The ABA Tax Section has now posted (the slides for the panel on rising wealth inequality on which I’ll be a panelist this coming Friday. Available here. Slides #31-36 are mine.
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Another milepost towards the publication of my literature book
I have just completed reviewing the page proofs of my literature book, aka Literature and Inequality: Nine Perspectives from the Napoleonic Era Through the First Gilded Age. This is my last input in the process, which should now move smoothly (or even inexorably) towards fulfillment of the projected April 1 publication date.
The book is now also referenced here on the Anthem Press website, although the page hasn’t fully been fleshed out yet, pending further progress in the publication process.
The page proofs indicate that the book is 226 pages, including the bibliography and index (210 pages without them), so not at all a behemoth – rather, I am hoping, a smooth and enjoyable read that doesn’t require advance familiarity with all of the books that I discuss.
On April 13, we’ll be having a discussion of the book at an NYU Law School event. Branko Milanovic and Kenji Yoshino have graciously volunteered their services as commentators. Branko is a leading economic historian of inequality who also has written about the use of literature in developing sociological insights regarding the topic, and Kenji is a leading law and literature scholar (among other bows in his quiver). So I am very much looking forward to their comments.
Upcoming panel discussion
This coming Friday (January 31), I will be appearing on a panel at the ABA Tax Section’s Annual Meeting, in Boca Raton, FL. The session will take place from 8:30 to 10 am, and its title is “How Should the US Tax System Respond to the Growing Wealth Gap: The Continuing Debate over Wealth Taxes and Other Tax Proposals to Narrow the Gap Between Rich and Poor.” My fellow panelists are Roger Royse, Linda Beale, and Richard Prisinzano.
Among other things, we’ll be discussing recent data concerning wealth inequality, and such proposals to address it as wealth taxation (a la the proposal by Senator Warren), expanded mark-to-market taxation (a la the proposal by Senator Wyden), Ed Kleinbard’s business enterprise income tax (BEIT) proposal, and raising income &/or estate & gift tax rates.
Another newly posted item
Tax Jotwell has just, as of today, posted my annual short feature there. It’s entitled “Writing Books Versus Journal Articles,” but after brief ruminations on that general topic I turn to the real matter at hand, which is that of offering brief but extremely well-deserved praise to (1) Kimberly Clausing’s Open: The Progressive Case for Free Trade, Immigration, and Global Capital, and (2) William Gale’s Fiscal Therapy: Curing America’s Debt Addiction and Investing in the Future.
You can find the text of my brief Jotwell write-up here.
Back in the US of A
Earlier today, I returned to NYC from Asia, where I spent 3 days in Singapore, followed by 6 in Bali near Ubud.
While in Singapore, I gave the first (I believe to be annual, but by a rotating list of people) Sat Pal Khattar Visiting Professor of Tax Law Lecture. The slides for this talk are available here. You also can find the most recent draft of the paper here.
The side trip to Bali was purely for vacation and relaxation. Ubud is getting crazily over-built and over-grown (hence, risking some of the charm I remember from a trip there 30 years ago), but the resort that we stayed at, about a half hour’s drive outside of the town proper, was exceptionally delightful.
Soon to be on the road again
This being a sabbatical semester, I will soon be on the road again, albeit not traveling as far or for as long as I did most recently. On Friday next week (January 31), I’ll be speaking at the ABA Tax Section Annual Meeting in Boca Raton, FL. (You may notice a broader personal theme here – getting out of New York, in favor of warmer climes, during peak winter.)
More specifically, I’ll be among the members of a Tax Policy and Simplification Committee Panel at the ABA Tax Section meeting that has the current working title: “How Should the US Tax System Respond to the Growing Wealth Gap?: The Continuing Debate Over Wealth Taxes and Other Tax Proposals to Narrow the Gap Between Rich and Poor.”
Many thanks to Pamela Fuller for doing lots of hard work in getting this panel organized, although she won’t be appearing on it. My co-panelists will be Roger Royse, Linda Beale, and Richard Prisinzano.
We’re dividing up a set of related topics within the panel’s broader themes. For example, while others will take the lead in discussing such topics as recent empirical evidence regarding wealth inequality, Senator Warren’s wealth tax proposal, and Senator Wyden’s mark-to-market proposal for taxing capital gains upon accrual) I will do so with respect to (1) Edward Kleinbard’s dual BEIT proposal – an important income tax reform option that is often mysteriously under-appreciated, and (2) proposals to raise significantly the top rates in income and/or estate and gift taxes.
Off to Singapore
Tomorrow I head east – from New York City to Singapore, or 9,521 miles as the crow flies (if it was a unusually fit and vigorous crow). Also a time zone change of 13 hours. While there, I will be giving a talk on my digital services tax paper, as well as lingering for a few days (some of it in Bali near Ubud). I’ll post the slides, which are fuller than previously-posted versions, as I’ll be speaking for longer, on my return.
