TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, January 25, 2016

Avi-Yonah & Xu Post Tax Papers On SSRN

Reuven Avi-Yonah (Michigan) and Haiyan Xu (S.J.D. 2016, Michigan) have posted two tax papers on SSRN:

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January 25, 2016 in Scholarship, Tax | Permalink | Comments (0)

Student Evaluations As Windows Into Gender Bias

Inside Higher Ed, Bias Against Female Instructors:

There’s mounting evidence suggesting that student evaluations of teaching are unreliable. But are these evaluations, commonly referred to as SET, so bad that they’re actually better at gauging students’ gender bias and grade expectations than they are at measuring teaching effectiveness? A new paper argues that’s the case, and that evaluations are biased against female instructors in particular in so many ways that adjusting them for that bias is impossible.

Moreover, the paper says, gender biases about instructors -- which vary by discipline, student gender and other factors -- affect how students rate even supposedly objective practices, such as how quickly assignments are graded. And these biases can be large enough to cause more effective instructors to get lower teaching ratings than instructors who prove less effective by other measures, according to the study based on analyses of data sets from one French and one U.S. institution.

“In two very different universities and in a broad range of course topics, SET measure students’ gender biases better than they measure the instructor’s teaching effectiveness,” the paper says. “Overall, SET disadvantage female instructors. There is no evidence that this is the exception rather than the rule.”

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January 25, 2016 in Legal Education | Permalink | Comments (2)

Muller:  10% Of Law School Enrollment Is In Non-J.D. Programs

Derek Muller (Pepperdine), One in Ten Law School Enrollees Is Not a Part of a JD Program:

In the Fall of 2012, 7.4%, or about 1 in 14 law school enrollees, were non-JD students. In the Fall of 2013, that rose to 8.0%, or about 1 in 12. This year, it's 10.3%, or about 1 in 10.

Muller

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January 25, 2016 | Permalink | Comments (9)

Ventry Named To IRS Advisory Council

VentryIR-2016-8 (Jan. 22, 2016), IRS Selects New Advisory Council Members:

The Internal Revenue Service today announced the selection of five new members to the Internal Revenue Service Advisory Council (IRSAC), which provides an organized public forum for IRS officials and representatives of the public to discuss key tax administration issues.

The IRSAC, established in 1953, selects members to represent the taxpaying public, tax professionals, small and large businesses, academia and the payroll community. The council provides the IRS Commissioner and division leadership with important feedback, observations and suggestions. ... IRSAC meets periodically and will submit a report to the agency in November 2016 at a public meeting. IRSAC members generally serve three-year terms. The new members will join 13 returning members in 2016.

The following persons were appointed to serve on the committee beginning in 2016: ...

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January 25, 2016 in IRS News, Tax | Permalink | Comments (0)

Merritt:  Experiential Education And Bar Passage

Following up on Saturday's post, Robert Kuehn (Associate Dean for Clinical Education, Washington University), Whither Clinical Courses and Bar Passage:  Deborah Jones Merritt (Ohio State), Experiential Education and Bar Passage:

Robert Kuehn has written an excellent post about clinical courses and bar passage. He notes that Erica Moeser, President of the National Conference of Bar Examiners, suggested in print that declining bar passage rates might stem in part from the rise of experiential learning in law schools. NCBE’s Director of Testing and Research has made the same claim, noting that: “There has also been a trend toward incorporating non-core courses and clinical experiences into the law school curriculum. These, too, can take students’ time away from learning the core concepts that are tested on the bar examination.”

When Kuehn contacted Moeser to ask if she knew about any empirical research supporting this purported connection, she admitted that she knew of none. Nor did her testing staff.

Kuehn, in contrast, assembles the available research in his post. There is very little evidence that taking courses on bar subjects correlates with success on the bar exam. There is evidence–cited by Kuehn–that well designed academic support programs can improve bar passage. Where do clinical, writing, and other experiential courses fall on this spectrum? We don’t know; this is an essential subject for research.

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January 25, 2016 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 991

IRS Logo 2House Ways & Means Committee Press Release, Brady, Roskam Demand Answers After IRS Admits to Destroying More Hard Drives:

After recent news that the Internal Revenue Service (IRS) has destroyed more protected documents, House Ways and Means Committee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Peter Roskam (R-IL) sent a letter today to IRS Commissioner John Koskinen.

The Chairmen called for information regarding the IRS’s document retention policies and its troubling record of destroying protected records. They also requested documents about the IRS’s alarming admission that it erased a hard drive that contained information relevant to an ongoing lawsuit against the agency:

This is not the first time the IRS has lost key records that were subject to a document hold.  In the course of this Committee’s investigation into the IRS’s targeting of conservative organizations, the IRS disclosed that it had destroyed backup tapes containing thousands of Lois Lerner’s records.  Furthermore, the IRS did not inform Congress of the destruction for several months.  In the Microsoft case, the IRS discovered the loss of records in December 2015, but did not disclose the loss until January 19, 2016.

“In order for taxpayers to trust the IRS, they need to know that the IRS is dealing with them fairly and playing by the rules.  The IRS, however, has demonstrated now at least twice that it is either unwilling or unable to obey basic rules of discovery before federal courts and before Congress.”

Click here to view the letter.

