Paul L. Caron
Dean


Saturday, September 21, 2019

This Week's Ten Most Popular TaxProf Blog Posts

Sports Gambling, Taxes, And Higher Education

Kathryn Kisska-Schulze (Clemson) & John T. Holden (Oklahoma State), Betting on Education, 81 Ohio St. L.J. ___ (2020):

Two recent changes to U.S. federal law threaten the viability of colleges and universities. President Trump’s signing of the Tax Cuts and Jobs Act (TCJA) into law at the close of 2017 signified a continued trend of decreasing funds previously available to higher education. National and state funding cuts are resulting in a cost-value educational crisis in the U.S., with tuition increasing, students needing to borrow more, and academic programs and faculty lines being cut. In addition, college athletic departments assert that the U.S. Supreme Court’s holding in Murphy v. National College Athletic Association, which declared that the Professional and Amateur Sports Protection Act (PASPA) unconstitutionally commandeered state legislatures into maintaining laws prohibiting sports wagering, could jeopardize the integrity of college sports. Only by examining the foundational relationships between gambling, taxation, and higher education in the U.S. is it evident that Murphy could actually be the catalyst for generating revenue back into colleges and universities rather than the apocalyptic threat some have predicted.

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September 21, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Friday, September 20, 2019

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Hemel's Taxing Wealth In An Uncertain World

This week, Mirit Eyal-Cohen (Alabama) reviews Daniel Jacob Hemel (Chicago), Taxing Wealth in an Uncertain World, 72 Nat’l Tax J. ___ (2019).

Mirit-Cohen (2018)Lately, many political candidates are asked to comment about, and many of them have released, proposals to narrow the economic inequity gap by taxing wealth more heavily. This Essay highlights three alternative capital taxation regimes, namely annual wealth tax, mark-to-market, and retrospective capital gains through their exposure to different types of uncertainties.

An annual wealth tax and a mark-to-market income tax are similar in their operation. The annual wealth tax would require taxpayers to estimate the value of all of their assets each year and pay a tax equal to a percentage of that value (perhaps after subtracting the value of liabilities). Thus, an annual wealth tax would have minimal information requirements and will rely only on a point-in-time snapshot of net worth. Yet, under an annual wealth tax, taxpayers will not have to account for assets sold during the year if the proceeds were consumed before the next valuation date. Such a regime was featured in Senator Elizabeth Warren’s proposal to impose 2% tax on $50 million net worth and 3% on $1 billion of net worth.

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September 20, 2019 in Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Cohen & Viswanathan: Corporate Behavior And The Tax Cuts And Jobs Act

Nicholas Cohen (MIT) & Manoj Viswanathan (UC-Hastings), Corporate Behavior and the Tax Cuts and Jobs Act:

The Tax Cuts and Jobs Act of 2017 fundamentally altered United States tax law. TCJA supporters believed that the tax benefits afforded U.S. corporations would incentivize corporations to use their additional after-tax cash in ways beneficial to the U.S. economy. Our study, the first of its kind, uses corporation-by-corporation data from recent public filings to measure how the change in effective corporate tax rate affects various corporate behaviors. We find that the TCJA’s reduction in effective tax rate has no relationship to several corporate actions, including hiring new employees and making capital expenditures, two behaviors predicted by TCJA proponents.

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September 20, 2019 in Scholarship, Tax | Permalink | Comments (0)

Kaestner Fails: The Way Forward

Mitchell M. Gans (Hofstra), Kaestner Fails: The Way Forward, 11 Wm. & Mary Bus. L. Rev. __ (2020):

This past term, the Supreme Court applied the due process clause to prevent the states from closing down a tax strategy that employs out-of-state trusts. Many had hoped that the case would serve as a vehicle for the Court to overrule taxpayer-friendly precedents that make the strategy possible. But it failed. The question that emerges is whether the decision leaves the states with a path to address the strategy and thereby prevent it from being used to exacerbate issues of inequality.

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September 20, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Thursday, September 19, 2019

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

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

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

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September 19, 2019 in Scholarship, Tax | Permalink | Comments (0)

Carl Icahn Is Moving From NY To Florida For Lower Tax Rates

Bloomberg, Carl Icahn Is Heading to Florida for Lower Tax Rates:

Billionaire Carl Icahn is planning to move his home and business to Florida to avoid New York’s higher taxes, according to people familiar with the matter.

Icahn, 83, who was born in the Far Rockaway neighborhood in Queens, New York, has been an icon on Wall Street for decades. In the 1990s, he bought a mansion in the exclusive Indian Creek island enclave on Biscayne Bay in Miami.

