Weekly SSRN Tax Article Review And Roundup: Speck Reviews Blue J's Use Of Machine Learning To Predict Tax Litigation Results

This week, Sloan Speck (Colorado; Google Scholar) reviews new works by: 

• Benjamin Alarie (Toronto; Google Scholar) & Stefanie Di Giandomenico (Blue J Legal), Timing Is Everything: The Step Transaction Doctrine in GSS Holdings, 174 Tax Notes Fed. 1849 (Mar. 28, 2022)
• Benjamin Alarie (Toronto; Google Scholar) & Christopher Yan (Blue J Legal), Using Machine Learning to Evaluate the Existence of a Trade or Business: Olsen, 174 Tax Notes Fed. 1231 (Feb. 28, 2022)
• Benjamin Alarie (Toronto; Google Scholar) & Bettina Xue Griffin (Blue J Legal), Using Machine Learning to Crack the Tax Code, 174 Tax Notes Fed. 661 (Jan. 31, 2022)

Since 2014, Ben Alarie and his team at Blue J Legal have worked to apply machine learning (ML) principles to the process of tax advising (among other areas of law). Through a series of articles in Tax Notes Federal, Alarie and his coauthors provide a window into their artificial intelligence prediction engine. Their commentary is crucial: big data has arrived in legal and accounting practice, and some degree of transparency may improve tax equity and administration. In addition, these articles yield important and interesting insights about various doctrines in tax law.

In winter 2022, Alarie and his coauthors gave us three short articles: a general review of ML’s potential in tax practice and two applications of Alarie’s ML model to existing controversies.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews A New Framework For Digital Taxation By Avi-Yonah, Kim & Sam

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Reuven Avi-Yonah (Michigan; Google Scholar), Christine Kim (Utah; moving to Cardozo; Google Scholar) & Karen Sam (Michigan), A New Framework for Digital Taxation, 63 Harv. Int’l L.J. __ (2022).

Last October, the OECD/G20 announced a global deal that sought to remake the international tax system. Key to that change was the commitment of the many nations, including the U.S. and members of the E.U., to support, in principle, two pillars. Pillar One focused on eliminating physical presence requirements thereby allowing market countries to tax digital platforms. Pillar Two created a minimum tax backstop in residence countries. But as Reuven Avi-Yonah, Young Ran “Christine” Kim, and Karen Sam, show in their article A New Framework for Digital Taxation, forthcoming in the Harvard Journal of International Law, for Pillar One, the declaration of victory is premature. And so-called Digital Service Taxes (DSTs) may not be so terrible either.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Taxation, Aristocracy, And The Constitution

This week, Tracey Roberts (Cumberland; Google Scholar) reviews new works by:

• Jeremy Bearer-Friend (George Washington; Google Scholar) & Vanessa Williamson (Brookings; Google Scholar), Thomas Paine and Taxation as Freedom from Aristocracy, 26 Fla. Tax Rev. __ (2022)
• John R. Brooks (Fordham; Google Scholar) and David Gamage (Indiana; Google Scholar), Taxation and the Constitution, Reconsidered, 74 Tax L. Rev. __(2022)

Recently, ProPublica uncovered troves of tax information for the wealthiest Americans, revealing numerous pathways by which they avoid taxes. Last year the Department of the Treasury estimated that the tax gap, the difference between taxes that are owed and the taxes that have been paid, has increased to approximately $600 billion per year. Over the next ten years, this comes to $7 trillion in lost tax revenue, important resources that might be used to reduce the federal debt, for those concerned about such matters, and to address other needs as COVID 19 recedes and we recover from its impacts. Using tax data, Emmanuel Saez and Gabriel Zucman have estimated that the top one percent of taxpayers are responsible for one-third of that tax gap. These recent reports demonstrate that the federal income tax and the estate and gift taxes are inadequate in ensuring that the ultrawealthy in the United States pay their fair share. Two recent papers delve into historical resources, constitutional caselaw, and constitutional history to underscore that concerns about adequate taxation of the wealthy are not new, but are instead central to our nation’s founding, to the periods in which our country has faced its greatest challenges, and to democracy.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Sanchirico's A Game-theoretic Analysis of Global Minimum Tax Design

This week, Young Ran (Christine) Kim (Utah, moving to Cardozo; Google Scholar) reviews a new work by Chris William Sanchirico (Penn; Google Scholar), A Game-theoretic Analysis of Global Minimum Tax Design (March 2022).

