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Enhancing Efficiency At Nonprofits With Analysis And Disclosure, David M. Schizer Jan 2020

Enhancing Efficiency At Nonprofits With Analysis And Disclosure, David M. Schizer

Faculty Scholarship

The U.S. nonprofit sector spends $2.54 trillion each year. If the sector were a country, it would have the eighth largest economy in the world, ahead of Brazil, Italy, Canada, and Russia. The government provides nonprofits with billions in tax subsidies, but instead of evaluating the quality of their work, it leaves this responsibility to nonprofit managers, boards, and donors. The best nonprofits are laboratories of innovation, but unfortunately some are stagnant backwaters, which waste money on out-of-date missions and inefficient programs. To promote more innovation and less stagnation, this Article makes two contributions to the literature.

First ...


Distributional Arguments, In Reverse, Alex Raskolnikov Jan 2020

Distributional Arguments, In Reverse, Alex Raskolnikov

Faculty Scholarship

What should the government do about the distribution of resources and outcomes in the society? Two arguments have shaped academic debates about this question for several decades. The first argument states that economic regulation should focus on efficiency alone, leaving distributional considerations for the tax-and-transfer system. The second argument objects to government assistance for people unintentionally harmed by legal reforms. Taken together, the two arguments impose major restrictions on the range of possible distributional policies.

This Article contends that a growing body of research in the economics of trade, immigration, industrial organization, labor, and environmental regulation reveals that the core ...


Foreword – The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy, Michael J. Graetz Jan 2018

Foreword – The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy, Michael J. Graetz

Faculty Scholarship

By lowering the corporate tax rate from 35% to 21%, the 2017 tax legislation brought the U.S. statutory rate into closer alignment with the rates applicable in other Organisation for Economic Co-operation and Development (OECD) nations, thereby decreasing the incentive for businesses to locate their deductions in the United States and their income abroad. Its overhaul of the U.S. international income tax rules simultaneously reduced preexisting incentives for U.S. multinationals to reinvest their foreign earnings abroad and put a floor on the benefits of shifting profits to low-tax jurisdictions. The 2017 legislation also added an unprecedented, troublesome ...


Charitable Subsidies And Nonprofit Governance: Comparing The Charitable Deduction With The Exemption For Endowment Income, David M. Schizer Jan 2017

Charitable Subsidies And Nonprofit Governance: Comparing The Charitable Deduction With The Exemption For Endowment Income, David M. Schizer

Faculty Scholarship

Charitable subsidies are supposed to encourage positive externalities from charity. In principle, the government can pursue this goal by evaluating specific charitable initiatives and deciding how much each should receive. But this Article focuses on two income tax rules that leave the government very little discretion about which charities to fund: the deduction for donations to charity (“the deduction”) and the exemption of a charity’s investment income (“the exemption”). Under each rule, as long as charities satisfy very general criteria, federal dollars flow automatically. While both of these sibling subsidies delegate key decisions to private individuals, they create very ...


Heading Off A Cliff? The Tax Reform Man Cometh, And Goeth, Michael J. Graetz Jan 2017

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 ...


Border Adjustments And The Conservation Of Tax Planning, David M. Schizer Jan 2017

Border Adjustments And The Conservation Of Tax Planning, David M. Schizer

Faculty Scholarship

This article is based on Schizer’s keynote address at the 17th annual NYU-KPMG Tax Symposium on March 10.

In this article, Schizer argues that U.S. corporate and shareholder taxes need to be reformed, and the corporate rate should be much lower. In reforming this dysfunctional regime, according to Schizer, Congress should keep both of these taxes as a form of built-in redundancy; if one tax is avoided, the other can still be collected. More generally, Congress should be wary of Utopian solutions. Tax reform is more likely to change tax planning than to eliminate it entirely, Schizer concludes ...


The Known Unknowns Of The Business Tax Reforms Proposed In The House Republican Blueprint, Michael J. Graetz Jan 2017

The Known Unknowns Of The Business Tax Reforms Proposed In The House Republican Blueprint, Michael J. Graetz

Faculty Scholarship

This set of slides raises important issues and questions concerning the potential effects of a border-adjusted destination-based cash flow tax (DBCFT) as proposed in the 2016 House Blueprint “A Better Way.” These slides reflect the final version published by the Columbia Tax Journal on April 16, 2017 and now include a bibliography. This is the second update since they were first published on February 2.


