Blank & Osofsky: Democratizing Administrative Law

Joshua D. Blank (UC-Irvine; Google Scholar) & Leigh Osofsky (North Carolina; Google Scholar), Democratizing Administrative Law, 73 Duke L.J. __ (2024):

When agencies make statements about the law, people listen. This insight yields a fundamental tension. According to one set of views, such agency statements, and their ability to influence public behavior, are critical not only for a well-functioning bureaucracy, but also for our entire system of government. According to another set of views, this agency power, if left unchecked, could border on tyranny.

Administrative law responds to this tension through an extensive, purportedly comprehensive, framework that attempts to police agency statements. The framework places different types of agency statements into different legal categories. 

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Lesson From The Tax Court: The New Evidence Rule In Spousal Relief Cases

When a taxpayer requests spousal relief under §6015, the IRS must decide whether to grant it.  If the IRS denies relief, the taxpayer can petition the Tax Court. §6015(e).  In 2019 Congress created a modified administrative record rule for how the Tax Court is supposed to conduct that review.  Taxpayer First Act, 133 Stat. 981, 988.

It’s awkward.  Congress tells the Court to review the IRS decision de novo but, at the same time, tells the Court to do that using only a limited information set consisting of (a) “the administrative record established at the time of the determination” and (b) “any additional newly discovered or previously unavailable evidence.”  §6015(e)(7).

Sydney Ann Chaney Thomas v. Commissioner, 160 T.C. No. 4 (Feb. 13, 2023) (Judge Toro), is a reviewed opinion where a unanimous Tax Court interprets the phrase “newly discovered or previously unavailable evidence” broadly rather than narrowly, thus creating a new evidence rule (pun intended) that robustly protecting its ability to conduct the required de novo review.  Ironically, the decision worked against the taxpayer in this case because it was the IRS that here wanted to introduce new information (the taxpayer’s social media posts).  The taxpayer objected that those posts had been publicly available during the administrative proceeding; therefore they were not newly discovered or previously unavailable.  The Court rejected that argument and admitted the posts as evidence.

Today’s case is also an illustrative contrast to the T.C. opinion I discussed in last week’s post.  That was a case where the taxpayer was proceeding pro se.  And there the Court had no benefit of briefing from both sides.  I think the Court’s opinion showed it.  In today’s case, the taxpayer was (eventually) represented by one of the best tax attorneys I know, Megan Brackney.  Thus the Court had the benefit of a well-presented taxpayer argument.  The Court also had the benefit of a strong amicus brief submitted jointly by the Center for Taxpayer Rights, the Community Tax Law Project, the UC-SF LITC and the Villanova LITC.  That made the Tax Court’s opinion all the more robust, which is what it will need if and when its decision is reviewed in turn by a Court of Appeals.

Spoiler alert.  This post is a little longer than normal.  Sorry, Lew.

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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. The #1 paper is #800 among 17,490 tax papers in all-time downloads:

1. [773 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [616 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [413 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
4. [304 Downloads]  Global Tax Reform and Mythical International Law, by Tarcísio Diniz Magalhães (Antwerp; Google Scholar) & Allison Christians (McGill; Google Scholar
5. [175 Downloads]  21st Century Churches and Federal Tax Law, by Ellen Aprill (Loyola-L.A.; Google Scholar) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar)

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

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

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

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Next Week’s Tax Workshops

Monday, February 27: Linda Sugin (Fordham; Google Scholar) will present Proxy Taxes as part of the San Diego Tax Law Speaker Series. 

Tuesday, February 28: Shu-Yi Oei (Duke; Google Scholar) will present Understanding Developing Country Tax Treaties with OECD Partners: A Multilevel Analysis as part of the UC-San Francisco Law Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan. 

Tuesday, February 28: Max Risch (Carnegie Mellon; Google Scholar) will present Trickle-Down Revisited as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Tuesday, February 28: John Guyton (IRS) will present Integrating Reward Maximization and Population Estimation: Sequential Decision-Making for Internal Revenue Service Audit Selection (with Peter Henderson (Stanford; Google Scholar), Ben Chugg (Carnegie Mellon), Brandon Anderson (IRS), Kristen Altenburger (Stanford; Google Scholar), Alex Turk (IRS), Jacob Goldin (Chicago; Google Scholar) & Daniel E. Ho (Stanford; Google Scholar)) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday, March 1: Jeremy Bearer-Friend (George Washington; Google Scholar) will present Poll Taxes, Revisited as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky.

Thursday, March 2: Martin Gilens (UCLA) will present Campaign Finance Regulations and Public Policy, 115 Am. Pol. Sci. Rev. 1074 (2021) (with Shawn Patterson, Jr. (Southern Oregon) & Pavielle Haines (Rollins College)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh. 

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UCLA|NYU|Berkeley Host Conference Today On Five Years After TCJA: New Directions In Tax Policy Research

UCLA|NYU|Berkeley host a symposium today on Five Years After TCJA: New Directions in Tax Policy Research today:

Tax Evasion|Non-Compliance|IRS Money and the Future of Tax Enforcement

• Natasha Sarin (Penn; Google Scholar)
• Daniel Reck (Maryland)
• Day Manoli (Georgetown; Google Scholar)

Taxing the Rich After TCJA

• Danny Yagan (UC-Berkeley; Google Scholar)
• Wojciech Kopczuk (Columbia; Google Scholar)
• Daniel Hemel (NYU; Google Scholar)
• David Kamin (NYU) (discussant)

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Stetson Hosts 2nd Annual Tax Law Symposium Today

The Stetson Business Law Review hosts a Tax Law Symposium today at  9:00 AM (registration): 

State and Local Tax Law Panel

• George Thurlow, America’s Most Hated Tax?: Why Property Taxes Are Unfair and Regressive Taxation
• Omar Hussein, Stock Transfer Taxes in the Modern Age

Embracing Tax Avoidance

• David Elkins (Netanya, visiting NYU; Google Scholar) 

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Duplicative Taxation Among The States: A Problem Not Worth Solving?