In the globalized, open economy, multinational enterprises (MNEs) can easily shift their profits from high tax jurisdictions to low tax jurisdictions. Many countries, especially developing countries, were increasingly squeezed by MNEs to provide lower corporate tax rates and tax holidays as conditions for receiving foreign direct investment. Furthermore, those countries had to compete with peer countries vying to attract foreign capital to their economy. The epitome of such rivalry is “tax competition.” As tax competition has grown, global effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom.” In order to curb harmful tax competition, the OECD/Inclusive Framework has proposed a global minimum tax at 15% rate and to impose a top-up tax to the extent that the effective tax rate paid by the MNE falls short of the said minimum tax rate.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Thimmesch's Tax, Incorporated: Dynamic Incorporation And The Modern Fiscal State

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Adam B. Thimmesch (Nebraska; Google Scholar), Tax, Incorporated: Dynamic Incorporation and the Modern Fiscal State, 53 Ariz. St. L. J. __ (2021):

States’ fiscal stability is crucial to providing residents with health, economic security, and physical safety. Most states rely heavily on the personal income tax, which is often an unpredictable source of revenue. Yet, even more so, states increase the volatility of that stream of tax revenues by relegating tax-writing authority to Congress through referral or fully incorporating the federal tax code (the “Tax Code”) into their own laws.  

In this Article, Thimmesch reviews the practice of incorporation—also known as conformity, piggybacking, or delegating up, thereby excusing states from having to devise tax policy or craft income tax de novo. Perhaps the most notable examples to this phenomenon include the referral to federal level AGI, determination of a taxable gift, calculating tax basis, or allowing deductibility of business meal expenses, among others. 

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Oxford Business Tax Policy Brief On Pillar 2

This week, David Elkins (Netanya, visiting NYU 2021-2022; Google Scholar) reviews a new paper by Michael P. Devreux (Oxford; Google Scholar), John Vella (Oxford) & Heydon Wardell-Burrus (Oxford), Pillar 2: Rule Order, Incentives, and Tax Competition (2022).

International taxation is undergoing a transformation the likes of which have not been seen for a century, responding to challenges of globalization and digitalization that the current international tax regime is ill-equipped to handle. Twenty-five years have passed since the OECD shot the first arrow across the bow, twenty-five years during which the discourse has expanded to include over 140 countries in the Inclusive Framework and the goals of the project have been constantly evolving. Whether and to what extent the transformation will come to fruition and, if it does, will survive the test of time is a matter of speculation.

The latest iteration on the subject is the Pillar Two Global Minimum Tax Model Rules released on December 22, 2021. In this week’s feature article, three scholars from the Oxford University Centre for Business Taxation examine how the Model Rules deal with two of the more controversial questions relating to Pillar Two: the extent to which it will allow countries to engage in tax competition, and which countries will collect the tax revenue that it generates. 

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Parsons’ Tax’s Digital Labor Dilemma

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Amanda Parsons (Columbia), Tax’s Digital Labor Dilemma, 71 Duke L.J. __ (2022).

In Tax’s Digital Labor Dilemma, Amanda Parsons develops a compelling challenge to conventional frameworks for international tax reform by reconceptualizing traditional distinctions between consumers and workers in digital economy enterprises. Parsons generally agrees with the critics of the 1920s compromise: the historical allocation of taxing authority between source and residence countries fails in the world of today. Under longstanding international tax norms, market countries—in which an enterprise’s goods and services are consumed or used—receive little consideration and less tax revenue. Parsons, among many others, sees justice in transferring some measure of taxing authority to these market countries. The sticky question—and where Parsons shows her careful creativity—is how policymakers should address this shared goal.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Davis’s Taxing Choices

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Tessa Davis (South Carolina), Taxing Choices, 15 Fla. Int'l U. L. Rev. __ (2022).

Choice is often bandied about in tax discussion. Indeed, the very notion of marginal effects that taxation is based on the idea of either inducing or avoiding such inducement of choices. We also use choice as a proxy to determine what should count or not count as an item of income or deduction. But as Tessa Davis argues in her piece Taxing Choices, forthcoming in the Florida International University Law Review, there is a choice problem in taxation. Too often, we use choice and related concepts like neutrality, to hide our value judgments and normative frames. In pushing an idea called “choice as heuristic” and in drawing from some of the debates about choice in Contract Law, Davis forces us to rethink what we are doing when we use the concept of choice in our tax discussions.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Aprill's Governmental And Semi-Governmental Federal Charitable Entities

This week, Michelle Layser (Illinois; Google Scholar) reviews Ellen Aprill (Loyola-L.A.; Google Scholar), Governmental and Semi-Governmental Federal Charitable Entities (2022).

