Paul L. Caron
Dean


Monday, January 27, 2020

Lesson From The Tax Court: §6672 Trust Fund Recovery Penalty Is Really A Penalty ... Sort Of

Tax Court (2017)Sometimes we get so used to norms of practice that we forget the legal text governing that practice.  Last week the Tax Court taught that text is still important.  In David J. Chadwick v. Commissioner, 154 T.C. No 5. (Jan. 21, 2020) (Judge Lauber), the Court held that the IRS must comply with §6751(b)’s supervisory approval requirements before assessing the §6672 Trust Fund Recovery Penalty.  That is because the text of §6751(b) says those requirements apply to any “penalty” and the text of §6672 permits the IRS to assess a “penalty.”

Some may laugh!  Some may snort “It’s so simple!”  But, truly I tell you, nothing is simple when you combine the Tax Code and lawyers.  While the lesson may seem simple, it’s more nuanced than you may realize.  And even though this is a reviewed opinion, it may be of surprisingly limited reach.  Details below the fold.

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January 27, 2020 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)

NY Times: It May Be The Biggest Tax Heist Ever. And Europe Wants Justice.

New York Times, It May Be the Biggest Tax Heist Ever. And Europe Wants Justice.:

Stock traders are accused of siphoning $60 billion from state coffers, in a scheme that one called “the devil’s machine.” Germany is the first country to try to get its money back. ...

The scheme was built around “cum-ex trading” (from the Latin for “with-without”): a monetary maneuver to avoid double taxation of investment profits that plays out like high finance’s answer to a David Copperfield stage illusion. Through careful timing, and the coordination of a dozen different transactions, cum-ex trades produced two refunds for dividend tax paid on one basket of stocks.

One basket of stocks. Abracadabra. Two refunds.

The process was repeated over and over, as word of cum-ex spread like a quiet contagion. Germany was hardest hit, with an estimated $30 billion in losses, followed by France, taken for about $17 billion. Smaller sums were drained away from Spain, Italy, Belgium, Austria, Norway, Finland, Poland and others.

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January 27, 2020 in Tax, Tax News | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, January 26, 2020

The Top Five New Tax Papers

This week's list of the Top 5 Recent Tax Paper Downloads us the same as last week's list, with some minor reshuffling within the Top 5:

  1. SSRN Logo (2018)[724 Downloads]  Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?, by Jennifer Blouin (Penn) & Leslie Robinson (Dartmouth)
  2. [321 Downloads]  EU General Anti-(Tax) Avoidance Mechanisms: From GAAP to GAAR, by Rita de la Feria (University of Leeds)
  3. [222 Downloads]  How Big is Profit Shifting?, by Kimberly Clausing (Reed College; moving to UCLA)
  4. [221 Downloads]  Commentary on the 'OECD Secretariat Proposal for a 'Unified Approach' Under Pillar One, by Lorraine Eden (Texas A&M) & Oliver Treidler
  5. [167 Downloads]  Why a Wealth Tax is Definitely Constitutional, by John Brooks (Georgetown) & David Gamage (Indiana)

January 26, 2020 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 25, 2020

This Week's Ten Most Popular TaxProf Blog Posts

Tenured University of Minnesota Law Prof Sentenced In Tax Fraud Case

Following up on my previous post, University of Minnesota Law Professor Charged In Multi-Million Dollar Corporate Fraud Scheme:  Minneapolis Star-Tribune, University of Minnesota Law Professor Sentenced to Probation For Lying to IRS:

AdamsA federal judge sentenced University of Minnesota financial law professor Ed Adams to two years of probation and $5,000 in fines Thursday for lying to the Internal Revenue Service.

Judge Donovan Frank said Adams deserved a harsher sentence than the one year of probation that prosecutors requested because of his role as a tenured professor who should be setting an example for up-and-coming lawyers.

“You clearly knew more than most that what you were doing was illegal and unethical,” said Frank.

Still, the punishment is much lighter than what Adams could have faced if he had been convicted on the original charges.

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January 25, 2020 in Legal Ed News, Legal Education, Tax, Tax News | Permalink | Comments (0)

A Dad Allegedly Paid $220,000 To Bribe His Son's Way Into USC. Then He Claimed The Bribe As A Tax Deduction

BuzzFeed News, A Dad Allegedly Paid $220,000 To Bribe His Son's Way Into USC. Then He Claimed The Bribe As A Tax Deduction, Prosecutors Say.:

A father allegedly paid $220,000 to bribe his son's way into the University of Southern California, prosecutors said, then he listed part of the secret payoff as a tax deduction.

Since March 2019, more than 50 people have been charged in the college admissions scandal that federal prosecutors have dubbed Operation Varsity Blues. According to authorities, wealthy — and in some cases famous — families paid large sums of money to get their children into prestigious colleges across the country, often by embellishing or fabricating their children's sports careers in coordination with college officials.

But on Tuesday, prosecutors filed an additional charge of tax fraud against a Massachusetts investor who allegedly went a step further and claimed an illegal bribe as a tax write-off.

Prosecutors allege John Wilson, 59, paid life coach Rick Singer $220,000 to get his son into the University of Southern California in 2013 by lying about his son's athletic ability. ...

In his 2014 taxes, Wilson claimed a $100,000 payment to Singer's foundation as a charitable contribution, and $120,000 as business consulting fees.

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January 25, 2020 in Tax, Tax News | Permalink | Comments (1)

Friday, January 24, 2020

Weekly SSRN Tax Article Review And Roundup: Kim Reviews Chason's Cryptocurrency Hard Forks And Rev. Rul. 2019-24

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Eric D. Chason (William & Mary), Cryptocurrency Hard Forks and Revenue Ruling 2019-24, 39 Va. Tax Rev. 277 (2019).

