Paul L. Caron
Dean


Saturday, November 16, 2019

This Week's Ten Most Popular TaxProf Blog Posts

NY Times: Warren's Tax Plan Would Dramatically Cut Billionaires' Wealth Over Time

New York Times, Warren Would Take Billionaires Down a Few Billion Pegs:

“Yes, billionaires will have to pay a little more,” Senator Elizabeth Warren said of the revised tax package she introduced recently, “six cents on each dollar.”

This modest-sounding proposal, though, would have a far-reaching impact on the wealthiest Americans when combined with her other tax plans — shrinking colossal fortunes over time and making it much more difficult to hand down multibillion-dollar legacies.

The tax bite for any individual would not equal the $100 billion that Bill Gates jokingly cited, but over time it would still sting, according to estimates by two economists who advised Ms. Warren. If her wealth tax had been in effect since 1982, for example, Mr. Gates, who had made his first billion dollars by 1987, would have had $13.9 billion in 2018 instead of $97 billion. Jeff Bezos, the world’s richest person, would have had $48.8 billion last year instead of $160 billion. ...

NYT 1

As for the 400 people who made it to Forbes magazine’s list of the country’s wealthiest people, each would have an average worth of $3.1 billion, down from the current $7.2 billion.

NYT 2

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November 16, 2019 in Tax, Tax News | Permalink | Comments (0)

Friday, November 15, 2019

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Chason's A Tax On The Clones: The Strange Case Of Bitcoin Cash

This week, Mirit Eyal-Cohen (Alabama) reviews Eric D. Chason (William & Mary),  A Tax on the Clones: The Strange Case of Bitcoin Cash, 39 Va. Tax Rev. __ (2019).  

Mirit-Cohen (2018)This Article is right down my ally dealing with taxation and innovation. In recent years, Cryptocurrency generally, and Bitcoin specifically, have risen steeply in their market value breaking record percentage increase. Notwithstanding its speculative hype, blockchain technology through community-wide protocols has been a state-of-the-art development that had been spurring change in the fields of economics, technology, and the law. The rise in digital assets has created tax issues involving the definition of blockchain. Is it property or currency? In a series of publications including Rev. Rul. 2019-24, the IRS determined these digital assets are considered property. This Article presents the difficulty of applying such tax treatment encroach upon its administrability and making digital assets’ use impractical when looking at every transaction as subject to gain and loss recognition. It does so by focusing on implications of Cryptocurrency derivatives, also known as Bitcoin forks or Bitcoin Cash.

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November 15, 2019 in Scholarship, Tax, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

New York Times, Trump Asks Supreme Court to Bar Release of His Tax Returns:

President Trump asked the Supreme Court on Thursday to bar his accounting firm from turning over eight years of his tax returns to Manhattan prosecutors.

The case, the first concerning Mr. Trump’s personal conduct and business dealings to reach the court, could yield a major ruling on the scope of presidential immunity from criminal investigations. ...

In their petition urging the Supreme Court to hear their appeal, Mr. Trump’s lawyers argued that he was immune from all criminal proceedings and investigations so long as he remained in office. But even if some federal investigations may be proper, the petition said, the Supreme Court should rule that state and local prosecutors may not seek information about a sitting president’s conduct. ...

Mr. Trump’s lawyers noted that the Supreme Court heard cases concerning claims of immunity from Presidents Richard M. Nixon and Bill Clinton. ... In the two earlier cases, United States v. Nixon in 1974 and Clinton v. Jones in 1997, both presidents suffered unanimous losses.

Last week, a unanimous three-judge panel of a federal appeals court in Manhattan ruled against Mr. Trump. The court, in a focused ruling, said state prosecutors may require third parties to turn over a sitting president’s financial records for use in a grand jury investigation.

Mr. Trump has fought vigorously to shield his financial records, and prosecutors in Manhattan have agreed not to seek the tax returns until the case is resolved by the Supreme Court. ...

On Thursday, Mr. Trump’s lawyers wrote that the proper way to address any misconduct by a sitting president is through impeachment proceedings. “Allowing a single prosecutor to investigate a sitting president through the issuance of criminal process no less invades Congress’s impeachment authority than the filing of a criminal charge,” they wrote.

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November 15, 2019 in Tax, Tax News | Permalink | Comments (0)

Flanagan: Reframing Taxigration

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

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

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November 15, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Billionaires Are Bad For Democracy

New York Times op-ed:  Are Billionaires Bad for Democracy?, by Michael Tomasky:

I’m not expert enough to judge the wisdom of Senator Warren’s proposed wealth tax. ... So this column is not a brief for Ms. Warren’s wealth tax or for her candidacy — I don’t have a preferred candidate. Instead, I want to make a simple plea to the country’s billionaires: Multibillion-dollar fortunes are often called excessive and decadent. But here’s something they’re rarely called but ought to be: anti-democratic. These fortunes will destroy our democracy. ...

[A]ny democracy needs a robust and thriving middle class, and we have spent the last 30 or so years transferring trillions of dollars from the middle class to the people at the very top. Just one set of numbers, from the University of California, Berkeley economist Gabriel Zucman: The 400 richest Americans — the top .00025 percent of the population — now own more of the country’s riches than the 150 million adults in the bottom 60 percent of wealth distribution. The 400’s share has tripled since the 1980s.