The federal tax deduction for charitable contributions is sometimes defended on the theory that charitable organizations provide public goods that may be under-produced by the government. This understanding of tax-exempt nonprofits imagines charities as existing in a sphere that is separate and distinct from the government. Professor Ellen Aprill challenges the conventional view, arguing that government and charities are better understood as “resting on a continuum rather than in separate spheres.”

Aprill begins by reviewing the basics of the charitable contribution deduction under I.R.C. § 170. Contributions to 501(c)(3) nonprofits, commonly called charitable organizations, are undoubtedly the most familiar deductible donations. But Aprill points out that section 170 also authorizes a deduction for contributions or gifts to the United States, provided that the gifts are used for “exclusively public purposes.” In other words, taxpayers can claim a charitable contribution deduction for gifts to the federal government itself. Congress can also authorize federal agencies to accept charitable deductions, and in some cases it has done so. In a sense, the federal government and its agencies represent an extreme end of the spectrum of what Aprill calls “federal charitable entities.”

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Love's Measuring The Flow Of Partnership Income To Tax Havens

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by Michael Love (Berkeley), Where in the World Does Partnership Income Go? Evidence of a Growing Use of Tax Havens.

In 2016, in The Hidden Wealth of Nations, UC Berkeley Associate Professor of Economics Gabriel Zucman quantified the amount of the world’s assets held in tax havens, clarified the ways large-scale tax evasion undermined global markets, and explained the connection between tax evasion and financial, budgetary and democratic crises occurring throughout the world. He argued that tax evasion can be stopped, but only if we have statistics to measure it, if we implement policies and penalties to address it, and if we monitor our progress. In his recent research, Michael Love has made important progress in measuring the flow of partnership income to tax havens and monitoring the effects of the Foreign Account Tax Compliance Act (FATCA) in improving reporting and compliance by U.S. investors.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Warren's Evaluating The Oxford Corporate Cash Flow Tax Proposal

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Alvin C. Warren Jr. (Harvard), Evaluating the Oxford Proposal for a Corporate Cash Flow Tax, 173 Tax Notes Fed. 1223 (Nov. 29, 2021).  

Many tax commentators would remember the discourse on the proposed "destination-based cash flow tax (DBCFT)" during the presidential election debate in 2016-17. Although I lamented the acronym of the proposal, DBCFT, as an unwelcome addition to the already-crowded alphabet soup in tax law, such as CFC, ECI, PE, TOB, CEN, CIN, UBIT, DRD, GILTI, and so on, I enjoyed the concept itself, which is to replace the traditional corporate income tax with taxation of a corporation's domestic cash flow. I particularly enjoyed the comments by Michael Devereux (Oxford) and Alan Auerbach (Berkeley), who are renowned experts in business cash flow taxation. The DBCFT proposal was not included in the Tax Cuts and Jobs Act (TCJA) of 2017.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Layser's Financing Affordable Housing Through Opportunity Funds

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Michelle D. Layser (Illinois; Google Scholar), Financing Affordable Housing Through Opportunity Funds, 19 Pitt. Tax Rev. __ (2022):

Affordable housing is a national challenge, now more than ever. While the idea is not new, utilizing the tax system to incentivize creation of affordable housing has been endorsed by current and previous administrations. The Opportunity Zone Fund and the Opportunity Zones tax incentive are programs that provide tax relief to taxpayers who would otherwise be subject to the capital gains tax but choose to invest in low-income communities.  Specifically, they provide deferral of capital gains from sale if gains are reinvested in an opportunity fund; they make available partial exclusion of pre-investment gains if kept for five years (through increases in basis); and they offer complete exclusion for post-investment gains if held for ten years.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Infanti's Tax And Time: On The Use And Misuse Of Legal Imagination

This week David Elkins (Netanya, visiting NYU 2021-2022; Google Scholar) reviews a new paper by Anthony C. Infanti (Pittsburgh; Google Scholar), Tax and Time: On the Use and Misuse of Legal Imagination (NYU Press 2022). 