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September 19, 2019 in Tax, Tax News | Permalink | Comments (1)

529 College Savings Plans Under The TCJA

Ross Riskin (American College of Financial Services), Tax Deductions V. Tax-Free Growth: A Closer Look at 529 College Savings Plans Under the TCJA, J. Multistate Tax'n & Incentives, Vol. 29, No. 6, Sept. 2019:

Now that investors can receive preferential federal income tax treatment when using 529 college savings plans to pay for qualified K-12 tuition expenses under the Tax Cuts and Jobs Act of 2017 (TCJA), it is important to determine whether the value of receiving and investing state income tax deductions provided for qualifying contributions made to this education savings vehicle is more beneficial than the value associated with tax-free growth, given the potential for shortened education planning time horizons. ...

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September 19, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

WSJ: One Argument For Radical Income Transparency

Wall Street Journal:  One Argument for Radical Income Transparency, by Oliver Hauser (University of Exeter Business School) & Michael Norton (Harvard Business School):

How much do people actually know about the income and wealth of people who live around them? And how does what they think they know skew the way they think about government taxes and spending?

Recent research we conducted suggests that the answer to those two questions are: Not much and a lot.

An emerging body of research suggests that citizens’ preferences for spending on public goods—from social programs to health care to infrastructure—are based in part about who they believe contributes and benefits. However, we discovered that many people are unaware of the true extent of inequality where they live. And in some cases, their beliefs are dramatically different than reality.

In our research, we assessed people’s behavior toward the rich and poor under two conditions in a controlled experiment: when inequality remains invisible (or hidden), and when we reveal it. We then explored whether people might view the behavior of lower-income people differently when they were made aware of just how little income being “low income” entailed.

In other words, I might be angry that poor people contribute very little in income tax to the overall federal budget. But I might feel differently when I realize that they have so little that any contribution represents a large percentage of their small income. ...

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September 19, 2019 in Tax, Tax News | Permalink | Comments (3)

Financial Times: Are Big Corporations Paying Enough Tax?

Wednesday, September 18, 2019

Apple Takes On EU In World's Biggest Tax Case: $14 Billion

Bloomberg News, Apple Takes on EU’s Vestager in Record $14 Billion Tax Fight:

Apple EUApple fights the world’s biggest tax case in a quiet courtroom this week, trying to rein in the European Union’s powerful antitrust chief ahead of a potential new crackdown on internet giants.

The iPhone maker can tell the EU General Court in Luxembourg that it’s the world’s biggest taxpayer. But that’s not enough for EU Competition Commissioner Margrethe Vestager who said in a 2016 ruling that Apple’s tax deals with Ireland allowed the company to pay far less than other businesses. The court must now weigh whether regulators were right to levy a record 13 billion-euro ($14.4 billion) tax bill.

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September 18, 2019 in New Cases, Tax, Tax News | Permalink | Comments (2)

Tax Prof Twitter Rankings

Shaviro: Digital Service Taxes

Daniel Shaviro (NYU), Digital Service Taxes and the Broader Shift from Determining the Source of Income to Taxing Location-Specific Rents:

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

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

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September 18, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Cooper: Lessons From The State Death Tax Credit And The SALT Deduction

Jeffrey A. Cooper (Quinnipiac), Red States, Blue States: Lessons from the State Death Tax Credit and the 'SALT' Deduction, 73 Tax Law. ___ (2020):

ABA Tax Lawyer (2019)Since 1861, every version of the federal income tax has included a deduction for state and local taxes (often referred to by its popular acronym “SALT”). Since this provision, the “SALT deduction,” minimizes the effect of state and local taxes on taxpayers, it offers greater benefits to those living in states that impose the highest tax burden — the high-tax “blue” states. In 2017, the Tax Cuts and Jobs Act marked a major shift in this long-established federal policy toward state taxes. Among its many provisions, the Act capped the SALT deduction at $10,000 per married couple, providing no Federal tax offset for amounts paid in excess of that amount.

In this article, I attempt to address two questions raised by this turn of events. First, how will states respond to this change in federal law? Second, does the capping of the SALT deduction represent a major shift in federal-state relations, an unprecedented attack on blue states, or is it simply politics as usual?

My novel approach to the subject is to consider these questions by exploring the similarities and contrasts between the income tax SALT deduction and the estate tax state death tax credit, which was established in 1924 and repealed in 2001. Viewing the 2017 legislation within this broader historical context more reveals trends and patterns, providing greater insight than would a study of the SALT deduction in isolation.

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September 18, 2019 in ABA Tax Section, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Tuesday, September 17, 2019

Schanzenbach Presents Safety Net Investments In Children Today At NYU

Diane Whitmore Schanzenbach (Northwestern) presents Safety Net Investments in Children (with Hilary W. Hoynes (UC-Berkeley)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

SchanzIn this paper, we examine what groups of children are served by core childhood social safety net programs—including Medicaid, EITC, CTC, SNAP, and AFDC/TANF—and how they have changed over time. We find that virtually all gains in spending on the social safety net for children since 1990 have gone to families with earnings, and to families with income above the poverty line. These trends are the result of welfare reform and the expansion of in-work tax credits. We review the available research and find that access to safety net programs during childhood improves outcomes for children and society over the long run. This evidence suggests that the recent changes to the social safety net may have lasting negative effects on the poorest children.

