Tax Law Commons^™

Perils Of Tax Reform, James R. Hines Jr.

Articles

Tax reforms dangle possibilities of improving the tax system, but are fraught with perils that are evident from the 2017 U.S. experience and caution against frequent reforms of its ilk. The first peril is that reforms containing tax provisions selected simply on the basis of their projected revenue contributions will produce less tax revenue than anticipated, illustrative calculations suggesting shortfalls of roughly 8–16 percent. The second peril is that reforms will not advance the objectives of efficiency and tax equity to the extent that they include provisions intended to influence future tax legislation or government spending. The third peril is …

The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos

Law & Economics Working Papers

The “Tax Cuts and Jobs Act” (TCJA) enacted on December 22, 2017 includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …

Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah

Law & Economics Working Papers

The Tax Cuts and Jobs Act (TCJA) includes several provisions that may be viewed as potential violations of US tax treaties. However, most of those potential violations, such as new IRC section 951A and to a large extent new IRC section 59A, are covered by the Savings Clause (US model article 1(4)). The only remaining question is whether IRC section 59A (the “Base Erosion Anti-Abuse Tax”, or BEAT) violates the non-discrimination provision (article 24), which is exempted from the Savings Clause. The answer is no, because foreign related parties are not comparable to US related parties receiving interest or royalties.

How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah

Law & Economics Working Papers

Overall, TRA17 is not much worse than TRA86 or TRA14. It increases the deficit, but not by an impossible amount; it is distributionally skewed, but less so than is usually assumed; and its details are not terrible (on the international side they are a big improvement over prior law). There is one big problem, the pass through provisions, and we can only hope that as its horrible implications unfold it will be a prime candidate for repeal.

The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Tax Cuts and Jobs ACT” (TCJA) enacted on December 22, 2017, includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …

Innovative Approach To Anti-Beps And The Coherence Of International Tax Law, Haiyan Xu

SJD Dissertations

This dissertation is comprised of three articles:

• Avi-Yonah, Reuven,. co-author. "Evaluating BEPS: A Reconsideration of the Benefits Principle and Proposal for UN Oversight." H. Xu, co-author. Harv. Bus. L. Rev. 6, no. 2 (2016): 185-238
• Reuven S. Avi-Yonah & Haiyan Xu, A Global Treaty Override? The New OECD Multilateral Tax Instrument and Its Limits, 39 Mich. J. Int'l L. 155 (2018).
• Avi-Yonah, Reuven S. "China and BEPS." Haiyan Xu, co-author. Laws 7, no. 1 (2018): 4-30.

Macroeconomic Modeling Of Tax Policy: A Comparison Of Current Methodologies, Itai Grinberg, Alan J. Auerbach, Thomas A. Barthold, Nicholas Bull, W. Gavin Elkins, Pamela J. Moomau, Rachel Moore, Benjamin Page, Brandon Pecoraro, Kyle Pomerleau

Georgetown Law Faculty Publications and Other Works

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new “dynamic scoring” rule requiring a point estimate within the budget window of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress’ interest in macrodynamic estimates for …

A Destination-Based Cash Flow Tax Can Be Structured To Comply With World Trade Organization Rules, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

This paper briefly outlines alternative approaches to enacting a destination-based cash flow tax that are more clearly compatible with the World Trade Organization rules than the approach that has previously been described in the literature. The first structural alternative involves expanding the universe of businesses subject to the tax by clearly defining both the base of the new U.S. business tax and its tax nexus requirement as domestic consumption, and thereafter treating foreign importers and other sellers equivalently, rather than imposing a deduction disallowance or an import tax. The second alternative involves adopting a business activities tax, and then enacting …

Slicing And Dicing: The Structural Problems Of The Tax Reform Framework, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Unified Framework for Fixing Our Broken Tax Code” (the “Framework”) released by the “Big Six” group of Treasury, White House and Congressional leaders on September 27 has been the focus of a lot of commentary. Most of the comments have focused on the distributive aspects of the plan and on the proposed rate structure, as well as the impact on revenues and the federal deficit. In this comment, I plan to focus instead on the structural aspects of the plan and in particular on the various new lines that it draws, because these are more likely to be lasting.

Evaluating Beps, Reuven Avi-Yonah, Haiyan Xu

Articles

This article evaluates the recently completed Base Erosion and Profit Shifting (BEPS) project of the G20 and OECD and offers some alternatives for reform.

