Category Archives: Default

Work in progress

 I now have two completed article drafts that I have not as yet posted anywhere. But they will be available in due course. Each has a presumed publication site (outside of the usual law review rat race), and I would anticipate posting each on SSRN before it appears in print.

The first, tentatively entitled “Moralist” Versus “Scientist”: Stanley Surrey and the Public Intellectual Practice of Tax Policy, should be appearing in a book of essays concerning Surrey that Lawrence Zelenak and Ajay Mehrotra plan to release, in relation to their recently published edited volume of Surrey’s memoirs.

Its abstract goes something like this: “This essay takes it title from William F. Buckley’s 1974 observation that, while Surrey claimed to analyze tax policy issues with ‘scientific detachment,’ in fact he was a ‘tax moralist,’ whose ‘policy recommendations were based on a highly articulated set of personal value principles.’ Largely agreeing with Buckley as a descriptive matter, the essay considers what Surrey’s work both gained and lost intellectually by hewing so strongly to a set of career-long, deeply held beliefs. Along the way, the essay contrasts Surrey’s moral and intellectual certainty with the skepticism and resistance to grand system-building of Boris Bittker of Yale Law School, Surrey’s only mid-century rival for intellectual leadership of the tax legal academy.”

Although I myself am temperamentally closer to Bittker than Surrey, I would say that here I rather take Surrey’s side. The piece also discusses (although Surrey never did, at least in writing) the impact that anti-Semitism may have had on his thinking. (He was a prominent, at least ethnically Jewish, intellectual during am era of rampant, albeit not wholly dominant, mainstream American anti-Semitism.)

The second, a first draft of which I have just now completed, is entitled Would an Unapportioned U.S. Wealth Tax Be Constitutional, and What Does That Mean? It is ticketed for an economics journal, and aimed primarily at non-legal readers. I haven’t actually written the abstract yet. But a large part of the aim is to explain legal reasoning to non-lawyers who are used to substantive areas in which a conclusion may be objectively, and provably, either right or wrong. I also express my views on the current debate about wealth taxes, and about taxing rich people’s unrealized income, leaning heavily on others’ research as this is not an area into which I have delved extensively on my own. And I discuss the relevance to the analysis of the current Supreme Court’s right-wing ideological orientation.

Blurbs for my forthcoming book

 My new book, Bonfires of the American Dream in American Rhetoric, Literature, and Film, is coming out with Anthem Press in a couple of months. Here are the blurbs (names redacted for now, although they will appear in the volume when it comes out):

1.  “This is a wonderful book, a page-turner about popular American thinking about the American Dream. Shaviro shows how much of our cultural experience consists of economic fantasies, and how much in turn those fantasies shape our culture and our politics. Brilliant, accurate, surprising, and unfailingly interesting.” 
2. “These readings of film and literature are subtle, convincing, and fascinating. Further, since they are written in short sentences, in plain yet lively prose, with carefully explicit conclusions, they are wholly accessible to the lay reader. Their theme is of exceptional interest to us all, in our anxious perception that American democratic values may be on course for disintegration.” 
3. “A selective but fascinating tour of American popular culture (Atlas Shrugged, The Great Gatsby, It’s a Wonderful Life, The Wolf of Wall Street) that illuminates destructive discrepancies between American ideals and practices and bitter divisions between rival ideals since the founding. One wonders how America has survived—and if it should.” 

The Biden Administration’s new proposal to impose a minimum tax on billionaires

 I was asked yesterday by an NYT reporter (Peter Coy) to comment quickly on the constitutionality of the Biden Administration’s new proposal to impose a 20% minimum tax (including unrealized income) on the super-rich. His column (which quotes my paragraph 3 below) is available here.

Here is the full text of the comments I sent him. (This preceded publication of the Treasury’s Greenbook explanation yesterday afternoon.)

1) In legal terms, it appears to be clearly an income tax, not a wealth tax. This ought to protect it against constitutional challenge. As I understand it, people who meet the wealth threshold are taxed with respect to certain unrealized income. There are provisions in the existing tax code that tax unrealized income. And wealth as such is not being taxed. I don’t think this should be more controversial legally than having an asset test under which people can fail to meet the qualifications for receiving Medicaid.
2) That said, the current Supreme Court might very well strike it down. But in my view this would simply add to the concerns that many have already expressed about the Court’s descent from just “calling the balls and strikes” (as Chief Justice Roberts once put it) into operating like a loyal branch of the Republican Party and the conservative movement.
3) Even apart from the possibility that the Court would declare this a wealth tax even though it apparently isn’t, there have also been rising concerns that the Court will revive the basically defunct doctrine from Eisner v. Macomber, a case decided in 1920, to the effect that unrealized income cannot constitutionally be taxed. The legal academy predominantly agrees that this doctrine from the Macomber case is both obsolete (dating back at least to Helvering v. Bruun, a 1940 case) and wrong. It could also be highly damaging to both the equity and administrability of the existing federal income tax. But it is not clear whether the current Supreme Court majority would regard the infliction of such damage as a defect or as a virtue.
4) The proposal clearly raises issues pertaining to administrability, revenue and its likely economic effects that are subject to fair debate, and as to which there may be good arguments on both sides. I would need to know more about the proposal than I currently do in order to weigh in on that debate.
[Although not included in my comments to Mr. Coy, I also am generally not a huge fan of minimum tax structures, but I accept that there may be pressing political reasons for using them.]

How Defense Lawyer Help You In Criminal Proceedings

It is always better to hire a defense lawyer as soon as you are accused of any crime. There are several proceedings in a criminal case and in every proceeding, a good defense lawyer will play as a guardian of life for you. Here below is the level of proceeding given and how a good defense lawyer in Fort Bend will help you in each process. Let’s read further:

Arrest and Bookings 

You should not answer any question of police anywhere whether it is a crime scene, police station, or car until your county criminal defense lawyer in Fort Bend doesn’t arrive.  If you answer them then they will try to take most of the queries from you and find if there is any criminal recount against or not. Once any past charge or record is found then it might create a bad image and thus a problem for you in the proceedings.


As soon as the lawyer arrives he/she will try to dismiss the cases or charges against you then and there but unluckily or this doesn’t happen then the next processing is going to be an arraignment. The fort bend county criminal lawyer will ask for bail for you so that both of you can get sufficient time to prepare for the trial and free you from jail. 

Plea Bargaining

If you are sure that you have done nothing wrong then it is always better to go for trial instead of accepting that you had a criminal history earlier. Take time with your defense lawyer in Fort Bend, marijuana attorney harris county discuss everything with him, and try to plead to the prosecution that this case is not worth it and there is not enough evidence to prove the crime. 