Between Scylla And Charybdis: Taxing Corporations Or Shareholders (Or Both), David M. Schizer Jan 2016

Between Scylla And Charybdis: Taxing Corporations Or Shareholders (Or Both), David M. Schizer

Faculty Scholarship

The US taxes both corporations and shareholders on corporate profits. In principle, the U.S. could rely on only one of these taxes, as many commentators have suggested. Although choosing to tax the corporation or its owners may seem like taking money from one pocket or the other, this Essay emphasizes a key difference: corporate and shareholder taxes prompt different tax planning. Relying on one or the other mitigates some distortions and leaks, while exacerbating others. As a result, choosing which tax to impose is like navigating between Scylla and Charybdis.

In response to these dualing distortions, this Essay recommends ...


Bringing International Tax Policy Into The 21st Century, Michael J. Graetz Jan 2016

Bringing International Tax Policy Into The 21st Century, Michael J. Graetz

Faculty Scholarship

Michael J. Graetz delivered the following remarks at the Tax Policy Center's "A Corporate Tax for the 21st Century" conference on July 14 in Washington. These remarks are substantially taken from his April 2015 Ross Parsons Lecture at the University of Sydney Law School.


Follow The Money: Essays On International Taxation – Introduction, Michael J. Graetz Jan 2016

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 ...


Integration Of Corporate And Shareholder Taxes, Michael J. Graetz, Alvin C. Warren Jan 2016

Integration Of Corporate And Shareholder Taxes, Michael J. Graetz, Alvin C. Warren

Faculty Scholarship

Integration of the corporate and individual income taxes can be achieved by providing shareholders a credit for corporate taxes paid with respect to corporate earnings distributed as dividends. When such integration was previously considered in the U.S., proponents emphasized that it could reduce or eliminate many of the familiar distortions of a classical corporate income tax. Integration would also provide a framework for addressing current concerns for tax incentives for U.S. companies to shift income to foreign affiliates in lower-taxed countries or to expatriate in "inversion" transactions. A recent Congressional proposal for a corporate dividend deduction coupled with ...


"Death Tax" Politics, Michael J. Graetz Jan 2016

"Death Tax" Politics, Michael J. Graetz

Faculty Scholarship

In his Keynote Address “Death Tax” Politics at the October 2, 2015 Boston College Law School and American College of Trust and Estate Counsel Symposium, The Centennial of the Estate and Gift Tax: Perspectives and Recommendations, Michael Graetz describes the fight over the repeal of the estate tax and its current diminished state. Graetz argues that the political battle over the repeal of the estate tax reflects a fundamental challenge to our nation’s progressive tax system. This Address concludes that a revitalized estate tax is important for managing the national debt and reducing massive inequalities in wealth.


Energy Subsidies: Worthy Goals, Competing Priorities, And Flawed Institutional Design, David M. Schizer Jan 2015

Energy Subsidies: Worthy Goals, Competing Priorities, And Flawed Institutional Design, David M. Schizer

Faculty Scholarship

The government often relies on targeted subsidies for both “green” energy and hydrocarbons. These subsidies pursue worthwhile goals. But unfortunately, many have design flaws that make them less effective or even counterproductive. The goal of this Article is to show how we can do better.

This Article focuses on three sets of issues. First, there often is tension between our environmental and national security goals. Unfortunately, the economics literature on energy largely ignores these tradeoffs by omitting national security from the analysis. This Article takes issue with this approach and suggests ways to manage these tradeoffs. Second, as a strategy ...


Tax And Corporate Governance: The Influence Of Tax On Managerial Agency Costs, David M. Schizer Jan 2014

Tax And Corporate Governance: The Influence Of Tax On Managerial Agency Costs, David M. Schizer

Faculty Scholarship

This chapter of the Oxford Handbook on Corporate Law and Governance canvasses a broad range of ways that tax influences managerial agency costs, focusing especially on the United States. In doing so, this chapter has two goals. The first is to help corporate law experts target managerial agency costs more effectively. The analysis here flags when tax is likely to exacerbate agency costs, and when it is likely to mitigate them. Armed with this information, corporate law experts have a better sense of how vigorous a contractual or corporate law response they need. In some cases, a change in the ...


Limiting Tax Expenditures, David M. Schizer Jan 2014

Limiting Tax Expenditures, David M. Schizer

Faculty Scholarship

The federal government devotes over a trillion dollars each year to tax provisions that pursue “nontax” goals. Scaling back these tax expenditures should be a high priority. Yet one-size-fits-all limits are often proposed, and are not good policy. Each tax expenditure generates its own mix of positive externalities and private benefits (or “programmatic benefits”). To choose the right limit, we should consider what programmatic benefits we would lose. The goal should be to reap programmatic benefits at lower cost. Different strategies are appropriate for each tax expenditure, including: tightening the definition of favored conduct; focusing on claimants who are easiest ...


