Weekly SSRN Tax Article Review And Roundup: Kim Reviews Has Cross-Border Arbitrage Met Its Match? By Mason & Saint-Amans

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Ruth Mason (Virginia; Google Scholar) and Pascal Saint-Amans (OECD), Has Cross-Border Arbitrage Met Its Match?, in Thinker, Teacher, Traveler: Reimagining International Tax. Essays in Honor of H. David Rosenbloom (Georg Kofler, Ruth Mason & Alexander Rust, eds., IBFD 2021), reprinted in the 41 Va. Tax Rev. 1 (2021).

Earlier this month, a group of international tax lawyers and policymakers got together to celebrate H. David Rosenbloom (Caplin & Drysdale, NYU)'s 80th birthday. The group spent two years secretly creating a Festschrift honoring Rosenbloom. The Festschrift is titled " Thinker, Teacher, Traveler: Reimagining International Tax. Essays in Honor of H. David Rosenbloom," edited by Georg Kofler (WU), Ruth Mason (Virginia), and Alexander Rust (WU) (IBFD 2021). Mason and Pascal Saint-Amans (OECD) contributed a chapter to the Festschrift titled, Has Cross-Border Arbitrage Met Its Match?, reprinted in the 41 Va. Tax Rev. 1 (2021). In their essay, Mason and Saint-Amans reviewed Rosenbloom’s criticisms of regulatory responses to international tax arbitrage, the academic response to those criticisms, and subsequent international cooperative efforts to curb international tax arbitrage. This review introduces their essay.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Glogower's Comparing Capital Income And Wealth Taxes

This week, David Elkins (Netanya, visiting NYU 2021-2022) reviews a new article by Ari Glogower (Ohio State; Google Scholar), Comparing Capital Income and Wealth Taxes, 48 Pepp. L. Rev. 875 (2021):

In this week’s article, Professor Glogower examines two proposals to reform the current tax system and improve progressivity. The first is a reformed capital income tax that would tax unrealized appreciation. The second is a wealth tax, under which individuals each year would pay a percentage of their net wealth. He evaluates these two proposals by considering their economic effects, administrability and avoidance opportunities, and constitutionality.

The author notes that if all capital produced a similar rate of return, then a reformed capital income tax and a wealth tax would be functionally equivalent: given a fixed return of x%, a y% income tax would be the same as an (x*y)% wealth tax. It is only because capital does not produce a fixed rate of return that the equivalence breaks down: relative to a reformed capital tax, a wealth tax would over-burden lower-yielding assets and would under-burden higher-yielding assets. Thus, in the real world, the normative question becomes: are we seeking to mitigate inequality of wealth or inequality of income? The former would best be served by a wealth tax, while the latter would best be served by a reformed income tax.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews The Inequity Of Informal Guidance By Blank & Osofsky

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Joshua Blank (UC-Irvine; Google Scholar) and Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. __ (2022).

In The Inequity of Informal Guidance, Josh Blank and Leigh Osofsky recontextualize the IRS’s use of informal guidance as a social justice issue. Adding to the substantial literature on subregulatory guidance in tax law—as well as their own deeply researched work on simplexity, automated legal guidance, and the tax legislative process—Blank and Osofsky highlight the systemic inequities and access to justice issues created by what they describe as a “two-tiered system of [tax] law.” Through agents such as tax attorneys and other advisors, certain groups benefit from planning and structuring mediated by traditional bodies of formal authorities, which offer robust protections should any controversy arise. Others are left with informal guidance: IRS publications, FAQs, and online widgets that often provide a misleading gloss of the real stuff and always give limited support in audit or litigation. To remedy this systemic inequity, Blank and Osofsky propose a slate of reforms addressing the treatment of both formal and informal law.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Administering Taxes Democratically By Wallace And Blaylock

This week, Blaine Saito (Northeastern) reviews a new work by Clint Wallace (South Carolina; Google Scholar) & Jeff Blaylock (J.D. 2019, South Carolina), Administering Taxes Democratically?, 94 Temp. L. Rev. __ (2022).

Taxes are both the lifeblood of the state and a major power of the state. Thus, the issue of democratic values intersecting with taxation is one of cardinal import. Administering Taxes Democratically, a forthcoming piece in the Temple Law Review by Clinton Wallace and Jeff Blaylock, looks at a key aspect of that issue, the development of guidance from the Treasury and the IRS. The article adds an important contribution to the conversation regarding the unification of tax law and administrative law. In many ways, the piece is a bit of a cautionary tale of being careful what one wishes for.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Property Tax Privateers By Bradley & Baskett

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by Christopher G. Bradley (Kentucky) & Cameron Baskett (J.D. 2021, Kentucky), Property Tax Privateers, 40 Va. Tax Rev. __ (2021).

"Property tax privateers" are third-party investors that buy property tax liens in bulk, frequently at a steep discount, from local governments. They then foreclose on those liens, often pocketing not only the full value of the lien (plus interest, fees, and costs), but also most of the homeowners' equity in the home. While a homeowner's tax delinquency may initially have been no greater than $100, the impacts to the household include the expulsion of vulnerable individuals from their family home, loss of what is often the family's sole source of wealth, dislocation, and homelessness. In addition, these foreclosures undermine several of the key goals and uses of property taxes: fostering community, stability and support through particular amenities. At the same time, the bulk sales offer very little in the way of local benefit, since the government is likely to have received only a fraction of the value of the lien and foreclosure rarely spurs increased investment. The authors advocate for reforms to limit the foreclosure rights of third parties who purchase tax liens. Under their new rule, privateers would be permitted to foreclose on liens against a homeowner’s primary residence only when the homeowner sells the home or moves out of the home on a long-term basis.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Kaye's The Low-Income Housing Tax Credit And Opportunity Zones

This week, Michelle Layser (Illinois; Google Scholar) reviews Tracy Kaye (Seton Hall), Ogden Commons Case Study: A Comparative Look at the Low-Income Housing Tax Credit and Opportunity Zone Tax Incentive Programs, 48 Ford. Urb. L.J. __ (forthcoming 2021).

Many tax experts, policy watchdogs, and anti-poverty advocates doubt the Opportunity Zones tax incentive will benefit low-income communities (see here, here, and here for just a few examples). Nevertheless, proponents of the incentive love to highlight success stories, in which the tax preference has been used to subsidize pro-social investment in distressed communities. Stories like Ogden Commons, a mixed-use affordable housing development in the North Lawndale neighborhood of Chicago, which is being funded, in part, using Opportunity Zone capital. Even the law’s harshest critics are forced to acknowledge that such examples exist. But are they evidence that the Opportunity Zones law will have a positive impact on low-income communities, after all?