Your case doesn’t need to be at the jury level, yes! It can be prevented. For that, you need to hire a good defense lawyer in Fort Bend who can prove your innocence and convince the judges to free you as this case is bogus. If he succeeds in showing the evidence as meager then you need not go for the jury and wait for the verdict.


Sentencing will be the final verdict if you are proved for the crime. Here, the work of your criminal defense attorney sugar land doesn’t end but increase as now he has to show the probation officers that even you have committed the crime you are still a responsible person, have good character, and how your important matters in four family and society as well do that you are sentenced for less time.


Your case doesn’t end here! You have the right to appeal if you think that you are protected for wrong and don’t feel satisfied with the jury’s decision. This should be done as soon as possible. Courts are filled with tons of cases, you need to tell your lawyers soon that you want them to file an appeal against the verdict.

Therefore, you should look at the experience and the knowledge of the defense lawyer that you are going to hire. This is the question of your life, the better lawyer will take you out of all these problems fast and then you can focus on your life completely and carefully!

Contact Us:

Lawrence Law Firm, PLLC
Address: 695 Industrial Blvd #100, Sugar Land, TX 77478
Phone: 832-356-4404

Tanking in professional sports as a Mirrleesean optimal tax problem

 In the current baseball lockout, the players are rightly focused on the problem of tanking, while the owners are oddly verging on indifferent to it. (Their proposed revision to the amateur draft rules is ludicrously short of the mark.)

Since clearly it is good for the sport (in terms of fan interest, likely revenues, and aesthetics) to limit the current level of tanking, I can only presume that the owners sufficiently value the downward pressure on salaries that tanking presumably creates to be happy to make things worse overall. This could either be a financial calculation about their share of the overall take, or (given how poisonous the labor relations in baseball appear to be) they may even value hurting the players financially as an end in itself. Or, perhaps they figure that the players care more about it than they do, so they can use an inadequate proposed response to extract leverage in the bargaining process.

To explain: Suppose a given team isn’t going to do well this year no matter what. But they hope to be better in the future, e.g., after their minor league prospects get a chance to develop. It makes perfect sense for the team to trade current value (e.g., an aging star who is still very good) for future value (e.g., promising minor leaguers). They are trying to trade current wins for future wins, because the latter are expected to have greater marginal value. After all, the aim isn’t just to maximize overall wins over time, but to make the playoffs and win championships.

That is not tanking, and there is probably no reason to limit it. The key is, under the problem as stated so far, the team still wants to win as much as possible this year – they just are willing to reallocate expected wins from the current to the future given how the marginal value of a win depends on its other wins for the same season.

A team that does this will still be trying to win every game it can this year (subject to the roster moves that serve its long-term goals). And its fans will still be rooting for it to win every game it can, even if they are realistic about how good this year can actually be. 

Then we get to the actual system, where draft position depends on your won-lost record, in the inverse. Now a bad team, even taking its roster as given, actually wants to lose each game it can (or should want to, from an incentives standpoint). Sophisticated fans also want it to lose and lose. (E.g., as a New York Jets fan, I was disappointed by their wins last year that took them out of the running for Trevor Lawrence.)

But when a team is rationally wanting to lose, and even if its fans are rationally on the same page, it diminishes the sport. Things are worse and less interesting all around. So, while I wanted the Jets lose and was disappointed by their (with typical stupidity and incompetence) stumbling into a couple of ill-needed wins, that simply reflected the current design. Wanting your team to lose under the current rules does not logically require wanting there to be rules under which you will want your team to lose.

On the other hand, there is a reason for having teams with worse won-loss records get higher draft positions. This helps promote long-term equality in how well different franchises do, which I would argue is good for each of these sports on multiple grounds.

How can these points both be true? Easy. It’s the classic tradeoff between incentive and distributional goals. The James Mirrlees optimal tax set-up involves a very similar problem. From a distributional standpoint, at least within the model we should 100% equalize after-tax-and-transfer resources. But this would destroy incentives to earn. So the optimal solution involves a tradeoff between the right distributional answer (100% earnings tax to fund a demogrant) and the right incentives answer (no earnings tax).

A sport like baseball, football, and basketball tracks right onto this model. No draft preference for the losing teams is bad on distributional grounds. But an overpowered draft preference for losing creates undesirable incentives to tank. 

Currently in both baseball and football, I get the sense that incentives to tank are overpowered. In baseball, it’s quite extreme, as the Astros and to a lesser extent Cubs success stories of almost a decade ago help to show. Basketball, by contrast, seems to have gotten it more into the right range. From a purely distributional standpoint, it is unfortunate and suboptimal that the very worst team in the league has only a relatively small chance at the #1 pick. But it does mean that teams aren’t battling so hard to be the worst, even when there is a consensus #1 pick out there, since the payoff is only a modest increase in one’s likelihood of landing that player. And to get yourself into the NBA draft lottery, you actually have to miss the playoffs. Given that the best non-playoff team has only a small chance of rising a great deal, teams are generally trying to win – and less prone to tanking – creating a better sport with better games and, I would think, greater fan interest (late in the year especially) than in the alternative.

Returning to baseball, the owners are proposing a lottery only for the three worst records. That simply doesn’t do enough, or even close to it, to address tanking. Baseball tends not to have as clear a standout #1 pick as basketball more often does, anyway. So the players are right – more of a lottery would be good for the sport, and if the owners disagree (as opposed to just pretending to do so for now) then it is because they are short-sighted at best and malevolent at worst.

NYU Tax Policy Colloquium on Auerbach, Tax Policy Design With Low Interest Rates

 Yesterday we had our final NYU Tax Policy Colloquium of the year, with Alan Auerbach to discuss his paper (coauthored by William Gale), Tax Policy Design With Low Interest Rates. 

Before getting to it, a couple of notes about next year. NYU Law School is now shifting permanently to 13-week semesters. Also, I will be repeating this year’s experiment of teaching the colloquium solo, and hence having public sessions only every other week. But next year, rather than having an extra public session, I will have an extra “private” session with just the enrolled students. So there will be just 6 public sessions. These will almost certainly still be on Tuesday afternoons, running from early September through the end of November.

The sessions will still be hybrid (i.e., in-person plus Zoom), unless the law school moves away from use of the Zoom component. But any institutional decision about that lies in the future. Also, while the sessions ran from 2:15 to 4:15 pm this year, I will move them back to something like 4 to 6 pm (depending on how the law school sets up its scheduling blocks), if the state of COVID permits small group dinners afterwards by that time.

