Law Commons^™

Free Tax Assistance Available At The Maurer School Of Law Through March 26, James Owsley Boyd

Keep Up With the Latest News from the Law School (blog)

Some Monroe County residents and Indiana University students can receive free assistance with their 2023 federal and state tax returns at the Maurer School of Law as part of the Volunteer Income Tax Assistance (VITA) program.

Why States Should Conform To The New Corporate Amt, David Gamage, Darien Shanske

Articles by Maurer Faculty

In 2022, as a key component of the Inflation Reduction Act, Congress enacted a new corporate alternative minimum tax (CAMT). With the possible exception of Alaska, states with corporate income taxes will not automatically conform to this change. But should they? Although states may not currently be seeking additional tax revenue, seasons change quickly when it comes to revenue needs. Further, there is increasing reason to believe that the corporate income tax is a progressive tax, and if so, a state might consider conforming to the CAMT as part of a revenue-neutral change to make its tax system more progressive. …

Volunteer Income Tax Assistance Available To Local Community Members Through March 28, James Owsley Boyd

Keep Up With the Latest News from the Law School (blog)

With tax season now in full-swing through April 18, a dedicated group of volunteers is making the filing process easier—and cheaper—for many local community members. Local taxpayers with an annual income under $57,000 are eligible for free tax preparation help from students at the Indiana University Maurer School of Law’s Volunteer Income Tax Assistance site on Monday and Tuesday evenings from 6 to 9 p.m. beginning January 30.

State Workarounds To The Irc's Salt Cap: The Past, The Present, And Building For The Future, Richard Stephenson Mcewan

Indiana Law Journal

Recently, Congress has debated measures to provide some relief to taxpayers negatively impacted by the Internal Revenue Code’s State and Local Tax (SALT) deductibility limit. Although Congress has not yet budged on whether to adjust this cap, many states have taken it upon themselves to find creative workarounds to provide relief for their constituent taxpayers. In the face of an uncertain future for the current SALT cap, crucial questions exist for these state workarounds and those still to come. This Note carefully lays out the individual income tax issue posed by the SALT cap, before analyzing the core elements of …

Tax Complexity And Technology, David I. Walker

Indiana Law Journal

The Federal Income Tax Code has become increasingly complex over time with the implication that many taxpayers no longer understand the connection between their life decisions and their taxes. Some commentators have suggested that increasing computational complexity may be attributable in part to the proliferation of tax preparation software that renders such complexity manageable at filing time, but otherwise does nothing to mitigate the “black box” nature of the tax system. While such complexity and opacity undercut explicit incentives embedded in the Code, make planning more difficult, and undermine political accountability for taxes, they may also reduce the inefficient distortion …

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.

Weathering State And Local Budget Storms: Fiscal Federalism With An Uncooperative Congress, David Gamage, Darien Shanske, Gladriel Shobe, Adam Thimmesch

Articles by Maurer Faculty

Throughout most of 2020, state and local governments faced severe budget crises as a result of the COVID-19 pandemic. Increased demand for state welfare services and rising state expenses related to controlling the spread of COVID-19 stretched state and local budgets to their breaking points. At the same time, layoffs, business closures, and social distancing measures reduced states’ primary sources of tax revenues. The traditional practice of American fiscal federalism is for the federal government to step in to provide aid during a national emergency of this magnitude, because state and local governments lack the federal government’s monetary and fiscal …

Maryland’S Digital Tax And The Itfa’S Catch-22, David Gamage, Darien Shanske, Christopher Moran

Articles by Maurer Faculty

In this installment of Academic Perspectives on SALT, the authors examine whether statelevel taxes on digital advertising — like Maryland’s new tax — are barred by the Internet Tax Freedom Act and discuss how the act’s prohibition against “discriminatory” taxes on electronic commerce should be construed narrowly.

Is New York’S Mark-To-Market Act Unconstitutionally Retroactive?, Reuven S. Avi-Yonah, David Gamage, Kirk J. Stark, Darien Shanske

Articles by Maurer Faculty

It is well known in tax literature that rudimentary tax planning strategies enable wealthy individuals to avoid state and federal income tax on much of their true economic income. Indeed, the existing income tax has been described as being effectively optional for those who derive their income chiefly from the ownership of assets rather than the provision of services. The reason is — except for a few relatively narrowly tailored deemed-realization rules — both state and federal income taxes rely on the realization principle. Under realization accounting, taxpayers generally do not owe tax on economic gains until they sell their …

How States Should Now Consider Expanding Sales Taxes To Services, Part 2, Grace Stephenson Nielsen, Gladriel Shobe, Darien Shanske, David Gamage

Articles by Maurer Faculty

As we explained in our prior essay, state governments are experiencing severe revenue needs because of COVID-19, and expanding state sales tax bases to include services is a promising option for state governments to manage their budget shortfalls. In this, the second essay in this series — a contribution to Project SAFE: State Action in Fiscal Emergencies — we explain some of the implementation details and options for how states might go about expanding their sales tax bases to include services. In particular, we argue that there are some incremental steps that seem to be technically and politically feasible as …

Why States Should Consider Expanding Sales Taxes To Services, Part 1, Gladriel Shobe, Grace Stephenson Nielsen, Darien Shanske, David Gamage

Articles by Maurer Faculty

States are facing a severe budget crisis as a result of the coronavirus pandemic. And with the federal government unlikely to pass a relief bill to address those state budget issues,1 states will need to play a significant role in making up revenue shortfalls.

