Category Archives: Taxation

New Article: How Federal Tax Law Rewards Housing Segregation

Holc_redlining_1937New Article: Michelle Layser, How Federal Tax Law Rewards Housing Segregation, forthcoming Indiana L.J., SSRN Mar. 2018. Abstract below:

Residual, de facto segregation is among the most enduring barriers to equal opportunity in America. Nearly five decades after the Fair Housing Act of 1968, Blacks and Latinos still tend to live in neighborhoods where the majority of residents are people of color. Such racial segregation is often accompanied by economic segregation. Meanwhile, sociologists, housing law scholars, and poverty law experts have stressed the importance of residential location to the impact of poverty and the potential for upward economic mobility. But an unlikely source of federal housing law—the tax code—may interfere with efforts to promote more integrated communities.

This Article argues that federal tax law rewards White-flight and economic segregation and, as a result, may exacerbate the enduring effects of past policies like redlining and exclusionary zoning, while also limiting the effectiveness of non-tax federal programs intended to promote housing choice, such as the Section 8 tenant voucher program. The Article begins by using publicly available data from the Internal Revenue Service and the Department of Housing and Urban Development to map the flow of mortgage interest deduction benefits and the location of low-income housing tax credit properties in a representative city, Philadelphia. Next, the Article uses thought experiments to demonstrate how features of the tax law create monetary incentives to reinforce the segregation patterns reflected in the spatial distribution of these tax-subsidies. Finally, the Article sets forth recommendations for tax policy reforms that would better promote integrated communities.

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New Article: “The Income Equality Case for Eliminating the Estate Tax”

New Article: David Herzig, The Income Equality Case for Eliminating the Estate Tax, 90 S. Cal. L. Rev. 1143 (2017). Abstract below:

The estate tax and income tax rules independently attempt to either promote or deter different behaviors. The interaction of these different rules often leads to disparate or unintended consequences to taxpayers: for example, achieving an overall lower effective tax rate by paying more estate tax to lower the income tax rate. This overlay of the estate tax rules on the income tax rules is a key problem at the core of our tax system. Yet, few scholars focus on this topic.

In this Article, I document the actual behavior of the trust and estate bar. By looking at how attorneys approach the intersection of estate and income taxes, I demonstrate deficiencies in the current scholarly belief, which is based largely on anecdotal information, that the wealthy have a preference for paying less or no estate tax. I show the real-world preferences that indicate wealthy taxpayers are paying high levels of estate tax to minimize the income tax incidents. After showing the shift of preferences and the resulting overall tax loss to the fisc, the Article then proposes useful policy solutions, such as elimination of the estate tax or using death as an income tax triggering event.

New Article: “Consumer Law As Tax Alternative”

New Article: Rory Van Loo, Consumer Law As Tax Alternative, forthcoming N.C. L. Rev., SSRN Dec. 2017. Abstract below:

The law and economics paradigm has traditionally emphasized tax and transfer as the best way to achieve distributional goals. This Article explores an alternative. Well-designed consumer laws—defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions—can make markets more efficient and lessen inequality. Policymakers and scholars have traditionally ignored consumer laws in redistribution conversations in part because consumer laws examine narrow and siloed contexts—deceptive fees by Visa or a proposed merger between Comcast and Time Warner Cable. Those are different microeconomic fields, whereas redistribution is dominated by macroeconomics. Even millions of dollars in reduced credit card fees seem trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article synthesizes the fragmented empirical literature quantifying inefficiently higher prices across diverse markets—called overcharge. To my knowledge, it is the first to conclude that consumer law-related inefficiencies plausibly overcharge more than a trillion dollars, or over ten percent of all that consumers spend. It also analyzes which households pay and earn income from that overcharge. Consumers outside the top one percent likely pay significantly more of their expenditures toward overcharge. A static simulation also indicates that removing consumer overcharge could bring the share of income earned by the top one percent of households from its current level—twenty percent of all income—to about where it was in 1980, when the top one percent earned ten percent of all income. Moreover, this massive redistribution would be driven by laws making markets more competitive, rather than tax increases that distort markets. If the empirical literature currently available is right, consumer law merits serious consideration as an alternative to tax.

New Book: “Racial Taxation: Schools, Segregation, and Taxpayer Citizenship, 1869–1973”

Racial TaxationNew Book: Camille Walsh, Racial Taxation: Schools, Segregation, and Taxpayer Citizenship, 1869–1973 (2018). Summary below:

In the United States, it is quite common to lay claim to the benefits of society by appealing to “taxpayer citizenship”–the idea that, as taxpayers, we deserve access to certain social services like a public education. Tracing the genealogy of this concept, Camille Walsh shows how tax policy and taxpayer identity were built on the foundations of white supremacy and intertwined with ideas of whiteness. From the origins of unequal public school funding after the Civil War through school desegregation cases from Brown v. Board of Education to San Antonio v. Rodriguez in the 1970s, this study spans over a century of racial injustice, dramatic courtroom clashes, and white supremacist backlash to collective justice claims.

Incorporating letters from everyday individuals as well as the private notes of Supreme Court justices as they deliberated, Walsh reveals how the idea of a “taxpayer” identity contributed to the contemporary crises of public education, racial disparity, and income inequality.