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September 17, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

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

Young Ran (Christine) Kim (Utah) presented Digital Services Tax: A Cross-border Variation of Consumption Tax Debate? yesterday at San Diego as part of its Tax Law Speaker 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.

Due to such background, 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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September 17, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

WSJ: Inequality Is Holding Back The U.S. Economy

Wall Street Journal, Inequality Is Holding Back the U.S. Economy:

When it comes to money, America has always had winners and losers, but the widening gulf between the rich and the bulk of U.S. households may be making almost everybody worse off. That includes investors.

Income data released by the Census Bureau on Tuesday showed that the median U.S. household—the one in the statistical middle—had income of $63,200 last year. That was a bit more than the $62,600, adjusted for inflation, that the median household made in 2017. And it is well above the $56,750 that new data, adjusted for methodology changes, show the median household made in 2014, when many Americans were still smarting from the aftermath of the financial crisis.

But the 2018 figure was basically even with what the adjusted data show for 1999.

WSJ

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September 17, 2019 in Tax, Tax News | Permalink | Comments (4)

NY Times: GAO Study Shows Income Gap Between Rich And Poor Keeps Growing, With Deadly Effects

New York Times, Study Shows Income Gap Between Rich and Poor Keeps Growing, With Deadly Effects:

The expanding gap between rich and poor is not only widening the gulf in incomes and wealth in America. It is helping the rich lead longer lives, while cutting short the lives of those who are struggling, according to a study released this week by the Government Accountability Office [Income and Wealth Disparities Continue through Old Age].

Almost three-quarters of rich Americans who were in their 50s and 60s in 1992 were still alive in 2014. Just over half of poor Americans in their 50s and 60s in 1992 made it to 2014.

GAO

“It’s not only that rich people are living longer but some people’s life expectancy is actually shrinking compared to their parents, for some groups of people,” said Kathleen Romig, a senior policy analyst at the liberal Center on Budget and Policy Priorities.

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September 17, 2019 in Tax, Tax News | Permalink | Comments (0)

American Taxation Association Journal Of Legal Tax Research Call For Papers

The American Taxation Association Journal of Legal Tax Research Call for Submissions:

ATAThe ATA Journal of Legal Tax Research (JLTR), a double-blind peer-reviewed journal, publishes creative and innovative studies that employ legal research methodologies that logically and clearly:

  • Identify, describe, and illuminate important current tax issues including the history, development, and congressional intent of specific provisions
  • Propose improvements in U.S., state and local, or foreign tax systems, and unique solutions to tax or fiscal problems
  • Critically analyze proposed or recent tax law changes from both a technical and a policy perspective
  • Discuss improvements in tax compliance, tax complexity, or tax policy
  • Provide critical discussions for strategically structuring transactions, considering tax and non-tax ramifications
  • Critically analyze recent or proposed legislative or regulatory changes
  • Critically analyze similarities and differences between tax accounting and financial accounting issues
  • Critically analyze similarities and differences between U.S. and other tax regimes

Legal tax research articles in all areas are appropriate for the journal, including state and local taxation, international taxation, estate and gift tax law, and federal income taxation.  Manuscripts analyzing tax issue of countries other than the U.S., particularly if it includes a comparison to U.S. tax law, are also encouraged. 

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September 17, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

Monday, September 16, 2019

Gordon Presents Fiscal Democracy In The States: How Much Spending Is On Autopilot? Today At Loyola-L.A.

Tracy Gordon (Urban Institute) presents Fiscal Democracy In The States: How Much Spending Is On Autopilot? (with Megan RandallC. Eugene Steuerle & Aravind Boddupalli) at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Ted Seto: 

GordonGovernors, lawmakers, and journalists often decry constitutional and statutory formulas, federal grant requirements, and court rulings they think excessively limit state budget decisions.

Some observers estimate as much as 70 percent of state spending is “on autopilot,” meaning these constraints are in place before proposals or negotiations begin.

But measuring predetermined state budget commitments is far from straightforward. The federal government explicitly defines “tax expenditures” and “mandatory spending” and reinforces these concepts through the annual budget process. In contrast, few states rigorously and transparently assess the long-term cost of tax breaks and spending programs that are either fixed in size or will grow automatically without policy changes.

In this report, we perform a first-of-its-kind analysis of how much spending was restricted or partially restricted in CaliforniaFloridaIllinoisNew YorkTexas, and Virginia from 2000 to 2015.

