Category Archives: Taxation

New Article: “Should the Law Do Anything About Economic Inequality?”

New Article: Matthew Dimick, Should the Law Do Anything About Economic Inequality?, SSRN Jan. 2016.  Abstract below:

What should be done about rising income and wealth inequality? Should the design and adoption of legal rules take into account their effects on the distribution of income and wealth? Or should the tax-and-transfer system be the exclusive means to address concerns about inequality? A widely-held view argues for the latter: only the tax system, and not the legal system, should be used to redistribute income. While this argument comes in a variety of normative arguments and has support across the political spectrum, there is also a well-known law-and-economics version. This argument, known as the “double-distortion” argument, is simply stated. Legal rules that redistribute income only add to the economic distortions that are already present in the tax system. It would therefore be better for everyone, and especially the poor, to instead adopt an efficient, nonredistributive legal rule, and increase redistribution through the tax system.

This Article challenges the double-distortion argument from a law-and-economics perspective. There are two main arguments, in addition to several other subsidiary points. First, in the abstract, there is no reason to believe that legal rules that have redistributive effects will always reduce efficiency; indeed, they can sometimes increase efficiency. Examples from the regulation of product markets, labor markets, and financial markets underscore this claim. In these cases, legal redistribution is more efficient than redistribution through the tax system. Second, legal rules are likely to be more attractive than taxation precisely in cases where inequality itself or normative concerns about inequality is high. Under the optimal tax policy, higher inequality or greater concern about inequality will justify larger tax distortions. Therefore, a particular legal rule is more likely to be more efficient than the optimal tax policy under these circumstances. The ultimate conclusion is that a mix of legal rules and taxation, rather than taxation exclusively, will be the best way to address economic inequality.

New Article: “Rethinking The Sales Tax Food Exclusion With SNAP Benefits”

New Article: Anna Johnson & Steven M. Sheffrin, Rethinking The Sales Tax Food Exclusion With SNAP Benefits, 79 State Tax Notes 149 (Jan. 11, 2016).  Abstract below:

Most states either totally or partially exclude food at home from the general sales tax. This exclusion generates a debate between tax policy analysts with their emphasis on broad base, low-rate tax systems against the advocates for the poor who argue that the exemption for food is necessary on distributional grounds. States that do tax food at home are often singled out as having particularly regressive and punitive tax systems. What is missing from this debate is a serious discussion of the consequences of non-taxability of benefits under the Supplemental Nutritional Assistance Program (food stamps). We present evidence that the SNAP program effectively reaches the vast majority of the poor thus making the taxability of food at home much less important for individuals in lower income tiers.

-Thanks to http://taxprof.typepad.com/ for the heads up!

 News Coverage: For the Wealthiest, a Private Tax System That Saves Them Billions – The New York Times

News Coverage: For the Wealthiest, a Private Tax System That Saves Them Billions – The New York Times

New Article: “The Real Marriage Penalty: How Welfare Law Discourages Marriage Despite Public Policy Statements to the Contrary – and What Can Be Done About it”

DSC_0022New Article: Spencer Rand, The Real Marriage Penalty: How Welfare Law Discourages Marriage Despite Public Policy Statements to the Contrary – and What Can Be Done About it, 18 UDC/DCSL L Rev.  93 (2015).  Abstract below:

On marriage, people lose welfare benefits abruptly. It is devastating to them, diminishing and in some cases overwhelming any economic benefits of marriage. It makes marriage unattainable and a status for the rich alone. It is also a surprising and unintended outcome of policymakers, who since at least Reconstruction and with much fanfare in the 1996 welfare reform touted marriage for the poor as a self-help measure and poverty cure. It is these same government policy makers, however, who make marriage impossible. Low-income people tend to marry each other. Both incomes need to be brought into the home to raise people out of poverty. When people lose welfare on marrying, the family’s combined income is often lower than if they had stayed separated or chose to live together without marrying. They cannot survive. Unable to marry, they are statistically less likely to remain together as long. They lose out on statistically more long-term relationships, long-term spousal government and employee benefits, and legal protections on the dissolution of their relationships from divorce and estate laws.

This article situates marriage promotion laws among poverty programs in the United States and looks at some of the policy reasons people have argued for the marriage as a poverty cure, such as economic, legal, and social gains, and policy reasons against marriage promotion programs, including those who think such policies are racist and disrespectful. Suggesting that marriage promotion may or may not be wrong but that marriage may be helpful to the poor whether encouraging it is appropriate, it catalogues some of the welfare programs that are much harder for married people to obtain. These include many public assistance programs, like SSI and TANF. It also includes some social insurance programs, like some Social Security and Medicare. It describes how many people are financially better off at least in the short-term by living with their partner outside of wedlock, perhaps forfeiting long-term benefits. Most commonly, the penalties stem from deeming income of spouses to each other right away and from expecting a spouse with relatively limited resources to spend those before either spouse gets help, depleting the resources that keep people out of poverty. The paper suggest delaying attributing income and resources to spouses until the family can develop the pragmatic benefits of marriage, raising the amount of income or resources married couples can have before being penalized, and creating tax credits to make marriage economically beneficial.

