New Article: Francine J. Lipman & Dawn Davis, Heal the Suffering Children: Fifty Years after the Declaration of War on Poverty, 34 B.C. J. L. & Soc. Change 1 (2014). Abstract below:
Fifty years ago, President Lyndon B. Johnson declared the War on Poverty. Since then, the federal tax code has been a fundamental tool in providing financial assistance to poor working families. Even today, however, thirty-two million children live in families that cannot support basic living expenses, and sixteen million of those live in extreme poverty. This Article navigates the confusing requirements of an array of child-related tax benefits including the dependency exemption deduction, head of household filing status, the Earned Income Tax Credit, and the Child Tax Credit. Specifically, this Article explores how altering the definition of a “qualifying child” across these tax benefits might provide financial relief for working families. The Article concludes that the elimination of the outdated requirement that a “child” be a citizen of the United States or a resident of North America would reduce tax-payer confusion and result in more tax benefits to help lift working families out of poverty.
New Article: Jennifer Bird-Pollan, Unseating Privilege: Rawls, Equality of Opportunity, and Wealth Transfer Taxation, 59 Wayne L. Rev. __ (forthcoming 2014). Abstract below:
This Article is the second in a series that examines the estate tax from a particular philosophical position in order to demonstrate the relevance and importance of the wealth transfer taxes to that position. In this Article, I explore Rawlsian equality of opportunity, a philosophical position that is at the heart of much American thought. Equality of opportunity requires not only ensuring that sufficient opportunities are available to the least well-off members of society but also that opportunities are not available to other members merely because of their wealth or other arbitrary advantages. Therefore, an income tax alone, even one with high rates on the wealthy, would be insufficient to achieve these goals. While revenue raised via the income tax should be used to provide additional opportunities to low-income members of society, wealth transfer taxes provide the additional safeguard of preventing the heirs of wealthy individuals from inheriting wealth that would provide them with additional, unwarranted and unjust, opportunities. Given the importance of the wealth transfer taxes, this Article also examines the question of what form of tax is most consistent with Rawls’ position, ultimately determining that an inheritance or accessions tax best fits the role.
New Article: Eric M. Zolt, Inequality in America: Challenges for Tax and Spending Policies, 66 Tax L. Rev. 1101 (2013). Abstract below:
The goal of this article is to provide a guide to addressing tax and spending policies in an era of increasing inequality of income and wealth. This is challenging because it requires a good understanding of inequality and economic mobility, the changing role of taxes and government social spending, the constraints on policy options, and the possible misconceptions that may influence tax and spending policies.
Inequality in the United States has increased dramatically over the last 30 years. Perhaps even more troubling than the rise in inequality may be the persistence of high levels of poverty and the decline in economic mobility. The same thirty-year period during which inequality has increased, poverty levels have not declined, and economic mobility has decreased has seen major changes in fiscal policy. Tax law changes have altered the relative tax rates, the relative revenue contributions from different tax instruments, and the tax burdens of different income groups. Government spending on social programs has increased substantially, but perhaps not in ways one might expect. The United States likely has a smaller percentage of government social spending going to the needy than other developed countries. In recent decades, an increasingly larger percentage of social spending has been directed to the elderly (without regard to need) and to the upper-half of the income distribution through tax subsidies for healthcare, education, housing, and retirement savings.
The essential first step in shaping fiscal policy is to identify clearly the relative priorities among reducing inequality, reducing poverty, and increasing economic mobility. Tax and spending policies will differ depending on the weight given each of these objectives, and especially in a world of relatively limited resources, the government needs to make difficult choices. Perhaps the most significant implication of this reality is that it may be time to stop thinking about increasing the income tax burden on the wealthy as the only, or perhaps even the primary, way to increase funding for social spending programs. The United States may need less progressive (or even regressive) taxes to fund more progressive spending programs.
