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.

Federalizing Tax Justice, Reuven Avi-Yonah, Orli Avi-Yonah, Nir Fishbien, Hayian Xu

Articles

The United States is the only large federal country that does not have an explicit way to reduce the economic disparities among more and less developed regions. In Germany, for example, federal revenues are distributed by a formula that takes into account the relative level of wealth of each state (the so-called Finanzausgleich, or fiscal equalization). Similar mechanisms are found in Australia, Canada, India, and other large federal countries. The United States, on the other hand, has no such explicit redistribution. Each state is generally considered equal and sovereign, and the federal government does not distribute revenues to equalize …

Stanley Surrey, The 1981 Us Model, And The Single Tax Principle, Reuven S. Avi-Yonah

Articles

2021 marks the fortieth anniversary of the 1981 US Model Tax Treaty as well as the fifth anniversary of the 2016 US Model Tax Treaty. The first author has repeatedly argued that the 1981 Model gave life to the single tax principle (‘STP’). The 2016 Model updates effectively implemented the principle that cross-border income should be taxed once – that is not more and but also not less than once. For example, the 2016 Model does not reduce withholding taxes on payments of highly mobile income that are made to related persons that enjoy low or no taxation with respect …

Why Study Tax History?, Reuven S. Avi-Yonah

Reviews

Since the beginning of this century, John Tiley organized an annual tax history conference at Cambridge, a tradition that was continued after his death under the leadership of Peter Harris. These are the papers from the ninthCambridge Tax Law History Conference, held in July 2018. In the usual manner, the papers have been selected from an oversupply of proposals for their interest and relevance, and scrutinized and edited to the highest standard for inclusion in this prestigious series. The result is an outstanding book, with many high quality contributions to historical tax research.

Tax Attorneys As Defenders Of Taxpayer Rights, Michelle Lyon Drumbl

Scholarly Articles

What is the modern role of a tax practitioner, in particular a tax attorney, in the United States? In an era in which the Internal Revenue Service (IRS) is underfunded, understaffed, and struggles to address its mission, tax attorneys play an important role as advocates for taxpayer rights.

Tax attorneys act as advocates who represent ordinary individual taxpayers in controversies with the IRS. These controversies include post-filing disputes, such as audits, as well as issues arising with the collection of assessed taxes. Many of these cases are resolved at the administrative level; those that cannot be resolved are litigated, most …

The Tcja And The Questionable Incentive To Incorporate, Part 2, Michael S. Knoll

All Faculty Scholarship

The Tax Cuts and Jobs Act (TCJA) has put the question should a business be organized as a passthrough entity or as a corporation at center stage. The TCJA eliminated much of the tax disadvantage from using the corporate form, but did Congress go so far that it advantaged corporations relative to pass-through entities? Some prominent commentators say yes. They argue that the federal income tax now encourages individual owners of pass-through businesses to restructure their business as subchapter C corporations, and they predict that the TCJA will lead to a cascade of incorporations. The principal driver of the shift …

The Tcja And The Questionable Incentive To Incorporate, Michael S. Knoll

All Faculty Scholarship

The Tax Cuts and Jobs Act (TCJA) has put the question should a business be organized as a passthrough entity or as a corporation at center stage. The TCJA eliminated much of the tax disadvantage from using the corporate form, but did Congress go so far that it advantaged corporations relative to pass-through entities? Some prominent commentators say yes. They argue that the federal income tax now encourages individual owners of pass-through businesses to restructure their business as subchapter C corporations, and they predict that the TCJA will lead to a cascade of incorporations. The principal driver of the shift …

The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Kamin, David Gamage, Ari Glogower, Rebecca Kysar, Darien Shanske, Reuven S. Avi-Yonah, Lily Batchelder, J. Clifton Fleming, Daniel Hemel, Mitchell Kane, David Miller, Daniel Shaviro, Manoj Viswanathan

Articles

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 …

America's (D)Evolving Childcare Tax Laws, Shannon Weeks Mccormack

Articles

Proponents have touted the ability of the Tax Cuts and Jobs Act (the TCJA) — enacted in the twilight of 2017 — to help American working families. But while the TCJA expanded some benefits available to parents with dependent children, these parental tax benefits may be claimed regardless of whether or to what extent childcare costs are incurred to work outside the home. To help working parents with these costs (which are often their largest expense), Congress might have turned to two other mechanisms in the tax law — the “child and dependent care credit” and the “dependent care exclusion.” …

