Law Commons^™

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 …

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.

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.

Charitable Contributions In Lieu Of Salt Deductions, David Gamage

Articles by Maurer Faculty

State governments are considering new charitable tax credits designed to circumvent the 2017 federal tax overhaul’s cap on state and local tax deductions. Will these plans work? This essay argues that the answer is: yes, but with some qualifications.

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 …

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.

A New Theory Of Equitable Apportionment, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay analyzes the purpose of the equitable apportionment doctrine in state and local tax jurisprudence, arguing that the doctrine remains coherent in the context of single-sales-factor apportionment regimes.

Why A State-Level Carbon Tax Can Include Border Adjustments, David Gamage, Darien Shanske

Articles by Maurer Faculty

This is our third in a series of articles considering taxation and greenhouse gas mitigation. To date, all state-level attempts to mitigate greenhouse gas emissions by placing a price on carbon have involved cap-and-trade regimes. In our previous two articles, we considered how importing tax features into a cap and- trade regime could ease distributive concerns and also make cap-and-trade regimes more efficient.

A State-Level Carbon Tax With Border Adjustments, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay develops three new doctrinal arguments in support of the conclusion that a state-level carbon tax with border adjustments should be permissible under the dormant commerce clause. This essay builds on our prior work to argue against the view that a single state cannot (practically) impose a significant carbon tax due to the claim that border tax adjustments are Constitutionally impermissible. By demonstrating how a state government could implement a carbon tax with border tax adjustments in a Constitutionally permissible fashion, this essay shows that levying a carbon tax is a realistic and practical option for U.S. state governments. …

The American Health Care Act Would Toss The States A Hot Potato, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay explains how the American Health Care Act (AHCA) – the House Republicans’ proposed replacement for Obamacare – would toss a hot potato to state governments. Were the AHCA to be enacted into law, state governments would need to act promptly if they are to save individual insurance markets within their states. This essay explains measures that state governments might take to respond to this threat.

The Case For Consumer-Based Use Tax Enforcement, David Gamage, Adam Thimmesch, Darien Shanske

Articles by Maurer Faculty

This essay argues that state governments’ current focus on getting vendors to collect their sales and use taxes is insufficient, especially in regard to e-commerce transactions. If state governments want their use taxes to serve as effective and lawful backstops to their sales taxes—as state governments claim is their goal—then states must also focus on the consumer side of the use-tax equation. This essay explains that both economic and rule of law considerations make it imperative for state governments to better enforce their sales and use taxes with respect to consumer taxpayers.

Tax Cannibalization And Fiscal Federalism In The United States, David Gamage, Darien Shanske

Articles by Maurer Faculty

We began this project pondering a riddle. Most state governments have adopted what we-and many others-view as clearly suboptimal tax policies, especially in regard to the taxation of corporate income and capital gains. Yet, with the notable exception of those who oppose progressivity and the taxation of capital, state-level tax policymakers have had remarkably little appetite for reform.

This Article provides one major explanation for this riddle by identifying and demonstrating a phenomenon that we label as "tax cannibalization." We argue that flawed state-level tax policies derive in part from perverse incentives inadvertently created by the federal government.

Consumer-Based Use Tax Enforcement And Taxpayer Compliance, David Gamage, Adam Thimmesch, Darien Shanske

Articles by Maurer Faculty

This essay explains how current state government approaches to use-tax enforcement undermine tax morale and taxpayer compliance. This essay further argues that these threats to tax morale and taxpayer compliance will become even more severe as many states are moving toward adopting notice and reporting statutes for their sales and use taxes.

Using Taxes To Improve Cap And Trade, Part Ii: Efficient Pricing, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this article, the first of a series, we analyze the distributional issues involved in implementing U.S. state level cap-and-trade regimes. Specifically, we will argue that the structure of California’s AB 32 regime will unnecessarily disadvantage lower-income Californians under the announced plan to give away approximately half of the permits to businesses and pollution-emitting entities.

