Schizer Presents How Energy Policy Can Protect Both National Security And The Environment Today At San Diego

David M. Schizer (Columbia) presents Red White and Blue – and also Green: How Energy Policy Can Protect Both National Security and the Environment at San Diego today as part of its Tax Law Speaker Series.

Too often, energy policy protects the environment while neglecting national security, or vice versa. Since each goal is critical, this Article shows to how to advance both at the same time.

For national security, the key is to avoid depending on the wrong suppliers. If they are vulnerable to attack (like some Middle Eastern producers), they need to be defended. Or if they are themselves geopolitical threats (like Russia and Iran), their energy exports fund harmful conduct. This Article breaks new ground in showing why suppliers tend to be insecure or menacing: authoritarian regimes have a comparative advantage in producing oil and gas, since they are less responsive to opposition from environmentalists, local residents, and other groups.

To avoid depending on the wrong suppliers, the U.S. and its allies should pursue two strategies. First, they should cut demand for fossil fuel. Along with making it easier to stop buying from the wrong suppliers, slashing demand also reduces greenhouse gas emissions and pollution.

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Next Week’s Tax Workshops

Monday, March 20: David M. Schizer (Columbia) will present Red White and Blue – and also Green: How Energy Policy Can Protect Both National Security and the Environment as part of the San Diego Tax Law Speaker Series. 

Tuesday, March 21: Clinton G. Wallace (South Carolina; Google Scholar) will present Taxing Luxury Emissions (with Shelley Welton (Penn)) as part of the UC-San Francisco Law Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan. 

Tuesday, March 21: Phyllis Taite (Oklahoma City) will present Welfare v Wealthfare: The Illusion of Equity in Tax Policy 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 22: 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 Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie.

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Kleiman Presents Subjective Costs Of Tax Compliance Today At The OMG Transatlantic Tax Talks

Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) presents Subjective Costs of Tax Compliance (with Jonathan Choi (Minnesota; Google Scholar)) today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

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. Indeed, our results suggest that people value their tax compliance time at a rate much lower than their hourly wage. 

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Mason Presents Bounded Extraterritoriality Today At UCLA

Ruth Mason (Virginia; Google Scholar) presents Bounded Extraterritoriality (with Michael Knoll (Penn)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Politics in the United States is ever more divided, stymying federal legislation. States have responded to this political polarization and congressional gridlock by seeking to impose their policies outside their own borders. Prominent examples include recent California regulation of the composition of corporate boards, including of companies incorporated in Delaware, as well as regulation of the size of cages that confine hogs located in other states. The Supreme Court’s withdrawal of the federal right to abortion likewise has inspired legislative proposals in abortion-restrictive states meant to hamper or forbid residents from seeking abortion services not only at home, but also in abortion-permitting states. The twenty-first century has inspired a new mode of interstate “rivalries and reprisals” consisting not of the tariffs that plagued the Founding, but rather of substantive regulation that state legislatures deliberately target outward, to behavior taking place in other states.

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Newton Presents Closing the Opportunity Gap Today At Toronto

Deanna Newton (Pepperdine) presents Closing the Opportunity Gap at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

Researchers have found little to no evidence that Opportunity Zones positively impact zone residents’ lives. Scholars agree that the majority of benefits from Opportunity Zone legislation go to wealthy investors and should be reformed to better benefit community members. This Article argues that current reform efforts and related scholarship do not give adequate weight to active and direct participation by community members and investors. This Article proposes two novel policy reforms for the Opportunity Zone program, which fills a growing gap in Opportunity Zone literature. First, investors should be required to buy into the community financially or personally. Buy-in would entail a one-time lump sum payment to a community fund or a community service pledge to ensure actualized commitment to community development. Second, a percentage of each Opportunity Zone should be reserved for current community members to invest in. Investors are currently not required to finance projects geared toward the needs of local communities, and are instead funding developments they would have already invested in, whether located in an Opportunity Zone or not.

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Simkovic Presents Pigouvian Contracts Today At Northwestern

Michael Simkovic (USC; Google Scholar) presents Pigouvian Contracts (with Meirav Furth-Matzkin (UCLA)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

Pigouvian taxes are often used to limit environmental externalities such as pollution. We argue that consumer contracts generate externalities by overwhelming consumers’ attention. Depleting each consumer’s attention harms consumers collectively because lower comprehension levels enable sellers to adopt less efficient and more one-sided terms. We propose to tax sellers in proportion to the costs that comprehending their contracts would impose on consumers. This would force sellers to internalize these costs and incentivize them to invest in contract simplification and forego strategic obfuscation. As a result, the costs to consumers of comprehending would decrease, and comprehension rates would rise. To further penalize inefficient contracts while reducing the tax burden on efficient contracts, we propose subsidizing consumer comprehension and information sharing efforts. Inefficient contracts would thereby be strongly disincentivized.

