Announcing the 2020 Indiana/Leeds Summer Tax Workshop Series!

Indiana Leeds PR image to useBy: Leandra Lederman

As I posted previously, this summer, Dr. Leopoldo Parada from the University of  Leeds School of Law and I (with the support of the Indiana University Maurer School of Law) will co-host the new Indiana/Leeds Summer Tax Workshop Series. It will meet online via Zoom on Thursdays from 10:30am-noon Eastern time (3:30-5pm British Summer Time). If you are interested in cutting-edge tax issues, we hope you will consider attending!

We received many terrific submissions in response to the Call for Papers. As stated there, we prioritized tax topics that would be of interest to scholars in multiple countries. We are very fortunate to have Professor Ruth Mason from the University of Virginia kicking off what promises to be an outstanding series! The following is the full list of speakers and the papers they’ll be presenting: Continue reading “Announcing the 2020 Indiana/Leeds Summer Tax Workshop Series!”

Call for Papers for the Indiana/Leeds Summer Tax Workshop Series

By: Leandra LedermanTwitter Second Proof 2.5

This summer, the Indiana University Maurer School of Law and the University of  Leeds School of Law will run a new Summer Tax Workshop Series. Dr. Leopoldo Parada from U. Leeds and I will host it. It will meet online via Zoom on Thursdays from 10:30am-noon Eastern time (3:30-5pm British Summer Time), starting May 21, 2020.

The Call for Papers opens today and will close on May 10, 2020 at midnight British Summer Time (7pm Eastern Daylight Time). If you are interested in presenting in the Workshop, please send the following before then to llederma@indiana.edu and L.Parada@leeds.ac.uk:

  1. Your name, title, and affiliation.
  2. The paper title and an Abstract of no more than 1,000 words.
  3. Whether or not you already have a draft of the paper. (We expect to circulate a draft of each paper—at least 10 pages—a week in advance of each talk.)
  4. Whether or not the paper has been accepted for publication.
  5. A list of any Thursdays between May 28 and August 6 that you would not be available to present, or a statement that any Thursday in that date range would work for you.

Continue reading “Call for Papers for the Indiana/Leeds Summer Tax Workshop Series”

Updated Working Paper on Pandemic Regulation Includes Analysis of the CARES Act, H.R. 748

My co-authors and I (Hiba Hafiz, Shu-Yi Oei, and Natalya Shnitser) have just posted an updated version of our Working Paper, Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis. The Working Paper is revised and updated to incorporate the provisions of H.R. 748 (the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act) enacted into law on March 27, 2020. In addition, the revised draft considers recent action by the Federal Reserve, the Department of Labor, and other agencies all through the analytical framework we offer for evaluating these initiatives.

Virtual Tax Policy Colloquia

Orly Mazur--edited
Prof. Mazur

By: Leandra Lederman

The Tax Policy Colloquium at Indiana University Maurer School of Law, which I’ve been blogging about, ran in person in Bloomington until our Spring Break. The fourth talk of the semester was given by Prof. Orly Mazur of SMU Dedman School of Law on March 5, 2020. She presented her interesting law-and-technology paper titled “Can Blockchain Revolutionize Tax Compliance?” (In general, she argued that it can’t: blockchain is unlikely to dramatically change tax enforcement by, for example, replacing third-party information reporting.)

The subsequent IU Tax Policy Colloquium talk, by Prof. Rita de la Feria of the University of Leeds School of Law, was on March 27. She presented a paper, coauthored with Michael Walpole of UNSW, titled “The Impact of Public Perceptions on VAT Rates Policy,” which is part of a larger project proposing a progressive VAT. The paper argues that, although having a single consumption tax rate that is broadly applied is most equitable, there typically are numerous exemptions and/or lower rates, for political economy reasons.

