Law Commons^™

Re-Evaluating Turnover/Gross Receipts Taxes: Their Myths And Their Realities, Richard Pomp

Faculty Articles and Papers

Turnover taxes have a storied history dating back to ancient Athens, and are starting to make a comeback in the States. A gross receipts or turnover tax is levied every time a good or service “turns over,” that is, transferred from one entity to another for consideration. The resulting gross receipt is subject to tax. The tax base is “turnover” and the measure of the tax is “gross receipts.”

A turnover tax applies to both services and tangible items ranging from sales of business inputs to sales to end users alike; in essence it taxes business activity, whereas a retail …

Turnover Taxes: Their Origin, Fall From Grace, And Resurrection, Richard Pomp

Faculty Articles and Papers

The turnover tax, a hallmark of developing nations and even once blamed for Spain’s decline, has made a comeback in the states, starting with Ohio.

A turnover tax is a gross receipts tax that is applied every time a good or service “turns over,” that is, every time the good or service transfers from one entity to another for consideration. The tax base is therefore turnover, and the measure of the tax is gross receipts.

In this article, Professor Richard Pomp examines the turnover tax’s deep roots dating back to ancient Athens, and tracks its course from the time the …

Resisting The Siren Song Of Gross Receipts Taxes: From The Middle Ages To Maryland’S Tax On Digital Advertising-Abstract, Richard Pomp

Faculty Articles and Papers

A turnover tax, more commonly known as a gross receipts tax, has a long and sordid history. The tax has ancient roots, first appearing when economies were primitive and underdeveloped, with few alternatives for raising revenue. A turnover tax makes no pretense of taxing profits, income, consumption, wealth, or other bases that have come to be accepted as legitimate around the world. Instead, it taxes business activity, and is fundamentally different in concept, and inferior to, either a well-designed retail sales tax or a value-added tax.

Economists throughout the ages have nearly universally condemned turnover taxes; some even blame the …

Responding To The Pandemic: A Case Study, Richard Pomp

Faculty Articles and Papers

This article describes how Connecticut, despite catching a fiscal break from the pandemic, has failed to seize the opportunity to enact meaningful reform targeted at its $90 billion debt.

The article begins by explaining why Connecticut fared well during the pandemic. Many wealthy taxpayers moved into Connecticut from New York City. The increase in their stock-market driven income taxes, as well the sales tax boost from secondary and tertiary purchases by homebuyers, has eliminated Connecticut’s short-term budget deficit. The State is sitting on a $3 billion rainy-day fund.

Next, the article examines several tensions between the democratic governor, Ned Lamont, …

Never Let A Good Crises Go To Waste, Richard Pomp

Faculty Articles and Papers

A problem with temporary tax study commissions is that by the time their findings are released, changes in the political environment may have rendered their suggestions worthless. Permanent standing commissions are needed. The temporary crisis of the current pandemic, an opportunity for tax reform, illustrates this point.

In this article, Professor Pomp argues for the creation of a permanent state body tasked with managing tax reform. It would perform research and analysis, educate legislatures about how current law operates, initiate proposals, and draft legislation. Being permanent, such a body would be proactive enough to respond to a temporary crisis.

In …

What Can The Oecd Learn From The States?, Richard Pomp

Faculty Articles and Papers

In this article, Professor Pomp argues that the OECD should look to the American states for insight into taxing cross-jurisdictional corporations. In the early 20th century, the states had to respond to the challenge of taxing domestic interstate corporations. While these corporations posed no tax problem at the federal level, states had to respond to the reality of corporations shifting profits into neighboring tax havens. They needed a better alternative to federal transfer pricing and sourcing rules. In the 1930’s, some states began combining domestic related entities.

