Law Commons^™

German Vat Compliance - Moving One Step Closer To Automated Third-Party Solutions, Richard Thompson Ainsworth

Faculty Scholarship

Recent developments in German VAT compliance, notably (a) the imposition of criminal penalties for failing to immediately amend a preliminary return that is known to be in error [Bundesgerichtshof decision of March 17, 2009, No. BGH 1 StR 342/08], when considered in tandem with (b) amendments to the voluntary disclosure rules, Gesetz zur Vebesserung der Bekämpfung von Geldwäsche und Steuerhinterziehung, it is clear that the German VAT compliance landscape has changed dramatically in the past year.

Taken as a whole, the German rules strongly encourage internal audits, self-reviews, and immediate self-disclosures of errors in previously filed returns and taxes paid. …

An Industry-Specific Vat In Michigan - Objective Valuation In The Retail Gasoline Trade, Richard Thompson Ainsworth

Faculty Scholarship

New York adopted an industry-specific value added tax (VAT) to solve problems with virtual intermediaries (room remarketers) under its hotel accommodations tax. The New York VAT resembles the VAT used in the European Union (EU). It is a credit-invoice VAT that subjectively values supplies.

Michigan has also adopted an industry-specific credit-invoice VAT, however the targeted industry is the retail gasoline trade. The valuation method is objective, rather than subjective. In valuing supplies objectively rather than subjectively, the Michigan VAT resembles the exception provisions that are found in most VATs around the globe. Objective valuations are used in VATs when dealing …

Hip-Hop And Housing: Revisiting Culture, Urban Space, Power, And Law, Lisa T. Alexander

Faculty Scholarship

U.S. housing law is finally receiving its due attention. Scholars and practitioners are focused primarily on the subprime mortgage and foreclosure crises. Yet the current recession has also resurrected the debate about the efficacy of place-based lawmaking. Place-based laws direct economic resources to low-income neighborhoods to help existing residents remain in place and to improve those areas. Law-and-economists and staunch integrationists attack place-based lawmaking on economic and social grounds. This Article examines the efficacy of place-based lawmaking through the underutilized prism of culture. Using a sociolegal approach, it develops a theory of cultural collective efficacy as a justification for place-based …

Post Racialism?, André Douglas Pond Cummings

Faculty Scholarship

The 2008 election of President Barack Obama represents a halcyon moment in U.S. history. President Obama’s election begs a critical question: whether his nationwide landslide victory catapulted the United States, with its sordid racial past, into a truly post-racial place as many claim. While Obama’s election was possible due to important changes that have taken place in the United States in the past fifty years, the reality is that profound disparities continue to exist between minority and white Americans that show no sign of dissipating during this Obama presidency. Of these profound disparities, some of the most striking include those …

Church And State: An Economic Analysis, Keith N. Hylton, Yulia Rodionova, Fei Deng

Faculty Scholarship

What purpose is served by a government's protection of religious liberty? Many have been suggested, the most prominent of which center on the protection of freedom of belief and expression. However, since every regulation potentially interferes with religious freedom, it is useful to consider more concrete purposes that could suggest limits on the degree to which religious liberty should be protected. This paper focuses on the concrete economic consequences of state regulation of religion. We examine the effects of state regulation on corruption, economic growth, and inequality. The results suggest that laws and practices burdening religion enhance corruption. Laws burdening …

Combating Moral Hazard: The Case For Rationalizing Public Employee Benefits, Maria O'Brien

Faculty Scholarship

The current crisis in public employee benefits is a fairly conventional moral hazard story about overly generous promises made by both private sector employers and politicians spending public dollars. The private sector, forced by the Financial Accounting Standards Board (FASB) in 1993 to confront the true cost of promises made to future retirees, dealt with the newly discovered debt in a number of ways, including the termination of defined benefit plans which were quickly replaced by defined contribution plans. The public sector was also forced to confront its own largesse with the implementation of GASB 45 which focused careful attention …

New York Adopts A Vat, Richard Thompson Ainsworth

Faculty Scholarship

On August 13, 2010 the New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Taxpayer Guidance Division released Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers. The legislative revision it considers (Chapter 57 of the Laws of 2010) was effective September 1, 2010. The changes brought in by this Chapter effectively converted New York’s Hotel Room Occupancy Tax from a single-stage retail sales tax to multi-stage European-style VAT. This paper considers the New York VAT in hotel accommodations in three sections. The first defines a European-style credit-invoice VAT …