6a00d8341c4eab53ef022ad3a74c80200d-300wi (1)When the IRS issued Revenue Ruling 2019-24 (the "Ruling") on the tax treatment of hard forks and airdrops of cryptocurrencies, many people believed that the Ruling would offer guidance on the tax issues of both hard forks and airdrops that the community of cryptocurrency users generally understand. Is that so? Many commentators and investors in cryptocurrencies say no (see e.g., Mathew Beedham, The IRS' Latest Cryptocurrency Tax Guidance Shows It Still Doesn't Get It). Eric Chason's new work, Cryptocurrency Hard Forks and Revenue Ruling 2019-24, 39 Va. Tax Rev. 277 (2019), is soundly in line with such criticism.

As an introduction, the Ruling is understood as the IRS’s response to tax issues arising from the hard fork of the Bitcoin blockchain that resulted in the creation of Bitcoin Cash, a new cryptocurrency. The hard fork resulted in a windfall to owners of Bitcoin, who, at the time of the hard fork, received one unit of Bitcoin Cash for each unit of Bitcoin owned. This hard fork resulted in many unanswered tax issues relating to such newly created cryptocurrency.

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January 24, 2020 in Christine Kim, Scholarship, Tax, Tax Scholarship, Tax Workshops, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

10th Annual Tax Policy Lecture On Taxing Wealth Today At Florida

The University of Florida Law Graduate Tax Program hosts the 10th Annual Ellen Bellet Gelberg Tax Policy Lecture today on Taxing Wealth (webcast):

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January 24, 2020 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

NY Times: There’s No Such Thing As A Free Tax Cut

New York Times editorial, There’s No Such Thing as a Free Tax Cut:

Legend has it that the British economist John Maynard Keynes, asked why he had changed his position on a question of economic policy, responded: “When the facts change, I change my mind. What do you do, sir?”

Treasury Secretary Steven Mnuchin has embraced a different approach: ignoring the facts.

This week, Mr. Mnuchin repeated the risible fantasy that the Trump administration’s 2017 tax cuts will bolster economic growth sufficiently for the government to recoup the revenue it has lost by lowering tax rates. ...

Two years later, the results are in. The annual federal budget deficit has topped $1 trillion. And it is even more difficult to understand how anyone could make such a claim. ...

The exact mechanics will be studied for years to come. Gary Cohn,  a chief architect of the tax cuts during his time as Mr. Trump’s chief economic adviser, argues plausibly that the uncertainty created by Mr. Trump’s trade policy has worked against the tax cuts, discouraging companies from making long-term investments.

A study by the International Monetary Fund [U.S. Investment Since The Tax Cuts And Jobs Act Of 2017], by contrast, found that the supply-side effects were even smaller than the total increase in investment. The study concluded that business responded to increased demand more than they did to the lower tax rates.

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January 24, 2020 in Tax, Tax News | Permalink | Comments (0)

Michael Avenatti Arrested By IRS Agents, Accused Of Committing More Financial Crimes While Out On Bail

Washington Post, Michael Avenatti, Arrested by IRS agents and Accused of Violating Bail Terms, to Remain in Jail, Judge Rules:

Michael Avenatti, the attorney who rose to prominence as the legal counsel for adult-film actress Stormy Daniels during her lawsuit against President Trump over a hush-money deal, will remain in jail following his rearrest by IRS agents, a judge in Los Angeles ruled Wednesday after prosecutors alleged he continued to commit financial crimes while out on bail.

Avenatti — who is accused of extorting athletic apparel maker Nike for up to $25 million and stealing millions of dollars from those he once represented, including Daniels — was arrested Tuesday evening while appearing before the State Bar Court in Los Angeles, in the middle of a disciplinary hearing alleging he stole about $840,000 from a former client.

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January 24, 2020 in Tax, Tax News | Permalink | Comments (2)

Thursday, January 23, 2020

Ring Presents Falling Short In The Data Age Today At Duke

Diane Ring (Boston College) presents Falling Short in the Data Age (with Shu-Yi Oei (Boston College)) at Duke today as part of its Tax Policy Workshop Series hosted by Richard Schmalbeck and Lawrence Zelenak:

Ring (2017)Humans are imperfect and do not always comply with the law, but the reality is that we are sometimes permitted to fall short of law’s requirements without consequences. This informal space to fall short and not be held accountable—which may arise from a confluence of information imperfections, resource constraints, politics, or luck—exists in addition to formal legal provisions that allow flexibility and discretion (such as tiered penalties or equitable provisions allowing leniency under specified circumstances). Fall-short spaces often pass unnoticed, but are in fact quite significant in intermediating the relationship between humans and the law.

This Article examines how the increasing access to data and information will change the availability and shape of law’s fall-short spaces. We introduce a taxonomy of how leeway arises, outlining the reasons it exists and the different ways it is deployed. Applying this taxonomy, we show how increasingly ubiquitous data and information have caused and will continue to cause the availability of leeway to contract, and we highlight the risk that we will see disparate contraction for different populations.

