Law Commons^™

Phased Mark-To-Market For Billionaire Income Tax Reforms, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this installment of Academic Perspectives on SALT, Gamage and Shanske advocate for phased mark-to-market as a mechanism for reforming the taxation of investment gains of billionaires and megamillionaires.

Weathering State And Local Budget Storms: Fiscal Federalism With An Uncooperative Congress, David Gamage, Darien Shanske, Gladriel Shobe, Adam Thimmesch

Articles by Maurer Faculty

Throughout most of 2020, state and local governments faced severe budget crises as a result of the COVID-19 pandemic. Increased demand for state welfare services and rising state expenses related to controlling the spread of COVID-19 stretched state and local budgets to their breaking points. At the same time, layoffs, business closures, and social distancing measures reduced states’ primary sources of tax revenues. The traditional practice of American fiscal federalism is for the federal government to step in to provide aid during a national emergency of this magnitude, because state and local governments lack the federal government’s monetary and fiscal …

Why A Federal Wealth Tax Is Constitutional, Ari Glogower, David Gamage, Kitty Richards

Articles by Maurer Faculty

The 2020 Democratic presidential primaries brought national attention to a new direction for the tax system: a federal wealth tax for the wealthiest taxpayers. During their campaigns, Senators Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) both introduced proposals to tax the wealth of multimillionaires and billionaires, and to use the revenue for public investments, including in health care and education. These reforms generated broad public support—even among many Republicans—and broadened the conversation over the future of progressive tax reform.

A well-designed, high-end wealth tax can level the playing field in an unequal society and promote shared economic prosperity.

Critics have …

Valuation As A Challenge For Tax Administration, Leandra Lederman

Articles by Maurer Faculty

Valuation issues have long posed challenges for the U.S. federal tax system. This is not just because of questions about what technique will most accurately value particular types of property. A key problem for tax administration is that taxpayers have a financial incentive to claim erroneous, self-serving valuations. This Essay analyzes tax valuation through this tax compliance lens. In so doing, it highlights the importance that third parties to the taxpayer-government relationship act at arm’s length from the taxpayer. It also explains why penalties are insufficient to deter erroneous self-reported valuations. The Essay also draws on the tax compliance perspective …

How To Measure And Value Wealth For A Federal Wealth Tax Reform, David Gamage, Ari Glogower, Kitty Richards

Articles by Maurer Faculty

Over the last several decades, wealth inequality has exploded, warping economic outcomes and limiting opportunity—for individuals and for the US at large.

Sky-high income inequality and runaway income gains for the nation’s highest earners compound that wealth inequality and are insufficiently taxed under the current tax regime.

Further, wealth in the US has always been heavily skewed by race.

Since the country’s founding, US laws and customs have prevented Black and brown people from receiving fair wages and accruing assets, thereby creating and perpetuating today’s massive racial wealth gap.

While our existing tax systems are ill-equipped to tackle these challenges, …

The Case For State Borrowing As A Response To The Current Crisis, David Gamage, Darien Shanske

Articles by Maurer Faculty

The coronavirus pandemic is a national emergency that requires a national response. Asking states to absorb the budgetary losses caused by the pandemic while they are tasked with providing essential frontline services is comparable to asking states during World War II to pay for the landing in Normandy.

This article is a contribution to Project SAFE: State Action in Fiscal Emergencies. We have already argued, more than once, that the federal government should borrow to prevent steep state and local budget cuts. But because the federal government will apparently not take sufficient action, we offer these ideas to states for …

Strategic Nonconformity To The Tcja, Part I: Personal Income Taxes, Darien Shanske, Adam Thimmesch, David Gamage

Articles by Maurer Faculty

The dire revenue situation that COVID-19 has created for state and local governments is a well documented and looming reality for state legislatures. We and others have explored a variety of ways that states should respond to this crisis in prior articles as a part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research. We think, as do many others, that in the absence of sufficient federal action, the states should prioritize raising revenue through targeted taxes on economic actors that are best enduring …

Conformity And State Income Taxes: Suggestions For The Crisis, David Gamage, Michael A. Livingston

Articles by Maurer Faculty

To guarantee adequate revenue in the postCOVID-19 era, state governments should consider using all possible tools at their disposal. This article explains how and why state governments should evaluate their degree of conformity with federal tax changes in order to achieve this purpose.

States Should Consider Partial Wealth Tax Reforms, David Gamage, Darien Shanske

Articles by Maurer Faculty

This article is a contribution to Project SAFE (State Action in Fiscal Emergencies). In other essays in this project, we explain steps the federal government should take to help state and local governments cope with their looming budget crises. The federal government is much better positioned to manage these crises than states and localities and, ideally, it would act sufficiently to prevent the need for state and local governments to cut spending or raise taxes. However, we fear that the federal government may fail to act sufficiently, leaving states and localities with the need to make painful spending cuts, raise …

How The Federal Reserve Should Help States And Localities Right Now, Darien Shanske, David Gamage

Articles by Maurer Faculty

The COVID-19 pandemic is a giant catastrophe, but the Federal Reserve can still mitigate the looming fiscal crises facing state and local governments. This article — a contribution to Project SAFE (State Action in Fiscal Emergencies) — builds on our prior background essay explaining state and local budget issues.