Julie Roin (Chicago), Duplicative Taxation Among The States: A Problem Not Worth Solving?:

Recent legal and economic changes—not to mention the rise in telecommuting caused by COVID--have raised the salience of a long-simmering fact about the operation of state and local income tax systems: some multistate employers and employees pay a combined income tax liability that is higher than the tax they would have borne had they operated in just one jurisdiction. Seemingly beyond the reach of the courts to correct, there have been persistent calls for Congressional action to eliminate or reduce this “duplicative” taxation. This Article suggests that the alleged problem may be both less of a problem, and more resistant to a solution, than is commonly understood.

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Mason Presents Bounded Extraterritoriality Today At Duke

Ruth Mason (Virginia; Google Scholar) presents Bounded Extraterritoriality (with Michael Knoll (Penn)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Conclusion
It is easy to accept that federalism imposes limits on states’ entitlement to regulate too much. Vastly more difficult is describing the precise contours of any such limit. The challenge of this Article was to find a way of thinking about extraterritoriality that is not only simpler than what has come before, but also grounded in our Constitution’s structural federalism. To be successful, a conception of extraterritoriality must both give clear direction to courts and be sensitive to differences between nexus, extraterritoriality, and burdens. It must also answer the critics, who rightly argue that because extraterritorial effects are ubiquitous in commercial regulation, judicial attempts to root them out are unprincipled, overbroad, and unduly restrain states.

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Osofsky Reviews Field's Flipping The Tax Law Classroom

Leigh Osofsky (North Carolina; Google Scholar), Flipping Classrooms in an In-Person World (JOTWELL) (reviewing Heather Field (UC-San Francisco; Google Scholar), How the Pandemic Flipped My Perspective on Flipping the Tax Law Classroom, 19 Pitt. Tax Rev. 267 (2022)):

In this illuminating article, Heather Field describes her adoption of a flipped classroom model for teaching tax law during the pandemic. Like many, Field learned lessons from her pandemic teaching that will continue to be instructive now that we are (hopefully) back to an in-person teaching world. Field’s thoughtful article is well worth a read for those (like me!) wanting to do more with flipped classroom teaching. ...

Field’s flipping of classes involved providing students before-class mini-lecturettes, which gave students an overview and explanation of the material. Class time was then spent going through problems, potentially with polls and additional bonus problems added in to the class to better gauge student understanding. Overall, her experience was a positive one. Students appreciated the opportunity to review the content at their own pace and potentially revisit it, students had more time in class to work on problems, Field was better able to direct students to the important parts of the course, weaker students were able to participate more fully in the class, Field could cover more difficult material much more efficiently, and Field had the opportunity to think more carefully though all her explanations of the course material. ...

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Kim Presents Taxing Digital Platforms Today At Northwestern

Young Ran (Christine) Kim (Cardozo; Google Scholar) presents Taxing Digital Platforms (with Darien Shanske (UC-Davis; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky: 

Tax systems have been struggling to adapt to the digitalization of the economy. At the center of the struggles is taxing digital platforms, such as Google or Facebook. These immensely profitable firms have a business model that gives away "free" services, such as searching the web. The service is not really free; it is paid for by having the users watch ads and tender data. Traditional tax systems are not designed to tax such barter transactions, leaving a gap in taxation.

One response, pioneered in Europe, has been the creation of a wholly new tax to target digital platforms: The Digital Services Tax (DST). Though controversial, ten states have entertained imposing a DST, and Maryland actually did so. Maryland’s tax was immediately challenged, with the strongest argument against the tax being that it is preempted by the Internet Tax Freedom Act. 

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Mason Presents Bounding Extraterritoriality Today At Columbia

Ruth Mason (Virginia; Google Scholar) presents Bounding Extraterritoriality (with Michael Knoll (Penn)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer:

Conclusion
It is easy to accept that federalism imposes limits on states’ entitlement to regulate too much. Vastly more difficult is describing the precise contours of any such limit. The challenge of this Article was to find a way of thinking about extraterritoriality that is not only simpler than what has come before, but also grounded in our Constitution’s structural federalism. To be successful, a conception of extraterritoriality must both give clear direction to courts and be sensitive to differences between nexus, extraterritoriality, and burdens. It must also answer the critics, who rightly argue that because extraterritorial effects are ubiquitous in commercial regulation, judicial attempts to root them out are unprincipled, overbroad, and unduly restrain states.

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Tax Policy Center: More Black Couples Incur A Marriage Tax Penalty Than White Couples

Janet Holtzblatt, Swati Joshi & Nora Cahill (Tax Policy Center), Marriage Costs Black Couples More Than White Couples At Tax Time:

We find that 46 percent of Black married couples incurred a marriage penalty under 2018 tax law, compared to 43 percent of white couples.

Conversely, Black couples were less likely to receive a bonus than white couples (36 percent to 43 percent).

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Lesson From The Tax Court: The Limited Review Of Passport Revocation Certifications

Today’s lesson is about §7345, created by Congress in 2015.  The idea behind §7345 is simple.  If you owe taxes and the government threatens to take your passport, you are more likely to pay up.  But its operation is complex.  It requires the IRS to first certify to the State Department that a taxpayer has a “seriously delinquent tax debt.”  Then the State Department is authorized to take certain actions based on that certification.  Section 7345 permits taxpayers to seek Tax Court Review of IRS Certifications.

The Tax Court does not get many passport cases.  According to the Court’s FY 2024 Budget Request, of the 29,000 petitions filed in 2022, only 25 were §7345 petitions.  For those who are interested in learning more about the Court’s budget request, Keith Fogg posted this great review over on Procedurally Taxing.

