Tax Prof Blog Review: Roberts Reviews The Missing “T” in ESG By Chaim & Parchomovsky, May 17, 2024

SSRN Review and Roundup, May 17, 2024

 

This week, Tracey M. Roberts (Cumberland; Google Scholar) reviews a new work by Danielle A. Chaim (Bar-Ilan; Google Scholar) and Gideon Parchomovsky (Penn; Google Scholar), The Missing “T” in ESG, 77:3 Vanderbilt L. Rev. 789 (2024).

In The Missing T in ESG, Danielle Chaim and Gideon Parchomovsky take a magnifying glass to ESG investing and the large asset management firms that have been promoting it in recent years. Environmental Social and Governance or “ESG” standards describe a broad array of criteria. Environmental factors examine environmental impacts (such as waste management and greenhouse gas production). Social factors focus on human rights violations and violations of labor laws (such as human trafficking and child labor in the supply chains), among other things. Governance factors consider longer-term value, positive and negative spillover effects, and whether a corporation has implemented structures and personnel with diverse perspectives to avoid the kinds of group-think that led to the mortgage crisis and Great Recession. Ultimately, ESG ratings allow investors, with an aversion to longer-term risks and with preferences beyond short term profit, to pick and choose where they invest their money.

According to Chaim and Parchomovsky, large asset managers, such as the Black Rock Group, State Street Global Advisors, and the Vanguard Group, and the institutional investors they advise, have stepped into a new role as the sole purveyors of good governance by promoting ESG investments and by requiring the corporations in which they hold a significant interests to disclose information on which an ESG score may be based. Chaim and Parchomovsky then argue that these firms are not the saviors of the greater good or the solution to governmental shortcomings, but systematic contributors to the problems that ESG criteria are designed to address. These firms are, in fact, leaders in corporate tax avoidance, undercutting the government's very ability to promote the greater good of society.

To address this problem Chaim and Parchomovsky argue in favor of incorporating into ESG ratings an additional criterion, “T” for taxation, to evaluate corporate tax avoidance behavior. While some of the ratings organizations may account for aggressive tax avoidance behavior to some extent, most ignore it. Furthermore, most of the large asset managers have advocated against incorporating tax criteria into ESG ratings, despite the broad social and economic consequences of corporate tax avoidance. (These firms themselves enjoy significant tax relief as well as regulatory relief; this may explain their reluctance to push for tax transparency, lest their own practices be subject to scrutiny.) Chaim and Parchomovsky note that there is an inverse relationship between corporations’ ESG scores and their effective tax rates. They describe this situation as a “paradox” since corporations, institutional investors, and large asset managers are being called upon to solve the very problems they are creating.

Examining these developments from a broader perspective, however, one may set aside as mere hyperbole the description of large asset managers and institutional investors as “saviors.”  These firms, far from being regulators, are instead responding to demands by investors for more information. Fortunately, to examine ESG ratings from a wide-angle lens, there is a robust literature from which to draw. ESG is a form of private governance, private regulation. While ESG ratings are part of a much broader set of private governance mechanisms that have been employed in response to political gridlock (as Vanderbilt Law Professor Michael Vandenbergh has explained) and regulatory ossification (as Virginia Law Professor Michael Livermore has explained), private governance has old roots in the boycott campaigns of temperance activists and abolitionists from the 1800s. In the U.S., Michael Vandenbergh has provided extensive coverage of environmental approaches, Yale Professor Daniel Esty has published an edited edition in view of international trade, Edward P. Stringham has given a historical account from the European perspective, and Elinor Ostrom won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009 for her collection and analysis of private governance of the commons. Private governance has historically been bottom-up, consumer- and investor-driven. If large asset managers are making efforts to adopt ESG criteria in assembling their portfolios of assets, this is the outcome of three or four decades of investor demand for corporate accountability. [In fact, it’s even more likely that the large asset managers have used ESG reporting to troll for deals that would qualify for massive subsidies available via the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, but that is a separate line of inquiry.] In its earlier forms, ESG was known as corporate social responsibility (CSR) and socially responsible investing (SRI), which used social and environmental criteria to screen and package investments that conform to ethical, environmental, and other parameters.