This is carnage, plain and simple. No democratic society can let that keep happening and expect to stay a democracy. It will produce a middle and working classes with no sense of security, and when people have no sense that the system is providing them with basic security, they’ll make some odd and desperate choices. ...

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November 15, 2019 in Tax, Tax News | Permalink | Comments (4)

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

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

Indiana (2017)The “sharing economy,” also known as the “gig” or “on-demand” economy, is transforming the way people work, eat, commute, and travel by seamlessly connecting suppliers and consumers via app-based technology platforms.  It provides flexible income earning opportunities for one side and convenience and low prices for the other. However, it also creates a dizzying array of policy problems for communities of all sizes—from tax evasion and pollution to price discrimination, worker precarity, and violent protests.  The Indiana Journal of Law and Social Equality (IJLSE), in collaboration with Indiana University’s Kelley School of Business and the Ostrom Workshop, is hosting a symposium on February 13th and 14th at the Maurer School of Law in Bloomington, Indiana to offer and debate solutions to these complex and fast-moving set of challenges.

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

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

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November 15, 2019 in Conferences, Legal Education, Tax, Tax Scholarship | Permalink | Comments (0)

Thursday, November 14, 2019

Blank Presents Progressive Tax Procedure Today At San Diego

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

6a00d8341c4eab53ef0240a4467a28200c-300wiDiscussions of progressive taxation in the United States—and of whether the rich pay enough in taxes—generally focus on the structure of the substantive tax law, such as the marginal rates, income brackets, deductions, and credits under the federal income tax. Despite recent reports of tax avoidance and noncompliance by high-income taxpayers, these discussions have not focused on the structure of the tax procedure rules, which govern the Internal Revenue Service’s administrative responsibilities and taxpayers’ compliance obligations.

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

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November 14, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

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

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

Florida Tax Review (2019)With promises of “Make America Great Again” and tax reform for “middle-class” Americans, the current federal government administration has implied that the average American would become more prosperous under this tax system. It is no surprise that most middle-class Americans view a college education as a requirement for achieving a better life. However, under the TCJA, education has not fared well, and in reality, students from many low- and moderate-income families will face reduced scholarships from elite schools, thereby reducing diversity on these campuses. Other proposed changes to education in the original tax bill, which were later removed, are also addressed as they may hint to which direction this may go and face legislative changes in the future.

November 14, 2019 in Legal Ed News, Legal Education, Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Morse: GILTI — The Cooperative Potential Of A Unilateral Minimum Tax

Susan C. Morse (Texas), GILTI: The Co-operative Potential of a Unilateral Minimum Tax, 2019 Brit. Tax Rev. 512:

Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), the US allowed US parented multinationals to delay indefinitely their payment of US corporate income tax on non-US income earned by non-US corporate subsidiaries (CFCs). The TCJA revoked this permission through the enactment of a unilateral, current minimum tax on the “global intangible low-taxed income” (GILTI) of CFCs. The post-TCJA US international tax law generally imposes current US tax on CFC income subject to reductions for foreign income taxes paid or accrued. This US regime supports the continued existence of a corporate income tax and presents an opportunity to co-ordinate the details of corporate income tax systems globally. Similarity among systems, for instance with respect to rate, timing and base, would further strengthen the corporate income tax and perhaps support innovations such as formulary apportionment.

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November 14, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

RenTech’s Billion-Dollar Tax Cloud Darkens After IRS Ruling

Following up on my previous post, $6.8 Billion Hedge Fund Tax Dispute Moves to IRS Appeals Office:  Bloomberg, RenTech’s Billion-Dollar Tax Cloud Darkens After IRS Ruling:

RenaissanceA little-noticed decision by the Internal Revenue Service’s appeals unit may spell trouble for legendary investor Jim Simons, who’s embroiled in a multibillion-dollar tax dispute with the agency.

Reviewing the audit of an investment manager in Connecticut, the IRS Office of Appeals rejected a tax-avoidance maneuver involving so-called basket options. That’s the type of transaction at the heart of a separate, larger case involving Simons’s Renaissance Technologies hedge fund. The decision, made public in a court filing in May, could offer a preview of the tax agency’s reasoning in the Renaissance case.

The Renaissance dispute is one of the largest ever handled by the IRS, potentially involving about $6.8 billion in back taxes, according to an estimate by U.S. Senate investigators.

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November 14, 2019 in Tax, Tax News | Permalink | Comments (0)

Wednesday, November 13, 2019

Robinson Presents Negotiated Tax Havens Today At Penn

Leslie Robinson (Dartmouth) presents Negotiated Tax Havens (with Kevin Markle (Iowa)) at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

Robinson (2019)The intersection of state aid and international tax has acquired a high profile in Europe. In response, disclosure policies are being proposed. With no empirical evidence, these policies are predicated on rhetoric that pervasive practices by host country governments unfairly benefit foreign-owned companies. Using several novel data sources on tax relief granted in the EU, we find that both domestic- and foreign-owned companies benefit from tax concessions. Our evidence that tax avoidance is a joint production function of business and government suggests that any jurisdiction can operate as a tax haven for a company willing to negotiate. ...

Conclusion.  Overall, our results suggest that state aid offers tax benefits to both foreignowned and domestic-owned companies. Aid that is pre-approved appears more likely to benefit domestic-owned companies, perhaps because helping domesticowned companies is more likely to meet a broader EU objective than aiding foreign-owned companies. The recent trend towards enhanced disclosure of tax rulings as well as disclosure of aid granted at the level of the beneficiary are, in our view, necessary steps toward appropriate enforcement of state aid rules in the EU. However, because state aid does appear to benefit domestic-owned companies, the automatic exchange of tax rulings should cover all rulings, not just those issued to foreign-owned companies.