Anyway, on to the very interesting paper.

1. Background / overview – The paper focuses on the implications of two important facts: (1) the absolute decline in recent years of interest rates on both safe assets and riskier assets, and (2) the decline of the former relative to the latter. So we are now living in a low interest rate environment, which appear likely to continue although of course one never knows for sure.

One could reasonably say that there have been 3 distinct eras in this sense, in the history of the US federal income tax: a low interest rate here from its inception until some time in the 1960s, then a high interest rate era from then through somewhere in the 1990s, and since then a low interest rate era. These eras have had an enormous effect on how people contemporaneously think about the issues. Thus, for example, in Era 1 Henry Simons regarded the deferral of unrealized gain as only a trivial concern (since the time value benefit from deferral was fairly low). Then in Era 2 William Andrews called the realization requirement the “Achilles heel of the income tax” (reflecting that the time value benefit from deferral was now quite high).

The paper also notes a third fact that initially seems in tension with low r (the term I will henceforth use here for the low-interest-rate phenomenon). This is the rise of capital income’s share of national income in official reports. All else equal, low r ought to lead to a lower, not higher, national income share for reported capital income. But the paper notes the main explanations in the literature for this seeming anomaly: (a) greater rents, (b) reduced worker power in wage-setting, (c) labor income’s being misreported as capital income (e.g., when it is earned through a passthrough entity), and (d) rising values for housing.

The paper then proceeds to discuss low r‘s implications in a number of areas:

2. Income versus consumption taxation – If these 2 systems differ in the abstract solely in how they treat the safe return (in theory, included by the former but excluded by the latter), then r‘s trending towards zero reduces the distinction’s significance.

That much is pretty intuitive, but the paper also discusses how low r affects the transition effect that a switch from income to consumption taxation (depending on how it is executed) can have. If we think of this as a one-time capital levy, then low r reduces its value to the government (which now will be earning low rather than high r), except insofar as it conveys a right to share in rents. But the latter right may actually gain value in a low-r environment, e.g., because future returns have greater present value (from a lower discount rate) if r is low rather than high, again all else equal.

I have questioned in past work the extent to which the capital levy is conceptually a proper part of the income to consumption tax transition. For example, one can make the switch in system without the capital levy, or else impose a capital levy without the switch in system. But there may be some tendency for the two to occur together, and its being a byproduct of “fundamental tax reform” may affect perceptions of whether it is likely to occur again.

3. Wealth taxation – The paper notes that the tax burden imposed by a wealth tax varies with r. Suppose, for example, that the wealth tax rate is in all cases 1%. If r is 5%, then this resembles a 20% capital income tax. But if r is 1%, it resembles a 100% capital income tax. Note that r has the potential to sink still lower, and perhaps even to turn negative.

A side implication here relates to Thomas Piketty’s claim that rising high-end inequality has been driven by r > g (the economy’s growth rate). Suppose r really is the driver of high-end inequality, as Piketty posits. Then seemingly low r should be solving the problem, all by itself. But if the problem is driven by rents and rising high-end labor income inequality, as I and many others find more plausible, then low r might even make things worse, e.g., by making rents more valuable as the discount rate drops.

Low r would weaken the case for a wealth tax on wholly separate grounds, if it indicated that the problem of high-end inequality was on a path to disappear on its own. But even absent that apparently false implication, the point about higher tax burdens (in capital income tax equivalent terms) if the wealth tax rate remains the same but r is low rather than high remains valid.

Why might one nonetheless favor a wealth tax, in an environment where r is low but high-end inequality is nonetheless remaining bad or even growing worse? Here are two quick thoughts:

a) In principle, one does not need a wealth tax to address the other causes if one can direct suitable tax instruments at rents, high-end labor income, rising but untaxed housing values, etc. For example,  a VAT or other such instrument for rents, a labor income tax that better addressed mislabeling, and a Henry George site value tax insofar as housing’s rise reflects site value appreciation, might all be better directed. But political or administrative limitations to the use of those instruments might make a wealth tax a suitable second-best fallback.

b) Suppose high-end wealth concentration has negative externalities. Then it might be the very thing we want to address, and a wealth tax might in that sense be rationalized in Pigouvian terms as hitting the very thing of interest. But suppose, as I discuss here, that the harms result, not from wealth itself but particular uses. Then one might instead want to tax or regulate, e.g., wealth’s political impact, its use in high-end consumption that generates “consumption cascades,” its transmission to heirs if this triggers dynasty problems, and so forth. But limitations to those efforts might nonetheless support a case for using a wealth tax as a fallback,

c) Wealth taxes are presumably levied annually. Even if they are then repealed, prior years’ revenues presumably won’t be rebated, given the limited use in practice of nominal retroactivity. By contrast, some instruments with similar effects at some margins (e.g., an estate or inheritance tax) may have deferred collection that increases the political risk of their being repealed first.

4. Capital gains deferral – The paper notes that low r reduces the economic value of deferral from the non-taxation of unrealized appreciation. So we might not need to worry nearly so much about deferral, except insofar as the basis step-up at death permits taxpayers to escape ever paying tax on the gain.

This is certainly true. But one unfortunate political byproduct of low r is that it raises the value of basis step-up at death to politically powerful taxpayers, thus perhaps making its repeal even more difficult than before.

Also, even if time value considerations no longer motivate deferral to anything like the same degree as in a high-r environment, consider deferral’s other great advantage to taxpayers. It has option value regarding the tax rate that will apply when one realizes the gain. Arguably, this has gone up (from the rising political volatility of statutory capital gains rates) even as r has gone down. So lock-in today might conceivably be as great as it ever was, even if its main cause now is option value rather than reducing the liability’s present value.

5. Investment incentives – As r declines, the present value difference between expensing and economic depreciation also declines. So timing-based tax preferences for one type of business outlay relative to another may likewise lose significance. But this does not necessarily imply any reduction in Congress’s ability to direct more favorable treatment to industries that it likes. It simply requires a shift in means, e.g., to the use of special tax rates for tax-favored industries.

6. Carbon taxes – Suppose one is setting the optimal carbon tax rate, based on a computation of the present value of the expected harms. If one uses market r rather than some sort of a social discount rate to make the PV computation, then low r greatly increases the present value of the harm and thus the level at which the carbon tax ought to be set.

I am on the side of those who believe that market r does not really tell one much (at least directly) about the proper social discount rate. For example, future generations’ interests may matter as much as ours even if they have not been born yet. But market r does affect the computation of tradeoffs.