Rita de la Feria
Prof. de la Feria

With the move to online classes due to the pandemic, this talk occurred via Zoom. It was unfortunate that, due to the pandemic, we were not able to host Rita in Bloomington. However, the silver lining was that I was able to invite tax experts and other faculty from all over the world to attend. Rita and I also both publicized the talk on social media. As a result, several academics and other tax experts either asked to attend, or, if they saw the notice too late, asked if there is a video they could watch, which there is. In addition to me, Rita, and the students in the class, there were 22 attendees, which produced a terrific discussion. The students later told me how wonderful it was to have so many international tax experts asking questions and making comments. Continue reading “Virtual Tax Policy Colloquia”

Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis

By Diane Ring

As is apparent to the entire nation, the United States is currently trying to manage a fast-moving public health crisis due to the coronavirus outbreak (COVID-19). The economic and financial ramifications of the outbreak are serious. Yet the policy responses being developed have limited time for assessment and evaluation—despite their likely dramatic impacts. Three of my colleagues (Hiba Hafiz, Shu-Yi Oei, and Natalya Shnister) and I are currently working on a project that analyzes and tracks these emerging responses. Having spent the past several years working together as part of Boston College Law School’s Regulation and Markets Workshop, it made sense to combine our efforts and expertise to try and contribute to effective policy guidance at this critical time.

Our new Working Paper (“Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis”) discusses the ramifications of proposed and legislated policy and other actions and identifies three interrelated but potentially conflicting policy priorities at stake in managing the economic and financial fallout of the COVID-19 crisis: (1) providing social insurance to individuals and families in need; (2) managing systemic economic and financial risk; and (3) encouraging critical spatial behaviors to help contain COVID-19 transmission. The confluence of these three policy considerations and the potential conflicts among them make the outbreak a significant and unique regulatory challenge for policymakers, and one for which the consequences of getting it wrong are dire.

This Working Paper—which will be continually updated to reflect current developments—will analyze the major legislative and other policy initiatives that are being proposed and enacted to manage the economic and financial aspects of the COVID-19 crisis by examining these initiatives through the lens of these three policy priorities. It starts by analyzing the provisions of H.R. 6201 (the “Families First Coronavirus Responses Act”) passed by the house on March 14, 2020. By doing so, this Working Paper provides an analytical framework for evaluating these initiatives.

 

IU Tax Policy Colloquium: Layser, “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives”

By: Leandra LedermanIMG_0435 (002)c

On January 23, the Indiana University Maurer School of Law welcomed our first Tax Policy Colloquium guest of the year: Prof. Michelle Layser from the University of Illinois College of Law. She presented her draft paper on the design of place-based tax incentives, then called “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives,” and since retitled “How Place-Based Tax Incentives Can Reduce Geographic Inequality.” An updated draft is available on SSRN.

Shelly explained that this draft is the second paper in a multi-part project she is conducting on place-based tax incentives. Last year, she published the first piece in the series, “A Typology of Place-Based Investment Tax Incentives,” 25 Wash. & Lee J. Civ. Rights & Soc. Just. 403 (2019). Place-based tax incentives are geography-based incentives that generally are intended to help low-income areas by fostering investment in those areas. The 2019 article distinguished among place-based tax incentives on two dimensions: direct and indirect tax subsidies and spatially-oriented versus community-oriented incentives. “Direct tax subsidies provide tax breaks directly to businesses that invest in low-income communities.” (p. 415) Indirect tax subsidies are instead provided to investors in such business (pp. 417-18). She cites as examples the New Markets Tax Credit (NMTC) of IRC § 45D and the Opportunity Zones (OZ) provisions in IRC § 1400Z-1 et seq. (The OZ provisions are the most oddly numbered Internal Revenue Code sections I’ve ever seen!). Spatially-oriented tax incentives focus on specific geographically-defined Continue reading “IU Tax Policy Colloquium: Layser, “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives””

Workforce and Workplace Trends: The Empirical Challenges and Policy Significance

By Diane Ring

On Thursday, my co-author (Shu-Yi Oei) and I had the opportunity to present on “Tax Related Challenges for Platform Workers” at the United States Government Accountability Office in downtown Boston. We enjoyed discussing our past and current research regarding taxation, platform workers, labor and emerging workforce trends with GAO researchers.