Corporate Inversions And The Unbundling Of Regulatory Competition, Eric L. Talley Jan 2014

Corporate Inversions And The Unbundling Of Regulatory Competition, Eric L. Talley

Faculty Scholarship

A sizable number of US public companies have recently executed “tax inversions” – acquisitions that move a corporation’s residency abroad while maintaining its listing in domestic securities markets. When appropriately structured, inversions replace American with foreign tax treatment of extraterritorial earnings, often at far lower effective rates. Regulators and politicians have reacted with alarm to the “inversionitis” pandemic, with many championing radical tax reforms. This paper questions the prudence of such extreme reactions, both on practical and on conceptual grounds. Practically, I argue that inversions are simply not a viable strategy for many firms, and thus the ongoing wave may ...


The Tax Reform Road Not Taken – Yet, Michael J. Graetz Jan 2014

The Tax Reform Road Not Taken – Yet, Michael J. Graetz

Faculty Scholarship

The United States has traveled a unique tax policy path, avoiding value added taxes (VATs), which have now been adopted by every OECD country and 160 countries worldwide. Moreover, many U.S. consumption tax advocates have insisted on direct personalized taxes that are unlike taxes used anywhere in the world. This article details a tax reform plan that uses revenues from a VAT to substantially reduce and reform our nation’s tax system. The plan would (1) enact a destination-based VAT; (2) use the revenue produced by this VAT to finance an income tax exemption of $100,000 of family ...


Irredeemably Inefficient Acts: A Threat To Markets, Firms, And The Fisc, Alex Raskolnikov Jan 2013

Irredeemably Inefficient Acts: A Threat To Markets, Firms, And The Fisc, Alex Raskolnikov

Faculty Scholarship

This Article defines and explores irredeemably inefficient acts – a conceptually distinct and empirically important category of socially undesirable conduct. Though inefficient behavior is, no doubt, pervasive, the standard view holds that inefficient conduct may be converted into efficient behavior by forcing actors to internalize the external harms of their decisions. For some acts, however, such conversion is impossible. These acts are not just inefficient forms of otherwise socially beneficial activities – they are not just contingently inefficient. Rather, they are inefficient at their core; they reduce social welfare no matter what the regulator does. These irredeemably inefficient (or just irredeemable) acts ...


Tax Advice For The Second Obama Administration, Michael J. Graetz Jan 2013

Tax Advice For The Second Obama Administration, Michael J. Graetz

Faculty Scholarship

Delivered January 18, 2013 as the keynote address at a conference cosponsored by Pepperdine Law School and Tax Analysts.


Updating The Competitive Tax Plan: A New Epilogue For 100 Million Unnecessary Returns, Michael J. Graetz Jan 2013

Updating The Competitive Tax Plan: A New Epilogue For 100 Million Unnecessary Returns, Michael J. Graetz

Faculty Scholarship

This is the first step of a new epilogue for my book 100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States. In January 2012, the Tax Policy Center (TPC), pursuant to a grant from Pew Charitable Trust, published an article analyzing and estimating the parameters of the tax plan set forth in this book. TPC has now updated its estimates to take into account the January 2013 “fiscal cliff” legislation and other economic changes. Certain details of the plan have also been revised somewhat.

The competitive tax reform plan has five pieces: First, enact ...


I Like To Pay Taxes: Taxpayer Support For Government Spending And The Efficiency Of The Tax System, David M. Schizer, Yair Listokin Jan 2012

I Like To Pay Taxes: Taxpayer Support For Government Spending And The Efficiency Of The Tax System, David M. Schizer, Yair Listokin

Faculty Scholarship

This paper is based on a simple proposition, which we believe but cannot prove: If taxpayers support the way their tax dollars are spent, they are more likely to comply voluntarily and less likely to change their behavior to avoid tax. To show that our claim is plausible, we offer direct evidence from a literature involving experiments, draw on the more general economics and psychology literature on prosocial behavior, and also invoke philanthropy as a “real world” analogy; after all, charitable donors contribute money voluntarily (indeed, 2% of the U.S. GDP), largely because they believe in the way their ...


Accepting The Limits Of Tax Law And Economics, Alex Raskolnikov Jan 2012

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 ...


"Keep Government Out Of My Medicare": The Elusive Search For Popular Support Of Taxes And Social Spending, Gillian Lester Jan 2012

"Keep Government Out Of My Medicare": The Elusive Search For Popular Support Of Taxes And Social Spending, Gillian Lester

Faculty Scholarship

Despite the broad reach of what is often referred to as the “social safety net,” Americans continue to have conflicted and contradictory attitudes about the relationship between tax burdens and social welfare benefits. Extensive and lively debates persist within political science, sociology, law, economics, and psychology over how mass publics form opinions about the role of the state in mediating economic equality through both taxation and welfare institutions. This chapter identifies several key themes that reappear across disciplinary and subject boundaries. Specifically: information about taxes and spending is complex and may be hard for ordinary citizens to fully apprehend, cognitive ...


