6015 is not titled “Innocent Spouse Relief.”  It is titled “Relief From Joint and Several Liability on Joint Return.”  And you will not find the word “innocent” (or any cognate) in the statute’s text.  But we still call the relief granted by §6105 “innocent spouse relief.”  Two cases from last week teach why.  In Habibe Kruja (Petitioner), Ermir Kruja (Intervenor) v. Commissioner, T.C. Memo. 2019-136 (Oct. 15, 2019) (Judge Buch) the Tax Court granted partial relief under §6105(c).  In Lori D. Sleeth (Petitioner), David T. Sleet (Intervenor) v. Commissioner, T.C. Memo. 2019-138 (Oct. 15, 2019) (Judge Goeke), the Court denied relief under §6015(f).  Both cases show that the idea of innocence plays an important, if often implied, role in the application of §6015.  Details below the fold.

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Call For Papers And Commentators: 23rd Annual Critical Tax Conference At Florida

[W]e at the University of Florida are pleased that we will be the hosts of the 2020 version of the Critical Tax Conference. To give you all maximum time to make plans and to consider the special publication possibility that I'll describe momentarily, we are sending this official Call for Papers a bit earlier than usual.

The conference will begin early on Saturday, April 4 and conclude on Sunday the 5th, with the usual mixture of paper panels and incubator sessions — and, of course, the meals and get-togethers that we've all come to expect and enjoy.

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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:

1. [1,945 Downloads]  Taxing the Rich: Issues and Options, by Lily Batchelder (NYU) & David Kamin (NYU)
2. [429 Downloads]  An Introduction to Tax Careers for J.D.s, by Heather Field (UC-Hastings)
3. [157 Downloads]  Digital Service Taxes and the Broader Shift From Determining the Source of Income to Taxing Location-Specific Rents, by Daniel Shaviro (NYU) (reviewed by Young Ran (Christine) Kim (Utah) here)
4. [149 Downloads]  Education Planning and the SECURE Act: Creating a Tax Law Paradox, by Ross Riskin (American College of Financial Services)
5. [125 Downloads]  Taxing Wealth in an Uncertain World, by Daniel Hemel (Chicago) (reviewed by Mirit Eyal-Cohen (Alabama) here)

Call For Tax Papers And Panels: SEALS 2019 (Oct. 23 Deadline)

While it is a little hard to believe, it is already time to start thinking about next summer.  The Call for Papers for SEALS 2020 has been open for awhile, but somehow I missed the original call, so we are now running late.  The 2020 conference will be held July 30-August 5, 2020 at the Marriott Fort Lauderdale, Florida. 

The conference submission tool is now open, and I am eager to coordinate people who are interested in presenting tax work at the SEALS conference into relevant panel groups.  In addition, we have also had very successful Tax Policy Discussion Groups in recent years.  Panels are generally composed of 4 to 5 people speaking for 15 to 20 minutes each.  I will attempt to group papers so that panels include papers on similar topics.  The Discussion Group includes about 10 people, each speaking for 5-8 minutes on a topic related to tax policy, broadly interpreted.  This has often included topics that are not necessarily fully formed paper ideas, but are thoughts the presenter has had on something he or she would like to discuss with a group of smart, informed people in an informal setting.  Both types of presentation have been very successful in the past.  Each presenter may participate in one Panel AND one Discussion Group.

So, if you are interested in submitting to SEALS and would like me to include you in a group of other tax profs, please email me at jbirdpollan@uky.edu with the following information:

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Does Government Play Favorites? Evidence From Opportunity Zones

This week, Michelle Layser (Illinois) reviews Ofer Eldar (Duke) and Chelsea Garber (Duke), Does Government Play Favorites? Evidence from Opportunity Zones (Oct. 3, 2019).

With the 2020 Census on the horizon, investors nationwide have been lobbying states to expand the areas designated for tax preferred investment under the federal Opportunity Zones law. In 2017, state governors selected 8,764 census tracts for Opportunity Zone designation. These tracts were selected from a pool of 30,981 low-income census tracts and 10,237 contiguous tracts that were eligible under the federal statute. Whether the IRS will permit states to expand or revisit their Opportunity Zone designations after the Census is yet to be seen. In the meantime, Professors Ofer Eldar and Chelsea Garber have provided a fascinating quantitative analysis of factors that may have driven the initial designation process.

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Book Presents Administrative Burdens, Sludge, And Individual Taxpayer Rights Today At Florida

Leslie Book (Villanova) presents Administrative Burdens, Sludge, and Individual Taxpayer Rights (with Keith Fogg (Harvard)) at Florida today as part of its Tax Colloquium Series:

The tax system designed by Congress imposes significant administrative burdens on taxpayers. Decisions by the IRS regarding how it administers the tax laws can add to the burdens imposed by Congress. The administrative burdens are consequential and hurt some people, especially lower or moderate-income individual taxpayers, more than others. While the IRS strives to measure and reduce the time and money that taxpayers spend to comply with their tax obligations, the IRS does not consider the effect that administrative burdens have on taxpayer rights, including the right to be informed, the right to pay no more than the correct amount of tax, and the right to a fair and just tax system. In this article, building on the work of public administration scholars Pamela Herd and Don Moynihan, we discuss the concept of administrative burdens and reveal specific examples of how IRS actions and inaction have burdened taxpayers and jeopardized taxpayer rights.

