Weekly SSRN Tax Article Review And Roundup: Saito Reviews Multibillion-Dollar Tax Questions By Alm, Soled & DeLaney

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by James Alm (Tulane; Google Scholar), Jay A. Soled (Rutgers; Google Scholar) & Kathleen DeLaney Thomas (North Carolina; Google Scholar), Multibillion-Dollar Tax Questions, 84 Ohio St. L.J. __ (2023).

The tax gap is an enduring problem. We should raise quite a bit more revenue than is collected by the IRS. Efforts to address the tax gap usually focus on greater audits and enforcement as well as new reporting requirements. But these measures are facing increasing political pressure. One need only look to the vilification of the increase in IRS funding, something for which tax policy experts have long advocated, to see this problem. Given these constraints, what then can we do? James Alm, Jay A. Soled, and Kathleen DeLaney Thomas in their piece, Multibillion Dollar Tax Questions, 84 Ohio St. L.J. __ (2023), say that compliance may be improved by asking the right questions in the right way.

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Tax Policy In The Biden Administration

• Bloomberg, Biden Reaches Moment of Truth for Electric Vehicle Tax Credits
• Bloomberg, Logging Into Zoom at the Beach Could Land You a Tax Bill
• Bloomberg, You’re Facing a Big Tax Bill If You Hold These Mutual Funds
• Center Square, Federal Legislation Hits Bankers Dumping Pre-Failure Stock With 100% Tax on Profits
• Fortune, U.S. Banks Are Sitting on $1.7 Trillion in Unrealized Losses. That’s Not a Problem—Until It Is

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Next Week’s Tax Workshops

Tuesday, March 28: Thomas J. Brennan (Harvard) will present Protean Capital Income Taxes (with Robert L. McDonald (Northwestern-Kellogg; Google Scholar)) as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer. 

Tuesday, March 28: Shayak Sarkar (UC-Davis; Google Scholar) will present Internal Revenue’s External Borders as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday March 29: David Duff (Toronto) will present a paper as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie. 

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Pistone Presents The Implications Of Pillar II (Globe) For Developing Countries Today At Boston College

Pasquale Pistone (Visiting Professor, NYU; Academic Chairman, IBFD (The Netherlands); Professor of Tax Law, University of Salerno (Italy); Jean Monnet ad Personam Chair in European Tax Law & Policy, WU Vienna (Austria); Google Scholar) presents The Implications of Pillar II (Globe) for Developing Countries at Boston College today as part of its Tax Policy Workshops hosted by Jim Repetti: 

The desirable global tax governance goal of preventing the race to the bottom should not justify the bias that the Pillar II version of GloBE might in some cases to produce in favour of domestic over foreign investment. By neutralizing tax incentives in cross-border, but not in domestic situations, the GloBE top-up tax (IIR) puts developing countries, which mostly rely on foreign capital, at a systematic disadvantage when their tax incentives reduce corporation taxes below the global corporate minimum rate. This hidden collateral effect of GloBE might undermine the right of such countries to remain the masters of their international tax policy decisions and pursue their economic development without external interferences. For such reason, it might be questioned from the perspective of fairness and legitimacy. 

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Stark Presents Retrofitting Prop 13 Through The Personal Income Tax Today At Duke

Kirk J. Stark (UCLA) presents Retrofitting Prop 13 Through the Personal Income Tax at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Under constitutional limitations on California’s local property tax introduced via Proposition 13 in June 1978, homeowners are generally taxed not on the fair market value of their homes but rather the property’s historic cost. As home prices rise over time, this “acquisition value” feature has two predictable effects: (1) it results in significant property tax disparities, favoring longtime homeowners relative to more recent purchasers, and (2) it discourages homeowners from moving because of the increased property tax burdens associated with purchasing a new home. Less widely recognized is the offsetting effect of a longstanding feature of California’s income tax: the deduction for local property taxes. By directing a larger subsidy to those with higher property taxes, this provision favors recent homebuyers facing market-value property taxes relative to longtime owners with constitutionally limited assessed valuations. It also mitigates to some degree Prop 13’s lock-in effect by reducing the effective property tax rate for those who purchase new homes.

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Mayer: Nonprofits, Taxes, And Speech

Lloyd Hitoshi Mayer (Notre Dame; Google Scholar), Nonprofits, Taxes, and Speech, 56 Loy. L.A. L. Rev. __ (2023):

Federal tax law is of two minds when it comes to speech by nonprofits. The tax benefits provided to nonprofits are justified in significant part because they provide nonprofits great discretion in choosing the specific ends and means to pursue, thereby promoting diversity and pluralism. But current law withholds some of these tax benefits if a nonprofit engages in certain types of political speech. Legislators have also repeatedly, if unsuccessfully, sought to expand these political speech restrictions in various ways. And some commentators have proposed denying tax benefits to groups engaged in other types of disfavored speech, including hate speech and fake news. These latter proposals have recently become more prominent as additional facts come to light about the role of nonprofits in supporting white supremacy and in disseminating misleading information about COVID-19 treatments.