The growth of multinational corporations created new problems for both the states and …

A Report To The Connecticut Office Of Policy And Management Regarding A Proposed Payroll Tax, Richard Pomp

Faculty Articles and Papers

This Report analyzes a 5% payroll tax that would be imposed on employers in the amount of the Connecticut wages they pay to their employees. An anticipated response to this tax is that employers would shift this tax to their employees by reducing their wages by the cost of the tax. In this case, there would also be a reduction of the existing personal income tax rates by 5 points, but only if there were a reduction in wages. The effect would be to eliminate the 3% and 5% brackets, and would only be applicable to wages; it would not …

Responding To Covid: How To Deal With Nearly $100 Billion In Wasted Incentives, Richard Pomp

Faculty Articles and Papers

This article urges policymakers to cut down on ineffective and costly tax expenditures. Tax expenditures aim to incentivize beneficial economic outcomes; the tax jurisdiction surrenders the right to a portion of its tax base in anticipation of economic benefits. While tax expenditures are not inherently bad or good, many believe that most tax incentive programs would fail a cost-benefit analysis.

Ideally, tax incentives target economic activity that would not occur in the absence of the incentive. And to be considered a success, the benefit of the activity must outweigh the cost of the incentive. For example, if the goal of …

Things Not Worth Doing Are Especially Not Worth Doing Poorly: The Maryland And Nebraska Taxes Of Digital Advertising, Richard Pomp

Faculty Articles and Papers

In this article, Professor Pomp reviews and critiques the recent attempts by Maryland and Nebraska to tax digital advertising.

Maryland has proposed a gross revenue tax on digital advertising with a progressive rate structure. Though the tax is based on Maryland revenue, the rate is determined by global revenue. While resembling an exemption with progression approach, commonly utilized in income taxes to assess a taxpayer’s ability to pay, gross receipts taxes like this one are not concerned with ability to pay. And the approach discriminates against taxpayers engaged in interstate commerce, since out-of-state business activity leads to a higher rate …

From 30,000 Feet Into The Weeds, Richard Pomp

Faculty Articles and Papers

In this article, Professor Pomp makes various predictions regarding the future of the tax law.

Artificial intelligence will continue to change the legal landscape. The IRS uses AI to predict the likelihood of nonpayment, abusive tax returns, underreporting, and nonfiling. It also uses AI to mine social media accounts for evidence of theft and tax fraud. AI also allows firms to analyze large data sets and predict how courts will resolve legal issues in tax cases.

Pomp predicts litigation surrounding the use of market-based sourcing arising from ambiguous terms like “benefit,” “delivery,” and “use.” He also expects litigation resulting from …

Myth Vs. Reality: Airbnb And Its Voluntary Tax Collection Efforts, Richard Pomp

Faculty Articles and Papers

In this report, Professor Pomp debunks the claims presented in several reports commissioned by the American Hotel and Lodging Association (Hotel Association). Despite hotel profits reaching all time highs, the Hotel Association has continued to attack Airbnb.

Part I serves as an introduction to Airbnb and its solution to an administrative challenge confronted by tax jurisdictions. Airbnb operates a platform that links guests looking for short-term rental opportunities with hosts offering such services.

There are potentially millions of hosts who are unaware that they are subject to municipal taxes on short-term rentals. Municipalities lack the resources required to track down …

The Disclosure Of Individual Tax Returns: A Historical Overview, Richard Pomp

Faculty Articles and Papers

In this article, Professor Pomp provides a historical overview of the debate and law surrounding public access to individual tax returns.

To fund the Civil War, the Revenue Act of 1862 imposed an income tax on individuals. At a time which predated reliable mail, the public was notified of their tax liabilities through newspaper advertisements.

In 1870, when the income tax had become unpopular, Congress prohibited the publication of tax returns. Public disclosure was revisited in 1913; by 1918 the public was permitted to view lists of individual taxpayers, though this information was not allowed to be published.

Fueled by …

Designing The Tax Treatment Of Litigation-Related Costs, Sachin Pandya, Stephen Utz

Faculty Articles and Papers

Defendants often deduct for income tax purposes their litigation-related costs, such as attorney fees and payments to settle claims or satisfy judgments. The result is often a large gap between the sticker price of settlements or judgments and their after-tax cost-what defendants really pay out of pocket. The problem: For every dollar that a defendant avoids in tax liability by, for example, deducting the damage awards it pays, the civil justice system falls that much short of its corrective justice or optimal-deterrence goals in that case. For this reason, the entire civil justice system should care about this question: How …

Modernizing The State Corporate Income Tax: Market-Based Apportionment For Content Providers, Richard Pomp

Faculty Articles and Papers

This Issue Paper discusses how technology has overtaken the traditional ways the states tax the income of “content providers” that operate broadcast and cable networks, sell advertising, and produce content such as movies and television programs. This content is licensed at wholesale to distributors and along with the advertising, is watched by customers of these distributors on their televisions, smart phones, tablets, gaming consoles, and computers— either in their homes or on the move.