Time is one of the more perplexing phenomena of the universe. Astrophysicists distinguish between what they call “real time” (time as we experience it, as a series of continuous moments moving from the past to the future) and “imaginary time” (time as viewed from outside the time-space continuum, as a unitary whole with past, present, and future existing simultaneously). However, lest we misinterpret the terms, real time is not more real than imaginary time, and imaginary time is not more imaginary than real time. The terms “real” and “imaginary” simply refer to the real and imaginary axes in Cartesian complex number coordinates. In fact, in ordinary language, it is probably more accurate to describe imaginary time as “real” (an objective portrayal of the universe) and real time as “imaginary” (our psychological perception of the flow of time). One example of the complexities that arise in this field is the conundrum of the arrow of time: Why do we remember the past, but not the future? Why do we experience time as always flowing in one direction? The arrow of time has intrigued philosophers also. Why is the knowledge that I am to experience future pleasure preferable to the knowledge that I experienced past pleasure? Why is knowledge that I am to experience future pain more disconcerting than the knowledge than I experienced pain in the past?

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Zelinsky's The Proposed Regs On ESG Investing

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by Edward A. Zelinsky (Cardozo), Comments to the Department of Labor Proposed ERISA Regulations, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” amending and restating 29 CFR §2550.404a-1.

The Employee Retirement Income Security Act of 1974 (ERISA) protects retirement plan participants and beneficiaries in a variety of ways. Under ERISA, pension plans must meet certain standards with respect to (i) participation, identifying who may participate, (ii) vesting, establishing how long those individuals must work to receive retirement funds, (iii) funding, determining the minimum amount of funds that must be set aside to pay future plan participants, (iv) management, requiring fund managers to adhere to a fiduciary standards, handling funds prudently and in the best interests of plan participants, and (v) disclosure, requiring plan managers to inform participants of their rights and the financial status of the plan. The Department of the Treasury and the Internal Revenue Service oversee plan participation, vesting, and funding. Participants in qualifying plans enjoy tax deduction and deferral benefits. They also retain the right to sue to recover earned benefits. The Department of Labor regulates fiduciary standards and requirements for reporting and disclosure of financial information.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Lederman’s Best Practices In Tax Rulings Transparency

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Leandra Lederman (Indiana-Maurer; Google Scholar), Best Practices In Tax Rulings Transparency.

Justice Brandeis once said that “sunlight is the best disinfectant.” Disclosure and transparency are often important for the legitimacy of government. In her article, Best Practices in Tax Rulings Transparency, Leandra Lederman not only creates a new typology for thinking about the costs of tax rulings in the dark, but also convincingly argues that many of the concerns against broader transparency of tax rulings is weak.

Tax rulings, as described by Lederman are rulings made by a tax authority or authorities to a specific taxpayer based on specific facts. For U.S. readers, the two most known in federal practice are Private Letter Rulings (PLRs), which speak to a specific taxpayer’s transaction, and Advanced Pricing Agreements (APAs), which fixes how the IRS will handle transfer pricing issues for a taxpayer over the course of about 3 to 5 years. In the U.S. context, PLRs are made public after a period with redactions of specifics regarding the taxpayer and their transactions, but APAs in the U.S. are never released widely.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews Field’s Taxpayer Choices, Itemized Deductions, And The Federal And State Tax Systems

This week, Michelle Layser (Illinois; Google Scholar) reviews Heather M. Field (UC Hastings; Google Scholar), Taxpayer Choices, Itemized Deductions, and the Relationship Between the Federal & State Tax Systems, 13 Col. J.Tax L. __ (forthcoming 2021).

Some of most significant changes implemented under the Tax Cuts & Jobs Act of 2017 (the “TCJA”) were an increased standard deduction and the scaling back of several itemized deductions. Together, the anticipated impact of these changes was to dramatically reduce the number of taxpayers who report itemized deductions on their tax returns. Proponents touted these changes as a simplification measure. But how well did it work?

In a new article, Professor Heather Field provides empirical evidence to suggest that itemization rates fell considerably more in some states than others, and in some states, the TCJA may have even complicated tax filing more than it simplified it. Field demonstrates that these geographic disparities can be traced to states’ different approaches to conformity with federal law. Not only do these findings have important implications for how we understand the impact of the TCJA, but they also show how state law can interact with federal law in ways that undermine federal policy.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Taxing Buybacks By Hemel & Polsky

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Daniel J. Hemel (Chicago; Google Scholar) and Gregg D. Polsky (Georgia; Google Scholar), Taxing Buybacks, 38 Yale J. Reg. 246 (2021).