Why are investors seeking this information? Two answers: (1) the rise of the Friedman Doctrine, also known as the theory of shareholder primacy, as the dominant normative model for business ethics, and (2) globalization. In his 1962 book Capitalism and Freedom, Milton Friedman explained that "there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." Friedman’s theory assumes that the corporations are actually playing by the rules of the game. These assumptions may be unwarranted. First, competition is not always open and free. In recent years, market consolidation has allowed major corporations to engage in monopoly pricing (as FTC Chair Lina Khan has argued) at the cost of consumers, to use monopsony power (as Chicago Professor Eric Posner has argued) to the detriment of workers, and to create barriers to entry, reducing competition. Furthermore, there are fewer pathways to discern whether corporate operations or stock transactions are marked with deception or fraud, given the nested nature of entity ownership and stock holdings through pension funds and retirement accounts.

Under Friedman’s theory, shareholders hold a property right to any profits that result after satisfying the statutory, contractual, and common law claims of a company’s creditors, employees, and other stakeholders, such as the government. This brings us to the second driver of shareholders’ use of private governance to gain access to information: globalization. Since World War II, globalization has obscured the pathways to profit. Corporations have moved their operations abroad to avoid (i) U.S. environmental regulations (statutory claims), (ii) U.S. labor regulations (statutory and contractual claims), and (iii) U.S. taxes (governmental claims). Beyond the reach of the U.S. government taxing and regulatory authorities, corporations may enhance profits through child labor, human trafficking, unrestrained pollution, dumping of toxic wastes, and zeroing out of tax liability. As a result, U.S. shareholders have enjoyed wealth aggregation at the expense of the rest of the world. Out of sight, out of mind.

Friedman argues that the sole social responsibility of business is to increase profits and maximize shareholder wealth. To those advocating for corporate social responsibility and sustainable investments, Friedman responds that investors should simply enjoy their outsized profits and then use the extra cash to achieve their social goals. Friedman’s account never considers the incidence of the costs associated with generating those profits, however. Those who bear the costs of extractive capitalism are rarely the ones who enjoy investor and corporate munificence. The inequities become even more pronounced when the profits enjoyed by U.S. investors are generated in other countries.

Fortunately, many U.S. and European investors and consumers recognize that the costs of externalized harms sometimes come back to haunt us. When we throw things away, there is no such place as “away.” A globalized food system means that we consume food grown on the very lands and drawn from the very waters we are poisoning. Migrants seeking refuge in the United States are often escaping exploitation, abuse, and environmental devastation wrought in the countries where U.S corporations have replicated and perfected the extractive economies first forged by colonialism. Corporate tax avoidance also shifts the tax burden from those who earn profits from property to those who pay taxes on compensation from labor. Furthermore, these actions may give rise to tort and regulatory risks that may have a more immediate effect on profitability. In selecting ESG investments, shareholders may also take an ethical stance, funding their retirement with something other than the surplus from others’ suffering. To make these choices, investors need more information about the environmental, labor, and governance profiles of the companies than currently available through securities filings.  Blackrock, Vanguard, and State Street have responded to this demand by using ESG rankings to score companies within their portfolios.

Chaim and Parchomovsky argue that to improve ESG, three changes should be made. First, the ratings agencies should require corporations to disclose their tax payments, which would allow the agencies to calculate their effective tax rate (average tax rate) by dividing their profits by their tax payments, as well as their Country-by-Country (CbC) reports. The Organisation for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting Action Plan, which 140 countries have begun to implement, provides for CbC reporting to the government, but not to the public. Second, they argue that tax compliance should be given greater weight in determining an ESG(T) corporate score. Third, they argue that the ESG ratings agencies should disclose the criteria and processes by which they make ratings determinations, information that is currently withheld as proprietary. They argue that “[i]f the rating agencies insist on withholding the rating criteria from the public, they should be ordered to disclose their criteria by regulation.”

Chaim’s and Parchomovsky’s demand for greater transparency is laudable. However, it’s unclear whether their proposed changes would have the desired effect. First, ESG ratings are voluntary. Corporations are unlikely to share their tax secrets voluntarily, lest they waive the attorney and accounting privileges of confidentiality, open themselves up to an IRS audit, or lose the competitive advantage they gain from tax avoidance. Furthermore, corporations may have low effective tax rates for a variety of reasons. Historically, the US has used tax credits to attract equity investments to fund the construction of affordable housing and the development of renewable energy resources. Corporations that are investing in the development of these quasi-public goods should be promoted, not sanctioned. Moreover, the regulatory impact of the ratings may already be limited, given that the only enforcement mechanism is exclusion from a portfolio or stock grouping.  Corporations performing a cost-benefit analysis might learn that the rewards of tax avoidance exceed those of inclusion in an ESG portfolio.