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January 23, 2020 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

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

Robert Peroni (Texas) presents An Updated Look at Expanded Worldwide Versus Territorial Taxation After the TCJA (with J. Clifton Fleming (BYU) & Stephen Shay (Harvard)) at Northwestern today as part of its Advanced Topics in Taxation Colloquium Series hosted by Herbert Beller, David Cameron, Charlotte Crane, Sarah Lawsky, Ajay Mehrotra, Philip Postlewaite, and Jeffrey Sheffield:

Peroni (2020)This paper is a spinoff from J. Clifton Fleming (BYU), Robert J. Peroni (Texas) & Stephen E. Shay (Harvard), Expanded Worldwide Versus Territorial Taxation after the TCJA, 161 Tax Notes 1178 (Dec. 3, 2018): In the run up to enactment of the 2017 Tax Cuts and Jobs Act (TCJA) one of the principal U.S. tax policy issues was how foreign-source, active-business income of U.S. multinational enterprises (MNEs) should be taxed by the United States if the system of deferring U.S. tax on active income of a foreign subsidiary was ended. Should active foreign income be taxed under a territorial or exemption system—i.e. bear no residual U.S. tax—or should it be subjected to expanded worldwide taxation—i.e. current taxation at regular U.S. rates coupled with a credit for foreign income taxes paid or accrued, but limited to the U.S. tax on the foreign-source income as measured for U.S. tax purposes.

The opposing sides were not without common ground. Both agreed that the existing U.S. system for taxing the foreign-source, active-business income of U.S. MNEs needed to be changed because it generally did not impose U.S. tax until the active income of foreign subsidiaries was repatriated, either through dividends or by sale of subsidiary stock at a price reflecting accumulated foreign-source income. 

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January 23, 2020 in Colloquia, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Layser Presents Designing Community-Oriented Place-Based Tax Incentives Today At Indiana

Michelle D. Layser (Illinois) presents When, Where, and How to Design Community-Oriented Place-Based Tax Incentives at Indiana today as part of its Tax Policy Colloquium Series hosted by David Gamage and Leandra Lederman:

Layser (2018)Place-based tax incentives are frequently used by federal, state, and local governments to encourage investment in low-income areas. The newest federal incentive, the Opportunity Zones tax law, has been criticized for lacking safeguards for low-income communities. However, Opportunity Zones are just the latest chapter in a long history of place-based tax incentives that lack any clear objective to benefit residents of targeted communities. Meanwhile, no standard exists to describe the ideal community-oriented place-based tax incentive. This Article provides that baseline by explaining when, where, and how to design community-oriented place-based tax incentives. It argues that place-based tax incentives should be designed to reduce the underlying, geographic causes of neighborhood inequality.

Accordingly, this Article presents a two-step approach to tax incentive design. The first step draws on geography, sociology, and communication theories to determine when place-based tax incentives can be used to reduce spatial inequities. Using Geospatial Information System (GIS) mapping methods, it demonstrates how lawmakers can use public data to determine where people are likely to experience spatial disadvantage. The second step draws on tax theory to show how place-based tax incentives can maximize programmatic benefits and achieve the desired distributive outcomes.

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January 23, 2020 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

International Tax Symposium In Honor Of Tim Edgar

Symposium, Re-Imagining Tax for the 21st Century: Inspired by the Scholarship of Tim Edgar (York University, Osgoode Hall Law School):

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January 23, 2020 in Conferences, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Infanti Delivers Lecture On Our Taxing Selves Today At Pittsburgh

Anthony Infanti delivers a lecture on Our Taxing Selves at Pittsburgh today :

Infanti (2020)In this inaugural lecture for the Christopher C. Walthour, Sr. Professorship of Law, I reflect on my two decades of work at the University of Pittsburgh School of Law in the fields of comparative tax law and critical tax theory. I connect my personal “outsider” story to these two fields, both of which themselves embrace “outsider” perspectives on the law, albeit in somewhat different senses of the word. In doing so, I draw on my most recent book, Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves (The MIT Press, 2018).

Our Selfish Tax Laws builds on my past comparative tax work by providing case studies that demonstrate the expressive function of tax law, showing how the choices made by different countries in constructing their tax laws send messages about what and whom they value that are woven into their cultural fabrics.

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January 23, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Wednesday, January 22, 2020

Hoffer: Tax Theory And Feral AI

Stephanie R. Hoffer (Ohio State), Tax Theory and Feral AI:

This essay is a sci-fi thought experiment about the significance of personhood in income taxation, meant to explore the validity of currently prevailing justifications for the tax. Assume that the year is 2050. Developers, human or otherwise, have created non-sentient artificial intelligences (AIs) capable of transacting in digital currency. Assume, perhaps improbably, that some of these AIs are “feral.” A nonsentient AI might be feral in the future because it was never the property of a human, because it was abandoned by a human, or because it “escaped” into the wild. Imagine that non-sentient feral AIs create new value in the economy by doing things like writing, designing, securities and currency trading, planning, and 3D printing. They monetize that new economic value as active participants in the economy who sell goods or services to consumers. Intuition suggests that the value newly created by these independent economic actors should be included in the tax base and, in particular, the income tax base. Under current law, it is not.

The federal income tax law, and the theories that underpin it, have yet to fully address the status of non-human earners. Scholarship on AI and taxation primarily has focused on the taxation of AI’s owners, on whether AI itself should be taxed despite being owned by someone else, or on the philosophical question of taxing sentient AI.

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January 22, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (2)

Brooks & Gamage: Why A Wealth Tax Is Definitely Constitutional

John R. Brooks (Georgetown) & David Gamage (Indiana), Why a Wealth Tax is Definitely Constitutional:

Wealth tax reform proposals are playing a major role in the 2020 presidential campaign. However, some opponents of these wealth tax reform proposals have claimed that a wealth tax would be unconstitutional. Other prominent critics have argued that wealth tax reforms are probably unconstitutional, so that, after review by the courts, the “likeliest outcome is that a wealth tax will raise exactly zero dollars.”

These claims are wrong. More precisely, these claims are wrong conditioned on wealth tax legislation being carefully drafted so as to ensure its constitutionality. As we will explain in this essay, properly drafted, wealth tax reform legislation is definitely constitutional and thus capable of raising substantial revenues to fund new spending programs.