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Zelenak’s Taxes Of The Ultra Rich And Mark-To-Market Reforms (1924, 2021)

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Lawrence A. Zelenak (Duke), 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Note Fed. 583 (2021).

Larry Zelenak is an amazing tax storyteller, not to mention a highly-respected tax scholar. He seems to have a treasure box full of fascinating tax stories. I enjoyed going to the annual Tax Movie Night event held every Tax Day at NYU School of Law, where Larry was always a special guest speaker. It was a lot of fun to watch classic television episodes featuring various tax matters in everyday life, mostly from the "Mad Men" era, and then listen to Larry's comments afterwards. Larry recently published another fascinating tax story, 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Note Fed. 583 (2021) that covers the billionaires' tax story, ranging from contemporary billionaires, like Jeff Bezos, Elon Musk, Michael Bloomberg, and Warren Buffet, to the “billionaires” from the past century, such as Rockefeller, Ford, and J.P. Morgan. Embedded in the story, he presents an important lesson on how to reform the taxation of unrealized capital gains.

 

 

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews The Charitable Tax Deduction And Civic Engagement By Hayashi & Hopkins

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Andrew T. Hayashi (Virginia; Google Scholar) & Justin Hopkins (Virginia; Google Scholar), The Charitable Tax Deduction and Civic Engagement.

It’s no wonder the federal income tax deduction of charitable contribution has been central theme in recent political debates. The tax expenditure to the U.S. government from the charitable contribution deduction in 2018 amounted to over $45 billion and projected to exceed $88 million in 2028. Recently, the CARES Act expended this tax benefit permitting taxpayers who take the standard deduction to deduct up to $300 for charitable contributions while increasing the maximum amount of deductible cash contributions for itemizers. Albeit its historical record as a social and economic policy by providing supplemental (sometimes primary) support for welfare and social services through wealth transfers from wealthy and their preferred charities to the poor, Presidents Obama, Trump, and Biden have all proposed limiting the charitable deduction and even abolishing it altogether. The current charitable deduction increases opportunities to influence political representativeness and appears to favor high-income taxpayers (who itemize their deductions) and their chosen charities while remaining unsuccessful in closing the inequity gap (not all 501(c)(3) organizations benefit lower-income households) and the decline of voluntary associations.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Monetary Finance By Galle And Listokin

This week, David Elkins (Netanya) reviews a new article by Brian Galle (Georgetown; Google Scholar) & Yair Listokin (Yale; Google Scholar), Monetary Finance (2021):

Governments need (or want) to spend money. Perhaps the most obvious and time-honored means to finance that spending is via taxation. However, when the government concerned is a sovereign entity with the power to print currency, the question arises as to why it should resort to taxation at all. Why not simply print (or otherwise create ex nihilo) the money that it needs? The traditional response is that printing money leads to inflation, which is itself a form of taxation. It effectively redistributes from those who are least able to protect themselves from rising prices (e.g., retirees living on fixed income or employees without sufficient bargaining power to demand cost-of-living wage adjustments) to those who are able to protect themselves from rising prices and perhaps even to benefit from it. Furthermore, high inflation carries with it severe economic and political risks (Europe’s experience with hyper-inflation in the twentieth century is one reason why the mandate of the European Central Bank emphasizes price stability above all other goals).

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Lawsky's Teaching Algorithms And Algorithms For Teaching

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Sarah Lawsky (Northwestern; Google Scholar), Teaching Algorithms and Algorithms for Teaching, 24 Fla. Tax Rev. ___ (2021).

In Teaching Algorithms and Algorithms for Teaching, Sarah Lawsky identifies and elaborates what she denotes as the “algorithm method” for teaching tax. A corollary or companion to the problem method, the algorithm method unpacks complex statutory language by “ask[ing] students to work through unambiguous problems that have right and wrong answers.” Although Lawsky’s terminology is novel and useful, she describes the algorithm method as fundamentally “unremarkable, uncontroversial, and common” in tax instruction. Her article carefully connects the algorithm method to in- and out-of-class learning in the context of “flipped” classrooms and her outstanding exercise-generating website, Lawsky’s Practice Problems. This context illustrates the importance of delineating and deploying the algorithm method in legal pedagogy.

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Taxation And Law And Political Economy By Bearer-Friend, Glogower, Kleiman & Wallace

This week, Hayes Holderness (Richmond) reviews Jeremy Bearer-Friend (George Washington; Google Scholar), Ari Glogower (Ohio State; Google Scholar), Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), & Clinton G. Wallace (South Carolina; Google Scholar), Taxation and Law and Political Economy, 83 Ohio St. L.J. ___ (2022).

One bit of folk wisdom among tax professors is that many students interested in law careers addressing social inequities will fail to consider tax law as an area of practice in favor of something like criminal law. I suppose the idea is that tax law is just about numbers and math and making sure that rich people and corporations don’t pay taxes. With such a framing, one can understand the lack of appeal to this set of students. Of course, if these students are lured into a tax class, it seems they are often delightfully surprised at the role taxation can play in shaping social policy. So how did tax law earn its muted reputation, and can or should that reputation change?

Though their article is not about how to get more students to enroll in their classes, Jeremy Bearer-Friend, Ari Glogower, Ariel Jurow Kleiman, and Clint Wallace have answers to these questions. 

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Woodcock's Antimonopolism As A Symptom Of American Political Dysfunction

This week, Michelle Layser (Illinois; Google Scholar) reviews Ramsi A. Woodcock (Kentucky; Google Scholar), Antimonopolism as a Symptom of American Political Dysfunction.

One of the biggest news stories of the year has focused on antitrust cases and bills targeting tech giants Amazon, Apple, Facebook and Google. Outside the academy, liberal progressives increasingly point to monopoly power held by BigTech as a source of growing income and wealth inequality (see here, here, and here).  Newly appointed chair of the Federal Trade Commission and Columbia Law Professor Lina Khan made a splash in 2016 with her Yale student note, which made a legal case for breaking up Amazon, inspiring a “‘hipster antitrust’ movement among young scholars who want to expand existing antitrust law to better target issues like corporate concentration and income inequality” (Vox).

But is antitrust law really a promising tool for redistributing income and wealth? Professor Ramsi A.Woodcock doesn’t think so.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews New Papers By Hackney And Peck

This week, Tracey Roberts (Cumberland; Google Scholar) reviews new works by Allison Peck (West Virginia) Standard Oil, Consolidation Coal, and the Roots of the Resource Curse in West Virginia, 124 W. Va. L. Rev. ___ (2021); and Philip Hackney (Pittsburgh), Dark Money Darker? IRS Shutters Collection of Donor Data, 25 Fla. Tax Rev. ___ (2021).

