Category Archives: Taxation

New Article: Subsidizing Sprawl, Segregation, and Regressivity: A Deep Dive into Sublocal Tax Districts

New Article: Deb Niemeier and Darien Shanske, Subsidizing Sprawl, Segregation, and Regressivity: A Deep Dive into Sublocal Tax Districts, 106 Iowa L. Rev. 2427 (2021). Introduction below:

Much ink has already been spilled demonstrating that our current built environment was—and is—the product of numerous policy decisions. Some of these decisions are accidental (as with the mortgage interest deduction provided by the federal income tax), some can be reasonable at times, but are problematic overall (as with local power over zoning), and some are outright immoral (as with redlining). This Essay will demonstrate yet another policy tool that has contributed to the current structuralization of the built landscape: the sublocal tax district. These districts are very common, but are also, by virtue of their nature and spatial heterogeneity, very difficult to study.

As we will demonstrate with a deep dive into their use in Sacramento, California, such taxing districts, by design, primarily enable low-density, urban fringe development. This low-density urban expansion then motivates further investments in schools and other services to meet the needs of the spatially expanding population. County and local governments then create new service-aimed and school sublocal tax districts to meet these needs. Our goal is not to demonize these districts or blame them for the many problems that are characteristic of the current built environment. Rather, our primary goal is instead to demonstrate that these districts represent a significant subsidy for a problematic development pattern that is already encouraged in numerous other ways. Aided by this demonstration, we will then outline some of the many reforms that could improve these districts.

New Article: How to Design An Antiracist State and Local Tax System

New Article: Francine J. Lipman, How to Design An Antiracist State and Local Tax System, Seton Hall L. Rev. (2022). Abstract below:

Since the first ship of enslaved African people landed in Virginia in 1619, racist policies in institutions, systems, structures, practices, and laws have ensured inequity for people of color. These racist policies include every imaginable variant of injustice from slavery to lynching, to segregation, and to economic injustices, including those delivered through tax systems today. Although facially color-blind, tax systems have long empowered the explosion of white wealth and undermined wealth accumulation for Black families and communities of color. State and local tax systems, especially in the South, have deeply-rooted racist fiscal policies, including Jim Crow laws that continue to sustain and bolster racial inequality today. These injustices have become even more obvious during the global pandemic.

As Americans struggle with COVID-19 and its aftermath, racial inequality has become even more salient. People of color have suffered higher rates of unemployment, impoverishment, infection, and death from COVID-19. Moreover, scientists, economists, engineers, and doctors agree that racism, not race, is the cause of this disproportionate impact. As we struggle to battle COVID-19 and rebuild from its devastation, federal, state, and local governments have used many tools, including tax systems. In 2021, the federal government, together with twenty-nine states and the District of Columbia, enacted significant tax cuts, with nearly all states cutting individual income tax rates and many tax systems meaningfully delivering expanded tax credits for workers and their children.

With race increasingly front and center as a cause of economic inequality, this Article applies Dr. Ibram X. Kendi’s transformative concept of antiracism as the framework to rethink state and local tax systems to better serve all Americans. Deriving an antiracist framework from decades of exhaustive research, Dr. Kendi, a professor of history, international relations, and an award-winning author, has facilitated a broader understanding of racism, its poisonous consequences, and most importantly provides antiracist tools to dismantle it.

New Book: “The Fight to Save the Town: Reimagining Discarded America”

the-fight-to-save-the-town-9781501195983_lgNew Book: Michelle Wilde Anderson, The Fight to Save the Town: Reimagining Discarded America (2022). Overview below:

A sweeping and authoritative study of wealth inequality and the dismantling of local government in four working-class cities across the US that passionately argues for reinvestment in people-centered leadership.

Decades of cuts to local government amidst rising concentrations of poverty have wreaked havoc on communities left behind by the modern economy. Some of these discarded places are rural. Others are big cities, small cities, or historic suburbs. Some vote blue, others red. Some are the most diverse communities in America, while others are nearly all white, all Latino, or all Black. All are routinely trashed by outsiders for their poverty and their politics. Mostly, their governments are just broke. Forty years after the anti-tax revolution began protecting wealthy taxpayers and their cities, our high-poverty cities and counties have run out of services to cut, properties to sell, bills to defer, and risky loans to take.

In The Fight to Save the Town, urban law expert and author Michelle Wilde Anderson offers unsparing, humanistic portraits of the hardships left behind in four such places. But this book is not a eulogy or a lament. Instead, Anderson travels to four blue-collar communities that are poor, broke, and progressing. Networks of leaders and residents in these places are facing down some of the hardest challenges in American poverty today. In Stockton, California, locals are finding ways, beyond the police department, to reduce gun violence and treat the trauma it leaves behind. In Josephine County, Oregon, community leaders have enacted new taxes to support basic services in a rural area with fiercely anti-government politics. In Lawrence, Massachusetts, leaders are figuring out how to improve job security and wages in an era of backbreaking poverty for the working class. And a social movement in Detroit, Michigan is pioneering ways to stabilize low-income housing after a wave of foreclosures and housing loss.