Key findings:

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September 16, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Tax Paper Presentations Today At UC-Berkeley

Tax paper presentations at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

Antoine Ferey (Ph.D Candidate (Economics), CREST – École Polytechnique, Paris, France)), Optimal Income Taxation and Tax Complexity with Taxpayers Misperceptions (with Jérémy Boccanfuso (Ph.D Candidate (Economics), Paris School of Economics):

Ferey

We analyze optimal income taxation and tax complexity – defined as the features of a tax system preventing agents from correctly internalizing taxes in their choices – in a Mirrlees economy where agents misperceive taxes. We capture tax complexity along two dimensions – the number of tax instruments and the design (e.g. salience) of each instrument – and demonstrate how these factors shape the overall complexity of an integrated tax system. Tax complexity is a desirable feature of tax systems to the extent that it induces misperceptions which reduce the efficiency costs of taxation and allow an inequality-averse government to increase taxes and redistribution towards poor households. However, misperceptions generate utility misoptimization costs which are heterogeneous across taxpayers: more able workers are relatively more stricken and thus willing to pay more attention to the tax schedule. The possibility to dedicate time and energy to study the tax schedule and to turn to tax advisors give rise to an optimal level of tax complexity that we characterize. Preliminary estimations indicate that the monetary equivalent for internalizing the US income tax system was $2,364 in 2016, whereas our estimate for the optimal level of complexity is around $1,100. Because richest households resort to tax advisors, it is the upper middle class who loses the most from this tremendous complexity.

Malka Guillot (Postdoctoral Research Fellow, Center for Law and Economics, ETH Zürich), Who Paid the 75% Tax on Millionaires? Optimisation of Salary Incomes and Incidence in France:

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September 16, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Zwick Presents Top Wealth In The United States — New Estimates And Implications For Taxing The Rich At NYU

Eric Zwick (Chicago) presented Top Wealth in the United States: New Estimates and Implications for Taxing the Rich (with Matthew Smith (U.S. Treasury Department) & Owen Zidar (Princeton)) at NYU last week as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

Zwick (2019)This paper uses administrative tax data to estimate top wealth in the United States. We build on the capitalization approach in Saez and Zucman (2016) while accounting for heterogeneity within asset classes when mapping income flows to wealth. Our approach reduces bias in wealth estimates because wealth and rates of return are correlated. Overall, wealth is very concentrated: the top 1% holds as much wealth as the bottom 90%. However, the “P90-99” class holds more wealth than either group after accounting for heterogeneity. Relative to a top 0.1% wealth share of more than 20% under equal returns, we estimate a top 0.1% wealth share of [15%] and find that the rise since 1980 in top wealth shares falls by [half]. Top portfolios depend less on fixed income and public equity, depend more on private equity and housing, and more closely match the composition reported in the SCF and estate tax returns. Our adjustments reduce mechanical revenue estimates from a wealth tax and top capital income shares in distributional national accounts, which depend on well-measured estimates of top wealth. Though the capitalization approach has advantages over other methods of estimating top wealth, we emphasize that considerable uncertainty remains inherent to the approach by showing the sensitivity of estimates to different assumptions.

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September 16, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

Lesson From The Tax Court: Administrative File Notes Are Not Ex-Parte Contact

Tax Court (2017)Tax collectors have an tough and lonely job.  I know.  I collected taxes for Arlington County, Virginia shortly after law school.  And when I was in IRS Office of Chief Counsel, my clients were Revenue Officers (ROs), the IRS employees whose dolorous job is to collect unpaid taxes. 

When a taxpayer receives a CDP hearing, ROs are prohibited from making ex part contacts with anyone in Appeals about the substance of the collections under review.  If the RO wants to communicate with anyone in Appeals about matters that are not ministerial, administrative, or procedural, they must give taxpayers an opportunity to participate in the discussion. Rev. Proc. 2000-43, §3, Q&A-6.   If they violate the ex-parte prohibition, then the CDP hearing becomes tainted and the ex part nature of the contact must either be cured or else the case be reassigned.  Rev. Proc. 2012-18, §2.10(1).

Not every communication from an RO to Appeals is a prohibited ex parte contact.  Last week’s case of Jason Stewart and Kristy Stewart v. Commissioner, T.C. Memo 2019-116 (September 10, 2019) (Judge Kerrigan) teaches a lesson in what does not constitute a prohibited communication from an RO to the Settlement Officer in a CDP hearing.  Details below the fold.

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September 16, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax News, Tax Practice And Procedure | Permalink | Comments (1)

Tax Uniformity As A Requirement Of Justice

Charles Delmotte (NYU), Tax Uniformity as a Requirement of Justice:

Barbara Fried takes the view that uniform taxation — that is, a single rate applicable to all income levels — cannot be defended on any grounds of justice. She goes further by saying that, of all possible rate structures, it might be “the hardest one” to ground in “a” theory of fairness. Using the contractarian-constitutional perspective advanced by John Rawls and James Buchanan, this article argues that tax uniformity can be seen as a requirement of justice. After modelling how the political world realistically decides to distribute tax shares (self-interested parties act under a majority constraint), I show how the uniformity principle could emerge from the constitutional contract. In other words, rational individuals would choose uniformity as a procedural constraint under a “veil of uncertainty”; that is, with limited knowledge regarding their positions under the future application of the rule.