In Standard Oil, Consolidation Coal, and the Roots of the Resource Curse in West Virginia, Allison Peck recounts the early 20^th Century efforts of Morgantown, West Virginia lawyer, George C. Baker, to pave a pathway for the state to tax its coal, oil, and gas resources. Industrialists initially delayed legislative reform by persuading the legislature to employ a time-honored tactic: setting up a commission to study the matter. Imagine their surprise and chagrin when the commission proposed that the state, in stark need of revenues, issue licenses for extraction and tax the licenses based on volume of production. The commission described the tax as merely sufficient to offset the state’s costs from extraction activities: mine inspections (West Virginia’s safety laws were the nation’s weakest), miner’s hospitals (miners were frequently injured and died from mine collapse, explosions, and fires), the decline in value and harm to the land resulting from extraction activities, and deployment of state militia and national guard to put down civil unrest as miners sought to unionize and strike (a prescient consideration, given the scope of West Virginia’s mine wars from 1912-21). Despite this setback, the industrialists defeated the commission’s proposed bill in a special session of the legislature.

 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews 'Slack' In The Data Age By Oei And Ring

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Diane Ring (Boston College; Google Scholar) and Shu-yi Oei (Boston College; Google Scholar), "Slack" in the Data Age, 73 Ala. Law Rev. ___  (2021).

Legal systems tolerate "informal" spaces where law is not enforced and where those who violate the law are not sanctioned. We, tax lawyers, are familiar with this situation. In their new article, "Slack" in the Data Age, forthcoming in the Alabama Law Review, Diane Ring (Boston College) and Shu-yi Oei (Boston College) refer to this phenomenon as "slack." The authors discuss how slack relates to the formal flexibility and leniency of legal systems, and how the influx of ubiquitous data and information affects slack. While they give examples of slack in other areas of law, such as criminal law, this review will focus on slack in tax law.

Slack arises when enforcers have scarce resources and must prioritize, as Leigh Osofsky (North Carolina) demonstrated in The Case for Categorial Nonenforcement. 

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Scharff's Local Revenue When Federalism Fails

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Erin Scharff (Arizona State), Cities on Their Own: Local Revenue When Federalism Fails, 48 Fordham Urb. L.J. 919 (2021):

The COVID-19 pandemic has required states and local governments to spend more funds to apply frequent cleaning, retrofit public spaces, support local businesses, and address pandemic-related increased poverty rates, all the while local revenue collections meaningfully shrank. Though some assistance to local governments with substantial deficits was provided through the American Rescue Plan passed in March of 2021, it is more a bandage than a panacea to their fiscal health issues. The scope and magnitude of the Covid-19 global economic contraction has only one parallel in U.S. History—the Great Depression. Scharf does a great job here comparing the effects of the current pandemic recession to the Great Recession on localities, and how state and local governments then and today handled growing spending and contractions in their revenues. She demonstrates that during the Great Depression most local governments focused their spending reductions on education, health, and social services. Yet, Scharff argues that long-term and meaningful economic renewal in the current economic recession necessitates effective reform of local fiscal policy and taxing authority. She does a great job laying the ground to some of the means to achieve such goal.

 

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews The Psychology Of Taxing Capital Income By Liscow & Fox

This week, David Elkins (Netanya) reviews a new article by Zachary Liscow & Edward Fox, The Psychology of Taxing Capital Income: Evidence from a Survey Experiment on the Realization Rule (2021):

As a rule, unrealized gain is not recognized as income for tax purposes. It is only when the appreciated property is sold that the gain is subject to tax. Tax scholars agree that the only impediments to taxing unrealized income are valuation and liquidity: the market value of a particular asset may be difficult to determine and the taxpayer may not have the necessary cash. The sale of the property – and specifically the sale of the property in a cash transaction – removes these two obstacles: the tax administration does not need to engage in speculative valuation and the taxpayer presumably has the wherewithal to pay the tax. Nevertheless, the realization doctrine carries considerable cost in terms of both equity and efficiency. It is horizontally inequitable because taxpayers whose accession to wealth takes the form of unrealized gain bear a lower effective burden than similarly situated taxpayers whose income is taxed currently. It is vertically inequitable both because the wealthier segments of society own more assets and because they have a greater ability to defer the realization of the gain. It is economically inefficient because of the lock-in effect: taxpayers who would otherwise want to sell an appreciated may be unwilling to waive the advantage of deferral.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mazur's Can Blockchain Revolutionize Tax Administration?

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Orly Mazur (SMU; Google Scholar), Can Blockchain Revolutionize Tax Administration?:

In Can Blockchain Revolutionize Tax Administration, Orly Mazur provides an excellent addition to the burgeoning academic commentary on blockchain technologies in tax administration. And Mazur is cautiously evangelical in her belief that blockchain offers real benefits compared to the current U.S. tax system. The stakes, for Mazur, are significant: there’s real promise that blockchain could bolster or unlock enforcement mechanisms that could help close the net tax gap. Mazur ably explores the potential benefits—and associated drawbacks—of deploying blockchain in the tax space.

Blockchain technology generally refers to data storage using a unified, secure, distributed ledger. Importantly, changes to the ledger do not rely on a trusted intermediary for approval. Instead, changes arise through an a priori consensus mechanism involving the various parties, known as nodes, that keep copies of the ledger. The term “blockchain” directly refers to a particular method for ensuring data integrity, in which a ledger is appended using time-stamped blocks of data that begin with a unique verification code (or hash) based on the prior block of data. 

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Monroe's Improvisation And Forgotten Taxpayers In Partnership Tax

This week, Hayes Holderness (Richmond) reviews Andrea Monroe (Temple), Making Tax Law Work: Improvisation and Forgotten Taxpayers in Partnership Tax, 55 Mich. J. L. Reform ___ (2021):

When I teach Partnership Taxation, I like to introduce the subject by telling my students that there are really only two principles behind Subchapter K: 1) do what you want, and 2) don’t screw the government. I explain that the course will be an exercise in reconciling those two principles, and it will probably be the most difficult exercise in tax law that they encounter in law school. Until reading Andy Monroe’s forthcoming article, I was certain that the difficulty of Partnership Taxation was merely the unfortunate side effect of a tax regime designed to respect taxpayer choices. Now I’m not so sure, and worse, I’ve certainly been complicit in promoting this narrative.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Work Hours And Income Tax Cuts By Simkovic And Allen

This week, Michelle Layser (Illinois; Google Scholar) reviews Michael Simkovic (USC; Google Scholar) and Eric J. Allen (UC-Riverside; Google Scholar), Work Hours & Income Tax Cuts: Evidence from Federal-State Tax Interactions, 25 Fla Tax Rev. __ (2021).