Before the COVID-19 pandemic, one of the hottest topics in the U.S. capital market was the rise in the volume of corporate share repurchases, also known as stock buybacks. In 2018, U.S. corporation stock buybacks topped $1 trillion, a record-breaking volume. In 2019, stock buybacks remained the single biggest source of demand for U.S. public equity. Despite the pandemic in 2020, stock buybacks continued to be in high demand. This trend has attracted attention from commentators and bipartisan politicians who have raised concerns about the surge. In recent days, most recent criticisms have focused on securities law issues; however, tax scholars have been considering the problem for decades. A monumental example is Marvin A. Chirelstein's seminal article, Optional Redemptions and Optional Dividends: Taxing the Repurchase of Common Shares, published in the Yale Law Journal in 1969.    

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Automated Government For Vulnerable Citizens — Intermediating Rights

This week, Sloan Speck (Colorado; Google Scholar) reviews a new paper by Sofia Ranchordás (University of Groningen) & Luisa Scarcella (University of Antwerp), Automated Government for Vulnerable Citizens: Intermediating Rights, 30 Wm. & Mary Bill Rts. J. ___ (2021).

In Automated Government for Vulnerable Citizens, Sofia Ranchordás and Luisa Scarcella survey the landscape of digital governmental services, concluding that, while these automated mechanisms may enhance convenience and efficiency for some, they inflict differential effects on vulnerable populations and often entrench existing disparities. Prominent in the authors’ analysis (and in governments’ digital transitions) is tax compliance: in particular, electronic return preparation and algorithmic enforcement. Ranchordás and Scarcella conclude by offering various prescriptions to ameliorate the digital revolution’s disproportionate harms and promote humanity—literal and metaphorical—in public administration.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Pratt's Learning To Live Without Form 1040

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Katherine Pratt (Loyola-L.A.; Google Scholar), Learning to Live Without Form 1040, 75 Tax Law. __ (2022).

From its inception, our federal revenue system has been based on income rather than consumption. Over the year, there have been numerous failed academic and practical proposals to switch to a consumption tax base, mainly for the latter’s promise for greater simplicity and administrability. Accordingly, we came to accept the fact that our system is so deeply ingrained in the concept of income that the transformation to a consumption tax base (such as the VAT and GST prominent in other countries) has become purely theoretical at this point.

Nonetheless, this Article is not another academic exercise. Pratt points out that the switch to consumption tax is extremely relevant today (and even more than ever) in light of the growing inequity gap and erosion of anti-poverty programs. With the diminished share of corporate tax revenues and multinational tax transfers, fulfilment of the growing need for alternative sources of revenues lies with Federal consumption taxes. 

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Hasen's Debt And Taxes

This week, David Elkins (Netanya, visiting NYU 2021-2022) reviews a new paper by David Hasen (Florida; Google Scholar), Debt and Taxes, 12 Columbia J. Tax L. 89 (2021).

As indicated by its whimsical title, David Hasen’s well-written paper considers the tax treatment of debt. Under the standard view, in exchange for the loan proceeds, the borrower commits to paying the lender interest and, eventually, repaying the loan proceeds. Because of the obligation to repay, the borrower does not report income on receipt of the loan proceeds. The idea is that income is accession to wealth, and wealth, in turn, is assets minus obligations. Increasing one’s assets (i.e., the cash received) and one’s liabilities by the same amount does not cause any change to one’s wealth. Similarly, for the lender, the cash is replaced by the borrower’s obligation. Thus, while the composition of the lender’s assets undergoes a transformation, the value of the assets remains the same and the lender cannot deduct the loan proceeds.

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Weekly SSRN Tax Article Review And Roundup: Sarkar Reviews Rationalizing The Arbitrary Foreign Tax Credit By Barry And Kleiman

This week, Shayak Sarkar (UC-Davis) reviews Jordan Barry (USC) & Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Rationalizing the Arbitrary Foreign Tax Credit, 74 Tax L. Rev. __ (2022).

In a globalized world, taxpayers often answer to multiple sovereigns. The United States, with its unique worldwide taxation system, addresses this reality with the century-old Foreign Tax Credit (FTC).  In Rationalizing the Arbitrary Foreign Tax Credit, 74 Tax L. Rev. ___ (2022), Jordan Barry and Ariel Jurow Kleiman provide a far-reaching but precise perspective on this credit’s many limitations.

