The Law With No Name or the “2017 Budget Reconciliation Act”

Victor Thuronyi

Legislative drafting conventions are conservative, and it is traditional for a bill to have a long title which describes the purposes of the bill in technical detail, and then to include in the first section a short title which provides a more user friendly name. The short titles of Acts used to be fairly straightforward (e.g., the “Revenue Act of 1939”) but by the late 70s or early 80s, they tended to get cute and political, so now we have names like the “PATRIOT Act” and the “Affordable Care Act.”

The tax bill just passed by both houses of Congress introduces a new and somewhat unprecedented variation. There is no short title. There used to be: the “Tax Cuts and Jobs Act” (TCJA). However, at the last minute, it was stripped out of the bill because the Senate Parliamentarian ruled that it was extraneous to the bill’s purpose of affecting revenues, which is what a reconciliation bill is limited to. Hard to argue with that – the name of the law does not have an effect on revenues.

As a result, it would not be accurate to refer to this piece of legislation as the TCJA. Opponents have been referring to it as the Trump Tax Scam, and likely will continue to do so. It is probably too much to ask the media and tax advisors to refer to it that way, since that does seem overtly political. The “2017 Budget Reconciliation Act” perhaps would work (BRA for short). Several pieces of legislation enacted through reconciliation procedure have been called “Omnibus Budget Reconciliation Act of 19xx” so there is precedent. So calling it a Budget Reconciliation Act is a correct generic description in the absence of an official short title. I believe that calling it a tax reform act would also be political, since it falls far short of reform. Budget reconciliation is perhaps as neutral as one can get. An additional argument for this is that the bill contains not only tax provisions but also provisions on Alaska drilling, which are not tax related, but are related to budget reconciliation.

Upcoming Corrections May be More than Technical

Victor Thuronyi

In 1981, Congress passed a tax cut which, among other things, greatly accelerated deductions for investment in equipment. It soon became apparent that the 1981 Act was going to lose too much revenue. Republicans were in charge of the Senate and the White House. At that time, Republicans were by and large responsible, reasonable legislators. Bob Dole was chair of the Senate Finance Committee. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) was enacted, undoing many of the provisions of the 1981 legislation.

While it would be unrealistic to expect Republicans today to propose something similar to TEFRA, there is no reason Democrats should not do so. Democrats might start as soon as the tax bill passes (if it does) putting together legislation to repeal many of its problematic provisions, and perhaps include other reform measures that would raise revenue and improve the equity of the tax system. Such a piece of legislation should also include technical corrections to the Tax Cuts and Jobs Act (TCJA). Continue reading “Upcoming Corrections May be More than Technical” →

Potential Effects of Tax Reform on Work (Guest Posts @ On Labor Blog)

Shu-Yi Oei

Diane Ring and I were invited to write a guest post for the On Labor blog, to explain the potential effects of tax reform on work arrangements for a labor law audience. There was some interest in tax reform among labor law experts in light of the New York Times article that ran on December 9, titled “Tax Plans May Give Your Co-Worker a Better Deal Than You.”

We wrote a pair of posts, describing the potential effects of tax reform on work arrangements (including decisions to form a passthrough or to classify oneself as an independent contractor).

Something that struck us in our attempt to translate the policy issues for a non-tax legal audience was the sheer complexity of some of the new provisions in the new proposed provisions and the difficulty of discussing them with integrity–maintaining nuance, not oversimplifying or being hyperbolic, but still being understandable. As others have noted, the creation of the proposed tax legislation and the subsequent commentary on it have both happened very quickly. Our attempt to explain clearly the proposed legislative provisions to a non-tax legal audience and to discuss the policy issues at stake really highlighted for us the complexity of these proposed laws, the policy pitfalls, and the perils of operating at high speed.

In any case, here are the posts:

…The goal of this two-part blog post is to summarize for a labor law audience how the proposed tax legislation creates these outcomes and to highlight the important policy issues that observers and commentators might be concerned about. This Part 1 focuses on the statutory provisions, and Part 2 will discuss the key policy conversations that are taking place….

This post follows up on our prior post, which focused on the complex provisions of the proposed Senate tax bill. This post discusses some of the key concerns that have been expressed about the new tax bill. (Again, we focus here on the Senate version of the proposed legislation. The specifics of the analysis may change once we get the Conference version, though the broader policy and design questions are likely to persist.)

Crip the Code*

By Francine J. Lipman

*Attribution, respect and applause to #CriptheVote Disability Visibility Project community organizers and activists.

“[W]ork is a valued activity, both for individuals and society; and fulfills the need of an individual to be productive, promotes independence, enhances self-esteem, and allows for participation in the mainstream of life in America.” Rehabilitation Act of 1973
Continue reading “Crip the Code*” →

The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs

By: Diane Ring

Shu-Yi Oei and I have been tracking the recent tax reform developments as well as a couple of proposed tax bills that deal with worker classification, information reporting, and tax withholding. Based on a description prepared by the Joint Committee on Taxation, it looks like the Senate Tax Bill is going to include a new safe harbor provision guaranteeing worker classification as an independent contractor and will make changes to independent contractor withholding and information reporting. We posted our analysis of this proposal and its potentially serious implications on TaxProf Blog: The Senate Bill and the Battles Over Worker Classification.