New Article: “Corrective Progressivity”

New Article: Eric A. Kades, Corrective Progressivity, SSRN 2015.  Abstract below:

In these times of widening inequality, regressive taxation is about the last thing needed in the United States. Yet that is exactly what we observe in every single state: overall state tax regimes (various combinations of income, property, and sales taxes) impose their highest rates on the poor and lower and lower rates as income increases. This article describes Corrective Progressivity (CP), a federal income tax mechanism to undo all of this variegated regressive state taxation in one fell swoop. Under CP, federal income tax rates vary from state to state — in each state the federal income tax varies inversely with that state’s overall state tax rates so that the total (state federal) tax burden achieves a target level of progressivity. CP would make tax burdens in the states with the most regressive tax systems much more equitable, raising average tax rates by as much as 20% on top incomes and lowering them (into the negative/subsidy range) by a similar amount at the bottom of the income distribution. Although having federal income tax rates vary from state to state sounds like the epitome of a violation of the Constitution’s Uniformity Clause, CP passes muster both as matter of the doctrine of that clause and its underlying policy purpose.

New Article: “Reducing Inequality with a Retrospective Tax on Capital”

New Article: James Kwak, Reducing Inequality with a Retrospective Tax on Capital, Cornell J. L. & Pub. Pol’y forthcoming, SSRN May 2015.  Abstract below:

Inequality in the developed world is high and growing: in the United States, 1% of the population now owns more than 40% of all wealth. In Capital in the Twenty-First Century, the economist Thomas Piketty argues that inequality is only likely to increase: invested capital tends to grow faster than the economy as a whole, causing wealth to concentrate in a small number of hands and eventually producing a society dominated by inherited fortunes. The solution he proposes, an annual wealth tax, has been reflexively dismissed even by supporters of his overall thesis, and presents a number of practical difficulties. However, a retrospective capital tax — which imposes a tax on the sale of an asset based on its (imputed) historical values — can reduce the rate of return on investments and thereby slow down the growth of wealth inequality. A retrospective capital tax mitigates or avoids the administrative and constitutional problems with a simple annual wealth tax and can reduce the rate of return on capital more effectively than a traditional income tax. This Article proposes a revenue-neutral implementation of a retrospective capital tax in the United States that would apply to only 5% of the population and replace most existing taxes on capital, including the estate tax and the corporate income tax. Despite conventional wisdom, there are reasons to believe that such a tax could be politically feasible even in the United States today.

News Coverage of a New Report: Tax Cuts For The Poor And Middle Class — Not The Rich — Create Jobs, Research Shows

News Coverage of a New Report: Tax Cuts For The Poor And Middle Class — Not The Rich — Create Jobs, Research Shows.

New Article: “Exploding Wealth Inequalities: Does Tax Policy Promote Social Justice or Social Injustice?”

New Article: Phyllis C. Taite, Exploding Wealth Inequalities: Does Tax Policy Promote Social Justice or Social Injustice?, 36 W. New Eng. L. Rev. 201 (2014).  Abstract below:

This essay discusses how tax policies work in concert to contribute to the wealth and income inequality that disadvantage the poor and middle class in favor of the wealthy. While there is current and past discourse on wealth and income inequality, and impact of the same, as well as discussions of multiple causes of wealth and income inequality, there is little discussion on how various tax policies work together as a common force to perpetuate income and economic inequality. This Essay briefly discussed how certain tax policies work in concert to systematically shift wealth to the wealthiest taxpayers. This social arrangement is counter to what many would perceive as social justice. Social justice requires that those who are of greater means and receive greater benefits of tax policy should be responsible for a greater weight of the tax burdens. This Essay furthered discussed proposed limitations that should be placed on certain tax subsidies and defined benefits and burdens that should attach for the benefits received from these tax subsidies.

New Article: “For Goodness’ Sake: A Two-Part Proposal for Remedying the U.S. Charity/Justice Imbalance”

New Article: Fran Quigley, For Goodness’ Sake: A Two-Part Proposal for Remedying the U.S. Charity/Justice Imbalance, SSRN 2015.  Abstract below:

The U.S. approach to addressing economic and social needs strongly favors individual and corporate charity over the establishment and enforcement of economic and social rights. This charity/justice imbalance has a severely negative impact on the nation’s poor, who despite the overall U.S. wealth struggle with inadequate access to healthcare, housing, and nutrition. This article suggests a two-part approach for remedying the charity/justice imbalance in the U.S.: First, the U.S. should eliminate the charitable tax deduction, a policy creation that does not effectively address economic and social needs, forces an inequitable poverty relief and tax burden on the middle class, and lulls the nation into a false sense of complacency about its poverty crisis. Second, the U.S. should replace the deduction with ratification of the International Covenant on Economic, Social and Cultural Rights. This two-part process would reverse the U.S. legacy of avoiding enforceable commitments to economic and social rights. Charity would take a step back; justice a step forward.

New Article: “The Tax War on Poverty”

New Article: Susannah Camic Tahk, The Tax War on Poverty, 56 Ariz. L. Rev. 791 (2014).  Abstract below:

In recent years, the war on poverty has moved in large part into the tax code. Scholarship has started to note that the tax laws, which once exacerbated the problem of poverty, have become increasingly powerful tools that the federal government uses to fight against it. Yet questions remain about how this new tax war on poverty works, how it is different from the decades of non-tax anti-poverty policy and how it could improve. To answer these questions, this Article looks comprehensively at the provisions that make up the new tax war on poverty. First, this Article examines each major piece of the tax war on poverty. The Article looks at its mechanics of each, its political history and its effectiveness at addressing poverty. Second, this Article analyzes the tax war on poverty as a whole, identifying commonalities across its different provisions and highlighting its distinctive features. Third, this Article proposes ways that the tax war on poverty could be more effective. In particular, this Article examines how tax lawmakers and tax lawyers could approach this task. In so doing, this Article conceptualizes tax law as the new poverty law and proposes a growing role for public-interest tax lawyers.