Tax Law Commons^™

Post-Wto China Tax Law System Reform And The Rule Of Law: Progress And Prospects, Tianlong Hu

SJD Dissertations

A close examination of China's accession commitments reveals that effective economic reform and trade liberalization call for substantiations from a matching legal infrastructure reform. For example, taxpayers' rights protection should be viewed in terms of broader political and civil rights reform. Indeed, a number of the values featured in the WTO principles and the rule of law framework encourage China's further integration into both the global trade network and the international human rights regime. This is particularly evident in the Chinese tax law context. WTO principles and the rule of law requirements must be introduced and evaluated together in tax …

The Case For Dividend Deduction, Reuven S. Avi-Yonah, Amir C. Chenchinski

Articles

The December 2010 compromise between President Barack Obama and the Republicans extended the 15% tax rate on dividends through the end of 2012. At that point, however, the rate may revert to the Clinton administration rate-39.6%-or be raised to 20%-as proposed by the Obama Administration. Thus, the United States may either abandon corporate-shareholder integration, maintain partial integration, or perhaps even adopt the George W Bush administration's 2003 proposal to exempt dividends altogether-as advocated by some Republicans in Congress. Given this uncertainty and the likelihood of additional Congressional action, now may be a good time to revisit the integration issue. Another …

The Political Pathway: When Will The Us Adopt A Vat?, Reuven S. Avi-Yonah

Book Chapters

The reason the VAT is on the table is also stated in the referenced article by Orszag: "Although hardly anyone wants to admit it, we're not going to solve our budget deficit unless revenue is part of the equation." And while in the short term it may be possible to address the deficit by raising income tax rates(Orszag suggests letting all the Bush tax cuts expire in 2013}, in the long term it doesn't seem plausible that we can raise sufficient revenue that way to pay for Medicare, Medicaid, Social Security, interest on the national debt, and defense and some …

Formulary Apportionment: Myths And Prospects - Promoting Better International Policy And Utilizing The Misunderstood And Under-Theorized Formulary Alternative, Reuven S. Avi-Yonah, Ilan Benshalom

Articles

This article seeks to re-examine the formulary alternative to transfer pricing by inquiring whether partial integration of formulary concepts into current practices would offer a reasonable alternative to transfer pricing rules. We believe that the key to achieving an equitable and efficient allocation of MNE income is to solve the problem of the residual, i.e., how to allocate income generated from mobile assets and activities whose risks are borne collectively by the entire MNE group. These assets and activities generate most of the current transfer pricing compliance and administrative costs, as well as tax avoidance opportunities. A limited formulary tax …

Doing Too Much: The Standard Deduction And The Conflict Between Progressivity And Simplification, John R. Brooks

Georgetown Law Faculty Publications and Other Works

In U.S. federal income tax, the standard deduction, along with the personal exemptions, provides taxpayers with a minimum amount of untaxed income, effectively creating a "zero bracket amount." For historical and political reasons, however, the standard deduction also operates as a simplified substitute for the itemized deductions, such as the deductions for extraordinary medical expenses, charitable contributions, and home mortgage interest. This seemingly reasonable compromise in fact leads to substantial, and surprising, conceptual complexity. In particular, close analysis of each of the two roles shows that their effects, and related criticisms, are often contradictory, which in turn makes it difficult, …

The Redemption Puzzle, Reuven S. Avi-Yonah

Articles

After the adoption of partial integration in 2003, there has been only a modest rise in dividends, but a sixfold increase in redemptions. This article argues that the explanation for that lies in the different treatment of dividends and capital gains to foreign shareholders and that Congress should respond by making sections 302 and 304 inapplicable to foreign shareholders.

An Irs Duty Of Consistency: The Failure Of Common Law Making And A Proposed Statutory Solution, Steve R. Johnson

Scholarly Publications

The IRS should endeavor to treat similarly-situated taxpayers similarly, but does this aspiration rise to the level of a judicially enforceable duty? If the IRS takes a position on Taxpayer B that is correct under the law but is inconsistent with a position the IRS took on similarly-situated Taxpayer A, should the IRS’s position on Taxpayer B fail simply because of the inconsistency? These questions implicate important themes, such as fairness, the rule of law, separation of powers, administrative exigencies, the role of common law making in a highly positivistic system, and the sustainability of legal regimes.

A constitutional standard …

California Women: Trying To Use Federal Taxes To Put The 'Community' In Community Property, Stephanie H. Mcmahon

Faculty Articles and Other Publications

Community property is thought to be a more equitable marital property regime than the common law because we assume that providing each spouse with an interest in fifty percent of the family’s income also provides a substantial amount of equality between spouses. Historically, however, as the regime operated in the United States, it was not especially favorable to wives. Although the concept implied a partnership between spouses, in practice wives were denied rights a partner would expect to enjoy. This article examines how women lobbied to enlarge the protection California wives enjoyed under the state’s community property regime in the …

Taxing Inheritances, Taxing Estates, James R. Hines Jr.