The event will be the first Sat Pal Khattar Professorial Lecture at the National University of Singapore (NUS) Law School. This is a venue that I know fairly well, as on three occasions I taught mini-courses there (in connection with the now-defunct NYU@NUS program).
The lecture is named for a generous leading Singaporean with a tax background, whom I look forward to meeting while there. I believe that Sat Pal Khattar Professorial Lectures on tax issues are meant to become a regular, perhaps even annual, event at the NUS Law School.
A poster for the event can be found here.
Year-end activities
Yay for the holiday season; it’s about time. This has been a tough last couple of months in some ways, for me as for our country.
In terms of my professional activities, my forthcoming book, LITERATURE AND INEQUALITY: Nine Perspectives from the Napoleonic Era Through the First Gilded Age, remains on-track for April 2020 publication by the Anthem Press. Copy-editing has begun.
In mid-January, I’ll be traveling to Singapore to give a lecture at the NUS Faculty of Law as Sat Pal Khattar Visiting Professor of Tax Law. It will concern my work in progress, Digital Services Taxes and the Broader Shift From Determining the Source of Income to Taxing Location-Specific Rents. A final version of the piece will then appear in the Singapore Journal of Legal Studies. The lecture time is long enough that I’m preparing, and will post here, significantly longer and fuller slides than I have posted upon giving briefer talks concerning the piece.
My new article in process is well underway, albeit perhaps ready for seasonal hiatus. Its current working title is What Are Minimum Taxes, and Why Might One Favor or Disfavor Them? It will discuss, inter alia, what one might call the “Mortimer Adler” problem with using minimum taxes, how minimum taxes might be defined (and why minimum tax-ness might matter), and it will discuss in this regard institutional manifestations that include at least the following:
(1) the AMT,
(2) standalone versus minimum tax structure for taxing public companies’ reported financial statement income, with reference to the 1987-1989 AMT preference that was based on book income,
(3) the BEAT,
(4) GILTI (along with worldwide/foreign tax credit systems that are structurally similar, albeit typically not called minimum taxes if they tax foreign source income at the full domestic rate), and
(5) other global minimum taxes, such as the OECD’s Pillar Two proposal.
Taxing corporate book income: minimum tax vs. add-on tax
Vice President Biden has just proposed a 15% corporate minimum tax based on companies’ financial statement accounting income (aka, book income) above a large threshold. By contrast, Senator Warren is proposing a 7% add-on or additional tax on book income above the threshold. The difference is that the latter would be payable in all events, while the former would be payable only to the extent in excess of regular taxable income (albeit, with multi-year smoothing provisions).
Leaving aside perhaps the biggest issue here, which pertains to taxing book income or not, the contrast between them raises the classic old issue of minimum taxes versus separate add-on taxes. I have begin writing about this issue more generally (including in my analysis the US experience with the individual and corporate AMTS, as well as global minimum taxes such as GILTI and the OECD Pillar Two Globe proposal. But it also goes way back for me. The first article I published after entering academe in 1987 was entitled something like “Perception, Reality, and Strategy: The New Alternative Minimum Tax.” I published it in Taxes Magazine so I could get it out fast, although in style and substance it was more like a Tax Law Review article.
I am not, however, writing the new article within a time frame that’s aimed at participating in the current Democratic campaign debate. I’m more interested in getting a general analysis out there that I think is presently lacking, although lots of experts have a decent grasp on some of the main points.
Final NYU Tax Policy Colloquium session for fall 2019
Yesterday at the colloquium, after marking the completion of my 25th year co-running the thing, we discussed Josh Blank’s and Ari Glogower’s Progressive Tax Procedure. This is still an early draft of an ambitious project, hence plenty of opportunities to discuss the way forward. (Not presented when we discuss, as sometimes happens, recently published papers.)
Each of the three words in the title could be interrogated a bit. However, the basic idea is that procedural rules in the federal income tax – for example, concerning statutes of limitation, penalty rules, and standards of care in taking reporting positions – might vary with the income or wealth of the taxpayer. Audit rates are also in the ballpark, although to what extent within scope remains unclear. The clearest contrast, although here I seem to have begun interrogating the third word in the title, lies between procedural and “substantive “ rules – establishing, for example the tax rate and base.
“Progressive” raises numerous definitional issues, but the broader category might be called “means-based.” Suppose you want average or effective or statutory or marginal rates to rise with the taxpayer’s income. Then you favor income tax progressivity as defined or measured one way or another, but the broader point is that you favor a positive relationship between the rate of particular interest to you and the taxpayer’s overall income (which is a measure of the taxpayer’s means).