Our smallest governments shape people’s safety, comfort, and life chances. For decades, these governments have no longer just reflected inequality—they have helped drive it. But it doesn’t have to be that way. Anderson argues that a new generation of local leaders are figuring out how to turn poverty traps back into gateway cities.


New Article: “Tax Audits, Economics, and Racism”

New Article: Francine J. Lipman, Tax Audits, Economics, and Racism, Oxford Research Economics and Finance (2022 Forthcoming). Abstract:

The Internal Revenue Service (IRS) is the federal agency charged with tax revenue collection. In fiscal year 2020, the IRS collected $3.5 trillion in taxes, which represented about 96 percent of aggregate annual federal funding (IRS, 2020). In its mission statement the IRS states that its primary role is to enforce tax laws. The IRS’ website announces that it is responsible “to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share,” among similar duties. Nevertheless, the IRS’ most recent official estimate of the “tax gap” or the amount of net taxes owed by taxpayers who did not “pay their fair share” even after IRS enforcement efforts was $1.143 trillion for the three-year period 2011-2013 or $381 billion average annually. This amount is more than all the income taxes paid by 90 percent of all taxpayers (Rossotti & Forman, 2020). Assuming constant compliance rates, the Treasury has estimated that the tax gap in 2019 was $584 billion, $7 billion over the decade, or 15 percent of annual tax liabilities (IRS, 2019). Economists have estimated that the tax gap was at least $630 billion in 2020 (Sarin & Summers, 2019).

Despite these titanic uncollected tax obligations and the IRS’ patent failure to accomplish its charge and stated goal every year, Congress has significantly cut the IRS budget since 2010. Budget cuts have occurred even though Congress has been requiring broader and deeper IRS engagement in tax reform, health care, and economic stimulus payments. The IRS has responded to these budget cuts and additional work with meaningful decreases in its enforcement activities even with increasing annual tax gaps. Most notably, the audit rates of corporations and high-income individuals have dropped precipitously. Audits on millionaires have plummeted 71 percent (Center on Budget and Policy Priorities, 2021) and on large corporations they have dropped 51 percent (Huang, 2020). As a result, voluntary compliance rates likely have not stayed constant, but more likely have declined.

Past IRS Commissioners and notable economists have found that the IRS’ reported estimate of the tax gap significantly understates sophisticated tax evasion among wealthy taxpayers and large corporations (Guyton et al., 2021; Debacker et al., 2020; Alstadsaeter et al., 2019; Johns & Slemrod, 2010). IRS Commissioner Charles Rettig in testimony before Congress estimated that the tax gap could be as high as $1 trillion a year or almost 30 percent of gross revenues (Davidson, 2021). Unless systemic changes are made, Americans can expect to lose 3 percent of gross domestic product or $7.5 trillion in tax liabilities due and payable under current tax law over the next decade (Rossotti et al., 2020; Sarin, 2021).

The IRS, economists, scholars, and policy experts generally agree on an effective remedy. The tax gap could be reduced by increased funding for targeted IRS enforcement that would more than pay for itself severalfold (U.S. Department of the Treasury, 2021; Holtzblatt, 2021, Huang, 2020). Despite this obvious and lucrative remedy, Congress has done the opposite while certain representatives simultaneously complain about increasing federal deficits. Why has Congress defunded the IRS when the annual tax gap has soared? Why has the IRS decreased audits of the highest income taxpayers and largest corporations when economists have estimated they are responsible for more than 70 percent of the tax gap? This article will attempt to provide a critical tax framework with which to analyze this enigma.

New Article: “Whose Child Is This? Improving Child-Claiming Rules in Safety-Net Programs”

New Article: Jacob Goldin, Ariel Jurow Kleiman, Whose Child Is This? Improving Child-Claiming Rules in Safety-Net Programs, 131 Yale L.J. 6 (2022). Abstract below:

To address the staggering problem of child poverty in the United States, policymakers distribute a host of safety-net and transfer programs designed to support children and families. All of these programs require rules to determine how benefits are distributed. Among the more important of these are “child-claiming” rules. These rules determine which adults can receive benefits for which children, driving how well a program helps recipients and satisfies societal goals.

This Article critically assesses the design of child-claiming rules for safety-net programs, using as case studies the Child Tax Credit and the Earned Income Tax Credit. It considers how best to design child-claiming rules to achieve specific program goals, the foremost of which is supporting children’s well-being. This analysis illustrates that no single rule regime dominates. Rather, policymakers must compromise between important objectives such as channeling benefits to children’s caregivers and providing flexibility to claimants’ households. Informed by a principle-driven framework, the Article considers how best to navigate these difficult tradeoffs and proposes specific child-claiming rules under several different benefit structures. The analytical framework can inform the design of administrable and inclusive child-claiming rules across safety-net programs.

New Article: “Claimin’ True: Optimizing Eligible Take-Up of the EITC”

New Article: Jaden Warren, Claimin’ True: Optimizing Eligible Take-Up of the EITC, 28 Geo. Poverty L. & Pol’y J. 243 (2021). Abstract below:

The Earned Income Tax Credit (EITC) suffers from two competing issues: incomplete take-up and overclaims—some eligible people do not claim the credit while some ineligible people do. This Note applies concepts from behavioral economics to these issues to determine why existing reforms have had limited success and what can be done to address them. This Note proposes the creation of an “opt-out” EITC system in which the IRS automatically determines EITC eligibility and the harmonization of the EITC audit rate with the national audit rate, accompanied by a bundle of existing EITC reform proposals.