Our talk at GAO was particularly timely because we’re in the process of writing a book chapter for a new empirical volume, tentatively entitled “The Law and Policy of the Gig Economy: Qualitative Analysis,” which is forthcoming at Cambridge University Press (ed. Deepa Das Acevedo). This volume will address the promise of qualitative empirical approaches to studying the gig economy. Our contribution will build on our previous work in which we looked at the public online conversations among Uber and Lyft drivers regarding challenges they face in tax compliance.

Even without considering the impacts of the 2017 Tax Reform on both the gig economy and the broader workforce (which we have examined here, here and here), significant empirical questions remain regarding the tax and economic pressures faced by gig and contingent workers. Some, but not all, of those questions can be addressed by examining tax return and survey data. Add in tax reform to the mix (think the new section 199A deduction, the suspension of employee business deductions and the offshoring international provisions (section 250 and 956A)) and it’s clear we have a lot of work to do to better understand the interplay between tax and labor policies across many fields and how this will impact the future of the workplace. Our view is that it will take a combination of empirical approaches to get a well-textured picture of how tax impacts work.

U.S. Business Community Calls for Ratification of Tax Treaties in U.S. — Again

By Diane Ring

I have been wondering for the past few years why the business community has not put more pressure on the Senate to resolve the tax treaty roadblock created by Senator Rand Paul (R-KY). In 2011, newly-elected Senator Paul announced objections to the ratification of tax treaties and protocols and sought to block Senate consideration of those tax agreements in the pipeline. Senator Paul contended that the exchange of information provisions in the treaties violated taxpayers’ 4th amendment rights to privacy in their banking and financial data and that U.S. disclosure of such data to treaty partners would violate the due process rights of taxpayers. He succeeded in blocking the agreements (none have been ratified since 2010) and the result is a backlog of negotiated but unratified U.S. tax treaties and protocols.

A single senator can delay vote on a treaty and keep debate open. Negotiation with Senator Paul has not proven fruitful because he fundamentally objects to the information exchange provisions. However, other senators do have procedural recourse to end debate on a treaty and bring it to a vote. Under a process known as “cloture” (see Senate Rule XXII), a vote of 60 senators can force the end of debate. But this procedural path also requires an additional 30 hours of debate and the Senate can conduct no other business during this time. Thus, the cloture option puts a significant price tag on efforts to end the ratification impasse.

In a 2016 article (When International Tax Agreements Fail at Home: A U.S. Example), I mapped the historical and Senate procedural factors leading to the standstill on tax treaty ratification in the U.S. and the business community’s failed efforts to lobby  ratification of tax treaties. For example, in 2013 several major U.S. business trade groups (including the Technology Industry Council, the National Association of Manufacturers, the National Foreign Trade Council, the U.S. Chamber of Commerce, and the United States Council for International Business) sent a letter to Senator Bob Corker stressing the importance of approving pending tax treaties and protocols. Senator Paul remained unmoved by business community pleas and apparently, the problem had not been considered serious enough to warrant commencement of cloture.

But it now appears that the business community has been reviving its public efforts to pressure the Senate to act: Continue reading “U.S. Business Community Calls for Ratification of Tax Treaties in U.S. — Again”

Do You Really Need More Information?

By Gaute Solheim, Senior Tax Advisor, Norwegian Tax Administration

(Mr. Solheim writes in his individual capacity and does not purport to represent the views of the Norwegian Tax Administration.)