Second, the ratings agencies are diverse in the way they rank the same corporation. The various criteria sometimes conflict or offset one another and the overall result may be skewed by disparities in weighting. In the private environmental governance arena, following the creation of the Forest Stewardship Council and its voluntary regime to certify sustainably harvested wood, the timber industry created its own alternative regimes that were far more favorable to industry profits, the Sustainable Forestry Initiative (SFI) and Programme for the Endorsement of Forest Certification (PEFC). The multiplicity of agencies and ratings schema has diluted their regulatory power in the forestry industry. The same thing is likely occurring among ESG rating agencies.

Third, anti-ESG legislation being proposed at the state level has given the large asset managers pause in their push for corporations to submit to ESG ratings. Some states are barring their pension managers from investing in ESG portfolio funds and barring state contracts with corporations that submit to ESG scrutiny. Far from being regulators themselves, the big asset managers are simply riding the wave of investor demands.

Finally, Chaim’s and Parchomovsky’s proposal to use legislation to regulate ratings agencies loses track of the main reason investors have resorted to private governance in the first place. Private voluntary regulation is designed to fill the gaps that result when state and federal governments fail to regulate harmful externalities and correct market failures. If we are to achieve something through regulation, surely the legislation should be leveled directly at the harmful behavior. Otherwise, requiring public disclosure by the entities whose profits derive from such behaviors (rather than simply from agencies that rate them) would send a stronger and clearer market signal. For example, the publication of the Toxic Release Inventory in the mid-1980s has had important and beneficial market effects with respect to corporate environmental compliance. Public disclosure of tax information could have similar salubrious effects on the market.

Notwithstanding these matters, Chaim and Parchomovsky have raised an important issue in the field of corporate governance and one that should not be elided or overlooked. Tax avoidance has at its core the same economic motivations and rewards as regulatory exit. Tax avoidance also foments noncompliance and regulatory disfunction and undercuts public “governance for all,” which sits at the core of our political debates today.

Here’s the rest of this week’s roundup:

Reuven S. Avi-Yonah (Michigan) and Lucas Salama (Michigan), Taxation of Autonomous Artificial Intelligence: Socially Sustainable Expansion of Automation and Impacts on International Tax, U of Michigan Public Law Research Paper. (Apr. 15, 2024)

Vicente Bagnoli (Mackenzie Presbyterian), Vivian Leinz (Mackenzie Presbyterian) and Marcos Sales (Mackenzie Presbyterian), Taxation, Tax Benefits and Competition Distortion in Brazil, Working Paper Series (Nov. 13, 2023)

John R. Brooks (Fordham), The (Non)Taxation of Student Debt Cancellation: Statutory Misinterpretation and Normative Conflict, 77 National Tax Journal (Forthcoming, 2024)

Samuel D. Brunson (Loyola - Chicago), Leave Your Conscience at the Court: Religious Tax Protest Before and After RFRA, Canopy Forum on the Interactions of Law & Religion  (Dec. 4, 2023)

Peter D. Enrich (Northeastern), Michael Mazerov, Darien Shanske (UC Davis), and Dan Bucks, State Conformity to GILTI is a Good Idea (A Defense of Minnesota), Working Paper Series (May 14, 2024)

Jonathan Farrar (Wilfrid Laurier) and Tisha King (Waterloo), Policy Forum: Using Retributive Justice to Ensure Public Trust in Canada's Tax System, 72:1 Canadian Tax Journal/Revue fiscale canadienne 83-93 (2024)

Malcolm J Gammie (IFS), Policy Forum: Some Reflections on Ethical Considerations in Tax Litigation, 72:1 Canadian Tax Journal/Revue fiscale canadienne  95-105 (2024)

Emilia Gschossmann (Mannheim), Jost Heckemeyer (Kiel), Jessica Müller (Mannheim), Christoph Spengel (Mannheim), Julia Spix (Mannheim), and Sophia Wickel (Mannheim), The EU’s New Era of “Fair Company Taxation”: The Impact of DEBRA and Pillar Two on the EU Member States’ Effective Tax Rates, ZEW - Centre for European Economic Research Discussion Paper No. 24-014 (Mar. 28, 2024)