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January 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

TaxProf Blog Weekend Roundup

Sunday, January 24, 2016

Tax Policy Roundtable Today At Netanya College School Of Law (Israel)

The Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5:

  1. [346 Downloads]  The Three Causes of Inversions: Reflections on Pfizer/Allergan and Notice 2015-79, by Reuven Avi-Yonah (Michigan)
  2. [288 Downloads]  Conservation Easements and the Valuation Conundrum, by Nancy McLaughlin (Utah)
  3. [145 Downloads]  Are Corporate Inversions Good for Shareholders?, by Anton Babkin (Wisconsin), Brent Glover (Carnegie Mellon) & Oliver Levine (Wisconsin)
  4. [123 Downloads]  Inversions and Competitiveness: Reflections in the Wake of Pfizer/Allergan, by Reuven Avi-Yonah (Michigan) & Omri Marian (UC-Irvine)
  5. [118 Downloads]  Profit Shifting Of U.S. Multinationals, by Tim Dowd (Joint Committee on Taxation), Paul Landefeld (Joint Committee on Taxation) & Anne Moore (Joint Committee on Taxation)

January 24, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Gash:  Divine Collision

Cover 2Jim Gash (Pepperdine), Divine Collision (2016):

Los Angeles lawyer and law professor, Jim Gash, tells the amazing true story of how, after a series of God-orchestrated events, he finds himself in the heart of Africa defending a courageous Ugandan boy languishing in prison and wrongfully accused of two separate murders. Ultimately, their unlikely friendship and unrelenting persistence reforms Uganda's criminal justice system, leaving a lasting impact on hundreds of thousands of lives and unearthing a friendship that supersedes circumstance, culture and the walls we often hide behind.

The story is as emotional as it is thrilling, and it reads like a major film.  Publishers Weekly

With great courage and conviction, Jim Gash provides an extraordinary glimpse into the power of obedience, prayer, and hope in transforming not only one life-or even one community-but an entire justice system. Divine Collision speaks to what is at the heart of our Christian calling: Learn to do right; seek justice. Defend the oppressed. Take up the cause of the fatherless; plead the case of the widow." (Isaiah 1:17).
Gary A. Haugen, President & CEO of International Justice Mission and author of The Locust Effect

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January 24, 2016 in Book Club, Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 990

IRS Logo 2Power Line, Federal Bureaucracies: Incompetent, Corrupt, Or Both?:

The saga of Barack Obama’s Internal Revenue Service is almost unbelievable. After “joking” years ago that he would audit his enemies, it turned out that Obama’s minions were in fact delaying or blocking routine applications for 501(c) status by conservative organizations, in order to help the Democratic Party. When Congress tried to investigate, the Obama administration stonewalled at every turn. Evidence mysteriously disappeared and the key player in the scheme, Lois Lerner, pled the Fifth rather than answer Congress’s questions.

Obama’s stonewall strategy has generally worked well. Scandals fade from the front pages when there are no new developments, and if information finally emerges, Democratic Party reporters treat it as old news. So the IRS scandal has pretty much disappeared from public awareness. Nevertheless, via InstaPundit, we learn that yet another IRS computer hard drive has been destroyed. How many is that now? I’ve lost track. ...

Most people probably don’t realize how astonishing this is. I practiced law for 41 years before retiring at the end of last year, all of it doing litigation. Preserving evidence is a routine obligation in lawsuits; it doesn’t depend on a court order. But if a federal judge has ordered a party to preserve a hard drive, as happened here, you can be assured that the hard drive will be protected like the crown jewels. Every company in America understands this: if a court has ordered you to preserve evidence, you guard it with your lawyers’ lives.

And yet, time after time, the IRS has either inadvertently or intentionally destroyed hard drives that courts have ordered them to preserve. In the private sector, this is unthinkable. Private companies obey court orders. They know that if they don’t, millions of dollars in sanctions are likely to result, and executives will lose their jobs. Only in government agencies do we see this kind of irresponsible scofflaw behavior. This is because most bureaucrats have a deep loyalty to the left-wing cause, and there is no accountability. ...

Is this because federal agencies are corrupt, or because they are unusually inept? The familiar adage is that one should never presume malice when incompetence is a sufficient explanation. But here, I think we are going beyond ineptitude. Are federal agencies the only employers who can’t hire people who know how to follow court orders? No. Incompetence may play a part, but it is hard to avoid the conclusion that federal agencies led by left-wing bureaucrats, including but not limited to the IRS, view themselves as above the law and protected by the scofflaw Obama administration, and therefore entitled to thumb their noses at the federal courts.

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January 24, 2016 in IRS News, IRS Scandal | Permalink | Comments (3)

Saturday, January 23, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Kuehn:  Clinical/Experiential Courses Are Not To Blame For Declining Bar Passage Rates

Robert Kuehn (Associate Dean for Clinical Education, Washington University), Whither Clinical Courses and Bar Passage:

Bar examination passage rates are down again in many states. ... In response to the declines, some blame an easy scapegoat — too many electives (especially experiential courses) and too few bar-tested courses. While limiting experiential or clinical courses or credits or mandating more bar courses presents an easy way of appearing  to do something,  there is no available evidence that students who take more experiential or clinical courses do worse on  the bar exam, and only a limited, weak positive correlation between bar courses and bar exam success.

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January 23, 2016 | Permalink | Comments (6)

Lewis & Clark College Names Law Prof Inaugural Dean Of Diversity And Inclusion

SteversonThe Oregonian, Lewis & Clark College Names Janet Steverson New Dean of Diversity and Inclusion:

Lewis & Clark College on Friday named Janet Steverson, a longtime law school professor, as its first Dean of Diversity and Inclusion.

Steverson, 54, has taught at the private Southwest Portland college for more than 25 years. Starting this summer, she'll no longer teach classes, but will devote her attention to her new role of crafting and implementing a campus wide plan to make the college "a safe, welcoming, and equitable learning community."

The announcement comes about two months after some race-related unrest on campus, including racist posts on the anonymous Yik Yak social network and the alleged beating of a black student on campus, which led to a sit-in outside President Barry Glassner's office.

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January 23, 2016 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 989

IRS Logo 2Washington Examiner editorial, The Dog Keeps Eating IRS Hard Drives:

In Oscar Wilde's comedy, "The Importance of Being Earnest," Lady Bracknell is indignant to hear that Jack Worthing is an orphan. "To lose one parent, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness."

If only one could enjoy a similar belly laugh over President Obama's IRS repeatedly losing hard drives loaded with data related to scandals at the agency. To lose one might be regarded as suspicious happenstance; to lose two looks like conspiracy.