In a previous post, I explained with reference to the Cui 2017 paper on Third Party Information Reporting (TPIR) why I expect good quality TPIR, based on a primitive analysis of the human factor in corporate filings. When I started rereading Cui’s paper, I only read a few lines before a chapter heading from the CIA textbook “The Psychology of Intelligence Analysis” popped into my mind: Do you really need more information? That book contains a full chapter (starting on page 51) on how more information sometimes contributed nothing to the quality of the analysis, but was of immense help for the confidence of the analyst.

I will below make my argument for why the answer should be “yes” when it concerns the TPIR data mentioned by Cui in the paper, but it is a qualified yes. TPIR is a bit like cooking. Fantastic raw materials will not end up as gourmet meals on their own. You need a talented and skilled chef and a kitchen with the right tools, as well.

Having spent some time on capacity-building with less developed tax administrations than the Norwegian, I agree with Cui that establishing a TPIR machinery should not be the first priority in these countries. However, TPIR being the wrong starting point for some developing countries is not an argument for abstaining from it in Norway and other jurisdictions with better-resourced administrations. I will below state my case for why I find TPIR useful based on my observations working for the Norwegian Tax Administration (NTA) (which may of course differ from the opinions of the NTA itself). Continue reading “Do You Really Need More Information?”

The Human Factor in TPIR Filing

By Gaute Solheim, Senior Tax Advisor, Norwegian Tax Administration

(Mr. Solheim writes in his individual capacity and does not purport to represent the views of the Norwegian Tax Administration.)

I happened to reread a paper by Wei Cui from 2017 on Third Party Information Reporting (TPIR) some weeks ago. Based on my own practical experience working for the Norwegian Tax Administration, I found it hard to agree with him on uselessness of TPIR. In this post, I will explain why I expect good quality in TPIR filing. I plan to write a later post on why TPIR is useful.

I will start with crediting Cui for outlining very well what I will call “the story of the corporate tax revenue collection machine.” He does a good job describing how the government has outsourced the bulk of the revenue collection to corporations. I would love to see papers adding empirical numbers to this description. My Norwegian perspective is a world of VAT, corporations withholding taxes on wages and delivering massive amounts of data used to prepopulate the personal tax filings. The way Cui describe the role of the corporations in the “tax revenue collection machine” is probably even more spot on for me than for a reader with a US perspective.

As I read Cui, he expect legal entities to cooperate sufficiently to ensure fairly good quality TPIR. He does some reasoning on why this is to be expected, but I did not find his arguments very convincing. This may be because for some years I have had a different line of reasoning ending with the same conclusion. What follows is based on material I used in a talk some ten years ago for my colleagues at the Large Taxpayer Office in Norway. The theme of that talk was why we found less evasion in our segment of taxpayers than what other tax auditors found when auditing smaller entities. I called the talk “The Human Factor in Tax Filing”. I believe the reasoning I used there also may explain high quality TPIR. Continue reading “The Human Factor in TPIR Filing”

Tax and Changing Labor Markets: The OECD Weighs In

By: Diane Ring

Across the globe, policy makers are wrestling with the possibility that the nature of work is changing and that those changes might be positive or negative. One of the most prominent changes identified is the rise of “non-standard” work, essentially work that is not part of a traditional employer-employee relationship. The rise of the gig economy, and perhaps its even greater growth in the public imagination, have fueled concerns about the prospect of disappearing employment and its replacement with less stable and less desirable non-employee work options.

The degree to which this shift is taking place is an empirical question which has been difficult to pin down. As my co-author Shu-Yi Oei and I have explored in our paper, Tax Law’s Workplace Shift (forthcoming in the Boston University Law Review), data on the changing nature of work comes from empirical studies, which suffer from limitations due to the questions asked, the terminology employed, and comparability of studies over time and across databases. But regardless of any precise conclusions on the rate at which work is changing, there are valid reasons to be concerned and inquire about the impact of tax law on any such shifts. The OECD has begun to weigh in on these questions, releasing a new working paper entitled Taxation and the Future of Work: How Tax Systems Influence Choice of Employment Form, by Anna Milanez and Barbara Bratta (March 21, 2019).