This Article explores the existing and proposed limitations on speech by tax-exempt nonprofits given the constitutional restrictions on such limitations and the policy justifications for existing nonprofit tax benefits.

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Taxing Nudity: State 'Pole Taxes' Violate The First Amendment

Alexander Volokh (Emory; Google Scholar), Taxing Nudity: Discriminatory Taxes, Secondary Effects, and Tiers of Scrutiny:

In recent years, states have passed “pole taxes,” i.e., taxes targeting nude dancing at adult entertainment establishments. Such taxes generally target establishments where alcohol is consumed, and the proceeds generally fund programs that benefit victims of sex crimes (or similar). Some of these taxes are “erotic-expression taxes” that specifically target sexual dance or other expressive conduct, while others are more general “nudity taxes” that are not defined by reference to expressive conduct.

State governments have defended such taxes against First Amendment attack on the theory that (1) such taxes combat negative secondary effects and (under Renton v. Playtime Theaters) should be analyzed under intermediate scrutiny as though they were content-neutral, and (2) such taxes survive intermediate scrutiny given sufficient evidence of the linkage between the establishments and the secondary effects.

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

Sarah B. Lawsky (Northwestern; Google Scholar) presents Coding the Code: Catala and Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022), at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:

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

While this Article describes a particular programming language, key characteristics of this particular language could generalize to other programming languages that formalize the law. First, Catala is a domain-specific programming language designed specifically for formalizing tax law. In particular, Catala is structured using default logic, a nonstandard logic that represents the underlying structure of the U.S. tax code more accurately than does standard logic. This structure makes the computer code easier to read, easier to create, and easier to modify when the law changes. Second, computer code is created in Catala using a well-known approach in the field of computer science (though rarely mentioned in legal literature) called “pair programming,” which, in this implementation, takes advantage of the knowledge of both lawyers and computer coders. 

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ChatGPT Thinks I Am Way More Interesting Than I Am

Write a bio of Pepperdine Caruso Law School Dean Paul Caron

Paul Caron is an American legal scholar and academic administrator who currently serves as the Dean of the Pepperdine Caruso School of Law. He was born in the United States and grew up in the Chicago area.

Caron graduated with honors from the University of Illinois at Urbana-Champaign, where he earned a Bachelor of Science in Accountancy. He then went on to earn a law degree from Yale Law School, where he was an editor of the Yale Law Journal.

After law school, Caron worked as an attorney in the tax department of the law firm Sullivan & Cromwell in New York City. He later joined the faculty of the University of Cincinnati College of Law, where he taught courses in tax law and served as the Associate Dean for Academic Affairs.

In 2003, Caron joined the faculty of the University of San Diego School of Law, where he held the rank of Professor of Law and served as the Associate Dean for Research and Faculty Development. During his time at USD, Caron became well-known for his scholarship in tax law and his popular TaxProf Blog, which he founded in 2004.

In 2017, Caron was appointed as the 7th Dean of the Pepperdine Caruso School of Law. In this role, he has overseen significant changes at the law school, including the construction of a new campus in downtown Los Angeles and the creation of new programs in areas such as dispute resolution and entertainment, media, and sports law.

Throughout his career, Caron has been a prolific scholar and writer, with more than 50 published articles and book chapters to his credit. He is widely regarded as one of the leading experts in the field of tax law, and has been frequently cited in the national media on issues related to tax policy and reform.

Caron has also been active in the legal community, serving on the board of directors of the American Tax Policy Institute and as a member of the executive committee of the Tax Section of the American Bar Association. He has received numerous awards and honors for his scholarship and teaching, including the University of Cincinnati College of Law's Goldman Prize for Excellence in Teaching and the American Bar Association's Section of Taxation Distinguished Service Award.

In addition to his academic and professional accomplishments, Caron is also an accomplished musician and photographer. He has released several albums of original music and his photographs have been featured in exhibitions and publications around the world.

Can you guess the number of factual errors?

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Curtis & Avi-Yonah: Microsoft’s Cost-Sharing Arrangement — Frankenstein Strikes Again

Stephen L. Curtis (Cross Border Analytics) & Reuven S. Avi-Yonah (Michigan; Google Scholar), Microsoft’s Cost-Sharing Arrangement: Frankenstein Strikes Again, 178 Tax Notes Fed. 1433 (Mar. 6, 2023):

In this report, Curtis and Avi-Yonah break down Microsoft’s cost-sharing arrangement and explain how corporate taxpayers have been able to improperly exploit the cost-sharing regulations to shift hundreds of billions or even trillions in U.S. profits offshore with little or no IRS detection or enforcement.

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Wallace Presents Taxing Luxury Emissions Today At UC-San Francisco

Clinton G. Wallace (South Carolina; Google Scholar) presents Taxing Luxury Emissions, 106 Cornell L. Rev. __ (2023) (with Shelley Welton (Penn)) (reviewed by Tracey Roberts (Cumberland; Google Scholar) here) at UC-San Francisco today as part of its Tax Policy Colloquium hosted by Manoj Viswanathan:

A host of recent economic and sociological studies have documented the rising challenge of carbon inequality — that is, extreme class disparities in carbon emissions both within the United States and globally. These studies show an alarming divide, with the top 10% of emitters producing half of all emissions and the top 1% alone producing 17% of emissions, while the bottom 50% of the world produces only 10%. These disparities are driven by “luxury emissions” produced by the carbon-intensive lifestyles of the rich, which too often include private jets, mega-SUVs, yachts, and multiple mansions.