Andy Grewal (Iowa), The Mandatory Repatriation Tax Is Not a Tax, University of Iowa Legal Studies Research Paper (Oct. 25, 2023)

Adam Kern (NYU), Progressive Taxation for the World, Tax Law Review (Forthcoming 2024)

Jonathan Rhys Kesselman (Simon Fraser), The Pivotal Role of Capital Gains in Efficient and Progressive Tax Reform, 72: 1 Canadian Tax Journal/Revue fiscale canadienne 1-32 (2024)

Rebecca M. Kysar (Fordham), The Global Tax Deal and the New International Economic Governance, 74 Tax Law Review (Forthcoming 2024)

Lyne Latulippe (Sherbrooke), Policy Forum: Transparency—An Essential Condition for Ethical Behaviour in Tax Planning, 72:1 Canadian Tax Journal/Revue fiscale canadienne  67-81 (2024)

David Lin (Waterloo), Finances of the Nation, 72:1 Canadian Tax Journal/Revue fiscale canadienne 131-182 (2024)

Kenny Z. Lin (Lingnan) and Wei Qiang (Harbin Inst. Tech.), Beyond Tax Compliance: The Role of Tax Behavior Certification in Auditing, Working Paper Series (May 13, 2024)

Francine J. Lipman (Nevada - Las Vegas), Is Now A(nother) Teachable Moment? Honoring the Legacy of Dr. William E. Spriggs, 21:1 Pittsburgh Tax Rev. (Forthcoming 2024)

Leopoldo Parada (Leeds), Amazon and the Future of State Aid Law in Direct Tax Matters, 113 Tax Notes Int'l 5 (2024)

Mark Stevens, False Statement or Omission Penalties in Canadian Tax Law, 72:1 Canadian Tax Journal/Revue fiscale canadienne 33-64 (2024)

Artur Swistak (IMF) and Rita de la Feria (Leeds), Designing a Progressive VAT,  IMF Working Paper No. 2024/078 (Apr. 11, 2024)

Karen Wensley, Policy Forum: Ethics and Tax Practice—We Need To Talk, 72:1 Canadian Tax Journal/Revue fiscale canadienne 107-116 (2024)

 

Tax Prof Blog Review: Roberts Reviews Climate Policy Reform Options in 2025 by Bistline, Clausing, Mehrotra, Stock and Wolfram, March 29, 2024

SSRN Review and Roundup, March 29, 2024

 

This week, Tracey M. Roberts (Cumberland; Google Scholar) reviews a new work by John E. Bistline (Stanford; Google Scholar), Kimberly A. Clausing (UCLA; Google Scholar), Neil Mehrotra (Google Scholar), James H. Stock (Harvard; Google Scholar), and Catherine Wolfram (MIT; Google Scholar), Climate Policy Reform Options in 2025, UCLA School of Law, Law-Econ Research Paper No. 24-02, Accepted Paper Series (March 8, 2024).

This week, a cohort of scholars has examined an array of possibilities for bringing the United States into alignment with its promises under the Paris Agreement. The Paris Agreement is the legally binding 2015 international climate change treaty adopted in Paris France by 196 nations at the UN Climate Change Conference. In that agreement, the United States pledged to reduce greenhouse gas emissions to 50% below our 2005 emissions. Because of the thirty-plus-year plus delay in actually taking action after signing the 1992 United Nations Framework Convention on Climate Change, we are not going to meet those goals.

However, Bistline, Clausing, et al. have good news. We can come close, and we can meet that goal by 2035. They use the Electric Power Research Institute’s U.S. Regional Economy Greenhouse Gas and Energy (US-REGEN) model to project emissions reductions, budgetary impacts, and effects on household energy and fuel expenditures.

The researchers focus primarily on fiscal and tax measures. This is smart for two reasons. First, with a divided Congress, the best way to secure climate change legislation is the budget reconciliation process, since this pathway allows the Senate to pass legislation by majority vote rather than the 3/5 supermajority vote needed to get past a filibuster. Only taxing and spending measures may be considered during the budget reconciliation process. Note that the Inflation Reduction Act of 2022 (the “IRA”), the first major effort by the United States to address climate change, was passed through the budget reconciliation process without any support from Republican legislators, though a number of those folks have since sought to take credit for it.