So when the Tax Court gets a passport case, it often uses it to shape its §7345 jurisprudence by issuing precedential Tax Court opinions.  Today’s case is one of those. Blake M. Adams v. Commissioner, 160 T.C. No. 1 (Jan. 24, 2023) (Judge Toro), teaches two lessons.  First, the Court holds that it will not look behind the IRS certification to redetermine the merits of the tax liabilities that make up the certification.  Second, the Court also decides it lacks authority to determine whether the assessment underlying the Certification was procedurally defective.

Note that this is a case where the taxpayer was unrepresented.  While the Court’s desire to settle important §7345 issues is understandable, I question whether doing so in a pro-se case is desirable. Next week we will see a case where the Court wrote a much stronger opinion after first suggesting that the pro se taxpayer find counsel (who then filed briefed the issue) and also accepting an amicus brief. I offer my thoughts on this below the fold.

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SSRN Tax Professor Rankings

SSRN has updated its monthly ranking of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through February 5, 2023) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

		All-Time			Recent
1	Reuven Avi-Yonah (Michigan)	217,707	1	Reuven Avi-Yonah (Michigan)	11,875
2	Daniel Hemel (NYU)	128,768	2	Kristin Hickman (Minnesota)	6,367
3	Dan Shaviro (NYU)	125,977	3	Daniel Hemel (NYU)	4,776
4	Lily Batchelder (NYU)	125,814	4	Bridget Crawford (Pace)	4,134
5	David Gamage (Indiana-Bloom.)	123,478	5	Robert Sitkoff (Harvard)	3,066
6	Darien Shanske (UC-Davis)	116,573	6	Darien Shanske (UC-Davis)	3,037
7	David Kamin (NYU)	113,129	7	Ruth Mason (Virginia)	2,879
8	Cliff Fleming (BYU)	107,708	8	D. Dharmapala (Chicago)	2,838
9	Manoj Viswanathan (UC-Hastings)	104,350	9	Louis Kaplow (Harvard)	2,809
10	Ari Glogower (Northwestern)	103,504	10	Richard Ainsworth (Boston Univ.)	2,779
11	Rebecca Kysar (Fordham)	103,452	11	David Gamage (Indiana-Bloom.)	2,714
12	D. Dharmapala (Chicago)	49,459	12	Zachary Liscow (Yale)	2,563
13	Michael Simkovic (USC)	47,296	13	Kyle Rozema (Washington University)	2,492
14	Paul Caron (Pepperdine)	40,575	14	Kim Clausing (UCLA)	2,227
15	Louis Kaplow (Harvard)	39,193	15	Brad Borden (Brooklyn)	2,209
16	Richard Ainsworth (Boston Univ.)	36,989	16	Young Ran (Christine) Kim (Cardozo)	2,123
17	Bridget Crawford (Pace)	34,922	17	Margaret Ryznar (Indiana-Indy)	2,081
18	Robert Sitkoff (Harvard)	31,128	18	Lily Batchelder (NYU)	2,054
19	Brad Borden (Brooklyn)	29,692	19	Dan Shaviro (NYU)	1,901
20	Vic Fleischer (UC-Irvine)	29,480	20	Victoria Haneman (Creighton)	1,736
21	Ed Kleinbard (USC)	29,150	21	David Kamin (NYU)	1,688
22	Ruth Mason (Virginia)	28,562	22	Richard Kaplan (Illinois)	1,658
23	Jim Hines (Michigan)	27,547	23	Chris Sanchirico (Penn)	1,573
24	Richard Kaplan (Illinois)	26,592	24	Brian Galle (Georgetown)	1,453
25	Katie Pratt (Loyola-L.A.)	26,025	25	Edward McCaffery (USC)	1,418

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Global Tax Reform And Mythical International Law

Tarcísio Diniz Magalhães (Antwerp; Google Scholar) & Allison Christians (McGill; Google Scholar), Global Tax Reform and Mythical International Law:

Over the past several years, governments around the world have been debating how to design coordinated minimum taxes on large multinationals in a bid to end race-to-the-bottom global tax competition. The plans so far have been complex and intricate, but in virtually all respects the evolution of ideas has followed well-worn practices and approaches in tax and corporate law. Nevertheless, outspoken critics have emerged with arguments against change that are grounded in abstract and often ill-defined international law concepts—effectively, a mythology of general and/or customary norms meant to forestall forward momentum and cast doubt on the fundamental workability of global tax reform as it has been collaboratively developed to date. This Article examines the myths of international tax law and demonstrates that each purported impediment is either conceptually under-theorized or exaggerated in legal impact or both.

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The Top Five New Tax Papers

There is 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. The #1 paper is #782 among 17,482 tax papers in all-time downloads:

1. [732 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [600 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [397 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
4. [229 Downloads]  Global Tax Reform and Mythical International Law, by Tarcísio Diniz Magalhães (Antwerp; Google Scholar) & Allison Christians (McGill; Google Scholar
5. [139 Downloads]  21st Century Churches and Federal Tax Law, by Ellen Aprill (Loyola-L.A.; Google Scholar) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar)

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Morse's Tax Without Law: Cui's Administrative Foundations Of The Chinese Fiscal State

This week, David Elkins (Netanya, visiting NYU 2021-2023; Google Scholar) reviews a new paper by Susan Morse (Texas; Google Scholar), Tax Without Law: Book Review of Wei Cui, The Administrative Foundations of the Chinese Fiscal State, 26 Fla. Tax Rev. __ (2023).

In this week’s feature article, Susan Morse reviews a new book by Wei Cui (British Columbia), The Administrative Foundations of the Chinese Fiscal State (Oxford University Press 2022). While it might be a bit unusual to review a review, I think that Professor Cui’s important book and Professor Morse’s insightful comments make it a worthwhile endeavor.