The OECD Project

In this paper, the OECD tackles the question of whether tax considerations may be driving any increases in non-standard work. Using three labor scenarios—traditional employee, self-employed worker, and incorporated worker (e.g., a personal services corporation)—the paper asks how the tax burdens change across the three labor scenarios in eight test countries (including the United States).

In particular, the paper measures the “tax payment wedge” in each labor scenario in each country.

Payment wedge = total employment costs minus worker take home pay                                                                                  total employment costs

where total employment costs equal take home pay, income tax, employee social security contributions, employer social contributions, and payroll taxes minus any cash transfers (i.e. cash payments from the government to the worker, such as those made with respect to dependent children).

What did the OECD find across these eight test countries? Continue reading “Tax and Changing Labor Markets: The OECD Weighs In”

Lead us not into temptation

By Gaute Solheim, Senior Tax Advisor, Norwegian Tax Administration

(Mr. Solheim writes in his individual capacity and does not purport to represent the views of the Norwegian Tax Administration.)

The Norwegian Tax Administration (NTA) has succeeded in leading most of the taxpayers away from the temptation of tax evasion over the last two decades. Not all, but most. It was not by carefully guiding them down a narrow path. The NTA constructed a wide avenue built on large quantities of third-party information pushed into prepopulated tax filings. Norway tweaked details in the rules for the most used deductions, linking them to easy observable facts and standard rates instead of using actual cost. Feedback from audits were used to evaluate possible changes in rules, eliminating or reducing the temptations facing the taxpayer in the filing process.

After all this work, we still had a problem with taxpayers being formally non-compliant by not logging into the digital portal and clicking the button for submitting their prepopulated tax filing. The easy fix was to change the law. A taxpayer receiving the digital and prepopulated tax report would be deemed to accept it as his filing if he stayed passive. Presto, even more compliant taxpayers.

But, at least for internal use, the NTA retained the old division of taxpayers into those who want to comply and those who want to evade. The faithful and the sinners. What people want is hard to observe, and it is hard to design measures to influence what people want. The NTA kept it despite its actions being focused very much on making it irrelevant whether the taxpayer wanted this or that. Spending all my time auditing MNEs, I found it really hard to figure out the wants of a corporation. Continue reading “Lead us not into temptation”

IU Tax Policy Colloquium: Williamson, Filer Voter: An Experiment Testing Voter Registration at Tax Time

IMG_7332
Left to right: Pamela Foohey, Leandra Lederman, Vanessa Williamson, David Gamage, Tim Riffle

By: Leandra Lederman

On February 28, Indiana University Maurer School of Law’s Tax Policy Colloquium, hosted this year by my colleague David Gamage, welcomed Vanessa Williamson from the Brookings Institution. Vanessa presented a report that is due to be released at the end of March on a “Filer Voter” experiment she conducted at Volunteer Income Tax Assistance (VITA) sites in Cleveland, Ohio and Dallas, Texas.

For those who may not be familiar with it, VITA is an IRS-run program that offers free tax return preparation (generally federal and state) for taxpayers who made $54,000 in income or less (for 2018) and meet certain other requirements. An IRS web page provides training materials and certification tests for volunteers. The IRS works with local groups in that it provides VITA grants to partner organizations. For example, in Bloomington, the VITA program is run by United Way of Monroe County.

Vanessa’s Filer Voter experiment involved offering some taxpayers who come to VITA sites for tax-return preparation the opportunity to register to vote. The experiment was structured as follows: Each VITA session was divided in half by time, and within each session, the first half or second half was randomly assigned the treatment of offering voter registration, and the other half of the session was the control. The study included collection of demographic information and consent forms from taxpayers in both the treatment and control groups. Continue reading “IU Tax Policy Colloquium: Williamson, Filer Voter: An Experiment Testing Voter Registration at Tax Time”

TIGTA’s Report on the Growing Gig Economy

By: Joseph C. Dugan, Trial Attorney, Department of Justice, Civil Division

On February 14, 2019, the Treasury Inspector General for Tax Administration (TIGTA) released a Valentine’s Day treat: a comprehensive report following a TIGTA audit concerning self-employment tax compliance by taxpayers in the emerging “gig economy.”