Conclusion
Many legal scholars, regulators, elected officials, and consumer advocates have noted consumers’ limited ability to comprehend standard form contracts. Some have suggested ways of reducing comprehension costs to consumers. However, to the best of our knowledge, we are the first to propose and formally model Pigouvian taxation of contracts and subsidization of consumer comprehension.

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Next Week’s Tax Workshops

Wednesday, March 15: Michael Simkovic (USC; Google Scholar) will present Pigouvian Contracts (with Meirav Furth-Matzkin (UCLA)) as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky.

Wednesday, March 15: Deanna Newton (Pepperdine) will present Closing the Opportunity Gap as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

Thursday, March 16: Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) will present Subjective Costs of Tax Compliance (with Jonathan Choi (Minnesota; Google Scholar)) as part of the OMG Transatlantic Tax Talks. No registration is required for this event.

Thursday, March 16: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) 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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Oei Presents Understanding Developing Country Tax Treaties With OECD Partners Today At Duke

Shu-Yi Oei (Duke; Google Scholar) presents Understanding Developing Country Tax Treaties with OECD Partners: A Multilevel Analysis at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

This paper investigates what factors predict the relative distribution of taxing rights in tax treaties signed between developing and developed countries. Existing literature posits power-based, contractualist, and institutional/contextual theories of how tax treaties allocate taxing rights between signatories. This paper examines the available evidence supporting each of these theories using multilevel regression analysis to do so. This paper ultimately finds suggestive evidence that relative power, contractually bargained-for preferences, and institutional/contextual pathways may all play some role in shaping tax treaty outcomes.

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Slemrod Presents Two (Short) Papers About Gender Equity In The Income Tax At UCLA

Joel Slemrod (Michigan; Google Scholar) presented Two (Short) Papers About Gender Equity In The U.S. Income Tax at UCLA on Wednesday as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Who’s On (the 1040) First? Determinants and Consequences of Spouses’ Name Order on Joint Returns (with Emily Lin (Office of Tax Analysis, U.S. Treasury Department), Evelyn Smith (Michigan) & Alexander Yuskavage (Office of Tax Analysis, U.S. Treasury Department)): 

Married couples filing a joint return put the male name first 88.1% of the time in tax year 2020, down from 97.3% in 1996. The man’s name is more likely to go first the larger is the fraction of the couple’s allocable income that goes to him, and the older is the couple. Based on state averages, putting the man’s name first is strongly associated with conservative religious attitudes, religiosity, and a survey-based measure of sexist attitudes. Risk-taking and tax noncompliance are both associated with the man’s name going first.

For more, see Wall Street Journal, Whose Name Goes First On Your Joint Tax Return? Probably Not The Woman's.

Group Equity and Implicit Gender Discrimination in the U.S. Income Tax:

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Viswanathan Presents Tax And Expectation Damages Today At Toronto

Manoj Viswanathan (UC-San Francisco; Google Scholar) presents Tax and Expectation Damages at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie: 

The tax consequences of expectation damages can leave non-breaching parties worse off than had the contract been performed. This normatively troubling lack of restoration could be remedied by (1) modifying how contract damage awards are taxed or (2) adjusting (in dollar terms) the expectation damages paid by the non-breaching party. 

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Jurow Kleiman Presents Subjective Costs Of Tax Compliance Today At Columbia

Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) presents Subjective Costs of Tax Compliance (with Jonathan Choi (Minnesota; Google Scholar)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer:

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. Indeed, our results suggest that people value their tax compliance time at a rate much lower than their hourly wage. 

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Grewal Presents Billionaire Taxes And The Constitution Today At Georgetown

Andy Grewal (Iowa; Google Scholar) presents Billionaire Taxes and the Constitution at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

The holistic approach advanced in this Article has everything going for it – except scholarly opinion and Supreme Court jurisprudence. However, the piecemeal approach embraced by those authorities has led to incoherence, instability, and interpretive chaos. Few, if any, would look admirably at the current doctrine.

The piecemeal approach could be tolerated in the early days of the income tax because Congress hewed closely to “income” whenever it amended the tax code. So, outside of Macomber, the distinction between a piecemeal approach and a holistic approach generally made no difference. But in recent decades, Congress has adopted more aggressive definitions of income, often to pursue social policies beyond revenue collection.