Professor Cui describes the Chinese fiscal system as divorced from the rule of law. No legal norms guide the tax administration, audits are practically nonexistent, and there is no meaningful judicial review. At the heart of the system are hundreds of thousands of revenue managers, each responsible for perhaps 1,000 taxpayers. One of their functions is to serve as a “nagging adult presence,” to make sure that taxpayers register and file on time. 

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Next Week’s Tax Workshops

Tuesday, February 21: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Wednesday, February 22: Young Ran (Christine) Kim (Cardozo; Google Scholar) will present Taxing Digital Platforms (with Darien Shanske (UC-Davis; Google Scholar)) as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, February 23: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak.

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Clausing Presents Capital Taxation And Market Power Today At Indiana

Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation And Market Power at Indiana-Maurer today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

In recent decades, market power has increased substantially, according to multiple measures that describe industry concentration, mark-ups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize capital income, making it important to distinguish between normal and above-normal returns to capital. The tax system taxes both types of returns to capital, but often imperfectly and incompletely. 

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van Dijk Presents Eviction and Poverty in American Cities Today At UCLA

Winnie van Dijk (Harvard, NBER) presents Eviction and Poverty in American Cities (with Robert Collinson (Notre Dame; Google Scholar), John Eric Humphries (Yale; Google Scholar), Nicholas Mader (Chapin Hall), Davin Reed (Federal Reserve Bank of Philadelphia; Google Scholar), Daniel Tannenbaum (Nebraska; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

More than two million U.S. households have an eviction case filed against them each year. Policymakers at the federal, state, and local levels are increasingly pursuing policies to reduce the number of evictions, citing harm to tenants and high public expenditures related to homelessness. We study the consequences of eviction for tenants using newly linked administrative data from two large cities.

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Galle & Shay Present Admin Law And The Crisis Of Tax Administration Today At Duke

Brian Galle (Georgetown; Google Scholar)& Stephen Shay (Boston College; Google Scholar) present Admin Law and the Crisis of Tax Administration, 101  N.C. L. Rev. __ (2023) (reviewed by Blaine Saito (Northeastern; Google Scholar) here) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The IRS is struggling. Phone calls from confused taxpayers ring unanswered, paper returns pile up, aggressive tax filers are confident they are unlikely to be audited. Congress piles new responsibilities on the agency while (so far) slashing its budget to modern lows.

This is a strange time, then, to launch perhaps the largest-ever experiment in tax administration. Yet that is what some courts and the Trump White House, encouraged by some tax law scholarship, have begun. In at least four distinct ways, IRS and its regulatory partner the U.S. Treasury are now facing greater procedural obstacles to their efforts to guide and constrain the taxpaying public. 

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Hasen: Nonprofit Law As The Tool To Kill What Remains Of Campaign Finance Law: Reluctant Lessons From Ellen Aprill

Richard L. Hasen (UCLA; Google Scholar), Nonprofit Law as the Tool to Kill What Remains of Campaign Finance Law: Reluctant Lessons from Ellen Aprill, 46 Loy. L.A. L. Rev. __ (2023):

This brief Essay was prepared for a festschrift honoring the work of Professor Ellen Aprill. I explain in the Essay how Professor Aprill’s deep knowledge of nonprofit and tax law and her relentless intellectual honesty leads her (and us) to an unhappy place: a world in which many of the remaining regulations of money in politics could well be struck down as unconstitutional or rendered wholly ineffective by a Supreme Court increasingly hostile to the goals of campaign finance law and extremely solicitous of religious freedom. Just as the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission used the First Amendment rights of nonprofit corporations to open up direct political spending by large, for-profit corporations, additional arguments about the rights of charitable institutions and other nonprofits will be used to push further judicial deregulation of the political process for all.

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Smart Presents Distributionally Sensitive Cost Benefit Analysis Today At Toronto

Michael Smart (Toronto; Google Scholar) presents Distributionally Sensitive Cost Benefit Analysis at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

I review the case for and against the use of a distributionally weighted sum of gains and losses in cost-benefit analysis. I conclude that distributional weighting is logically consistent and ethically justified in cases where policy reforms have direct effects on inequality in pre-tax incomes of individuals. I show how distributional weights can be calculated for Canada using information on income inequality and effective tax rates in the income tax system. I apply distributional weights to evaluate a recent proposed merger with presumed anticompetitive effects in Canada’s telecommunications sector.

Concluding Remarks
The methods described here offer a robust, data-driven approach for determining how the potentially adverse distributional consequences of mergers could be taken into account in evaluating the efficiencies defence under Section 96 of the Competition Act. Examining effective tax rates by income group, I found that the Canadian tax system exhibits a relatively modest preference for redistribution from rich to poor, reflected in a distributional weight on the richest group that is about 30% lower than average.

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Doran Presents Executive Compensation And Corporate Governance Today At Georgetown

Michael Doran (Virginia; Google Scholar) presents Executive Compensation and Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

Over the past four decades, Congress has repeatedly used tax policy to address executive-compensation practices, most notably through golden-parachute penalty taxes (enacted in 1984), a $1 million cap on compensation deductions (enacted in 1993 and expanded in 2017), and penalty taxes on nonqualified deferred compensation (enacted in 2004). The critical assumptions underlying these efforts are, first, that certain features of executive pay represent a failure of corporate governance and, second, that tax policy can correct that failure. The first assumption may or may not be correct; the theoretical and empirical arguments about it remain unresolved. But the second assumption is increasingly untenable. Penalty taxes have been largely ineffective in changing executive-compensation practices in the ways that legislators intend; in many instances, they actually exacerbate the features of executive pay that concern Congress in the first place. 

