Tax Law Commons^™

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.

How States Can Respond To The Ahca: Using The Mccarran-Ferguson Act, David Gamage, Darien Shanske

Articles by Maurer Faculty

No abstract provided.

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 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.

Using Taxes To Support Multiple Health Insurance Risk Pools, David Gamage, Darien Shanske

Articles by Maurer Faculty

In most markets, it is considered desirable for consumers to have more choices. But health insurance regulation is different. When it comes to health insurance, giving consumers more choices can result in the market collapsing — leaving the sickest and most needy consumers without any good choices at all. To mitigate this problem, the Affordable Care Act’s Exchanges were designed around maintaining a single exchange-based risk pool. However, one problem with this approach taken by the Affordable Care Act is that the regulations designed to maintain the single exchange-based risk pool have the side effect of limiting some potentially positive …

Irs Reform: Politics As Usual?, Leandra Lederman

Articles by Maurer Faculty

The IRS is still reeling from accusations that it "targeted" Tea Party and other non-profit organizations. Although multiple government investigations found no politically motivated behavior-only mismanagement-Congressional hearings were quite inflammatory. Congress recently followed up those hearings with a set of IRS reforms. Congress's approach is reminiscent of the late 1990s, when highly publicized Congressional hearings regarding alleged abuses by the IRS resulted in a major IRS reform and restructuring, although the allegations subsequently were largely debunked. This Article argues that the recent allegations against the IRS also were overblown. It looks to the aftermath of the 1998 IRS reform, which …

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.

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.

Book Review. Reviving Fiscal Citizenship, Ajay K. Mehrotra

Articles by Maurer Faculty

In recent years, numerous lawmakers, policy analysts, and scholars have been decrying the many defects of the present U.S. income tax system. Few have attempted to defend our return-based mass income tax. This essay reviews Learning to Love Form 1040, Lawrence Zelenak’s stirring and persuasive defense of a simplified version of our present federal income tax system. In contrast to the conventional economic critiques, Zelenak explores the underappreciated social, cultural, and political benefits of a return-based, mass income tax. Chief among these, he argues, is the existing regime’s potential to raise the tax consciousness of the average citizen and to …

When The Bough Breaks: The U.S. Tax Court's Branch Difficulties, Leandra Lederman

Articles by Maurer Faculty

This essay highlights the confusion over which of the three branches of government (if any) is home to the U.S. Tax Court, which hears over 95% of litigated federal tax cases. This uncertainty recently resulted in a separation of powers challenge to the Tax Court. There is a pressing need for the Tax Court’s status to be resolved, to decrease its insularity and increase transparency and accountability.

Foreword--King V. Burwell Symposium: Comments On The Commentaries (And On Some Elephants In The Room), David Gamage

Articles by Maurer Faculty

This invited essay reviews the pieces submitted for the Pepperdine Law Review symposium on the King v. Burwell case. The thrust of this essay's response commentary is to praise the submitted essays for their excellence and insightfulness, but to suggest that the submitted essays nonetheless might benefit from focusing more on the role of the political mobilization that resulted in the King v. Burwell dispute. Ultimately, this essay suggests that what may have motivated the Supreme Court to develop and apply its new "deep economic and political significance" test in this this case may not have been anything inherent to …

The Case For Taxing (All Of) Labor Income, Consumption, Capital Income, And Wealth, David Gamage

Articles by Maurer Faculty

Perhaps the most fundamental questions in tax legal scholarship concern debates about what should be the ideal tax base or tax bases. In particular, scholars have vigorously disagreed about (1) whether the United States should follow other developed countries in supplementing its income tax with a value-added consumption tax, and (2) whether governments should seek to tax capital income and wealth or should instead seek to redesign or replace income taxes with progressive consumption taxes.

The prior economics-oriented theoretical literature on these questions has largely focused on analyzing labor supply and savings behaviors. Yet the existing empirical literature does not …

(Un)Appealing Deference To The Tax Court, Leandra Lederman

Articles by Maurer Faculty

The U.S. Tax Court (Tax Court), which hears the vast majority of litigated federal tax cases, occupies an unusual place in the federal government. It is a federal court located outside of the judicial branch, but its decisions are appealable to the federal courts of appeals. This odd structure, coupled with the court's history as an independent agency in the executive branch, can give rise to important questions, such as the standard of review that should apply to its decisions. In particular, should the courts of appeals treat Tax Court decisions the same as those of district courts in tax …