The stakes over whether Congress has properly imposed “taxes on incomes” under the Sixteenth Amendment have never been higher. 

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Newton Presents Closing the Opportunity Gap Today At Florida State

Deanna Newton (Pepperdine) presents Closing the Opportunity Gap at Florida State today as part of its Law and Business Speaker Series hosted by Jeffrey Kahn:

Researchers have found little to no evidence that Opportunity Zones positively impact zone residents’ lives. Scholars agree that the majority of benefits from Opportunity Zone legislation go to wealthy investors and should be reformed to better benefit community members. This Article argues that current reform efforts and related scholarship do not give adequate weight to active and direct participation by community members and investors. This Article proposes two novel policy reforms for the Opportunity Zone program, which fills a growing gap in Opportunity Zone literature. First, investors should be required to buy into the community financially or personally. Buy-in would entail a one-time lump sum payment to a community fund or a community service pledge to ensure actualized commitment to community development. Second, a percentage of each Opportunity Zone should be reserved for current community members to invest in. Investors are currently not required to finance projects geared toward the needs of local communities, and are instead funding developments they would have already invested in, whether located in an Opportunity Zone or not.

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Next Week’s Tax Workshops

Monday, March 6: Deanna Newton (Pepperdine) will present Closing the Opportunity Gap as part of the Florida State Law and Business Speaker Series. If you would like to attend, please contact Jeffrey Kahn.

Tuesday, March 7: Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar) will present Subjective Costs of Tax Compliance (with Jonathan Choi (Minnesota; Google Scholar)) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer.

Tuesday, March 7: Joel Slemrod (Michigan; 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. 

Tuesday, March 7: Andy Grewal (Iowa; Google Scholar) will present Billionaire Taxes and the Constitution 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 8: Manoj Viswanathan (UC-San Francisco; Google Scholar) will present Tax and Expectation Damages as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

Thursday, March 9: Shu-Yi Oei (Duke; Google Scholar) will present Understanding Developing Country Tax Treaties with OECD Partners: A Multilevel Analysis as part of the Duke Tax Policy Seminar. If you would like to attend, please contact Lawrence Zelenak. 

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Gilens Presents Campaign Finance Regulations And Public Policy Today At UCLA

Martin Gilens (UCLA) presents  Campaign Finance Regulations and Public Policy, 115 Am. Pol. Sci. Rev. 1074 (2021) (with Shawn Patterson, Jr. (Southern Oregon) & Pavielle Haines (Rollins College)) at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

Despite a century of efforts to constrain money in American elections, there is little consensus on whether campaign finance regulations make any appreciable difference. Here we take advantage of a change in the campaign finance regulations of half of the U.S. states mandated by the Supreme Court’s Citizens United decision. This exogenously imposed change in the regulation of independent expenditures provides an advance over the identification strategies used in most previous studies. Using a generalized synthetic control method, we find that after Citizens United, states that had previously banned independent corporate expenditures (and thus were “treated” by the decision) adopted more “corporate-friendly” policies on issues with broad effects on corporations’ welfare; we find no evidence of shifts on policies with little or no effect on corporate welfare. 

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Bearer-Friend Presents Poll Taxes, Revisited Today At Northwestern

Jeremy Bearer-Friend (George Washington; Google Scholar) presents Poll Taxes, Revisited at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

In the United States, the term “poll tax” conjures a very specific historical episode: the use of tax policy to prevent voting by Black citizens. While “poll tax” is an accurate descriptor of these taxes, poll taxes have a much more expansive history within the twentieth century.

Following in the rich tradition of comparative tax scholarship that looks at multiple jurisdictions to arrive at broader tax policy conclusions, this Article examines four distinct poll taxes applied by Anglophone governments in the twentieth century. After introducing the statutory text, design features, and democratic context of each of these twentieth century poll taxes, the Article makes three original claims about poll taxes.

First, my comparative research on twentieth century poll taxes reveals how universal language in tax statutes is used to effectively target political enemies. 

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Risch Presents Trickle-Down Revisited Today At Columbia

Max Risch (Carnegie Mellon; Google Scholar) presents Trickle-Down Revisited at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer: 

In this paper I discuss what can be learned about “trickle-down” ideas from recent empirical evidence on tax incidence. Tax incidence, defined as the effect of tax policies on the distribution of welfare, provides an ideal framework because of the explicit focus on tracing the impacts of a policy beyond the directly affected group (ex. the rich). I arrive at three main lessons. First, recent evidence finds that business income taxes do affect the earnings of workers, but these effects are mostly a result of rent-sharing and taxation of rents, not from traditional supply-side channels. Second, there are systematic differences in the types of workers that are affected by the tax policies, so to understand how taxing businesses or business owners affects the distribution of welfare, it is not sufficient to treat workers/labor as a class. Third, across different income tax policies that statutorily affect the rich, the burden is generally ultimately born by the rich.