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Hemel & Weisbach: The Behavioral Elasticity Of Tax Revenue

Daniel Hemel (Chicago) & David A. Weisbach (Chicago), The Behavioral Elasticity of Tax Revenue:

This article presents a new measure of the efficiency consequences of tax policies and explains how this new measure can shed light on a wide range of tax law debates. We build upon the “elasticity of taxable income” approach pioneered by public finance scholars over the last quarter century and extend that approach to address complex tax systems with multiple rates, multiple bases, and administrative and compliance costs. The resulting measure — the behavioral elasticity of taxable income, or BETR — captures the change in real resources available to society caused by any marginal change in tax rates, the tax base, or tax enforcement. We argue that the BETR can serve as a guide to a wide range of tax policy issues, and we illustrate the BETR’s utility by applying it to questions such as the proper treatment of mixed personal/business expenses, the appropriate aggressiveness of efforts to address tax shelters, and the optimal mix of audits, recordkeeping and reporting requirements, and penalties.

We also consider the relationship between the BETR and the distributive aims of tax law. While the BETR is a measure of efficiency and not distribution, the BETR can aid policymakers in deciding both how much to redistribute and how to accomplish distributive objectives most efficiently. We end with reflections on the implications of the BETR for the design of non-tax legal rules.

Kleiman Presents Tax Limits And The Future Of Local Democracy Today At Northwestern

Ariel Jurow Kleiman (San Diego) presents Tax Limits and the Future of Local Democracy, 133 Harv. L. Rev. ___ (2019), at Northwestern today 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:

Property tax limits are state-level laws that place caps on local governments’ tax rates and revenue. These statutory limits, which put pressure on already strapped cities and counties in forty-six states, present an inexorable dilemma for local policymakers. On the one hand, they may cause cuts to vital services, bankruptcy, and reliance on regressive revenue sources. At the same time, however, tax limits may reflect genuine concerns about government profligacy and nonresponsiveness. While much research has focused on the first side of the dilemma—examining the laws’ fiscal consequences—this Article explores the second, probing how tax limits affect the distribution of political power between local voters and policymakers.

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Yale & Polsky: Taxing Residential Solar

Ethan Yale (Virginia) & Gregg D. Polsky (Georgia), Taxing Residential Solar:

Residential solar systems are becoming commonplace in many regions of the United States. Use of such systems raises issues in tax doctrine and policy that are not well appreciated and have not yet been systematically analyzed. The goals of this article are threefold: (1) to identify the main issues and to organize them into a coherent framework, (2) to analyze the doctrinal and policy ramifications of present law, and (3) to suggest improvements to present law.

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Call For Proposals: Inequality Of Wealth, Race, And Class, Equality Of Opportunity

The University of St. Thomas (MN) Journal of Law and Public Policy is hosting a symposium on March 27, 2020, entitled “Inequality of Wealth, Race, and Class, Equality of Opportunity.” Topics include “Student Loans;” “Social Mobility;” “Housing;” and “The Public Good.”

Please submit proposals of 250 to 500 words to Professor Charles J. Reid, Jr, by November 15, 2019. We shall notify those who have submitted successful proposals shortly after that date. Successful submissions can expect a modest honorarium. Successful submissions will be published in our Journal of Law and Public Policy. The deadline for final drafts is July, 2020.

For those who wish to present in person on March 27, in addition to the honorarium, we shall cover travel costs, food and lodging.

Foreign Corruption Of The Political Process Through Social Welfare Organizations

Norman I. Silber (Hofstra), Foreign Corruption of the Political Process Through Social Welfare Organizations, 114 Nw. U. L. Rev. ___ (2019):

Social welfare organizations are prohibited from channeling foreign contributions to favored political candidates. Prospects for enforcing this prohibition, however, are uncertain. Do federal election laws or tax laws provide effective tools? Are state authorities equipped to hold a nonprofit culpable as an entity, or to hold a manager or board member responsible? These questions are important to understand whether the existing rules safeguard the nonprofit community and the fairness of elections. This Essay concludes that federal tax and election rules are likely to be less effective than the authority vested with state attorneys general to monitor and hold accountable nonprofits and their officers and directors who become vehicles for foreign interference in national elections.

Kane Presents The Global Battle To Capture Multinational Enterprise Profits Today At Pennsylvania

Mitchell Kane (NYU) presents Collecting the Rent: The Global Battle to Capture MNE Profits, 72 Tax L. Rev. ___ (2019) (with Joseph Bankman (Stanford) & Alan Sykes (Stanford)) (reviewed by David Elkins (Netanya) here) at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

Multinational enterprises (MNEs) often earn substantial profits, or "economic rents." Often, these MNEs are domiciled in the United States, and the rents derive from ownership of intellectual property. These MNEs have structured their affairs to pay little taxes to countries outside the United States or otherwise to share their rents in these countries. Apple and Microsoft, for example, may earn roughly half their profits outside the United States but do not pay significant amounts of taxes to any foreign country.

The European Union and other countries have responded to this state of affairs with new tax legislation, antitrust actions, and other policies that have the effect of, and perhaps the intention of, capturing a greater share of MNE rents for their treasuries or citizens. To date, these policies are discussed in separate literatures focused on a particular policy domain (tax, antitrust, and so on). This paper offers the first unified or comparative analysis of the issue.

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Viard Posts Two 2019 Tax Papers On SSRN

Alan D. Viard (American Enterprise Institute), Base Broadening Gone Wrong: Work-Related Costs and the TCJA, 164 Tax Notes 539 (July 22, 2019):

Tax policy scholars often advocate broadening the tax base. Not all base broadening is created equal, however. A fundamental tax policy principle, firmly grounded in economic theory, requires that an income tax allow deductions for the costs of earning income, including work-related costs. Base broadening that removes those deductions is misdirected. Unfortunately, the Tax Cuts and Jobs Act implemented that type of base broadening by suspending tax relief for moving expenses and employee business expenses for 2018 through 2025.