Brown Shoe Versus The Horizontal Merger Guidelines, Keith N. Hylton

Faculty Scholarship

The new Horizontal Merger Guidelines, if treated by courts as a source of law, would reduce the discretion traditionally exercised by courts in defining relevant markets and market power in merger cases. This is an undesirable shift in the balance of power because courts have used the market power inquiry stage of merger analysis as a general checkpoint or weigh station for evaluating factors relevant to the welfare effects of a merger.

American And European Monopolization Law: A Doctrinal And Empirical Comparison, Keith N. Hylton, Haizhen Lin

Faculty Scholarship

This paper focuses on the differences between Article 82 and Section 2, reflecting largely on the American experience. We start with a discussion of the American experience and use that as a background from which to examine the European law on monopolies. American law is more conservative (less interventionist), reflecting the error cost analysis that is increasingly common in American courts. The second half of this paper provides an empirical comparison of the American and European regimes. Although a preliminary empirical examination suggests that the scope of a country’s monopolization law is inversely related to its degree of trade dependence, …

Nonprofit Executive Compensation, Terri Lynn Helge, David M. Rosenberg

Faculty Scholarship

Excessive compensation paid to nonprofit executives and board members is one of the key issues concerning charitable organizations that garner the attention of the general public and Congress. Charitable organizations may pay reasonable compensation to their directors, executive officers and employees for their services without violating applicable federal tax law or state law. The determination of reasonable compensation depends on several factors – the budget of the organization being the most significant factor. Other factors include the number of employees of the organization, the particular sector of the charitable community served by the organization, the geographic location of the organization, …

The Economics Of Nuisance Law, Keith N. Hylton

Faculty Scholarship

Economic analysis of nuisance law can be divided into two branches: the transaction cost model and the externality model. The two models provide a relatively complete positive theory of nuisance law. Under the externality model, nuisance law optimally regulates activity levels. Nuisance law induces actors to choose socially optimal activity levels by imposing liability when externalized costs are far in excess of externalized benefits or not reciprocal to other background external costs. Proximate cause doctrine plays an important role in inducing optimal activity levels.

Will Cutting The Payroll Tax Increase Jobs? (Empirical Evidence From The Eu Vat), Richard Thompson Ainsworth

Faculty Scholarship

Red Ink Rising, the Peterson–Pew Commission on Budget Reform’s report presents the country with a fiscal/employment dilemma – Congress must act immediately to stem the federal debt, but it must move carefully lest it harm employment in the fragile economy. In short, we must act fast and slow – we must decrease the debt and increase employment. This is a difficult task.

The Peterson-Pew dilemma (notably its jobs-creation aspect) was taken to heart by both of the reform commissions that issued reports soon thereafter (National Commission on Fiscal Responsibility and Reform, The Moment of Truth and The Debt Reduction Task …

Mitigating Financial Risk For Small Business Entrepreneurs, Michelle M. Harner

Faculty Scholarship

Financial distress by definition threatens a company’s viability. Entrepreneurial and start-up entities are particularly vulnerable to this threat. Yet, much of the discussion following the recent recession focuses almost exclusively on financial institutions and “too-big-to-fail” entities. This essay re-examines lessons gleaned from the recession in the context of smaller, entrepreneurial entities. Specifically, it analyzes how small business entrepreneurs might invoke principles of enterprise risk management to mitigate the long-term impact of financial distress on their business models. It also considers related refinements to extant small business regulations, including the U.S. bankruptcy laws. The essay’s primary objective is to help policymakers, …

Maximizing Autonomy In The Shadow Of Great Powers: The Political Economy Of Sovereign Wealth Funds, Kyle Hatton, Katharina Pistor

Faculty Scholarship

Sovereign wealth funds ("SWFs") have received a great deal of attention since they appeared as critical investors during the global financial crisis. Reactions have ranged from fears of state intervention and mercantilism to hopes that SWFs will emerge as model long-term investors that will take on risky investments in green technology and infrastructure that few private investors are willing to touch. In this paper we argue that both of these reactions overlook the fact that SWFs are deeply embedded in the political economy of their respective sovereign sponsors. This paper focuses on four political entities that sponsor some of the …

