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”

Satan, Tea Parties, and the IRS

By Sam Brunson

Did you hear that the IRS granted a Satanic cult tax-exempt status in ten days?!? Meanwhile, Tea Party groups’ exemption applications languished for months or even years?!?

I know, it sounds pure conspiracy theory: the IRS loves Satan and hates conservatives. But it’s true! Or, at least, kind of! But it needs to be contextualized, because comparing the exemption application of Reason Alliance, Ltd. (the putative Satanic cult) and Tea Party groups is inapposite.[fn1] Continue reading “Satan, Tea Parties, and the IRS”

Death, Taxes, and a Beach Read

51bm1qlqlzl-_sy344_bo1204203200_By: Leandra Lederman

Back in December 2011, I received a targeted mailing. It was the postcard below, which I received at the office. Tfullsizerender-1hus far, I haven’t found a Maurer colleague or tax friend who received this mailing. Some marketer apparently did his or her homework and identified me as someone with an interest in both tax and chick lit! I don’t get to read novels very often anymore, but this looked like exactly the kind of book I would enjoy. I even acted on the sticker on the reverse of the postcard, which said “A book makes a great holiday gift!” “Death, Taxes, and a French Manicure” was a great start to the Christmas list request I had recently received.

I received the book for Christmas and got hooked on the series. I’ve gotten through Book 10 so far. They’re a lot of fun. It never occurred to me to blog about them, though, until I read the first page of “Death, Taxes, and Cheap Sunglasses” while on a plane, and saw a link with tax issues I frequently write about. The opening paragraph reads:

“I slid my gun into my purse, grabbed my briefcase, and headed out to my car. Yep, tax season was in full swing once again, honest people scrambling to round up their receipts, hoping for a refund or at least to break even. As a taxpayer myself, I felt for them. But as far as tax cheats were concerned, I had no sympathy. The most recent annual report indicated that American individuals and corporations had underpaid their taxes by $450 billion. Not exactly chump change. That’s where I came in.”

I had just presented my latest tax compliance article, “Does Enforcement Crowd Out Voluntary Tax Compliance?” and here were tax gap figures showing up in a novel! “Death, Taxes, and Cheap Sunglasses” was published in 2015, when the annual federal tax gap was in fact estimated at $450 billion. (The updated tax gap figures, released in April 2016, and which I blogged about previously, are available here.)  Continue reading “Death, Taxes, and a Beach Read”

When Leaks Drive Tax Law (a.k.a. our new paper!)

Shu-Yi Oei

Diane Ring and I just posted our new article, Leak-Driven Law, on SSRN. I had previously blogged about this paper as part of Leandra Lederman’s 2017 Mini-Symposium on Tax Enforcement and Administration, The abstract is here:

Over the past decade, a number of well-publicized data leaks have revealed the secret offshore holdings of high-net-worth individuals and multinational taxpayers, leading to a sea change in cross-border tax enforcement. Spurred by leaked data, tax authorities have prosecuted offshore tax cheats, attempted to recoup lost revenues, enacted new laws, and signed international agreements that promote “sunshine” and exchange of financial information between countries.

The conventional wisdom is that data leaks enable tax authorities to detect and punish offshore tax evasion more effectively, and that leaks are therefore socially beneficial from an economic welfare perspective. This Article argues, however, that the conventional wisdom is too simplistic. In certain circumstances, leak-driven lawmaking may in fact produce negative social welfare outcomes. Agenda-setting behaviors of leakers and media organizations, inefficiencies in data transmission, suboptimally designed legislation, and unanticipated behavioral responses by enforcement-elastic taxpayers are all factors that may reduce social welfare in the aftermath of a tax leak.

This Article examines the potential welfare outcomes of leak-driven lawmaking and identifies predictable drivers that may affect those outcomes. It provides suggestions and cautions for making tax law, after a leak, in order to best tap into the benefits of leaks while managing their pitfalls.