Climate change law has been slow to react to the reality of carbon emissions inequality — even as public and media outrage has mounted. Perhaps discouraged by decades of slow progress on both wealth redistribution and carbon consumption policy, policymakers and legal scholars have yet to put forward any serious proposals for how the law might, or should, account for class-based emissions disparities.

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Taite Presents Welfare v Wealthfare: The Illusion Of Equity In Tax Policy Today At Georgetown

Phyllis Taite (Oklahoma City) presents Welfare v Wealthfare: The Illusion of Equity in Tax Policy at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli: 

Tax laws and policies may be perceived as race-neutral because race data is not used to determine tax liability. Similarly, the rate structure may be perceived as progressive because tax rates increase as income increases. Nonetheless, history has demonstrated that tax laws and policies are biased against race and class and the tax system is not effectively progressive. This article explores a few ways that perceptions of tax policy do not match the reality of tax laws and policy. 

This article will discuss how transfer taxes were implemented permanently to raise revenue and combat wealth concentration. Instead, the federal transfer tax system is no longer effective for either purpose, though both are essential to effectively addressing vast economic inequalities. Through various tax acts, tax policy has subsidized the wealthy, people who need no financial assistance, rather than combat wealth concentration.

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Blue J Predicts With 90% Confidence That Taxpayer In Podlucky Would Not Win Innocent Spouse Claim

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal),  Susan Massey (Director, Blue J Legal) & Christopher Yan (Senior Legal Research Associate, Blue J Legal), Relief of Innocent Spouses — Not So Podlucky, 178 Tax Notes Fed. 1339 (Feb. 27, 2023):

In this article, the authors use the Blue J machine-learning algorithm to examine Podlucky, an innocent spouse relief case recently decided by the Tax Court, demonstrating how useful artificial intelligence tools can be in calibrating the strengths and weaknesses of clients’ circumstances and predicting likely outcomes in similar cases.

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

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

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

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

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

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Avi-Yonah: The 1923 Report And The International Tax Revolution

Reuven S. Avi-Yonah (Michigan; Google Scholar), The 1923 Report and the International Tax Revolution:

The centennial of the four economists’ Report on Double Taxation (1923) provides a good opportunity to reflect on the extent the international tax regime (ITR) that was founded on the Report has changed in the past decade. While on the surface the changes brought about by the BEPS project seem radical enough to consider them an “international tax revolution”, this article will argue that the principles developed in the Report are still influential a hundred years later.

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Lesson From The Tax Court: Another Reason To Keep Good Records

Last week’s Lesson looked at the inherent unreliability of third-party information returns.  Taxpayers need to keep good records to refute those errors.  This week’s Lesson continues that theme: keeping good records can help avoid a bank deposits analysis.  When the IRS is forced to reconstruct income using the bank deposits method, it puts taxpayers in the hard place of having to prove why every bank deposit should not be counted as gross income for that year.

A pair of opinions issued by Judge Buch on the same day gives us a lesson on the unhappy consequences to taxpayers when their poor record-keeping leads the IRS to use a bank deposits method to reconstruct income.  In both Kevin B. Cheam and Julie Lim v. Commissioner, T.C. Memo. 2023-23 (Feb. 27, 2023), and Lundy Nath and Tanya Nath, T.C. Memo. 2023-22 (Feb. 27, 2023), the taxpayers’ failure to keep adequate books and records forced the IRS to conduct a bank deposits analysis, thus putting the burden on the taxpayers to show which bank deposits represented something other than gross income.  In neither case could the taxpayers show the Court nontaxable sources of income for the deposits the IRS asserted were unreported income.  And their record-keeping failures also hurt them in the usual way on the deduction side as well.  Details below the fold.

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TaxProf Blog Weekend Roundup

Saturday:

• This Week's Ten Most Popular TaxProf Blog Posts
• More Commentary On The Disruption Of A Federal Judge's Speech At Stanford Law School (Part 2)
• ProPublica IRS Files: Wealthy Executives Make Millions Trading Competitors’ Stock With Remarkable Timing
• Big Law's Immigration Advocates

Sunday:

• NY Times Op-Ed: The Real Problem With the ‘He Gets Us’ Ads
• NY Times Op-Ed: Pope Francis’ Decade Of Division
• Brunson & Hackney: A More Capacious Concept Of Church
• The Top Five New Tax Papers

Brunson & Hackney: A More Capacious Concept Of Church

Samuel D. Brunson (Loyola-Chicago; Google Scholar) & Philip Hackney (Pittsburgh; Google Scholar), A More Capacious Concept of Church, 56 Loy. L.A. L. Rev. __ (2023):

United States tax law provides churches with extra benefits and robust protection from IRS enforcement actions. Churches and religious organizations are automatically exempt from the income tax without needing to apply to be so recognized and without needing to file a tax return. Beyond that, churches are protected from audit by stringent procedures. There are good reasons to consider providing a distance between church and state, including the state tax authority. In many instances, Congress granted churches preferential tax treatment to try to avoid excess entanglement between church and state, though that preferential treatment often just shifts the locus of entanglement. But those benefits and protections come with cost both to individual churches (by making these organizations susceptible to tax shelters and political activity shelters) and to our democratic order (by granting churches to a higher status than other organizations).