States Should Quickly Reform Unemployment Insurance, Brian Galle, David Gamage, Erin Scharff, Darien Shanske

Articles by Maurer Faculty

COVID-19 is causing mass layoffs and related economic hardship, as well as budget crises for state and local governments. This article is part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research. This article will focus on how state governments should reform unemployment insurance (UI) eligibility and benefits and the taxes funding these programs.

Tax Cannibalization By State Corporate Taxes: Policy Implications, Darien Shanske, David Gamage

Articles by Maurer Faculty

The tax cannibalization problem is especially large for state corporate income taxes because state governments piggyback on a deeply flawed federal corporate tax base. In this article, we clarify a point of possible confusion about these issues and then discuss some policy implications.

Tax Cannibalization By State Corporate Taxes: Revised Estimates, David Gamage, Darien Shanske

Articles by Maurer Faculty

To what extent do our prior estimates for the tax cannibalization problem still apply post-2017? In this article we address that question, focusing on the implications of the reduced federal corporate income tax rate.

Will States Step Up In 2020? We Hope So, Darien Shanske, David Gamage

Articles by Maurer Faculty

We offer no predictions about the next year in tax, but we will offer what we hope will happen — if not next year, then soon. To paraphrase Chief Justice John Roberts, we hope that when it comes to the taxation of multinational corporations in particular, states will act more like the “separate and independent sovereigns” that they are. often rely on volatile revenue sources. More stable tax bases, like the sales tax and the property tax bases, are riddled with design flaws, from the sales tax base not including services and intangibles to the property tax failing to provide …

The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Gamage, David Kamin

Articles by Maurer Faculty

The 2017 tax legislation brought sweeping changes to the rules for taxing individuals and business, the deductibility of state and local taxes, and the international tax regime. The complex legislation was drafted and passed through a rushed and secretive process intended to limit public comment on one of the most consequential pieces of domestic policy enacted in recent history. This Article is an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage and describes key problem areas in the new legislation. Many of the new changes fundamentally undermine the integrity of the tax …

Why States Should Tax The Gilti, David Gamage, Darien Shanske

Articles by Maurer Faculty

A centerpiece of the 2017 federal tax legislation’s reforms to international corporate income tax rules is the new global intangible low-taxed income regime (or GILTI). In a prior essay, we argued that U.S. state governments should conform to GILTI. But might there be constitutional restrictions preventing state governments from doing so? This essay argues that state governments can constitutionally conform to the federal GILTI rules and thereby tax GILTI income as part of the states’ corporate income tax bases. However, in doing so, we explain that state governments will need to be attentive to background constitutional principles.

States Should Conform To Gilti, Part 3: Elevator Pitch And Q & A, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay argues that the states should conform to the post-2017 federal tax law's provision for Global Intangible Low-Taxed Income (or “GILTI”). This essay is directed at state legislators and their staffs and presents the argument as succinctly as possible.

Our argument can be summarized in three sentences. First, states should conform to GILTI because there is significant evidence that profit shifting is substantially eroding their corporate tax bases. Second, GILTI is a tool for identifying shifted profits. Third, there are many legally and analytically sound ways to apportion GILTI income to a state.

We also - briefly - counter …

Why States Can Tax The Gilti, David Gamage, Darien Shanske

Articles by Maurer Faculty

A centerpiece of the 2017 federal tax legislation’s reforms to international corporate income tax rules is the new global intangible low-taxed income regime (or GILTI). In a prior essay, we argued that U.S. state governments should conform to GILTI. But might there be constitutional restrictions preventing state governments from doing so? This essay argues that state governments can constitutionally conform to the federal GILTI rules and thereby tax GILTI income as part of the states’ corporate income tax bases. However, in doing so, we explain that state governments will need to be attentive to background constitutional principles.

Aba Rpte Conservation Easement Task Force Report: Recommendations Regarding Conservation Easements And Federal Tax Law, W. William Weeks

Articles by Maurer Faculty

Authors' Synopsis: In October 2015, the American Bar Association's Real Property, Trust and Estate Law (RPTE) section convened a Conservation Easement Task Force. The objective of the Task Force was to provide recommendations regarding federal tax law as it relates to conservation easements. This Report is the culmination of the Task Force's work. Part I of the Report is an Executive Summary of the Task Force's recommendations. Part II provides the background necessary to understand the Task Force's recommendations. Part III briefly sets forth the Task Force's comments on the Tax Cuts and Jobs Act of 2017 as it relates …

On Yang's Proposed Federal Tax On Subnational Tax Incentives, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay analyzes presidential candidate Andrew Yang’s proposal to tax subnational tax incentives for companies at a rate of 100 percent.

