Law Commons^™

International Taxation In An Era Of Digital Disruption: Analyzing The Current Debate, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

The “taxation of the digital economy” is currently at the top of the global international tax policymaking agenda. A core claim some European governments are advancing is that user data or user participation in the digital economy justifies a gross tax on digital receipts, new profit attribution criteria, or a special formulary apportionment factor in a future formulary regime targeted specifically at the “digital economy.” Just a couple years ago the OECD undertook an evaluation of whether the digital economy can (or should) be “ring-fenced” as part of the BEPS project, and concluded that it neither can be nor should …

International Taxation In An Era Of Digital Disruption: Analyzing The Current Debate, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

The “taxation of the digital economy” is currently at the top of the global international tax policymaking agenda. A core claim some European governments are advancing is that user data or user participation in the digital economy justifies a gross tax on digital receipts, new profit attribution criteria, or a special formulary apportionment factor in a future formulary regime targeted specifically at the “digital economy.” Just a couple years ago the OECD undertook an evaluation of whether the digital economy can (or should) be “ring-fenced” as part of the BEPS project, and concluded that it neither can be nor should …

The Definitions Of Income, John R. Brooks

Georgetown Law Faculty Publications and Other Works

What is income? It’s a seemingly simple question that’s surprisingly hard to answer. Income is the basis for assigning tax burdens, for distributing transfers, and for broader normative issues of inequality and justice. Yet we lack a shared conception of income, and a pure, rigorous definition of income is impossible. In this Article I review the intellectual history of the income concept among tax and fiscal theorists to show the difficulty of the problem, and also to show that some important debates about what’s proper under an income tax can be explained instead as arguments over competing income definitions that …

Fiscal Federalism As Risk-Sharing: The Insurance Role Of Redistributive Taxation, John R. Brooks

Georgetown Law Faculty Publications and Other Works

In addition to funding government and redistributing income, a redistributive tax-and-transfer system, and a progressive income tax in particular, provides insurance against the risk of uncertain future income. By providing for high taxes for high incomes, and low taxes, exemptions, and transfers for low incomes, a progressive income tax lowers the volatility of potential after-tax income relative to a lump-sum tax. This insurance function is distinct from the redistributive function of the system, since it provides a direct risk-mitigation benefit to the taxpayer himself, rather than simply redistributing income from one taxpayer to another.

This article analyzes the question of …

Where Credit Is Due: Advantages Of The Credit-Invoice Method For A Partial Replacement Vat, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

If a value-added tax (VAT) were chosen to supplement or replace some portion of the revenue from the income tax, a choice would likely be made between the credit-invoice method and the subtraction-method for calculating VAT liability. Credit-invoice method VATs and subtraction-method VATs are, at a conceptual level, very similar taxes. The key substantive difference between most subtraction-method VAT proposals and extant credit-invoice method VATs is that subtraction-method VAT proposals generally do not impose an invoice requirement. The invoice requirement substantially reduces tax avoidance opportunities in the VAT, and also ensures the ability to provide appropriate treatment for exports while …

The Misuse Of Textualism: A Further Reply To Prof. Kahn, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Because readers have already endured four articles, two by me and two by Prof. Douglas A. Kahn, debating the meaning of section 67(e)(1), I am reluctant to respond to Prof. Kahn’s rejoinder, which appeared in the January 18 issue of Tax Notes. Nevertheless, our disagreement implicates the judicial craft of two U.S. Supreme Court members, Chief Justice John Roberts and Justice Sonia Sotomayor. I therefore feel it important to answer Prof. Kahn’s latest contentions, recognizing my duty to be as brief as possible.