Suppose, for example, that one thinks of the carbon tax as aimed at reducing present consumption, with the consequence that more will be invested, and hence greater consumption will be possible in the future. With low r, one needs to reduce consumption more today in order to increase it (commensurately to under high r) in the future.

One thought that occurred to me in this regard is that it implies a balanced budget view of the carbon tax. Suppose, however, that the government uses the carbon tax revenues to fund greater present consumption. Then it is possible that current consumption might not decline after all. But I gather that the models generally do employ a balanced-budget estimate, e.g., with carbon tax revenues merely replacing other taxes on business activity that did not distinguish between activities based on the degree to which they increase carbon emission.

Once one is thinking in these broad terms about consumption in different periods and by different age cohorts, the needed analysis inevitably broadens. Thus, consider the following 2 arguments:

–Because future generations will (we hope) be richer than we are, their marginal utility of consumption might be lower than ours. Hence, we should leave more of the costs to them than if this were not true.

–On the other hand, suppose that, by reason of continuing technological advances, future generations have consumption opportunities that we lack. An example might be the development of new medical technologies that, while very costly, can save and extend lives ,while also improving life quality by more effectively fighting chronic pain, lost physical capacity from illness, etc. Then future generations might actually have a higher marginal utility of consumption than ours, even if they are wealthier, by reason of their having these opportunities that we lack to do great things with extra resourcs. This would push towards our leaving less of the costs to them than if this were not true.

In sum, while market r is surely a relevant input to our thinking about climate change and the acceptance of greater immediate costs today in fighting it, its level is just one piece of a much larger set of issues. But that said, we of course know beyond any possible doubt that we are doing far too little today to address climate change. Indeed, current policy cannot seriously be explained without making ample room, not just for collective action problems and myopia, but also for deliberate climate change denialism that reflects the same depravity as that which we see in a major US political party’s decision to side vehemently with the COVID virus and against humanity.

NYU Tax Policy Colloquium on Herzfeld, Defining Taxes in Economics, Accounting and Law

 Yesterday was our penultimate NYU Tax Policy Colloquium session. The semester has certainly gone fast. Mindy Herzfeld presented the above paper, and here are some quick thoughts that I had in response:

1. Overview

In a number of areas, legal rules distinguish between “direct” and “indirect” taxes, and treat them quite differently. Often “direct tax” means income tax (and wealth tax if pertinent) in particular, while “indirect tax” describes VATs, excise taxes, and so forth. The paper looks at 4 distinct areas in which some version of this happens:

a) US Constitution – Direct taxes, unlike indirect taxes, must be apportioned. As we discussed earlier in the semester, in connection with our discussing this paper by Jake Brooks and David Gamage), in 1895 Pollock held (contradicting prior authority) that income taxes are direct taxes for this purpose, although the 16th Amendment then intervened with respect to the need for apportionment. 

b) International trade law – VATs, as indirect taxes, can exempt exports without violating WTO rules. Income taxes, by contrast, as direct taxes, have been held to violate the WTO if they have export subsidies. The US learned this the hard way by losing WTO litigation with respect to its DISC rules, then FSC, then ETI.

c) Foreign tax credits – Under US federal income tax law, foreign tax credits are allowed only for other income taxes (or certain levies that are deemed to be in lieu of income taxes) that look sufficiently like out income tax. Recent proposed regulations make it clear that digital services taxes (DSTs) are not creditable.

d) Financial accounting – Income taxes get detailed reporting in financial statements. Other taxes show up, at best, in a single line entry for “Other Taxes,” or may even be amalgamated with other above-the-line items without separate reporting – e.g., being included in the cost of goods sold.

2. Overall takeaways

I personally find “direct tax” vs. “indirect tax” too underspecified and formalistic to be of much use analytically. However, once we recognize that the distinction often cashes out as things like income taxes vs. things like VATs, one can start drawing meaningful contrasts. Consider the following polar distinctions between pure or typical income taxes, and pure or typical VATs and other consumption taxes.

a) Is the normal return to waiting being taxed? In a pure income tax the answer is yes; in a pure consumption tax (such as a VAT) the answer is no. In practice, however, things may be far more blurred. For example, the existing US income tax has provisions such as the realization requirement, expensing for various capital outlays, and lower capital gains than ordinary income rates, that may make it more consumption tax-like. For that matter, a consumption tax that uses the “traditional IRA” methodology (deduct savings today, tax them when used to fund consumption) may place a tax burden on saving if the later tax rate is higher than the earlier one.

b) Is the tax base domestic production, or domestic consumption? An income tax is typically origin-based, while VATs are generally destination-based. Thus, in theory the income tax reaches all domestic production, and a VAT all domestic consumption. Note, however, that in practice each may exempt or tax-favor a significant portion of its presumed base. Plus, actual income taxes may have destination-based features. Consider, for example, the use of sales-based formulary apportionment in US state income taxes, along with US source rules for royalties that rely on where the items is used.

c) Who is the tax “on”? – We commonly think of business income taxes as being “on” the business itself. But when they collect and remit VATs or retail sales taxes (RSTs), we think of these taxes as being “on” the consumer. This distinction, however, lies somewhere in between being an economic incidence theory and being based on the taxes’ formal features.

d) Administrative timing – Income taxes often allow deferral for economically accrued income (and for such income that has accrued for financial accounting purposes). They also often have deferred resolution of reporting and audit issues. These tend not to be issues (at least, for the latter, to the same degree) with respect to consumption taxes such as VATs.

The paper performs a service by laying out such issues as these across the various contexts. But a question of interest is what main takeaways one should derive from the comparisons.

One takeaway might be that problems arise when these distinctions prove to be less binary in practice than they are in theory. However, this view was more prominent in earlier drafts of the paper than it is in the current one.

3. U.S. constitutional law

Here “direct tax” has a distinctive historical meaning. The phrase was inserted into the Constitution’s text at a time when modern income taxes (even in the sense of what the US had during the Civil War) did not yet exist. Moreover, while in other areas (such as WTO law) it’s clear that an income tax is viewed as a direct tax, this apparently was not the case in US constitutional law until the Supreme Court in 1895, pursuant to its right-wing members’ ideological mission of combating socialism, so held in not incredibly good faith.

Today’s right-wing Supreme Court majority will undoubtedly likewise so hold, if an unapportioned wealth tax comes before them. But many who are more on the left disagree, and much of the dispute comes down to the question of how much precedential weight (if any) one should give Pollock.

In my view, however one comes out in the end, this is a rather hard issue to relate to the other three that the paper discusses. The distinguishing point is that it involves the interpretation of cryptic eighteenth century text that predated the modern context.