Does Enforcement Reduce Voluntary Tax Compliance?, Leandra Lederman

Articles by Maurer Faculty

Governments generally use enforcement methods, such as audits and the imposition of penalties, to deter noncompliance with tax laws. Although this approach is consistent with most economic modeling of tax compliance, some scholars caution that enforcement may backfire, “crowding out” taxpayers’ intrinsic motivations to pay taxes to such an extent that they reduce their tax payments. This article analyzes the existing evidence to determine if this occurs. In fact, field studies suggest that enforcement tools, such as audits, are effective deterrents, generally greatly increasing tax collections. A few recent studies have found that audits have a negative effect on the …

Increasing Transparency In The Us Tax Court, Leandra Lederman

Articles by Maurer Faculty

Transparency is a widely accepted judicial norm because it increases accountability. Access to U.S. Tax Court documents has long differed from access to the documents of other courts. For example, the Tax Court does not participate in PACER (Public Access to Court Electronic Records). This essay discusses some of the ways in which access to Tax Court documents has been restricted; areas in which the Tax Court has increased transparency over the years; upcoming changes; and where increased transparency is still needed, such as with respect to case statistics.

Wayfair: Substantial Nexus And Undue Burden, David Gamage, Darien Shanske, Adam Thimmesch

Articles by Maurer Faculty

This is the first of a series of essays wherein we analyze the U.S. Supreme Court’s decision in South Dakota v. Wayfair. In this essay, we tackle some of the more immediate interpretive questions raised by the Wayfair opinion, such as how a state should approach substantial nexus. As part of our analysis, we offer advice to state governments. Specifically, we recommend that states take note of the features of South Dakota’s law that appealed to the Court and replicate or improve on these to the extent possible. We advise states to consider simplifying their sales tax systems (and potentially …

Caveat Irs: Problems With Abandoning The Full Deduction Rule, David Gamage, Joseph Bankman, Jacob Goldin, Daniel J. Hemel, Darien Shanske, Kirk J. Stark, Dennis J. Ventry Jr., Manoj Viswanathan

Articles by Maurer Faculty

Several states have passed — and many more are considering — new tax credits that would reduce tax liability based on donations made by a taxpayer in support of various state, local or non-profit programs. In general, taxpayer contributions to qualifying organizations — including public charities and private foundations, as well as federal, state, local, and tribal governments — are eligible for the federal charitable contribution deduction under section 170. In a previous article, we explained how current law supports the view that qualifying charitable contributions are deductible under section 170, even when the donor derives some federal or state …

Why (And How) States Should Tax The Repatriation, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay analyzed how U.S. state tax laws should treat the repatriation income generated by the 2017 federal tax legislation.

Wayfair: Sales Tax Formalism And Income Tax Nexus, David Gamage, Adam Thimmesch, Darien Shanske

Articles by Maurer Faculty

This is the second of a series of essays wherein we analyze the U.S. Supreme Court's decision in South Dakota v. Wayfair. In this essay, we address issues related to sales tax formalism and income tax nexus.

State Responses To Federal Tax Reform: Charitable Tax Credits, David Gamage, Joseph Bankman, Jacob Goldin, Daniel Hemel, Darien Shanske, Kirk J. Stark, Dennis J. Ventry Jr., Manoj Viswanathan

Articles by Maurer Faculty

This paper summarizes the current federal income tax treatment of charitable contributions where the gift entitles the donor to a state tax credit. Such credits are very common and are used by the states to encourage private donations to a wide range of activities, including natural resource preservation through conservation easements, private school tuition scholarship programs, financial aid for college-bound children from low-income households, shelters for victims of domestic violence, and numerous other state-supported programs. Under these programs, taxpayers receive tax credits for donations to governments, government-created funds, and nonprofits.

A central federal income tax question raised by these donations …

Wayfair And The Retroactivity Of Constitutional Holdings, David Gamage, Adam Thimmesch, Darien Shanske

Articles by Maurer Faculty

This essay analyzes the issue of retroactivity with respect to the Supreme Court case of South Dakota v. Wayfair.

The Future Of Salt: A Broader Picture, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this essay, we evaluate the new cap on the state and local tax (SALT) deduction. We argue that the structure of the new cap is not consistent with any theory as to what the SALT deduction is or should be. In canvassing these theories, we further evaluate how future reforms to the SALT deduction might proceed.

Wayfair: Marketplaces And Foreign Vendors, David Gamage, Adam Thimmesch, Darien Shanske

Articles by Maurer Faculty

This is the third of a series of essays wherein we analyze the U.S. Supreme Court's decision in South Dakota v. Wayfair. In this essay, we address issues related to state taxation of internet marketplaces and of foreign vendors.