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January 22, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

SSRN Tax Professor Rankings

SSRN Logo (2018)SSRN has updated its monthly ranking of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through January 5, 2020) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

    All-Time   Recent
1 Reuven Avi-Yonah (Michigan)  187,671 Reuven Avi-Yonah (Michigan) 7,341
2 Dan Shaviro (NYU) 119,866 David Kamin (NYU) 5,518
3 David Gamage (Indiana-Bloom.) 115,750 Lily Batchelder (NYU) 5,438
4 Lily Batchelder (NYU) 115,511 Daniel Hemel (Chicago) 4,860
5 Daniel Hemel (Chicago) 114,566 David Gamage (Indiana-Bloom.) 3,524
6 Darien Shanske (UC-Davis) 109,283 Dan Shaviro (NYU) 3,263
7 Cliff Fleming (BYU) 104,201 Bridget Crawford (Pace) 3,136
8 David Kamin (NYU) 104,115 Darien Shanske (UC-Davis)  2,978
9 Manoj Viswanathan (UC-Hastings) 101,471 Ari Glogower (Ohio State) 2,968
10 Rebecca Kysar (Fordham) 100,364 Manoj Viswanathan (UC-Hastings) 2,846
11 Ari Glogower (Ohio State) 99,126 Rebecca Kysar (Fordham)  2,454
12 Michael Simkovic (USC) 43,817 Cliff Fleming (BYU) 2,448
13 D. Dharmapala (Chicago) 38,004 Richard Ainsworth (BU) 2,418
14 Paul Caron (Pepperdine) 36,287 Brad Borden (Brooklyn) 2,397
15 Louis Kaplow (Harvard) 32,642 D. Dharmapala (Chicago) 2,091
16 Richard Ainsworth (BU) 28,873 Ruth Mason (Virginia) 2,034
17 Ed Kleinbard (USC) 26,310 Robert Sitkoff (Harvard) 1,996
18 Vic Fleischer (UC-Irvine) 25,879 Michael Simkovic (USC) 1,957
19 Jim Hines (Michigan) 24,837 Louis Kaplow (Harvard) 1,925
20 Gladriel Shobe (BYU) 24,098 Hugh Ault (Boston College) 1,811
21 Ted Seto (Loyola-L.A.) 23,921 Kyle Rozema (Washington U.) 1,790
22 Brad Borden (Brooklyn) 23,828 Yariv Brauner (Florida) 1,712
23 Richard Kaplan (Illinois) 23,585 Margaret Ryznar (Indiana-Indy) 1,440
24 Robert Sitkoff (Harvard) 23,524 Paul Caron (Pepperdine)   1,357
25 Katie Pratt (Loyola-L.A.) 22,849 Leandra Lederman (Indiana Bloom.) 1,214

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January 22, 2020 in Scholarship, Tax, Tax Prof Rankings, Tax Scholarship | Permalink | Comments (0)

Using Tax Credits To Reverse The Fortunes Of Active Funds

Adi Libson (Bar-Ilan University) & Gideon Parchomovsky (University of Pennsylvania), Reversing the Fortunes of Active Funds:

Recent years have witnessed a considerable growth of passive fund at the expense of active funds. This trend picked in 2019, a year that saw passive funds surpass active funds in terms of assets under management. The continuous decline of active funds is a cause for concern. Active funds engage in monitoring of firms and partake of decision-making in companies in their portfolio. The cost of these activities are born exclusively by active funds; the benefits, by contrast, are spread over all shareholders, including passive funds that freeride on the efforts of active funds. The contraction of active funds threatens to set back the quality of corporate governance in U.S. firms.

This Essay proposes a way to reverse this trend. To preserve the benefits presented by active funds, we explore the possibility of employing tax mechanisms to help defray the extra-cost born by active funds. In particular, we establish a prima facie case for using tax credits to support active funds and enhance their market share. We discuss two types of tax credits: effort based tax credits and result-based tax credits.

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January 22, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (4)

Tuesday, January 21, 2020

WSJ: The ‘Robot Tax’ Debate Heats Up

Wall Street Journal, The ‘Robot Tax’ Debate Heats Up:

In all likelihood, your co-workers pay taxes. But what happens if your boss replaces them with sophisticated software or dexterous machines—ones that perform the same tasks for less money (at least over the long run) and contribute nothing in payroll taxes?

One seemingly flip answer is starting to gain some attention: Just tax the robots.

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January 21, 2020 in Tax, Tax News | Permalink | Comments (2)

WSJ: Did The U.S. Tax Overhaul Do What It Promised?

Wall Street Journal, Did the U.S. Tax Overhaul Do What It Promised?:

Two years after Trump’s tax cuts, a deep dive into what happened to jobs, tax revenue, corporate profits and investment.

The Tax Cuts and Jobs Act is now two years old. So what did it do?

The tax cuts themselves are easy to see: Tax bills went down for most families and corporations. Domestic retailers and banks reaped some of the biggest savings.

How the law rippled through the economy is muddier. Employment, wages and other key indicators have improved, and the 2020 economy looks stronger than projected at the start of the Trump presidency.

But many of those metrics were already on the rise before the tax law was signed by President Trump, and most economic numbers don’t show a sharp change that coincides with the tax law. Early growth in business investment seems to have faded; overall economic growth rose before pulling back again. Cross-border investment patterns have changed only modestly.

The bottom line: It seems clear the tax cuts contributed to economic growth—but not enough to pay for themselves, as many backers promised. And even some of the intended beneficiaries say the gains haven’t been dramatic. ...

