On Marginal and Effective Tax Rates

By Sam Brunson

A friend sent me a cartoon that’s been going around his Facebook feed. The cartoon’s message amounts, roughly, to: undocumented immigrants are far better-off than legal residents because taxes.

The various assertions the cartoon makes are an amazing collection of racist and wrong. In fact, there’s too much racist, and too much wrong, to address. But it’s worth pointing out that, although the cartoon uses numbers, its numbers are wildly, wildly wrong.

If you want to hate-read the whole thing, you can see it here, but for my purposes, we’re going to look at these two panels: Continue reading “On Marginal and Effective Tax Rates”

Macron and the Potential Future of Tax Leaks

By: Diane Ring

The French election for president—an event worthy of note in its own right (particularly on the heels of the Brexit vote)—generated a political, international relations, security and media firestorm due to a late-breaking data leak and hack. On Friday, the campaign of French centrist candidate Emmanuel Macron announced that it had been the subject of a major computer hack. At least 9GB of emails and personal and business documents from Macron’s campaign were posted to a document sharing site called Pastebin. Initial reports contended that the hack and leak were an effort to aid Macron’s far-right opponent Marine Le Pen, and may have been undertaken with Russian assistance. While Macron won the election, the potential fallout out from these leaks may have only just begun.

There’s an important tax dimension to the story, which may have been slightly overshadowed by Friday’s massive data dump. Two days before, on Wednesday, Le Pen hinted during a debate at possibility that Macron might have an offshore account in the Bahamas. Apparently, two hours before the debate, documents were anonymously posted on an internet forum that purported to include Macron’s signature and to show that he had a Bahamas bank account. During the debate, Macron responded that the claim was false and constituted “defamation.” On Thursday, Macron and his campaign outlined the spread of this offshore-account assertion on various sites and contended some were connected to “Russian interests.” On Friday, Macron lodged a complaint with the French prosecutor’s office regarding offshore account allegations made online.

Though the Friday hack and data dump have dominated the spotlight, the alleged tax leak is in fact part of the bigger and quite troubling picture of leaks in the modern cyber environment . . .

Continue reading “Macron and the Potential Future of Tax Leaks”

We Hear What We Want to Hear

Shu-Yi Oei

I’ve been preoccupied by country music these past few days. For this, I blame my Tulane colleague, Sally Richardson, who recently wrote this post on Property Law Profs Blog. In it, Sally makes the following observation:

Last week, my good friend, brilliant colleague, and property law scholar extraordinaire, Jim Gordley (Tulane), told me that he had been on a road trip and listened to a good deal of country music.  In the course of listening to a series of country songs, Jim decided that country music was about two things:  love and breaking the law.  Being from the south and having listened to my fair share of country music, I have to admit that Jim is right.  Just listen to Friends in Low PlacesAchy-Breaky HeartBefore He CheatsFolsom Prison Blues, and Ol’ Red and you can see for yourself.  Sure, there are some other songs about dogs and beer, but those are really in the minority.  Most country music is about love and the law.

Sally also shares some really genius lyrics coined by Jim, which include:

I assign and convey to you
That unencumbered heart
With one restrictive covenant
That we shall never part,
And this condition subsequent
That if you let it break,
Then I in my discretion
May reenter and retake.

Reminds me a bit of the Conway Twitty tax case—both the Tax Court’s Ode and the IRS AOD in response!

Of course, as a matter of substance, I think Jim and Sally are dead wrong. Love and breaking the law…pshaw! Aside from some notable lines such as the one about Ilsa the acrobat falling in love with Horatio the Human Cannonball, country music is, in fact, all about economic security, lending and financing, foreclosure, bailouts, and tax.

Let me explain:

Caveat: I have an immense soft spot for country music. Some days I have half a mind to move to Nashville and try to earn a living as a country music songwriter. (I’m only very slightly kidding about that.) However, I do not actually know anything about country music. And obviously, country music has a bazillion subgenres is about lots of other things as well (as this article describes), including the painful, painful process of creating legal scholarship.