This is the first in a three-part series, which is a contribution to Project SAFE: State Action in Fiscal Emergencies. This essay will lay out the general case for why states should consider expanding their sales tax bases to more services as a response to the COVID-19 crisis. The follow-ups will discuss further mechanics and details …

Why States Should Now Consider Expanding Sales Taxes To Services, Part 1, Gladriel Shobe, Grace Stephenson Nielsen, Darien Shanske, David Gamage

Articles by Maurer Faculty

States are facing a severe budget crisis as a result of the coronavirus pandemic. And with the federal government unlikely to pass a relief bill to address those state budget issues,1 states will need to play a significant role in making up revenue shortfalls.

This is the first in a three-part series, which is a contribution to Project SAFE: State Action in Fiscal Emergencies. This essay will lay out the general case for why states should consider expanding their sales tax bases to more services as a response to the COVID-19 crisis. The follow-ups will discuss further mechanics and details …

Mandatory Tax Penalty Insurance, Michael Abramowicz

Indiana Law Journal

In a mandatory tax penalty insurance regime, taxpayers would be required to find insurers to certify portions of their tax returns. A certifying insurer would be subject to a governmental auditing regime insurers of randomly selected filings would pay an amount equal to the inverse of the selection probability multiplied by the underpayment, or they would receive money from the government in the case of overpayment. The insurers function as private auditors with no incentive to underestimate their customers' tax liability. Such a regime will consume real resources, ultimately paid by taxpayers, and thus should not be imposed universally. But …

The Case For State Borrowing As A Response To The Current Crisis, David Gamage, Darien Shanske

Articles by Maurer Faculty

The coronavirus pandemic is a national emergency that requires a national response. Asking states to absorb the budgetary losses caused by the pandemic while they are tasked with providing essential frontline services is comparable to asking states during World War II to pay for the landing in Normandy.

This article is a contribution to Project SAFE: State Action in Fiscal Emergencies. We have already argued, more than once, that the federal government should borrow to prevent steep state and local budget cuts. But because the federal government will apparently not take sufficient action, we offer these ideas to states for …

Strategic Nonconformity To The Tcja, Part I: Personal Income Taxes, Darien Shanske, Adam Thimmesch, David Gamage

Articles by Maurer Faculty

The dire revenue situation that COVID-19 has created for state and local governments is a well documented and looming reality for state legislatures. We and others have explored a variety of ways that states should respond to this crisis in prior articles as a part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research. We think, as do many others, that in the absence of sufficient federal action, the states should prioritize raising revenue through targeted taxes on economic actors that are best enduring …

Conformity And State Income Taxes: Suggestions For The Crisis, David Gamage, Michael A. Livingston

Articles by Maurer Faculty

To guarantee adequate revenue in the postCOVID-19 era, state governments should consider using all possible tools at their disposal. This article explains how and why state governments should evaluate their degree of conformity with federal tax changes in order to achieve this purpose.

Reforming State Corporate Income Taxes Can Yield Billions, Darien Shanske, Reuven S. Avi-Yonah, David Gamage

Articles by Maurer Faculty

The federal government should be providing states and localities with hundreds of billions of dollars in aid. The arguments against such aid, including the claim that the states have somehow been profligate, do not stand up to scrutiny. Nevertheless, it seems unlikely that the federal government will do enough, and it is already the case that the federal government is acting too slowly. States and local governments, which generally operate under balanced budget constraints, are, accordingly, already making sweeping cuts4 that will deepen the recession and reduce services when they are most needed.

Rather than make these cuts, it would …

States Should Consider Partial Wealth Tax Reforms, David Gamage, Darien Shanske

Articles by Maurer Faculty

This article is a contribution to Project SAFE (State Action in Fiscal Emergencies). In other essays in this project, we explain steps the federal government should take to help state and local governments cope with their looming budget crises. The federal government is much better positioned to manage these crises than states and localities and, ideally, it would act sufficiently to prevent the need for state and local governments to cut spending or raise taxes. However, we fear that the federal government may fail to act sufficiently, leaving states and localities with the need to make painful spending cuts, raise …

How The Federal Reserve Should Help States And Localities Right Now, Darien Shanske, David Gamage

Articles by Maurer Faculty

The COVID-19 pandemic is a giant catastrophe, but the Federal Reserve can still mitigate the looming fiscal crises facing state and local governments. This article — a contribution to Project SAFE (State Action in Fiscal Emergencies) — builds on our prior background essay explaining state and local budget issues.