The most famous case is that of Lois Lerner, whose division became notorious for targeting conservative groups applying for nonprofit status. Her computer hard drive malfunctioned before that scandal broke, around the same time Congress was looking for information on a separate IRS targeting scheme aimed at conservative donors.

One of Lerner's emails to colleagues, which was finally retrieved from data tapes after roughly two years of congressional demands, stated, "No one will ever believe that both your hard drive and mine crashed within a week of each other."

The newest case of IRS hard drive trouble happened last April, but came to light only this month. Law 360, a subscription-based trade publication, reported this week that the IRS has notified the Justice Department that it erased a hard drive after being ordered not to do so by a federal judge.

In this case, the missing communications are those of a former IRS official named Samuel Maruca in the Large Business and International division. He is believed to have been among the senior IRS employees who made the unusual and possibly illegal decision in May 2014 to hire the outside law firm Quinn Emanuel to help conduct an audit of Microsoft Corporation. ...

Another reason Congress is upset about this law firm's $2.2 million contract is that it came at the expense of IRS customer service. Ever since the Lerner scandal, IRS leadership has moaned incessantly about cuts to their budget. In an effort to gain public sympathy, they made a big deal of the fact that the cuts would diminish the agency's capacity to provide taxpayer assistance during spring 2015.

But at the same time, the IRS was using funds to pay executive bonuses and to hire this outside law firm, even though the agency has many qualified tax attorneys and auditors on staff capable of investigating Microsoft

House Oversight & Government Reform Committee Press Release, Chaffetz, Jordan Letter to IRS Commissioner Regarding Destroyed Documents:

Today, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) and Health Care, Benefits, and Administrative Rules Subcommittee Chairman Jim Jordan (R-OH) sent a letter to Internal Revenue Service (IRS) Commissioner John Koskinen after learning the IRS destroyed documents covered by a federal district court’s preservation order. The preservation order was issued in response to a Freedom of Information Act lawsuit filed by Microsoft relating to the potentially wasteful hiring of an outside law firm by the IRS to assist in auditing Microsoft.

Key excerpts from the letter:

“The destruction of evidence subject to preservation orders and subpoenas has been an ongoing problem under your leadership at the IRS. …

“It is stunning to see that the IRS still does not take reasonable care to preserve documents that it is legally required to protect. …

 “It is now apparent that the IRS has not solved the management problems that have led once again to the destruction of documents in contravention of its legal obligations.”

The letter requests documents from the IRS so that the Committee can better understand the IRS’s policies.

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January 23, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, January 22, 2016

McGinnis:  Law Schools Should Give Greater Weight To Objective Data In Faculty Hiring To Combat Bias Against Conservative/Libertarian Law Profs

Following up on last week's post, Why Are There So Few Conservative/Libertarian Law Profs, Even Though They Are More Productive Scholars Than Liberal Law Profs?:  John O. McGinnis (Northwestern), Conservative and Libertarian Legal Scholars Are More Published and Cited:

In a fascinating article, James Phillips has focused on the productivity, citations, and credentials of scholars at the top sixteen law schools. His analysis suggests that conservatives and libertarians are more productive, better cited, and, with one important exception, better credentialed than other scholars. The powerful combination of these findings is thus consistent with the hypothesis that conservatives suffer discrimination in hiring, perhaps particularly in the lateral market when productivity and citation data are very visible. It is as if they are competing in a race with an extra weight on their backs. ...

[T]he normative implication that I draw is that in hiring schools should weigh more objective data, like productivity and citations counts more heavily and take less account of their faculty’s more subjective impression of scholarship. ...

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January 22, 2016 in Legal Education, Scholarship | Permalink | Comments (3)

An Ode To Tax Season: How To Bid Farewell To Your Family

Tax SeasonAnthony Nitti (Forbes), An Ode To Tax Season: How To Bid Farewell To Your Family:

Tax season is here. Tax season is the worst. But don’t just abandon your family for the next three months with no explanation; make them aware of the series of mistakes that were set into motion long ago that led you to this self-imposed hell. And tell them with rhymes! It will make your prolonged absence less painful.

Daddy, he chose accounting,
For reasons that he can’t explain.
And here we are two decades later,
And this choice still drives Daddy insane.

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January 22, 2016 in Tax | Permalink | Comments (0)

Weekly Tax Roundup

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January 22, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

Muller:  Law Schools Have Added Administrators (+16%) While Shedding Full-Time Faculty (-14%)

Bernie Sanders Releases Tax Plan: 54% Top Rate On Income, Capital Gains & Dividends, Double The Estate Tax

Feel the BernBernieSanders.com, Medicare for All: Leaving No One Behind:

How Much Will It Cost and How Do We Pay For It?

How Much Will It Cost?
This plan has been estimated to cost $1.38 trillion per year.

The Plan Would Be Fully Paid For By:

A 6.2 percent income-based health care premium paid by employers.
Revenue raised: $630 billion per year.

A 2.2 percent income-based premium paid by households.
Revenue raised: $210 billion per year.

This year, a family of four taking the standard deduction can have income up to $28,800 and not pay this tax under this plan.

A family of four making $50,000 a year taking the standard deduction would only pay $466 this year.

Progressive income tax rates.
Revenue raised: $110 billion a year.

Under this plan the marginal income tax rate would be:

  • 37 percent on income between $250,000 and $500,000.
  • 43 percent on income between $500,000 and $2 million.
  • 48 percent on income between $2 million and $10 million. (In 2013, only 113,000 households, the top 0.08 percent of taxpayers, had income between $2 million and $10 million.)
  • 52 percent on income above $10 million. (In 2013, only 13,000 households, just 0.01 percent of taxpayers, had income exceeding $10 million.)

Taxing capital gains and dividends the same as income from work.
Revenue raised: $92 billion per year.