New Article: Context, Purpose, and Coordination in Taxation

New Article: Blaine G. Saito, Context, Purpose, and Coordination in Taxation, 55 Conn. L. Rev. (forthcoming 2023). Abstract below:

A great deal of scholarship focuses on whether we should place social safety net and redistribution programs within the tax sphere and under the responsibility of the IRS. But much of this literature misses a key point. These programs are here, and they are unlikely to leave the tax sphere. But little is said about how to approach administering them.

This article suggests a new framework to administering these programs by the IRS called contextualized purpose. The idea is that these tax programs exist in a broader context of the social safety net and redistribution and should be organized and managed in a way that comports with that. The IRS would discern the various purposes, values, and goals of these programs and note how they interrelate with other purposes, values, and goals within the tax system and the broader social safety net. As a result, contextualized purpose often requires that the IRS coordinate with other agencies to avoid administrative cross-purposes and that the agencies iteratively grow through learning by doing.

The article uses contextualized purpose to examine and suggest administrative changes to key income support programs like the earned income tax credit (EITC), the child tax credit (CTC), and the pandemic economic impact payments (EIP). It then discusses what are some of the advantages and concerns with this approach and how this approach fills the gap left by traditional discussions of tax programs to effectuate social policy.

New Article: “Teaching Critical Tax: What, Why, And How”

New Article: Diane Klein, Teaching Critical Tax: What, Why, And How, Pittsburgh Tax Review, Forthcoming. Abstract below:

“Critical tax” is an approach to the analysis of tax law and policy that takes race, gender, sexual orientation, disability, citizenship/immigrant status, and other historically marginalized statuses into account, and does so in a way that is centrally focused on the role of tax law in creating and perpetuating persistent economic inequality and disadvantage. This descendant of Critical Legal Studies and Critical Race Theory has been around for more than twenty years. And yet, critical tax is almost entirely absent from the casebooks and syllabi used for the teaching of the core tax courses. This can and should change, and this Article is a practical guide to both why and how teachers of tax law should integrate critical tax perspectives into their courses.

Part I explores a basic question: what is “critical tax”? Part II advocates for the addition of critical tax perspectives to the teaching of tax law by describing some of the intellectual, pedagogical, and professional benefits associated with it. Finally, Part III shows tax teachers how to add these perspectives relatively seamlessly into traditional tax courses, by providing an annotated bibliography of readily available readings that can be added to Syllabi for the basic Federal Income Tax course. This bibliography is intended to provide some points of access to the critical tax literature; it is only a starting point, of course, and is neither comprehensive nor exhaustive.

The recommendation to include critical tax perspectives has precursors. In 2010, Professor Dorothy Brown published an essay called “Teaching Civil Rights Through the Basic Tax Course” in the St. Louis Law Review. Professor Brown at that point framed her approach as “how to incorporate race and class into the basic tax course,” which she paraphrases in her title as “civil rights.” She was not, at that stage, arguing for the inclusion of distinctively critical tax perspectives; it was challenging enough at that time simply to advocate that race (and class, and in some cases, gender) be taken into account at all. Similarly, while Anthony Infanti and Bridget Crawford’s 2009 anthology, CRITICAL TAX THEORY: AN INTRODUCTION, collects many important early works of feminist, queer, and other “outsider” tax scholarship, it too is now more than a decade old, a decade during which the editors and many others have made numerous very substantive contributions to the literature. The legal academic and pedagogical landscape has also changed in the past decade, and Critical Race Theory is currently on everyone’s radar. This Article, and particularly Part III, the critical tax bibliography, is intended to reflect this.

New Article: EITC Correspondence Audits: An Equal Protection Issue

New Article: Sydney Warda, EITC Correspondence Audits: An Equal Protection Issue, 70 DePaul L. Rev. 777 (2021).

New Article: Clarifying Nonprofit Purchase Rights in Affordable Housing

New Article: Brandon M. Weiss, Clarifying Nonprofit Purchase Rights in Affordable Housing, 49 Fordham Urban Law Journal 1159 (2021). Abstract below:

Disputes around the country are proliferating as limited partner investors attempt to thwart the ability of nonprofit general partners to exercise statutorily defined rights of first refusal to acquire low-income housing tax credit developments upon the expiration of rent restrictions. Such efforts, increasingly being made by “aggregator” investors, frustrate congressional intent, violate long-held norms and expectations in the industry, are costly for nonprofits to litigate, jeopardize the ongoing affordability of an already scarce federally-assisted housing stock, and threaten to displace thousands of low-income tenants. This Essay describes the problem, explores the collision of housing policy and tax policy that gives rise to it, considers various conceptual approaches to resolution, and provides specific policy recommendations using the Affordable Housing Credit Improvement Act of 2019 as a point of departure.