All posts by Janet Byrd

Should Fox News get to deduct the damages it is paying to Dominion?

There has been a bit of (naive?) outrage out there about the fact that Fox News will presumably get to deduct the $787 million of damages that it has agreed to pay Dominion, thus greatly reducing the after-tax cost (and in effect sharing it with US taxpayers, although it is true that on the other side Dominion will presumably be including and paying tax on its recovery).

From a standard tax policy standpoint, there is actually nothing wrong with this – indeed, it is the correct answer. As I discussed with a Lever News journalist here:

“If your business model is to tell lies so that you’ll get viewers and have lots of advertising revenues, then, odious though this business model may be, the tax system’s job is to tax you on the profits that you actually make from it,” Daniel Shaviro, a professor of tax law at NYU, told The Lever. “And those profits are indeed reduced when you are successfully sued by the victims of your malicious falsehoods.”

But there is another side to it. As suggested by the public outcry when Dominion settled instead of forcing a trial, Fox’s malign behavior was and remains grossly under-deterred. Dominion was able to collect for the private harm imposed on its business by Fox’s willingness to spew lies into the public realm, but no one gets to collect for the vast public harm that it malignantly inflicted. My own personal view is that the damages for that, if they could be measured and collected, would be many times greater, in billions of dollars, than Fox’s entire business is worth.

But there is no law in place allowing such collection for the public harm. And, no such law would be politically feasible (e.g., to deter Fox in the future) even if it were easy to design and clearly constitutional. And, even if such a law were easy to design, it would risk being held unconstitutional, even by an honest Supreme Court. And, holding such a law unconstitutional might even be the best thing, all told, given the possibility that such a provision could be misused to deter free speech that has greater value than Fox’s simply poisoning the public realm by lying for profit.

From that standpoint, if one could deny Fox deductions for the damage award – this time, and in the Smartmatic case, and in future instances where it was contemplating defaming private parties while also poisoning the public realm – it would seemingly be a good thing. Only, how could one design such a rule to avoid the political and constitutional problems, and to avoid over-deterring potential torts where there is no negative externality? Maybe it can’t be done, but even so there is reason to regret (even if just idly) that Fox must remain under-deterred.

All hands on deck

 The Supreme Court has asked for amicus briefs regarding whether it should grant certiorari in the case of Moore v. United States, in which taxpayers challenged the constitutionality of the transition tax in the 2017 tax act regarding undistributed earnings from controlled foreign corporations (which were taxed at a low rate in combination with the repeal of deferral, under which they would have been taxable upon repatriation).

The taxpayers’ challenge is based on the view that Eisner v. Macomber (1920) makes realization  a constitutional prerequisite to taxing income (without apportionment between the states) under the Sixteenth Amendment. The Ninth Circuit rejected this challenge, based on extensive post-Macomber precedents, and held forthrightly that realization is not a constitutional prerequisite to taxing income. 

Macomber has never been expressly overruled by the Supreme Court, but by 1940 (in Helvering v. Bruun) it was very openly refusing to follow it outside of its particular facts, which related to stock dividends. There has probably been no time since, until the right-wing takeover of the court accelerated in the last few years, when there would have been any chance of the Court’s relying on it to block a provision such as the 2017 transition tax. But Chief Justice Roberts cited Macomber as apparently still good precedent in his 2012 opinion upholding Obamacare (National Federation of Independent Business v. Sebelius) – a sly nudge that (to mix my metaphors) may now be on the verge of bearing fruit.

It is difficult to exaggerate how destructive a Supreme Court decision reviving Macomber‘s constitutionalized realization requirement could potentially be. In addition to ruling out efforts to tax unrealized appreciation (e.g., through new legislation such as that proposed by Senator Wyden), it might also conceivably, depending on how broadly it was worded, make impossible the taxation of original issue discount (OID) bond interest until the due date. This, in turn, could unleash tax sheltering that might cost the federal government billions of dollars in revenue, most or all of it from the upper income brackets. That prospect, however, may actually be enticing to several members of the Supreme Court, who appear to want to blow things up.