Restructuring The U.S. Tax Court: A Reply To Stephanie Hoffer And Christopher Walker's The Death Of Tax Court Exceptionalism, Leandra Lederman

Articles by Maurer Faculty

This article is an invited reply to an article in the Minnesota Law Review regarding whether the “reviewing court” provisions of the Administrative Procedure Act (APA) apply to the U.S. Tax Court, the principal court hearing disputes between taxpayers and the IRS. (The Tax Court has repeatedly said that the APA does not apply to it). It argues in part that the question of whether the Tax Court must apply the APA’s standard and scope of review when reviewing IRS action is not as clear as a matter of history and doctrine as Professors Hoffer and Walker argue. The author …

How Should Governments Promote Distributive Justice?: A Framework For Analyzing The Optimal Choice Of Tax Instruments, David Gamage

Articles by Maurer Faculty

A particular methodology derived from public finance economics has become very influential in the legal literature on taxation and related topics. Sometimes called the “double-distortion” approach, this methodology forms the heart of Louis Kaplow’s book “The Theory of Taxation and Public Economics” and is also the foundation of prominent work by other leading tax legal scholars such as David Weisbach and James Hines.

This Article develops an extended critique of how the double-distortion approach has been used to make legal policy arguments. In doing so, this Article constructs a framework for analyzing how governments can optimally raise revenues and promote …

A Way Forward For Tax Law And Economics? A Response To Osofsky's "Frictions, Screening, And Tax Law Design", David Gamage

Articles by Maurer Faculty

This Essay responds to Leigh Osofsky's, "Who’s Naughty and Who’s Nice? Frictions, Screening, and Tax Law Design." Osofsky’s analysis suggests that tax rules might be designed so as to take account both of heterogeneity in taxpayers’ tax planning proclivities and of taxpayer characteristics relevant for distribution. By designing tax rules so as to create frictions that differentially impose higher costs on those taxpayers who are more successfully circumventing existing taxes we can perhaps reform our tax system so as to better achieve equitable distribution at lower efficiency costs. This Essay argues that Osofsky's analysis is generally correct and that it …

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 …

On The Future Of Tax Salience Scholarship: Operative Mechanisms And Limiting Factors, David Gamage

Articles by Maurer Faculty

This Essay — written for Florida State University’s symposium on the 100th anniversary of the U.S. federal income tax — evaluates how the literature on tax salience should be advanced in order for it to better guide tax policy over the coming decades. The literature on tax salience analyzes how taxpayers account for the costs imposed by taxation when the taxpayers make decisions or judgments, both in the taxpayers’ roles as voters and as market participants. This Essay evaluates both possible operative mechanisms that might underlie observed tax salience effects and limiting factors that might prevent tax salience effects from …

Enforcement As Substance In Tax Compliance, Leandra Lederman, Ted Sichelman

Articles by Maurer Faculty

It is well known that the government's complete failure to enforce a law can nullify that law. But what are the effects of partial enforcement? This Article shows that imperfect enforcement can alter the de facto content of the written law in predictable and beneficial ways. Specifically, in the tax compliance context, even if perfect enforcement were costless, it would not always be socially optimal. When improving the substantive law is infeasible, the enforcement agency can effect beneficial changes in the law by adopting a probabilistic enforcement scheme that varies according to the category of taxpayer and type of transaction. …

Perverse Incentives Arising From The Tax Provisions Of Healthcare Reform: Why Further Reforms Are Needed To Prevent Avoidable Costs To Low- And Moderate-Income Workers, David Gamage

Articles by Maurer Faculty

Called “Obamacare” by some, the Affordable Care Act (or “ACA”) is the most extensive reform to the American healthcare system since the creation of Medicare and Medicaid in 1965. The ACA promises many improvements to American health care. While recognizing the importance of these improvements, this Article focuses on how the ACA’s tax provisions will create avoidable costs for low- and moderate-income workers.

This Article argues that – once key tax-related provisions of the ACA come into effect in 2014 – the ACA will create perverse incentives with respect to a number of important decisions affecting low- and moderate-income Americans, …

Comments On Daniel Shaviro's Tax Reform Implications Of The Risk Of A U.S. Budget Catastrophe, David Gamage

Articles by Maurer Faculty

This symposium essay reviews and comments on Daniel Shaviro's article "Tax Reform Implications of the Risk of a U.S. Budget Catastrophe."