New Article: Francine J. Lipman & Alan Smith, The Social Security Benefits Formula and the Windfall Elimination Provision: An Equitable Approach to Addressing ‘Windfall’ Benefits, 39 J. Legis. 181 (2013). Abstract below:
Certain federal, state, and local government employees do not pay into the Social Security system, but rather pay into alternative government pension plans. For purposes of the Social Security Act, where a worker pays into an alternative government pension plan, the worker’s employment constitutes noncovered employment. Even if a worker’s employment record reflects significant periods of noncovered employment, the worker may still qualify for Social Security coverage because she satisfies the minimum requirement of 10 years (40 quarters) of earnings in Social Security covered employment. However, an employment record which reflects both covered and noncovered employment presents a challenge to equitable application of the Social Security Act. To determine the benefits to which a worker is entitled, the Social Security Act first employs an averaging provision that considers 35 years of covered employment. Where an individual’s employment record does not reflect 35 years of covered employment, the averaging provision compresses the worker’s average earnings. Effectively, a life-time high-income worker who held both covered and noncovered employment appears to be a life-time low-income worker by operation of the averaging provision. The second step in determining a worker’s Social Security benefits entails application of a progressive benefits formula to the workers average earnings. By operation of the averaging provision and the progressive benefit formula, a high-income worker who held both covered and non covered employment received a higher than statutorily intended replacement rate (the ratio of benefits to average earnings) prior to 1983. In an effort to downward-adjust Social Security benefits for worker who held both covered and noncovered employment, Congress enacted the Windfall Elimination Provision in 1983. This article presents and examines the Windfall Elimination Provision highlighting inherent problems in its design, which include structural and administrative issues that disproportionately impact low-income workers. The article also describes and examines public misperception and resentment of the Windfall Elimination Provision, and deficiencies in the Social Security Administration’s communication efforts. The article also describes considerable legislative efforts since its enactment to modify, replace, or repeal the Windfall Elimination Provision, providing an explanation and analysis of each bill. Finally, the article presents an alternative approach to eliminating the ‘windfall’ benefits that accrue to noncovered workers. The alternative approach balances the fundamental tenants of the Social Security system – a progressive benefits structure and the earned right nature of benefits. As such, the proposed legislative amendment (included in the appendix of the article) ensures equitable benefits to noncovered workers.
New Article: Mary Louise Fellows & Lily Kahng, Costly Mistakes: Undertaxed Business Owners and Overtaxed Workers, 81 Geo. Wash. L. Rev. 329 (2013).
New Article: Francine Lipman, Access to Tax Justice (forthcoming Pepperdine L. Rev. 2013). Abstract below:
Every morning, Monday through Friday, school children across the United States raise their voices in unison and pledge allegiance to America, with liberty and justice for all. America, in turn, pledges to these children and the world that it is a nation of liberty, justice, and laws. Laws drafted by representatives intended to follow through on America’s promise of liberty and justice for all. Yet for more than 16 million of these children and 30 million adults living in poverty in 2011, America does not deliver on its promise of justice. In a recent global study, America ranked 27th out of 31 countries in social justice. Social justice was evaluated by looking at six key factors: poverty prevention, access to education, labor market inclusion, social cohesion and non-discrimination, health, and “intergenerational justice.” Prevention of poverty is a fundamental precondition for social justice. Under conditions of poverty, engagement in and access to basic education, labor, and health care services are demonstrably curtailed. The causes of poverty are numerous, interrelated, and complex. Nevertheless, poverty reflects the consequences of national policies in fundamental societal arenas including education, labor, immigration, welfare, and taxation.
This essay examines access to the most successful antipoverty program for working lower-income families with children, the earned income tax credit (EITC). At almost 40 years young, the EITC lifts more children out of poverty each year than any other program in America today. Nevertheless, because the EITC is a social benefit program delivered through the federal income tax system by the Internal Revenue Service, America’s revenue collector, EITC beneficiaries bear meaningful access to tax justice costs. This essay discusses these costs and proposes specific opportunities to empower, rather than undermine this long-term, successful, bipartisan antipoverty tax provision.
Tax Day Related Report: Phil Oliff & Nicholas Johnson, The Impact of State Income Taxes on Low-Income Families in 2010, Center on Budget and Policy Priorities (2011).
New Article: John Thomas Plecnik, Abolish the Inflation Tax on the Poor & Middle Class, 29 Quinnipiac L. Rev. 925 (2011). Abstract below:
Inflation erodes the purchasing power of money and distorts some income tax liabilities upward, which in turn discourages savings and investment. When inflation is caused by the central bank “printing” money to fund deficit spending, it results in a transfer of real wealth from the holders of dollars or assets denominated in dollars to the government and, in normative terms, may be conceptualized as a tax. The effect of the so-called inflation tax is regressive, because low-income taxpayers often lack the sophistication or liquidity to invest in hedges against inflation.
Following the double-digit inflation of the late 1970s and early 1980s, the U.S. Treasury Department and a host of legal scholars proposed sweeping reforms to comprehensively index the Internal Revenue Code for inflation. However, their proposals were never enacted into law. Instead, Congress chose to respond to inflation on a case-by-case basis. Many of those responses, such as the preferential rate for capital gains, afford relief to the wealthy, but do little to help the poor and middle class. To counter the pernicious effects of inflation and make the Code more equitable, this article proposes an inflation tax credit. Under the proposal, low-income taxpayers may elect between (i) substantiating the average balance of their bank deposits and treasury bills to receive a credit based on that balance, and (ii) taking a standard credit based on their gross income.