Our main points:

1. Not just tax: This worker classification safe harbor is not just about tax, it will likely have impacts on employment/labor law outcomes and protections as well.

2. Not just gig workers: Based on the Joint Committee description, the proposal is not limited to gig economy workers —anyone who meets the safe harbor requirements (which are pretty easy to satisfy in many cases) can be classified as an independent contractor. This may have the effect of encouraging employers to push workers into work relationships that come within the safe harbor. Or, in certain cases, it may facilitate the strategic movement of higher-income workers into independent contractor status — see point 4 below.

Continue reading “The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs” →

Why We Need Rational Tax Discourse: A Progressive’s Lament

By Jennifer Bird-Pollan

I woke up this morning to a viral video of Rep. DelBene of Washington State questioning economist Thomas Barthold, Chief of Staff of the Joint Committee on Tax (who incidentally became Chief of Staff of the nonpartisan organization in 2009, when Democrat Charles Rangel, then chair of House Ways and Means Committee, praised him heartily).

The optics are a progressive’s dream come true: whip-smart Congresswoman shows up white-haired, straight-laced, white man by revealing how the proposed tax bill screws over individuals while protecting corporations. And all across social media sites progressives are eating it up. The thing is, while I share my friends’ progressive values, and I love a good younger-woman-shows-up-an-older-man video, the line of questioning in this exchange is entirely misguided and misleading, and all of the students in my basic income tax course can explain why.

Continue reading “Why We Need Rational Tax Discourse: A Progressive’s Lament” →

How SALT Deduction Repeal Promotes State Capture of Federal Charitable Contributions

By Manoj Viswanathan, Associate Professor of Law, UC Hastings College of the Law

The current version of the GOP tax bill dramatically limits the deductibility of state and local taxes. For individuals, the deduction for state and local income taxes is eliminated entirely and the deduction for state and local property taxes is limited to the first $10,000. [fn.1] Though much has been said about the proposal, there has been little discussion about how eliminating the state and local tax deduction dramatically incentivizes (1) states to solicit charitable contributions in exchange for state tax credits and (2) taxpayers to make these charitable contributions.

Consider a taxpayer donating $500 to a tax-exempt private school in Arizona. Assuming the taxpayer itemizes, this reduces the taxpayer’s federal taxable income by $500 as per Sections 170(c) and 67(b)(4). Under Arizona’s School Tax Credits for Individuals program, this donation also entitles the taxpayer to a dollar-for-dollar $500 credit against state income tax liability. By donating the $500, the taxpayer has both saved $500 in state tax liability and obtained a federal charitable contribution deduction of $500. Continue reading “How SALT Deduction Repeal Promotes State Capture of Federal Charitable Contributions” →

Paradise Papers: Day 2

By: Diane Ring

The most recent big financial data leak, dubbed the Paradise Papers, is now in full swing in the media. On Monday, Shu-Yi Oei blogged the initial release and its immediate takeaways (including the revelation that U.S. Commerce Secretary Wilbur Ross continued to hold investments in a shipping business that had business connections to key Russian figures). But each passing hour brings new information and individuals into the public spotlight – and in the process sheds light on how such information is likely to be used and what the media and the public seem to find most noteworthy.

So what did Day 2 bring? . . .

Continue reading “Paradise Papers: Day 2” →

Missing In Tax Reform: What About the Gas Tax?

By: David J. Herzig

I, and others, certainly will have plenty of articles about what is wrong and right about the current tax cuts proposals. But, as I read the plan, I became frustrated with a proposal that was missing – fixing the Highway Trust Fund.

Infrastructure spending is a priority of this administration. In the spring President Trump announced his $1 Trillion ($1,000,000,000,000) infrastructure plan. According to the administration, the plan will rebuild the nation’s roads, tunnels and bridges. By September, the administration was contemplating how to pay for this spending from private sector credits to dumping the burden on the states.

The most recent discussion of how to pay for the $1 Trillion spend happened during discussions with the House Ways and Means members. According to the Washington Post, “At the meeting Tuesday, Higgins said Trump indicated the administration instead would seek to pay for infrastructure upgrades through direct federal spending — either by paying for projects with new tax revenue or by taking on debt.”

I was hoping, I know naivety, that another option would be discussed – pay for the infrastructure spending like always via the Highway Trust Fund which generates revenues via the gasoline and diesel tax. Since there would be a budgetary shortfall, maybe we should actually increase or fix the tax.