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September 16, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (2)

Sunday, September 15, 2019

Founders’ Fortunes And Philanthropy: A History Of The U.S. Charitable Deduction

Vox, The Charitable Deduction Is Mostly for the Rich. A New Study Argues That’s by Design.:

In the early 20th century, legislators carved out a tax break to help megaphilanthropists. It still shapes our tax law today. ... [A] a new paper published this week in Business History Review argues that throughout its 100-year history, the charitable deduction was always aimed primarily at benefiting the rich.

Nicolas J. Duquette (USC), Founders’ Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution Deduction, 93 Bus. Hist. Rev. 553 (2019):

Since 1917, tax filers in the United States who itemize tax deductions have been able to subtract gifts to eligible charities from their taxable income. The deduction is especially valuable to successful entrepreneurs who donate corporate stock.

Founders

Such philanthropy was seen as a close substitute for government spending until after the mid-twentieth century. In the 1950s and 1960s, high tax rates catalyzed the formation of large foundations from industrial fortunes and precipitated a national debate about the legitimacy of such giving. The midcentury debate preceded increased oversight of charities and foundations and a shift in the way U.S. lawmakers regarded the contribution deduction—from a subsidy by philanthropists of public goods government would otherwise provide to an implicit public cost.

Nicolas J. Duquette (USC), Highlighting The (Elitist) History Of The Charitable Contribution Income Tax Deduction:

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September 15, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

The Top Five New Tax Papers

SSRN Logo (2018)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 #4:

  1. [484 Downloads]  Five Key Research Findings on Wealth Taxation for the Super Rich, by David Gamage (Indiana)
  2. [341 Downloads]  An Introduction to Tax Careers for J.D.s, by Heather Field (UC-Hastings)
  3. [155 Downloads]  The Superiority of the Digital Services Tax over Significant Digital Presence Proposals, by Wei Cui (University of British Columbia)
  4. [131 Downloads]  The Qualified Small Business Stock Exclusion: How Startup Shareholders Get $10 Million (Or More) Tax-Free, by Manoj Viswanathan (UC-Hastings)
  5. [96 Downloads]  Cannabis Businesses and Passthrough Deduction Availability, by Daniel Rowe (Green Hasson & Janks, Los Angeles)

September 15, 2019 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink | Comments (0)

Saturday, September 14, 2019

This Week's Ten Most Popular TaxProf Blog Posts

BEPS And The Emerging Global Approach To Taxing Multinational Enterprises

Jinyan Li, Jin Bao & Huaning (Christina) Li (York University, Osgoode Hall Law School), BEPS and the Emerging Global Approach to Taxing Multinational Enterprises, in Symposium, Re-Imagining Tax for the 21st Century: Inspired by the Scholarship of Tim Edgar):

The G20/OECD Base Erosion and Profit Shifting (BEPS) Project aimed at revising existing tax rules to align the taxation of profit with the location of economic activities and value creation (the “value creation principle”). It has received much commentary in literature and general debates and has been regarded as “the most significant re-write of the international tax rules in a century”, an opportunity to “rebuild a healthy scheme for allocating taxation rights”, having the potential to significantly alter the contours of the international tax regime, transforming the international tax regime, signaling a “new struggle over international taxation”, or representing the “emergence of a new international tax regime”. The OECD claimed that the revised rules represent “the first substantial – and overdue – renovation of the international tax standards in almost a century”.

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

Friday, September 13, 2019

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Osofsky's Agency Legislative Fixes

This week, Sloan Speck (Colorado) reviews a new work by Leigh Osofsky (North Carolina), Agency Legislative Fixes, 105 Iowa L. Rev. __ (2020).

Speck (2017)In Agency Legislative Fixes, Leigh Osofsky develops a framework for understanding and analyzing agency actions to correct technical and drafting errors in legislation. Osofsky motivates this framework primary through various examples from the December 2017 tax legislation known as the Tax Cuts and Jobs Act. In addition, Osofsky alludes to a number of other high-profile legislative mistakes in the Affordable Care Act, the Dodd-Frank Act, and elsewhere. Osofsky adeptly interweaves her tax-oriented story with academic work on legislation and administrative law, yielding a rich critique of Treasury’s current practices in handling gaps between Congress’s presumptive or purported intent and prevailing interpretations of statutory text, as enacted. Osofsky concludes by addressing several possible reforms, including an interesting proposal to adjust the revenue baseline in budget reconciliation to account for erroneous scores attributable to congressional mistakes.

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September 13, 2019 in Scholarship, Sloan Speck, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Trump's Taxes And Tax Returns

Batchelder & Kamin: Taxing the Rich: Issues and Options

Lily L. Batchelder (NYU) & David Kamin (NYU), Taxing the Rich — Issues and Options:

The U.S. economy exhibits high inequality and low economic mobility across generations relative to other high-income countries.