Technological Innovation, International Competition, And The Challenges Of International Income Taxation, Michael J. Graetz, Rachael Doud Jan 2012

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 ...


Fiscal Policy In An Era Of Austerity, David M. Schizer Jan 2011

Fiscal Policy In An Era Of Austerity, David M. Schizer

Faculty Scholarship

We face a time of stagnant economic growth, severe unemployment, massive budget deficits, and an increasingly competitive global economy. Monetary policy is tapped out, and there is a great deal of uncertainty about the effectiveness of a traditional Keynesian stimulus – and, not surprisingly, a heated debate among economists. One thing we do know is that a stimulus is quite difficult to execute effectively. For example, it is a challenge to identify “shovel ready” projects that contribute to long-term economic growth, particularly on short notice. There is no uncertainty, though, about the need to address a broad range of specific problems ...


Taxation Of Financial Products: Options For Fundamental Reform, Alex Raskolnikov Jan 2011

Taxation Of Financial Products: Options For Fundamental Reform, Alex Raskolnikov

Faculty Scholarship

The following is testimony to the joint hearing of the House of Representatives Committee on Ways and Means and the Senate Committee on Finance. The testimony discusses three benchmarks for evaluating the taxation of capital income in general and financial instruments in particular, summarizes three broad-based approaches to reforming the tax treatment of financial products, evaluates the impact of other fundamental reforms on the urgency of reforming the taxation of derivatives, and urges Congress to encourage the IRS to make detailed tax return data available for empirical research of revenue costs and other losses arising from derivatives-based tax planning.


The Politics And Policy Of The Estate Tax – Past, Present, And Future, Michael J. Graetz Jan 2011

The Politics And Policy Of The Estate Tax – Past, Present, And Future, Michael J. Graetz

Faculty Scholarship

This paper is an edited transcript of the Lloyd Leva Plaine Distinguished Lecture, delivered at the University of Miami’s Heckerling Estate Planning Institute on January 11, 2011. It reviews the history of the estate tax, discusses the politics of its bizarre repeal for the year 2010 only, and outlines the forces that led to reinstatement of the tax for 2011 and 2012 with a $5 million exemption and 35 percent top rate. The paper makes clear that the coalition pushing for repeal of the estate tax will continue to work to eliminate it and also explores potential broader implications ...


Reforming The Taxation Of Derivatives – An Overview, Alex Raskolnikov Jan 2010

Reforming The Taxation Of Derivatives – An Overview, Alex Raskolnikov

Faculty Scholarship

This brief essay outlines three benchmarks for evaluating alternative ways of taxing capital income, summarizes anticipatory, retroactive, and accrual-based proposals for reforming the taxation of derivatives, and offers guidelines for evaluating more limited reforms. It is intended as an introduction to key concepts, tensions, and ideas for reforming the taxation of financial instruments.


Subsidizing Charitable Contributions: Incentives, Information, And The Private Pursuit Of Public Goals, David M. Schizer Jan 2008

Subsidizing Charitable Contributions: Incentives, Information, And The Private Pursuit Of Public Goals, David M. Schizer

Faculty Scholarship

The charitable deduction has enjoyed relatively little support in the legal academy. Many commentators have asked what it adds to the tax system and, as critics have observed, the deduction obviously does not itself collect tax revenue. Defenders respond that the deduction helps measure income and keeps taxpayers from inefficiently substituting leisure for work, but these points are, of course, contested. Instead of revisiting debates about what the deduction adds to the tax system, this Article focuses on the broader question of what it adds to the pursuit of public goals. The deduction – and any other government subsidy that matches ...


Revealing Choices: Using Taxpayer Choice To Target Tax Enforcement, Alex Raskolnikov Jan 2008

Revealing Choices: Using Taxpayer Choice To Target Tax Enforcement, Alex Raskolnikov

Faculty Scholarship

People pay their taxes for many different reasons. Some choose to game the system, paying only when the cost of noncompliance outweighs its benefits. Others comply out of habit, a sense of duty or reciprocity, a desire to avoid feelings of guilt or shame, and for many other reasons. Our tax enforcement system has ignored this variety of taxpaying motivations for decades. It continues to rely primarily on audits and penalties, at least where information reporting and withholding are impossible. Fines and audits work well for those rationally playing the tax compliance game, but are wasteful or even counterproductive when ...