The Fight Over "Fighting Regs" And Judicial Deference In Tax Litigation, Leandra Lederman

Articles by Maurer Faculty

The question of how much deference courts should accord agency interpretations of statutes is a high-profile and important issue that affects both rulemaking and case outcomes. What level of deference should courts accord an agency regulation or other rule that an agency has issued opportunistically, during the course of related litigation? This important question has arisen in numerous cases, including the 2011 U.S. Supreme Court decision in Mayo Foundation for Medical Education and Research v. United States, a case involving a Treasury regulation.

To answer the question, the Article analyzes the law on judicial deference to tax authorities generally, as …

What Do Courts Have To Do With It?: The Judiciary's Role In Making Federal Tax Law, Leandra Lederman

Articles by Maurer Faculty

The Internal Revenue Code is an important source of federal tax law, but it is not the only source. The U.S. Department of the Treasury and Internal Revenue Service issue important guidance, and federal courts interpret all of these authorities. This essay provides an overview of federal tax litigation, at both the trial and appellate levels, and discusses the interplay among Congress, the Treasury, and the judiciary in developing federal tax law.

The Use Of Voluntary Disclosure Initiatives In The Battle Against Offshore Tax Evasion, Leandra Lederman

Articles by Maurer Faculty

The federal government has engaged in a number of well-publicized enforcement efforts in an attempt to collect back taxes owed on offshore bank account and other offshore assets. Among those efforts are special offshore “voluntary disclosure” initiatives — essentially tax amnesties — offered by the Internal Revenue Service. One such program closed in September 2011, and another opened in January 2012. After discussing the history of voluntary disclosure programs, particularly the offshore initiatives of 2003, 2009, 2011, and 2012, this essay evaluates the government’s approach to voluntary disclosure of offshore evasion in light of the literature on optimal tax amnesties. …

From Programmatic Reform To Social Science Research: The National Tax Association And The Promise And Perils Of Disciplinary Encounters, Ajay K. Mehrotra, Joseph J. Thorndike

Articles by Maurer Faculty

This article uses the history of the National Tax Association (NTA), the leading twentieth-century organization of tax professionals, to strengthen our empirical understanding of the disciplinary encounter between law and the social sciences. Building on existing sociolegal scholarship, this article explores how the NTA embodied tax law's ambivalent historical interaction with public economics. Since its founding in 1907, the NTA has changed dramatically from an eclectic and catholic organization of tax professionals with a high public profile to an insular, scholarly association of mainly academic public finance economists. Using a mix of quantitative and qualitative historical evidence, we contend that …

Three Essays On Tax Salience: Market Salience And Political Salience, David Gamage, Darien Shanske

Articles by Maurer Faculty

This Article analyzes the literatures on how individuals understand taxation (i.e., tax salience). We evaluate how taxpayers respond to different presentations of tax prices both in their roles as market participants and as voters. We aim to combat naïve notions about tax salience that currently exert a pernicious influence on tax lawmaking. In particular, we argue that it is normatively desirable for governments to reduce tax salience with respect to market decision making, and that there is nothing objectionable about governments reducing tax salience with respect to political decision making.

The Public Control Of Corporate Power: Revisiting The 1909 U.S. Corporate Tax From A Comparative Perspective, Ajay K. Mehrotra

Articles by Maurer Faculty

The origins of U.S. corporate taxation are often associated with the 1909 corporate excise tax. Scholars who have investigated the beginnings of this levy have mainly focused on the legislative history of the 1909 corporate tax to argue that it was either an expression of the Progressive Era impulse to regulate large-scale corporations or an attempt to use corporations as remittance devices to collect taxes aimed at wealthy shareholders. This Article broadens the conventional historical accounts of the emergence of American corporate taxation by revisiting the 1909 U.S. corporate tax from a comparative perspective. The aim is to look both …

Reducing Information Gaps To Reduce The Tax Gap: When Is Information Reporting Warranted?, Leandra Lederman

Articles by Maurer Faculty

A core problem for enforcement of tax laws is asymmetric information. The taxpayer knows the facts regarding the relevant transactions it engages in during the year-or at least has ready access to that information. The government is forced to play catch-up, obtaining that information either from the taxpayer or from third parties. Information reporting is routinely used to address this information gap. The government obtains information about the taxpayer's tax situation from a third party and-equally important-the taxpayer knows that the government has received that information. This fosters taxpayer honesty. Information reporting is not a panacea, however. It imposes costs …

The Intellectual Foundations Of The Modern American Fiscal State, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.