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January 22, 2016 in Political News, Tax | Permalink | Comments (17)

Highest State And Local Tax Burdens Are In Blue States, Lowest Are In Red States

Tax Foundation, State-Local Tax Burden Rankings FY 2012:

During the 2012 fiscal year, state-local tax burdens as a share of state incomes decreased on average across the U.S. Average income increased at a faster rate than tax collections, driving down state-local tax burdens on average.

New Yorkers faced the highest burden, with 12.7 percent of income in the state going to state and local taxes. Connecticut (12.6 percent) and New Jersey (12.2 percent) followed closely behind. On the other end of the spectrum, Alaska (6.5 percent), South Dakota (7.1 percent) and Wyoming (7.1 percent) had the lowest burdens.

Map

Interestingly, the ten states with the highest per capita tax burden voted for Barack Obama in the 2012 presidential election, and eight of the ten states with the lowest per capita tax burden voted for Mitt Romney.

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January 22, 2016 in Tax, Think Tank Reports | Permalink | Comments (9)

Number of LSAT Test-Takers Increased For Fifth Consecutive Period

After five years of declines in the number of LSAT test-takers, the LSAC reports that the number of LSAT test-takers in December 2015 increased 1.9%, the fifth consecutive period with an increase:

LSAT 3

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January 22, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 988

IRS Logo 2Senate Finance Committee Press Release, Hatch, Wyden Press IRS on Record Keeping Practices; Tax Agency Erased Hard Drive Despite Litigation Hold:

Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (R-Ore.) today sent a letter to Internal Revenue Commissioner (IRS) John Koskinen asking for answers regarding the agency’s recordkeeping practices after it was revealed the agency erased a former employee’s hard drive and destroyed electronic records subject to a litigation hold and potentially responsive to a  Freedom of Information Act (FOIA) request.  The documents related to the agency’s use of outside law firms to conduct examinations of taxpayers.   
 
“This disclosure comes months after the IRS deleted electronic evidence related to a Finance Committee investigation,” Hatch and Wyden wrote. “During the Committee’s bipartisan investigation into the treatment of tax-exempt organizations, the IRS accidentally destroyed 422 back-up tapes and up to 24,000 emails subject to our document requests. The IRS’s missteps in preserving documents – whether they be the subject of a congressional investigation, court order, or FOIA request – are concerning, and necessitate further oversight into the agency’s document preservation practices."

The text of the letter is below. 

Robert W. Wood (Forbes), IRS Wipes Another Hard Drive Defying Court Order...But You Must Keep Tax Records:

Talk about Déjà vu. Despite a court order to preserve documents, the IRS wiped the hard drive of an important IRS official, Mr. Samuel Maruca. Controversially, Mr. Maruca helped the IRS hire Quinn Emanuel, an outside law firm tasked with pursuing Microsoft. Hiring outsiders at over $1,000 an hour (!) angered Senate Finance Committee Chairman Orrin Hatch, who wrote a letter to the IRS complaining about strange deal and the $2.2 million fee.

Sen. Hatch pointed out that this was work the IRS and Justice Department should do. A federal judge was also troubled. And when the questions were too probing, oops, the hard drive was wiped. Sound familiar? Meanwhile, of course, you have to keep all your receipts and tax records! Imagine if the IRS found out that you deleted emails or destroyed records? The fact that the IRS–accidentally–wiped Mr. Maruca’s hard drive reminds everyone of Lois Lerner, the key IRS official who refused to testify about targeting conservatives. ...

It was no surprise that the Justice Department wrote a letter to members of Congress announcing that Lois Lerner will face no criminal charges. What about emails sent from Ms. Lerner’s dog’s email account? The dog is safe too. The DOJ said there was no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives.

Let’s see, is the IRS likely to accept similar taxpayer arguments? 

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January 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, January 21, 2016

Gamage Presents Tax Cannibalization And Fiscal Federalism Today At Duke

Gamage (2016)David Gamage (UC-Berkeley) presents Tax Cannibalization and Fiscal Federalism in the United States (with Darien Shanske (UC-Davis)) at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

The design of federal tax law strongly influences the tax policy choices of the individual U.S. states. This article argues that under the current structure of U.S. federal tax law these influences are often perverse. Specifically, the current structure of U.S. federal tax law incentivizes state governments to adopt tax policies that inflict costs on the federal government, at the expense of national welfare. We label this the “tax cannibalization” problem.

This article introduces the tax cannibalization problem to the legal literature for the first time.

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January 21, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oei Presents The Tax Lives Of Uber Drivers Today At Indiana

OeiShuyi Oei (Tulane) presents The Tax Lives of Uber Drivers: Evidence from Internet Discussion Forums (with Diane Ring (Boston College)) at Indiana today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

In this Article, we investigate the tax issues and challenges facing Uber and Lyft drivers by studying their interactions in three internet discussion forums: Reddit.com, Uberpeople.net, and Intuit TurboTax AnswerXchange. Using descriptive statistics and content analysis, we examine four research questions: (1) the substantive tax concerns facing forum participants, (2) how taxes factor into driving and profitability decisions, (3) forum participants’ understandings of and attitudes towards worker classification issues (i.e., independent contractor vs. employee), and (4) user sophistication, attitudes towards compliance, and other cultural features of the forums.

We find that while forum participants displayed generally accurate understandings regarding tax filing and income inclusion obligations, their approaches to expenses and deductions were less accurate and more varied in terms of sophistication and willingness to comply with tax law. Forum participants also engaged in frequent discussions about whether driving was ultimately profitable and exhibited a range of awareness of how taxes affected such profitability. They also displayed heterogeneous understandings and preferences regarding worker classification questions (i.e., independent contractors versus employees). Finally, while the forums contained a surprising degree of sophisticated and accurate tax advice, they also contained a good amount of inaccurate, confusing, or misleading information. It is thus uncertain whether forum readers are able to successfully distinguish between accurate and inaccurate advice dispensed in the forums. 