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Guyton Presents Sequential Decision-Making For Internal Revenue Service Audit Selection Today At Georgetown

John Guyton (IRS) presents Integrating Reward Maximization and Population Estimation: Sequential Decision-Making for Internal Revenue Service Audit Selection at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:

We introduce a new setting, optimize-and-estimate structured bandits. Here, a policy must select a batch of arms, each characterized by its own context, that would allow it to both maximize reward and maintain an accurate (ideally unbiased) population estimate of the reward. This setting is inherent to many public and private sector applications and often requires handling delayed feedback, small data, and distribution shifts. We demonstrate its importance on real data from the United States Internal Revenue Service (IRS). The IRS performs yearly audits of the tax base. Two of its most important objectives are to identify suspected misreporting and to estimate the “tax gap” — the global difference between the amount paid and true amount owed. 

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Oei Presents Understanding Developing Country Tax Treaties With OECD Partners Today At UC-San Francisco

Shu-Yi Oei (Duke; Google Scholar) presents Understanding Developing Country Tax Treaties with OECD Partners: A Multilevel Analysis at UC-San Francisco today as part of its Tax Policy Colloquium hosted by Manoj Viswanathan:

This paper investigates what factors predict the relative distribution of taxing rights in tax treaties signed between developing and developed countries. Existing literature posits power-based, contractualist, and institutional/contextual theories of how tax treaties allocate taxing rights between signatories. This paper examines the available evidence supporting each of these theories using multilevel regression analysis to do so. This paper ultimately finds suggestive evidence that relative power, contractually bargained-for preferences, and institutional/contextual pathways may all play some role in shaping tax treaty outcomes.

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Sugin Presents Proxy Taxes Today At San Diego

Linda Sugin (Fordham; Google Scholar) presents Proxy Taxes at San Diego today as part of its Tax Law Speaker Series:

This article offers a conceptual and theoretical framework for seemingly oddball and unprincipled provisions in the Internal Revenue Code, praising them for increasing progressivity and producing revenue.  “Proxy taxes” impose liability on taxpayers with ability to pay who are connected, in some way, to income earners who pay insufficient or no tax on that income.  Given the combination of rising income and wealth inequality and the political impossibility of raising taxes on income in a straightforward way, policymakers should embrace proxy taxes as a flexible solution to a pressing tax justice problem.  This article argues that proxy taxes contribute to a more comprehensive income tax system, despite their departure from classic income tax principles, and can also be more efficient than higher taxes imposed on income.

While accepting the corporate governance critiques in the literature, the article endorses §162(m)’s limit on the deduction for executive compensation as a great proxy tax on labor income. 

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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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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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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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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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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. 

Continue reading

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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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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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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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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Clausing Presents Capital Taxation And Market Power Today At Toronto

Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation and Market Power at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

In recent decades, market power has increased substantially, as shown by measures that include 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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Morse Presents APA Challenges To Old Tax Guidance And The Six-Year Default Limitations Period Today At Northwestern

Susie Morse (Texas; Google Scholar) presents Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period at Northwestern today as part of its Advanced Topics in Taxation Colloquium hosted by Gregg Polsky:

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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Doran Presents Executive Compensation And Corporate Governance Today At Columbia

Michael Doran (Virginia; Google Scholar) presents Executive Compensation And Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by David Schizer, Michael Love, Wojciech Kopczuk, and Alex Raskolnikov. 

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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Goldin Presents Measurement And Mitigation Of Racial Disparities In Tax Audits Today At Georgetown

Jacob Goldin (Chicago; Google Scholar) presents Measurement and Mitigation of Racial Disparities in Tax Audits at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli. 

Government agencies around the world use data-driven algorithms to allocate enforcement resources. Even when such algorithms are formally neutral with respect to protected characteristics like race, there is widespread concern that they can disproportionately burden vulnerable groups. We study differences in Internal Revenue Service (IRS) audit rates between Black and non-Black taxpayers. Because neither we nor the IRS observe taxpayer race, we propose and employ a novel partial identification strategy to estimate these differences. Despite race-blind audit selection, we find that Black taxpayers are audited at 2.9 to 4.7 times the rate of non-Black taxpayers. The main source of the disparity is differing audit rates by race among taxpayers claiming the Earned Income Tax Credit (EITC). Using counterfactual audit selection models for EITC claimants, we find that maximizing the detection of underreported taxes would not lead to Black taxpayers being audited at higher rates. In contrast, in these models, certain policies tend to increase the audit rate of Black taxpayers: (1) designing audit selection algorithms to minimize the “no-change rate”; (2) targeting erroneously claimed refundable credits rather than total under-reporting; and (3) limiting the share of more complex EITC returns that can be selected for audit. 