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The Top Five New Tax Papers

There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with new papers debuting on the list at #3 and #5. The #1 paper is #745 among 17,547 tax papers in all-time downloads:

1. [805 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [650 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [436 Downloads]  Why Corporate Giants Don't Pay Enough Tax, by Tarcísio Diniz Magalhães (Antwerp; Google Scholar) & Allison Christians (McGill; Google Scholar)
4. [196 Downloads]  21st Century Churches and Federal Tax Law, by Ellen Aprill (Loyola-L.A.; Google Scholar) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar)
5. [189 Downloads]  The Rise of the Robotic Tax Analyst, by Benjamin Alarie (Toronto; Google Scholar; CEO, Blue J Legal)

This Week's Ten Most Popular TaxProf Blog Posts

Legal Education:

1. Inside Higher Ed, A Law School’s ‘Denaming’ Evokes Donor Family’s Ire
2. Paul Caron (Dean, Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: Employment
3. Paul Caron (Dean, Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: First-Time Bar Passage
4. Paul Caron (Dean, Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: Ultimate Bar Passage
5. Paul Caron (Dean Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: Admissions
6. Bryce Clayton Newell (Oregon), 2022 Meta-Ranking Of Flagship U.S. Law Reviews
7. Council of the ABA Section of Legal Education and Admissions to the Bar, Notice of Finding of Significant Noncompliance With Standard 206, University of Oregon School of Law
8. Stanford President And Law Dean, Apology To Fifth Circuit Judge For Disruption Of His Speech
9. Richard Sander (UCLA), Law-School “Mismatch” Is Worse Than We Thought
10. Theodore Seto (Loyola-L.A.), First-Time Bar Pass Performance of California Law Schools, Controlling For 25th Percentile LSATs

Tax:

1. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Inherent Unreliability Of Third-Party Reporting
2. U.S. Treasury Department, Greenbook On Tax Proposals In Biden's FY24 Budget
3. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Unforeseen Circumstances Rule For §121 Home Sale Exclusions
4. Bloomberg, ChatGPT's Tax Advice Was Wrong 100% Of The Time
5. Cato Institute, The Federal Tax System Is Highly Progressive
6. James Alm (Tulane), Jay Soled (Rutgers) & Kathleen DeLaney Thomas (North Carolina), Multibillion-Dollar Tax Questions
7. ABA, The Tax Lawyer Publishes New Issue
8. Paul Caron (Dean, Pepperdine), Tax Policy in the Biden Administration
9. SSRN, The Top Five New Tax Papers
10. Tracey Roberts (Cumberland), Review Of Taxing Luxury Emissions By Clint Wallace (South Carolina) & Shelley Welton (Penn)

Faith: 

1. Paul Caron (Dean, Pepperdine), Religious Liberty Clinics At Notre Dame, Pepperdine, Texas, And Yale File Supreme Court Amicus Briefs: Post Office Must Accommodate Employee's Sabbath Observance

ProPublica IRS Files: Wealthy Executives Make Millions Trading Competitors’ Stock With Remarkable Timing

ProPublica, The IRS Files: Wealthy Executives Make Millions Trading Competitors’ Stock With Remarkable Timing:

Never-before-seen IRS records show that CEOs are sometimes making multimillion-dollar bets on the stocks of direct competitors and partners — and doing so with exquisite timing.

On Feb. 21, 2018, August Troendle, an Ohio billionaire, made a remarkably well-timed stock trade. He sold $1.1 million worth of shares of Syneos Health the day before a management shake-up caused the company’s stock to plunge 16%. It was the largest one-day drop that year for Syneos’ share price.

The company was one Troendle knew well. He is the CEO of Medpace, one of Syneos’ chief competitors in a niche industry. Both Syneos and Medpace handle clinical trials for biopharma companies, and that year they had jointly launched a trade association for companies in the field.

The day after selling the Syneos shares in February 2018, Troendle bought again — at least $3.9 million worth. The value of his Syneos stake then rose 75% in the year that followed.

In February 2019, Troendle sold much of that position, netting $2.3 million in profit. Two days later, Syneos disclosed that the Securities and Exchange Commission was investigating its accounting practices. The news sent the company’s shares tumbling. Troendle’s sale avoided a 25% loss, the stock’s largest decline in such a short period during either that or the previous year. (Troendle declined to comment.)

The Medpace executive is among dozens of top executives who have traded shares of either competitors or other companies with close connections to their own. A Gulf of Mexico oil executive invested in one partner company the day before it announced good news about some of its wells. A paper-industry executive made a 37% return in less than a week by buying shares of a competitor just before it was acquired by another company. And a toy magnate traded hundreds of millions of dollars in stock and options of his main rival, conducting transactions on at least 295 days. He made an 11% return over a recent five-year period, even as the rival’s shares fell by 57%.