Tax Cannibalization And State Government Tax Incentive Programs, David Gamage, Darien Shanske

Articles by Maurer Faculty

States and localities offer businesses an enormous amount of tax incentives to locate within their jurisdictions despite: 1) the mass of evidence that suggests that these incentives are not particularly effective and, 2) substantial doubts about their constitutionality.

In this essay, we develop a new critical perspective on state tax incentives. We argue that offering these incentives permits states to offer lower taxes to more mobile businesses while keeping their overall corporate tax rates high. This is arguably not the best choice for the states, but it is definitely not the best choice for the federal government. Because the states …

The Federal Government's Power To Restrict State Taxation, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay evaluates the limits on the U.S. federal government’s powers to restrict the taxing powers of state governments. The essay revisits earlier debates on this question, to consider the implications of the Supreme Court’s decision in National Federation of Independent Business v. Sebelius and also academic research on the problem of tax cannibalization.

The Implications Of Csx And Dma, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay analyzes the implications of two recent Supreme Court cases on state and local taxation: Alabama Department of Revenue v. CSX Transportation Inc. and Direct Marketing Association v. Brohl. We argue that both of these decisions not only fail to resolve major issues in state and local taxation, but actually unsettle these issues.

Preventing Government Shutdowns: Designing Default Rules For Budgets, David Gamage, David Scott Louk

Articles by Maurer Faculty

In nearly every area of law and governance, default policies exist when lawmakers cannot pass new legislation — typically, the status quo simply remains in effect. To its detriment, U.S. budget making at both the state and federal levels lacks effective defaults. If a new budget isn’t passed by year end, there is no budget, and the government shuts down. This lack of defaults, coupled with a dysfunctional era of budgetary politics, has led to a number of recent high-profile and costly state and federal government shutdowns at the state and federal levels.

To date, legal scholarship has failed to …

Using Taxes To Improve Cap And Trade, Part I: Distribution, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this article, the first of a series, we analyze the distributional issues involved in implementing U.S. state level cap-and-trade regimes. Specifically, we will argue that the structure of California’s AB 32 regime will unnecessarily disadvantage lower-income Californians under the announced plan to give away approximately half of the permits to businesses and pollution-emitting entities.

The Case For A State-Level Debt-Financing Authority, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this essay, we argue for the adoption of state-level debt-financing authorities as part of a broader package for reforming local government borrowing.

A Potential Game Changer In E-Commerce Taxation, David Gamage, Andrew J. Haile, Darien Shanske

Articles by Maurer Faculty

In this essay, we evaluate recent legislative proposals for Congress to authorize state taxation of e-commerce. We argue that these proposals contain a potential game-changing innovation — the requirement that states provide remote sellers with “adequate software” for calculating use tax due within the state. Properly implemented, we explain how this innovation could force states to internalize the compliance costs of levying tax collection obligations on remote sellers, thereby incentivizing the states to simplify their sales and use tax statutes and resolving concerns about states overburdening interstate commerce.

The Trouble With Tax Increase Limitations, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this symposium essay, we explore the theoretical implications of one particular type of fiscal limitation on state legislatures — namely, special Tax Increase Limitation rules (TILs). We argue that there is no meaningful content to the term “tax increase” as used in TILs. This incoherence allows legislative majorities who wish to do so to circumvent TILs. This fact about TILs, among others, explains the observed inefficacy of TILs in shrinking the size of state governments.

Furthermore, TILs are not just harmless political theater. When combined with other common features of state fiscal constitutions, particularly Balanced Budget Requirements (BBRs), they …

Vendor Compensation As An Approach For State "Amazon" Laws: Part 2, David Gamage, Devin J. Heckman

Articles by Maurer Faculty

In this essay, the second of a two-part series, we propose an approach for the U.S. states to tax interstate e-commerce. If the states adequately compensate remote e-commerce vendors for all tax compliance costs, we argue that the states can constitutionally impose use tax collection obligations on the remote vendors in a manner compatible with the Quill framework.