Alan D. Viard (American Enterprise Institute), An Economic Analysis of the TCJA's Larger Standard Deduction, 163 Tax Notes 79 (Apr. 1, 2019):

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Liscow Presents Democratic Law And Economics Today At NYU

Zachary Liscow (Yale) presents Democratic Law and Economics at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

Law and economics typically analyzes ideal policies, ignoring real-world institutions and constraints. It is helpful for real-world political actors, though, to have guidance for the real world, which this Article provides for policymakers setting policy with distributional impacts. Current guidance not considering real-world constraints may significantly hamper policymakers’ effectiveness at addressing today’s crisis of inequality. Critique of law and economics is widespread, but, to provide an alternative framework for policymaking, one needs to start with an account of its failures that can provide such an alternative framework. This Article provides such an account of the failures and an alternative framework.

This Article explores a major dissonance between expert and lay policy views: the set of tax prescriptions required by law and economics is sharply at odds with ordinary citizens’ psychology about taxes. While standard economic reasoning views taxes solely as a system of incentives and redistribution, many ordinary people also think of taxes as rewarding desert—as recent rigorous survey experiments, advances in the economics of taxation, and decades of experience show. Desert-based tax views limit redistribution, since the poor are deemed to not deserve free cash and the rich are deemed to deserve some of their income. A democracy where Congress is attentive to such tax views will need to look elsewhere to achieve distributive justice.

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Rosenbloom & Shaheen: The TCJA And Tax Treaties

H. David Rosenbloom (NYU) & Fadi Shaheen (Rutgers), The TCJA and the Treaties, 95 Tax Notes Int'l 1057 (Sept. 9 2019):

This article addresses the interaction of U.S. income tax treaties and certain changes made by the Tax Cuts and Jobs Act to the international provisions of the corporate income tax. The article makes four main points. First, it explains why the participation exemption, the global intangible low-taxed income (GILTI) regime, and the transition tax on deemed repatriations of deferred foreign earnings are compatible with provisions of U.S. treaties allowing for relief from international double taxation. Second, it explains why the disallowance of deductions for foreign related-party interest or royalty payments in hybrid transactions or with hybrid entities is compatible with treaty nondiscrimination provisions. Third, the article explains why the foreign-derived intangible income (FDII) regime, the (arguable) disallowance of a statutory foreign tax credit (FTC) with respect to hybrid dividends not benefiting from the participation exemption, and the repeal of IRC section 902 are inconsistent, but not in conflict, with U.S. treaty provisions on nondiscrimination and relief from double taxation, and therefore raise no treaty override questions.

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Fox Presents The Uneasy Case For Higher Business Taxes Today At Loyola-L.A.

Edward Fox (Michigan) presents The Uneasy Case for Higher Business Taxes at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto: 

Despite the huge stakes, there is little scholarly discussion of the appropriate corporate tax rate. Where there is analysis, discussion focuses overwhelmingly on increasing international competition, which suggests lower corporate tax rates. We try to add some balance to the discussion by elaborating on reasons for higher corporate tax rates. In particular, two recent changes militate in favor of higher taxes on corporations: first, changes in the American economy leading to the rise of rents and, second, recent changes in tax law (and potential future changes) making the corporate tax more efficient. Other arguments favor higher rates as well. Although we cannot say what that rate should be, we offer the reasons favoring a higher rate and describe reforms that could help ease the adoption of higher, efficient taxes on corporate profits. We suggest that, at minimum, proponents of lower corporate tax rates present an incomplete picture and that the “lower corporate tax rates” conclusion is a non-obvious one.

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Lesson From The Tax Court: No § 911 Exclusion For Taxpayers With U.S. Abode

In several Lessons From The Tax Court (here, here, and here) we have seen how the concept of a tax home is important for deciding when §162 allows a deduction for the expenses of travel away from home.  The lessons teach that a tax home is where one must live to earn a living.  One’s personal choice of abode may or may not be one’s tax home.  That is the law for §162 purposes.  For §911 purposes, however, Congress has made the taxpayer’s personal choice of abode part of the definition of tax home.  That definition is what tripped up the taxpayers in Joseph S. Bellwood And Jacqueline E. Bellwood v. Commissioner, T.C. Memo 2019-135 (October 7, 2019)(Judge Gustafson) and in James M. Cambria v. Commissioner, T. C. Summary Opinion 2019-28 (September 30, 2019)(Judge Nega).  Details below the fold.

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Saez & Zucman: How To Tax Our Way Back To Justice

New York Times op-ed:  How to Tax Our Way Back to Justice, by Emmanuel Saez (UC-Berkeley) & Gabriel Zucman (UC-Berkeley):

America’s soaring inequality has a new engine: its regressive tax system. Over the past half century, even as their wealth rose to previously unseen heights, the richest Americans watched their tax rates collapse. For the working classes over the same period, as wages stagnated, work conditions deteriorated and debts ballooned, tax rates increased.

Stop to think this over for a minute: For the first time in the past hundred years, the working class — the 50 percent of Americans with the lowest incomes — today pays higher tax rates than billionaires. ...

[W]we have estimated how much each social group, from the poorest to billionaires, paid in taxes for the year 2018. Our starting point is the total amount of tax revenue collected in the United States, 28 percent of national income. We allocate this total across the population, divided into 15 income groups: the bottom 10 percent (the 24 million adults with the lowest pretax income), the next 10 percent and so on, with finer-grained groups within the top 10 percent, up to the 400 wealthiest Americans.