Not that it would necessarily make much of a difference, but responsible members of the legal tax academy ought to weigh in on this issue if the Supreme Court grants certiorari in Moore v. Harper.

ChatGPT strikes (out) again

 Here is what ChatGPT thinks my novel, Getting It, is about. Not a word of this (attribution of authorship aside) is correct:

“Getting It” is a book written by Daniel Shaviro, a tax law professor at NYU School of Law. The book explores the current state of U.S. tax policy and suggests reforms that could improve the fairness and effectiveness of the tax system.

Shaviro argues that the U.S. tax system is overly complex, inefficient, and inequitable, and that it fails to achieve its stated goals of raising revenue and promoting economic growth. He proposes a number of reforms that would simplify the tax code, reduce tax evasion and avoidance, and ensure that the wealthy pay their fair share.

Some of the specific proposals in the book include replacing the income tax with a consumption tax, increasing taxes on the wealthy and corporations, and reforming the estate tax. Overall, the book is a thought-provoking and accessible exploration of one of the most important and contentious issues in American public policy.

By contrast, here is what the book description at Amazon says.:

“Young D.C. lawyer Bill Doberman, who fancies himself the James Bond of the Potomac. is a liar, a conniver, a phony, a hypocrite, and a cad, and those are his good points. But will they be enough to win him the much desired booby prize of partnership at Ashby & Cinders?

My “Law, Literature, and Social Science” seminar

I have posted on SSRN a syllabus and the weekly discussion questions for the seminar, “Law, Literature, and Social Science,” that I am now teaching for the second time. Conceptualizing and executing it took a TON of work, and I feel it’s been a successful class both times. Also, I feel that it’s fairly novel, albeit perhaps idiosyncratic. Given the unlikelihood that I could either publish this work conventionally or monetize it any way, I thought I’d share it, in the hope that others might find it of interest. It’s available here.

Talk on Bonfires of the American Dream, part 2

 As I noted in the prior blog post, yesterday, at an NYU Law and Culture Colloquium, I discussed the Great Gatsby chapter from my recent book, Bonfires of the American Dream. That post offered broader background concerning the project; this one will briefly discuss the Gatsby chapter.

Again as personal background, I have always liked The Great Gatsby (which I first read in high school, but I think on my own rather than for class), but I don’t quite love it. It’s obviously well-written, and I like its darkness, unhappiness, sense of estrangement, noir elements, and use of a very passive, and possibly quite unreliable, narrator. But I have never personally resonated enormously either to its poetry (e.g., the famous closing paragraph about boats beating against the current), or to the somewhat heavy-handed use of symbolism that makes high school English teachers so happy (e.g., Dr. T.J. Eckleberg).

Obviously, Gatsby has been written about a lot. In finding my own discussion space for it, I was interested in its changing cultural reception over time. As the chapter discusses, it was a flop when it came out, forgotten and seemingly buried by the time F. Scott Fitzgerald died. Then it rose from the dead, starting in about 1945, becoming perhaps the Great American Novel for a while, although more recently its star has dimmed, at least among elite literary critics. It may be modernist, but it isn’t very post-modern.

In the 1950s, the literary critics who embraced it appeared to be especially entranced by its arguably supporting what I call a hipster critique of American culture – suggesting that, while upward mobility and social / economic success might be within reach for the aspiring, the pursuit thereof was empty, alienating, and unsatisfying. Many regarded it as a devastating indictment, the grounds for which weren’t entirely clear, of the American Dream. Given underlying elements of social and self-satisfaction among these critics, it functioned as pessimism for optimists.

In today’s much angrier and more pessimistic era, that has become pretty thin gruel as a critique of American culture. Hence my suggestion that Gatsby now operates more as voyeurism for pessimists than as pessimism for optimists – as in the Baz Luhrmann movie version.

The underlying ambiguity between those two responses is baked in the novel itself. But rather than more fully review my Gatsby chapter here, I’ll just mention a couple of related themes. The first is the relationship between conscious authorial intent and what we might learn for sociological purposes from reading literature. The second is whether what we might choose to call “great” literature offers deeper or different insights than, say, really bad literature.