In this paper, we wanted to explore how leaks of taxpayer data in the offshore context have shaped international tax law and policy, both in the US and other countries. We especially were interested in the possibility that—while leaks might appear useful on the surface from a tax enforcement and informational standpoint—there are unexplored pitfalls and downsides to relying on leaks to direct lawmaking and policy priorities.

In the non-tax world, of course, leaks have suddenly become very salient, in terms of both their usefulness and their dangers. But (non-tax lurkers take note!) tax law has been dealing with leaks of taxpayer information and what they mean for tax enforcement for at least the past ten years. Of course, tax leaks have some distinctive characteristics that make them different from other types of leaks. For example, the tax leaks that are the subject of this paper are usually (though not invariably) leaks of private taxpayer data, rather than leaks about governments from government sources.

We do think that the framework we introduce in our paper for analyzing the upsides and downsides of leak-driven lawmaking can be applied to explore how non-tax leaks and reactions to them may be socially beneficial but could also lead to less than ideal results. In both tax and in other fields, the meta-issue is not just how governments and private actors can use leaked information to sanction bad behaviors, make decisions, or design laws. Rather, the issue is how the actions and responses of leakers, governments, journalists, international organizations and the public work together to create and promote certain outcomes. Once we understand the underlying dynamics, then we can consider how the outcomes they create should be evaluated, supported, or resisted.

If you’re working on leak-related scholarship in either tax or other fields, we’d love to chat.

Newspapers and the Total Destruction of the Johnson Amendment

By Sam Brunson

Yesterday at the National Prayer Breakfast, Donald Trump promised to “get rid of and totally destroy the Johnson Amendment.”

In case you’re unfamiliar with the name “Johnson Amendment” (and I kind of hope you are—it’s a stupid name), that refers to the phrase in section 501(c)(3) that prohibits tax-exempt organizations from endorsing or opposing candidates for office. It was proposed by Senator Lyndon Johnson in 1954, and inserted into the tax code with little fanfare and no legislative history.

There’s a lot that can (and, in fact, has) been said about Trump’s proposal, which follows up on a campaign promise he made, apparently repeatedly. I wouldn’t doubt if we return to it a few times here at Surly. But I just wanted to point out one potential consequence: Continue reading “Newspapers and the Total Destruction of the Johnson Amendment”

Twitter Tax Feeds for 2017

By David Herzig

I promised I would update the twitter tax feeds in my last post.  There are a number of new names on the updated list as tax professors continue to enter the twitterverse.  I did update the list to be in alphabetical order.  As always, if I am missing someone, please let me know.

Starting with the SurlySubgroup (@surlysubgroup)

Jennifer Bird-Pollan (@jbirdpollan)

Sam Brunson (@smbrnsn)

Phil Hackney (@EOTaxProf)

David Herzig (@professortax)

Stephanie Hoffer (@Profhoffer)

Leandra Lederman (@leandra2848)

Ben Leff (@benmosesleff)

Francine Lipman (@Narfnampil)

Diane Ring (@ringdi_dr)

Shu-Yi Oei (@shuyioei)

Other United States/Canadian Tax Professor (in alphabetical order):

Continue reading “Twitter Tax Feeds for 2017”

TurboTax vs. H&R Block: Deductible Moving Expenses and Haunted Houses

Scrolling through my Twitter feed, I saw this Promoted Tweet:

Curious, I looked to see what it was responding to. TurboTax, it turns out, will have a (pretty awesome, actually) new Super Bowl ad, starring Kathy Bates: Continue reading “TurboTax vs. H&R Block: Deductible Moving Expenses and Haunted Houses”

The Art of the (Budget) Deal

By Daniel Hemel and David Herzig

Who Holds the Trump Card on Reconciliation?