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UC-Davis/ACTEC Symposium: An Empirical Analysis Of Wealth Transfer Law

The UC Davis Law Review hosted its 53rd annual symposium on Friday on An Empirical Analysis of Wealth Transfer Law,  co-sponsored by the ACTEC Foundation (call for papers here): 

Panel #1: Marriage

• David Horton (UC-Davis) (moderator)
• Naomi Cahn (George Washington), What's Wrong about the Elective Share Right
  Commentator: Shayak Sarkar (UC-Davis)
• Alyssa DiRusso (Samford), Using Empirical Data on the Widowhood Effect to Optimize Simultaneous Health Law and Drafting
  Commentator: Andrea Chandrasekher (UC-Davis)
• Russell James (Texas Tech), Empirical Analysis of Charitable Bequest Transfers: A Comprehensive Review, New Findings, and the Emerging Potential of Longitudinal Data
• Jeffrey Pennell (Emory), Individuated Determination of a Surviving Spouse's Elective Share

Panel #2: Research Using Probate Records

• Adam Hirsch (San Diego) (moderator)
• Bridget Crawford (Pace), What Probate Courts Cite: A Study of the New York County Surrogate's Court 2017-2018
  Commentator: Donna Shestowsky (UC-Davis)
• David Horton (UC-Davis), Do-It-Yourself-Wills
  Commentator: Alexander Boni-Saenz (Chicago-Kent)
• Alberto Lopez (Alabama), Antebellum and Postbellum Testamentary Transfers in Three Kentucky Counties
• Reid Kress Weisbord (Rutgers), Fiduciary Authority and Liability in Probate Estates: An Empirical Analysis
  Commentator: Jane Baron (Temple)

Panel #3: Nonprobate Transfers, Estate Planning, and Intestacy

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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 new papers debuting on the list at #4 and #5:

1. [1,899 Downloads]  Taxing the Rich: Issues and Options, by Lily Batchelder (NYU) & David Kamin (NYU)
2. [412 Downloads]  An Introduction to Tax Careers for J.D.s, by Heather Field (UC-Hastings)
3. [171 Downloads]  The Qualified Small Business Stock Exclusion: How Startup Shareholders Get $10 Million (Or More) Tax-Free, by Manoj Viswanathan (UC-Hastings)
4. [127 Downloads]  Digital Service Taxes and the Broader Shift From Determining the Source of Income to Taxing Location-Specific Rents, by Daniel Shaviro (NYU)
5. [126 Downloads]  Education Planning and the SECURE Act: Creating a Tax Law Paradox, by Ross Riskin (American College of Financial Services)

Weekly SSRN Tax Article Review And Roundup: Kim Reviews Shaviro's Digital Services Taxes

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Daniel Shaviro (NYU), Digital Service Taxes and the Broader Shift from Determining the Source of Income to Taxing Location-Specific Rents.

Earlier this week, the OECD released the Secretariat Proposal for a "Unified Approach" for the new tax nexus and profit allocation rules to address the tax challenges of the increasingly digitalized economy. The proposal covers highly digitalized business models, but is increased in scope to include consumer-facing businesses. The Unified Approach creates 1) a new nexus rule, not dependent on physical presence and instead largely based on sales, and 2) a new profit allocation rule using a formulaic approach to determine a share of residual, or non-routine, profit allocated to market countries. In addition, if a taxpayer has a traditional nexus in the market country, an additional amount of profit consisting of a fixed return for certain baseline marketing and distribution functions that take place in the market country may further be allocated to the market country. In exchange for this new taxing right of market countries, the countries should agree to a binding and effective dispute prevention and resolution mechanism even if there might be cases where there are more functions in the market countries—that is, more allocable profits to market countries—than the baseline marketing and distribution functions.

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Taxing The Sharing Economy And Digital Platforms

Yue Dai (Shanghai University of Finance and Economics, School of Law), Taxing the Sharing Economy and Digital Platforms, 95 Tax Notes Int'l 511 (Aug. 5, 2019):

This article examines how companies like Uber and Airbnb present themselves to tax authorities, how different jurisdictions respond to and tax the sharing economy, and the unique challenges of taxing platform businesses in China, the United States, and around the globe.

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Fleming Presents Is Unilateral Formulary Apportionment Better Than The Status Quo? Today In Vienna

Cliff Fleming (BYU) presents Is Unilateral Formulary Apportionment Better Than the Status Quo? (with Robert Peroni (Texas) & Stephen Shay (Harvard)) at the Institute for Austrian and International Tax Law of the Vienna University of Economics and Business:

It’s doubtful that the world’s large-economy countries will adopt formulary apportionment in a coordinated movement that yields a uniform regime. The more likely scenario is that a formulary apportionment adopter will be a unilateral actor winding up with a system that does not mesh well with the systems of its major trading partners.

This paper points out that formulary apportionment does not require adoption of a territorial system. Formulary apportionment can be used in a worldwide regime to identify foreign-source income for foreign tax credit purposes. Thus, the unilateral adoption issue, with its uncoordinated results, is relevant even for countries that contemplate maintaining some form of worldwide taxation with a limited foreign tax credit.