On conscious authorial intent, Gatsby offers an interesting picture. There is something intentionally didactic going on, relating to Fitzgerald’s autobiographically rooted anxieties about the contemporary American upper class. That’s probably why Tom Buchanan is the least nuanced of the major characters in the book. (Daisy Buchanan is a bit more nuanced, in relation to her travails as a woman.) We also get Fitzgerald’s personal pet theory about why high-end inequality matters, which is that, unless you are born rich, you will lack self-confidence. This theory falls fairly far short in illuminating all of the issues that are raised by modern high-end inequality. Especially, since we are now past the era of the leisure class and of status’s primary reliance on birth, and living in an era where even the dynastically wealthy claim to be self-made.

But the book is at its best when it gets away from Fitzgerald the would-be social thinker, and isn’t just reflecting the beliefs that he could have put into an op-ed (had these existed at the time). An example is the Gatsby parties, which Gatsby says are full of “interesting people … who do interesting things.” Fitzgerald is showing us the rise of celebrity culture alongside the old hierarchy of birth and inherited wealth.

The book is also great on consumerism and ennui. Plus, its disturbing elements of racism (along with mockery of overly intense racism) and of anti-Semitism make for interesting, if unsettling, reading today.

If you wanted to defend the proposition that great literature has more to offer sociologically than bad literature, Gatsby arguably suggests that the former, by escaping in interesting ways the author’s conscious or didactic beliefs, can become especially revelatory.

But I’m not sure that I would defend the proposition that you learn more sociologically from great than bad literature.

I do mainly focus my writing in this area on great and very good works (by my estimation) – although the John Galt speech in Atlas Shrugged is an exception, and possibly the single worst thing that I have ever read. (Although, I haven’t read Mein Kampf and don’t plan to.) But my main reason for doing so is simply that it’s more enjoyable to spend your time in good company than bad.

Talk on Bonfires of the American Dream, part 1

 Yesterday, at an NYU Law and Culture Colloquium, I discussed the Great Gatsby chapter from my recent book, Bonfires of the American Dream. This book has been falling between the cracks a bit, although here is its Kirkus review – which is a shame, certainly from my personal standpoint but also because I think it’s a good read (as well as short) that has important things to say. This may be true of a lot of books that fall between the cracks (as there are just so many of them), but a lot of people out there might connect with it, if only they knew about it and gave it a chance. Maybe including you?

Anyway, here is a considerably fleshed-out version of notes that I used to make brief remarks at the start of the session:

Instead of presenting my Gatsby chapter as if it were a separate paper, let me give some context for the book it’s in, as well as the genre in my recent work of which it is a part.

Going back 40+ years, when I was in college (at Princeton) I majored in history, and (despite focusing on American history) participated in the European Culture Studies (ECS) program, then run by Carl Schorske. The central ECS idea was to treat cultural products – from literature, the visual arts, philosophy, music, etc. – as objects for historical study. I wrote my senior thesis on some very interesting diaries that were left behind by the eighteenth century Virginia planter (and slaveholder) William Byrd II, which gave a remarkably intimate portrait of his life.

For most of my college career I was planning to go to graduate school in history and, while not enormously methodologically self-conscious, I had a fairly clear idea of the sort of work that I might do. But on a glorious spring day near the end of my junior year, as I struggled to find materials for a term paper on the medieval town, it suddenly occurred to me that I didn’t want to do this with my life. (This reflected a combination of my understanding the already dire career prospects for history PhDs, with a comprehension that scouring library shelves was not really what I wanted for myself.) This left me with the obvious default plan for that era: I’ll go to law school like 90% of my friends! 

After law school I entered tax practice, and subsequently tax law & policy in academia, because I almost accidentally stumbled into learning about its advantages in both realms.

Academic tax law features a mix between “just law,” math/quantitative, social scientist, and (to a lesser degree) humanities approaches. My work has been mainly in the social scientist camp, with an occasional side helping of humanities.

I’ve enjoyed working in that space, and I still do. But it was perhaps under-utilizing my humanities side.