Republicans on Capitol Hill are reportedly planning to use the filibuster-proof budget reconciliation process to repeal the Affordable Care Act and overhaul the tax code. Against that background, Sam Wice says that “the most powerful person in America” in 2017 will be Senate Parliamentarian Elizabeth MacDonough, the nonpartisan official who will “determine” how much of their agenda Republicans can pass through reconciliation. This, of course, is an exaggeration: like it or not, the most powerful person in America in 2017 will be Donald J. Trump, who will wield all the power of the imperial presidency. But Wice’s post helpfully directs our attention to the budget reconciliation process, the rules of which quite likely will determine whether the Republican leadership on Capitol Hill can repeal the ACA and reform the tax laws.

Yet while one should not underestimate the importance of reconciliation, one should also not overestimate the power of the Parliamentarian in the reconciliation process. As a formal matter, the Parliamentarian’s role is advisory; and as a practical matter, the Parliamentarian has little say over significant aspects of reconciliation. Other actors—most notably, Senate Budget Committee Chairman Mike Enzi (R-Wy.)—wield at least as much influence as the Parliamentarian. Most importantly, Enzi—not MacDonough—will determine whether the provisions in any reconciliation bill violate various rules against deficit-increasing legislation being passed via reconciliation. And unlike the Parliamentarian, the Budget Committee Chairman is very hard to fire.

Reconciliation measures can begin in either or both chambers. However, since the ultimate vote on the budget measure occurs in the Senate, we’ll focus on the Senate side of the reconciliation process for purposes of this discussion. On the House side, the Rules Committee Chair and the Budget Committee Chair will wield outsized influence as well. We expect Pete Sessions (R-Tex.) to stay on as House Rules Committee Chair; as for the House Budget Committee Chair, the race is on for a replacement to Tom Price, the Georgia Republican recently tapped as Trump’s Health and Human Services Secretary.

To understand why the Budget Committee Chair is as powerful as he is, a bit of background on reconciliation may be helpful. Continue reading “The Art of the (Budget) Deal”

Trump’s Emolument Tax Problem

By: David J. Herzig (photo from Vox.com)

When a businessperson who runs many active businesses runs and wins for President, clearly there would be many second order problems associated with inherent conflicts between running corporations and the country.  When President-elect Trump won the office, many of these conflicts have bubbled to the surface.

For example, to avoid a conflict of interest between benefiting one’s personal holdings and the Country’s best interests, assets of the President are placed in a blind trust.  As many have pointed out, this works only when the President does not know the nature of the holdings.  Putting existing businesses into a blind trust does not stop the President for knowing the underlying assets of the trust.  The conflict is not ameliorated by trust structure.  Nor, by the way, would it be fixed if President elect Trump divests but the family continues to own the assets.

For this post, I want to consider the current discussion related to the blind trust problem called emolument.  Many prior to the election probably have not heard much about the idea of emolument.  Larry Tribe and others believe that President elect Trump’s ownership of active business assets, even in a blind trust, would violate, Article I, Section 9, Clause 8 of the Constitution which prevents the President from accepting “presents” or “Emolument” from foreign states.  Others, like Andy Grewal, do not believe that mere ownership of assets triggers the Emolument Clause.

If the solution to the blind trust and Emolument Clause problems is a divesture of President elect Trump’s assets as many advocate, this would trigger (to borrow a catch phrase of President elect Trump’s) huuuuuuge tax problem.

Continue reading “Trump’s Emolument Tax Problem”

Cooking The Books Podcast on Trump’s Taxes

By: David J. Herzig

Today Pulitzer Prize winning journalist, David Cay Johnston, Phil Hackney, and I got together for a 30 minute podcast discussion regarding the recent NY Times follow-up article about Mr. Trump’s $916 million tax loss (“NOL”).

Here is link if you missed hyper-link above: http://share.sparemin.com/recording-5131

The topics ranged from the current tax reporting regarding Mr. Trump’s 1990s tax returns to the Trump Foundation to potential criminal sanctions against Mr. Trump.  It was fantastic to be a part of and I hope everyone listens.

Continue reading “Cooking The Books Podcast on Trump’s Taxes”