Law Commons^™

Heading Off A Cliff? The Tax Reform Man Cometh, And Goeth, Michael J. Graetz

Faculty Scholarship

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even …

A Guide To The Guide To The Republican Better Way Plan, Alex Raskolnikov

Faculty Scholarship

This special Issue of the Columbia Journal of Tax Law is bound to have both an immediate impact and a lasting significance. The immediate impact is assured because the sole focus of this Issue is the tax plan proposed by the Congressional Republicans as part of their broad reform agenda called A Better Way: Our Vision For A Confident America. As this Issue goes to print, the Better Way Plan (or the Plan for short) is being debated in the White House, on Capitol Hill, in the press, in academic circles, think tanks, the U.S. Chamber of Commerce, and …

Accepting The Limits Of Tax Law And Economics, Alex Raskolnikov

Faculty Scholarship

This Article explores the limits of tax law and economics, attributing them to the unique complexity of the tax optimization problem. Designers of the optimal tax system must account for the impossibility of deterring socially undesirable behavior, provide for redistribution, and minimize social costs on the basis of assumptions that are laden with deeply contested value judgments, pervasive empirical uncertainty, or both. Given these challenges, it is hardly surprising that economic theory has a much weaker connection to the content of our tax laws and their enforcement than it does to the content and enforcement of many other legal regimes. …

Technological Innovation, International Competition, And The Challenges Of International Income Taxation, Michael J. Graetz, Rachael Doud

Faculty Scholarship

Because of the importance of technological innovation to economic growth, nations strive to stimulate and attract the research and development ("R&D") that leads to that innovation and to make themselves hospitable environments for the holding of intellectual property ("IP"). Tax policies have taken center stage in their efforts to accomplish these goals and to capture a share of the income from technological innovations.

Designing cost-effective methods of supporting technological innovations has, however, become substantially more difficult as the world economy has become more interconnected. Where R&D is performed and where income is earned change in response to the nature and …

Foreword, David M. Schizer

Faculty Scholarship

I would like to congratulate the editors and staff of the Columbia Journal of Tax Law on their inaugural edition. It is very exciting for me to participate in the birth of a new journal in an area of such importance to financial and economic policy.

The Cost Of Norms: Tax Effects Of Tacit Understandings, Alex Raskolnikov

Faculty Scholarship

Most human interactions take place in reliance on tacit understandings, customary practices, and other legally unenforceable agreements. A considerable literature studying these informal arrangements (commonly referred to as social norms) has a decidedly positive flavor, arguing that many, if not most, of these norms are welfare enhancing. This Article looks at the less-appreciated darker side of social norms. It combines an analysis of modern sophisticated tax planning techniques with existing empirical studies of commercial relationships to reveal a disturbing connection. By relying on tacit understandings rather than express contractual terms, many taxpayers shift some of their tax liabilities to those …

The "Original Intent" Of U.S. International Taxation, Michael J. Graetz, Michael M. O'Hear

Faculty Scholarship

The Sixteenth Amendment took effect on February 25, 1913, permitting Congress to tax income "from whatever source derived," and on October 3rd of that year, Congress approved a tax on the net income of individuals and corporations. The United States regime for taxing international income took shape soon thereafter, during the decade 1919-1928. In the Revenue Act of 1918, the United States enacted, for the first time anywhere in the world, a credit against U.S. income for taxes paid by a U.S. citizen or resident to any foreign government on income earned outside the United States. The Revenue Act of …

Tax Policy At The Beginning Of The Clinton Administration, Michael J. Graetz

Faculty Scholarship

Ten years ago, in 1983, the Yale Journal on Regulation was started by students at the Yale Law School to foster scholarship and debate on issues of regulatory policy. Today the Journal staff consists of students from Yale University graduate and professional programs in law, management, forestry, and public health. One of the Journal's primary missions was to track the regulatory/deregulatory developments under the Reagan Administration and later the Bush Administration. Since our tenth anniversary coincided with the installment of a Democratic Administration under President Clinton, we have asked two professors at the Yale Law School to submit an essay …

The Truth About Tax Reform, Michael J. Graetz

Faculty Scholarship

The Tax Reform Act of 1986 has been widely heralded as the most important tax legislation since the income tax was converted to a tax on the masses during the Second World War. Since his favorite proposal for a constitutional amendment – the one calling for a balanced budget – was not adopted, the 1986 Tax Reform Act clearly will be the major domestic achievement of Ronald Reagan's presidency. This law even produced the new Internal Revenue Code of 1986; no more Internal Revenue Code of 1954, as amended. It took until the very end of 1987 until we were …

To Praise The Estate Tax, Not To Bury It, Michael J. Graetz

Faculty Scholarship

For several decades, total revenues raised by estate and gift taxes have roughly equaled those raised by excise taxes on alcohol and tobacco. Yet no law journal has ever asked me to write on alcohol or tobacco excise taxes. The law firms of America do not routinely have divisions devoted to excise tax planning. We do not hear of the suffering of widows and orphans (or even of farmers and small businesses) because of alcohol and tobacco taxes. Philosophers and economists do not routinely debate the merits of such taxes. Perhaps most significantly, increases in such excise taxes do not …

The 1982 Minimum Tax Amendments As A First Step In The Transition To A "Flat-Rate" Tax, Michael J. Graetz

Faculty Scholarship

The massive body of tax legislation enacted in the first two years of the Reagan Administration offers little guidance for predicting the future direction of United States tax policy. Dramatically different Congressional coalitions – each led by the President – passed by very narrow margins the nation's largest tax reduction (the Economic Recovery Tax Act of 1981) and then the next year enacted the largest peacetime tax increase (the Tax Equity and Fiscal Responsibility Act of 1982). In each case, short-term political and fiscal concerns dominated the debates. The 1981 legislation reduced taxes in an effort to stimulate economic activity …