Articles

This Article considers two aspects of converting the U.S. transfer tax system to one in which burdens are imposed on the basis of receipt rather than gift. The first aspect is the economic impact of distinguishing transfer tax liabilities by numbers of children in a family in addition to the total amount of transferred wealth. The second aspect is the nature of the event that triggers tax liability. Taxing on the basis of receipt raises complicated issues about generation-skipping transfers, transfers to trusts, and transfers that involve foreign as well as domestic parties, all of which are potentially influenced by …

Summary And Recommendations (Symposium On Designing A Federal Vat, Part I), Reuven S. Avi-Yonah

Articles

For the past thirty-five years, the debate on fundamental tax reform in the United States has centered on whether some type of consumption tax would replace all or part of the federal income tax. In my opinion, this debate has now been decided. Given recent budgetary developments and the impending eligibility of the baby boom generation for Social Security and Medicare, we cannot dispense with the revenue from the corporate and individual income tax. Moreover, we will need huge amounts of additional revenue, and most informed observers believe that the only plausible source for such revenues is a federal value-added …

Between Formulary Apportionment And The Oecd Guidelines: A Proposal For Reconciliation, Reuven S. Avi-Yonah

Articles

In the last 30 years, a debate has been raging in international tax circles between advocates of the OECD Transfer Pricing Guidelines and the arm’s length standard (ALS) they embody, on the one hand, and advocates of formulary apportionment (FA) on the other. After the adoption of the 1995 regulations and the new OECD Guidelines, the debate became quieter for a while, because everyone was waiting to see whether the issue had been resolved. However, while there have been few decided cases, it is clear by now that the transfer pricing problem is as bad as it ever was. That …

Xilinx And The Arm's-Length Standard, Reuven S. Avi-Yonah

Articles

On May 7 the Ninth Circuit decided Xilinx v. Commissioner. By a 2-1 majority, the panel reversed the Tax Court and held that costs of employee stock options must be included in the pool of costs subject to a tax-sharing agreement. The Xilinx decision is important for three reasons. First, cost sharing is probably the key element in current transfer pricing law because it is the principal way in which profits from intangibles get shifted from the United States to low-tax jurisdictions. Moreover, informed observers agree that the allocation of income from intangibles is the most important problem in transfer …

Tax Policy Challenges, Michael J. Graetz

Faculty Scholarship

In 1995, when the late, great Jack Nolan asked me to deliver the inaugural lecture in honor of Larry Woodworth, I was both honored and flattered. I had come to know Larry Woodworth beginning in 1969, when I was a rookie treasury tax policy staffer. At that time, he had already served the Joint Committee on Taxation for 25 years and had been the third Chief of Staff in its history beginning as chief of staff in 1964. Larry Woodworth was not only as knowledgeable about the tax law as anyone you would ever hope to meet, and as savvy …

Protectionist Pitfalls In U.S. Tax Reform, James R. Hines Jr.

Book Chapters

The magnitude of current and projected U.S. budget deficits makes it appropriate for the government to cast its net wide in seeking new revenue sources. In doing so, however, there is the danger of misconstruing the role of domestic taxation in a global economy, and thereby designing a tax reform proposal with significant protectionist elements.

Structuring A Us Federal Vat, Reuven S. Avi-Yonah

Articles

On 18 and 19 February 2009, the American Tax Policy Institute (ATPI) sponsored a conference in Washington, DC, on “Structuring a Federal VAT: Design and Coordination Issues.” The purpose of the conference was to lay the ground for a potential future adoption of a federalVAT in the United States by discussing some of the technical issues related to two broad topics: firstly, how should such a US federal VAT be designed and, secondly, how should it be coordinated with the existing state retail sales taxes (RST). In this article, the author summarized the conference presentations.

Risks, Rents And Regressivity Revisited, Reuven S. Avi-Yonah

Articles

This article seeks to survey the debate in the United States about whether the tax base should be income or consumption, and then focus on some recent arguments that have been made in favour of a consumption tax. In the author's opinion, none of these arguments are convincing, and he would favour adopting a consumption tax in addition to, and not in lieu of, the existing income tax.

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

Articles by Maurer Faculty

No abstract provided.

Enforcing Dividend Withholding On Derivatives, Reuven S. Avi-Yonah

Articles

The United States imposes a 30 percent withholding tax on dividends paid to nonresident aliens. However, this tax is rarely paid by portfolio investors because they can swap into U.S. securities, receiving payments to match both capital gain and dividends. Treasury has ruled that swap payments have an origin in the taxpayer’s residence so there is no withholding obligation on payments that match dividends. The proposal would impose withholding tax on dividend equivalents on the ground that there is no policy justification for a distinction between dividends, substitute dividends under securities lending transaction (which are treated as dividends and are …

Foreign Income And Domestic Deductions, James R. Hines Jr.