4. Trade

Again, the WTO bans export subsidies in direct taxes such as income taxes, but it allows indirect taxes (such as VATs) to tax imports and exempt exports.

The historical and political grounds for this distinction may pre-date the WTO, reflecting earlier stages such as the GATT. But in economic models, based on idealized models of an income tax on the one hand and a VAT on the other, it makes perfect sense.

Suppose that we have, on the one hand, an origin-based income tax that reaches all domestic production, and on the other hand a VAT that reaches all domestic consumption. Then an export subsidy in the income tax, equivalently with an import tariff, violates free trade principles and ought to be struck down under a global free trade agreement. By contrast, the VAT’s taxing the full value of imports and exempting exports does not violate free trade principles and should not be struck down. Without providing the full analysis here, it is simply tautologically correct under the assumed premises.

So what’s the problem with drawing these distinctions in WTO law? Insofar as the analysis is correct, US resentment of the decisions striking down DISC, FSC, and ETI, and associated griping about why the VATs (which everyone else has) do better, is simply misguided.

But in fact there are two big problems with accepting the binary distinction in current WTO law:

a) The models are too simple – As noted above, it’s not quite true that actual income taxes reach all domestic production and only that, whereas VATs reach all and only domestic consumption.

Starting with the income tax, suppose various income tax preferences either wholly or partially exempt production for the domestic market. (E.g., consider tax preferences for real estate). Then tax-favoring exports may not, on balance, cause the latter to be, in the aggregate, more favorably taxed than the former. Indeed, it’s conceivable that export subsidies might in practice push towards leveling the playing field.

Turning to the VAT, suppose (as is generally true of existing VATs) that it exempts or effectively excludes lots of domestic consumption, and that this tends mainly to benefit domestic production. Examples might include food, financial services, the informal economy, and small businesses that are exempted. Collecting the full VAT on imports, when home production often escapes being taxed, might end up being a bit tariff-like.

b) Hybrid instruments – Recent decades have seen the birth of the proposals that occupy space in between existing income taxes and VATs. For example, the Hall-Rabushka flat tax, David Bradford’s X-tax, and more recently the DBCFT put businesses on what is effectively a VAT plus wage deductions. Most legal experts view this as making them direct taxes for WTO purposes, with the consequence that they might be viewed as containing illegal export subsidies. But proponents say: Why should they be treated any differently than VATs, when the economics are the same? (Whether they are actually the same depends on how one analyzes the wage deduction, but here they note that it could be placed in a separate tax instrument from the VAT, avoiding any WTO violation even if the overall economics were now in fact entirely the same).

The conclusions I would reach are as follows. First, it’s a serious question whether the application of the binary distinction to actual income taxes and VATs is more problematic than the textbook economic analysis would suggest. This is partly an empirical question: how consequential are the real world deviations from the pure models?

As to the hybrid instruments, I (and most others) tend to accept the proponents’ argument that finding WTO violations for what are essentially formalistic reasons does not make a great deal of sense. But even if this is so, the rise of hybrid instruments may present real challenges for the binary WTO distinction that could get worse if and as further variants in the hybrid space emerge.

5. Foreign tax creditability

The US rules limiting foreign tax credits (FTCs) to income taxes in the US sense can lead to some odd results. For example:

–A Haig-Simons income tax, while a truer income tax than ours, would not be creditable because it would not use realization.

–Some years ago, Bolivia considered replacing its corporate income tax with a flat tax, but then backed off when it learned that this tax, unlike the instrument that it was replacing, would be non-creditable. Flat tax proponents responded, with understandable indignation, that it was hard to see why the US would seek to discourage such a tax change, rather than regarding it as an internal Bolivian decision that had no adverse impact on US interests. On the other hand, it is true that VATs (which a flat tax resembles, as it is simply a VAT plus wage deduction) are not creditable, a feature of the US rules that has not attracted significant complaint.

The big current issue in this area is the recently issued proposed regulations that make it clear that DSTs paid by US companies abroad do not get the FTC. They might already have been non-creditable because they are gross, not net, taxes, but the proposed regs also take aim at them for not following traditional international norms with respect to tax jurisdiction.

My own view about this is twofold. First, I think the US rules are logically wrong (or inconsistent) in thus distinguishing between DSTs and traditional source-based income taxes (or more specifically taxes in lieu thereof, such as gross withholding taxes). But second, the denial is at least arguably in the US national self-interest.

The logic supporting DST creditability – As Wei Cui has argued (and as I largely concurred here), multinationals often have limited marginal costs of using their digital platforms in a given country. Thus, a tax on their gross advertising revenues from exploiting a particular national consumer market may not be all that different from their net revenues. Indeed, a gross measure might even come closer in practice to capturing the true net than a purported net measure in which they got to play lots of fun and games.

Additionally, DSTs generally have a very traditional corporate income tax aim. They seek to impose some tax on income that the multinationals derive from tapping their consumer markets. This truly is domestic source income if one adopts a destination-based rather than an origin-based view of source (and actual income taxes do indeed do this to a degree), yet the companies have been able to avoid paying it because they don’t need physical presence, permanent establishments in the jurisdiction, etc. In that sense, they are in substance traditional / playing defense rather than offense, however novel their means of doing this may be. So there is a powerful logic in favor of the view that they are merely in lieu of traditional corporate income taxes, and hence as a matter of logical consistency ought to be creditable just like the traditional instruments that they, in effect, aim to revivify.

National welfare grounds for denying FTC creditability – But this is not to say that the US ought to credit them. As I have written in various formats (for example, here), it generally does not make sense, as a matter of unilateral national self-interest, to offer resident companies 100% reimbursement of their foreign taxes paid. And, while this can potentially make sense reciprocally or multilaterally (i.e., we’ll credit your income taxes if you credit ours), the US is not in the position of imposing DSTs that it would like other countries to credit.

More broadly, however, why should we generally limit creditability to foreign income taxes? As noted, for example, here, the policy reasons for doing this are, at best, far from obvious. Perhaps the best and only reason one can come up with is that this is the deal countries implicitly made – insofar as there ever was a deal to begin with. That is, the reciprocal practice in fact applied to income taxes and nothing else (albeit, not really to income taxes given that one could exempt foreign source income instead of crediting the source-based taxes).

6. Financial accounting

Whether or not financial accounting should provide for greater disclosure than it does with regard to non-income taxes, it is easy to understand why it requires the more extensive income tax disclosure than it does. Reason 1 is that deferral for taxable income relative to accounting income means that there are deferred liabilities to consider – not similarly an issue in the ordinary course for, say, VATs. Reason 2 is that income tax reporting positions that are uncertain to prevail may commonly linger unresolved for a significant time – again, less of an issue in other contexts (where disclosure may be required in special cases where there is such an issue).