Second, beyond the IRA, other efforts to address climate change on a nationwide basis have come not from the Federal government agencies, whose efforts to regulate have been stymied through litigation and other processes, but from private governance initiatives. Historically, religious and other groups in the U.S. and elsewhere have boycotted companies and products because of moral concerns about human enslavement, human rights abuses, apartheid, discrimination, and other concerns. More recently, investors and consumers have begun to reward with their investment corporations exercising Corporate Social Responsibility. As companies have voluntarily adopted environmental, social, and governance (or “ESG”) criteria to track the effects of pollution, labor violations, and other governance failures in their supply chains as risks to be managed, investors have demanded that their investments be screened according to these criteria. The investment, pension and retirement fund industries have responded by collecting investments into funds marked with the "ESG" umbrella label. Red states have sought to push back against voluntary disclosure of pollution, environmental hazards, unfair labor practices and other activities by enacting anti-ESG legislation to prevent their state pension funds from investing in, and their state contracts from going to, companies that make such disclosures. Because use of these labels has resulted in false, misleading, and fraudulent claims about being green, carbon-neutral, and employing socially responsible and other governance standards, the Securities and Exchange Commission has sought to regulate and has begun enforcing the existing laws in light of these activities. Republican-led groups have also pushed to end such efforts and to weaken any resulting securities regulation. Consequently, taxing and spending remain the few viable pathways for climate (or any other) regulation.

Bistline, Clausing, et al. clarify the principles under which they are evaluating the various policies: (a) emissions reductions, (b) economic efficiency, (c) budgetary impacts, (d) incidence (who enjoys the benefits and who bears the burden), and (e) international impact (given that the US generates about one-eighth of worldwide emissions, currently supports the largest emissions per capita, and remains responsible for one-fourth of the stock of greenhouse gases currently in the atmosphere as a result of historic emissions). They then analyze seven different policies that may plausibly be up for consideration in 2025: (1) continuation of existing policies at the state and federal level (including the Inflation Reduction Act incentives, and the EPA’s proposed tailpipe standards for light, medium and heavy dutiy vehicles, and existing and new source performance standards for power plant emissions under the Clean Air Act), (2) continuation of the IRA (without the new EPA regulations for vehicles and power plants), (3) the repeal of the IRA and the new EPA regulations for vehicles and power plants, (4) an expansion of the IRA to increase the most effective subsidies (those for technology-neutral investment and production tax credits for clean electricity) by 50%, (5) a carbon fee with carveouts for gasoline, (6) a clean energy portfolio standard (which would require utilities to include in their distribution a certain percentage of electricity from clean energy resources, and (7) the repeal of the least effective and most expensive subsidies under the IRA together with the addition of a carbon fee.

The researchers examine the economic impacts of the policies across economic sectors, the fiscal impacts to the federal budget, and the impacts on household energy costs. Unsurprisingly, offering only carrots (by expanding the IRA subsidies) is less effective than implementing a stick (carbon fee or portfolio standards or the repeal of certain IRA provisions along with a carbon fee). None of the options allow us to reach the 2030 deadline, but existing policies (Option 1) would allow us to meet our goals by 2035. They conclude that Option 7 (with the addition of a carbon fee and selective repeal of certain expensive IRA provisions) would be our most cost-effective response and it would allow us to meet our greenhouse gas goals by 2032. In contrast, repeal of the IRA and rejection of new regulation would further delay climate resilience and add to the costs we are currently facing from climate-related disasters.

Some are worried about the fiscal impacts of the Inflation Reduction Act. Economists have determined that the cost of the Inflation Reduction Act is higher than previously expected. The costs have been adjusted upward because the credits are popular. Quite simply, more businesses than expected are claiming them. Numerous Republican-led efforts have also sought to repeal the IRA. Note that red states stand to lose a great deal more ($337 billion in investments) than blue states ($183 billion) if the climate action subsidies are repealed, primarily because these states have strong solar and wind resources. They have enjoyed big boosts in solar, electric vehicle and battery manufacturing and job growth in these areas.