Problems With Destination-Based Corporate Taxes And The Ryan Blueprint, Reuven S. Avi-Yonah, Kimberly Clausing

Articles

With the election of Donald Trump and the Republican Party’s domination of Congress, House Speaker Paul Ryan’s blueprint for fundamental tax reform requires more careful analysis. The Ryan blueprint combines reduced individual rates with a destination-based cash flow type business tax applicable to all businesses. The destination-based business tax at the center of the blueprint has several major problems: It is incompatible with our WTO obligations, it is incompatible with our tax treaties, and it will not eliminate the problems of income shifting and inversions it is designed to address. In addition, these proposals generate vexing technical problems that are …

Gaars And The Nexus Between Statutory Interpretation And Legislative Drafting: Lessons For The U.S. From Canada, Reuven S. Avi-Yonah, Amir Pichhadze

Articles

Rules targeting specific known schemes are not the only tools available in the battle against tax avoidance. Legal systems also use measures that apply generally. The U.S. for example has tended to rely heavily on general doctrines. One such doctrine which is discussed in part 2 of this chapter is the “economic substance” doctrine. Yet as Xiong and Evans recently pointed out “although such judicial doctrines can be used to deal with various aspects of complicated tax abuse judges tended sometimes to limit and sometimes to enlarge the scope of jurisprudential interpretation leading to substantial uncertainty and risk.” One way …

Carbon Tax Rising, Shi-Ling Hsu

Scholarly Publications

No abstract provided.

Heading Off A Cliff? The Tax Reform Man Cometh, And Goeth, Michael J. Graetz

Faculty Scholarship

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even …

Proposals For International Tax Reform: Is There A Middle Road, Reuven S. Avi-Yonah

Articles

In this article, Avi-Yonah looks at two recent tax reform proposals and discusses plausible avenues for post-election tax reform, suggesting two proposals for solving the problems of the U.S. international tax regime. This article was originally prepared for the Century Foundation's November 17 conference, "Paying for Progress: A Tax Reform Agenda for the Next President." See https://tcf.org/content/report/proposals-international-tax-reform/. The author would like to thank Jeff Madrick and the Century Foundation staff for hosting the conference and revising the article.

From Avoiding ‘Double Taxation’ Yesterday To Avoiding ‘Double Non-Taxation’ Today: The Urgent Need For An International Tax Regime Based On Unitary Tax Principles, Zachée Pouga Tinhaga

SJD Dissertations

The purpose of this Dissertation is to analyze the current ills of the international tax system with a special focus on developing countries, and to structure and present a Unitary Taxation System (“UT”) as a solution to the legitimate and multifaceted complaints about current international taxation of multinational companies (“MNEs”). The research aims at presenting a UT that would restore credibility in the international tax arena by providing fiscal predictability and certainty to MNEs, and ensuring appropriate taxation by all countries (specifically developing nations) of all “real” economic activity within their borders. Although this issue has been previously explored, there …

Back To 1913?: The Ryan Blueprint And Its Problems, Reuven S. Avi-Yonah

Articles

From the Revolutionary War to the late 19th century, the federal government was financed primarily through regressive tariffs on imported goods. The exception was the income tax enacted during the national emergency of the Civil War, which was allowed to expire in 1872. The rise of an industrial economy in the post- Civil War era led to significant increases in inequality, which the tariffs exacerbated by falling primarily on the working class. ‘‘Robber barons’’ like J.P. Morgan, Andrew Carnegie, and John D. Rockefeller did not consume most of their income, and their intangible wealth avoided state-level personal property taxes as …

Evaluating Beps: A Reconsideration Of The Benefits Principle And Proposal For Un Oversight, Reuven Avi-Yonah, Haiyan Xu

Articles

The Financial Crisis of 2008 and Great Recession that followed have exacerbated income inequality within and between countries. In the aftermath of the economic turbulence, politicians have turned their attention to the twin problems of individual tax evasion and corporate tax avoidance. U.S. legislators enacted the Foreign Account Tax Compliance Act (FACTA), leading to the United States signing a series of Intergovernmental Agreements (IGAs) for the exchange of tax information. The Organization for Economic Co-operation and Development (OECD) developed the Multilateral Agreement for Administrative Assistance in Tax Matters (MAATM) and initiated the Base Erosion and Profit Shifting (BEPS) project to …

A Bipartisan Tax Reform?, Reuven S. Avi-Yonah

Articles

A Bipartisan Tax Reform?By Reuven S. Avi-YonahIf one listens to what Democratic and Republicancandidates for president are saying on the cam-paign trail, it would appear that the chances for taxreform in 2017 and beyond are minimal. A biparti-san approach is essential for tax reform to passbecause even if there are majorities from the presi-dent’s party in both houses, major tax reform wouldnot likely get through the Senate without 60 votes.But the parties seem very far apart on tax reform.Democrats are focused on using the tax system toreduce inequality and are determined to raise thetax rates at the top of the …

Follow The Money: Essays On International Taxation – Introduction, Michael J. Graetz

Faculty Scholarship

Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

Despite all the attention, however, issues of international income taxation are often not well understood. This Introduction outlines a collection of essays, …

Transfer Pricing Challenges In The Cloud, Orly Mazur

Faculty Journal Articles and Book Chapters

Cloud computing - the provision of information technology resources in a virtual environment - has fundamentally changed how companies operate. Companies have quickly adapted by moving their businesses to the cloud, but international tax standards have failed to follow suit. As a result, taxpayers and tax administrations confront significant tax challenges in applying outdated tax principles to this new environment. One particular area that raises perplexing tax issues is the transfer pricing rules. The transfer pricing rules set forth the intercompany price a cloud service provider must charge an affiliate using its cloud services, which ultimately affects in which jurisdiction …