This paper’s principal purpose is to examine and evaluate the factors that any country must consider when contemplating replacement of the arm’s-length approach with formulary apportionment. Among those factors are:

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The Geometry Of International Tax Planning After The Tax Cuts And Jobs Act

Michael P. Donohoe (Illinois), Gary A. McGill (Florida) & Edmund Outslay (Michigan State), The Geometry of International Tax Planning After the Tax Cuts and Jobs Act: A Riff on Circles, Squares, and Triangles, 72 Nat'l Tax J. ___ (2019):

The enactment of the so-called Tax Cuts and Jobs Act of 2017 (TCJA) significantly changes the landscape for tax planning and compliance by U.S. multinational corporations (MNCs). The promised shift to a more territorial system actually results in a greater likelihood that more of a U.S. MNC’s foreign income is subject to current U.S. taxation. The TCJA complicates effective tax planning for such firms, forcing them to reexamine their existing global structures and financial arrangements (i.e., the “geometry” of international tax planning). We briefly review international tax planning before the TCJA as well as some key international tax provisions in the TCJA.

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Peroni Presents Expanded Worldwide Versus Territorial Taxation After The TCJA Today At Pennsylvania

Robert Peroni (Texas) presents Expanded Worldwide Versus Territorial Taxation After the TCJA, 161 Tax Notes 1178 (Dec. 3, 2018) (with Cliff Fleming (BYU) & Stephen Shay (Harvard)) at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

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

The opposing sides were not without common ground. Both agreed that the existing U.S. system for taxing the foreign-source, active-business income of U.S. MNEs needed to be changed because it generally did not impose U.S. tax until the active income of foreign subsidiaries was repatriated, either through dividends or by sale of subsidiary stock at a price reflecting accumulated foreign-source income. This was problematic for the advocates of territoriality because it required payment of a U.S. tax before CFC earnings could be directly accessed by U.S. parent corporations when no home country tax would have to be paid by MNEs from some competitor countries. It was unacceptable to worldwide taxation advocates because the resulting deferral of U.S. tax effectively created a preferential tax rate for CFC income that encouraged U.S. MNEs to locate operations in, and engage in income shifting to, low-tax foreign countries. The two sides were, however, at loggerheads over whether the foreign-source, active-business income of U.S. MNEs should bear a current U.S. tax at regular rates, subject to a limited foreign tax credit, or should bear no U.S. tax at all. Neither view prevailed in the TCJA.

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Faulhaber: The Future Of Digital Taxation

Lilian V. Faulhaber (Georgetown), Taxing Tech: The Future of Digital Taxation, 40 Va. Tax Rev. ___ (2020):

In recent months, France and the United Kingdom have announced new taxes that are designed to target large multinational tech companies. In response, the United States has threatened trade sanctions.

This Article introduces the larger context of this controversy. The French and U.K. taxes are merely two examples of a much larger trend that has been taking place over the last several years, with countries around the world designing tax measures to target the so-called “digital economy” without ever determining what the digital economy is or how it differs from the rest of the economy.

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Should The U.S. Adopt The Common Reporting Standard?

Noam Noked (Chinese University of Hong Kong, Faculty of Law), Should the United States Adopt CRS?, 118 Mich. L. Rev. Online 118 (2019):

The United States’ one-sided approach to tax transparency might lead to an unprecedented clash with the European Union (EU) in the near future. In light of the EU’s deadline for the United States, the U.S. Treasury and Congress should urgently engage in a discussion on whether the United States should adopt the Common Reporting Standard (CRS) for automatic exchange of financial account information. A recent report from the U.S. Government Accountability Office considered this issue and did not recommend adopting CRS.

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Analyzing Gun-Violence-Prevention Taxes Under Emerging Firearm Fee Jurisprudence

Hannah Shearer & Allison Anderman (Giffords Law Center to Prevent Gun Violence), Analyzing Gun-Violence-Prevention Taxes Under Emerging Firearm Fee Jurisprudence, 43 S. Ill. U. L.J. 157 (2018):

Gun and ammunition taxes and fees have long been used to fund wildlife conservation programs and regulatory schemes that ensure guns are being purchased and possessed lawfully. In recent years, taxes have been proposed as a policy tool to help mitigate the staggering social and economic costs of gun violence by providing a reliable source of funding for gun safety and violence prevention programs. These proposed “gun-violence-prevention taxes” have been met with opposition, including from Second Amendment litigants who argue that courts should strike down gun and ammunition taxes under the Supreme Court’s First Amendment fee jurisprudence — a body of cases examining taxes on protected expressive or religious activity. This Article aims to evaluate that argument under accepted principles of both First and Second Amendment law. Although just ten years have passed since Heller recognized an individual right to possess handguns in the home for self-defense, this Article argues that enough is known about the history of gun and ammunition taxes, the differences between the First and Second Amendments, and the decade of post-Heller lower-court jurisprudence to conclude that most proposed gun-violence-prevention taxes are constitutional.

Pratt Presents The Curious State Of Tax Deductions For Fertility Treatment Costs Today At NYU

Katherine Pratt (Loyola-L.A.) presents The Curious State of Tax Deductions for Fertility Treatment Costs, 28 S. Cal. Rev. L. & Soc. Just. 261 (2019) (reviewed by Sloan Speck (Colorado) here), at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

The federal tax treatment of assisted reproductive technology (ART) expenses incurred by intended parents is unclear. This lack of clarity in the tax law is curious because millions of intended parents have incurred ART expenses, which typically are quite large, over the past 40 years. ARTs include in vitro fertilization (IVF), intracytoplasmic sperm injection (ICSI), egg donation, and surrogacy. This Article addresses the question of whether various categories of taxpayers can classify the costs of specific types of ART expenses as tax deductible “medical care,” taking into account new developments in the law, including the 2017 federal appellate court decision in Morrissey v. United States.