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November 13, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Winchester: A Tax Theory Of The Firm

Richard Winchester (Thomas Jefferson), A Tax Theory of the Firm, 88 U. Cin. L. Rev. 1 (2019):

The U.S. has always had two distinctly different methods for taxing business profits. The method that applies in any given case has always depended on the tax classification assigned to the firm. However, there has never been a satisfactory way to determine a firm’s tax classification because the rules for doing so were never grounded in a theory of the firm that had any relevance for tax purposes.

This article offers a tax theory of the firm that can serve as an organizing principle for classifying firms and taxing their profits.

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November 13, 2019 in Scholarship, Tax | Permalink | Comments (0)

ABA And UNLV Host Webinar Today On Economic, Gender And Racial Inequality In State & Local Tax Systems

The ABA and UNLV Law School host a webinar today (12:30 pm PST) on Economic, Gender and Racial Inequality in State and Local Tax Systems:

  • UNLV ABABridget Crawford (Pace)
  • Lisa Christensen Gee (Institute on Taxation & Economic Policy)
  • Francine Lipman (UNLV) (moderator)
  • Kirk Stark (UCLA)

Over the past four decades, wealth has increasingly concentrated among the highest-income households. These households are disproportionately White and male. In 2018, three White men held aggregate wealth greater than the aggregate wealth of one-half of Americans. The median White household has 41 times more wealth than the median Black household and 22 times more wealth than the median Latinx household. On average women earn less than men in all industries. The largest pay gaps are in management, in which men earned $88,000 on average in 2016, compared to $55,000 for women. At the intersection of race and gender the gaps are even more shocking. Women of color are disproportionately poor suffering poverty rates of 21.4% Black women, 18.7% Latinas, and 22.8% Native American women, as compared to 7% for White men The United States exhibits wider disparities of wealth than any other major developed nation.

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November 13, 2019 in Conferences, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

The Happy, Healthy Capitalists Of Switzerland

New York Times op-ed:  The Happy, Healthy Capitalists of Switzerland, by Ruchir Sharma (Chief Global Strategist, Morgan Stanley):

FlagLike many progressive intellectuals, Bernie Sanders traces his vision of economic paradise not to socialist dictatorships like Venezuela but to their distant cousins in Scandinavia, which are just as wealthy and democratic as the United States but have more equitable distributions of wealth, as well as affordable health care and free college for all.

There is, however, a country far richer and just as fair as any in the Scandinavian trio of Sweden, Denmark and Norway. But no one talks about it.

This $700 billion European economy is among the world’s 20 largest, significantly bigger than any in Scandinavia. It delivers welfare benefits as comprehensive as Scandinavia’s but with lighter taxes, smaller government, and a more open and stable economy. Steady growth recently made it the second richest nation in the world, after Luxembourg, with an average income of $84,000, or $20,000 more than the Scandinavian average. Money is not the final measure of success, but surveys also rank this nation as one of the world’s 10 happiest.

This less socialist but more successful utopia is Switzerland.

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November 13, 2019 in Tax, Tax News | Permalink | Comments (5)

Tuesday, November 12, 2019

LaPlante Presents The Effect Of Intellectual Property Boxes On Innovation And Effective Tax Rates Today At NYU

Stacie LaPlante (Wisconsin), The Effect of Intellectual Property Boxes on Innovative Activity & Effective Tax Rates (with Tobias Bornemann (Vienna University of Economics and Business) & Benjamin Osswald (Wisconsin)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

LaplanteWe investigate whether and to what extent the adoption of an intellectual property box increases innovative activity and the extent to which different types of firms benefit financially. We examine the adoption of the intellectual property box in Belgium because it allows us to cleanly identify the impact on innovative activity and effective tax rates. Our results indicate an overall increase in innovative activity as proxied by patent applications, grants, and highly-skilled employment, at the expense of patent quality. We also provide evidence that firms with patents on average enjoy 7.2% to 7.9% lower effective tax rates, with the greatest financial benefits accruing to multinational firms compared to domestic firms

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November 12, 2019 in Colloquia, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

WSJ: Democratic Candidates’ Wealth Tax Plans Would Shake Up Billionaire Philanthropy; 'Red Hot Chili Peppers Tax Policy'

Wall Street Journal, Democratic Candidates’ Wealth Tax Plans Would Shake Up Billionaire Philanthropy:

The wealth taxes proposed by top Democratic presidential candidates might spark a short-term boom in billionaires’ donations to charity, as they accelerate gifts to avoid years of taxes eroding their fortunes.

Facing an annual tax that eats into returns and shrinks wealth, billionaires would have an incentive to move money out of their control—and out of the wealth-tax base. Otherwise, every year would see more of their money sent to the government for public projects and less to charities of their choosing.

“It’s a tax policy that the Red Hot Chili Peppers would love, because they want you to give it away now,” said Brian Galle, a law professor at Georgetown University.