While those two reasons are surely the operative ones in practice, there’s arguably a third reason why we might be glad that financial accounting provides as much information about companies’ income tax liabilities as it does (which is not to say that it currently provides enough, or does the analysis entirely right). Because the income tax planning space is so capacious, especially internationally, capital markets may derive valuable information from disclosure of how much in such taxes given companies are paying relative to their reported financial accounting income. For example, investors might like companies that are very aggressive. Or, they might alternatively fear that such companies are also aggressively managing reported earnings and/or engaging in managerial diversion of profits. Either way, they may learn more from reporting about income tax liability than from that concerning other taxes that are less planning-susceptible.

Is this binary distinction also susceptible to breaking down in practice? Maybe so. Had the US adopted the DBCFT in lieu of the existing corporate income tax, back when the House Republican leadership was briefly contemplating doing such a thing, this would have given the financial accounting authorities an interesting classification challenge. They were probably as relieved as anyone not to have to face it. But in any event, the issues that control how best to draw lines in financial accounting appear to me to be quite distinct from those that are most relevant, say, for WTO purposes.

In the end, therefore, these various disputes may all end up proceeding on separate tracks, even if to a degree they employ common language and concepts.

New drafts and publications

 I have just now posted on SSRN a copy of my short piece, “Tax Law, Inequality, and Redistribution: Recent and Possible Future Developments.” It’s available here, where you can also read the abstract.

On Monday, I will be posting on SSRN my recent Tax Notes publication, “Bittker’s Pendulum and the Taxation of Multinationals.”

I also today submitted to the publisher a final manuscript for my forthcoming book “Bonfires of the American Dream in American Rhetoric, Literature, and Film.” The next stage is copyediting, and the target date for publication is May 2022.

NYU Tax Policy Colloquium on Mason & Knoll, Unbundling Undue Burdens

 Yesterday at the colloquium, we discussed the above article, coauthored by Ruth Mason and Michael Knoll. In a welcome departure from COVID-era norms, they were actually both physically present for the event.

The article is the fruit of a LOT of research, including careful reading of a large number of Supreme Court cases on the dormant commerce clause (DCC), in both the tax and regulatory realms. This is one of those times when one says: I’m glad they did it, so I don’t have to. These cases are notoriously turgid, all over the place, and difficult to fit into a coherent framework. But they are also, I think, important.


Let me start with a bit of background shorthand from the paper, so that the terms noted here can simply be plugged in below.

Internal consistency – In the 2015 Supreme Court case of Maryland v. Wynne, the Supreme Court struck down a Maryland tax provision on DCC grounds as violating “internal consistency.” (Knoll and Mason wrote an amicus brief, urging analysis that the Court then adopted.) This term is useful but not immediately intuitive, and hence worth explaining briefly here.

Maryland’s income tax taxed residents at 3.2% percent on both Maryland and non-Maryland income. It provided no credit for non-Maryland state income taxes paid on non-Maryland income. It also taxed nonresidents on Maryland source income at 1.25%.

Maryland argued that this tax oughtn’t to present a DCC problem. After all, it taxed Maryland residents’ outside income at the same rate (not a higher rate) than their local income, and it taxed non-residents at a lower rate than residents. But the tax was struck down as discriminatory against interstate commerce because it violated internal consistency.

The question asked by internal consistency is whether, if each of say 2 states adopted the challenged rule, cross-border transactions between them would be disfavored relative to same-state. The answer here was YES. Suppose we have Maryland 1 and Maryland 2, each with the same rules. A resident of either state would pay tax at a 3.25% rate on in-state income. But income earned in the other state would face a 4.45% tax rate (3.2% under one’s own state’s residence-based tax, and 1.25% in the other state from the source-based tax, with no abatement given the lack of home-state credit).

Knoll and Mason, along with Alan Viard, have discussed elsewhere why internal consistency is a sound economic method for identifying provisions that are tariff-like in the sense of burdening cross-border activity relative to one-jurisdiction activity. Obviously, an overt tariff would violate internal consistency, since only cross-border trade would lead to its being incurred, but the aim here is to generalize the concern and the inquiry.

Note that the inquiry does not involve actually looking at what other jurisdictions do. Although I agree with Mason and Knoll that this is an appropriate mode of inquiry into both the DCC and international equivalents (e.g., the ECJ’s review of member tax provisions that are charged with violating the EU’s commitment to a single market), the point for now is just that it offers a powerful and convenient analytic.

Pike balancing – In Pike v. Bruce Church (1970), the Supreme Court struck down an Arizona rule requiring cantaloupes that were grown in-state to be boxed in-state. The claimed rationale for the rule related to letting consumers know that particular cantaloupes were from Arizona (thus, e.g., spreading awareness of their quality). But it violated the DCC by burdening companies from out-of-state that might have boxing facilities (and cantaloupes) from elsewhere. “Pike balancing” is the process of thus weighing benefits vs. the burden on interstate commerce where it is a single-state issue. That is, one is looking at the Arizona rule independently of the question of how it fits with other states’ rules.

Bibb balancing – In Bibb v. Navajo Freight Lines (1959), Illinois had required truckers that were using its roads to use curved mudflaps to protect the cars behind them, whereas other states were requiring straight mudflaps. The Supreme Court struck down the rule under the DCC. Here the issue involved “interaction burdens” rather than a single-state analysis. That is, there was nothing wrong with curved mudflaps as such. But given other states’ widespread adherence to a straight mudflaps requirement, trucks engaged in interstate commerce would have to stick on new mudflaps – kindly made available, for a fee, by local Illinois businesses – if they wished to use Illinois roads. Just as in Pike, the court balanced legitimate in-state benefits (e.g., suppose the curved mudflaps worked better, at least under Illinois’ road conditions) against the burden to interstate commerce. But Bibb balancing differs from Pike balancing because it not only requires examining a broader set of questions regarding how different states’ regulations interact with each other, but also (if a DCC violation is found) may in effect require the courts to pick between alternative rules and cement one of the choices in place simply because it has become the prevalent one. This has various downsides, such as its potentially impeding the emergence of new and improved approaches. But if one doesn’t do it, one is inviting states to play the kind of destructive game that Illinois may conceivably have been engaged in here.

Green margarine rules – This term isn’t in the paper, but I find it expositionally useful. Wisconsin is a big dairy state, and hence a butter producer. Margarine predominantly comes from outside the state. For many years, Wisconsin forbade the in-state sale of yellow margarine. (I remember hearing decades ago from my parents that Wisconsin required margarine to be green, which apparently is not true – it could be white under the rule. But let’s say green because it is more vivid.)