Continue reading “We Hear What We Want to Hear”

Trump’s Back-to Basics Tax Plan: It’s Tremendous!

Aren’t we all wondering what President Trump’s big tax reform announcement will be tomorrow?  Loyola Los Angeles Tax LL.M. student Anosh Ali ventured a tongue-in-cheek guess in a short memo he wrote in Katie Pratt’s Tax Policy class.  We’ll see tomorrow how good a prognosticator Anosh is. 

Until then, at least we know that his Presidential ‘voice’ is spot on


TO:         President Trump

FROM:   Anosh Ali, White House Communications Specialist

RE:         Your tax reform press conference on Wednesday

DATE:    April 25, 2017

_____________________________________________________________________________________

You have asked me to prepare talking points for your tax reform press conference tomorrow. This memo includes general talking points and responses to hostile questions you are likely to get from the liberal media. Continue reading “Trump’s Back-to Basics Tax Plan: It’s Tremendous!”

Grover and Godwin

By Sam Brunson

Over the weekend, tax opponent extraordinaire and Americans for Tax Reform founder Grover Norquist said …

Well, I’ll let him speak for himself:

In two follow-up tweets (here and here), he clarified and doubled-down on his position: essentially, he argues that (a) without the 16th Amendment, the country couldn’t have enacted an income tax, (b) without an income tax, we couldn’t have afforded to enter World War I, (c) if we hadn’t entered the war, the Versailles Treaty wouldn’t have happened,[fn1] and (d) without the Versailles Treaty, World War II, with all of its attendant evils, wouldn’t have happened.[fn2] Continue reading “Grover and Godwin”

A Libertarian Tip

By: David Herzig

Yesterday on Twitter, Scott Greenberg (@ScottElliotG) posted the following tweet from Matt Bruenig.

Screen Shot 2017-04-20 at 7.41.36 PM

Well, David Gamage, Omri MarianAndy Grewal and I had fun in 120 characters debating the quality of the tax advice provided on both the receipt and the note.  Suffice to say: (A) this will be appearing on a number of basic income tax exams shortly;[1] and, (B) neither piece of advice provided by “Mr. Libertarian” seems to be correct.  Both David and I pointed out that the “tip” did not seem to meet the old Duberstein detached and disinterested test.  Clearly there was a quid-pro-quo; don’t spit on my food and I will give you extra money in addition to the bill.

Joking around about the gift/income distinction made me think that tipping is very tax inefficient.  Assuming that what I said is true: tips are not gifts and they are income to the recipient. This means that the payment is not deductible by the payor (just personal consumption) yet income to the recipient, i.e. the server. If it is ordinary income to the recipient, then there should be a corresponding wage deduction, right?

Let’s assume the following counterfactual.  The restaurant includes the tip as part of the bill.  The restaurant pays the employee salary including the entire tip.  Under this structure, the restaurant would receive an entire wage adjustment for the tip paid.  The customer is still does not receive a deduction for paying the employee’s wages and the employee still pays the same amount of income tax.  But the employer captures the unused deduction for wages by the customer.  Theoretically, this deduction could be shared by all the stakeholders to reduce costs to all parties.

Who cares?  Well, only economists and tax professors, probably.  Back to finals preparation!

[1] Here is David Gamage’s hypo: customer leaves $1K and says, I just won the lottery and want to share some of my winnings as a “gift”. 

The Surly Subgroup Turns One!

Time flies when you’re having fun, I guess. Today is the one-year blogiversary of the Surly Subgroup. What started off as a group-blogging experiment hatched at last year’s Critical Tax Conference at Tulane Law School has provided quite a bit of entertainment for Surly bloggers and our guest bloggers, and hopefully for our readers as well.

It’s obviously been a big year on tax and other fronts. Since our inception, we’ve published 206 blog posts on a variety of topics. And we’ve drawn readers from 140 different countries.