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November 12, 2019 in Tax, Tax News | Permalink | Comments (1)

Tax Lessons From Trump's Move From New York To Florida

Following up on my previous post, NY Times: The Next Trump Legal Battle — Claiming Florida As His Legal Residence; 'It’s Hard For Mr. New York to Disavow His Residency':  

Wall Street Journal Tax Report, Not So Fast, Mr. Trump! Relocating to a Low-Tax State Is Hard to Do:

The President joins a long line of wealthy people who have left high-tax states like New York, Connecticut and California for low-tax states like Florida, Texas or Nevada. Among the latest is billionaire Carl Icahn, who has announced that he’s leaving his native New York for Florida.

The tax differences are clear. Florida, Texas and Nevada have neither income nor estate taxes, while New York and Connecticut have both. California doesn’t have an estate tax, but its top statutory income tax rate is the highest in the nation: 13.3%.

For Americans considering similar moves, and for Mr. Trump himself, tax specialists have a warning: Be careful, because states left behind can subject leavers to intrusive audits and sometimes lawsuits that drag on for years.

Forbes, Tax Lessons From Trump’s NY to Florida Move…For Californians:

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November 12, 2019 in Tax, Tax News | Permalink | Comments (0)

The Arm's Length Standard Is Not The Problem

Lorraine Eden (Texas A&M), The Arm's Length Standard Is Not the Problem, 48 Tax Mgmt. Int'l J. 10 (Oct. 11, 2019):

The historical approach to taxing intrafirm transactions of multinational enterprises — the arm’s-length standard (ALS) — has been criticized as unworkable, out of date and on death’s door. Criticisms of the ALS fall into two broad categories. First are concerns that MNEs have been deliberately engaging in abusive transfer pricing that is extensive, unfair and draining development. Second is that the transfer pricing rules are too difficult to implement for various reasons, of which the two most important reasons are the lack of arm’s-length comparables (e.g., for hard-to-value intangibles) and that MNE have synergies not available to unrelated parties. As a result, many academics and policy makers advocate getting rid of the ALS and shifting to global formulary apportionment (GFA). Even the OECD, long a supporter of the ALS and opponent of GFA, now includes fractional apportionment as a possible method for attributing income among countries under its Pillar 1 proposals for taxing the digital economy. My views are different. My preferred policy response to the income shifting problem is two-fold.

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November 12, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Monday, November 11, 2019

Hayashi Presents State And Local Taxation Of Foreign Investment In Real Property Today At Loyola-L.A.

Andrew Hayashi (Virginia) presents Bullion in the Sky: State and Local Taxation of Foreign Investment in Real Property at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto:

Hayashi (2019)The current protectionist moment is characterized not only by national restrictions on immigration and international trade. Cities have played their part, adopting direct restrictions and taxes on foreign ownership of real property and imposing taxes on second homes and vacant properties that indirectly burden foreign investment. Although these laws are new, they draw from a well of suspicion regarding foreign ownership that is very old. We provide economic and historical context for the current wave of local restrictions on foreign owners of real property and evaluate the legality of such restrictions under U.S. law. We then assess the policy merits of these laws within an economic framework that highlights the role that law can play in helping individuals manage the wide variety of economic risks that they face. We describe the circumstances under which local restrictions on foreign property ownership can help or hurt local residents.

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November 11, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

The Truth About Income Inequality

Wall Street Journal op-ed:  The Truth About Income Inequality, by Phil Gramm & John F. Early:

Never in American history has the debate over income inequality so dominated the public square, with Democratic presidential candidates and congressional leaders calling for massive tax increases and federal expenditures to redistribute the nation’s income. Unfortunately, official measures of income inequality, the numbers being debated, are profoundly distorted by what the Census Bureau chooses to count as household income.

The published census data for 2017 portray the top quintile of households as having almost 17 times as much income as the bottom quintile. But this picture is false. The measure fails to account for the one-third of all household income paid in federal, state and local taxes. Since households in the top income quintile pay almost two-thirds of all taxes, ignoring the earned income lost to taxes substantially overstates inequality.

The Census Bureau also fails to count $1.9 trillion in annual public transfer payments to American households. The bureau ignores transfer payments from some 95 federal programs such as Medicare, Medicaid and food stamps, which make up more than 40% of federal spending, along with dozens of state and local programs. Government transfers provide 89% of all resources available to the bottom income quintile of households and more than half of the total resources available to the second quintile.

WSJIn all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles.

America’s system of data collection is among the most sophisticated in the world, but the Census Bureau’s decision not to count taxes as lost income and transfers as gained income grossly distorts its measure of the income distribution. As a result, the raging national debate over income inequality, the outcome of which could alter the foundations of our economic and political system, is based on faulty information.

The average bottom-quintile household earns only $4,908, while the average top-quintile one earns $295,904, or 60 times as much. But using official government data sources on taxes and all transfer payments to compute net income produces the more complete comparison displayed in the nearby chart. ...

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November 11, 2019 in Tax, Tax News | Permalink | Comments (2)

Lesson From The Tax Court: One Year At A Time

Tax Court Logo 2I do not teach much tax accounting in my basic tax class.  I do, however, teach the general rule in §441(a) that each tax year stands alone.  Last week’s case of Roger G. Maki and Lilane J. Gervais v. Commissioner, T.C. Summary Op. 2019-34 (Nov. 4, 2019) (Judge Gerber), illustrates that general rule.  In Maki, the taxpayers won a §162 deduction for Mr. Maki’s travel away from home.  What makes this case fun is that these are the same retired taxpayers I blogged about last year in “Where Is A Retiree’s Tax Home.”  In both cases they won the issue, albeit for a smaller amount than they had claimed.  The lesson here is that a win in the first case did not guarantee the win in the next.  Details below the fold.