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January 21, 2020 in Tax, Tax News | Permalink | Comments (0)

Megxit Tax Planning For Prince Harry And Meghan Markle

Town & Country, Meghan Markle and Prince Harry's New Roles Could Impact Meghan's Immigration Status—and Their Taxes:

Now that Meghan and Harry intend to retreat from their royal roles, attain "financial independence," and live part-time in North America, Meghan and Archie's tax and citizenship plans are a little up in the air. ...

Meghan is still a US citizen, and therefore required to pay US taxes on her worldwide income. Prince Harry could technically elect to be treated as a US taxpayer and file jointly with Meghan, but "he would never do that," explains Dianne Mehany, a lawyer specializing in international tax planning." ...

When Meghan and Harry announced their engagement back in 2017, Harry's communications team confirmed to the BBC that Meghan "intends to become a UK citizen and will go through the process of that." Said process, as per the UK government's website, would require Meghan to have lived in the country for three years before becoming eligible for naturalization.

Once gaining UK citizenship, Meghan could elect to relinquish her US citizenship, and save herself the trouble and expense of filing US tax returns. "The only problem there is, she would have to pay the exit tax," Mehany notes, referencing the expatriation tax that those forfeiting US citizenship are subject to. ...

"The real tricky thing," Mehany notes, "is to make sure they don't spend too much time in the United States, so that Harry becomes a resident of the United States, at which point his entire worldwide wealth would become subject to US taxation, which I know they want to avoid."

Dan Mitchell (Cato Institute), Taxes Will Be a Royal Pain for Meghan and Harry:

As reported by the U.K.-based Telegraph, they’re minimizing their exposure to the rapacious California tax system:

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January 21, 2020 in Tax, Tax News | Permalink | Comments (1)

TaxProf Blog Holiday Weekend Roundup

Monday, January 20, 2020

Lesson From The Tax Court: Employee Cannot Deduct Expense That Could Have Been Reimbursed

Tax Court (2017)I teach my students this rule: “always take the reimbursement.”  Last week’s case of Daniel Alan Near and Denise Frances Mayhugh v. Commissioner, T.C. Memo. 2020-10 (Jan. 14, 2020) (Judge Kerrigan) reinforces the soundness of that rule.  There, the Tax Court held that Mr. Near’s travel expenses were not deductible because he did not take the reimbursement his employer offered for those expenses.  Details below the fold.

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January 20, 2020 in Bryan Camp, New Cases, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

WSJ: In Florida, Homeowners Come For The Weather And Stay For The Tax Relief

Wall Street Journal, In Florida, Homeowners Come for the Weather and Stay for the Tax Relief:

FloridaThere’s a way for rich homeowners to potentially shave tens of thousands of dollars from their tax bills. They can get that same savings the next year and the following years as well. They can cut their taxes even further after they die. What’s the secret?

Moving to Florida, a state with no income tax or estate tax.

Plenty of millionaires and billionaires have been happy to ditch high-tax states like New York, New Jersey, Connecticut and California. President Donald Trump and Carl Icahn both announced in the fall that they’ll be making Florida their primary residence, joining other high-profile executives like financiers Barry Sternlicht, Eddie Lampert and Paul Tudor Jones.

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January 20, 2020 in Tax, Tax News | Permalink | Comments (0)

Sunday, January 19, 2020

$1.7 Billion Fire Settlement Could Mean $470 Million Tax Break For PG&E

Bloomberg, PG&E’s $1.7 Billion Fire Settlement Could Mean Big Tax Break:

PG&EPG&E’s $1.68 billion settlement agreement with California over wildfires sparked by its power lines could save the bankrupt utility about $470 million in taxes.

Nearly all the wildfire recovery and prevention work included in the agreement should be deductible from both its state and federal taxes, PG&E said in a regulatory filing late Friday.

The agreement reached with state regulators in December covers Northern California blazes in 2017 and the 2018 Camp Fire, the deadliest in state history. As part of the deal, PG&E agreed not to saddle customers with $1.63 billion in costs it will incur preventing and responding to fires.

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January 19, 2020 in Tax, Tax News | Permalink | Comments (2)

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 papers debuting on the list at #5:

  1. SSRN Logo (2018)[689 Downloads]  Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?, by Jennifer Blouin (Penn) & Leslie Robinson (Dartmouth)
  2. [283 Downloads]  EU General Anti-(Tax) Avoidance Mechanisms: From GAAP to GAAR, by Rita de la Feria (University of Leeds)
  3. [194 Downloads]  Commentary on the 'OECD Secretariat Proposal for a 'Unified Approach' Under Pillar One, by Lorraine Eden (Texas A&M) & Oliver Treidler
  4. [185 Downloads]  How Big is Profit Shifting?, by Kimberly Clausing (Reed College; moving to UCLA)
  5. [175 Downloads]  Why a Wealth Tax is Definitely Constitutional, by John Brooks (Georgetown) & David Gamage (Indiana)

January 19, 2020 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 18, 2020

This Week's Ten Most Popular TaxProf Blog Posts

The IRS Tried To Crack Down On Rich People Using An 'Abusive' Tax Deduction. It Hasn’t Gone So Well.

ProPublica, The IRS Tried to Crack Down on Rich People Using an “Abusive” Tax Deduction. It Hasn’t Gone So Well.:

Pro PublicaIn March 2019, the IRS added a scheme to its annual “Dirty Dozen” list of “the worst of the worst tax scams.” That same scheme was targeted, just weeks earlier, when the U.S. Department of Justice filed a fraud lawsuit against a handful of promoters allegedly responsible for generating more than $2 billion in improper tax write-offs. And the Senate Finance Committee has been investigating that very same racket, recently demanding thousands of pages of documents from six promoters. Lawmakers from both parties have introduced legislation to halt the same practice.