The higher cost of the IRA is something to worry about, especially given the hole in the budget that had already been carved out with the TCJA. However, with climate change, we must be concerned about the cost of doing nothing. Economists have dubbed their measure of these costs as "the social cost of carbon." In 2023 alone, the United States saw 28 climate-related disasters, including drought, wildfire, storms, tornadoes, cyclones, flooding, and, as an added bonus, an arctic cold wave from the polar vortex that extended into the deep South! Other parts of the world have been facing similarly harsh climate-related disasters. Consequently, we are seeing an increasing number of climate migrants at the border, and more Americans are moving to safer ground within the US. Personally, I recommend all those Rustbelt cities in the Midwest, previously hollowed out by job losses in the automotive and steel industries - the people are friendly, and the housing was built to last (with big, beautiful bones ready for renovation). Damages from climate change will force the government to spend an extra $1 trillion or more over the course of a decade on flood insurance, disaster relief, health care costs from heat waves, and more. As Bistline, Clausing, et al., point out, the IRA is especially cost-effective when you take seriously the costs of doing nothing.

Some may worry about the regressivity of a carbon fee; carbon taxes and fees (and other sticks) affect lower income households to a greater degree than higher income households because lower income households must use all of their income to meet their needs. However, there are pathways to offset these impacts. For example, some of the revenue from the carbon fee could be rebated to households through a tax credit. The expansion of the Child Tax Credit during the pandemic and its delivery in the form of a pre-bate (a tax refund that is paid in advance of filing taxes for the current year) pulled millions of children out of poverty and reduced the poverty rate by about 40 percent. A similar credit could be used to protect the middle class and lower-income households. In a time of increasing billion dollar disasters from extreme weather events, the vast majority of Americans will take all the help they can get. The IRA was a great step in the right direction. Bistline, Clausing, Mehrotra, Stock, and Wolfram have made an important advance in identifying paths forward for 2025 and beyond.

Here’s the rest of this week’s roundup:

Christina Allen (Curtin), Mischaracterized Personal-Use Assets And Lower Australian Tax Revenue, 11:7 Tax Notes International 813 (August 14, 2023)

Jonathan M. Barrett (Victoria - Wellington), Exploitation, Exchange, and Discontent: New England Whalers and New Zealand’s First Tax Laws, Working Paper Series (Feb. 13,  2024)

Bradley T. Borden (Brooklyn), The IRS’s Position on Section 1031 Straddle Exchanges Is Half Wrong, 181 Tax Notes Federal 1193, (Nov. 13, 2023)

Brayden Bulloch (Wisconsin), Dan Lynch (Wisconsin), Max Pflitsch (Tech. Munich), and Joseph H. Schroeder (Indiana), An Examination of Uncertain Tax Position Reserves Around the Purchase of Auditor Provided Tax Services, Working Paper Series (Mar. 26, 2024)

Luís Calderón Gómez (Cardozo), Taxation’s Limits, 119 Nw. U. L. Rev. (Forthcoming 2024)

Howard F. Chang (Penn), Import Taxes Based on Climate Policies and International Trade Law, U of Penn, Inst for Law & Econ Research Paper No. 24-03, Working Paper Series (Feb 27, 2024)

Sabrina Chi (Cal State Fullerton), Anh Persson (Illinois, Urbana-Champaign), Terry J. Shevlin (UC Irvine), and Oktay Urcan (UC Irvine), The Effect of Non-U.S. Tax Authority Monitoring on U.S. Multinationals’ Affiliates Income Shifting: Evidence from EDGAR Search Activity, Working Paper Series (Mar. 27, 2024)

Bridget J. Crawford (Pace), Taxing Sugar Babies, Minnesota Law Review (Forthcoming 2024)

Craig Elliffe (Auckland), Designing a Powerful General Anti-Avoidance Rule: Reflections on the New Zealand Experience, 5 British Tax Review 704 (2023)

Miranda Perry Fleischer (San Diego), A New Look at Old Money, 98 Southern California Law Review, (Forthcoming 2024)

Dirk Foremny (Barcelona), Tax Decentralization, Preferences for Redistribution, and Regional Identities, Working Paper Series (Mar 28, 2024)

Daniel J. Hemel (NYU), Capital Taxation in the Middle of History, 99 New York University Law Review, Forthcoming 2024)

Sharona Hoffman (Case Western), Employers and the Privatization of Public Health, 65:7 Boston College Law Review (Forthcoming 2024)

Hayes Holderness (Richmond), The Erosion of State Tax Consensus in (Quad) Graphics, Working Paper Series (Mar 28, 2024)

Darryll Keith Jones (Florida A&M), Charitalism and Federal Tax Exemption: A Case Study Using OpenAI and The PGA Tour, Capital University Law Review (Forthcoming 2024)