BK1

The U.S. will need to raise more revenues in order to reduce these disparities, finance much-needed new services and investments, and address the nation’s long-term fiscal needs. This paper outlines policy options for raising a large amount of revenues primarily from the most affluent, first discussing potential incremental reforms and then focusing on four main options for more structural reform: (1) dramatically increasing the top tax rates on labor and other ordinary income, (2) taxing the wealthy on accrued gains as they arise and at ordinary rates, (3) a wealth tax on high-net-worth individuals, and (4) a financial transactions tax.

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September 13, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (4)

Minors And Digital Asset Succession

Natalie M. Banta (Drake), Minors and Digital Asset Succession, 104 Iowa L. Rev. 1699 (2019):

Minors who die in the United States hold a property interest in an asset that did not exist when the law established eighteen as the age of legal capacity to devise. These assets are digital assets: email, social networking, documents, photos, text messages, and other forms of digital media. Minors use these assets with a fluidity and ease unrivaled by older generations. Under the current law, minors have no right to decide what happens to their digital property at death. Despite the fact that minors have the capacity to contract with online businesses, make health care decisions, marry, have sex, and seek employment, minors are denied one of the most basic rights of property ownership — the right to devise. This Article is the first to explore how minor capacity law should change to accommodate the changing nature of property and grant minors the right to devise their digital assets.

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

The Peripatetic Nature Of EU Corporate Tax Law

Christiana HJI Panayi (Queen Mary University of London), The Peripatetic Nature of EU Corporate Tax Law:

This article examines some aspects of the European Union’s corporate tax set-up which correspond to aspects of a country’s corporate tax regime. The overarching question is whether there is such a thing as EU corporate tax law. This article seeks to address this in the context of the following issues: the existence of a uniform tax base and tax rates;the existence of anti-abuse rules and a transfer pricing regime; and, finally, the existence of a common tax administration and its powers. The article questions whether the peripatetic development of EU corporate tax law is suitable for the EU or whether it undermines its long-term objectives.

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

Thursday, September 12, 2019

Polsky Presents Two Tax Papers Today At Florida

Polsky (2018)Gregg Polsky (Georgia) presents two papers today at Florida:

There's a Problem With Buybacks, But It's Not What Senators Think, 162 Tax Notes 765 (Feb. 18, 2019) (with Daniel Hemel (Chicago)), as part of the Tax Colloquium Series:

In a deeply divided Washington, one of the few issues on which leading lawmakers on both sides of the aisle appear to agree is that corporations should be discouraged from buying back their stock from shareholders. This short article argues that, while this anti-buyback sentiment is misguided, there nevertheless are good tax policy arguments for reforming the tax treatment of buybacks. The article recommends adoption of a 1969 proposal made by Professor Marvin Chirelstein that would recharacterize (for tax purposes) buybacks as a pro rata cash dividend, followed by sales of shares from the shareholders who participate in the buyback to the shareholders who do not.

Taxing Residential Solar as part of the Marshall M. Criser Distinguished Lecture and Workshop Series (with Ethan Yale (Virginia)):

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

Osofsky: Agency Legislative Fixes

Leigh Osofsky (North Carolina), Agency Legislative Fixes, 105 Iowa L. Rev.  ___ (2019):

Legislative drafting mistakes can upset statutory schemes. The Affordable Care Act was nearly undone by such mistakes. The recent Tax Cuts and Jobs Act is rife with them. Traditional legal scholarship has examined whether courts should help resolve Congress’s mistakes. But courts have remained stubbornly resistant to fixes outside of the legislative process.

In the face of legislative error and judicial inaction, administrative agencies have taken it upon themselves to fix legislative drafting mistakes. This Article provides the first comprehensive analysis of these “agency legislative fixes.” It identifies features and complexities of such fixes, which are not captured by existing scholarship. It also describes the behind-the-scenes, post-legislative dialogue between Congress and agency officials about such fixes, which is frequently hidden from public view. The Article shows that agencies routinely fix legislative drafting mistakes in a manner that is nontransparent and motivated by factors external to the legal framework.

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September 12, 2019 in Scholarship, Tax, Tax Scholarship | Permalink | Comments (1)

Andrew Weiner Appointed To Lead Temple Tax LL.M. Program

Andrew Weiner Appointed to Lead LL.M. in Tax at Temple Law School:

Weiner 2Nationally recognized tax litigator Andrew Weiner has joined the faculty at Temple Law School, where he will serve as Director of the Graduate Tax Program and Practice Professor of Law.

In joining Temple’s nationally ranked tax program, Professor Weiner brings a wealth of tax litigation experience to an exceptional roster of scholar-teachers on the full-time faculty and highly accomplished adjuncts. He also brings experience in the classroom, having taught corporate tax and partnership tax at American University Washington College of Law for several years. In addition, Professor Weiner is developing a tax research and writing class, and has plans to explore interdisciplinary opportunities with Temple’s vaunted trial advocacy program. ...