The scheme they’re all trying to kill is what’s called a “syndicated conservation easement,” which the IRS calls “abusive” and says has resulted in bogus deductions for the rich that have cost the U.S. Treasury billions in revenues.

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January 18, 2020 in IRS News, Tax, Tax News | Permalink | Comments (2)

Certified Professional Employer Organizations And Tax Liability Shifting: Assessing The First Two Years Of The IRS Certification Program

Katherine Sanford Goodner (Lewis Thomason, Knoxville, TN) & Ursula Ramsey (North Carolina, Cameron School of Business), Certified Professional Employer Organizations and Tax Liability Shifting: Assessing the First Two Years of the IRS Certification Program, 16 Berkeley Bus. L.J. 571 (2019):

The growing popularity of Professional Employer Organizations ("PEOs") over the past several decades has led to an increasing number of small businesses using third-party organizations to provide everything from payroll services to benefits management to human resource services. Recent data suggests that between 780 to 980 PEOs exist industry-wide and provide services for 156,000 to 180,000 clients. Even more staggering is the $136 billion to $156 billion in client payroll and PEO fees that make up the gross revenues of these PEOs. These PEOs, often referred to as "co-employers," are generally responsible for the remittance of the taxpayer's employment taxes as a part of the PEO's payroll services.

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January 18, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Friday, January 17, 2020

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Klein's Contemptuous Tax Reporting

This week, Mirit Eyal-Cohen (Alabama) reviews Israel Klein (Ariel University), Contemptuous Tax Reporting, 2019 Wis. L. Rev. ___ : 

Mirit-Cohen (2018)This interesting article is right down my alley, namely R&D tax incentives. Recently, legal scholars (including yours truly here and here) have questioned the justifications for the current R&D tax incentives regime and their effectiveness in inducing additional research expenditures. Every year, about 25 billion dollars of research incentives are claimed by companies. Likewise, the current R&D credit allows companies to reduce tax bills by an amount equal to 14 or 20 percent of their current year Qualified Research Expenditures. The article points out that this tax benefit combined with the U.S. self-assessment principle that encompasses only occasional ex-post audits create an incentive for managers to participate in contemptuous self-reporting, that is reporting their companies’ tax while intentionally miscategorized R&D expenditures. Moreover, the recent repeal of the corporate Alternative Minimum Tax (AMT) in the Tax Cuts and Job Act removed the limits on the extent to which taxpayers can utilize credits and deductions to lower their overall tax liability, thus created a bigger tax break for R&D while perpetuating the incentive to overstate R&D spending.

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January 17, 2020 in 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

Blank And Osofsky Present Automated Legal Guidance Today At Florida

Joshua Blank (UC-Irvine) and Leigh Osofsky (North Carolina) present Automated Legal Guidance at Florida today as part of its Tax Colloquium Series hosted by Yariv Brauner:

Blank OsofskyThe use of artificial intelligence as an aid to law enforcement has received significant attention from legal scholars.  For instance, the introduction of machine learning to identify likely crime hot spots has caused scholars to consider questions such as how to apply Fourth Amendment standards, how to prevent racial discrimination and how to preserve transparency and accountability.  On the other hand, scholars have not addressed the government’s increasing use of artificial intelligence for another purpose—providing guidance to the public regarding legal entitlements and obligations.  For example, the Internal Revenue Service encourages taxpayers to seek answers regarding various tax credits and deductions not from human IRS representatives, but rather from its online “Interactive Tax Assistant.”  Likewise, the U.S. Army directs individuals with questions about enlistment to its virtual guide, “Sgt. Star,” and the U.S. Citizenship and Immigration Services suggests that potential green card holders and citizens speak with its interactive chatbot, “Emma.”

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January 17, 2020 in Colloquia, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Congressional Research Service Seeks To Hire Head Of American Law Division

Assistant Director and Senior Specialist (American Law Division):

CRS LogoSummary:  The Congressional Research Service (CRS) seeks a senior manager to lead its American Law Division (ALD), one of CRS’ five research divisions. CRS provides objective, nonpartisan, and authoritative legislative research, analysis, and consultative support exclusively to the U.S. Congress.

Salary:  $131,239 to $197,300 per year

Responsibilities:  This position serves as head of the American Law Division, a major CRS research division. In this capacity, and reporting directly to the Director of CRS, the Assistant Director leads, plans, directs, and evaluates the work of a team of attorneys in its production of written products and consulting services in support of the U.S. Congress.

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January 17, 2020 in Tax | Permalink | Comments (0)

Thursday, January 16, 2020

2020 Tannenwald Tax Writing Competition

Tannenwald (2013)The Theodore Tannenwald, Jr. Foundation for Excellence in Tax Scholarship and American College of Tax Counsel are sponsoring the 2020 Tannenwald Tax Writing Competition:

Named for the late Tax Court Judge Theodore Tannenwald, Jr., and designed to perpetuate his dedication to legal scholarship of the highest quality, the Tannenwald Writing Competition is open to all full- or part-time law school students, undergraduate or graduate. Papers on any federal or state tax-related topic may be submitted in accordance with the Competition Rules.

Prizes:

  • 1st Place:  $5,000
  • 2nd Place: $2,500
  • 3rd Place:  $1,500

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January 16, 2020 in Tax, Teaching | Permalink | Comments (0)

Should The Tax System Be Used To Reduce Wealth Inequality In The United States?

Tax Policy Center, Should the Tax System Be Used to Reduce Wealth Inequality in the United States?:

Tax Polcy Center Logo (2017)Wealth is highly concentrated in the United States, with the top 0.1 percent of households holding an estimated 10 to 20 percent of all assets. Concerns about the effects of wealth inequality have spurred some presidential hopefuls to propose new taxes on wealth and unrealized capital gains and increases to the existing estate tax.