I’ve always had strong arts interests, extending to books, film/TV, and popular music, and also once wrote a satirical novel about scoundrels competing with each other at a law firm that is also, I think, a fun short read (and only $4.03 at Amazon!). But about 10 years ago I saw an opportunity to expand my academic use of the humanities side to my interests.

With the rise of high-end inequality as a tax (and other) policy problem, I noticed that the dominant public economics frame treated declining marginal utility as the only reason for being concerned about it. I agree about the relevance of declining marginal utility, but believe that there are also other concerns, relating to hierarchy, status competition, etcetera. Those problems call for a broader sociological approach, which might be enlightened by (among other things) studying cultural products ECS-style.

Then came Piketty’s famous publication of Capital in the 21st Century. I got on the bandwagon early enough to invite him (before his dance card was filled) to a symposium discussing the book at NYU Law School, and i co-authored one of the papers at the conference.

Piketty got a lot of popular mileage in the book from his discussing famous novels by Austen and Balzac. His use of them was a bit limited by my ECS standards, but he did make some interesting points about them.

I noticed, however, that he got Balzac wrong! He treats Le Pere Goriot as showing the utter futility of using personal effort to get rich, as opposed to relying on inheritance. Yet Goriot’s closest thing to a lead character is Eugene de Rastignac, who is surely the preeminent arriviste or social climber in all of French literature. Rastignac learns in the novel (from the famous Vautrin speech) that there is simply no point to his seeking wealth as a lawyer. The returns would simply be too small, deferred, and uncertain. But he doesn’t give up on social climbing through personal effort – rather, he learns that a better career choice is that of social parasite (e.g., going to salons, seducing rich women who can help him, trying to inveigle or finagle their husbands, etc.).

That paper plus my ECS training and my sense that the legal and economics literatures about high-end inequality were missing something led to a book, Literature and Inequality, that features 9 studies of classic French, British, and American novels from the nineeteenth through the early twentieth century. That was going to be Part 1, and then Part 2 would hypothetically feature 9 more recent British and American works (e.g., Waugh, Wodehouse, GatsbyBonfire of the Vanities, and several others TBD).

But then I realized that I didn’t want to write Part 2. Instead, I’d do something much shorter, focused on the US setting where I feel more sure-footed, and shifting the emphasis to factors that might help to explain the rise of Trump and American fascism.

In particular, I was interested in the role played by the tensions between two deeply rooted American cultural ideals: egalitarianism (at least for white males) and what I call market meritocracy, or the view that everyone has a fair chance, and that market outcomes decide who is worthy and who is not. (Suggesting that the “winners” deserve everything that the market gives them, while the “losers” deserve nothing but hatred and scorn.)

The book has three main substantive chapters (leaving aside the Introduction and Conclusion). The first discusses the John Galt speech in Ayn Rand’s Atlas Shrugged, and compares it to a much less malignant late 19th century entry in the so-called success literature genre, Russell Conwell’s Acres of Diamonds speech, which he gave to paying audience thousands of times between 1870 and 1925, thereby earning enough moolah to found Temple University.

The last chapter compares 2 movies that have a surprising amount in common, apart from the pervasive cultural influences of their very different eras: Frank Capra’s It’s a Wonderful Life from 1946, and Martin Scorsese’s The Wolf of Wall Street from 2013.

The middle chapter, which I presented at the workshop and will recapitulate briefly in a follow-up blog post to this one, discusses The Great Gatsby.

Fiction recommendation

 I just finished Olivia Manning’s Levant Trilogy, a follow-up to her Balkan Trilogy. These are 6 novels (about 1,500 pages total) set during World War II, and following her own experiences as a young Englishwoman who follows her newly-married husband (whom she barely knows) from England to his posting as a university lecturer in Bucharest in 1939. The fortunes of war (which is also the name generally given to the sextet) chase them first to Athens and then to Cairo. Her husband Guy is the single worst husband I have ever seen in fiction, if you eliminate all those who are angry, violent, abusive, dangerous, unfaithful, etcetera. There is also a broader rotating cast, composed of numerous other mainly English characters whose foibles and vanities are generally at center stage.