On Tax Increase Limitations: Part Ii -- Evasion And Transcendence, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this essay, the second of a series, we continue our evaluation of state Tax Increase Limitations (TILs) – special rules that limit state legislatures’ ability to raise taxes, such as by requiring supermajority votes. We analyze two strategies whereby majority parties can evade TILs to the extent they so desire. We further argue that these strategies have some positive normative features. The strategies designed to evade TILs may ultimately lead toward a more effective means for controlling the size of state government than TILs themselves are able to provide.

The Saga Of State "Amazon" Laws: Reflections On The Colorado Decision, David Gamage, Darien Shanske

Articles by Maurer Faculty

We analyze the Colorado district court’s decision in Direct Marketing Association v. Huber – a decision that permanently enjoined Colorado’s "Amazon" law. Had it not been enjoined, the Colorado law would have mandated information reporting by remote e-commerce vendors so that Colorado could levy its sales and use tax on the e-commerce purchases made by Colorado residents. We evaluate the applicability of the Tax (Anti-)Injunction Act and whether the Colorado statute and regulations should be reviewed as a tax or as a regulation. We also suggest alternative approaches that state legislatures might use in order to levy taxes on remote …

A Better Way Forward For State Taxation Of E-Commerce, David Gamage, Devin J. Heckman

Articles by Maurer Faculty

We propose a novel solution for states that wish to tax interstate e-commerce – based on fully and adequately compensating remote vendors for all tax compliance costs. We argue that our proposed solution is compatible with the Quill framework for when states can constitutionally impose burdens on remote vendors. We argue that unlike our proposed solution, the recent state attempts to tax interstate e-commerce through so-called “Amazon laws” are unconstitutional, ineffective, or both. We thus urge the states to adopt our proposed approach as the best way forward for state taxation of interstate e-commerce.

Vendor Compensation As An Approach For State "Amazon" Laws: Part 1, David Gamage, Devin J. Heckman

Articles by Maurer Faculty

In this Essay, the first of a two-part series, we analyze the approaches U.S. states have been using in their attempts to tax interstate e-commerce. We argue that these existing approaches are unlikely to be effective. In our companion Essay, the second in the series, we outline a novel approach that states might employ in order to more effectively tax interstate e-commerce – based on adequately compensating remote vendors for all tax compliance costs. But before we can argue for our new approach, we must first survey the current constitutional and statutory landscape.

On Tax Increase Limitations: Part I -- A Costly Incoherence, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this essay, the first of a series, we explore the theoretical implications of one particular type of fiscal limitation on state legislatures - namely, special rules limiting tax increases. In this first essay we will explore the analytic soundness of these tax increase limitations (TILs). In future essays in this series we will analyze some of the consequences of TILs and in particular how they can be 'evaded.' We will argue over the course of this series of essays that because there is no meaningful content to the term 'tax increase' as it is used in TILs, legislative majorities …

Preventing State Budget Crises: Managing The Fiscal Volatility Problem, David Gamage

Articles by Maurer Faculty

Forty-nine of the U.S. states have balanced budget requirements, and every state acts as though bound by such constraints. These constraints create fiscal volatility - the states must either cut spending or raise taxes during economic downturns, while doing the opposite during upturns. This paper discusses how states should cope with fiscal volatility on both the levels of ordinary politics and of institutional-design policy. On the level of ordinary politics, the paper applies principles of risk allocation theory to conclude that states should primarily adjust the rates of broad-based taxes as their economies cycle, rather than fluctuating public spending. States …

Managing Fiscal Volatility By Redefining "Tax Cuts" And "Tax Hikes", David Gamage, Jeremy Bearer-Friend

Articles by Maurer Faculty

This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts’’ and ‘‘tax hikes.’’ By adopting a new baseline for defining those terms, states can increase the likelihood of using tax rate adjustments to cope with fiscal volatility rather than more harmful spending fluctuations.