The so-called “model” for taxing multistate businesses like content providers--the Uniform Division of Income for Tax Purposes Act (UDITPA)--was developed in 1957 and has been adopted …

Transparency And Taxation, Stephen Utz

Faculty Articles and Papers

An unexpectedly partisan political debate over redistributive tax measures has recently come to focus on fiscal transparency. In this debate, fiscal transparency and tax neutrality are often spoken of interchangeably. They are, however, distinct. Tax legislation is neutral if it does not influence economic choices. It is transparent if the public can understand how tax burdens are allocated and the reasons for their allocation. Neutrality and transparency differ therefore not only in their primary focus but also in the types of evidence that may support assertions concerning them. A feature of a tax system can only be said to be …

Section 7433'S Statute Of Limitations: How Courts Have Wrongly Turned A Taxpayer's Exclusive Sword Into The Irs's Shield Against Damages, Diana Leyden

Faculty Articles and Papers

Over twenty years ago, Congress took the extraordinary step of authorizing taxpayers to sue the Internal Revenue Service (“IRS”) for damages if the IRS engaged in “unauthorized collection action” when trying to collect a federal tax debt. For many years the IRS has generally been immune from any private action by three laws. Thus, fashioning a private cause of action against the IRS for damages was an extraordinary act. Congress expressly authorized taxpayers to bring a private cause of action against the United States for economic damages caused by “unauthorized collection.” Codified as section 7433 of the Internal Revenue Code, …

Chartism And The Income Tax, Stephen Utz

Faculty Articles and Papers

Although the identity of Chartism was bound up with political demands, many in the movement consistently pressed for the repeal of duplicative taxes on consumption and the introduction of even-handed taxation of land, capital and labour. Earlier popular radicals had asked for limited tax relief. Chartist leaders from the outset saw a link between fiscal problems and the democratic deficit prolonged by the Reform Act, insisting that a broader franchise would quickly lead to a broad direct tax. Novel features of their tax agenda emerged as they transformed views first aired in radical attacks on the replacement of workers with …

Report Of The Hearing Officer, Multistate Tax Compact Article Iv [Uditpa] Proposed Amendments, Richard Pomp

Faculty Articles and Papers

The Uniform Law Commission (ULC) promulgated its model Uniform Division of Income for Tax Purposes Act (UDITPA) in 1957. UDITPA provides a model law for dividing the income of a multistate corporation among the states in which it is doing business. UDITPA is incorporated into the Multistate Tax Compact, which is administered by the Multistate Tax Commission.

UDITPA has never been amended since its original adoption more than fifty years ago. The ULC attempted a revision in 2006 but abandoned it in response to business pressures. The MTC stepped into the vacuum and undertook its own reforms. It proposed five …

Tax Liability For Wage Theft, Sachin S. Pandya

Faculty Articles and Papers

This paper shows how, under existing tax law, illegal wage underpayment by an employer (sometimes called “wage theft”) may generate employer tax liability for unreported income or disallowed business expense deductions. Given that the tax authority needs information from the underpaid worker to prove such liability, the paper identifies two ways that a worker can transmit that information to a tax authority: becoming a tax informant, or bringing a qui tam action under a state false claims act. Finally, the paper discusses possible influences on the decision of the unpaid worker to inform on the employer to the tax authority, …

Tax Neutrality, Stephen Utz

Faculty Articles and Papers

Is tax neutrality an illusion? My honored friend Pierre Beltrame and his distinguished co-author Lucien Mehl once wrote: “[L]orsque le taux de l’impôt s’éléve, qu’il devient progressif, et que d’importantes masses monétaires sont redistribuées, le fait financier ne peut être neutre, stricto sensu, à l’égard, ni de l’ensemble de l’économie, ne de la répartition de revenu national” (Pierre Beltrame & Lucien Mehl, Techniques, Politiques et Institutions Fiscales Comparées, Presses Universitaires de France, Paris, 2d ed., 1997, p. 314). As they also observed, however, relative judgments of neutrality, judgments that purport to deal the neutrality of isolated elements of a tax …

Tax Reform In The Aftermath Of The Financial Crisis, Stephen Utz

Faculty Articles and Papers

No abstract provided.