Cultivating Justice For The Working Poor: Clinical Representation Of Unemployment Claimants, Colleen F. Shanahan

Faculty Scholarship

The combination of current economic conditions and recent changes in the United States' welfare system makes representation of unemployment insurance claimants by clinic students a timely learning opportunity. While unemployment insurance claimants often share similarities with student attorneys, they are unable to access justice as easily as student attorneys, and as a result, face the risk of severe poverty. Clinical representation of unemployment claimants is a rich opportunity for students to experience making a difference for a client, and to understand the issues of poverty and justice that these clients experience along the way. These cases reveal that larger lessons …

Traynor (Drennan) Versus Hand (Baird): Much Ado About (Almost) Nothing, Victor P. Goldberg

Faculty Scholarship

Most Contracts casebooks feature either Baird v. Gimbel or Drennan v. Star Paving to illustrate the limits on revocability of an offer. In this article an analysis of the case law yields three major conclusions. First, as is generally known, in the contractor-subcontractor cases Drennan has prevailed. However, both it and its spawn, Restatement 2d E 87(2), have had almost no impact outside that narrow area. Moreover, almost all the cases involve public construction projects – private projects account for only about ten percent of the cases. This suggests that private parties have managed to resolve the problem contractually. Public …

Regulatory Dualism As A Development Strategy: Corporate Reform In Brazil, The United States, And The European Union, Ronald J. Gilson, Henry Hansmaan, Mariana Pargendler

Faculty Scholarship

Countries pursuing economic development confront afundamental obstacle. Reforms that increase the size of the overall pie are blocked by powerful interests that are threatened by the growth-inducing changes. This problem is conspicuous in efforts to create effective capital markets to support economic development. Controlling owners and managers of established firms successfully oppose corporate governance reforms that would improve investor protection and promote capital market growth. In this Article, we examine the promise of regulatory dualism as a strategy to defuse the tension between future growth and the current distribution of wealth and power. Regulatory dualism seeks to mitigate political opposition …

Subsidizing The Press, David M. Schizer

Faculty Scholarship

Through beat reporting and investigative journalism, reporters monitor the foundational institutions of our society. This reporting has value even to those who never buy a newspaper or read a website. For example, subscribers and nonsubscribers alike benefit when government officials respond to a critical news story by eliminating an abusive practice. Yet unfortunately, the professional press is experiencing a severe economic crisis. Layoffs are pervasive, and news organizations across the nation are on the brink of insolvency. As a result, a number of commentators have proposed government subsidies for the press. Yet if the press becomes financially dependent on the …

Systemic Risk After Dodd-Frank: Contingent Capital And The Need For Regulatory Strategies Beyond Oversight, John C. Coffee Jr.

Faculty Scholarship

Because the quickest, simplest way for a financial institution to increase its profitability is to increase its leverage, an enduring tension will exist between regulators and systemically significant financial institutions over the issues of risk and leverage. Many have suggested that the 2008 financial crisis erupted because flawed systems of executive compensation induced financial institutions to increase leverage and accept undue risk. But that begs the question why such compensation formulas were adopted. Growing evidence suggests that shareholders favored these formulas to induce managers to accept higher risk and leverage. Shareholder pressure, then, is a factor that could cause the …

After Frustration: Three Cheers For Chandler V. Webster, Victor P. Goldberg

Faculty Scholarship

Performance of a contract can be excused by a number of circumstances, notably impossibility, impracticability, and frustration. When performance is excused there remains the question of how to treat any payments or expenditures that were made prior to the occurrence of the contract-frustrating event. In Chandler v. Webster, the English courts decided over a century ago that the parties should be left where they were at the time of the frustrating event. Forty years later that holding was overturned so that now recovery might be had both for restitution of payments made prior to the event and for expenditures …

Incarceration And The Economic Fortunes Of Urban Neighborhoods, Jeffrey Fagan, Valerie West

Faculty Scholarship

New research has identified the consequences of high rates of incarceration on neighborhood crime rates, but few studies have looked beyond crime to examine the collateral effects of incarceration on the social and economic well being of the neighborhoods themselves and their residents. We assess two specific indicia of neighborhood economic well-being, household income and human capital, dimensions that are robust predictors of elevated crime, enforcement and incarceration rates. We decompose incarceration effects by neighborhood racial composition and socio-economic conditions to account for structural disadvantages in labor force and access to wealth that flow from persistent patterns of residential segregation. …