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November 11, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)

Borden: Sec. 1031 Exchanges Within Qualified Opportunity Funds

Bradley T. Borden (Brooklyn), Wrapped Nonrecognition: Code Sec. 1031 Exchanges Within Qualified Opportunity Funds, 22 J. Passthrough Entities 37 (2019):

This article is about section 1031 exchanges wrapped in qualified opportunity funds (QOFs). QOFs are new, so they are in the process of buying property, but eventually some QOFs will think about selling their property. To qualify for the full benefit of the QOF regime, a QOF must hold property for at least 10 years. Prior to the end of that 10-year period, some QOF investors may get antsy and want to sell the QOF’s property. If they sell the property for gain, they will lose some or all of the QOF benefits. This article considers whether a QOF can sell property and use the proceeds to acquire like-kind replacement property and defer gain on that transaction under section 1031. If so, a QOF could sell its original property, defer gain on that sale, and remain eligible for the QOF exclusion. The article illustrates that although in concept wrapped nonrecognition is possible, it is not without its challenges.

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November 11, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, November 10, 2019

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

Btax

Bloomberg Tax Podcast: When Religion Tangles With Tax Law: Things to Consider:

In the U.S., religious practices have an unclear relationship to the tax code. Sam Brunson, a professor at Loyola University Chicago School of Law, has an idea to give some structure to the way policy makers deal with that relationship.

Congress historically writes religious accommodations into the tax code on a case-by-case basis: A group of people appears with a specific tax problem, and lawmakers decide whether to write a fix.

But what if there were a framework that would help them consider the problems consistently and fairly? Brunson proposes such a framework in his book, God and the IRS: Accommodating Religious Practice in United States Tax Law.

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November 10, 2019 in Book Club, Tax, Tax News, Tax Scholarship | Permalink | Comments (0)

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 #3. The #1 paper is #88 among 14,703 tax papers in all-time downloads:

  1. SSRN Logo (2018)[2,309 Downloads]  Taxing the Rich: Issues and Options, by Lily Batchelder (NYU) & David Kamin (NYU)
  2. [268 Downloads]  Boiling Starbucks’ Roasting Down to the Essence of its Residual, by William Byrnes (Texas A&M)
  3. [233 Downloads]  The Arm's Length Standard Is Not the Problem, by Lorraine Eden (Texas A&M)
  4. [198 Downloads]  Implications for Apple in the Lower Court Rulings in Starbucks and Fiat, by Ruth Mason (Virginia)
  5. [195 Downloads]  Digital Service Taxes and the Broader Shift From Determining the Source of Income to Taxing Location-Specific Rents, by Daniel Shaviro (NYU) (reviewed by Young Ran (Christine) Kim (Utah) here)

November 10, 2019 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 9, 2019

This Week's Ten Most Popular TaxProf Blog Posts

Is The Tax Cuts And Jobs Act GILTI Of Anti-Simplification?

Christine Davis (S.J.D. (Tax) 2020, Florida), Is the Tax Cuts and Jobs Act GILTI of Anti-Simplification?, 38 Va. Tax Rev. 315 (2019):

In December 2017, Congress enacted tax reform legislation, commonly referred to as the “Tax Cuts and Jobs Act” or “TCJA,” which fundamentally changed the United States’ international corporate taxation system. The TCJA was enacted quickly; the bill was signed into law less than 2 months after the House of Representatives introduced it. Since that time, tax professionals across the United States and around the world have worked overtime to try to understand the new tax laws. Now that the U.S. Treasury Department is releasing and requesting comments on proposed tax regulations, practitioners must have a thorough understanding of the TCJA. This paper attempts to reduce the complexity of the TCJA’s international tax provisions by examining global intangible low-taxed income (“GILTI”) and its interaction with other provisions that implement income taxation of cross border corporations.

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November 9, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Friday, November 8, 2019

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Listokin's Posner on Tax: The Independent Investor Test

This week, David Elkins (Netanya) reviews a new work by Yair Listokin (Yale), Posner on Tax: The Independent Investor Test, 86 U. Chi. L. Rev. 1159 (2019):

Elkins (2018)

Richard Posner is one of the most influential legal scholars of recent generations. He is perhaps best known as a leading figure in the school of Law and Economics. Complimenting his academic work, he served as a judge on the Seventh Circuit Court of Appeals for 36 years before retiring in 2017. In the field of taxation, one of his more memorable decisions was Exacto Springs Corp. v. Commissioner, 196 F3d 833 (7th Cir. 1999), which concerns the characterization of payments from closely held corporations to individuals who are both shareholders and employees: is the payment properly classified as a salary or as a distribution?

The question of how to characterize payments to shareholders arises whenever shareholders provide services or sell property to the corporation that they control. If a shareholder leases property to a corporation, is the payment that the parties describe as rent truly rent or is it only partly rent and partly a distribution? The issue of classification is particularly significant in the field of international taxation. For example, if a corporation operating in Country A pays what it describes as a royalty to a parent (or otherwise related) corporation in Country B, is the payment actually a deductible royalty or is it a nondeductible distribution? The answer to that question may determine whether Country A can collect tax from the economic activity in its territory.