When the Biden Administration announced its plans to increase both capital gains tax rates and ordinary income tax rates on high-income earners, opponents predictably responded that doing so would reduce economic growth. This objection is supported, in part, by the familiar theory that taxpayers respond to increased taxes on labor by simply working less. Conversely, tax cuts are expected to increase labor effort since the after-tax returns are greater. But the reality is more complicated. As Professors Michael Simkovic and Eric J. Allen explain, “[t]he effect of an income tax cut on work hours can be difficult to predict because tax cuts often produce two opposite effects: a substitution effect, which encourages work, and an income or wealth effect which discourages work.”

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Tax Boycotts

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by H. Scott Asay (Iowa; Google Scholar), Jeffrey L. Hoopes (North Carolina; Google Scholar), Jacob Thornock (BYU; Google Scholar), and Jaron H. Wilde (Iowa, Google Scholar), Tax Boycotts:

In Tax Boycotts, the authors evaluate the widespread assumption among tax scholars that the key risk deterring corporations from engaging in greater levels of tax planning is the loss of corporate reputation. The authors undertake a systematic set of studies to determine whether U.S. consumers actually respond to news about corporate tax avoidance with boycotts of corporate products and stock purchases. The authors survey a representative sample of U.S. consumers concerning their perceptions of and actions with respect to corporate tax planning and then examine weekly scanner-level data on consumer purchaser, daily data on retail stock purchase activity, and data for ongoing boycotts. The authors conclude that tax planning and tax avoidance are not particularly important drivers of past boycott activity in the U.S. They also conclude that boycotts also pose no threat to future tax avoidance activity.

 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Shanske's Agglomeration and State Personal Income Taxes

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Darien Shanske (UC-Davis), Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire’s Complaint Against Massachusetts), 48 Fordham Urb. L.J. ___ (2021). 

Many people have been working from home since COVID-19 swept the country in early 2020. If the pre-pandemic workplace and the remote workplace are located in different states, many potential tax problems for employees (individuals) and employers (businesses) arise. To address individuals’ tax issues, the Supreme Court is considering granting certiorari in the New Hampshire v. Massachusetts case. Massachusetts would only tax nonresident employees' income before the pandemic if such employee physically worked in Massachusetts. On the other hand, if the employee worked remotely from a different state, their income was sourced in their residence state—e.g., New Hampshire—and thus, Massachusetts had not taxed such income. However, when the pandemic hit, those employees stopped commuting to Massachusetts. Massachusetts then announced a temporary emergency regulation to treat nonresident employees who commuted to Massachusetts but now work from home as Massachusetts source. In other words, nonresident remote workers' income is now subject to Massachusetts state income tax. As a residence state of those remote workers, New Hampshire has submitted a claim that Massachusetts’ emergency regulation violates the dormant Commerce Clause and the Due Process Clause.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Measuring And Valuing Wealth For Federal Wealth Tax Reform

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews David Gamage (Indiana; Google Scholar), Ari Glogower (Ohio State; Google Scholar) and Kitty Richards (Independent), How to Measure and Value Wealth for a Federal Wealth Tax Reform, Roosevelt Inst. Issue Brief (2021):   

One of the most debated topic in the last decade is wealth inequality and the unequal distribution of assets among individuals in the U.S.. Wealth distribution becomes even more skewed when race and ethnicity are involved with (not surprisingly) a staggering racial wealth gap.

Recent proposals to reduce the wealth gap (such as those proposed by Senators Warren and Sanders) encountered the hurdle that fails to succeed any tax reform—overcoming valuation issues.  Our current income tax system is cash realization–based and thus mostly takes a deferral-based approach to valuation of wealth accumulation, which makes valuation of wealth rather challenging. If we truly want to make a progress on narrowing the income inequality gap and tax income and wealth of the highest income taxpayers in our society, we have to find efficient ways to overcome assessment difficulties, namely how to measure and value taxpayers’ wealth. This report—published under the auspices of the Roosevelt Institute, a think tank of experts on the American economy—is a practical attempt by Gamage, Glogower, and Richards to do just that.  

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Lucas's The Pain of Paying Taxes

This week, David Elkins (Netanya) reviews a new article by Gary Lucas, Jr. (Texas A&M; Google Scholar), The Pain of Paying Taxes, 56 Richmond L. Rev. __ (2021) (forthcoming):

The financing of government spending (and in particular the financing of transfer payments) by taxation has been analogized in the literature to the carrying of water in a leaky bucket. In many cases, the amount received by the beneficiaries of the spending program will be less than the cost imposed upon the taxpayers. Under standard economic modeling, the sources of the leak include compliance costs, administrative costs, and the substitution effect (which occurs when taxpayers alter their behavior in order to avoid the tax or to minimize their tax liability). In a fascinating article, Professor Lucas argues that the leak may be larger than we thought. Leaving aside Oliver Wendell Holmes’ famous declaration that he does not mind paying taxes because taxes are the cost of a civilized society, people do not like to pay taxes. The psychological pain associated with paying taxes reduces social welfare and can also exaggerate the substitution effect.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Cauble's Questions The IRS Will Not Answer

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Emily Cauble (DePaul), Questions the IRS Will Not Answer, 97 Ind. L.J. ___ (2021).

In Questions the IRS Will Not Answer, Emily Cauble provides an important analysis and critique of the Internal Revenue Service’s “no-rule” areas—topics on which the IRS will not, or ordinarily will not, issue private letter rulings. Cauble focuses on fact-intensive issues that fall into this prohibited space. Her motivating examples involve the classification of gifts under the Duberstein standard, the boundary between nondeductible personal outlays and deductible medical expenses under § 213, and intent-oriented aspects of the related party antiabuse rule for like-kind exchanges under § 1031(f). Fundamentally, however, Cauble’s approach is normative: she searches for, then evaluates, potential rationales for administrative reticence in giving private guidance in situations where the facts are likely determinative.

Cauble presents—then largely rejects—eight reasons that might justify an administrative refusal to rule on fact-sensitive issues.

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Saito's Tax Coordination

This week, Hayes Holderness (Richmond) reviews Blaine G. Saito (Northeastern), Tax Coordination, 38 Ga. St. U. L. Rev. ___ (2022):

The idea of tax expenditures—those provisions of the tax law not in line with the normative base—has intuitive appeal. Of course the tax law is imperfect, but if we pinpoint the offending provisions, we can approach a more perfect code. Now where did we put that normative baseline? Harsh and compelling critiques of the tax expenditure concept essentially accuse it of masking personal preferences regarding the desirability of tax provisions, yet the concept apparently cannot be so easily killed off.