New Article: “Itemized Deductions in a High Standard Deduction World”

irs-form-1040New Article: Emily Cauble, Itemized Deductions in a High Standard Deduction World, Stan. L. Rev. Online, Jan. 2018. Abstract below:

New tax legislation enacted in December 2017 exacerbates the extent to which various itemized deductions, such as the charitable contribution deduction and the home mortgage interest deduction, disproportionately benefit high income individuals. This essay develops this critique and concludes by suggesting paths for reform that should be considered by a future Congress.

New Article: “Kaplow and Shavell and the Priority of Income Taxation and Transfer”

New Article: David Blankfein-Tabachnick & Kevin A. Kordana, Kaplow and Shavell and the Priority of Income Taxation and Transfer, 69 Hastings L.J. 1 (2017). Abstract below:

This Article rejects a central claim of taxation and private law theory, namely, Kaplow and Shavell’s prominent thesis that egalitarian social goals are most efficiently achieved through income taxation and transfer, as opposed to egalitarian alterations in private law rules. Kaplow and Shavell compare the efficiency of rules of tort to rules of tax and transfer in meeting egalitarian goals, concluding that taxation and transfer is always more efficient than other private law legal rules. We argue that Kaplow and Shavell reach this conclusion only through inattention to the body of private law that informs the very basis of their discussion: underlying property entitlements. This Article contends that Kaplow and Shavell’s comparison of rules of taxation to rules of tort fails to take proper account of the powerful role that (re)assigning underlying property entitlements plays in achieving egalitarian goals, even at the level of formal theory. We conclude that, contrary to Kaplow and Shavell’s prominent claim, as a matter of efficiency, the rules of income taxation and transfer are not always preferable to alterations in the initial assignment of property entitlements in achieving distributive or egalitarian goals.

News Coverage: “Tax Overhaul Is a Blow to Affordable Housing Efforts”

News Coverage: Conor Dougherty, Tax Overhaul Is a Blow to Affordable Housing Efforts, N.Y. Times, Jan. 18, 2018.

New Article: “(Anti)Poverty Measures Exposed”

New Article: Francine J. Lipman, (Anti)Poverty Measures Exposed, 21 Florida Tax Rev. 256 (2017). Abstract below:

Few economic indicators have more salience and pervasive financial impact on everyday lives in the United States than poverty measures. Nevertheless, policymakers, researchers, advocates, and legislators generally do not understand the details of poverty measure mechanics. These detailed mechanics shape and reshape poverty measures and the too often uninformed responses and remedies. This Article will build a bridge from personal portraits of families living in poverty to the resource allocations that failed them by exposing the specific detailed mechanics underlying the Census Bureau’s official (OPM) and supplemental poverty measures (SPM). Too often, when we confront the problem of poverty, the focus is on the lives and behavior of those suffering the burdens of poverty and not on the inadequacy of resource allocations in antipoverty programs. The purpose of poverty measures should be to expose the effectiveness and failures of antipoverty programs so that they can be improved, not to scrutinize the lives and characteristics of those who are enduring these hardships.

This Article exposes poverty measures through the details of the United States’ current antipoverty programs, including the demographics of the populations who are included as beneficiaries and those that are left without adequate resources to survive. After reverse engineering the OPM and SPM, the Article describes the raw data from the starting population universes but then reveals the details of U.S. citizens and residents who have been intentionally excluded from the poverty analysis. The Article reveals that the excluded population is likely disproportionately poor and, thus, their erasure from the starting population universe understates derived poverty rates. Therefore, as a starting point, the OPM and SPM exclude millions of vulnerable Americans from the Census Bureau’s poverty measurement analyses. Nevertheless, the Article continues its poverty measure analysis using the Census Bureau’s original databases and rebuilds the OPM and SPM from the original population universes by applying each resource allocation program by program until demographic patterns emerge of who is lifted out of poverty proportionately or disproportionately in accordance with their pre-allocation poverty percentages in the population universes. By shifting the focus from Americans who suffer scarcity to the details of each antipoverty program and the demographics of who and in what proportion they are served by these programs, we better understand why almost 50 million Americans, including 16 million children, are not adequately provided for; do not have the necessary life resources; are struggling day in and day out; have been “nickel and dimed”; and are not getting by in the United States; and who, because of the misallocation (not lack) of resources, suffer the persistent and pernicious plight of poverty.

[Self-promoting post] New Op-ed: “The Previously Unrecognized Costs of Booze, Women, and Movies: Thank you Sen. Chuck Grassley for explaining why people are not rich”

[Self-promoting post] New Op-ed: Ezra Rosser, The Previously Unrecognized Costs of Booze, Women, and Movies: Thank you Sen. Chuck Grassley for explaining why people are not rich, CommonDreams, Dec. 5, 2017.

New Article: “Assessing President Trump’s Child Care Proposals”

Batchelder, Lily L. and Maag, Elaine and Huang, Chye-Ching and Horton, Emily, Assessing President Trump’s Child Care Proposals (October 30, 2017). National Tax Journal, Forthcoming. [Abstract below]

During the presidential campaign, Donald Trump proposed three tax benefits for child care: a credit for low-income families, an above-the-line deduction, and tax-subsidized savings accounts. While these proposals laudably bring attention to the heavy burden that child care costs place on many low- and middle-income families, they are a case study in how not to reform child care policy. They are unduly complicated, arbitrarily exclude certain low-income families, deliver support well after child care payments are due, and provide the largest benefits to higher-income families who need the least help.