Despite the drama surrounding the War’s events, these are quiet, observant social novels full of character observation, almost like country house fiction except set amid violent chaos, and generally lacking major dramatic events other than those on the broader canvas imposed by history. It seems like they ought to be boring, but instead I found them enthralling throughout. (I didn’t read them straight through, however, but over some months with other books in between.)

Highly recommended, although I can’t guarantee that everyone will find them as compelling as I did.

New paper posted on SSRN

I have just posted on SSRN a paper that I wrote last year, entitled “Would an Unapportioned U.S. Federal Wealth Tax Be Constitutional, and What Does That Mean?”

It’s available here, and the abstract is as follows:

To assess the constitutionality of an unapportioned federal wealth tax, and/or of a federal income tax provision reaching wealthy taxpayers’ unrealized gains, one needs an underlying framework for making judgments about legal claims. While no such framework can be entirely specified, at least to general agreement, this does not support nihilistically rejecting all comparative judgments about better versus worse, or more versus less convincing, instances of legal analysis.
While it appears nearly certain that the Supreme Court‘s current right-wing majority would strike down an unapportioned federal wealth tax, the “correct” answer to this constitutional question cannot be proven to general agreement. I myself would disagree with such a holding by the Court. An important variable in resolving the issue for oneself is how much continuing precedential weight one should give to Pollock v. Farmers’ Loan & Trust Co. – a case that itself blatantly disrespected precedent, but that did so more than a century ago, and that (on the other hand) some argue has already ceased to be good law. The principle of respecting precedent both has instrumental value and has been long (if fitfully) honored within the American legal system, but all agree that its weight is not absolute.
An unapportioned minimum income tax on the wealthiest Americans that included in income their unrealized capital gains would likely be constitutional under currently prevalent legal doctrine. It is true, however, that Eisner v. Macomber (1920), if it were held to remain good law beyond its immediate facts, would support holding it unconstitutional. The prospect that the current Supreme Court’s six right-wingers will decide to revive Macomber provides only one reason for suspecting that they might strike down such a provision, perhaps while also launching a broader constitutional war against central tenets of the current regime for taxing wealthy individuals and capital income. However, it lies beyond the power of conventional legal analysis to predict either what form such a war would take, or on what terms it might end up being resolved.

Just the other day at the NYU-UCLA Tax Conference

At the NYU-UCLA Tax Conference last week, an economist was giving a talk about the Biden Administration’s budget proposal to tax billionaires on unrealized appreciation. This provision moves beyond the Wyden mark-to-market tax, making it somewhat more of a prepayment provision for future tax liabilities that might be more conventionally realized.

In the question period, I opined that the 6 right-wingers on the Supreme Court would probably strike it down, relying on Eisner v. Macomber‘s statement (formally unreversed, although widely viewed as having been repudiated by the Court more than 80 years ago), to the effect that realization is a mandated constitutional prerequisite for treating something as “income.” I suggested that the six of them just wouldn’t care about the prepayment issue, because why bother with it when you have the votes.

“I’m not a lawyer …” he started to answer.

“Neither are they” was my reply.

Final NYU Tax Policy Colloquium for 2022: Ariel Jurow Kleiman’s Fiscal Impoverishment by Taxation

Yesterday (November 29) we had our last session of the year. Ariel Jurow Kleiman presented a forthcoming law review article, Impoverishment by Taxation, along with a related (but broader) book proposal.

While I don’t discuss the sessions as such here because they’re off the record, just as a quick word I have high aspirations for them that can be challenging to fulfill entirely in practice. Basically I want to combine a stimulating class that will deeply engage the students with a cutting-edge academic seminar that will enlighten and inform all of the participants (myself and the author included). I felt that this year went well, for reasons that had as much to do with the students, and with other participants in the public sessions, as with anything that I or even the authors brought to the table. 

The sessions have evolved over the years (and indeed decades), reflecting the thing’s evolution as an institution but also I suppose my changing goals. I used to be a lot more combative, but the more senior you are the less appropriate this is. (Plus I have grown more agnostic about a lot of things.) I think of myself as trying now to be late-career Chris Paul rather than any-stage Russell Westbrook. This requires a deep, strong, effective, and multi-talented team if it is to succeed, but luckily that is what we’ve had.