States Should Quickly Reform Unemployment Insurance, Brian Galle, David Gamage, Erin Scharff, Darien Shanske

Articles by Maurer Faculty

COVID-19 is causing mass layoffs and related economic hardship, as well as budget crises for state and local governments. This article is part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research. This article will focus on how state governments should reform unemployment insurance (UI) eligibility and benefits and the taxes funding these programs.

The Ordinary Diet Of The Law: How To Interpret Public Law 86-272, Darien Shanske, David Gamage

Articles by Maurer Faculty

Indeed, in today’s world, filled with legal complexity, the true test of federalist principle may lie, not in the occasional constitutional effort to trim Congress’ commerce power at its edges, or to protect a State’s treasury from a private damages action, but rather in those many statutory cases where courts interpret the mass of technical detail that is the ordinary diet of the law.

Public Law 86-272 is an important feature of the landscape of both state corporate income taxation and state tax policy more generally. The Multistate Tax Commission is completing an important project on updating the guidance given …

Tax Cannibalization By State Corporate Taxes: Policy Implications, Darien Shanske, David Gamage

Articles by Maurer Faculty

The tax cannibalization problem is especially large for state corporate income taxes because state governments piggyback on a deeply flawed federal corporate tax base. In this article, we clarify a point of possible confusion about these issues and then discuss some policy implications.

Tax Cannibalization By State Corporate Taxes: Revised Estimates, David Gamage, Darien Shanske

Articles by Maurer Faculty

To what extent do our prior estimates for the tax cannibalization problem still apply post-2017? In this article we address that question, focusing on the implications of the reduced federal corporate income tax rate.

Information Matters In Tax Enforcement, Leandra Lederman, Joseph C. Dugan

Articles by Maurer Faculty

Most scholars recognize both that the government needs information about taxpayers’ transactions to determine whether their reporting is honest, and that third third-party reporting helps the government obtain that information. Given governments’ reliance on tax collections, it would be risky to think that information or third third-party reporting is not needed by tax agencies. However, a recent article by Professor Wei Cui asserts that “modern governments can practice ‘taxation without information.’” Professor Cui’s argument rests on two claims: (1) “giving governments effective access to taxpayer information through third parties does not explain the success of modern tax administration” because, he …

Will States Step Up In 2020? We Hope So, Darien Shanske, David Gamage

Articles by Maurer Faculty

We offer no predictions about the next year in tax, but we will offer what we hope will happen — if not next year, then soon. To paraphrase Chief Justice John Roberts, we hope that when it comes to the taxation of multinational corporations in particular, states will act more like the “separate and independent sovereigns” that they are. often rely on volatile revenue sources. More stable tax bases, like the sales tax and the property tax bases, are riddled with design flaws, from the sales tax base not including services and intangibles to the property tax failing to provide …

A Georgist Perspective Of Petroleum Taxation, Joseph Leeson

Indiana Journal of Global Legal Studies

Over a century ago, the town of Arden, Delaware, was founded on a unique single-tax-community system that radically altered the popular concept of land ownership. This system was premised on concepts developed by a man few know today but who was a major figure in economics during the 1800s, Henry George. George's public finance theory has been described as having received "intermittent attention over the years, with many eminent names in economics making at least a passing comment, but it has seen comparably little action in the policy debate arena and has been largely ignored by the modern era of …

Why States Should Tax The Gilti, David Gamage, Darien Shanske

Articles by Maurer Faculty

A centerpiece of the 2017 federal tax legislation’s reforms to international corporate income tax rules is the new global intangible low-taxed income regime (or GILTI). In a prior essay, we argued that U.S. state governments should conform to GILTI. But might there be constitutional restrictions preventing state governments from doing so? This essay argues that state governments can constitutionally conform to the federal GILTI rules and thereby tax GILTI income as part of the states’ corporate income tax bases. However, in doing so, we explain that state governments will need to be attentive to background constitutional principles.

Taxing E-Commerce In The Post-Wayfair World, David Gamage, Darien Shanske, Adam Thimmesch

Articles by Maurer Faculty

No abstract provided.

States Should Conform To Gilti, Part 3: Elevator Pitch And Q & A, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay argues that the states should conform to the post-2017 federal tax law's provision for Global Intangible Low-Taxed Income (or “GILTI”). This essay is directed at state legislators and their staffs and presents the argument as succinctly as possible.

Our argument can be summarized in three sentences. First, states should conform to GILTI because there is significant evidence that profit shifting is substantially eroding their corporate tax bases. Second, GILTI is a tool for identifying shifted profits. Third, there are many legally and analytically sound ways to apportion GILTI income to a state.

We also - briefly - counter …

Why States Can Tax The Gilti, David Gamage, Darien Shanske

Articles by Maurer Faculty

A centerpiece of the 2017 federal tax legislation’s reforms to international corporate income tax rules is the new global intangible low-taxed income regime (or GILTI). In a prior essay, we argued that U.S. state governments should conform to GILTI. But might there be constitutional restrictions preventing state governments from doing so? This essay argues that state governments can constitutionally conform to the federal GILTI rules and thereby tax GILTI income as part of the states’ corporate income tax bases. However, in doing so, we explain that state governments will need to be attentive to background constitutional principles.