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Choi Presents Subjective Costs Of Tax Compliance Today At UC-San Francisco

Jonathan Choi (Minnesota; Google Scholar) presents Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) at UC-San Francisco today as part of its Tax Policy Colloquium hosted by Manoj Viswanathan:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

These findings have important implications for theory and policy. From a theoretical perspective, these survey results call into question the nearly universal practice of using market wages to monetize the time that people spend on tax compliance work. 

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Hellerstein & Appleby: The Internet Tax Freedom Act At 25

Walter Hellerstein (Georgia) & Andrew D. Appleby (Stetson; Google Scholar), The Internet Tax Freedom Act at 25, 107 Tax Notes St. 7 (Jan. 2, 2023):

In October 1998, Congress enacted the Internet Tax Freedom Act (ITFA), a temporary three-year “moratorium” on the enactment of new state and local “taxes on Internet access” and on “multiple or discriminatory taxes on electronic commerce.” After extending the act temporarily several times, Congress, in 2016, finally and controversially struck the language temporarily extending the act, thereby making it permanent.

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Lesson From The Tax Court: Mortgage Interest Deductions When The Payor Is Not The Borrower

Families can be complicated.  Tax law can be complicated.  Put those complications together and you get today’s lesson: family obligations to pay interest on a mortgage don’t support the §163 deduction even though they might, informally, be as binding as legal obligations.

In Hrach Shilgevorkyan v. Commissioner, T. C. Memo. 2023-12 (Jan. 23, 2023) (Judge Ashford), the taxpayer paid half the interest due on a mortgage, but he was not the borrower.  The loan had been obtained by his brothers.  And while the complex rules for §163 allow interest deductions in some circumstances when the payor is not also the borrower, this taxpayer was unable to show how the complexities of his particular family arrangement fit into the complexities of the statute.  Details below the fold.

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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. The #1 paper is now #889 among 17,359 tax papers in all-time downloads: :

1. [717 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [586 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [387 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
4. [237 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
5. [111 Downloads]  Multistate Business Entities, by Andrew Appleby (Stetson; Google Scholar) & Tomer Stein (Stetson)

Gershon Presents Top Five Code Sections That Should Not Exist At Alabama

Richard Gershon (Mississippi) presented Top Five Code Sections That Should Not Exist at Alabama this week: 

As a fan of the strange and unusual, I am a fan of YouTube. YouTube channels often feature top 5’s. For example, the Top 5 Unknowns often features videos like "The Five Photos That Should Not Exist." I find it so interesting that even though those photos should not exist, they in fact do exist. Since every aspect of life eventually leads back to tax law, I realized that there are at least five sections of the Internal Revenue Code (IRC) that should not exist, but nevertheless do exist. In true YouTube style, this article will discuss each of these five sections in order from least compelling to most compelling and will include one honorable mention.

The sections I have chosen in this article are those that have always bothered me when I taught them in my tax classes. The article will address the flaws in policy, application, or both of each of the code sections discussed. So, turn out the lights and grab some popcorn because tax law is always entertaining.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Admin Law And The Crisis Of Tax Administration By Galle & Shay

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Brian Galle (Georgetown; Google Scholar) & Stephen Shay (Boston College; Google Scholar), Admin Law and the Crisis of Tax Administration, 101  N.C. L. Rev. __ (2023).

One of the major issues in taxation is the application of administrative law principles, derived from the Administrative Procedure Act (APA) and the case law interpreting it. Scholars like Professor Kristin Hickman have persuasively shown that tax is not exceptional, and the federal courts, starting with Mayo Foundation for Medical Education & Research v. United States, have followed. This author too has fallen closer to the line of applying these administrative law doctrines to the IRS and Treasury’s administrative actions. But in their article, Admin Law and the Crisis of Tax Administration, Professors Brian Galle and Stephen Shay force us to grapple with some of the effects of this revolution. 

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Next Week’s Tax Workshops

Tuesday, February 14: Jonathan Choi (Minnesota; Google Scholar) will present Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) as part of the UC-San Francisco Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan.

Tuesday, February 14: Michael Doran (Virginia; Google Scholar) will present Executive Compensation and Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday, February 15: Michael Smart (Toronto; Google Scholar) will present Distributionally Sensitive Cost Benefit Analysis as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

Thursday, February 16: Owen Zidar (Princeton; Google Scholar) will present The Health Wedge and Labor Market Inequality (with Amy Finkelstein (MIT; Google Scholar), Casey McQuillan (Ph.D. Candidate, Princeton), and Eric Zwick (Chicago; Google Scholar)) as part of the OMG Transatlantic Tax Talks. There is no registration required for this event. 

Thursday, February 16: Winnie van Dijk (Harvard, NBER) will present Eviction and Poverty in American Cities (with Robert Collinson (Notre Dame; Google Scholar), John Eric Humphries (Yale; Google Scholar), Nicholas Mader (Chapin Hall), Davin Reed (Federal Reserve Bank of Philadelphia; Google Scholar), Daniel Tannenbaum (Nebraska; Google Scholar)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

Thursday, February 16: Brian Galle (Georgetown; Google Scholar) & Stephen Shay (Boston College; Google Scholar) will present Admin Law and the Crisis of Tax Administration as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak.

Friday, February 17: Kimberly Clausing (UCLA; Google Scholar) will present Capital Taxation And Market Power as part of the Indiana-Maurer Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman.

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Schütze Presents Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons Today At The Oxford-Virginia Legal Dialogues

Robert Schütze (Durham) presents Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons (from The Question of Competence in the European Union, Oxford University Press 2014) at the Oxford-Virginia Legal Dialogues today hosted by Tsilly Dagan and Ruth Mason: 

This chapter examines the internal market competence of the United States and the EU. It first considers the American internal market competence — the ‘Commerce Clause’ which allows Congress to regulate Commerce in several states and has been the chief competence to deregulate and re-regulate the American federal market. It then analyses the EU's internal market competence, showing that Article 114 TFEU has — like the US ‘Commerce Clause’ — been given an (almost) unlimited scope. Both the American and the European internal market powers have encountered some political and legal limits, and the chapter compares these constitutional limitations.