Though I may be stretching the article too far in this claim, Blaine Saito’s forthcoming article, Tax Coordination, offers an alternative way to think about tax expenditures. They are those provisions of the tax law with effects on social policy. Further, they are those provisions of the tax law that could benefit from interagency coordination. The thrust of Saito’s argument is that the Internal Revenue Service and Treasury should be encouraged to play nicer with others, but in this argument lies a lesson about tax expenditures: they are those provisions of the tax law that the tax authorities are not well-suited to administer alone.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Joondeph's The States’ Multiple Taxation Of Personal Income

This week, Michelle Layser (Illinois; Google Scholar) reviews Bradley W. Joondeph (Santa Clara), The States’ Multiple Taxation of Personal Income, 71 Case Western Res. Law. Rev. 121 (2020).

The COVID-19 pandemic has drawn renewed attention to the possibility that state tax regimes may result in multiple taxation of personal income. In a new article, Bradley Joondeph explores the constitutional significance of multiple taxation of personal income, and he concludes that multiple taxation isn’t actually that problematic. To prove his point, Joondeph begins with an overview of contexts in which courts have blessed state tax laws that result in multiple taxation. Joondeph describes two major sources of multiple taxation: conflicting apportionment methods and conflicting jurisdictional bases.

When taxing nonresidents, states may only tax income sourced to their state, but it is not always obvious where income should be sourced. The problem is especially pronounced in the context of multi-state corporations, and states have adopted different apportionment formulas for sourcing corporations’ income. These formulas often conflict in ways that result in multiple taxation, but the Supreme Court has long held that this is fine.

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Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Sarkar's Capital Controls As Migrant Controls

This week, Ariel Jurow Kleiman (San Diego; moving to Loyola-L.A.; Google Scholar) reviews a new article by Shayak Sarkar (UC-Davis), Capital Controls as Migrant Controls, 109 Cal. L. Rev. ___ (2020).

Governments regulate migration in myriad ways. Via border policies, economic (dis)incentives, and inclusionary or exclusionary social and legal systems, governments seek to draw or repel migration into a domestic economy. As Shayak Sarkar argues in his most recent article, Capital Controls as Migrant Controls, they can also do so by regulating migrants’ financial activities. Building on his past scholarship on migrants’ financial habits and the legal infrastructure governing them (e.g., here and here), Sarkar describes and analyzes legal systems that constrain migrants’ financial activities in the U.S. He argues that this financial regulation not only controls migrants’ capital, but that it controls migrants as well.

Sarkar focuses on three examples of what he calls “capital controls”—although he notes that his use of the term is somewhat broader than its traditional meaning of restrictions on foreign capital inflows and outflows. He first discusses taxation of migrants’ remittances back to home countries (more on this momentarily). Second, he explores rules that restrict undocumented workers’ access to Social Security benefits and that require eligible noncitizens to leave the U.S. in order to collect payments. Third, he describes consumer-banking identification requirements, which often work to exclude undocumented workers from U.S. banking services. The article’s scope is broad, canvassing laws on immigration, taxation, financial regulation, and the social safety net. To make the current discussion more tractable, I will focus here on his analysis of remittance taxation.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews The IRS's Decisive Transfer Pricing Victory In Coca Cola By Avi-Yonah & Mazzoni

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Reuven Avi-Yonah (Michigan; Google Scholar) & Gianluca Mazzoni (Michigan SJD), Coca Cola: A Decisive IRS Transfer Pricing Victory, at Last, 169 Tax Notes Fed. 1739 (2020).

Coca-Cola has offshore manufacturing facilities that produce beverage concentrate in low tax countries, such as Brazil, Ireland, and Egypt. Because the beverage concentrate is a Coca-Cola product, though it is not a final product, the US Parent co. licenses its intangibles, such as trademarks and secret formulas, and the manufacturing facilities pay royalties and dividends. But the role of offshore manufacturing facilities stops there. The final products are made by third party entities, called “Bottlers,” and the marketing activities of the Coca-Cola brand and the final products are conducted by another foreign subsidiary (ServCos). Given such a limited role of offshore manufacturing facilities, called "Supply Points," what portion of profits under the transfer pricing rules should be allocated to those Supply Points compared to the US Parent co.? Probably not much.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Executive Compensation After 162(m)'s Repeal By Galle, Lund & Polsky

This week, Mirit Eyal-Cohen (Alabama) reviews Brian D. Galle (Georgetown), Andrew Lund (Villanova) & Gregg D. Polsky (Georgia), Does Tax Matter? Evidence on Executive Compensation after 162(M)'s Repeal, 26 Stan. J. L., Bus. & Fin. ___ (2020). 

Changes in legislation provide interesting opportunities for natural experiments. Tax law is one of those fields where legislative changes occur on an annual basis and students quickly become aware of their inability to save money on used statutory supplements. This paper explores said opportunity to observe the effect of variations in tax law on the much-contested topic of senior executive compensation.

Since 1993, the deductibility of senior management salaries in public companies has been limited under section 162(m) for payments above $1 million. Section 162(m) was enacted with rising scrutiny on executive pay during the 1990s. At the same time, then section 162(m) contained an exception that allowed deductibility above the $1 million threshold to the extent the compensation was performance-based. This exception encouraged firms, once the $1 million cap was reached, to pay compensation based on performance via shares, stock options, and bonuses. This performance sensitivity in executive pay was viewed as shareholders-friendly as it was based on objective performance goals, approved by an independent compensation committee of the board, and encouraged managers to take more risk to achieve better financial outcomes. 

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Ozai's Inter-Nation Equity Revisited

This week, David Elkins (Netanya) reviews a new article by Ivan Ozai (McGill; Google Scholar), Inter-Nation Equity Revisited, 12 Colum. J. Tax L. 58 (2020):

In 1963, Peggy Brewer Richman introduced the concept of inter-nation equity as a cornerstone for normative analysis of international taxation. In 1972, she (now Peggy Musgrave) and her husband Richard Musgrave fleshed out the idea. Their argument was that the international tax base should be allocated in such a way as to recognize the entitlement of countries to tax the income arising in their territories and to allow for some degree of international redistribution.

Since that time, the literature has transformed the term “inter-nation equity” into a catch-all term devoid of any substantive meaning. It is often used simply to denote the vague concept of fairness. Commentators have employed it in ways that denote different and sometimes even contradictory conceptions of the idea. In this week’s article, Ivan Ozai examines the original meaning of the term as envisioned by the Musgraves and proposes a number of measures that might be adopted to promote those ideas.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Repetti's Equity And Efficiency In A Progressive Income Tax

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by James R. Repetti (Boston College; Google Scholar), The Appropriate Roles for Equity and Efficiency in a Progressive Individual Income Tax, 23 Fla. Tax Rev. 522 (2020).