This policy debate raises broader issues about wealth inequality and how the tax code could reduce it. The causes, impacts on different groups, and effects of substantial wealth inequality are complex. Would higher taxes on the wealthy help fix the problems caused by wealth inequality?

Jason Furman, former chairman of the Council of Economic Advisers in the Obama administration, and panels of experts will consider the following questions:

  • What has been the impact of wealth inequality on different groups in the United States?
  • How does wealth concentration affect politics and public policy?
  • Would reducing after-tax wealth affect the political power of the wealthy and social and economic divisions across groups?
  • What are the pros and cons of using the tax system, instead of other government interventions, to reduce wealth inequality?

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January 16, 2020 in Conferences, Scholarship, Tax, Tax Scholarship | Permalink | Comments (2)

Conference Announcement And Call For Contributions: Taxation And Gender Equality

Announcement of Conference and Call for Contributions:
Taxation and Gender Equality Conference: Research Roundtable and Policy Program

As the Organizers and members of the Academic Advisory Committee we are pleased to issue this Announcement and Call for Contributions to an event that will be held on September 14 and 15, 2020, in Washington, DC, to explore the interaction between tax law and gender equality. The goal of the Conference, which is sponsored by the Tax Policy Center, the American Tax Policy Institute, the American Bar Foundation, and, subject to the final approval of their boards, the Tax Section of the American Bar Association and the American College of Tax Counsel, is to shine a spotlight on gender issues in taxation and to bring consideration of gender impacts into mainstream discussions surrounding the enactment and administration of tax laws. The intended scope of the Conference is broad, focusing not only on gender issues in U.S. tax law but also on gender issues in the tax laws of other countries; it will consider all taxes, whether income, consumption, transfer, wealth, or other national-level taxes, as well as subnational taxes.

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January 16, 2020 in Conferences, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Aprill: The Private Foundation Excise Tax On Self-Dealing

Ellen P. Aprill (Loyola-L.A.), The Private Foundation Excise Tax on Self-Dealing: Contours, Comparisons, and Character, 17 Pitt. Tax Rev. ___ (2020):

This paper considers section 4941, the private foundation excise tax on self-dealing, on the occasion of its fiftieth anniversary. Part I gives background on section 4941. Part II compares the rules of section 4941 to the parallel ones applicable to public charities, including the special rules for supporting organizations and donor advised funds. The fiftieth anniversary of the private foundation excises taxes is also an appropriate time to confront two foundational questions, and Part III does so. It first asks whether we can view the private foundation taxes in general and section 4941 in particular as constitutional exercises of Congress’s taxing power under the tests announced in National Federation of Independent Businesses v. Sibelius. Second, it considers whether we should characterize the section 4941 excise tax as a Pigouvian tax — a hot category among economists but less familiar to lawyers. It answers “maybe not” to the first and “yes but” to the second.

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January 16, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Wednesday, January 15, 2020

Stiglitz, Tucker & Zucman: The Starving State: Why Capitalism’s Salvation Depends On Taxation

Foreign Affairs:  The Starving State: Why Capitalism’s Salvation Depends on Taxation, by Joseph E. Stiglitz (Columbia), Todd N. Tucker (Columbia) & Gabriel Zucman (UC-Berkeley):

Foreign Affairs Cover 3For millennia, markets have not flourished without the help of the state. Without regulations and government support, the nineteenth-century English cloth-makers and Portuguese winemakers whom the economist David Ricardo made famous in his theory of comparative advantage would have never attained the scale necessary to drive international trade. Most economists rightly emphasize the role of the state in providing public goods and correcting market failures, but they often neglect the history of how markets came into being in the first place. The invisible hand of the market depended on the heavier hand of the state.

The state requires something simple to perform its multiple roles: revenue. It takes money to build roads and ports, to provide education for the young and health care for the sick, to finance the basic research that is the wellspring of all progress, and to staff the bureaucracies that keep societies and economies in motion. No successful market can survive without the underpinnings of a strong, functioning state.

That simple truth is being forgotten today. In the United States, total tax revenues paid to all levels of government shrank by close to four percent of national income over the last two decades, from about 32 percent in 1999 to approximately 28 percent today, a decline unique in modern history among wealthy nations.

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January 15, 2020 in Tax, Tax News | Permalink | Comments (5)

Christians & Magalhaes: A New Global Tax Deal For The Digital Age

Allison Christians (McGill) & Tarcisio Diniz Magalhaes (McGill), A New Global Tax Deal for the Digital Age:

The OECD is currently in the midst of a project intended to tackle the tax challenges arising from the digitalization of the economy. As laid out in Pillar 1 of its program of work released in May 2019, the goal seemed broadly to develop consensus on a new taxing right, to allow countries to tax multinationals even in the absence of traditional physical presence. Upon inspection, the plan seems to be about rebalancing taxing rights mostly among the relatively affluent OECD member states plus a few other key non-OECD states. Viewed from this perspective, the urgent effort to forge a new global tax deal for the digital age is destined to forestall a much-needed discussion on the broader distributive implications of the current global tax deal. This Article therefore critically examines the emerging tax bargain. Part I begins with a brief survey of some of the main factors that prompted the OECD to turn its attention to this topic. Part II considers the origins and development of nexus in the international tax regime, showing why this concept is amenable to broad expansion. Part III examines the range of reforms currently under consideration, arguing that the framing on digitalization misses a necessary connection to other pressing international policy programs that are also under development, most notably a global commitment to building institutions that support sustainable economic development.