Part I of this Article outlines the contours of the income tax deduction (and related tax benefits) for “medical care,” incorporating the statutory definition of “medical care” and the interpretation of that definition by the Internal Revenue Service (IRS) and courts. Part II applies the “medical care” definition to expenses incurred by different-sex married couples for specific types of reproductive medical care and ancillary payments. We begin our analysis with this cohort of intended parents because the IRS seems to have had such taxpayers in mind when it initially provided informal advice to taxpayers who incurred fertility treatment costs. Part II then extends the analysis to same-sex couples and unmarried individuals, focusing primarily on the U.S. Tax Court decision in Magdalin v. Commissioner, and briefly summarizing Longino v. Commissioner. In both cases, the court denied fertile unmarried men a medical expense deduction for ART expenses. Part II considers the implications of Magdalin for medically infertile men, married and unmarried women, and married different-sex couples. Part II also articulates a novel argument men could make for deducting some ART costs, notwithstanding Magdalin and Longino.

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Viswanathan: Hyperlocal Responses To The SALT Deduction Limitation

Manoj Viswanathan (UC-Hastings), Hyperlocal Responses to the SALT Deduction Limitation, 71 Stan. L. Rev. Online 294 (2019):

The Tax Cuts and Jobs Act, enacted in December 2017, places a $10,000 limit on the federal deduction for payments of state and local taxes (“SALT”). Several states with high numbers of adversely affected taxpayers have proposed or enacted legislative workarounds to this new cap. Much has been said about these state-level responses, but there has been little analysis of local-level effects or of how local governments could similarly respond. This essay addresses that gap by (1) statistically modeling the number of taxpayers affected by the SALT deduction limitation at a ZIP-code-by-ZIP-code (rather than state-by-state) level, and (2) proposing locality-based strategies relevant to taxpayers throughout the U.S., and not just those living in highly affected states.

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Colinvaux & Madoff: Charitable Tax Reform For The 21st Century

Roger Colinvaux (Catholic) & Ray D. Madoff (Boston College), Charitable Tax Reform For the 21st Century, 164 Tax Notes 1867 (Sept. 16, 2019):

The article identifies two goals of the charitable giving tax incentives: promoting actual charitable work and fostering a strong culture of charitable giving with broad participation. The recent increase to the standard deduction and the rise of donor-advised funds compromise both goals. The article outlines reform proposals to bolster the charitable sector, including expanding the giving incentive to all taxpayers in the form of a credit (subject to a giving floor), allowing some tax benefits to DAF donors upon contribution but delaying the income tax deduction until DAF funds are released from advisory privileges, closing loopholes that enable foundations and donors to skirt long-standing legal requirement, and modifying incentives to foundations to foster more spending.

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Kim Presents The Digital Services Tax: A Cross-Border Variation Of The Consumption Tax Debate? Today At Loyola-L.A.

Young Ran (Christine) Kim (Utah) presents The Digital Services Tax: A Crossborder Variation of Consumption Tax Debate at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto: 

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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Call For Tax Papers And Panels: Law & Society Annual Meeting On Rule And Resistance

Neil Buchanan (Florida) has issued his annual call for tax papers and panels for next year's annual meeting of the Law & Society Association in Denver (May 28 - 31, 2020):

For the sixteenth year in a row, I will organize sessions for the Law, Society, and Taxation group (Collaborative Research Network 31).  For the fourth year in a row, I am pleased to be joined (or, more accurately, carried) in these organizational efforts by Professors Jennifer Bird-Pollan and Mirit Eyal-Cohen.

Although there is an official call for papers, please remember that you are not bound by the official theme of the conference ("Rule and Resistance"). We will give full consideration to proposals in any area of tax law, tax policy, distributive justice, interdisciplinary scholarship, and so on.

The deadline for submissions is before midnight (Eastern Time) Wednesday, November 13, 2019.

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Lesson From The Tax Court: Payments v. Deposits

The only thing worse than overpaying ones tax liabilities is not realizing one has overpaid until it is too late to get the overpayment refunded.  Section 6511 requires taxpayers to ask the IRS for refunds of overpayments within the later of: (1) three years after the relevant return was filed; or (2) two years after the relevant payment was made.  If no return was filed, then the two year period applies.

Section 6511, however, only applies when there has been a payment in the first place.  Not every remittance to the IRS constitutes a payment.  Sometimes taxpayers send in money without intending it to be a payment.  For example, a taxpayer might send money to simply stop the running of interest while the taxpayer pursues a protest of the amount of tax owed.  The IRS and courts call those remittances “deposits.”  The good news is that returns of deposits are not subject to the limitation periods in 6511.  The better news is that if a taxpayer is entitled to their return, the government might have to pay interest. §6603.