In The Appropriate Roles for Equity and Efficiency in a Progressive Income Tax, James Repetti offers a magisterial reappraisal of the relationship between equity and efficiency in U.S. tax policy. Repetti connects the decline in statutory income tax rates since the 1950s to a rising “focus on efficiency” at the expense of distributional concerns. For Repetti, this shift occurred, in part, because policymakers felt that efficiency offered “certainty” and “quantifiable” gains, while equity considerations seemed “intangible and unmeasurable.” These intuitions are illusory, however, as Repetti demonstrates through a comprehensive review of empirical literature in economics and other social sciences, including connections to Repetti’s prior work on taxation and democracy. Repetti joins other contemporary voices in advocating for a revival of traditional equity norms in policy debates—and perhaps even for a new preeminence of equality-oriented equity in the near term.

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Pareja's The Role Of Congressional Procedure In Severability Doctrine

This week, Hayes Holderness (Richmond) reviews Mary Leto Pareja (New Mexico), California v. Texas: The Role of Congressional Procedure in Severability Doctrine, 46 Seton Hall Leg. J. (2021).

The Affordable Care Act and its controversial individual mandate are back in the headlines again as the Supreme Court considers the effect of reducing the tax for not maintaining health insurance to a zero rate. Surely, no reader of this blog will have forgotten Chief Justice Roberts’ weaving opinion in the 2012 NFIB case. Applying a “functional” approach, the opinion explained that the ACA’s “penalty” for not having health insurance was properly characterized as a “tax” for constitutional purposes. This interpretation ensured the constitutionality of the provision under Congress’ tax power, as it would not have been constitutional under Congress’ authority to regulate interstate commerce.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Lederman's Valuation As A Challenge For Tax Administration

This week, Michelle Layser (Illinois) reviews Leandra Lederman (Indiana), Valuation as a Challenge for Tax Administration, 96 Notre Dame L. Rev. __ (2021).

Property valuation lies at the center of many federal, state, and local tax policy debates. At the federal level, property valuation features prominently in problems related to gift and estate taxes, charitable contribution deductions, conservation easements, transfer pricing, and proposed wealth taxation. At the state and local levels, valuation problems arise most frequently in the context of property taxation. The goal of property valuation, of course, is to determine how an asset would be priced in an arms-length sale. In a forthcoming essay, Leandra Lederman argues that to achieve this goal, the tax law must overcome challenges presented by (i) opposing incentives that taxpayers have from the tax agency, and (ii) accurate measurement.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Holderness' Tax Relief for Commuters

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Hayes Holderness (Richmond), Changing Lanes: Tax Relief for Commuters, 40 Va. Tax Rev. ___ (2021).

Commuting has mixed motives: one must travel to get to work (business motive), but the extent and burden of the travel is the result of the personal choice about where to live (personal motive). However, there is no middle ground under the tax law; an expense is classified as either personal or business. Under current law, it is well established that commuting expenses are personal, and thus, nondeductible expenses under the tax law (e.g., Comm'r v. Flowers, 326 U.S. 465 (1946)). However, in the wake of COVID-19, working from home has become the new normal. Many people who used to commute to work no longer have the same amount of expenditure for commuting, such as gas and metro passes. What are the normative implications of such changed behavior? Hayes Holderness offers his views in his recent essay, Changing Lanes: Tax Relief for Commuters (forthcoming in Va. Tax Rev.).

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Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Hayashi's Dynamic Property Taxes And Racial Gentrification

This week, Ariel Jurow Kleiman (San Diego) reviews a new work by Andrew T. Hayashi (UVA), Dynamic Property Taxes and Racial Gentrification (2020).

Four decades after California’s Prop 13 and the Tax Revolt it instigated, we are still unraveling the downstream consequences of property tax limits. Andrew Hayashi explores yet another unanticipated, if not surprising, consequence of property tax assessment limits in the context of gentrification. Combining theoretical reasoning with empirical data from Maryland, his approach is thoughtful and nuanced, reflecting the multilayered complexity underlying the economic and social processes at play.

The crux of his reasoning is the following. Property taxes are based on a property’s assessed value, which often differs from its market value. A relatively lower assessed value means a lower “effective tax rate” (ETR), since the ETR is measured against market value. Tax limits play an important role by limiting the government’s ability to assess properties at their market value, either imposing a maximum increase percentage or requiring that increases be phased-in over time. Regardless of the form, these limits cause lower ETRs for properties that are increasing in value compared to properties with stable or declining values. The more rapid the appreciation, the more pronounced the ETR gap.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Tax Benefits, Higher Education and Race By Crawford & Gerzog

This week, Mirit Eyal-Cohen (Alabama) reviews Bridget J. Crawford (Pace) and Wendy C. Gerzog (Baltimore), Tax Benefits, Higher Education and Race: A Gift Tax Proposal for Direct Tuition Payments (Dec. 2020):

Amid recent nationwide protests and public condemnation of systemic racism, Americans are divided on whether this focus on the race and inequality gap will actually lead to major policy change. This product of collaboration between renowned tax crit Bridget Crawford and gift and estate tax expert Wendy Gerzog yields not only an admirable scholarly inquiry into the correlation between tax, race, and higher education, but also a practical proposal for policy reform to reduce race-based economic inequality. Using the case study of gift tax exemption for direct tuition payments, the Authors illustrate the ways tax rules can aggravate the racial wealth gap and put together a primer to fix the advantage most affluent taxpayers in the U.S. receive through educational tax benefits.  

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Tax Policy And Pharmaceutical Innovation By Eyal-Cohen & Rutschman

This week, David Elkins (Netanya) reviews a recently posted work by Mirit Eyal-Cohen (Alabama) & Ana Santos Rutschman (St. Louis), Tax Policy and Pharmaceutical Innovation (2020):

With so much of the world’s attention this year focused on the COVID-19 pandemic, it is little wonder that tax scholars too have waded into the breach. A quick search on SSRN turns up no less than 146 articles containing the key words “COVID” and “tax.” However, most of these articles are concerned either with the tax implications of the current pandemic or with what the government should do within the field of taxation in light of the economic havoc created by the virus and by the shutdowns and other measures instituted in an attempt to keep it at bay. This week’s article, co-authored by a tax law scholar and a public health law scholar, takes a step back and asks how the tax system can help prevent the next pandemic.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Nadler's Tax-Motivated Trading And Price Efficiency

This week, Sloan Speck (Colorado) reviews a new work by Hillel Nadler (Program on International Financial Systems), The Only Sure Alpha: Tax-Motivated Trading and Price Efficiency (Aug. 12, 2020).