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Clausing Delivers Pugh Lecture Today At San Diego On The Future of International Tax Cooperation

Kimberly Clausing (UCLA; Google Scholar) delivers the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego today on The Future of International Tax Cooperation:

Kimberly Clausing holds the Eric M. Zolt Chair in Tax Law and Policy.

During the first part of the Biden Administration, Clausing was the Deputy Assistant Secretary for Tax Analysis in the US Department of the Treasury, serving as the lead economist in the Office of Tax Policy. Prior to coming to UCLA, Clausing was the Thormund A. Miller and Walter Mintz Professor of Economics at Reed College.

Her research studies the taxation of multinational firms, examining how government decisions and corporate behavior interplay in the global economy. She has published numerous articles in this area, and she is the author of Open: The Progressive Case for Free Trade, Immigration, and Global Capital (Harvard University Press, 2019).

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Jan Brueckner And Blaine Saito Present Tax Papers At UCLA

Jan Brueckner (UC-Irvine; Google Scholar) presented Taxes and Telework: The Impacts of State Income Taxes in a Work-from-Home Economy (with David R. Agrawal (Kentucky; Google Scholar)) at UCLA this week as part of its Colloquium on Tax Policy and Public Finance hosted by Kirk Stark and Jason Oh:

This paper studies the interstate effects of decentralized taxation and spending when individuals can work from home (WFH). Because WFH decouples population and employment, the analysis of tax impacts on state populations, employment levels, wages and housing prices is radically different than in the standard model where individuals live and work in the same state. Which state can tax teleworkers—leading to either source or residence taxation—matters for tax impacts under WFH. Our main findings, which pertain to the employment and wage effects of WFH, show that a shift from a non-WFH economy to WFH reduces employment and raises the wage in high-tax states, with larger effects under source taxation. Once WHF is established, an increase in a state’s tax rate either reduces employment further while raising the wage (source taxation) or leaves the labor market unaffected (residence taxation). We show that only the residence-taxation equilibrium is efficient.

Blaine Saito (Northeastern; Google Scholar) presented Public Tax Actors at UCLA last week:

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Next Week’s Tax Workshops

Monday, January 30: Kimberly Clausing (UCLA; Google Scholar) will present The Future of International Tax Cooperation as part of the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego. If you would like to attend, please RSVP here.

Tuesday, January 31: Jacob Goldin (Chicago; Google Scholar) will present Measurement and Mitigation of Racial Disparities in Tax Audits 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, January 31: Michael Doran (Virginia; Google Scholar) will present Executive Compensation And Corporate Governance (reviewed by Sloan Speck (Colorado; Google Scholar) here) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Wednesday, February 1: Susan Morse (Texas; Google Scholar) will present Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Wednesday, February 1: Kimberly Clausing (UCLA; Google Scholar) will present Capital Taxation and Market Power 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 2: Juliana Londoño-Vélez (UCLA; Google Scholar) will present Behavioral Responses to Wealth Taxation: Evidence from Colombia (with Javier Avila-Mahecha (DIAN; 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.

Friday, February 3: Nyamagaga Gondwe (Wisconsin; Google Scholar) will present Emergency Exit: The Life-Saving Potential of Direct Public Financial Assistance to Survivors of Intimate Partner Violence as part of the Indiana Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman.

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Mason Presents Bibb Balancing Today At The OMG Transatlantic Tax Talks

Ruth Mason (Virginia; Google Scholar) presents Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

Courts and commentators have long understood dormant Commerce Clause doctrine to contain two types of cases: discrimination and undue burdens. This Article argues for a more nuanced understanding that divides undue burdens into single-state burdens—which arise from the application of a single state’s law alone—and mismatch burdens, which arise from legal diversity. Although the Supreme Court purports to apply Pike balancing in all undue-burden cases, we show that the Court’s approach in mismatch cases differs substantially. Specifically, unlike in single-state cases, balancing in mismatch cases involves an implicit and potentially problematic comparison by the Court between the challenged state’s regulation and those of other states. We label analysis in mismatch cases “Bibb balancing,” after the famous mudflaps case, and we show that mismatch cases present the Court with a more challenging set of issues than do other types of dormant Commerce Clause cases.

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