These transactions are captured in a vast IRS dataset of stock trades made by the country’s wealthiest people, part of a trove of tax data leaked to ProPublica. ProPublica analyzed millions of those trades, isolated those by corporate executives trading in companies related to their own, then identified transactions that were anomalous — either because of the size of the bets or because individuals were trading a particular stock for the first time or using high-risk, high-return options for the first time.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Taxing Luxury Emissions By Wallace & Welton

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by Clinton G. Wallace (South Carolina; Google Scholar) and Shelley Welton (Penn), Taxing Luxury Emissions, 106 Cornell L. Rev. __ (2023).

One of the greatest challenges to global coordinated action on climate change is climate justice. The vast majority who will suffer the most from climate change have contributed very little to the aggregate stock of carbon emissions during their lifetimes and enjoy few of the legacy benefits that industrialization has yielded over the past 100 years. Most of the discussions about matching responsibility for climate change to its benefits have approached the issue at a nation-state level. Underdeveloped countries, including most of the Global South, argue that the countries who developed using financially cheap, if globally harmful, fossil fuels should be subject to regulation or taxation, since they caused the bulk of the problem. They also argue that, until they reach the basic standard of living enjoyed throughout Europe and the United States, they should be exempt from such taxation or regulations. 

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Tax Policy In The Biden Administration

• Americans for Tax Fairness, The Biden Tax & Investment Budget
• Bloomberg, Amazon Tax Structure Like Something Out of a Bond Movie, EU Says
• Bloomberg, Better-Funded IRS Should Increase Audits of the Top 1%, Democrats Say
• Bloomberg, Biden’s Tax Plan Stings Some Two-Career Couples
• Bloomberg Editorial, Biden’s Budget Refuses to Face Reality
• Common Dreams, Biden Tax Boost Targeting the Rich Called 'Fair, Popular, and Long Overdue'

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Next Week’s Tax Workshops

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

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

Tuesday, March 21: Phyllis Taite (Oklahoma City) will present Welfare v Wealthfare: The Illusion of Equity in Tax Policy as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Emily Satterthwaite and Dayanand Manoli.

Wednesday, March 22: Sarah B. Lawsky (Northwestern; Google Scholar) will present Coding the Code: Catala and Computationally Accessible Tax Law, 75 S.M.U. L. Rev. 535 (2022) as part of the Toronto James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Benjamin Alarie.

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

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

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns. These findings have important implications for theory and policy. From a theoretical perspective, these survey results call into question the nearly universal practice of using market wages to monetize the time that people spend on tax compliance work. Indeed, our results suggest that people value their tax compliance time at a rate much lower than their hourly wage. 

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Mason Presents Bounded Extraterritoriality Today At UCLA

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

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

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The Tax Lawyer Publishes New Issue

The Tax Lawyer has published Vol. 76, No. 2 (Winter 2023):

• Philip G. Cohen (Pace), Whirlpool Financial Corp. v. Commissioner Was Properly Decided, 76 Tax Law. 247 (2023)
• William P. Kratzke (Memphis), Musings: Itemized Deductions and The Changing Fabric of American Society Wrought by the Tax Cuts and Jobs Act – Observing Regressiveness Hidden in Plain Sight, 76 Tax Law. 293 (2023)
• Scott A. Schumacher (Washington; Google Scholar), Taxes, Administrative Law, and Agency Expertise: Questioning the Orthodoxy, 76 Tax Law. 341 (2023)

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Newton Presents Closing the Opportunity Gap Today At Toronto

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

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

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Simkovic Presents Pigouvian Contracts Today At Northwestern

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

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

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

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Structural Inequality And The New Markets Tax Credit

Michelle D. Layser (San Diego; Google Scholar) & Andrew Greenlee (Illinois; Google Scholar), Structural Inequality and the New Markets Tax Credit, 73 Duke L.J. __ (2023):

The New Markets Tax Credit (NMTC) is a federal tax incentive used to promote investment in low-income neighborhoods. Many of these neighborhoods are home to historically marginalized communities. However, very few minority-led institutions participate in the NMTC program. This Article provides the first theoretical and empirical exploration of the underrepresentation of minority-led institutions in the NMTC program. Based on original interviews with representatives of Community Development Entities (CDEs), investors, borrowers, and consultants who participate in the NMTC program, this Article describes the “NMTC ecosystem,” a complex, relationship-driven network of NMTC program participants who influence decision making and create opportunities for success within the NMTC program. 

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Kleiman: Improverishment By Taxation

Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Improverishment By Taxation, 170 U. Pa. L. Rev. 1451 (2022):

Viewed in the aggregate, the U.S. fiscal system is progressive, reduces inequality, and cuts poverty. The system improves on market outcomes by transferring income from rich to poor. Yet this bird’s eye view rings hollow on the ground, where millions of taxpayers across the United States are made poor or poorer by paying their state and federal taxes. In truth, while the U.S. fiscal system may be broadly equalizing and poverty reducing, for many struggling households, it is impoverishing.