Surly regulars and guest bloggers have covered various tax-related issues surrounding politics and the 2016 election—including disclosure of presidential tax returns, the Emoluments Clause, the Trump Foundation, and the Clinton Foundation. We’ve written about churches, 501(c)(3)s and the IRS treatment of non-profits. We’ve discussed the tax reform proposals of the 2016 presidential candidates and the #DBCFT. We’ve written several administrative law posts about Treasury Regulations and rulemaking.

Politics aside we’ve also covered other important issues in tax policy—including taxation and poverty, healthcare, tax policy and disabilities, tax compliance, and tax aspects of the Puerto Rico fiscal crisis. We’ve discussed several issues in international and cross-border taxes, touching on the EU state aid debate, the CCCTB, taxation and migration, the Panama Papers, tax leaks more generally, and tax evasion in China.

We hosted our first ever online Mini-Symposium on Tax Enforcement and Administration, which featured posts by ten different authors on a variety of tax administration topics. The Mini-Symposium was spearheaded by Leandra Lederman. Leandra had organized and moderated a discussion group on “The Future of Tax Administration and Enforcement” at the 2017 AALS Annual Meeting, and many of the discussion group participants contributed to the online symposium. We hope to organize future online symposia on other topics.

We’ve blogged about various conferences, workshops, and papers, both tax related and not-so-much tax related. We’ve also had lots of fun writing about taxes in popular culture – Surly bloggers and guest bloggers have written about the tax aspects of Pokémon Go, tax fiction, music-related tax issues (Jazz Fest! Prince! “Taxman”!), soccer players, dogs, Harry Potter fan fiction, Star Trek, and John Oliver. Surly bloggers even recorded a few tax podcasts!

In short, it’s been a busy year, and we’ve had a lot of fun with the Surly platform. We hope you have as well. Going forward, we’re going to keep the blog posts coming. We also hope to draw more regular and guest bloggers and to organize other online symposia.

Thanks for reading!

Panama Papers: The One-Year Anniversary

By: Diane Ring

This month marks the one-year anniversary of the Panama Papers leak. In April 2016, the ICIJ announced the leak and a few weeks later (May 9, 2016) released a database that included a subset of the leaked data. The leak itself comprised over 11 million records spanning 40 years from the Panamanian law firm Mossack Fonseca. At its core, the leak revealed the true ownership of over 200,000 offshore entities, thereby raising a host of tax and political questions regarding many of the entities’ owners.

So what has happened over the past year as a result of the leak? Continue reading “Panama Papers: The One-Year Anniversary”

The Games We Play

Shu-Yi Oei

I’ve been ever so slightly glum since my colleague Ann Lipton went and blogged about this game called the Unicorn Startup Simulator over at BLPB. The goal of the game is for your startup to have a billion dollar valuation by the end of the year while keeping your employees happy. You have to make a series of decisions juggling those two goals. Turns out that’s harder than one might imagine. Here is what keeps happening to me:

Screenshot 2017-04-10 23.18.32

So, I guess the message is “don’t quit your day job”?

Anyway, I was feeling grumpy about not having cool tax games to call our own but then I went hunting around and realized, WAIT, we do have tax games! Whether they’re cool or not is another story.

Here are a couple:

Continue reading “The Games We Play”

Chuck Berry, Cash, and Taxes

Copyright Missouri History Museum, Some Rights Reserved

By Sam Brunson

In the aftermath of Chuck Berry’s death on March 18, I learned that I’m way more familiar with his music than I had realized. I’ll confess that I never spent a lot of time thinking about Chuck Berry, but his songs (it turns out) were an accidental soundtrack to my growing up. My dad had two or three oldies stations programmed into the radio, and Berry’s music was ubiquitous on their playlists. And many songs I’m partial to have turned out to be his. (I’m thinking particularly of Nina Simone’s cover of “Brown-Eyed Handsome Man.”)

Still, I’m not a big enough fan to try to write about Berry on a tax blog. Or, rather, I wasn’t until last night, at the gym. As I listened to Sound Opinions, I learned that, like so many musicians, Berry had a run-in with the IRS. Continue reading “Chuck Berry, Cash, and Taxes”