The Question of Competence in the European Union (Oxford University Press 2014):

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Morse Presents Old Regs At Boston College

Susie Morse (Texas; Google Scholar) presents Old Regs at Boston College as part of its Tax Policy Workshop hosted by Jim Repetti:

Old regs should not be subject indefinitely to administrative procedure challenge. Instead, we should leave them alone. The consensus case law view that applies the six-year limitations period under 28 U.S.C. § 2401(a) with accrual at the time of promulgation, strikes the right balance between accuracy and repose. It correctly reflects that all of the elements of the administrative procedure claim are in place at the time of the alleged error, when the regulation was promulgated. When -- as in tax -- claims can be delayed through no fault of any plaintiff, the solution is to make appropriate administrative and equitable adjustments.

Conclusion
The puzzle presented by administrative procedure challenges to old regs amounts to a classic tension in law: the tradeoff between accuracy and repose. The puzzle is solved by the default six-year limitations period of 28 U.S.C. § 2401(a), which, under a case law consensus, begins to run when the final agency rulemaking action is taken for administrative procedure claims. Tax provides a good text case for this argument because it is a somewhat more difficulty case, due to the fact that most opportunities to raise administrative procedure claims arise not as facial challenges, bur rather in enforcement cases – whether deficiency or refund -- where the pre-litigation tax procedure can be lengthy. 

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Bilicka Presents Organizational Capacity And Profit Shifting Today At UCLA

Katarzyna Anna Bilicka (Utah State; Google Scholar) presents Organizational Capacity and Profit Shifting (with Daniela Scur (Cornell; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh: 

Good organizational capacity drives productivity and potential taxable profits, but may also enable multinationals (MNEs) to more efficiently re allocate profits across tax jurisdictions, lowering actual taxable profits. We show that MNE subsidiaries with better organizational capacity report significantly lower profits and have a higher incidence of bunching around zero reported profitability in high-tax countries. This pattern is not present in low-tax countries. Further, responsiveness to corporate tax rate changes in terms of profit reporting is driven by firms with good organizational capacity. We show our results are consistent with profit-shifting behavior and rule out key alternative channels. JEL codes: M11, M02, H26, H32.

Conclusion
We show that the previously established link between organizational capacity and profitability has an important caveat: for multinationals, it only holds in low-tax countries. We document new patterns of reported profitability across countries taking into account heterogeneity in the quality of management of MNE subsidiaries, and propose that these patterns can be best attributed to profit shifting activities for those MNEs that can be classified as aggressive tax avoiders. We find that practices related to tractable and predictable production and MNE-aligned incentives are most likely to enable such actions. We rule out alternative explanations such as “real” performance differences, differential take-up of local tax incentives, the quality of information environment, or individual manager quality.

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Choi Presents Subjective Costs Of Tax Compliance Today At Northwestern

Jonathan Choi (Minnesota; Google Scholar) presents Subjective Costs of Tax Compliance (with Ariel Jurow Kleiman (Loyola-LA; Google Scholar)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

These findings have important implications for theory and policy. From a theoretical perspective, these survey results call into question the nearly universal practice of using market wages to monetize the time that people spend on tax compliance work. 

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Blank & Glogower: When Should Means Matter? The Case Of Tax Compliance

Joshua D. Blank (UC-Irvine; Google Scholar) & Ari D. Glogower (Northwestern; Google Scholar), When Should Means Matter? The Case of Tax Compliance, 42 Va. Tax Rev. __ (2023):

When should policymakers incorporate individuals’ economic means, such as wealth and income, into the design of legal rules? Two principles in legal theory typically favor uniform legal rules, which do not vary based on individual characteristics. First, under the “double distortion” principle in the law and economics literature, means-based adjustments to legal rules should be reserved for the tax system alone. Second, theories of the rule of law also favor generally applicable legal rules, rather than those targeted to certain individuals or groups.

Because of its core distributive function, the progressive tax system represents a prominent exception to these principles favoring uniform legal rules, and explicitly accounts for individuals’ economic means when determining tax liabilities.

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Galle Presents Solving the Valuation Challenge: The ULTRA Method of Taxing Extreme Wealth Today At Columbia

Brian Galle (Georgetown; Google Scholar) presents Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth, 72 Duke L.J. ___ (2023) (with David Gamage (Indiana-Maurer; Google Scholar) & Darien Shanske (UC-Davis; Google Scholar)) (reviewed by Young Ran (Christine) Kim (Cardozo; Google Scholar) here) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer:

Recent reporting based on leaked tax returns of the ultra-rich confirms what experts have long suspected: for the wealthiest Americans, paying taxes is mostly optional. Some of the country's richest have reported annual incomes that would be modest for a school teacher, even as the share of wealth held by the top .1% is at its highest in nearly a century.

Experts have long understood that one problem sits at the root cause of many of the tax system's failures to reach the very rich: valuation. Because it is difficult to appraise complex or unique assets, modern tax systems instead wait until an asset is sold to impose tax. In combination with an American rule that wipes away income tax on inherited profits, and a highly porous estate tax system, this "realization" approach has deeply undermined U.S. efforts to tax extreme wealth.

This Article proposes a new approach: governments should take payments from the wealthy in the form of notional equity interests, which we call "ULTRAs," for unliquidated tax reserve accounts. 

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Lawsky Presents Coding The Code: Catala And Computationally Accessible Tax Law Today At Duke

Sarah B. Lawsky (Northwestern; Google Scholar) presents Coding The Code: Catala And Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022), at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

This Article describes a new programming language, Catala, created by a team of computer scientists and lawyers. Catala provides a tractable and functional approach to coding U.S. tax law that offers a more transparent formalization and could potentially hold the government more accountable than the current patchwork of forms, worksheets, and secret programs.