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January 21, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wilson Presents Corporate Inversions Update Today At Colorado

Wilson_John_John R. Wilson (Denver) presents  Corporate Inversions Update at Colorado today as part of its Tax Policy Colloquium Series hosted by David Hasen and Sloan Speck:

The presentation examines the evolution of inversions from the single-company transactions of the 1990’s to the real business combinations of today. It considers the various legislative and regulatory moves that have been designed to make such transactions less appealing, and why such measures haven’t succeeded. The presentation concludes with an examination of the current state of play and possible further legislative, treaty and regulatory responses that could be undertaken short of fundamental international tax reform.

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January 21, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hackney:  Charitable Organization Oversight — Rules v. Standards

Philip Hackney (LSU), Charitable Organization Oversight: Rules v. Standards, 13 Pitt. Tax Rev. ___ (2015):

Congress has traditionally utilized standards as a means of communicating charitable tax law in the Code. In the past fifteen years, however, Congress has increasingly turned to rules to stop fraud and abuse in the charitable sector. I review the rules versus standards debate to evaluate this trend. Are Congressional rules the best method for regulating the charitable sector?

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January 21, 2016 in Scholarship, Tax | Permalink | Comments (0)

Lloyd:  Raising The Bar, Razing Langdell

WakeHarold Lloyd (Wake Forest), Raising the Bar, Razing Langdell, 49 Wake Forest L. Rev. 1213 (2014):

As an introduction to the Wake Forest Law Review’s symposium edition on Revisiting Langdell: Legal Education Reform and the Lawyer’s Craft, this article highlights longstanding, substantial damage Christopher Columbus Langdell has inflicted on law schools and legal education. Much of this damage stems from three of Langdell’s wrong and counterintuitive notions: (1) law is a science of principles and doctrines known with certainty and primarily traced through case law; (2) studying redacted appellate cases is “much the shortest and best, if not the only way” of learning such law, and (3) despite Langdell’s own roughly fifteen years of practice experience, practice experience taints one’s ability to teach law. This article highlights problems with, and harms resulting from, each of these wrong notions.

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January 21, 2016 in Legal Education, Scholarship | Permalink | Comments (8)

Bar Exam Carnage Likely Will Worsen In 2016, 2017, And 2018

Following up on my recent posts on the widespread declines in bar exam pass rates (links below):  Jerry Organ (St. Thomas), Changes in Composition of the LSAT Profiles of Matriculants and Law Schools Between 2010 and 2015:

Given that the LSAT profiles of matriculants and of law schools for fall 2013, fall 2014 and fall 2015 are less robust than those for fall 2011 and fall 2012 (the classes that graduated in 2014 and 2015, respectively), one can anticipate that the declines in median MBE scaled scores and corresponding bar passage rates in 2014 and 2015 will continue in July 2016, 2017 and 2018 absent increases in attrition (I discussed attrition rates in a blog posting in October), significant improvement in academic support programs at law schools, or improved bar preparation efforts on the part of graduates.

Organ

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January 21, 2016 in Legal Education | Permalink | Comments (9)

Walker:  Reconsidering Realization-Based Accounting For Equity Compensation

David I. Walker (Boston University), Reconsidering Realization-Based Accounting for Equity Compensation:

The U.S. equity compensation landscape continues to evolve. Recent innovations have improved the linkage between pay and firm-specific performance, but have added complexity. Against that backdrop, this Article urges reconsideration of the accounting rules for equity pay. Under current rules, most equity pay awards are expensed based on grant date valuation with no updating for changes in value post grant. This Article advocates the adoption of a mark-to-market or realization-based approach under which the expense recorded for all equity pay awards would ultimately be trued to the value received by employees.

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January 21, 2016 in Scholarship, Tax | Permalink | Comments (0)

Profit Shifting Of U.S. Multinationals

Tim Dowd, Paul Landefeld & Anne Moore (Joint Committee on Taxation), Profit Shifting of U.S. Multinationals:

We analyze the profit shifting behavior of U.S. multinational firms using a unique panel data set of U.S. tax returns over the period 2002-2012. Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities, with semi-elasticities ranging from close to zero to well above one. We build on this prior work by allowing more heterogeneity in response across the distribution of tax rates and by including affiliates located in tax havens around the world. Our findings suggest that elasticities based on a log-linear specification may severely understate the sensitivity of profits to tax in low-tax jurisdictions while simultaneously overstating this elasticity in high-tax jurisdictions. Accounting for this type of nonlinearity appears crucial in considering how the global allocation of firm profits might change in response to tax rate changes.

2010

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January 21, 2016 in Gov't Reports, Scholarship, Tax | Permalink | Comments (0)

Miller & Stroud:  Medicaid Planning For Long Term Care — California Style

John A. Miller (Idaho) & Vanessa S. Stroud (Law Office of Vanessa Stroud, Petaluma, CA), Medicaid Planning for Long Term Care: California Style:

California’s Medicaid program, “Medi-Cal”, differs significantly from programs in other states. This article sets out the major distinctions between California's program and other state programs as applied to long term care for disabled seniors. It illustrates the major planning techniques that are employed throughout the country and also those techniques that are available only in California.

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January 21, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 987

IRS Logo 2Americans for Tax Reform, IRS Erases Hard Drive Despite Court Order:

The IRS erased a hard drive belonging to a former top employee involved in the agency’s controversial, taxpayer-funded hiring of elite trial law firm Quinn Emanuel.

Although there was a court preservation order on all documents related to the IRS hiring of the outside firm, the hard drive was erased anyway. The order was borne of a Freedom of Information Act (FOIA) request submitted by Microsoft.

Even though the white shoe law firm has zero experience handling sensitive tax data, taxpayers have been footing bills of over $1,000 per hour for its services.