The Creativity Effect, Christopher Buccafusco, Christopher Jon Sprigman

Faculty Scholarship

This Article reports the first experiment to demonstrate the existence of a valua­tion anomaly associated with the creation of new works. To date, a wealth of social science research has shown that the least amount of money that owners of goods are willing to accept to part with their possessions is often far greater than the amount that purchasers would be willing to pay to obtain them. This phenomenon, known as the endowment effect, may create substantial inefficiencies in many markets. Our experi­ment demonstrates the existence of a related "creativity effect." We show that creators of works value their creations …

Dodd-Frank For Bankruptcy Lawyers, Douglas G. Baird, Edward R. Morrison

Faculty Scholarship

The Dodd-Frank financial reform legislation creates an “Orderly Liquidation Authority” (OLA) that shares many features in common with the Bankruptcy Code. This is easy to overlook because the legislation uses a language and employs a decision-maker (both borrowed from bank regulation) that will seem foreign to bankruptcy lawyers. Our task in this essay is to identify the core congruities between OLA and the Code. In doing so, we highlight important differences and assess both their constitutionality and policy objectives. We conclude with a few thoughts on the likelihood that OLA will contribute to market stability.

Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith

Faculty Scholarship

In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional …

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 of …

Markets And Morality, Jagdish N. Bhagwati

Faculty Scholarship

The paper addresses two issues. First, economics has evolved both as a positive science and, from moral philosophy, also as a normative discipline. Advancing the public good requires that public policy walk on both these legs. Second, the criticism has been forcefully made that markets undermine morality. This contention is refuted in several ways.

Can Joe The Plumber Support Redistribution? Law, Social Preferences, And Sustainable Policy Design, Gillian Lester

Faculty Scholarship

How does one win popular support for laws designed specifically to redistribute economic wealth? One can hardly gainsay that this is a – perhaps the – defining issue for domestic policy in the age of President Obama. Even as the recent financial crisis has exposed the need for a reliable social safety net, attempts to respond through the political and legislative arenas have triggered increasingly hostile responses among conservatives, populists, Massachusetts voters, and incipient tea partiers. The puzzle of how to attract and preserve public support for law reform aimed at redistribution – of both income and risk – is …

Stimulus And Civil Rights, Olatunde C.A. Johnson

Faculty Scholarship

Federal spending has the capacity to perpetuate racial inequality, not simply through explicit exclusion, but through choices made in the legislative and institutional design of spending programs. Drawing on the lessons of New Deal and postwar social programs, this Essay offers an account of the specificfeatures offederal spending that give it salience in structuring racial arrangements. Federal spending programs, this Essay argues, are relevant in structuring racial inequality due to their massive scale, their creation of new programmatic and spending infrastructures, and the choices made in these programs as to whether to impose explicit inclusionary norms on states and localities. …

Ratings Reform: The Good, The Bad, And The Ugly, John C. Coffee Jr.

Faculty Scholarship

Although dissatisfaction with the performance of the credit rating agencies is universal (particularly with regard to structured finance), reformers divide into two basic camps: (1) those who see the "issuer pays" model of the major credit ratings firms as the fundamental cause of inflated ratings, and (2) those who view the licensing power given to credit ratings agencies by regulatory rules requiring an investment grade rating from an NRSRO rating agency as creating a de facto monopoly that precludes competition. After reviewing the recent empirical literature on how ratings became inflated, this Article agrees with the former school and doubts …

Beyond Individualism In Law And Economics, Robert B. Ahdieh

Faculty Scholarship

The study of law and economics was built upon two pillars. The first is the familiar assumption of individual rationality. The second, less familiar, is the principle of methodological individualism. Over the last twenty years, law and economics has largely internalized behavioral critiques of the rationality assumption. By contrast, the field has failed to appreciate the implications of growing challenges to its methodological individualism. Where social norms shape individual choices, network externalities are strong, coordination is the operative goal, or information is a substantial determinant of value, a methodology strongly oriented to the analysis of individuals overlooks at least as …