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November 8, 2019 in David Elkins, Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

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

Young Ran (Christine) Kim (Utah) presented The Digital Services Tax: A Crossborder Variation of Consumption Tax Debate at BYU yesterday as part of its Faculty Workshop Series:

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

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

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November 8, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Hemel & Kysar: The Warren/Sanders Wealth Taxes Would Raise Zero Revenue Because They Are Unconstitutional

New York Times op-ed:  The Big Problem With Wealth Taxes, by Daniel Hemel (Chicago) & Rebecca Kysar (Fordham):

Senator Elizabeth Warren unveiled a new wealth tax proposal last week that she says will raise — along with her previously announced wealth tax plan — $3.75 trillion over the next decade. Senator Bernie Sanders says his wealth tax will yield $4.35 trillion over the same period.

We fear these figures are vast overestimates. The likeliest outcome is that a wealth tax will raise exactly zero dollars. The problem, alas, is the Constitution. The Warren and Sanders plans run headlong into more than two centuries of precedent that cast doubt on the constitutionality of wealth taxation.

We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts and strongly support higher taxes on the affluent. We are heartened that prominent Democratic presidential candidates are taking the problem of wealth inequality very seriously. We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.

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November 8, 2019 in Tax, Tax News | Permalink | Comments (1)

Thursday, November 7, 2019

Columbia Journal Of Tax Law Publishes New Issue

Columbia Journal of Tax Law Logo (2020)The Columbia Journal of Tax Law has published Vol. 10, No. 2:

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November 7, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Carried Interest Warning From Court May Be Trouble For Treasury

Bloomberg Tax, Carried Interest Warning From Court May Be Trouble for Treasury:

A recent court case meant to clarify the definition of a corporation intensifies questions about the tax treatment of carried interest, a prized perk for private equity and hedge fund managers [Charleston Area Medical Ctr. v. United States (Fed. Cl. Oct. 17, 2019)].

The IRS argued for a broad definition of the term “corporation” in the case. But the legal issue that could come up in the future is whether it’s reasonable for Treasury regulations to interpret the term more narrowly in the carried interest context, affecting who can qualify for the treatment.

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November 7, 2019 in New Cases, Tax, Tax News | Permalink | Comments (0)

NY Times: Trump Tax Return Case Confronts Supreme Court With A Momentous Choice

New York Times, Trump Tax Return Case Confronts Supreme Court With a Momentous Choice:

Richard M. Nixon and Bill Clinton sustained unanimous losses when they sought to withhold evidence, suggesting that President Trump may face an uphill fight.

In a matter of days, President Trump will ask the Supreme Court to rule on his bold claim that he is absolutely immune from criminal investigation while he remains in office. If the court agrees to hear the case, its decision is likely to produce a major statement on the limits of presidential power — and to test the independence of the court itself.

Mr. Trump has been the subject of countless investigations and lawsuits since he took office, including a 22-month inquiry by Robert S. Mueller III, the special counsel appointed to look into his campaign’s ties to Russia. But the new case, concerning an investigation by Manhattan prosecutors into hush-money payments to two women who said they had affairs with Mr. Trump, will be the Supreme Court’s first chance to consider the president’s arguments that he is beyond the reach of the justice system.

The case concerns a subpoena to Mr. Trump’s accounting firm, Mazars USA, from the office of the Manhattan district attorney, Cyrus R. Vance Jr., a Democrat. On Monday, the federal appeals court in Manhattan rejected Mr. Trump’s request to block the subpoena, which seeks eight years of his personal and corporate tax returns.

The appeals court’s ruling was narrow and modest, hewing closely to the circumstances of the dispute before it. If the Supreme Court adopted the lower court’s reasoning, it would answer only the question of whether state prosecutors may require third parties to turn over a sitting president’s financial records for use in a grand jury investigation.

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November 7, 2019 in Tax, Tax News | Permalink | Comments (1)

Matching Tax With Economics In Subchapter K

Zhiyuan Zuo (Cleary Gottlieb, New York), A Gain Must Lie Where It Falls: Matching Tax with Economics in Subchapter K, 11 Colum. J. Tax L. ___ (2019):

Columbia Journal of Tax Law Logo (2020)Society suffers efficiency costs when tax and economics are mismatched. This principle is illustrated by the tax neutrality doctrines that are the cornerstone of the U.S. international tax system and by the BEPS’s efforts to combat arbitrary income shifting. While society has an interest in maximizing pre-tax income from all economic activities, self-interested taxpayers seek only to maximize their after-tax income. A good, non-arbitrary tax policy must thus incentivize taxpayers to maximize both their pre-tax and after-tax income. This note provides a novel efficiency analysis of the rules under Subchapter K and reveals the efficiency costs that arise when arbitrary tax liabilities sever the positive connection between pre-tax and after-tax income. It applies the insight gained from the efficiency analysis to the Treasury’s various flawed efforts under Subchapter K to match tax with economics, including the Substantial Economic Effect (SEE) safe harbor and doctrines under section 704(c). The Article then explores alternatives to the Treasury’s “one-size-fits-all” solution, focusing on a detailed analysis of the economic effect equivalence (EEE) test and so-called target allocations

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November 7, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Financial Transactions Tax: If Not Now, When?

Doron Narotzki (Akron), Financial Transactions Tax – If Not Now, When?, 165 Tax Notes 47 (Oct. 7, 2019):

In this article, Narotzki discusses the short history of the financial transaction tax in the United States and why now is the perfect time to adopt it.