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January 15, 2020 in Scholarship, Tax | Permalink | Comments (0)

Oei & Ring: The Importance Of Qualitative Research Approaches To Gig Economy Taxation

Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), The Importance of Qualitative Research Approaches to Gig Economy Taxation:

As the United States tax system continues to grapple with how to tax workers in the gig economy, it confronts a number of questions about the nature and composition of the sector as well as the tax issues confronted by its participants. Many of these questions have proven difficult to answer due to a lack of adequate information. But the answers are important and will shape how tax and other areas of law (such as employment law, labor law, and antitrust) respond to the gig economy. Thus, the question of how to obtain the data and information necessary to formulate sound policies for gig work is vital.

This chapter discusses the limitations of quantitative empirical research on the gig economy and argues that incorporating more qualitative approaches will help generate a more comprehensive understanding of the tax policy issues involved.

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January 15, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

The Perils of Common Ownership: How Corporate Tax Avoidance Floods (Overwhelms) The IRS

Danielle Chaim (J.S.D. 2020, Columbia), The Perils of Common Ownership: Flooding Strategy:

The increased concentration of shares in the hands of large institutional investors has triggered a phenomenon which I term “flooding.” Under this phenomenon, institutional investors push their portfolio firms towards higher levels of noncompliance. Given limited enforcement capabilities, the simultaneous increase in the levels of noncompliance reduces the probability that such behavior will be detected and adequately penalized. Consequently, the presence of large, diversified shareholders destructs the inherent trade-off between compliance and enforcement. Misconduct becomes less risky and more rewarding, changing the way in which public firms approach legal risks.

This Article focuses on the applicability of flooding in the context of tax avoidance. Data suggests that the emerging ownership pattern in the United States increases levels of corporate tax avoidance. In this Article, I argue that this increase results in flooding, overwhelming the tax agency, now faced with new enforcement challenges.

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January 15, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Tuesday, January 14, 2020

Hickman & Thomson: The Chevronization of Auer

Kristin E. Hickman (Minnesota) & Mark R. Thomson (Administrative Conference of the United States), The Chevronization of Auer, 103 Minn. L. Rev. Headnotes 103 (2019):

The Supreme Court is poised in Kisor v. Wilkie to reconsider the standard of review known as Auer deference, whereby courts must defer to an agency’s reasonable interpretation of its own regulation. Auer’s defenders have long argued that the standard advances important practical goals, such as simplifying the judicial task and fostering consistency and predictability in the administrative process. During the last two decades, though, courts have engrafted an increasingly complex array of qualifications and exceptions onto Auer’s basic framework.

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January 14, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Walker: The Implausibility Of Compensation As An Anticompetitive Mechanism

David I. Walker (Boston University), Common Ownership and Executive Incentives: The Implausibility Of Compensation As An Anticompetitive Mechanism, 99 B.U. L. Rev. 2373 (2019):

Mutual funds, pension funds, and other institutional investors are a growing presence in U.S. equity markets, and these investors frequently hold large stakes in shares of competing companies. Because these common owners might prefer to maximize the values of their portfolios of companies rather than the value of individual companies in isolation, this new reality has led to a concern that companies in concentrated industries with high degrees of common ownership might compete less vigorously with each other than they otherwise would. But what mechanism would link common ownership with reduced competition? Some commentators argue that one of the most plausible mechanisms is executive pay design. The idea is that executive pay at companies in concentrated industries with high common ownership may be designed to dampen the incentives of the companies’ managers to compete aggressively with peer firms.

This Article challenges both the theoretical and empirical bases for this argument and contends that executive pay design is actually an implausible mechanism for linking common ownership with reduced competition.

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January 14, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Wealth Of World’s Richest Rose 25% In 2019; Jeff Bezos Stays #1 Despite $9 Billion Divorce

Bloomberg News, World’s Richest Gain $1.2 Trillion in 2019 as Jeff Bezos Retains Crown:

The world’s 500 wealthiest people tracked by the Bloomberg Billionaires Index added $1.2 trillion, boosting their collective net worth 25% to $5.9 trillion.

Bloomberg

Such gains are sure to add fuel to the already heated debate about widening wealth and income inequality. In the U.S., the richest 0.1% control a bigger share of the pie than at any time since 1929, prompting some politicians to call for a radical restructuring of the economy.

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January 14, 2020 in Tax, Tax News | Permalink | Comments (0)

Cato: Taxing Wealth And Capital Income

Chris Edwards (Cato Institute), Taxing Wealth and Capital Income:

Taxing the wealthy is a hot issue among Democratic candidates for president. Sen. Elizabeth Warren (D-MA) is proposing an annual wealth tax on the richest households, while other candidates are proposing higher taxes on incomes, estates, capital gains, and corporations.

Calls for tax increases are animated by claims about the fairness of income and wealth distributions in the economy. Warren wants to address “runaway wealth concentration,” while Sen. Bernie Sanders (I-VT) says that the wealthy are not “paying their fair share of taxes.”

The proposed tax increases run counter to the international trend of declining tax rates on capital income and wealth. The number of European countries with a Warren-style wealth tax has fallen from 12 in 1990 to just 3 today.

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January 14, 2020 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (2)

Scholarship As Fun

Thomas Schultz (King's College London), Scholarship as Fun:

This paper — which is part of a symposium for Pierre Schlag — argues that the pursuit of fun is possibly better than most of our usual pursuits in legal scholarship. This has three likely implications, which are reflected in the structure of the paper: a recognition of the coexistence of mutually exclusive legal realities entertaining dialectic relationships; the abandonment of oneness of the legal academy; and the need to situate ourselves within tangled socio-professional hierarchies.

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January 14, 2020 in Legal Ed Scholarship, Legal Education, Scholarship, Tax | Permalink | Comments (0)