In that example, we also know how to define a regressive tax system. The rate of chosen interest goes south rather than north, with a perfectly flat tax standing in between them as the benchmark of a means-neutral system so far as these aspects are defined. (Of course, in a flat rate tax system, those with higher income still pay more overall tax, but the rate that one is focusing on, is distinct from overall liability, doesn’t vary with the measure of means.)
“Progressive tax procedure” therefore implies that item one is looking at grow less favorable in some way as the overall measure of the taxpayer’s means increases. Illustrative examples that the paper is at least willing to contemplate might involve, for example, having penalty rates go up as a percentage of the underpaid tax liability, statutes of limitation increase, or standards of taxpayer care to avoid penalties grow more demanding, as the taxpayer’s income (or, say, wealth, if a measure of that was available) increases.
Having audit rates rise with income would be within the paper’s scope if that qualifies as “procedure,” which remains to be determined by the authors. This helps raise the point that once is talking about means-based tax procedure, without specifying as yet that it might be progressive, one might be motivated, not just by distributional preferences, but also the question of what information is relevant to tax administration. For example, supposed that the IRS’s information audits found that the amount of one’s income (at the start of the audit, or at the end) was informative regarding the likely revenue yield from a given audit. We know, of course, that the IRS must be looking at such things as whether, say, cash businesses or those in particular industries offer greater audit yields, or perhaps returns with large vs. small charitable contributions of a given type. If they find that something relating to the taxpayer’s overall means is also relevant to expected audit yield, one could ask (among other questions) whether using or ignoring this information would be, not only the better approach all things considered, but even the more “neutral” one, if one was attempting to define and apply such a benchmark. But while I suspect that a consistently applied audit yield metric would result in a significant upward shift, along the income scale, in who is audited, it wouldn’t necessarily be “progressive” all the time. E.g., suppose EITC claimants tend to yield greater audit yield than those earning above the phase-out. Or suppose there is more audit yield from the merely rich in the 99.0 to 99.5% percentile, than from those at the very top. Then one’s audit yield strategy wouldn’t be “progressive” at all margins, even when it was means-based.
This distinction can be an important one – looking at “means” because it has relevant informational content wholly apart from one’s distributional policy preferences, vs. because it is itself a topic of interest under one’s distributional preferences.
A further distinction to have in mind here lies between formal and substantive means-based variation in tax procedural rules. You know the old gag: “The law, in its majesty, forbids the rich and poor alike to sleep under bridges.” An opposite version of the same thing is FATCA, requiring information reporting about US taxpayers’ foreign bank accounts. As between full-time U.S. residents, this has progressive impact, at least to a degree, because you have to be at a certain level of wealth and/or income before one starts availing oneself of foreign bank accounts. (But perhaps it tapers down at some point towards the top? And of course for U.S. taxpayers who spend enough time abroad to need local banking outside the country, FATCA looms even if their resources are decidedly modest.) Likewise, if one applies particular penalties above a flat dollar amount of overall tax liability shortfall, or if one disfavors the use of tax advisor opinions as penalty shields, the rule even if formally neutral will have upwards-tilting effects.
In thinking about the various approaches that the paper puts in play, both the Kaplow-Shavell work on restricting distribution policy to the “tax system” and the Kaplow work on the social value of determining income (or whatever) accurately offer important orienting devices. Rules that might be described as implementing progressive tax procedure are contrary to the Kaplow-Shavell approach if they are used to increase the overall progressivity of the tax system – except insofar as by, say, reducing tax avoidance opportunities they affect optimal rates. But if they are using means-based information that is relevant to efficient implementation, the case is different. The point here isn’t to insist on Kaplow-Shavell conformity, as that’s a live issue under debate, but it’s useful for situating and understanding the claims.
And here’s where “accuracy” as discussed by Kaplow and others may enter the analysis. Suppose we used means-based, whether or not progressive, tax procedural rules to change the taxation of rich people in the following way. E.g., suppose that initially half were paying tax at a 40% effective rate and others at a 20% rate, due to tax avoidance opportunities available disproportionately to the latter. Then we used tax procedural rules, such as cutting back on the use of penalty shield tax opinions, or more broadly (whether or not within the term’s scope) by increasing audits of high-income taxpayers. One might think of the shift as being distributionally neutral, in an aggregate group sense, if now all the rich paid 30%, but for multiple reasons this might now be a better system (leaving aside the costs of getting there). Whereas, if we got all of them up to 40%, the system would now apparently be more accurate, but it would also be more progressive – which might be fine, but muddies the waters a bit regarding why we might favor (if we did) the tax procedural changes that brought about this new state of affairs. In Kaplow terms, a key question in the now-all-30% scenario would be measuring the benefit vs. the cost (if positive) of the greater accuracy – we obviously wouldn’t be willing to spend infinite resources in order to measure everyone’s income accurately and assure the uniformly “correct” application of statutory tax rates.
My point here is simply that this helps to demarcate the different issues raised by means-based tax procedure that the paper will be exploring as it develops.