They begin by taking the Supreme Court to task for its questionable algebra in the primary case on the foreign tax credit, PPL v. Commissioner, 569 U.S. 329 (2013). o There, the Justices characterized the United Kingdom’s Windfall Tax as a creditable “pure” income tax, despite a similar tax that the regulations deemed noncreditable.  From this tenuous distinction (given the possibility of infinite algebraic manipulation), Barry and Kleiman revisit and rebuild the foundations of the FTC.

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Weekly SSRN Tax Article Review And Roundup: Speck Reviews Two New Papers By Kleiman And Widiss

This week, Sloan Speck (Colorado; Google Scholar) reviews new works by Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Revolutionizing Redistribution: Tax Credits and the American Rescue Plan, 131 Yale L.J. F. __ (2021) and Deborah A. Widiss (Indiana; Google Scholar), Chosen Family, Care, and the Workplace, 131 Yale L.J. F. __ (2021).

Historically, the American legal system has struggled to adequately recognize and accommodate individuals’ lived experiences of family and care relationships. Over the last two decades, however, there has been a veritable revolution in legislative, regulatory, and judicial positions regarding “nontraditional” family structures. In many ways, public and private responses to the COVID-19 pandemic accelerated and intensified this shift. In separate essays, Ariel Kleiman and Deborah Widiss explore and evaluate pandemic-era government actions in taxation and workplace leave (respectively) that implicate families and care, situating these most recent changes within larger narratives of social provisioning and asking how these changes should influence future policy. Both authors are optimistic but cautionary: we collectively face a tremendous opportunity to advance and cement more inclusive understandings of family and care. How this opportunity unfolds may establish the American welfare state’s trajectory for years to come.

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Weekly SSRN Tax Article Review And Roundup: Layser Reviews The Trouble With Targeting Tax Shelters By Blank & Glogower

This week, Michelle Layser (Illinois; Google Scholar) reviews Joshua D. Blank (UC-Irvine; Google Scholar) and Ari D. Glogower (Ohio State; Google Scholar), The Trouble with Targeting Tax Shelters, 74 Admin. L. Rev. __ (2022).

The subject of tax avoidance hit the headlines a couple weeks ago when news organizations began to publish analyses of the Pandora Papers. The leaked documents contain confidential records related to offshore accounts held by “130 Forbes billionaires, as well as celebrities, fraudsters, drug dealers, royal family members and leaders of religious groups around the world” (ICIJ). Among other things, analyses of the Pandora Papers illustrate the challenges governments face when trying to detect and deter abusive tax avoidance strategies used by the ultra-wealthy. Though the problem itself is not new, Professors Joshua Blank and Ari Glogower argue that a recent Supreme Court case, CIC Services, LLC v. Internal Revenue Service, may have made it even harder for the IRS to target tax shelters.

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Seto’s Modeling The Welfare Effects Of Advertising

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Theodore P. Seto (Loyola-L.A.; Google Scholar), Modeling the Welfare Effects of Advertising: Preference-Shifting Deadweight Loss, 75 Tax L. Rev. ___ (2022).

Advertising is ubiquitous. Ads appear in almost every form of media from newspapers to television. Today, advertising is more powerful, with large tech companies using data collected on their users to create and sell targeted ads. The question for economics, and by extension tax policy, is do these advertisements influence our consumption patterns and how does that affect optimal tax theory. Ted Seto’s new piece, forthcoming in the Tax Law Review, Modeling the Welfare Effects of Advertising: Preference-Shifting Deadweight Loss reveals how the preference-shifting forces us to change our thinking about optimal tax theory.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Building Better Conservation Easements

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by K. King Burnett, John D. Leshy (UC-Hastings), and Nancy A. McLaughlin (Utah), Building Better Conservation Easements for America the Beautiful, 45 Harv. Envtl. L. Rev. Online ___ (2021).

In May, the Biden Administration released a report developed by the Departments of Commerce, Interior, and Agriculture, and the Council on Environmental Quality, “Conserving and Restoring America the Beautiful,” which announced a new initiative to conserve 30 percent of the nation’s land and waters by 2030. Professors Arthur Middleton (UC Berkeley) and Justin Brashares (UC Berkeley), note in their New York Times op/ed, that additional lands twice the size of Texas will need to be conserved to achieve this goal. Given that more than half of U.S. forests and two-thirds of the species on the Endangered Species List have their primary habitat on private lands, they argue that conservation easements provide the key pathway to conservation at this scale. 

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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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