While this Article describes a particular programming language, key characteristics of this particular language could generalize to other programming languages that formalize the law. First, Catala is a domain-specific programming language designed specifically for formalizing tax law. In particular, Catala is structured using default logic, a nonstandard logic that represents the underlying structure of the U.S. tax code more accurately than does standard logic. This structure makes the computer code easier to read, easier to create, and easier to modify when the law changes. 

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Christians Presents Global Tax Reform And Mythical International Law Today At Georgetown

Allison Christians (McGill; Google Scholar) presents Global Tax Reform and Mythical International Law (with Tarcísio Diniz Magalhães (Antwerp; Google Scholar)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

Over the past several years, governments around the world have been debating how to design coordinated minimum taxes on large multinationals in a bid to end race-to-the-bottom global tax competition. The plans so far have been complex and intricate, but in virtually all respects the evolution of ideas has followed well-worn practices and approaches in tax and corporate law. Nevertheless, outspoken critics have emerged with arguments against change that are grounded in abstract and often ill-defined international law concepts—effectively, a mythology of general and/or customary norms meant to forestall forward momentum and cast doubt on the fundamental workability of global tax reform as it has been collaboratively developed to date. This Article examines the myths of international tax law and demonstrates that each purported impediment is either conceptually under-theorized or exaggerated in legal impact or both.

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Brooklyn Hosts A Book Talk And Discussion Today On For-Profit Philanthropy

Brooklyn hosts a hybrid Book Talk and Discussion with Dana Brakman Reiser (Brooklyn; Google Scholar) and Steven A. Dean (Brooklyn), featuring Anne-Marie Slaughter (CEO, New America; Professor Emerita, Princeton University) on For-Profit Philanthropy: Elite Power & the Threat of Limited Liability Companies, Donor-Advised Funds, & Strategic Corporate Giving (Oxford University Press 2023) today at 6:00 PM ET:

About the Book

Please join Professors Dana Brakman Reiser and Steven A. Dean for a discussion of their new book For-Profit Philanthropy (Oxford University Press, Jan. 3, 2023).

In For-Profit Philanthropy, the authors reveal that philanthropy law has long operated as strategic compromise, binding ordinary Americans and elites together in a common purpose. At its center stands the private foundation. Prophylactic restrictions separate foundations from their funders' business and political interests. And foundations must disclose more about the sources and uses of their assets than any other business or charity. The philanthropic innovations increasingly espoused by America's most privileged individuals and powerful companies prioritize donor autonomy and privacy, casting aside the foundation and the tools it provides elites to demonstrate their good faith. By threatening to displace impactful charity with hollow virtue signaling, these actions also jeopardize the public's faith in the generosity of those at the top.

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Lesson From The Tax Court: The Tax Court Is Not Your Advocate

Today I present two lessons.  First, we learn why diabetes is not a per se disability sufficient to avoid penalties for early 401(k) distributions.  Second, we learn that pro se litigants cannot rely on the Tax Court to consider potential arguments they could have raised, but did not.

Diabetes is a well-known and widespread disease, afflicting some 37.3 million people in the U.S., according to the CDC’s 2022 National Diabetes Statistics Report.  That’s just over 11% of the US population.  Medical complications abound, as detailed in this report from the Diabetes Institute Research Foundation.

Managing diabetes and its attendant complications can be difficult and expensive.  In recognition of that, Canada gives this tax credit to Canadians who must manage the disease.  And in the U.S., many of the costs associated with diabetes qualify for the medical expense deduction under §213.  See e.g. IRS Publication 502 (2021) at p. 7 (explaining that cost of blood sugar test kit for diabetes is a qualifying medical expense).

In Robert B. Lucas v. Commissioner, T.C. Memo. 2023-9 (Jan. 17, 2023) (Judge Urda), the unemployed taxpayer took an early distribution from his 401(k) plan to help make ends meet, which included helping to manage his diabetes.  The issue was whether he had to pay the §72(t) 10% penalty for early distributions.  He could avoid the entire penalty if his diabetes qualified as a disability, and he could avoid some of it if the distribution was used for expenses allowable as a §213 deduction.  As to the first, Judge Urda teaches us why diabetes is not, in and of itself, a disability sufficient to escape the 10% penalty.  As to the second, Judge Urda notes the issue but, because the taxpayer did not raise it, “[w]e accordingly deem the issue forfeited.”  Op. at 4.  In doing that, Judge Urda teaches an important lesson on the role of the Tax Court.

Details below the fold.

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Aprill & Mayer: 21st Century Churches And Federal Tax Law

Ellen P. Aprill (Loyola-L.A.; Google Scholar) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar), 21st Century Churches and Federal Tax Law:

Federal tax treatment matters to churches, the term the IRS uses for all types of religious congregations, including synagogues, mosques, and temples. The federal tax provisions most significant for churches and certain entities closely related to them, however, are not those that the public and commentators often assume. Exemption from income tax and the ability of donors to deduct contributions, the benefits that receive the most public attention, in fact provide surprisingly little benefit either to churches in the aggregate or to most individual churches. Their status as organizations tax-exempt under section 501(c)(3) of the Internal Revenue Code, moreover, imposes a variety of burdens on them. The burdens include limitations on lobbying and the prohibition on any intervention in campaigns for public office.

At the same time churches enjoy special tax benefits not afforded to other section 501(c)(3) organizations, not even other kinds of tax-exempt religious organizations. These special benefits make church status appealing. Such benefits include exemption from filing the IRS Form 990, an annual information return that, with the exception of the names and addresses of major donors, is also publicly available. In addition, the IRS cannot begin any audit of a church unless it complies with a number of procedures.