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Sugin: Tax Benefits And Fairness In K–12 Education

Linda Sugin (Fordham; Google Scholar), Tax Benefits and Fairness in K–12 Education, 111 Geo. L.J. Online 140 (2023):

This Article examines the tax law’s subsidies for inequality and segregation in primary and secondary education, analyzing the federal charitable deduction and education savings plans, and state tax credits for education. It argues that the tax system diverts funds from traditional public education into private education, fostering economic, racial, religious, and political separation. 

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New Evidence On Racial Disparities In IRS Audit Selection Calls For Immediate Action

Kathleen Bryant (NYU Tax Law Center) & Chye-Ching Huang (NYU Tax Law Center), New Evidence on Racial Disparities in IRS Audit Selection Calls for Immediate Action:

A recent working paper has found that although the Internal Revenue Service (IRS)’s audit selection processes are ostensibly “race-blind,” Black tax filers are 2.9 to 4.7 times as likely to be audited by the IRS as non-Black tax filers. Our report summarizes the paper’s conclusions, explains what we do and do not know about the causes of these disparities, and outlines next steps for policymakers to address racial disparities in audit selection.

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Multibillion-Dollar Tax Questions

James Alm (Tulane; Google Scholar), Jay A. Soled (Rutgers; Google Scholar) & Kathleen DeLaney Thomas (North Carolina; Google Scholar), Multibillion-Dollar Tax Questions, 84 Ohio St. L.J. __ (2023):

Tax compliance in the United States historically hovers in the 80 percent range, costing the nation approximately half a trillion dollars annually in uncollected tax revenue. To foster greater tax compliance, the Internal Revenue Service (IRS) should employ whatever tools are at its disposal. Standard deterrence theory argues that increasing the audit rate and imposing stiffer penalties would foster greater tax compliance. 

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Treasury Releases Greenbook On Tax Proposals In Biden's FY24 Budget

• U.S. Department of the Treasury Releases Greenbook, Outlining Tax Proposals to Reduce the Deficit, Expand Support for Working Families, and Ensure the Wealthy and Large Corporations Pay their Fair Share
• General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals
• Revenue Estimates of the Administration's Fiscal Year 2024 Revenue Proposals

• Bloomberg, Biden Budget Targets Tax Breaks for Private Equity, Crypto, Fossil Fuels
• Bloomberg, Biden Proposal Tries to Align US With Global Minimum Tax
• Bloomberg, Biden Seeks to Roll Back Trump Tax Breaks
• Bloomberg, Biden Tax Plan Stings Some Two-Career Couples
• Bloomberg, Biden Tax-the-Rich Budget Raises Capital-Gains Rates To 45%
• Cato Institute, The Eight Biggest Tax Increases in Biden’s Budget
• Cato Institute, President Biden’s Budget Misses the Mark
• The Hill, Biden’s $5 Trillion Tax Gambit Catches Congress by Surprise 
• Greg Mankiw (Harvard), The Budgetary Trilemma
• New York Times, Biden’s $6.8 Trillion Budget Proposes New Social Programs and Higher Taxes
• New York Times Op-Ed (Paul Krugman), Budget Wars: This Time Is Different

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Lesson From The Tax Court: The Inherent Unreliability Of Third-Party Reporting

Third-party reporting has long been crucial to tax administration.  Empirically, it helps taxpayers comply with their reporting duties.  Congress first starting requiring information returns in 1917 and keeps expanding the concept to reach new economic situations, such as the rise of the gig economy and on-line marketplaces.

But third-party information returns are inherently unreliable because they report payments, not income.  That is the lesson we learn in Tanisha Trice v. Commissioner, T.C. Memo. 2023-15 (Feb. 13, 2023) (Judge Gustafson).  In this case we learn the lesson with respect to Social Security Disability reporting.  There, the Form SSA-1099 reported payments to Ms. Trice of $15,365.  Judge Gustafson explains why that alone was not enough to support the Notice of Deficiency as to the payments that Ms. Trice denied receiving.  As to those, the IRS was required to produce additional evidence under §6201(d) because Ms. Trice had reasonably objected to that amount and had fully cooperated with the IRS.  Details below the fold.

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TaxProf Blog Weekend Roundup

Saturday:

• This Week's Ten Most Popular TaxProf Blog Posts
• A Law School’s ‘Denaming’ Evokes Donor Family’s Ire
• Tax Sanctions And The Russia-Ukraine Conflict
• Harvard Law School Faculty: 'Why I Changed My Mind'

Sunday:

• Was The Sermon You Heard At Church Today Written By ChatGPT?
• Religious Liberty Clinics At Notre Dame, Pepperdine, Texas, And Yale File Supreme Court Amicus Briefs: Post Office Must Accommodate Employee's Sabbath Observance
• Pandora’s Box Of Religious Exemptions (Harvard Law Review)
• The Top Five New Tax Papers

Pandora’s Box Of Religious Exemptions

Note, Pandora’s Box of Religious Exemptions, 136 Harv. L. Rev. 1178 (2023):

In 2021, the Satanic Temple filed suit in federal court challenging Texas’s abortion bans on grounds of religious liberty. Thanks to the Supreme Court’s recent free exercise decisions, federal courts must now embark on the difficult task of deciphering the Court’s new jurisprudence and whether the First Amendment indeed protects such claims. Through its shadow docket and Fulton v. City of Philadelphia [141 S. Ct. 1868 (2021)], the Supreme Court has essentially adopted the test that had once been percolating among the lower courts — the most-], the Supreme Court has essentially adopted the test that had once been percolating among the lower courts — the most-favored-nation theory of free exercise. In doing so, the Court has signaled a radical shift in its religious exemption doctrine.