Doing it solo the last couple of years is the other big change. While I’ve enjoyed and benefited from working with all of my co-teachers, doing it this way does leave more air in the room for others to breathe (if I may mangle the metaphor a bit), along with more time for reflection as a byproduct of our having a new paper every 2 weeks rather than weekly. It also allows students to take the class without making as big a sacrifice of other course needs.

Anyway, on to the paper. In addition to being itself interesting, it also helped round out the semester a bit. Generally the papers all concerned inequality. We had looked at high-end economic inequality, and at gender and racial inequality, so it was very appropriate to shift the focus this time to low-end economic inequality.

This week’s paper discusses fiscal impoverishment (FI), which arises when people are made poor (or poorer) by paying federal and/or state taxes in excess of the antipoverty public benefits that they receive. FI arises, despite the US fiscal system’s overall progressivity, for 3 main reasons:

1) Our fiscal system is not very generous.

2) It imposes a number of first-dollar taxes (i.e., without a zero bracket or its effective equivalent), such as payroll taxes and retail sales taxes.

3) Its coverage on the transfer side is spotty and gap-filled, for reasons that appear to combine the deliberate with the inadvertent. Hence, within a heterogeneous population of low-income individuals and households, some inevitably miss out, even on such benefits as there are.

Fiscal Impoverishment (FI) as a Measure

Proposed fiscal measures can serve one or both of two purposes: the purely analytical or descriptive, and the rhetorical purpose of helping to motivate policy change. This reflects the “scientist versus moralist” choice in one’s scholarship that I discussed here with regard to Stanley Surrey and Boris Bittker.

Thus, consider tax expenditure analysis. Although the distinction it addresses actually lies between distributional and allocative objectives, rather than between “taxes” and “spending” as such, it partly aims (and serves) to provide what is simply a more accurate accounting of what (and in a sense “how much”) the government is doing. But it also served, at least in Stanley Surrey’s hands, as effectively a hit list of provisions that should be eliminated from the income tax code even if they were permitted to re-emerge somewhere else.

FI likewise combines science with enlightened advocacy. The science part is well-illustrated by the old joke about the statistician who says: “My head is in a block of ice and my feet are on fire. On average, I’m very comfortable.”

It’s a joke because we know that the statistician is wrong. The distribution of outside temperatures for various body parts matters, not just the average.

By analogy, suppose that the fiscal system’s average effects, considered for all income levels together, are progressive, inequality-reducing, and poverty-reducing. Taking that as given, it’s worse if we have the accountant’s problem than if we don’t. For example, suppose that people whose market income lies right at the poverty line gain on average 5% after considering both taxes and transfers. It would be better if each of them gained exactly 5% than if (a) half of them lost 50% of their market income, while (b) the other half of them gained 60%. Declining marginal utility alone would tend to support this normative conclusion, and there may be other grounds, too.

FI is not, however, aimed at simply measuring dispersion, even at the bottom of the income scale in particular. It adds two further premises, each subject to challenge from the standpoint of pure “science,” albeit each defensible from the standpoint of enlightened advocacy. They are as follows:

        1) The poverty line is (or should be treated as) discontinuously important. Say that the fiscal system’s net effect is to reduce your market income by $1. FI counts this as a violation if the loss pushes you below (or further below) the poverty line, but not if it pushes you from $1 above the poverty line right to it. However, while this claimed discontinuity is open to challenge from a “scientific” standpoint, it allows the FI measure to have a dramatic and salient takeaway that might help to motivate desirable policy changes.

        2) Market income is normatively meaningful as a baseline. FI addresses, not where one stands relative to the poverty line after considering taxes and transfers, but how that placement compares to where one stood considering only market income. This seemingly invites the usual Murphy-Nagel critique of market income as lacking normative relevance given (for example) markets’ dependence on government’s existence and role. Plus FI looks separately just at the fiscal system, and combines the effects of what one might consider separate sovereigns given our federal form of government. But these “scientific” objections do not prevent FI from offering useful and salient information about how fiscal instruments that we can conceptualize separately and change as we like are affecting things.