Thus, it is useful to learn the difference between a payment and a deposit.  In Michael C. Worsham v. Commissioner, T.C. Memo. 2019-132 (Oct. 1, 2019) (Judge Colvin) the taxpayer thought that his remittances to the IRS were not payments because he made them long before the IRS assessed the relevant taxes.  Judge Colvin makes quick work of that argument.  Perhaps too quick.  There is more to the difference between payments and deposits than the timing of the remittance.  I still think the taxpayer’s remittances in this case still might have been deposits, depending on facts not contained in the opinion.  Details 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 papers returning to the list at #4 and #5:

1. [1,807 Downloads]  Taxing the Rich: Issues and Options, by Lily Batchelder (NYU) & David Kamin (NYU)
2. [395 Downloads]  An Introduction to Tax Careers for J.D.s, by Heather Field (UC-Hastings)
3. [155 Downloads]  The Qualified Small Business Stock Exclusion: How Startup Shareholders Get $10 Million (Or More) Tax-Free, by Manoj Viswanathan (UC-Hastings)
4. [141 Downloads]  Intergenerational Equity, Student Loan Debt, and Taxing Rich Dead People, by Victoria Haneman (Creighton)
5. [115 Downloads]  Cannabis Businesses and Passthrough Deduction Availability, by Daniel Rowe (Green Hasson & Janks, Los Angeles)

Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Kornhauser’s Conservative Women’s Groups And Tax Lobbying

This week, Ariel Jurow Kleiman (San Diego) reviews Conservative Women’s Groups & Tax Lobbying, Part 5 in Marjorie E. Kornhauser’s (Tulane) forthcoming book, American Voices in a Changing Democracy: Women, Lobbying, and Tax 1924–1936.

“Women Start Meat Strike,” the 1935 Danville Morning News headline read.  Outraged over the rising price of meat, Detroit housewives boycotted butcher shops and ignited shared outrage among homemakers across the nation. Mary Zuk, whom the newspaper (gratuitously) describes as the “five-foot Polish American originator” of the strike and a “fiery, dark complexioned” woman, blamed the high prices in part on processing taxes levied under the Agricultural Adjustment Act (AAA). As Kornhauser explains in the fourth chapter of her forthcoming book, American Voices in a Changing Democracy, Zuk and her fellow protestors believed that butchers used these taxes as an excuse to gouge consumers. Zuk took her protest to Washington to demand repeal of the tax. Although Congress demurred, the Supreme Court later declared the tax unconstitutional.  What started as a local news headline gained national momentum, offering a colorful example of how women’s voices contributed to the burgeoning national conversation about taxes and government spending.

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Brauner Presents The True Nature Of Tax Treaties Today In Vienna

Yariv Brauner (Florida) delivers the 2019 Klaus Vogel Lecture at Vienna University today on The True Nature of Tax Treaties:

Tax treaties are the building blocks of the international tax regime. Much scholarship has been devoted to them, peaking with Professor Klaus Vogel’s Magnum Opus on Double Tax Conventions. Yet, almost a century after modern tax treaties were formalized into a model, and the derivatives of that model, now over 3000 of them, dominate the tax consequences of cross-border trade and investment, there are still many unanswered fundamental questions, which roots are in the lack of a clear understanding of the true nature of tax treaties. The purpose of this article is to begin filling that void. ...

The article examines tax treaties from four different perspectives: tax treaties as creatures of international law, Tax exceptionalism as reflected in tax treaties, Tax treaties as a consequence of international negotiations, and multilateralism in a world of bilateral tax treaties.

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Hickman Reviews Choi's Substantive Canons Of Tax Law

Kristin Hickman (Minnesota), Refashioning Anti-Abuse Doctrines As Substantive Canons  (JOTWELL) (reviewing Jonathan H. Choi (NYU), The Substantive Canons of Tax Law, 72 Stan. L. Rev. ___ (2020)):

Jurists and legal scholars who think about methods and approaches for resolving questions of statutory meaning like to talk about traditional tools of statutory interpretation and the metaphorical toolbox in which those tools are kept. Textualism versus purposivism; the relative merits of text, history, and purpose; and the meaning and utility of both semantic and substantive canons are all common fodder for discussion and debate. Adding to the literature at the intersection of statutory interpretation and tax, Jonathan Choi offers an interesting and thorough treatment of why we ought to think of tax anti-abuse doctrines like the economic substance doctrine, the step transaction doctrine, and the assignment-of-income doctrine as substantive canons of statutory interpretation. (Helpfully, Choi provides a nice appendix, including footnotes, in which he catalogues substantive tax canons, including a couple of “not a canon” entries.) ...

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Viswanathan: Lower-Income Tax Planning

Manoj Viswanathan (UC-Hastings), Lower Income Tax Planning, 2020 U. Ill. L. Rev. ___:

Tax planning is generally criticized by scholars as inefficient; that is, imposing welfare-reducing costs by incentivizing transactions with few non-tax economic benefits. This Article argues that this view is unacceptably narrow, and makes the original claim that tax planning by lower-income taxpayers is often welfare-enhancing and should, as a normative matter, be encouraged. As such, various parties, including the IRS, law school clinics, legal academics, and tax practitioners should actively strategize to reduce the transaction costs currently hindering lower-income tax planning. This Article then applies that mandate to a specific cohort of lower-income taxpayers — drivers working in the sharing economy — and proposes a strategy through which these taxpayers can take advantage of both existing tax laws and the §199A qualified business income deduction of the recently enacted Tax Cuts and Jobs Act.

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Hemel Presents Phaseouts Today At Pennsylvania

Daniel Hemel (Chicago, visiting at Harvard) presents Phaseouts at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

The Internal Revenue Code is replete with tax benefits that phase out with income. While phaseout provisions are widespread, their effects are little understood. Some commentators have suggested that phaseouts reduce the revenue costs and increase the progressivity of tax benefits. Other leading tax law scholars have assailed these provisions for adding complexity to the Code and for confusing taxpayers about the rates that apply to them. This article presents a comprehensive evaluation of phaseouts and arrives at a more nuanced view. The notions that phaseouts reduce cost and increase progressivity turn out largely to be accounting illusions. At the same time, the implications of phaseouts for tax system complexity and taxpayer comprehension are more ambiguous than their critics charge. Phaseouts are appropriate when the externalities or internalities generated by an activity depend on the actor’s income. Most—though not all—of the phaseouts in the Internal Revenue Code are plausibly justified on these grounds.