This Note argues, however, that the Supreme Court’s adoption of the most-favored-nation doctrine was both haphazard and sloppy, leaving lower courts with little meaningful guidance on how to evaluate the constitutionality of laws burdening religion.

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The Top Five New Tax Papers

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5. The #1 paper is #748 among 17,541 tax papers in all-time downloads:

1. [799 Downloads]  The Declining Appeal of Inherited Retirement Accounts, by Richard L. Kaplan (Illinois; Google Scholar)
2. [635 Downloads]  Pillar 2, Fiat, and the EU Unanimity Rule on Tax Matters, by Rita de la Feria (Leeds)
3. [409 Downloads]  Global Tax Reform and Mythical International Law, by Tarcísio Diniz Magalhães (Antwerp; Google Scholar) & Allison Christians (McGill; Google Scholar)
4. [196 Downloads]  21st Century Churches and Federal Tax Law, by Ellen Aprill (Loyola-L.A.; Google Scholar) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar)
5. [152 Downloads]  Nonprofit Law as the Tool to Kill What Remains of Campaign Finance Law: Reluctant Lessons from Ellen Aprill, by Richard Hasen (UCLA; Google Scholar)

This Week's Ten Most Popular TaxProf Blog Posts

Legal Education:

1. Paul Caron (Dean Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: Admissions
2. Bryce Clayton Newell (Oregon), 2022 Meta-Ranking Of Flagship U.S. Law Reviews
3. Paul Caron (Dean, Pepperdine), Law School Rankings By Ultimate Bar Passage Rate (2020)
4. Paul Caron (Dean, Pepperdine), Law School Rankings By 2022 First-Time Bar Passage Rate
5. ABA Journal, Three Years After $20 Million Naming Gift, University Of Kentucky Is Out Of Compliance With Accreditation Standard That Law Schools Have Sufficient Financial Resources
6. Theodore Seto (Loyola-L.A.), 2022 First-Time Bar Pass Performance Of California Law Schools, Controlling For Median LSATs
7. ABA Journal, ABA Finds Four Law Schools Back In Compliance With Accreditation Standards: Hofstra (Faculty Diversity), Ave Maria, UDC & Vermont (2-Year Bar Passage)
8. Derek Muller (Iowa), Boycotting Law Schools Are Still Admitting 'Splitters' To Maximize Their U.S. News Ranking
9. ABA Journal, ABA Finds Baylor Out Of Compliance With Law School Accreditation Standard On Adjunct Faculty Diversity
10. Florida Politics, Does Judge's Delay Of Charlie Adelson's Trial In Dan Markel Murder And Refusal To Unseal Katie Magbanua's Proffer Mean State May Be Closing In On Donna, Harvey & Wendi?

Tax:

1. Bloomberg, ChatGPT's Tax Advice Was Wrong 100% Of The Time
2. Bryan Camp (Texas Tech), Lesson From The Tax Court: Fill Out The Damn Form
3. Donald Tobin (Maryland), MTV The Challenge: Did Tori And Devin Just 'Win' A Huge Tax Problem?
4. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Unforeseen Circumstances Rule For §121 Home Sale Exclusions
5. Daniel Shaviro (NYU), Would an Unapportioned U.S. Federal Wealth Tax Be Constitutional, and What Does That Mean?
6. Bryan Camp (Texas Tech), Lesson From The Tax Court: Distinguishing Property Settlement From (Indirect
7. Diane Kemker (DePaul & Southern), Do Black Taxpayers Matter? A Critical Tax Analysis of IRS Audit Practices
8. Paul Caron (Dean, Pepperdine), Tax Policy in the Biden Administration
9. SSRN, The Top Five New Tax Papers
10. Young Ran (Christine) Kim (Cardozo), Review Of The Rise Of The Robotic Tax Analyst By Ben Alarie (Toronto)

Faith: 

1. Kevin Williamson (The Dispatch), Who Are These ‘Cultural Christians’|'Christian Atheists'?

Tax Sanctions And The Russia-Ukraine Conflict

Andrew T. Hayashi (Virginia; Google Scholar) & Ashley Deeks (Virginia; Google Scholar), Tax Sanctions and the Russia-Ukraine Conflict:

The Russian invasion of Ukraine in 2022 provoked the imposition of economic sanctions that are unprecedented in their swiftness, severity, and novelty. In this essay, we evaluate the possible role of tax law as another sanctions tool for addressing the Russia-Ukraine conflict and discuss a recent legislative proposal to impose tax sanctions.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Alarie's The Rise Of The Robotic Tax Analyst

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Benjamin Alarie (Toronto; Google Scholar; CEO, Blue J Legal), The Rise of the Robotic Tax Analyst, 178 Tax Notes Fed. 57 (Jan. 2, 2023).