In The Only Sure Alpha: Tax-Motivated Trading and Price Efficiency, Hillel Nadler examines tax-motived trading in financial instruments from a novel and compelling perspective: the ways in which tax rules affect the process of price discovery in otherwise well-functioning markets. Nadler argues that tax considerations may drive “noisy trading”—trading that moves prices away from an equilibrium based on non-tax information. Although markets (eventually) should resolve these deviations of price from fundamental value, Nadler notes that the noise itself may have significant and detrimental systemic effects. Transitions to equilibrium matter, and taxation may cause distortions that leave financial markets in a constant state of low-level flux.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Polsky's The Impact Of The 2017 Tax Act On Personal Injury Plaintiffs

This week, Michelle Layser (Illinois) reviews Gregg D. Polsky (Georgia), The Impact of the 2017 Tax Act on Certain Personal Injury Plaintiffs, 12 Colum. J. Tax L. ___ (2021).

Between spiking COVID rates and election drama, it can be easy to forget that just a few years ago—before 2020 somehow stopped the passage of time—the country was rocked by the #MeToo movement. The 2017 movement,^[1] which emboldened women across the world to use social media to signal that they had experienced sexual harassment or assault using the hashtag #MeToo, was spurred by highly public sexual-abuse allegations against film producer Harvey Weinstein.

Since everything has a tax angle, the #MeToo movement made its mark on the 2017 Tax Cuts and Jobs Act in the form of a new rule 162(q), which is informally known as the Harvey Weinstein rule. The rule disallows taxpayers’ deductions for settlement payments related to sexual harassment or sexual abuse cases when the settlement is subject to a nondisclosure agreement (NDA). Seems like a win for the movement, right? Maybe not. In a new article, Professor Gregg Polsky argues that the Harvey Weinstein rule—no matter how well intended—may actually harm sexual assault plaintiffs.

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Choi's How Does Chevron Shape Agency Rulemaking?

This week, Hayes Holderness (Richmond) reviews Jonathan H. Choi (Minnesota), How Does Chevron Shape Agency Rulemaking? An Empirical Study, 38 Yale J. Reg. ___ (2021):

One would be hard-pressed to find a tax lawyer without knowledge of 1984’s Chevron case, which established a deferential standard for judicial review of agency rulemaking—as long as the rule is a reasonable interpretation of an ambiguous statute, courts should defer to the judgment of the agency. Most tax lawyers presumably also are familiar with 2011’s Mayo decision, which affirmed that tax regulations were subject to the same Chevron standard as regulations in other areas of law. Until Mayo, tax was assumed to be exceptional in this realm, with certain regulations entitled to less deference than Chevron would have provided.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews The Apple State Aid Case By Daly & Mason

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Ruth Mason (Virginia) and Stephen Daly (King's College London), State Aid: The General Court Decision in Apple, 99 Tax Notes Int’l 1317 (Sept. 7, 2020), also published as 168 Tax Notes Fed. 1791 (Sept. 7, 2020).

The recent court case Apple (the full text of the judgement is available here) revolves around an EU doctrine known as “state aid.” Under the state aid principle, member states are prohibited from subsidizing favored actors or industries in the form of, e.g., tax treatment or benefits. Unless the reader is an expert in international tax, the reader might find the details of the Apple case to be overwhelming and difficult to understand because Apple is also a hardcore transfer pricing case. However, for those who are interested in Apple and would like to understand the technical aspects as well as a big picture of the case, I would like to recommend State Aid: The General Court Decision in Apple by Ruth Mason (Virginia) and Stephen Daly (King's College London), published in 99 Tax Notes Int’l 1317 (Sept. 7, 2020), also published as 168 Tax Notes Fed. 1791 (Sept. 7, 2020). The first half of the article offers the summary of the recent decision by the General Court of the European Union (GCEU), and the second half offers the authors' commentary.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Holderness's Insidious Regulatory Taxes

This week, Tracey Roberts (Cumberland) reviews a recently posted work by Hayes Holderness (Richmond), Insidious Regulatory Taxes.

In Insidious Regulatory Taxes, Hayes Holderness takes issue with state legislatures’ use of taxes to regulate individual behavior. He clarifies that regulatory taxes are “insidious” when a state legislature chooses to use a tax in order to avoid the level of state and federal constitutional scrutiny imposed on direct regulation. Federal and state courts have generally deferred to legislatures on tax matters because the U.S. Constitution and state constitutions grant legislature the “power of the purse.” Judicial attempts to curtail this power may be viewed as a violation of the separation of powers doctrine. Holderness argues that while judicial deference may be appropriate when the legislators’ goals are to raise revenue, that deference is not justified when legislators are acting with a regulatory purpose and when their goal in using a tax is to skirt the level of scrutiny applied to direct regulation.

 

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Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Strategic Nonconformity To The TCJA

This week, Ariel Jurow Kleiman (San Diego) reviews a two-part essay, Strategic Nonconformity to the TCJA, Part I: Personal Income Taxes, 97 Tax Notes State 17 (July 6, 2020), by Adam Thimmesch (Nebraska), Darien Shanske (Davis), and David Gamage (Indiana); and Strategic Nonconformity, State Corporate Income Taxes, And the TCJA: Part II, 97 Tax Notes State 123 (July 13, 2020), by Darien Shanske, Adam Thimmesch, and David Gamage.

No one reading this review will be surprised to hear that states need cash. They need it to fund vital public services and to shore up coffers eviscerated by the economic fallout of the pandemic. While borrowing and federal support are both logical revenue sources, state borrowing limits prevent deficit spending and aid to state and local governments has been a major sticking point in federal stimulus talks. For the foreseeable future, states may be on their own.

Well, not entirely on their own. They do have some very able tax law scholars to help them navigate these rocky fiscal shoals. In this two-part essay, Adam Thimmesch, Darien Shanske, and David Gamage offer several ways that states can raise revenue during the current crisis. Part of a larger effort called Project SAFE (State Action in Fiscal Emergencies), this two-part installment considers how states’ tax laws should or should not conform with changes enacted in the Tax Cuts and Jobs Act (TCJA).

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Lunney's The Copyright Tax

This week, Mirit Eyal-Cohen (Alabama) reviews Glynn S. Lunney, Jr. (Texas A&M), The Copyright Tax.