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November 7, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Wednesday, November 6, 2019

Kysar Presents Unravelling The Tax Treaty Today At Pennsylvania

Rebecca Kysar (Fordham) presents Unravelling the Tax Treaty, 103 Minn. L. Rev. ___ (2019), at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

Kysar (2018)Coordination among nations over the taxation of international transactions rests on a network of some 2,000 bilateral double tax treaties. The double tax treaty is, in many ways, the roots of the international system of taxation. That system, however, is in upheaval in the face of globalization, technological advances, taxpayer abuse, and shifting political tides. In the academic literature, however, scrutiny of tax treaties is largely confined to the albeit important question of whether tax treaties are beneficial for developing countries. Surprisingly little consideration has been paid to whether developed countries, like the United States, should continue to sign tax treaties with one another, and no formal revenue or economic analyses of the treaties has been undertaken by the United States government. In fact, little evidence or theory exists to support entrance into tax treaties by the United States, and examination of investment flows indicates the treaties may even lose U.S. revenues. Problematically, the treaties also thwart reforms of the antiquated and broken international tax system. The trajectory of the recent U.S. tax legislation illustrates this phenomenon.

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November 6, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Federal Taxation Of Cannabis

CannabisKat Allen (Wykowski Law, San Francisco), Federal Taxation of Cannabis, Parts I - III:

  • Part I: The Tax Law's War on Drugs, 164 Tax Notes 855 (Aug. 5, 2019): "In the first of a three-part series on the
    taxation of cannabis, Allen provides a framework for debate regarding the tax code’s treatment of illegal activities or payments.
  • Part II: Timing Is Everything, 164 Tax Notes 1041 (Aug. 12, 2019):  "In this second installment of a three-part series, Allen examines the code’s timing rules for state-regulated cannabis businesses."

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November 6, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Listokin: Posner on Tax — The Independent Investor Test

Yair Listokin (Yale), Posner on Tax: The Independent Investor Test, 86 U. Chi. L. Rev. 1159 (2019):

This paper, written in honor of Judge Richard Posner’s retirement from the federal judiciary, uses his opinion in Exacto Spring v. Commissioner [196 F.3d 833 (7th Cir. 1999)] as a lens into his tax law jurisprudence more generally. In Exacto Spring, Posner delivers a devastating rejection of the muddled multifactor test then in effect to distinguish reasonable salaries, which are deductible from corporate income, from disguised dividends, which aren’t. Posner replaces the multifactor test with the independent investor test, which focuses the judicial inquiry on the substance of the transaction. I critique Posner’s application of the independent investor test to the problem of salary disguised as dividends, showing that it yields perverse outcomes by treating equity as a fixed claim, rather than a residual claim. But I show that, when applied to dividends disguised as debt, the independent investor test offers great promise.

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November 6, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

WSJ: Tax Cuts For The Wealthy Make Inequality Worse

Wall Street Journal op-ed:  Tax Cuts for the Wealthy Make Inequality Worse, by Alan S. Binder (Princeton):

Here’s a short test of your value judgments. (There’s no right answer.) If free markets start dishing out increasingly unequal pretax incomes, should the government ignore it, mitigate it by making the tax system more progressive, or exacerbate it by making the tax system less progressive?

The question isn’t hypothetical. And you may be surprised to learn that the U.S. political system has given a clear answer: Exacerbate it. ...

[I]ncome inequality in America now stands at, or just a tad below, its all-time high. The essential fact is that inequality has been rising for almost 40 years.

What about tax progressivity? Two economists at the University of California, Berkeley, Emmanuel Saez and Gabriel Zucman, just published an important new book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. Perhaps the most stunning finding: “For the first time in the past hundred years, the working class today pays higher tax rates than billionaires.”

Chew on that for a moment. You may remember Warren Buffett bemoaning that he paid a lower average tax rate than his secretary. Apparently, he wasn’t alone. ...

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November 6, 2019 in Tax, Tax News | Permalink | Comments (1)

Call For Student Tax Papers: 2020 Chris Bergin Award for Excellence In Writing

Tax Notes 2

Christopher E. Bergin Award for Excellence in Writing:

The Christopher E. Bergin Award for Excellence in Writing recognizes superior student writing on unsettled questions in tax law or policy. It is named in honor of the late Christopher E. Bergin, former president and publisher of Tax Analysts and longtime editor of Tax Notes Federal. The award, given annually, epitomizes the qualities that Chris championed.

No one cared more than he did about clear, precise writing about taxation, and he instilled that passion in our whole staff.
Cara Griffith, Tax Analysts President and CEO

To learn more about Christopher E. Bergin, click here.

Eligibility: Must be enrolled in an accredited undergraduate or graduate program during the academic year.
Topic: Submissions should focus on an unsettled question in federal, state, or international tax law or policy.
Evaluation: Our editorial staff blindly evaluates entries on originality, readability, organization, reasoning, and overall quality of content.
Due Date: June 30, 2020

Click here for competition guidelines.