ChatGPT, an artificial intelligence chatbot, is generating buzz in legal academia and practice. On November 30, 2022, OpenAI made ChatGPT available for public use through an open beta. In less than one week, the system was deployed by more than 1 million registered users. Driving this extremely rapid adoption were claims — and plenty of evidence — of impressive algorithmic feats performed by ChatGPT. The capabilities of this technology reportedly include achieving passing scores on practice bar and medical board examinations. Unsurprisingly, many law schools are discussing how to cope with students' using this technology to potentially cheat in their writing and exams. On the other hand, TaxBuzz said something the tax community would be glad to hear:ChatGPT's tax advice was wrong 100% of the time.

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Tax Policy In The Biden Administration

• Joe Biden (New York Times Op-Ed), My Plan to Extend Medicare for Another Generation
• Bloomberg, AI Can Help the IRS Catch Wealthy Tax Cheats
• Bloomberg, Biden Budget to Target Tax Breaks for Private Equity, Crypto, Fossil Fuels
• Bloomberg, Biden Proposal Tries to Align US With Global Minimum Tax
• Bloomberg, Biden Seeks to Roll Back Trump Tax Breaks
• Bloomberg, Biden to Urge 25% Billionaire Tax, Levies on Rich Investors

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Next Week’s Tax Workshops

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

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

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

Thursday, March 16: Ruth Mason (Virginia; Google Scholar) will present Bounded Extraterritoriality (with Michael Knoll (Penn)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark and Jason Oh.

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Tax Prof Presentations At Today's Poverty Law Conference

Tax Prof presentations at today's Poverty Law Conference at Berkeley (register here): 

David Gamage (Indiana-Maurer; Google Scholar), Taxpayer Mobility and the Goal of Inclusive Prosperity (with Erin Scharff (Arizona State) & Darien Shanske (UC-Davis; Google Scholar)):

Taxpayer mobility is often cited as a primary obstacle to progressive tax policies. However, this Article argues that mobility responses to taxation are often overemphasized. The empirical literature on taxpayer mobility sometimes characterizes responses as “large” merely because the responses are substantial enough to be measured with statistical significance. Yet, from a tax policy perspective, what should be considered “large” is partially a normative philosophical question. Applying a normative philosophical lens to the empirical literatures on taxpayer mobility, this Article concludes that there is no convincing evidence supporting the commonly held notion that taxpayer mobility should be considered a primary obstacle to enacting progressive tax policies—either for national-level governments or for subnational state and local governments. This does not imply that mobility responses are unimportant, however. This Article suggests policy responses to concerns related to taxpayer mobility for national governments and the international tax regime, for fiscal federalism and the interrelationship between national governments and subnational governments, and for subnational state and local governments acting on their own.

Francine J. Lipman (UNLV; Google Scholar), Not Taxing Puerto Rico? Whitewashing Impoverishment in United States v. Vaello-Madero:

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Oei Presents Understanding Developing Country Tax Treaties With OECD Partners Today At Duke

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

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

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

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

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

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

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

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

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Repetti: International Tax Policy's Harm To Manufacturing And National Interests

James R. Repetti (Boston College; Google Scholar), International Tax Policy's Harm to Manufacturing and National Interests, 2023 Wis. L. Rev. __ :

Two tax regulations that permit U.S. multinational enterprises (MNEs) to use foreign contract manufacturers and to disregard their wholly owned foreign subsidiaries have created significant tax incentives for MNEs to move manufacturing outside the U.S. These tax incentives have contributed to the loss of 5 million manufacturing jobs and the closure of more than 91,000 plants since 1997. 

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Viswanathan Presents Tax And Expectation Damages Today At Toronto

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

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

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Shaviro: Would An Unapportioned U.S. Federal Wealth Tax Be Constitutional, And What Does That Mean?

Daniel Shaviro (NYU; Google Scholar), Would an Unapportioned U.S. Federal Wealth Tax Be Constitutional, and What Does That Mean?: 

To assess the constitutionality of an unapportioned federal wealth tax, and/or of a federal income tax provision reaching wealthy taxpayers’ unrealized gains, one needs an underlying framework for making judgments about legal claims. While no such framework can be entirely specified, at least to general agreement, this does not support nihilistically rejecting all comparative judgments about better versus worse, or more versus less convincing, instances of legal analysis.

While it appears nearly certain that the Supreme Court‘s current right-wing majority would strike down an unapportioned federal wealth tax, the “correct” answer to this constitutional question cannot be proven to general agreement. I myself would disagree with such a holding by the Court. An important variable in resolving the issue for oneself is how much continuing precedential weight one should give to Pollock v. Farmers’ Loan & Trust Co. – a case that itself blatantly disrespected precedent, but that did so more than a century ago, and that (on the other hand) some argue has already ceased to be good law. The principle of respecting precedent both has instrumental value and has been long (if fitfully) honored within the American legal system, but all agree that its weight is not absolute.

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