The deleted hard drive belonged to the agency’s former director of transfer pricing operations at the IRS Large Business and International Division, likely a key employee involved in the controversy. It is not known if there is any way to recover documents belonging to the employee. ...

This is not the first time the agency has failed to preserve key information. The IRS also “accidentally” destroyed the hard drive belonging to Lois Lerner during investigations into the targeting of conservative groups. As many as 24,000 emails were lost forever when 422 backup tapes were wiped clean despite an agency-wide preservation order and congressional subpoena.

In the Lerner case, the IRS failed to take simple steps to ensure compliance with the order, according to a report by the House Oversight Committee.

Now, it appears that important information has once again disappeared because of IRS corruption, incompetence, or both.

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January 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, January 20, 2016

Pepperdine Tax Policy Workshop Series (Spring 2016)

Here is the schedule for my Spring 2016 Pepperdine Tax Policy Workshop Series:

  • Jan. 25    Omri Marian (UC-Irvine), The State Administration of International Tax Avoidance
  • Feb. 8     Adam Chodorow (Arizona State), Bitcoin, Foreign Currency, and the Case for Basis Pooling
  • Feb. 22   John Brooks (Georgetown), Quasi-Public Spending
  • Mar. 7    Ellen Aprill (Loyola-L.A.),  The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation
  • Mar. 28  Shuyi Oei (Tulane), The Tax Lives of Uber Drivers: Evidence from Internet Discussion Forums
  • Apr. 11   Jason Oh (UCLA), How the Rich Drive Progressive Tax Rates
  • Apr. 25   Lily Kahng (Seattle), Who Owns Human Capital?

I will of course blog each professor's paper on the day of their presentation.  Southern California professors and practitioners are welcome to attend any of the sessions (11:00 a.m. - 12:30 p.m.) -- just let me know.

Pepperdine Law School (2016)

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January 20, 2016 in Colloquia, Legal Education, Scholarship, Tax | Permalink | Comments (1)

President Obama Blames Male Legislators For The ‘Tampon Tax’ In 40 States

Time, President Obama Doesn’t Understand the ‘Tampon Tax’ Either:

President Obama said the existence of a “luxury goods” tax placed on feminine sanitary products like tampons and pads is likely due to the fact that men wrote the laws in an interview on Friday.

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January 20, 2016 | Permalink | Comments (6)

Chodorow & Hackney:  Post-Graduate Legal Training — The Case For Tax-Exempt Programs

ASUAdam Chodorow (Arizona State) & Philip Hackney (LSU), Post-Graduate Legal Training: The Case for Tax-Exempt Programs, 65 J. Legal Educ. ___ (2016):

The challenging job market for recent law school graduates has highlighted a fact well known to those familiar with legal education: A significant gap exists between what students learn in law school and what they need to be practice-ready lawyers. Legal employers historically assumed the task of providing real-world training, but they have become much less willing to do so. At the same time, a large numbers of Americans — and not just those living at or below the poverty line — are simply unable to afford lawyers. In this Article, we argue that post-graduate legal training, similar to post-graduate medical training, is a good way to address these market failures and reduce the gap in both skills and legal services.

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January 20, 2016 in Legal Education, Scholarship, Tax | Permalink | Comments (0)

Washburn Unveils Faculty Retirement Incentive Plan

Washburn LogoThe Topeka Capital-Journal reports that Washburn has unveiled a retirement incentive program for faculty and staff age 62 or older with at least ten years of service: a lump sum payment equal to the lesser of 100% of salary or $125,000, plus continued coverage in the university's group health insurance plan until the age of 65. 

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January 20, 2016 in Legal Education | Permalink | Comments (0)

Tax Shelters Or Efficient Tax Planning? A Theory Of The Firm Perspective On The Economic Substance Doctrine

T. Christopher Borek (Analysis Group, Inc.) & Angelo Frattarelli (U.S. Department of Justice) & Oliver Hart (Harvard University, Department of Economics), Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine, 57 J.L. & Econ. 975 (2014):

Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm, and describe its application in two recent tax cases.

January 20, 2016 in Scholarship, Tax | Permalink | Comments (0)

The 25 Most Influential People In Legal Education

MIPThe 25 Most Influential People in Legal Education (2015), The National Jurist (Jan. 2016):

These key players continue to be major forces in shaping legal education.  Many have pushed for more practical training, lowering law school debt, maintaining standards in the face of dropping application numbers and better employment outcomes. ... As in years past, in creating our list, we sought nominations from the nation's law schools and added our own nominees.  We then narrowed the list to 48 and asked every law school dean and one professor from each school to rate them.  Here are the top 25:

  1. Bill Henderson (Professor, Indiana)
  2. Erwin Chemerinsky (Dean, UC-Irvine)
  3. Paul Caron (Professor, Pepperdine)
  4. Brian Leiter (Professor, Chicago)
  5. Blake Morant (Dean. George Washington; Immediate Past-President, AALS)
  6. Kellye Testy (Dean, University of Washington; President, AALS)
  7. David Yellen (Dean, Loyola-Chicago)
  8. Martin Katz (Dean, Denver)
  9. Frank Wu (Former Dean, UC-Hastings) 
  10. Michael Simkovic (Professor, Seton Hall)

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January 20, 2016 in Legal Education | Permalink | Comments (5)