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 …

The International Provisions Of The Tcja: Six Results After Six Months, Reuven S. Avi-Yonah

Law & Economics Working Papers

Over six months have passed since the enactment of the TCJA, so it is now possible to reach some preliminary conclusions on its impact. The main ones are:

1. The transition tax plus anticipated GILTI tax minus territoriality have resulted in higher GAAP effective tax rates for 2017. In some cases they approach 35% for large multinationals with a lot of offshore income. For the first six months of 2018, however, overall corporate tax revenues are sharply down because of the 21% rate plus expensing. This is the exact reverse of the situation before TCJA in which MNEs showed very …

Perils Of Tax Reform, James R. Hines Jr.

Articles

Tax reforms dangle possibilities of improving the tax system, but are fraught with perils that are evident from the 2017 U.S. experience and caution against frequent reforms of its ilk. The first peril is that reforms containing tax provisions selected simply on the basis of their projected revenue contributions will produce less tax revenue than anticipated, illustrative calculations suggesting shortfalls of roughly 8–16 percent. The second peril is that reforms will not advance the objectives of efficiency and tax equity to the extent that they include provisions intended to influence future tax legislation or government spending. The third peril is …

Was The Amt Effectively Repealed?, Reed Shuldiner

All Faculty Scholarship

The individual alternative minimum tax (AMT) was a much disliked feature of the tax law prior to the Tax Cuts and Jobs Act (TCJA). Yet, despite repeated promises to repeal the AMT as part of tax reform, the TCJA dropped AMT repeal in favor of increasing the AMT exemption and its phaseout threshold. The question raised by this development is whether the AMT changes should be viewed as yet another stop-gap tweak of the AMT or whether the changes should be viewed as returning the AMT to its roots as a tax on high-income taxpayers using excessive loopholes. In this …

The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos

Law & Economics Working Papers

The “Tax Cuts and Jobs Act” (TCJA) enacted on December 22, 2017 includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …

Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah

Law & Economics Working Papers

The Tax Cuts and Jobs Act (TCJA) includes several provisions that may be viewed as potential violations of US tax treaties. However, most of those potential violations, such as new IRC section 951A and to a large extent new IRC section 59A, are covered by the Savings Clause (US model article 1(4)). The only remaining question is whether IRC section 59A (the “Base Erosion Anti-Abuse Tax”, or BEAT) violates the non-discrimination provision (article 24), which is exempted from the Savings Clause. The answer is no, because foreign related parties are not comparable to US related parties receiving interest or royalties.

How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah

Law & Economics Working Papers

Overall, TRA17 is not much worse than TRA86 or TRA14. It increases the deficit, but not by an impossible amount; it is distributionally skewed, but less so than is usually assumed; and its details are not terrible (on the international side they are a big improvement over prior law). There is one big problem, the pass through provisions, and we can only hope that as its horrible implications unfold it will be a prime candidate for repeal.

The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Tax Cuts and Jobs ACT” (TCJA) enacted on December 22, 2017, includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …

A Destination-Based Cash Flow Tax Can Be Structured To Comply With World Trade Organization Rules, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

This paper briefly outlines alternative approaches to enacting a destination-based cash flow tax that are more clearly compatible with the World Trade Organization rules than the approach that has previously been described in the literature. The first structural alternative involves expanding the universe of businesses subject to the tax by clearly defining both the base of the new U.S. business tax and its tax nexus requirement as domestic consumption, and thereafter treating foreign importers and other sellers equivalently, rather than imposing a deduction disallowance or an import tax. The second alternative involves adopting a business activities tax, and then enacting …

Macroeconomic Modeling Of Tax Policy: A Comparison Of Current Methodologies, Itai Grinberg, Alan J. Auerbach, Thomas A. Barthold, Nicholas Bull, W. Gavin Elkins, Pamela J. Moomau, Rachel Moore, Benjamin Page, Brandon Pecoraro, Kyle Pomerleau

Georgetown Law Faculty Publications and Other Works

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new “dynamic scoring” rule requiring a point estimate within the budget window of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress’ interest in macrodynamic estimates for …

Slicing And Dicing: The Structural Problems Of The Tax Reform Framework, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Unified Framework for Fixing Our Broken Tax Code” (the “Framework”) released by the “Big Six” group of Treasury, White House and Congressional leaders on September 27 has been the focus of a lot of commentary. Most of the comments have focused on the distributive aspects of the plan and on the proposed rate structure, as well as the impact on revenues and the federal deficit. In this comment, I plan to focus instead on the structural aspects of the plan and in particular on the various new lines that it draws, because these are more likely to be lasting.