This empirical Article makes the claim that copyright should be viewed as a form of government-imposed tax and a government-provided subsidy. Although Lord Thomas Babington Macaulay of the House of Commons had made this claim almost 180 years ago, the author reiterates it by examining the scope of such tax and comparing consumer price increases in copies of popular books and public transmissions of sound recordings. He observes the Amazon prices of top 250 books written in the 19th century and in the 21st century and the analog v. digital (Kindle) prices of these books on Amazon. The 19th century book market was unregulated allowing free entry so multiple publishers could offer paper or electronic books while the 21st century book market has been subject to copyright regulation that restricted entry. This empirical study aspires to provide insights on the scope of the “copyright tax”, its incidence, and the return that end users receive.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Duff's General Anti-Avoidance Rules Revisited

This week, David Elkins (Netanya) reviews a recently posted work by David G. Duff (British Columbia), General Anti-Avoidance Rules Revisited, 68 Can. Tax. J. 579 (2020):

It is no secret that tax legislation is extraordinary complex. Part of the reason is the subject matter itself. Economic reality and legal doctrines do not necessarily coincide, and when they do not then taxpayers frequently can exploit the mismatch to achieve beneficial tax results. One of the swords that administrators wield to combat this phenomenon is the general anti-avoidance rule (GAAR). The question of the limits to which taxpayers may go to lower their tax liability was originally – at least in common law countries – a product of judicial doctrine. Today many countries have codified the rule or at least certain key elements of it (the closest the United States has to a statutory GAAR is IRC §7701(o), which clarifies the judicial economic substance doctrine). However, whether codified or not, GAARs by their nature are problematic. They call upon the courts to ignore the express words of the statute to prevent tax avoidance. However, one would have to be extraordinarily naïve to believe that taxpayers do not routinely structure their affairs in response to tax rules. Thus the question of when it is legitimate to invoke a GAAR is not a simple one.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Brunson's Georgia, The IRS, And The KKK

This week, Sloan Speck (Colorado) reviews a new work by Samuel D. Brunson (Loyola Chicago), Addressing Hate: Georgia, the IRS, and the Ku Klux Klan.

The Ku Klux Klan’s second iteration began at a time of transformation for the American fiscal state. As economists and politicians reoriented the federal tax system towards progressive income taxation, white ethnonationalists consolidated and organized around false and pernicious understandings of the historic hate group. In 1915, a new Klan emerged, claiming as many as four million members at its peak in 1924. As Sam Brunson argues in his important new article, Addressing Hate: Georgia, the IRS, and the Ku Klux Klan, the Bureau of Internal Revenue and the State of Georgia each played crucial roles in both facilitating the rise of the second Klan and hastening its formal demise in the mid-1940s. Brunson’s valuable work resonates in our current political climate, as contemporary supremacist groups claim privileges under state corporate law and the Internal Revenue Code. How we address these groups today should be informed by the important history that Brunson uncovers.

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Walker's Tax Complexity And Technology

This week, Hayes Holderness (Richmond) reviews David I. Walker (Boston University), Tax Complexity and Technology:

Tax preparation platforms like TurboTax and TaxAct offer taxpayers a (relatively) easy way to complete and file their tax returns. Tax preparation businesses like H&R Block similarly ease the burden on taxpayers of completing and filing tax returns; those businesses also use technology to provide their services. Cumulatively, over 90% of individual taxpayers do their taxes with the help of these platforms or businesses, as opposed to filling out the returns themselves. Technology appears to be a tax simplification salve for the vast majority of individual taxpayers.

Not quite so fast, argues David Walker, in his draft article, Tax Complexity and Technology. While technology has undeniably simplified the return process for many, it has also helped mask the inner workings of the tax laws. Tax preparation platforms and businesses can operate like “black box” algorithms: just plug in the data and get a nice round number; don’t worry about how the number is reached. These black boxes allow for the complexity of the tax laws to grow.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Shanske's How The States Can Tax Shifted Corporate Profits

This week, Michelle Layser (Illinois) reviews Darien Shanske (UC Davis), How the States Can Tax Shifted Corporate Profits: An Application of Strategic Conformity, 93 S. Cal. L. Rev. ___ (2020).

A dangerous consequence of the economic disruptions caused by the COVID-19 pandemic has been steep declines in state and local tax revenue. As is often the case during crisis periods, these revenue shortfalls have arrived at precisely the time when many residents are in dire need of a social safety net (see here and here).  Under the circumstances, Professor Darien Shanske observes that “it would be reasonable for states to contemplate inefficient—and even regressive—revenue-raising measures.” In a new Article, Shanske cautions against such an approach and offers what he says is a more efficient, more equitable alternative that is also relatively easy to administer.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Is Unilateral Formulary Apportionment Better Than the Status Quo? By Fleming, Peroni & Shay

This week, Young Ran (Christine) Kim (Utah) reviews a new work by J. Clifton Fleming, Jr. (BYU), Robert J. Peroni (Texas), and Stephen E. Shay (Boston College), Is Unilateral Formulary Apportionment Better than the Status Quo?, in The Allocation of Multinational Business Income: Reassessing the Formulary Apportionment Option (Wolters Kluwer 2020).

It is always exciting to find a new international tax paper written by the famous cohort of authors—our learned Professors J. Clifton Fleming, Jr. (BYU), Robert J. Peroni (Texas), and Stephen E. Shay (Boston College). These authors can be trusted to provide insight into carefully selected topics relevant to current issues in international tax. In each paper, they demonstrate profound knowledge and experience in the chosen topic, and share thoughtful policy suggestions. The new book chapter, Is Unilateral Formulary Apportionment Better than the Status Quo?, in The Allocation of Multinational Business Income: Reassessing the Formulary Apportionment Option (Wolters Kluwer 2020), is not an exception. It provides a condensed analysis of the arm's length standard and the rise of formulary apportionment as an alternative. Additionally, the paper suggests criteria for the cost/benefit analysis of unilaterally adopted formulary apportionment in both territorial and worldwide system paradigms. Readers with advanced knowledge of international tax will find this chapter to be interesting, and, thanks to the authors’ mastery of the topic, the paper is also accessible to readers with only a basic knowledge of international tax. I highly recommend this paper to professors who are looking for reading material on transfer pricing.

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Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews U.S. Tax Systems Need Anti-Racist Restructuring

This week, Ariel Jurow Kleiman (San Diego) reviews Francine J. Lipman (UNLV), Nicholas A. Mirkay (Hawaii) & Palma Joy Strand’s (Creighton), U.S. Tax Systems Need Anti-Racist Restructuring, 168 Tax Notes Fed/State 855 (Aug. 3, 2020).

What might an “anti-racist” tax system look like? While those in the critical tax space have asked this question for some time, it seems that a larger community of tax legal scholars have more recently awakened to the importance of such considerations, sparked by the murders of George Floyd, Breonna Taylor, and others at the hands of police officers. Increasingly, tax professors are realizing that we do our students and our societies a disservice by ignoring how tax policies affect racial inequality—not to mention inequality based on gender, disability, immigration status, and the host of othernesses brandished to divide and oppress the most vulnerable among us.

Professors Francine Lipman, Nicholas Mirkay, and Palma Joy Strand’s recent article seizes this moment of awakening by calling upon those in privileged positions—which tax professors surely are—to raise questions about how our tax laws enshrine and perpetuate racial inequality. The article offers a birds-eye view of the racialized origins and racially disparate outcomes in our federal, state, and local tax systems. In doing so, it serves the important purpose of introducing critical tax and tax justice topics to those becoming newly aware of their importance.

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