Tax Reform In The Aftermath Of The Financial Crisis, Stephen Utz

Faculty Articles and Papers

No abstract provided.

Taxes And The 2008 Us Election, Stephen Utz

Faculty Articles and Papers

No abstract provided.

Taxes And The 2008 Election, Stephen Utz

Faculty Articles and Papers

No abstract provided.

A Policy Analysis Of Michigan's Mislabeled Gross Receipts Tax, Richard Pomp, Michael J. Mcintyre

Faculty Articles and Papers

On January 1, 2008, the State of Michigan implemented a new tax, labeled a modified gross receipts tax (MGRT). The label is misleading. The tax is not on gross receipts but rather on gross receipts reduced by "purchases from other firms," defined generally to include inventory purchased during the taxable year, capital purchases, and material and supplies. In some respects, the tax resembles a value-added tax (VAT), although it has some important features not found in a traditional VAT or in any known variation of that tax. The purpose of the MGRT, other than to raise revenue, is unclear on …

Taxing Smarter And Fairer: Proposals For Increased Accountability And Transparency In The Connecticut Tax Structure, Richard Pomp

Faculty Articles and Papers

The Connecticut tax structure contains glaring defects, especially in the corporate income tax, which have allowed it to hemorrhage to a point where, for some of the largest corporations in the state, it is essentially a voluntary tax. The corporate income tax must be revitalized in order to reduce the massive losses that have resulted from both an aged tax infrastructure and the Legislature’s failure to equip the Department of Revenue Services with a statutory regime to slow the erosion of the tax base.

This Report discusses how and why Connecticut’s rickety tax structure is resulting in a loss of …

Liking To Be In America: Puerto Rico's Quest For Difference In The United States, Ángel Oquendo

Faculty Articles and Papers

No abstract provided.

Allocation And Reallocation In Accordance With The Partners' Interests In The Partnership, Stephen Utz

Faculty Articles and Papers

If a partnership agreement either fails to allocate an item of partnership income, gain, deduction, credit, or loss, or does so invalidly, section 704(b) requires the item to be allocated in accordance with the partners' interests in the partnership (PIP). A brief portion of the section 704(b) regulations interpret this reallocation standard, providing guidelines of varying specificity. Commentators agree that the guidelines are vague and puzzling. The courts have not often had to apply this portion of the regulation. However, in the event that the courts do employ section 704(b), they have assigned an implicit priority to the different guidelines, …

Ability To Pay, Stephen Utz

Faculty Articles and Papers

There is broad agreement that a fair tax should be imposed in accordance with taxpayers' ability to pay. A utility-based interpretation of this standard, used in most tax policy discussions today, does not adequately reflect the its historical development and cannot escape long standing and devastating criticisms from within welfare economics and on other general grounds. This article traces the history of ability to pay, with special reference to the standard's emergence along with the British and German income tax laws, and in the theoretical literature that followed the adoption of income tax laws there and elsewhere. The article concludes …

Determining A Partner's Share On Unrealized Receivables At The Liquidation Of The Partner's Interest, Stephen Utz

Faculty Articles and Papers

Partnership law allows partners great freedom to vary the terms on which they share partnership profits from different sources. Partnership tax law, however, seems to presume, for purposes of the collapsible partner rules, that partners will share the revenue from the collection of receivables always in proportion to the value of their partnership interests. This counterfactual presumption exposes both the government and partner/taxpayers to unfortunate consequences. A substance-over-form approach to the attribution of unrealized receivables would certainly be unworkable, because too costly and intrusive to administer. Something between substance-over form and form-over-substance would best implement the policy of Subchapter K …