Evaluating Beps, Reuven Avi-Yonah, Haiyan Xu

Articles

This article evaluates the recently completed Base Erosion and Profit Shifting (BEPS) project of the G20 and OECD and offers some alternatives for reform.

Problems With Destination-Based Corporate Taxes And The Ryan Blueprint, Reuven S. Avi-Yonah, Kimberly Clausing

Articles

With the election of Donald Trump and the Republican Party’s domination of Congress, House Speaker Paul Ryan’s blueprint for fundamental tax reform requires more careful analysis. The Ryan blueprint combines reduced individual rates with a destination-based cash flow type business tax applicable to all businesses. The destination-based business tax at the center of the blueprint has several major problems: It is incompatible with our WTO obligations, it is incompatible with our tax treaties, and it will not eliminate the problems of income shifting and inversions it is designed to address. In addition, these proposals generate vexing technical problems that are …

Gaars And The Nexus Between Statutory Interpretation And Legislative Drafting: Lessons For The U.S. From Canada, Reuven S. Avi-Yonah, Amir Pichhadze

Articles

Rules targeting specific known schemes are not the only tools available in the battle against tax avoidance. Legal systems also use measures that apply generally. The U.S. for example has tended to rely heavily on general doctrines. One such doctrine which is discussed in part 2 of this chapter is the “economic substance” doctrine. Yet as Xiong and Evans recently pointed out “although such judicial doctrines can be used to deal with various aspects of complicated tax abuse judges tended sometimes to limit and sometimes to enlarge the scope of jurisprudential interpretation leading to substantial uncertainty and risk.” One way …

Carbon Tax Rising, Shi-Ling Hsu

Scholarly Publications

No abstract provided.

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 …

Valuation, Values, Norms: Proposals For Estate And Gift Tax Reform, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

In their contributions to this Symposium, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog's Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the …

Transfer Pricing Challenges In The Cloud, Orly Mazur

Faculty Journal Articles and Book Chapters

Cloud computing - the provision of information technology resources in a virtual environment - has fundamentally changed how companies operate. Companies have quickly adapted by moving their businesses to the cloud, but international tax standards have failed to follow suit. As a result, taxpayers and tax administrations confront significant tax challenges in applying outdated tax principles to this new environment. One particular area that raises perplexing tax issues is the transfer pricing rules. The transfer pricing rules set forth the intercompany price a cloud service provider must charge an affiliate using its cloud services, which ultimately affects in which jurisdiction …

Follow The Money: Essays On International Taxation – Introduction, Michael J. Graetz

Faculty Scholarship

Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

Despite all the attention, however, issues of international income taxation are often not well understood. This Introduction outlines a collection of essays, …

Evaluating Beps: A Reconsideration Of The Benefits Principle And Proposal For Un Oversight, Reuven Avi-Yonah, Haiyan Xu

Articles

The Financial Crisis of 2008 and Great Recession that followed have exacerbated income inequality within and between countries. In the aftermath of the economic turbulence, politicians have turned their attention to the twin problems of individual tax evasion and corporate tax avoidance. U.S. legislators enacted the Foreign Account Tax Compliance Act (FACTA), leading to the United States signing a series of Intergovernmental Agreements (IGAs) for the exchange of tax information. The Organization for Economic Co-operation and Development (OECD) developed the Multilateral Agreement for Administrative Assistance in Tax Matters (MAATM) and initiated the Base Erosion and Profit Shifting (BEPS) project to …

The Moving Target Of Tax Reform, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

In 2000, Professor William Turnier proposed a package of three reforms to make the estate tax more “equitable” and “taxpayerfriendly.” All of his proposals—allowing a surviving spouse to inherit a deceased spouse’s unused exemption, replacing the state death tax credit with a deduction, and indexing the exemption for inflation—were eventually enacted. Today, the estate tax remains on the books, but changes in rates and exemptions have severely curtailed its role in the larger federal tax system. Income tax rate reductions for capital gains and dividends have further lightened the tax burden on capital income, and international pressure to reduce the …