A green-margarine rule in a dairy state looks on its face like it is simply there to help consumers tell apart margarine and butter. But in context it may be sneaky protectionism, aimed at reducing consumer demand for the imported relative to the local product because yellow is the color that looks right to them in this context.

It seems to me that the green-margarine rule ought to have been challenged on DCC grounds, but if it was the challenge apparently failed, and there is no well-known precedent. So let’s just call this type of effort at disguised protectionism a “green margarine rule.” Whether we group a challenge to it under Pike or Bibb (an issue that I discuss below), it seems clear that there is a DCC issue that may need, under existing precedent (but for good reason) require the court to balance the burden to interstate commerce against the legitimate (i.e., non-protectionist) benefits.


The DCC can reasonably be viewed as reflecting an underlying set of views about both economics and politics. These are worth describing briefly because they affect not only its merits (some Supreme Court members, and of greater intellectual interest also some commentators, want to get rid of it), but also its interpretation.

In brief, the DCC empowers the federal courts to strike down state rules (whether taxes or other regulation) that are protectionist. The classic protectionist rule is an overt tariff, but a DCC inquiry also looks at provisions that are challenged as being tariff-like.

The DCC thus applies a bit selectively with regard to the totality of distortions that might arise from a given state’s having distinctive taxes or other rules. Other problems may be addressed by Congress, exercising its legislative powers under the active commerce clause (ACC), but are thought to lie outside the proper scope of DCC review.

For example, whenever two states have different tax rules in any way, this can violate locational neutrality. For example, if State A has a lower income tax rate than State B, this creates an incentive to earn income in A rather than B. But while Congress may address locational neutrality problems under the ACC, the courts don’t do so under the DCC.

Likewise, there may be spillovers such as that resulting from a race to the bottom. An example is tax competition – if one views it as normatively creating a race to the bottom, rather than (as I discuss below) to the top. Again, Congress can address this under the ACC, but courts don’t under the DCC.

Another issue is tax exportation (actual or attempted), but to things from getting too longwinded I will leave it out here.

Economics – There is a long tradition, prominent (for example) in the work of Adam Smith, to the effects that tariffs are generally inefficient. Indeed, unless a given jurisdiction has the requisite market power, it is likely to make itself worse-off on balance, not just the people in other jurisdictions, by reason of imposing them. Moreover, while it’s true that “optimal tariffs” (where one has the requisite market power) can benefit the jurisdiction that imposes them, there is still likely to be deadweight loss from the standpoint of all jurisdictions – suggesting that they should all agree to forgo even optimal tariffs if they are making this choice behind the veil.

If we accept the generalization that tariffs are bad, and what’s more view the federal courts under the DCC as well-situated to police the field, then it may make sense to hand them this power. But locational neutrality has far less definite policy implications, once one accepts that it nonetheless makes sense to allow inter-jurisdictional rule variation. So relegating this to the ACC and legislative choice makes sense.

Likewise, the only difference between a “bad” race to the bottom and a “good” race to the top is how one views the suggested equilibrium normatively. Consider the classic case of Delaware’s preeminence with respect to corporate law. This was once viewed as a race to the bottom, allowing managers to exploit the shareholders by reason of incorporating in a place where the governance rules are lax. Then it came to be viewed as a race to the top, on the ground that capital markets work well enough to incentivize good place of incorporation choices by founders and managers. Thus, the question of whether the race to Delaware should be addressed at the federal level depends on one’s view of how well capital markets are functioning – an issue completely distinct from that of the spillover process as between the states, when Delaware succeeds in capturing this business. Once again, the implication is that this is a legislative policy choice, and hence reasonably placed within the reach of the national legislature under the ACC, but not handed to federal courts under the DCC.

Politics – Why is there even a problem with tariffs (other than optimal tariffs), if sub-federal jurisdictions don’t generally benefit from imposing them? So why even bother with higher-level oversight. The standard answer is that jurisdictions are prone to enacting tariffs, and other tariff-like protectionist provisions, due to interest group politics. For example, concentrated producer groups and their lobbyists prevail legislatively over diffuse consumer interests.

So there is also a political theory under which the states might actually want federal oversight, including via the federal courts and the DCC, in order to help protect them against themselves. But this theory is about protectionism in particular. In other scenarios, even if the states are willing to concede (and indeed have conceded) ACC powers, they may not want to make it federal oversight as automatic and widespread as the DCC may make it with respect to protectionism. Plus, again, the optimal remedy isn’t so clear with respect to locational neutrality and race to the bottom vs. the top scenarios.


Again, both internal consistency as in Wynne, and Pike balancing, involve a single-state analysis. One is looking at a given state’s rules in isolation, not at how different states’ rules interact as in Bibb.

Under existing doctrine, endorsed by Knoll and Mason, internal consistency is distinctively relevant to tax cases, and results in per se finding of commerce clause violation – no Pike balancing needed. This potentially raises issues of tax exceptionalism that I discuss below. But herewith are a few efforts to poke at the distinctiveness, notwithstanding that (for reasons I’ll omit here) I am generally comfortable with this state of the doctrine.

Internal consistency in form, but arguably not in substance – Suppose a state with a retail sales tax imposes a use tax rate (for purchases of out-of-state) that exceeds the sales tax rate on sales made in-state. On its face, this is a clear violation of internal consistency, and indeed it could scarcely look any more tariff-like. But suppose that widespread avoidance of the use tax meant that this was, in the aggregate, moving towards the overall equalization of effective tax rates on in-state vs. in-bound sales. Would this potentially offer a defense, at least requiring the court to evaluate the underlying merits instead of striking down the higher nominal levy per se? If so, do we enter the realm of Pike balancing?

No internal consistency violation in form, but arguably yes in substance – Recall the Wisconsin “green margarine rule.” On its face, this has nothing to do with internal consistency. But suppose we consider this requirement equivalent to an explicit tax – and Wisconsin indeed had a margarine tax, on top of the green margarine rule – and generalized it as “Impose a special tax on mainly non-local businesses that compete with mainly local businesses” – then one could view it as an internal consistency violation. Is this a helpful perspective, at least in the quest for intellectually consistent rules across the board?

Can internal consistency apply beyond tax? – In the green margarine example right above, I considered both calling the rule in effect a tax, and stating it in a more general form (which the state imposing it would of course dispute). But what if we look at single-state analyses of other standard examples from outside the tax realm. Thus, recall Pike, in which, as discussed above, Arizona tried to require in-state boxing of Arizona cantaloupes. 