Whom Do You Trust? A Reply To Prof. Kahn, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

In his 2008 opinion in Knight v. Commissioner, Chief Justice John Roberts harshly criticized then Court of Appeals Judge Sonia Sotomayor, writing that her approach to the Internal Revenue Code “flies in the face of the statute.” In the August 3 issue of Tax Notes, I argued that Roberts’ criticism of Sotomayor was “logically flawed and unwarranted.” In the September 21 issue of Tax Notes, Prof. Douglas Kahn defended Robert’s criticism of Sotomayor as “persuasive and accurate” and attacked Sotomayor’s opinion in the case and my defense of what she wrote. I believe that Prof. Kahn’s arguments in defense of …

Judge Sonia Sotomayor’S Tax Opinions, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Judge Sonia Sotomayor has written three published opinions on federal taxation, one as a District Court judge and two as a Court of Appeals judge. Two of the opinions deal with routine matters and are unremarkable in the sense that it is difficult to imagine the cases coming out any other way. Her third opinion, however, in William L. Rudkin Testamentary Trust v. Commissioner, 467 F.3d 149 (2d Cir. 2006), aff'd sub nom. Knight v. Commissioner, 552 U.S. 181, 128 S. Ct. 782 (2008), generated a sharp difference of opinion with Chief Justice Roberts. Although Chief Justice Roberts, writing for …

Time To Start Over On Deferred Compensation, Michael Doran

Georgetown Law Faculty Publications and Other Works

Writing good regulations--"good" in the sense of promoting the public interest--always presents challenges. Regulators must hit a small but important target where private conduct is brought within appropriate government control, but unnecessary compliance burdens and other deadweight costs are minimized. Even if they see the government's objectives clearly, regulators often have only a limited understanding of the underlying private activities. Moreover, regulators may be unaware of how their rules disrupt or distort those activities in socially harmful ways.

Regulators occasionally hit the target exactly. More often, they miss--though not by an intolerably wide margin (good enough for government work, as …

Reforming The Taxation Of Deferred Compensation, Ethan Yale, Gregg D. Polsky

Georgetown Law Faculty Publications and Other Works

Executive pay is currently a topic of significant interest for policymakers, academics, and the popular press. On August 14, 2006, in reaction to widespread press reports and academic criticism of extravagant executive perquisites, the SEC proposed new regulations designed to change fundamentally the manner in which executive compensation is reported to shareholders. Despite all of this attention, one significant aspect of executive deferred compensation has gone virtually unnoticed - the federal tax rules governing this form of compensation are fundamentally flawed and must be extensively overhauled. These rules are flawed because they often create a significant incentive for companies and …

Misassigning Income: The Supreme Court And Attorneys' Fees, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

This past term's Supreme Court decision in Commissioner v. Banks and Commissioner v. Banaitis distorts foundational principles, known as assignment of income law, which help identify the person who must report income for federal tax purposes. The Court holds that assignment of income principles require a plaintiff to report as income the portion of a recovery paid to the plaintiffs attorney as a contingent fee. As a result, the plaintiff is taxed at excessively high rates, which may in some cases equal or exceed a confiscatory 100%. Taxing the plaintiff on the attorney-fee portion of a recovery also undermines the …

Words, Words, Words!!! Teaching The Language Of Tax, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

The basic course in federal income tax is usually a challenge for both teacher and student because so many different and difficult things are being taught at once: a prolix and opaque statute; complex financial transactions; and economic, political, and social analysis of the effects of the tax law. In addition, I believe that a teacher of tax must be a teacher of language, focusing explicitly and self-consciously on the ambiguous, imprecise, and confusing words that are embedded in tax law and discourse and that constitute a significant obstacle for students taking the basic course in federal income taxation.

When Are Capitalization Exceptions Justified?, Ethan Yale

Georgetown Law Faculty Publications and Other Works

It is a widely accepted general principle that a taxpayer should capitalize an expenditure that produces a benefit lasting beyond the current tax period. Yet rules putting this principle into practice are among the most controversial in all of federal income taxation. Many argue that a retreat from the general principle is warranted when designing capitalization rules, and even those who argue that capitalization rules ought to be sweeping usually conclude that exceptions are necessary or desirable. For instance, most commentators accept uncritically that expenses incurred to procure certain intangible capital should be expensed, as under current law, without exploring …