The Tax Prof blog, which posted a link to the event, also gave this summary of the paper, taken from its conclusion. With correction of a typo, here goes:
“Bad as the passthrough rules look by themselves, in some ways they look even worse when paired with the lower corporate rate and absence of significant safeguards against using corporations as tax shelters. From now on, anyone who is thinking of running a business or being an independent contractor, and for whom the dollar stakes are large enough, is going to have to think seriously about both the C corporation and passthrough alternatives. Tax advisors will need to be consulted, and large bills run up (although the tax savings may more than pay for these). Had the Congressional Republicans in 2017 expressly set out to make the tax system a far more intrusive nuisance and headache (albeit, in the guise of tax planning opportunities) than it already was, they could hardly have done ‘better’ than they did.
“The passthrough rules ought to be repealed as soon as possible. Even if this were to happen, however, the dark message that they send about contempt at high levels of government for basic principles of competence, transparency, and fair governance will continue to linger.”
Yes, I realize that sounds a bit harsh. And believe me, it doesn’t get less harsh-sounding (if anything, more so) when one reads the rest of the paper. But I believe the harshness is justifiable in context.
Someone at the session asked me if I anticipated that tax sheltering problems, coming out of the passthrough rules and the failure to enact safeguards around misuse of the 21% corporate rate to shelter labor income, would be as bad as those we have experienced in the past. I answered: It’s hard to tell, not necessarily given possible practical obstacles to maximum conceivable exploitation. But on the other hand it’s going to be the Wild West with no sheriff, given IRS funding levels. But even if it’s not as bad as the earlier tax shelter eras, I said, what sets this apart is its being so gratuitously self-inflicted by Congress, rather than (like the tax shelter eras of the 1970s-1980s and late 1990s to early 2000s) the byproduct of taxpayers initiating the rampant exploitation of soft spots in the law that had arisen for far less egregious reasons.
Just to show that I am not congenitally angry, even regarding the 2017 act, here is what I have to say, in an early draft of the introduction to my new work-in-progress regarding the 2017 act’s international tax rules:
“In general, I find two main grounds for judging the new provisions leniently. First, prior law was so bad that, even if the provisions, as they stand, have not improved U.S. international tax law – a low bar indeed – they could be tweaked to do so. Second, at least some of the provisions respond meaningfully, and not entirely unreasonably, to important tradeoffs in international tax policy that lack clear answers. On the other hand, the provisions have a number of significant design flaws, along with poorly worked out implementation details, that may reflect their highly rushed enactment with only minimal vetting and public feedback. Thus, how positively one should view them depends in part on whether one is assessing them exactly as they now are, or at a level of Platonic abstraction that permits one to discern underlying purposes that might have been (and perhaps might still be) more artfully accomplished.”