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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 #1:

1. [629 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [567 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [371 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
4. [219 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
5. [106 Downloads]  Multistate Business Entities, by Andrew Appleby (Stetson; Google Scholar) & Tomer Stein (Stetson)

Call For Papers: BI Norwegian Business School Workshop On Taxation, Citizenship, And Democracy

Call For Papers:

We invite submissions from scholars in from law, politics, economics, and history to jointly discuss the interlinking between taxation, citizenship, and democracy. The workshop and publication strive for a multidisciplinary approach and thought-provoking ideas on the theme. In contrast to general legal scholarship, formal citizenship has not been of particular interest to tax scholarship. 

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Household Asymmetric Risk Of Foreclosure From Tax Assessment Limit

This week, Michelle Layser (San Diego) reviews Sebastien Bradley (Drexel; Google Scholar), Da Huang (Utah; Google Scholar), Nathan Seegert (Utah; Google Scholar), Household Asymmetric Risk of Foreclosure From Tax Assessment Limit (Jan. 21, 2023).

During the pandemic, U.S. housing prices soared. In many cities, rising home prices can trigger higher assessed values for property taxation. But in California and 16 other states with assessment limits, laws limit how much appreciation cities can take into account for property tax purposes. That is good news for homeowners here in San Diego, where housing prices in March 2022 were up a whopping 29.9% from the previous year. Since California law caps the annual increase in assessed value at 2%, homeowners were protected from property tax spikes during that period.

Then came the fall. From April to September, prices in San Diego fell 5.2%, and they have continued to drop. 

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Next Week’s Tax Workshops

Tuesday, February 7: Brian Galle (Georgetown; Google Scholar) will present Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth (with David Gamage (Indiana-Maurer; Google Scholar) & Darien Shanske (UC-Davis; Google Scholar)) (reviewed by Young Ran (Christine) Kim (Cardozo; Google Scholar) here) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Tuesday, February 7: Allison Christians (McGill; Google Scholar) will present Global Tax Reform and Mythical International Law (with Tarcísio Diniz Magalhães (Antwerp; Google Scholar)) as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Tuesday, February 7: Sarah B. Lawsky (Northwestern; Google Scholar) will present Coding The Code: Catala And Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022), as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak. 

Wednesday, February 8: Jonathan Choi (Minnesota; Google Scholar) will present Subjective Costs of Taxation as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, February 9: Katarzyna Anna Bilicka (Utah State; Google Scholar) will present as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

Friday, February 10: Robert Schütze (Durham) will present Limits to the Union’s ‘Internal Market’ Competence(s): Constitutional Comparisons (from The Question of Competence in the European Union, Oxford University Press 2014) as part of the Oxford-Virginia Legal Dialogs. If you would like to attend, please contact Tsilly Dagan and Ruth Mason. 

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Gondwe Presents The Life-Saving Potential Of Direct Public Financial Assistance To Survivors Of Intimate Partner Violence Today At Indiana

Nyamagaga Gondwe (Wisconsin; Google Scholar) presents Emergency Exit: The Life-Saving Potential of Direct Public Financial Assistance to Survivors of Intimate Partner Violence at Indiana today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

Intimate partner violence (IPV) is viewed primarily as a class of criminal behavior in federal policy. But the criminal justice system operates through a model of individual accountability, which means that solutions to IPV in American communities focus on education (proactive) and incarceration (reactive) as interventions.

However, public health studies on IPV suggest that the kinds of physical violence that result in arrest should not be seen as the central issue in addressing IPV. Instead, those studies suggest that physical violence should be thought of as a tool for one partner in a relationship to exert coercive power and control over the other partner. Put another way, physical violence is just one of multiple tools an abuser will use to control their partner. Other tools include emotional abuse, psychological abuse, and economic abuse.

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Londoño-Vélez Presents Behavioral Responses To Wealth Taxation: Evidence From Colombia Today At UCLA

Juliana Londoño-Vélez (UCLA; Google Scholar) presents Behavioral Responses to Wealth Taxation: Evidence from Colombia (with Javier Avila-Mahecha (DIAN; Google Scholar)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

We study behavioral responses to personal wealth taxes in Colombia using tax microdata (1993-2016) linked with the leaked Panama Papers, which shed light on offshoring to Colombia’s most relevant tax havens. We leverage variation from four reforms that modified the wealth tax design—tax duration and rate schedule—and introduced discrete jumps in the tax liability. Using bunching and difference-in-difference techniques, we obtain four key results. First, we find salient and compelling evidence that wealth tax hikes cause taxpayers to lower their reported wealth instantly—a reporting response that slashes, at most, one-fifth of tax revenue. Second, this response can persist even after the wealth tax no longer applies—i.e., “hysteresis”—reflecting taxpayers’ strategic avoidance behavior. Third, taxpayers misreport what authorities cannot cross-verify: they inflate (interpersonal) debt and underreport non-third-party-reported business assets. Lastly, the wealthiest taxpayers respond to wealth tax hikes by hiding assets in hard-to-track entities in tax havens.

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Bargain Basement Progressivity? Constitutional Flat Taxes, Demogrants, And Progressive Income Taxation

Samuel D. Brunson (Loyola-Chicago; Google Scholar), Bargain Basement Progressivity? Constitutional Flat Taxes, Demogrants, and Progressive Income Taxation, 53 Loy. U. Chi. L.J. 683 (2022):

State and local governments raise revenue in three primary ways: property, sales, and income taxes. Property and sales taxes tend to impose a higher burden on low-income households. To ensure the fairness and progressivity of their overall revenue system, states need their income tax to be sufficiently progressive.

Four states face an apparently insurmountable barrier to progressive income taxation: their state constitutions mandate that any income tax must have a flat rate, applicable to all taxpayers. Without a constitutional amendment, a difficult process, they cannot adopt marginal rates that increase as income increases.

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