Articles

To what extent should taxpayers deduct expenses incurred domestically that contribute to foreign income production? It is widely believed that if the home country does not tax foreign income, then it also should not permit deductions for that portion of domestic expenses attributable to earning foreign income. This prescription is, however, inconsistent with the decision to exempt foreign income from taxation in the first place. The paper shows that, for any system of taxing foreign income, the consistent and efficient treatment is to permit domestic expense deductions for all expenses incurred domestically. This differs from the current U.S. regime, under …

Inter-Nation Equity: The Development Of An Important But Underappreciated International Tax Value, Kim Brooks

Articles, Book Chapters, & Popular Press

Modern high-income states have relied on income taxes and redistributive spending to reduce inequality nationally; yet few states have considered how their national tax systems might have important implications for international income flows between high-income and low-income states and how their tax treaties might be used as a mechanism for achieving a fairer distribution of income internationally. Discussions about the possibilities of tax systems as a means of distributing income globally, and of acting in the service of the reduction of global inequality, are nascent, but not new. The foundational, and still leading, contribution to this area of scholarship is …

The Aches And Pains Of Transition To A Consumption Tax: Can We Get There From Here?, Daniel S. Goldberg

Faculty Scholarship

This article discusses probably the most significant obstacle to the adoption of a consumption tax: the negative effects on existing wealth that the transition from the income tax to most forms of a consumption tax would have. The Congressional Budget Office in its 1997 study posed the question, “How to Get There from Here.” The difficulty with transition and the changes in the tax law since the CBO study, however, prompt the more basic question: “Can we get there from here?” This article deals with this question by examining the effects of transition on existing wealth under a variety of …

The Theory And Practice Of Tax Reform, Lawrence Zelenak

Michigan Law Review

On January 7, 2005, President Bush-flush with recent electoral victory- issued an Executive Order creating the President's Advisory Panel on Federal Tax Reform. The Order instructed the bipartisan Panel to recommend one or more plans for major reform of the federal income tax. The president did not, however, permit the Panel to begin its work on a blank slate. Instead, the Order required (among other things) that the Panel's proposals be revenue-neutral, simpler than current law, "appropriately progressive," and supportive of homeownership and charity. Although the Order contemplated that the Panel might offer more than one tax reform plan, it …

The Report Of The President's Advisory Panel On Federal Tax Reform: A Critical Assessment And A Proposal, Reuven S. Avi-Yonah

Articles

ON November 1, 2005, The President's Advisory Panel on Federal Tax Reform ("Panel") submitted its report ("Report") to the Secretary of the Treasury.1 At 272 pages, this is the most important and wide-ranging plan to reform the United States federal tax system since Blueprints for Basic Tax Reform (1977).2 While prospects for immediate action appear dim, the Report will no doubt be the basis of discussion of federal tax reform for a long time to come.

Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn

Articles

In the current tax system, a corporation is treated as a separate taxable entity. This tax system is sometimes referred to as an entity tax or a double tax system. Since a corporation is a separate and distinct entity from its owners, the shareholders, the default rule is that transfers between them are treated as realization events. Without a specific Internal Revenue Code (Code) provision providing otherwise, such transactions will also require the parties to recognize the realized gain or loss. Congress has enacted several nonrecognition corporate provisions when forcing the recognition of income could prevent changes to the form …

Teaching Tax Stories, Ajay K. Mehrotra

Journal of Legal Education

No abstract provided.

The Payroll Tax Liabilities Of Low And Middle Income Taxpayers, Deborah A. Geier

Law Faculty Articles and Essays

This 2005 article explores how using the "average" increase in wages rather than the "median" increase in wages to determine the yearly increase in the payroll tax wage bases - at a time of increasing inequality - has contributed markedly to the increased tax burden on labor income of the poor and middle classes.

The Ingenious Kerry Tax Plan, Reuven S. Avi-Yonah

Articles

The tax plan proposed by Democratic presidential candidate John Kerry at Wayne State University on March 26 is an ingenious set of ideas to encourage domestic job creation. Its greatest strength, however, may be its contribution to long-term economic growth, fairness, and tax law simplification. In this article I will first describe the Kerry proposal, then analyze its advantages, and finally address some counterarguments.

Book Review. The Price Of Progress: Public Services, Taxation And The American Corporate State, 1877-1929 By R. Rudy Higgens-Evenson, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.

Incremental Versus Fundamental Tax Reform And The Top One Percent, Deborah A. Geier

Law Faculty Articles and Essays

This article describes the historical shift from consumption taxation at the federal level to income taxation with the enactment of the 16th amendment (the intent of which was chiefly to tax the capital income of the wealthy) and the incremental shifts since then back toward consumption taxation (which frees capital from tax) through expansion of both the payroll taxes as well as the consumption tax features of our current hybrid income/consumption tax that target the middle class.

It then addresses the issue of whether we ought to expand consumption tax treatment to the very wealthy by reviewing two recently published …

Business Law Reform In The United States: Thinking Too Small?, Douglas C. Michael

Law Faculty Scholarly Articles

Dean Johan Henning presents the South African experience with business entity reform as one part of a coordinated whole. It included, for example, government funding for business, tax reforms, accounting and securities changes. Henning says that these reforms, though multi-faceted, had a uniform purpose: to use small business as an engine to improve the economy and to move “historically and socially disadvantaged groups” into the mainstream of the economy and the society.

These are noble goals and far reaching efforts, and a lot to ask of business entity reform. But because the South African experience was nonetheless successful by all …