Saving The Farm Or Giving Away The Farm: A Critical Analysis Of The Capital Gains Tax Preferences, Phyllis C. Taite

Faculty Articles

Over the years the topic of capital gain preferences has been thoroughly debated. Discussions range between whether the tax rates on capital gains should be raised, reduced, or repealed. Other discussions have centered on whether capital gains has an effect on the economy, and if so, how the research supports those assertions. It would be difficult to cover all aspects of the issues associated with capital gains taxes in one article; therefore this discussion will focus on capital gains as applied to individual income taxes. The capital gains tax has been criticized for the questionable effect it has on the …

Valuation, Values, Norms: Proposals For Estate And Gift Tax Reform, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

In their contributions to this Symposium, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog's Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the …

Delegating Tax, James R. Hines Jr., Kyle D. Logue

Michigan Law Review

Congress delegates extensive and growing lawmaking authority to federal administrative agencies in areas other than taxation, but tightly limits the scope of Internal Revenue Service (IRS) and Treasury regulatory discretion in the tax area, specifically not permitting these agencies to select or adjust tax rates. This Article questions why tax policy does and should differ from other policy areas in this respect, noting some of the potential policy benefits of delegation. Greater delegation of tax lawmaking authority would allow administrative agencies to apply their expertise to fiscal policy and afford timely adjustment to changing economic circumstances. Furthermore, delegation of the …

It’S Not That Difficult: The Shared Economic Growth Solution To Tax Reform, Matthew Lykken

Pace Law Review

In this article, I outline the latest version of the Shared Economic Growth package proposal and explain how it accomplishes all of its goals, with reference to some of the recent scholarly works that support it. I then walk through the derivation of the numbers to show that it really works, based on conservative assumptions and without any reliance on economic growth or voodoo, and that it would provide a substantial addition to revenue in the coming years. These numbers are based on 2010 data, the most recent comprehensive data available, and thus prove that the proposal works in the …

Expanding The Renewable Energy Industry Through Tax Subsidies Using The Structure And Rationale Of Traditional Energy Tax Subsidies, Blake Harrison

University of Michigan Journal of Law Reform

Just as the government invested in oil and gas, it must now invest in new energy sources. In a sense, Americans need history to repeat itself. This Note suggests that Congress should amend the United States Tax Code to further subsidize the renewable energy industry. Congress should use subsidies historically available to the oil and gas industries as a model in its amendments. These subsidies serve as a model for promoting the renewable energy industry because such subsidies were fundamental in facilitating the oil and gas industries’ dominance today. Ultimately, Congress must further subsidize the renewable energy industry to avoid …

Reviving Fiscal Citizenship, Ajay K. Mehrotra

Michigan Law Review

April 15 is a day that most Americans dread. That date is, of course, when federal and nearly all state-level individual income tax returns are due. Agonizing over the filing of income tax returns has long been a perennial part of modern American legal culture. Since the mid-1940s, when the United States first adopted a return-based mass income tax, the vast majority of Americans have been legally required to file an annual Form 1040. Over the years, taxpayers have been complaining about, procrastinating over, and generally loathing the filing of their annual tax returns. Indeed, in recent times, April 15 …

Reinventing The Wheel: What We Can Learn From The Tax Reform Act Of 1986, Reuven S. Avi-Yonah

Articles

In 2010, when former Senate Finance Committee Chair Max Baucus was beginning his push toward tax reform, he held a hearing featuring veterans of the great tax reform of 1986. The main conclusion from this hearing was that Congress has changed too much since then to make a repeat of 1986 likely. We are now five years later, Baucus is the U.S.ambassador to China, and no tax reform has happened yet, thus confirming what the veterans told the chair in 2010.

The Moving Target Of Tax Reform, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

In 2000, Professor William Turnier proposed a package of three reforms to make the estate tax more “equitable” and “taxpayerfriendly.” All of his proposals—allowing a surviving spouse to inherit a deceased spouse’s unused exemption, replacing the state death tax credit with a deduction, and indexing the exemption for inflation—were eventually enacted. Today, the estate tax remains on the books, but changes in rates and exemptions have severely curtailed its role in the larger federal tax system. Income tax rate reductions for capital gains and dividends have further lightened the tax burden on capital income, and international pressure to reduce the …

The Rise And Fall Of The Consumption Tax, Reuven S. Avi-Yonah

Articles

The year 1974 was an eventful one in U.S. history. For the first time, a president resigned under threat of impeachment. Watergate and the Vietnam War shook Americans’ faith in their government. The economy was reeling from the first oil embargo, and the United States’ prospects seemed bleak. In that context, Professor William Andrews of Harvard Law School published an article that would revolutionize tax scholarship. Against the backdrop of widespread dissatisfaction with the government in general and the income tax in particular, Andrews suggested replacing the income tax with a consumption tax. That suggestion was ironic for anyone familiar …