As Forbes noted last year, over one-third of American workers participate in the gig economy, doing freelance or part-time work to supplement their regular incomes or stringing together a series of “gigs” to displace traditional employment.  Popular gig services include ride-sharing giants Uber and Lyft; arts-and-crafts hub Etsy; food delivery services GrubHub and Postmates; and domestic support networks Care.com and TaskRabbit.  Even Amazon.com, the second-largest retailer in the world and a traditional employer to many thousands of workers in Seattle and at Amazon distribution centers worldwide, has gotten in on the gig economy with its Amazon Flex service.  And for those interested in more professional work experience to pad their resumes, Fiverr connects businesses with freelance copywriters, marketers, and graphic designers.  The power of smartphones and social media, coupled with flat wage growth in recent years, makes the digital side hustle appealing and, for many households, necessary.

From a tax revenue perspective, the gig economy is great:  it is creating billions of dollars of additional wealth and helping to replenish government coffers that the so-called Tax Cuts and Jobs Act (TCJA) has left a little emptier than usual.  From a tax compliance perspective, however, the gig economy presents new challenges.  Gig payers generally treat their workers as independent contractors, which means that the payers do not withhold income tax and do not pay the employer portion of FICA.  Instead, the contractor is required to remit quarterly estimated income tax payments to the IRS and to pay the regressive self-employment tax, which works out to 15.3% on the first $128,400 in net earnings during TY2018, and 2.9% to 3.8% on additional net earnings.  That self-employment tax applies even for low-income freelancers (i.e., it cannot be canceled out by the standard deduction or nonrefundable credits). Continue reading “TIGTA’s Report on the Growing Gig Economy”

Zelenak: IU Tax Policy Colloquium, “The NCAA and the IRS” & Tax Sitcom Night

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Left to right: Tim Riffle, David Gamage, Leandra Lederman, Larry Zelenak, Kevin Brown

By: Leandra Lederman

On February 14, the Indiana University Maurer School of Law’s Tax Policy Colloquium hosted Larry Zelenak from Duke University School of Law. Larry presented his fun new paper, co-authored with his colleague Rich Schmalbeck, “The NCAA and the IRS: Life at the Intersection of College Sports and the Federal Income Tax.” Larry really hit this one out of the park, with a crowd that was nearly standing-room-only! Larry also hosted a terrific Valentine’s evening event, “Tax Sitcom Night,” featuring three classic sitcom episodes in which couples encounter the federal income tax together. I’ll discuss each of these briefly in this blog post.

Larry and Rich’s paper argues that the IRS has not done as much as Congress to cut back on “unreasonably generous tax treatment” of college athletics. The paper covers four principal topics, which Larry explained was a combination of Rich’s work on two issues and Larry’s on the other two. The four topics are:

  • The possible application of the unrelated business income tax to college sports;
  • the federal income tax treatment of athletic scholarships;
  • the recently changed tax treatment of charitable deductions for most of the cost of season tickets to college ball games; and
  • the new 21% excise tax of IRC § 4960 on compensation in excess of $1 million on certain employees of tax-exempt organizations.

Each of these topics is interesting in its own right, and together they make a strong case that the IRS, and Congress at times, have tilted the playing field in favor of college athletics at the expense of protection of the federal fisc. I won’t give a play-by-play of these four issues here, as the paper does a great job of it and is available on SSRN, but I will mention a couple of highlights. Continue reading “Zelenak: IU Tax Policy Colloquium, “The NCAA and the IRS” & Tax Sitcom Night”