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November 6, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Scholarship | Permalink | Comments (0)

Tuesday, November 5, 2019

Fleurbaey Presents Optimal Income Taxation Theory And Principles Of Fairness Today At NYU

Marc Fleurbaey (Princeton) presents Optimal Income Taxation Theory and Principles of Fairness at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

Marc_Fleurbaey2The achievements and limitations of the classical theory of optimal labor-income taxation based on social welfare functions are now well known. Even though utilitarianism still dominates public economics, recent interest has arisen for broadening the normative approach and making room for fairness principles such as desert or responsibility. Fairness principles sometimes provide immediate recommendations about the relative weights to assign to various income ranges, but in general require a careful choice of utility representations embodying the relevant interpersonal comparisons. The main message of this paper is that the traditional tool of welfare economics, the social welfare function framework, is flexible enough to incorporate many approaches, from egalitarianism to libertarianism.

November 5, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Glogower Presents Progressive Tax Procedure Today At UC-Hastings

Ari Glogower (Ohio State) presents Progressive Tax Procedure (with Joshua Blank (UC-Irvine)) at UC-Hastings today as part of its Tax Speakers Series hosted by Heather Field and Manoj Viswanathan:

Glogower (2019)Discussions of progressive taxation in the United States—and of whether the rich pay enough in taxes—generally focus on the structure of the substantive tax law, such as the marginal rates, income brackets, deductions, and credits under the federal income tax. Despite recent reports of tax avoidance and noncompliance by high-income taxpayers, these discussions have not focused on the structure of the tax procedure rules, which govern the Internal Revenue Service’s administrative responsibilities and taxpayers’ compliance obligations.

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

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November 5, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (1)

Brunson: Taxing Student Athletes

Sam Brunson (Loyola-Chicago), Taxing Student Athletes: An Explainer:

NCAA LogoAbout a month ago, California Governor Newsom signed the Fair Pay to Play Act, which allowed California college athletes to be paid for the use of their image, name, and likeness. Other states, including Illinois, have proposed similar legislation. And today, the NCAA caved; though its concession is not entirely clear, it looks like the NCAA has paved the way to allow NCAA athletes to make money off of their image.

For some reason, this has provoked backlash by Senator Burr of North Carolina. On Twitter, he announced that he plans on introducing legislation that would tax college athletes who accepted payment for the use of their image, etc., on their scholarships.

The ensuing discussion following his tweet has evinced a lot of misunderstanding of what’s going on here, what the current tax treatment of scholarships is, and what “double taxation” means, among other things. So I thought I’d do a quick explainer: ...

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November 5, 2019 in Tax, Tax News, Tax Scholarship | Permalink | Comments (0)

Clausing Leaves Reed College For UCLA Law School

Kimberly Clausing, Thormund A. Miller and Walter Mintz Professor of Economics at Reed College, has accepted an offer to join the faculty at UCLA Law School. Her most recent publication is Open: The Progressive Case for Free Trade, Immigration, and Global Capital (Harvard University Press 2019):

Clausing (2017)With the winds of trade war blowing as they have not done in decades, and Left and Right flirting with protectionism, a leading economist forcefully shows how a free and open economy is still the best way to advance the interests of working Americans.

Globalization has a bad name. Critics on the left have long attacked it for exploiting the poor and undermining labor. Today, the Right challenges globalization for tilting the field against advanced economies. Kimberly Clausing faces down the critics from both sides, demonstrating in this vivid and compelling account that open economies are a force for good, not least in helping the most vulnerable.

A leading authority on corporate taxation and an advocate of a more equal economy, Clausing agrees that Americans, especially those with middle and lower incomes, face stark economic challenges. But these problems do not require us to retreat from the global economy. On the contrary, she shows, an open economy overwhelmingly helps. International trade makes countries richer, raises living standards, benefits consumers, and brings nations together.

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November 5, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Prof Moves | Permalink | Comments (2)

2019 Christopher Bergin Award For Excellence In Tax Writing

Benjamin M. Satterthwaite (J.D. 2019, South Carolina; LL.M. (Tax) 2020, Florida), Nash Bargaining Theory and Intangible Property Transfer Pricing, 164 Tax Notes 2275 (Sept. 30, 2019):

Tax NotesThis article was the winning entry in Tax Analysts’ annual student writing contest and received the 2019 Christopher E. Bergin Award for Excellence in Writing. [Honorable Mention: Daniel Pessar (Harvard)]

In this article, Satterthwaite proposes a transfer pricing framework for unique intangibles that integrates the economic fundamentals of John Nash’s bargaining theory with the “realistic alternatives” language of amended sections 367(d) and 482.

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November 5, 2019 in Legal Ed News, Legal Education, Tax, Tax News, Tax Scholarship, Teaching | Permalink | Comments (0)

Monday, November 4, 2019

McCaffery Presents Thomas's Taxing Nudges Today At Loyola-L.A.

Kathleen Delaney Thomas (North Carolina) was scheduled to present Taxing Nudges at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto:

Thomas (2019)Governments are increasingly turning to behavioral economics to inform policy design in areas like health care, the environment, and financial decision-making. Research shows that small behavioral interventions, referred to as “nudges,” often produce significant responses at a low cost. The theory behind nudges is that, rather than mandating certain behaviors or providing costly economic subsidies, modest initiatives may “nudge” individuals to choose desirable outcomes by appealing to their behavioral preferences. For example, automatically enrolling workers into savings plans as a default rather than requiring them to actively sign up has dramatically increased enrollment in such plans. Similarly, allowing individuals to earn “wellness points” from attendance at a gym, redeemable at various retail establishments, may improve exercise habits.

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November 4, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)