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Roberts: Greenbacks For The Green New Deal

Tracey M. Roberts (Cumberland), Greenbacks for the Green New Deal, 17 Pitt. Tax Rev. ___ (2019):

The Green New Deal calls for the overhaul of our nation’s energy, transportation and manufacturing infrastructure to support the transition to a green economy, the adaptation of the built environment to climate change, the remediation of polluted areas, the conservation of fragile and threatened ecosystems, and the encouragement of sustainable farming practices. While Green New Deal proposals have been criticized as an example of “big government spending,” the U.S. has a history of huge investments when economic transformation has been required for national security and long-term prosperity. This article makes four contributions.

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Pittsburgh Tax Review Publishes New Issue

The Pittsburgh Tax Review has published Vol. 16, No. 1 (2018):

• Stephen J. Pieklik, Nathan S. Catanese & Cory C. Omasta (all of Williams Coulson Johnson Lloyd Parker & Tedesco, Pittsburgh), Deducting Success: Congressional Policy Goals and the Tax Cuts and Jobs Act of 2017, 16 Pitt. Tax Rev. 1 (2018)
• Melissa L. Dougherty (Cohen & Grigsby, Pittsburgh), Better Late than Never: Allocating to Partially GST-Exempt Trusts After the Tax Cuts and Jobs Act of 2017, 16 Pitt. Tax Rev. 37 (2018)
• Leo N. Hitt (Reed Smith, Pittsburgh), Rethinking the Obvious: Choice of Entity After the Tax Cuts and Jobs Act, 16 Pitt. Tax Rev. 67 (2018)

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Shaviro Presents Digital Service Taxes Today At NYU

Daniel Shaviro (NYU) presents Digital Service Taxes and the Broader Shift from Determining the Source of Income to Taxing Location-Specific Rents at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder:

In recent decades, a number of fantastically successful, mainly American, multinational entities (MNEs) — led and epitomized by the “Four Horsemen,” Apple, Amazon, Facebook, and Google — have risen to global economic hyper-prominence. While their market capitalizations and profits are high, reflecting that they earn substantial rents or quasi-rents, their aggregate global taxes are generally quite low, reflecting their ability to create stateless income.

Often, these MNEs are technology companies, like the Four Horsemen – but not always. Starbucks, for example, enjoys high global profits and low taxes despite its following a classic brick-and-mortar retail business model. This reflects that, like its more obviously high-tech peers, it relies on valuable intellectual property that helps it in creating both global pretax profitability and stateless income.

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The Allure Of State VATs: The Business Value Tax

Jeremy Pilaar (Yale), Making the Most of a BVT: Lessons From New Hampshire and Michigan, 92 State Tax Notes 703 (Aug. 19, 2019):

States' corporate income taxes (CITs) have become increasingly unreliable in the past 40 years. Scholars have traced this decline to three legal shifts. First, in an effort to channel profits to individual owners, such that they are only subject to personal income taxes, many businesses have abandoned C corporation status to operate as S corporations or limited liability companies. Second, in a rush to foster “entrepreneurial climates,” states have increased their business tax breaks and lowered their real CIT rates by more than 30 percent. Third, Public Law 86-272 has prevented any state from imposing net income taxes on out-of-state businesses that solicit in-state orders for delivery from out of state.

This article argues that a form of VAT called a business value tax (BVT) can help remedy these problems. A BVT is a low-rate tax on all business activity conducted in a state over a specified period. By taxing all business endeavors rather than just profits, and sharply limiting exemptions, a BVT would address the revenue gaps the CIT leaves open. A BVT would thereby increase both revenue levels and stability. It would also escape P.L. 86-272’s restrictions. Policymakers should hence strongly consider enacting a BVT alongside their state’s CIT.

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Roin: The Case For (And Against) Surrogate Taxation

Julie Roin (Chicago), The Case For (And Against) Surrogate Taxation:

The 2017 Tax Cut and Jobs Act significantly revised long-standing rules regarding the tax treatment of many employer provided in-kind benefits. Instead of including the value of these benefits in the recipients’ taxable income, for the most part the new rules disallow employers a deduction for the cost of providing the affected benefits. This article argues that the two components of this legislative scheme – relying on cost of provision as the measure of taxable income and on imposing the nominal tax obligation on providers rather than recipients – are distinct policy decisions.

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Hemel & Porter: Aligning Taxes And Spending — Theory And Experimental Evidence

Daniel Hemel (Chicago) & Ethan Porter (George Washington), Aligning Taxes and Spending: Theory and Experimental Evidence:

Under what circumstances will members of the public hold positive attitudes toward new or higher taxes? While some scholars have posited that the practice of “earmarking” — designating tax revenues for a particular purpose — can increase support for taxes, the existing literature has not identified the conditions under which earmarking will prove effective in this regard. Here, we draw upon previous research on consumer behavior to hypothesize that support for earmarked taxes will be stronger when such taxes satisfy the criterion of “source–use alignment” (i.e., when the connection between the revenue source and the use for which those revenues are earmarked accords with familiar consumer fairness norms). Evidence in support of this hypothesis comes from two experiments on a sample of US residents matched to Census data, in which subjects were randomly assigned to read descriptions of hypothetical earmarked taxes with varying levels of alignment. Individuals consistently expressed stronger support for earmarked taxes that achieved source — use alignment as compared to earmarked taxes that did not satisfy the source — use alignment criterion.

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