The Ten Most Downloaded Tax Papers In 2015

  1. SSRN Logo[4620 Downloads]  Some Reflections on the OECD and the Sources of International Tax Principles (2013), by Hugh Ault (Boston College)
  2. [2858 Downloads]  Are We Heading Towards a Corporate Tax System Fit for the 21st Century? (2014), by Michael Devereux (Oxford) & John Vella (Oxford)
  3. [2500 Downloads]  Measuring Income Tax Evasion using Bank Credit: Evidence from Greece (2015), by Nikolaos Artavanis (UMass), Adair Morse (UC-Berkeley) & Margarita Tsoutsoura (Chicago)
  4. [1427 Downloads]  iTax: Apple's International Tax Structure and the Double Non-Taxation Issue (2014), by Antony Ting (Sydney)
  5. [1405 Downloads]  What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature (2014), by Dhammika Dharmapala (Chicago)
  6. [1329 Downloads]  Top Marginal Effective Tax Rates by State and by Source of Income, 2012 Tax Law vs. 2013 Tax Law (As Enacted in ATRA) (2013), by Gerald Prante (Lynchburg) & Austin John (Lynchburg)
  7. [1189 Downloads]  Taxing Multinationals in Europe (2012), by Wolfgang Schoen (Max Planck)
  8. [1028 Downloads]  The Nature and Practice of Capital Tax Competition (2015), by Kimberly Clausing (Reed)
  9. [903 Downloads]  Double Tax Treaties: An Introduction (2007), by Reuven Avi-Yonah (Michigan)
  10. [831 Downloads]  David Foster Wallace on Tax Policy: How to Be an Adult, and Other Mysteries of the Universe (2015), by Arthur Cockfield (Queen's)

January 20, 2016 in Scholarship, Tax | Permalink | Comments (0)

Bainbridge:  Louisville Exposes An Ugly Law School Secret: 'A Leftist Hegemony Pervades American Legal Education'

LouisvilleFollowing up on my previous posts (links below):  Stephen Bainbridge (UCLA), The University of Louisville Pulled Back the Curtain to Expose an Ugly Law School Secret:

Apparently the University of Louisville law school has decided to meet declining enrollments and dwindling funds not by upping their game, but by "branding" itself as a "progressive" institution committed to "social justice." ...

U of L's interim dean has filed trumped up charges against someone who limply objected to the project by encouraging his students to think [for] themselves. Which is obviously heresy in the left-liberal reeducation camp U of L has become.

The real tragedy, however, is that what's happening at U of L is just an express embracing of the leftist hegemony that pervades American legal education. Conservatives, libertarians, people of faith ... heck, anybody to the right of Hillary Clinton are hugely underrepresented in the legal academy and our students who profess such values have learned to hide their light under a bushel lest they be sent off to the Vice Chancellor for Diversity, Tolerance, and Goodness (higher education's version of the Ministry of Love).

Ultimately, of course, this is why U of L's branding effort will fail miserably. Virtually every other law school the country--with very few honorable exceptions--has precisely the same identity, they just don't advertise it. And why should they when everybody knows the dirty little secret, except the parents and state legislators who fund this cuckoo in their nest.

Ann Althouse (Wisconsin), "Apparently the University of Louisville law school has decided to meet declining enrollments and dwindling funds not by upping their game, but by 'branding' itself as a 'progressive' institution committed to 'social justice':

Are "compassion" and "social justice" neutral terms? Are they starkly, intentionally leftist? Maybe it's something in between: They feel neutral to those who are living within a left-wing environment, like fish in water. It's that third option that occurred to me when I read Marcosson's words: "I do not believe it ever occurred to anyone who proposed this at the law school or voted for it that it had any ideological or partisan content at all."

Althouse Poll

Louisville Courier-Journal, U of L Law School Adopts 'Compassion' Decree:

After a fierce and sometimes emotional debate, the faculty of University of Louisville’s Brandeis School of Law on Tuesday voted 26-2 to “champion the cause of compassion.” ...

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January 20, 2016 in Legal Education | Permalink | Comments (6)

Hillary Clinton’s Caymans Tax Dodge Hypocrisy

Hillary 2016New York Post editorial, Hillary Clinton’s Caymans-Tax-Dodge Hypocrisy:

Hillary Clinton last week lunged into her most flagrant fit of hypocrisy yet.

With Bernie Sanders surging, she took new aim at the rich — including their use of tax dodges.

She told MSNBC: “We can go after some of these schemes … the kind of misclassifying of income, trying to make it look like it’s a capital gain, when it’s really ordinary income, going ahead and routing income through the Bahamas or the Cayman Islands or wherever.”

Huh. Bloomberg News reported in 2014 on the Clintons’ use of a prime tax dodge: They put their Chappaqua home into a “residence trust” in 2010. Such trusts can save hundreds of thousands of dollars in estate taxes.

Meanwhile, the Clintons’ family wealth has grown big-time thanks to firms with significant holdings in places like . . . the Caymans.

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January 20, 2016 in Political News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 986

IRS Logo 2Legal Insurrection, Tea Party Class Action Against IRS Abuse May Proceed:

Tea Party groups won a major victory last week, when Judge Susan J. Dlott of the United States District Court for the Southern District of Ohio certified a class of Tea Party organizations that allege the IRS intentionally delayed their applications for preferential tax treatment based on their political viewpoints. ...

Having survived the hazardous class certification step, the Plaintiffs will now get substantive discovery from the IRS and from third parties. ...

Ms. Lerner’s deposition, assuming Plaintiffs are able to take it, will be a blockbuster.  Ms. Lerner, of course, was the senior-most identified IRS official with knowledge and apparent participation in slow-rolling IRS applications.  She would be entitled to assert her 5th Amendment right against self-incrimination, but only for questions that could lead to criminal penalties against her.

A subpoena to appear for deposition can also include a request for documents.  This is called a subpoena duces tecum.  In a very limited set of circumstances, production of documents can raise Fifth Amendment issues, but it is rare and not obviously applicable here.  This means that any email correspondence to or from Ms. Lerner regarding Tea Party groups should be discoverable.

In addition, a jury is entitled to make a negative inference against a party asserting his or her Fifth Amendment rights in a civil suit.  That is, Ms. Lerner or anyone else appearing on behalf of the IRS could assert his or her Fifth Amendment rights, but the jury would be entitled to assume he or she is doing so because the answer would be incriminating.  If the IRS refused to answer the question “did you delay Tea Party applications?” the jury would be entitled to infer that the deponent or witness is refusing to answer the question because the IRS did in fact delay Tea Party applications.