Suppose that all states required in-state boxing of in-state cantaloupes. Then you have 2 cantaloupe-growing states, Arizona and California. Any one-state cantaloupe grower can enjoy the efficiencies (if there on balance) of boxing everything at the same plant. But any two-state cantaloupe grower needs to have two boxing plants, one in each state. This might conceivably create competitive disadvantage for multi-state cantaloupe growers.

I run through this simply as a way of getting a better handle on how internal consistency fits into the broader doctrine. It may not matter substantively whether or not we call this an internal consistency violation – although it might conceivably aid us in identifying suspicious cases – unless the identification meant that there would be a per se violation in lieu of Pike balancing. So one has to consider the case for tax exceptionalism, which again I will get to shortly.


Again, Bibb balancing pertains to interaction problems, which involve a disparity between states’ rules, rather than how any one of them operates in isolation. And again, the problem with Illinois’ rule requiring curved mudflaps was that it imposed a cost on out-of-state or multi-state trucks given that straight mudflaps were generally required elsewhere. The paper argues that, while Bibb balancing may be necessary given the ingenuity of legislators (or lobbyists) in particular states – along with the barriers to Congressional action and the difficulty of proving malign intent even if one deems that a suitable focus in principle – it has also proven especially tricky in practice, including because it may effectively place an existing prevalent rule beyond the reach of evolutionary change that might conceivably have been for the better.

The paper usefully distinguishes 3 scenarios regarding how such evolution, if permitted to go forward, might systematically unfold. One is the Delaware scenario of race to the bottom (or to the top, depending on one’s normative view regarding the end state).

A second is the California scenario, so named because California is a big enough player, given the size of its economy, to prescribe rules that companies will then decide to follow nationwide. (E.g., if it has tougher emission rules for cars than the federal government, companies may decide that it’s cheapest simply to follow those rules nationwide.)

A third is the Balkans scenario, a term that the paper uses in the spirit of “balkanization”), in which markets get segmented by reason of incompatible regulatory rules. A classic instance of this problem was the instance in which the ECJ had to deal with Germany’s requiring that liqueurs have at least 25% alcohol, while France required that they not have more than 20% alcohol. The ECJ solved the problem here, arguably Solomonically, by invoking a rule called mutual recognition, under which each state had to allow the sale of liqueurs that met either rule.

DCC issues arise under the Balkans scenario, leaving the Delaware and California scenarios purely for the federal legislative power under the ACC. But one complication here is that it won’t always be so clear which scenario presents itself most forcefully.

To illustrate, consider Moorman Mfg. Co. v. Bair, the 1978 Supreme Court case that, by a 5-4 vote, upheld Iowa’s rule (which was novel at the time) replacing the standard 3-factor formula (sales, property, and payroll) for determining in-state income with a purely sales-based formula. Consider the following 3 scenarios that, based on knowledge at the time, might conceivably have transpired:

Scenario 1 – The prior near-consensus in favor of the 3-factor formula is required by each state’s choosing whatever formula worked for it best. E.g., Iowa reportedly chose sales because it was a “market state” in which there wasn’t much corporate property or payroll. Suppose that similarly self-interested choices were made by “property states” and “payroll states.” National businesses might then have found themselves including more than 100% of their national income in one state or another, disfavoring them relative to one-state businesses. This would systematically disfavor interstate commerce, relative to one-state activity, and arguably would have supported intervention under the DCC even if it doesn’t quite achieve Balkans levels of disjuncture. But this is not in fact what happened.

Scenario 2 – The diversity between states’ formulas ends up imposing tariff-like extra administrative and compliance burdens on national businesses. Again, this is not what happened, and it was perhaps never a realistic threat, but again we’d be in DCC territory. This resembles the 1967 National Bellas Hess case, overturned by Quill and then Wayfair, which held at the time that use tax compliance was simply too administratively burdensome to be demanded of national businesses. I recall the case saying that there were 50,000 separate sales tax districts, including mosquito abatement districts. And in a pre-computer age this simply imposed too much burden. It is plausible that National Bellas Hess was a reasonable decision when issued, and only became unreasonable later as the rise of computer technology and the Internet both (a) triggered the growth of interstate commerce, and (b) made compliance far cheaper than it had previously been.’

Again, this scenario might in principle have supported a DCC challenge to what Iowa was doing in Moorman, but even at the time probably was not factually plausible.

Scenario 3 – What actually happened is that states learned of the advantages that they would enjoy, via tax competition, from using sales-only allocation. States didn’t want to discourage the local placement of property and payroll, and sales were far less tax-elastic insofar as this depended on where the consumers lived. So there was a race to the bottom towards sales-only apportionment – AKA a race to the top, if you happen to view this as a better approach than use of the 3-factor formula. Good or bad, it does seem to lie outside the DCC’s concerns.


Lately and with good reason, tax folk have tended to be more self-conscious than previously about tax exceptionalism. This is the view that tax cases are unique and distinctive, and hence should be treated differently than non-tax cases. (By using the word “cases,” I don’t mean to restrict myself to DCC cases or other litigation. It arises as an issue in a variety of realms.)

The paper early on criticizes doctrinal instances of what it calls “unjustified tax exceptionalism,” such as the 4-factor DCC test for tax cases under Complete Auto Transit v. Brady (1977). But it later explains why tax exceptionalism may be justified with respect to treating internal consistency violations as per se adversely dispositive in tax cases, but not non-tax cases. This is distinct from requiring Pike balancing.

It makes clear that it is being substantive rather than formalistic in how it defines tax cases for this purpose. For example, a Pigovian tax would be treated like regulation in terms of DCC review. Likewise, issues of administrative burden from complying with a tax (as in my hypothetical Scenario 2 for Moorman) would face balancing. But when it’s just a matter of getting revenue, the paper argues that money is money. So a state’s interest in getting tax revenues in a particular manner that violates internal consistency is trivial, since they can get the same $$ some other way.

In response, one could argue that not all tax revenue is the same, in that states may have particular reasons for wanting to raise $$ in one way rather than another. But agreed, in a case such as Maryland v. Wynne, once one has shown through internal consistency that the provision does indeed have the tariff-like effect (whether intended or not and actualized or not) of burdening cross-border activity relative to one-state activity), the state’s legitimate interest in getting the $$ exactly this way, rather than in some other way, might reasonably be viewed as fairly trivial (making the formal occurrence or not of balancing rather a non-event). Whereas, under, say, the Pike or green margarine scenarios, it may be more necessary to look in detail at the state interests, even if they end up being deemed trivial.