History of Gas Tax Continue reading “Missing In Tax Reform: What About the Gas Tax?” →

Some Tax Reform Links and Tweets over at #BLPB

Ann Lipton at Business Law Profs Blog has assembled a nice collection of links to news commentary and tweets about the House tax bill.

Many of the links Ann has assembled look at the industry and deal-specific impacts of the tax bill…For example, potential effects on LBOs, sports stadium financing, future of stock options, higher education, and homebuilders. A nice complement to the more ubiquitous analyses of revenue effects, scoring, and distributional estimates we’re seeing on the tax prof/economists side. This information about who is likely to feel what effects gives us some insights into how the politics/political economy of this tax reform is likely to unfold going forward. Well worth a click.

The Johnson Amendment Under GOP Plan

By: David Herzig

Back in May, I continued to track President Trump’s promise to end the Johnson Amendment. At that time he promised during a National Prayer Breakfast that he would “get rid of and totally destroy” the Johnson Amendment and promised to issue an executive order (which he signed May 4).

But, a significant problem with legislating via Executive Order is that executives change and with the change so goes the Executive Orders. What works much better is legislation. Enter, the Tax Cuts and Job Act, where there is a proposal to end the Johnson Amendment.

What is the Johnson Amendment? In 1954, without explanation, Lyndon Johnson Continue reading “The Johnson Amendment Under GOP Plan” →

ABA Tax Section 5th Annual International Tax Enforcement and Controversy Conference (Washington, DC, Oct. 27, 2017)

By: Diane Ring

Yesterday my frequent co-author, Shu-Yi Oei, and I attended the ABA’s conference on “International Tax Enforcement and Controversy” in DC. The panels and discussion covered a range of interesting intersecting issues. These included: (1) the relationship among international organizations and bodies (such as the OECD, UN, World Bank, IMF and G20) in directing the shape of international tax law content and enforcement; (2) the place of developing countries in the evolving international tax system; (3) competing goals of finance ministers and tax ministers in various countries and the impact of that conflict on taxpayers; (4) the consequences of and responses to limited IRS resources; and (5) continuing benefits to enforcement from the Swiss Bank Program.

But probably the most significant theme that ran through the day’s discussion was the role of data, especially “big data”. . . .

Continue reading “ABA Tax Section 5th Annual International Tax Enforcement and Controversy Conference (Washington, DC, Oct. 27, 2017)” →

International Sharing Economy Conference: Day 2 Takeaways

By: Diane Ring

Yesterday I blogged about Day 1 of the international sharing economy conference, titled “Reshaping: Work in the Platform Economy.” Today the Conference resumed in Amsterdam and included a fascinating roundtable with representatives from some of the platform firms alongside some sharing economy workers. Each offered their experience/perspective on the sector, posed questions to each other, and took questions from the audience.

Not surprisingly, just as there are a range of business models and niches in the sector, there are also a variety of reasons why workers participate in and do platform work. What workers seek from the platforms (beyond good pay) may differ from worker to worker. For example, a sharing economy worker may desire contact with other workers, a sense of community, predictability, or worker dignity. Building on the Day 1 discussions, several themes emerged by the close of the Conference:

Continue reading “International Sharing Economy Conference: Day 2 Takeaways” →

International Sharing Economy Conference: Day 1 Takeaways

By: Diane Ring

Today the “Reshaping: Work in the Platform Economy” Conference got underway in Amsterdam. In contrast to many academic conferences, the explicit goal here is to bring together a truly wide array of actors in the sharing economy (policy makers, academics, actual gig workers, platform businesses, research institutes, and media) in a mixed format setting that includes academic presentations, panel presentations by gig workers, small group active round tables, and research-poster sessions. The international dimension, with participants and presenters from a variety of jurisdictions, contributes to the breadth of discussion.

I thought I would offer a few of my takeaways from day one: Continue reading “International Sharing Economy Conference: Day 1 Takeaways” →

Appealing Chamber of Commerce v. IRS?

By Sam Brunson

Last Friday the District Court for the Western District of Texas issued a decision in Chamber of Commerce v. IRS. In its decision, the court held that the IRS violated the Administrative Procedure Act in issuing Treas. Reg. § 1.7874-8T. The most interesting part of the case was that the Chamber got past the standing and Anti-Injunction Act hurdles; the substantive decision was that Congress didn’t eliminate the notice-and-comment requirement by expressly permitting time-limited temporary regulations. For a great substantive discussion of the case, take a look at Andy Grewal’s post on Notice & Comment.

The question on everybody’s mind now is, will the government appeal? On the one hand, as Andy explains, the court’s opinion is fairly summary; it may be right that the Anti-Injunction Act doesn’t bar the suit here, but it hasn’t done the work to make the holding bullet-proof.

On the other hand, the IRS takes a risk appealing to the Fifth Circuit. I’m not a close court-watcher, but I’ve heard talk that the Fifth Circuit is less than totally favorable to the IRS. Continue reading “Appealing Chamber of Commerce v. IRS?” →