In a criminal case, the jury is forbidden from drawing any negative inference from a witness’s assertion of his or her Fifth Amendment rights.

In short, Ms. Lerner can repeat her despicable performance before Congress, and continue to stonewall the search for what exactly happened at the IRS, why, and on who’s orders, but she may well suffer personal repercussions now that she was able to evade in Congress’s hearings (with the assistance of a complacent and complicit Department of Justice).

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January 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, January 19, 2016

Talley Presents Corporate Inversions And The Unbundling Of Regulatory Competition Today At NYU

Talley (2016)Eric L. Talley (Columbia) presents Corporate Inversions and the Unbundling of Regulatory Competition, 101 Va. L. Rev. 1649 (2015), at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Chris Sanchirico:

A sizable number of US public companies have recently executed “tax inversions” – acquisitions that move a corporation’s residency abroad while maintaining its listing in domestic securities markets. When appropriately structured, inversions replace American with foreign tax treatment of extraterritorial earnings, often at far lower effective rates. Regulators and politicians have reacted with alarm to the “inversionitis” pandemic, with many championing radical tax reforms. This paper questions the prudence of such extreme reactions, both on practical and on conceptual grounds. Practically, I argue that inversions are simply not a viable strategy for many firms, and thus the ongoing wave may abate naturally (or with only modest tax reforms). Conceptually, I assess the inversion trend through the lens of regulatory competition theory, in which jurisdictions compete not only in tax policy, but also along other dimensions, such as the quality of their corporate law and governance rules.

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January 19, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oxfam:  Wealth Inequality Is Soaring, Due To Tax Havens

Oxfam, An Economy for the 1%: How Privilege and Power in the Economy Drive Extreme Inequality and How This Can be Stopped:

The global inequality crisis is reaching new extremes. The richest 1% now have more wealth than the rest of the world combined. Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest. A global network of tax havens further enables the richest individuals to hide $7.6 trillion. The fight against poverty will not be won until the inequality crisis is tackled.

Oxfam 2

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January 19, 2016 in Tax | Permalink | Comments (3)

Hemel Reviews The Hidden Wealth Of Nations

WealthDaniel Hemel (Chicago), What’s the Matter with Luxembourg? (reviewing Gabriel Zucman (UC-Berkeley), Hidden Wealth of Nations: The Scourge of Tax Havens (University of Chicago Press, 2015)):

The Grand Duchy of Luxembourg is rarely the subject of international attention, much less the target of international opprobrium. With fewer than 600,000 inhabitants, it is less populous than the City of Milwaukee. With an area of under 1,000 square miles, it is smaller than the State of Rhode Island. Conquered twice by Germany and thrice by France, it is much more accustomed to the role of victim than villain. In the words of one New York Times writer, “Luxembourg is about as cuddly as countries come.”

But in the view of economist Gabriel Zucman, Luxembourg is the enfant terrible of the European Union. “If we wish to prevent the Irish and Cypriot catastrophes from happening again,” Zucman writes near the end of his new book, “it is essential that Luxembourg go backward” (p. 91). Back to where is not clear, but what is clear is that Zucman wants Luxembourg to change its ways. And if the tiny state refuses to cooperate, Zucman says, Luxembourg should be excluded from the EU and blockaded by its neighbors.

Why does Zucman place so much blame on little Luxembourg? The answer has to do with a statistical quirk—an inconsistency in international economic data. As Zucman notes, Luxembourg’s official statistics show that shares of mutual funds domiciled in the Grand Duchy are worth $3.5 trillion. But when Zucman looks at official data from other countries on their international investment positions, he can account for only $2 trillion of Luxembourgish mutual fund shares recorded as assets. To whom does the remaining $1.5 trillion belong? We don’t know. “This,” says Zucman, “is a big problem” (p. 38).

The big problem has a name: tax evasion. And thanks to Zucman, we can now have a better sense of just how big a problem it is. In 2014, according to Zucman, liabilities on national balance sheets exceeded assets by $6.1 trillion. In other words, $6.1 trillion of the world’s wealth has gone missing. Zucman hypothesizes that this missing $6.1 trillion has been stashed in offshore bank accounts, hiding out of tax authorities’ sight. And while we can’t be sure that’s the case, Zucman persuasively argues that the $6.1 trillion figure is “a reasonable estimate of the amount of offshore portfolios owned by households all over the world” (p. 39). ...

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January 19, 2016 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Krugman:  Is Vast Inequality Necessary?

InequalityNew York Times op-ed:  Is Vast Inequality Necessary?, by Paul Krugman:

How rich do we need the rich to be?

That’s not an idle question. It is, arguably, what U.S. politics are substantively about. Liberals want to raise taxes on high incomes and use the proceeds to strengthen the social safety net; conservatives want to do the reverse, claiming that tax-the-rich policies hurt everyone by reducing the incentives to create wealth. ...

Is there, however, a longer-term case in favor of vast inequality? It won’t surprise you to hear that many members of the economic elite believe that there is. It also won’t surprise you to learn that I disagree, that I believe that the economy can flourish with much less concentration of income and wealth at the very top. ...

[T]he real question, in any case, is whether we can redistribute some of the income currently going to the elite few to other purposes without crippling economic progress.

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January 19, 2016 in Tax | Permalink | Comments (3)

Ayres Data On 1L Enrollment Changes, 2011 To 2014

Following up on yesterday's post, Ayres: The U.S. News Rankings Keep Dozens Of Weak Law Schools Afloat, Preventing A 'Culling Of Legal Education's Herd':  Ian has asked me to post this spreadsheet with the underlying data.  Here is a chart of the law schools (ranked and unranked) with the largest percentage contraction in their first-year class from 2011 to 2014:

Ayres

January 19, 2016 in Law School Rankings, Legal Education | Permalink | Comments (2)