Prior to joining Temple Law, Professor Weiner served for more than a decade in the Tax Division of the Department of Justice. Most of his tenure at the Tax Division was spent as an Attorney in the Appellate Section, where he briefed and argued approximately 50 cases, including Florida Bankers Association v. Department of the Treasury before the DC Circuit and Bedrosian v. United States before the Third Circuit—important victories for the government. During that time, Professor Weiner also served as Counsel to both Diana Erbsen (Deputy Assistant Attorney General for Appellate and Review) and Tamara Ashford (then Acting Assistant Attorney General & Deputy Assistant Attorney General for Appellate and Review and now a judge on the United States Tax Court). Most recently, he worked as a Trial Attorney at the Court of Federal Claims Section.

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

Joulfaian: The Federal Estate Tax: History, Law, and Economics

David Joulfaian (U.S. Treasury Department), The Federal Estate Tax: History, Law, and Economics (MIT Press 2019):

JoulifanA comprehensive and accessible account of the U.S. estate tax, examining its history and evolution, structure and inner workings, and economic consequences.

Governments have been levying some form of inheritance tax since the ancient Egyptians did so in the seventh century BC. In the United States, the federal government experimented with various forms of inheritance taxes, settling on an estate tax in 1916 and a gift tax in 1932. Despite this long history, there are few empirical studies of the federal estate tax. This book offers the first comprehensive look at U.S. estate and inheritance taxes, examining their history and evolution, structure and inner workings, and economic consequences. Written by David Joulfaian, a veteran economist at the U.S. Department of the Treasury, the book provides accessible accounts of such topics as changes in tax laws, issues of equity, the fiscal contribution of the estate tax, and its behavioral effects.

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September 12, 2019 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Stock Repurchases And The 2017 Tax Cuts And Jobs Act

Benjamin Bennett (Tulane University), Anjan V. Thakor (Washington University) & Zexi Wang (Lancaster University), Stock Repurchases and the 2017 Tax Cuts and Jobs Act:

We study the effects of the 2017 Tax Cuts and Jobs Act (TCJA) on repurchases, leverage and investment. The TCJA generates tax windfalls through a repatriation tax cut and a corporate income tax cut. Using monthly repurchase data from SEC filings, we find the surge of repurchases after the TCJA is driven by the repatriation tax cut, and not the income tax cut.

Stock Repurchases

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

Wednesday, September 11, 2019

Benshalom Presents Recalibrating Moral Feasibility Boundaries Of Taxation Today At Toronto

Ilan Benshalom (Hebrew University, Faculty of Law) presents Recalibrating Moral Feasibility Boundaries of Taxation at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Benshalom (2019)Tax theorists have recognized the importance of linking policy proposals to different ideal theories of distributive justice such as equality of resources, maximin of primary goods, and welfarism. However, they have invested considerably less efforts in trying to engage the tax-distributive debate with a moral analysis that deals with non-ideal settings. This essay offers a new framework that enables a more effective integration of normative considerations into academic analysis the distributive dilemmas associated with existing tax systems.The essay briefly reviews some of the relevant modern social science research dealing with how individuals view the role of the tax system in reducing inequality, and then discusses the importance and limitations of empirical research. I argue that any attempt to rely on measurable concepts such as biases and distributive preferences to normatively evaluate the distributive function of the tax system would likely be insufficient and perhaps even somewhat misleading. Instead, any moral evaluation of tax policymaking should be done with reference to a set of feasibility constraints, which explicitly recalibrate the framework of normative debate based on relevant social science findings.

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

Tax Journals With Openings For Articles

ExpressO reports that two tax journals have openings for tax articles:

Virginia Tax Review
The Virginia Tax Review is one of the oldest student-run law journals at the University of Virginia. The journal seeks to publish a wide variety of articles within the general ambit of tax law, including domestic and international taxation. We are still accepting articles for our Winter 2019 and Spring 2020 issues.

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

Davis: Elective Egg Freezing And The Limits Of The Medical Expense Deduction

Tessa R. Davis (South Carolina), Freezing the Future: Elective Egg Freezing and the Limits of the Medical Expense Deduction, 107 Ky. L. Rev. 373 (2019):

Section 213 of the Internal Revenue Code (the Code) allows a deduction for unreimbursed expenses for medical care. To qualify as medical care, an individual’s outlay must meet the statutory definition of “medical care” set forth in § 213. Specifically, an outlay must be for care that is either for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Many costs raise few interpretive challenges. When an individual receives chemotherapy, for example, the costs tied to that care clearly satisfy the disease prong of § 213. But as medicine advances, emerging technologies test the breadth of the Code’s concept of medical care. This Article examines the case of elective egg freezing — an increasingly available technology and, in some cases, a new employer-provided benefit — analyzing the likely treatment of such costs under current law.

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

How Cryptocurrencies Thwart International Tax Policy

Benjamin Molloy (J.D. 2019, Oregon), Comment, Taxing the Blockchain: How Cryptocurrencies Thwart International Tax Policy, 20 Or. Rev. Int'l L. 623 (2019):

Over the past decade, cryptocurrencies have surged into the mainstream discussion about the future of financial transactions. Although cryptocurrencies first gained notoriety as digital cash to facilitate illegal transactions, blockchain technology could help shift the international financial system into the twenty-first century. Rather than imposing strict regulations or banning cryptocurrencies, the Chinese and American governments should embrace the shift toward a digital currency.