The paper’s discussion of FI also raises a host of interesting measurement issues. It relies on the federal poverty line, based not on a conviction that it is canonically correct but rather as a placeholder that one could separately adjust or replace if one liked. I do think that the measure ought to be regionally adjusted for price-level differences, whether or not actual fiscal rules should be so adjusted, given that it does indeed cost more (say) in NYC than Biloxi to pay for food, rent, heating, etcetera. And there are also measurement issues relating, e.g., to Medicaid benefits and to the accrual during one’s working years of expected Social Security retirement benefits. Without seeking to cover all that here, the paper offers cogent arguments for including, say, SNAP benefits that help one to afford the needed calories but not, say, the value to a given individual of national defense protection or a nice park across the street.

As an extension, the paper’s arguments might also support measuring what I call regulatory impoverishment. Suppose, for example, that a minimum wage increase leads to an increase in low-wage workers’ aggregate income, but that this comes (as it might not) at the price of net job loss. Or suppose that, while there is no net job loss, the increase causes some of the jobs to shift from people in low-income households to (say) high school and college students in high-income households. This is an example of information that would be highly relevant to a policy assessment, and that aggregated information misses.

BROADER POLICY IMPLICATIONS 

        1) How could fiscal impoverishment be reduced? – The most obvious and straightforward approach would be to make the fiscal system more generous towards those at the bottom. However, stating it that way would miss the main takeaway of FI analysis, which pertains to how the fiscal system treats some low-income individuals and households much less favorably than others, leading to adverse effects on some in the face of heterogeneity. 

The main groups that the paper identifies as being disadvantaged on the transfer side today, and thus facing most of the FI, are as follows: the undocumented, childless households, the unemployed, and those whose use of extended kinship relationships (e.g., with cousins or neighbors supplying unpaid care) prevents them from qualifying under child-focused rules. For each of those groups, there are indeed arguments out there for disfavoring them. These arguments are worth noting, in terms of the underlying substantive debate that FI encourages, even though I happen to disagree with each of them.

The undocumented: Here we obviously face issues of immigration policy, which, even in the absence of white supremacist racism, would require analyzing how broadly (or not) we want to limit the fiscal system’s generosity, along with access to US wage levels, to those who arrive or stay without being authorized.

Childless households – While I have thought for a long time that US fiscal rules (e.g., for the EITC) are often insufficiently generous to childless households, there are clearly reasons for providing additional benefits to households that have minor children, whose welfare is therefore at stake.

The unemployed – Here we get into such longstanding debates as those concerning TANF work requirements, the UBI vs. EITC approaches, and so forth. I tend not to favor conditioning benefits on having a job (it’s like providing reverse insurance for the winners of the job search lottery), but there are arguments for doing so, pertaining e.g. to claims about both externalities and internalities.

Extended kinship relationships – It seems clearly anomalous, and perhaps “unintended,” for various childcare benefits to be denied to people because their use of extended networks to provide childcare (in lieu of just the parents plus paid providers) causes them to fall outside the eligibility rules for particular benefits. But there is an underlying administrative issue of needing to direct benefits to the right people (i.e., those who would be most likely to use them on the kids’ behalf). So there may be design challenges to think through here even if current law unnecessarily falls short.

    2) Relationship to support for universal basic income (UBI)

From the standpoint of avoiding FI that results from households’ heterogeneity across various benefit design dimensions, the obvious answer would seem to be providing a generally available and unconditional UBI. So if FI troubles you that’s a point in favor of UBI, and if you favor UBI that may help to make FI seem a salient and relevant measure.

But even if one supports UBI (which is my own inclination), I wouldn’t be overly driven by FI as such in determining what the benefit level should be. That might instead be better driven by the standard policy tradeoffs regarding the distributional and incentive effects that it would have if it were set (and funded) at various alternative levels.

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This wraps up my blogposts on the NYU Tax Policy Colloquium for fall 2022. But we’ll be back, with blogposts from me after each public session, at the same time and place next year.