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

Tuesday, September 10, 2019

Pratt Presents The Curious State Of Tax Deductions For Fertility Treatment Costs Today At UC-Hastings

Katherine Pratt (Loyola-L.A.) presents The Curious State of Tax Deductions for Fertility Treatment Costs, 28 S. Cal. Rev. L. & Soc. Just. 261 (2019) (reviewed by Sloan Speck (Colorado) here), at UC-Hastings today as part of its Tax Speakers Series:

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

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

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September 10, 2019 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink | Comments (0)

29 Tax Profs Say Deference To Tax Court Is Not Needed In Altera

Bloomberg Tax, Deference to Tax Court Isn’t Needed in Altera Case, Academics Say:

AlteraIntel-owned Altera misrepresented how the Ninth Circuit should treat conflicting decisions between its own three-judge panel and the U.S. Tax Court, a group of legal academics said.

“No special deference is due to Tax Court decisions,” the 29 academics argued in an amicus brief filed with the U.S. Court of Appeals for the Ninth Circuit. They were responding to Altera's request for a rehearing in a tax dispute with the IRS.

The 29 Tax Profs signatories are:

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September 10, 2019 in New Cases, Tax, Tax News | Permalink | Comments (0)

Trump Took A Big Loan From Trump And Never Paid Trump Back ... Because It's A Tax Scam

Daily Kos, Trump Took a Big Loan From Trump and Never Paid Trump Back ... Because It's a Tax Scam:

A loan listed on Donald Trump’s personal financial disclosure forms appears to be hiding a scheme in which he got tens of millions from Deutsche Bank and never reported the income to the IRS. It all adds up to a huge violation of federal tax law that Trump is hiding behind one of the many LLCs that make up the Trump Organization.

Donald Trump has debts. How many debts, and who is collecting on those debts, is not very clear. It’s especially not clear because Trump is fighting tooth and nail to prevent the release of his tax returns and to prevent banks from providing Congress with any information. But among Trump’s loans there is one that may be more mysterious than all the rest, and that’s the over $50 million that Donald Trump owes to … Donald Trump.

Trump’s business is not actually a single business at all, but an interwoven network of over 500 LLCs and holding companies. They may have different names, different assets, and even different addresses, but what almost all these companies have in common is that they are 100% owned by Trump.

With that in mind, Mother Jones took a look a Trump’s personal financial disclosure forms and found that he reports owing “over $50 million” to Chicago Unit Acquisition LLC. Trump owns that company 100%. So he owes that debt to himself. Which isn’t necessarily dishonest, but Trump sets the value of Chicago Unit Acquisition at zero. He’s borrowed at least tens of millions, but he doesn’t seem to be making any payments on this “loan” at all. That’s just the start of the weirdness. On the books of the company, the company that Trump owns, the loan to Donald Trump is classified as a high-risk loan. 

That last thing is certainly true. But everything else about this situation stinks to high heaven. As the Mother Jones analysis points out, it not only violates every rule of accounting, but it also looks like massive tax fraud.

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September 10, 2019 in Tax, Tax News | Permalink | Comments (4)

IMF: The Rise Of Phantom Foreign Direct Investments And The Fall Of Global Tax Enforcement

Jannick Damgaard, Thomas Elkjaer & Niels Johannesen (IMF), The Rise of Phantom Investments: Empty Corporate Shells in Tax Havens Undermine Tax Collection in Advanced, Emerging Market, and Developing Economies:

According to official statistics, Luxembourg, a country of 600,000 people, hosts as much foreign direct investment (FDI) as the United States and much more than China. Luxembourg’s $4 trillion in FDI comes out to $6.6 million a person. FDI of this size hardly reflects brick-and-mortar investments in the minuscule Luxembourg economy. So is something amiss with official statistics or is something else at play?

FDI is often an important driver for genuine international economic integration, stimulating growth and job creation and boosting productivity through transfers of capital, skills, and technology. Therefore, many countries have policies to attract more of it. However, not all FDI brings capital in service of productivity gains. In practice, FDI is defined as cross-border financial investments between firms belonging to the same multinational group, and much of it is phantom in nature—investments that pass through empty corporate shells. These shells, also called special purpose entities, have no real business activities. Rather, they carry out holding activities, conduct intrafirm financing, or manage intangible assets—often to minimize multinationals’ global tax bill. Such financial and tax engineering blurs traditional FDI statistics and makes it difficult to understand genuine economic integration.

FDI 2

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September 10, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (1)

Monday, September 9, 2019

Wisconsin Symposium: Wills, Trusts, And Estates Meets Gender, Race, And Class

Wisconsin LogoSymposium, Wills, Trusts, and Estates Meets Gender, Race, and Class, 2019 Wis. L. Rev. 161-396:

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