Savvas Kostikidis (Independent) and Florian Striefler (Max Planck), Fictitious Interest and Dividends Under Tax Treaties and the EU Directives, 31:5 EC Tax Review 251-2259 (2022) Accepted Paper Series (Mar. 25, 2024)

Michelle D. Layser (San Diego), Renters' Tax Credits, Georgetown Law Journal (Forthcoming 2024)

Omri Y. Marian (UC Irvine), Income Taxation and the Regulation of Supreme Court Justices' Conduct, 110: 5 Cornell Law Review (forthcoming 2024)

Robin Morgan (Harvard), The Impact of Wealth Taxes on Cash Flows and Investor Behavior, Working Paper Series (Sept 19, 2023)

Danielle Morris, Yarik Kryvoi (BIICL), Sam Winter-Barker, and Tunc Savas, Empirical Study: Tax-related Measures in Investor-State Arbitration, Working Paper Series (Feb. 22, 2024)

Vincent Ooi (Singapore Management), CIT v AQQ: The Singapore GAAR and its Australasian Influences, 5 British Tax Review 724-731 (2023)

Matthew J. Rossman (Case Western), Assessing the Performance of Place-Based Economic Development Incentives: What’s the Word on the Street?, Washburn Law Journal (Forthcoming 2024)

Moritz Scherleitner (Aalto) and Edoardo Traversa (Catholic - Louvain), Involving the Corporate Sector in EU Financing – A Two-Tier Model for a Corporate Income Tax Based Own Resource,  European Law Review (forthcoming June 2024)

Erika Isabella Scuderi (Vienna), Tax Incentives for the Space Economy and the Potential Impact of Pillar Two, Working Paper Series (Sept. 6, 2023)

Christine Speidel (Villanova), Anna Gooch (Center for Taxpayer Rights), Leslie Book (Villanova), Nina E. Olson(Center for Taxpayer Rights), Nancy Rossner (Community Tax Law Project), and Amy Spivey (UC San Francisco), Amicus brief of the center for taxpayer rights, the community tax law project, the UC Hastings low-income taxpayer clinic and the Villanova Federal Tax Clinic in support of the petitioner (No. 12982-20), Working Paper Series (Feb. 3, 2024)

Masaaki Suzuki (Senshu), The Effects of Tax Rate Hikes in Tax Havens on High-Tax Countries, Working Paper Series (Mar. 27, 2024)

Susannah Camic Tahk (Wisconsin), The Tax Separation of Powers, Working Paper Series (Mar. 26, 2024)

Susana N. Vittadini Andres (Tamkang), Moral and Cultural Perspectives of Tax Evasion in Latin America, in The Ethics of Tax Evasion, Volume 2: New Perspectives in Theory and Practice (R.W. McGee & J. Shopovski, Eds. 2024)

 

 

Tax Prof Blog Review: Roberts Reviews New Articles on Moore v. United States by Avi-Yonah & Clarke, February 9, 2024

SSRN Review and Roundup, February 9, 2024

 

This week, Tracey M. Roberts (Cumberland; Google Scholar) reviews new works by Conor Clarke (Washington University, St. Louis; Google Scholar), Moore: The Overlooked Excise Power, 181 Tax Notes Federal 1179 (Dec. 4, 2023) and Reuven Avi-Yonah (Michigan; Google Scholar), Effects from Moore: Does the Corporate Tax Require Realization, Tax Notes (Jan. 22, 2024)

A tax case on an obscure provision in the Tax Cuts and Jobs Act has captured the attention not only of tax specialists, but the broader public. Rightly so. If decided in favor of the Moores, it could be the most consequential decision since Citizens United v. Federal Election Commission, which held that the freedom of speech clause of the First Amendment prohibits the government from restricting corporate expenditures for political campaigns. In Moore v. United States, the Moores take issue with the Mandatory Repatriation Tax (or “MRT”) set forth in I.R.C. section 965. The MRT is a one-time tax levied on the undistributed earnings and profits of specified foreign corporations dating from 1986, when Congress enacted provisions that shielded those earnings from taxation. Following Congress’s repeal of those provisions and the addition of the MRT under the Tax Cuts and Jobs Act, the MRT would tax that income, at a lower rate, to the shareholders whose holdings exceed a 10 percent threshold. The Moores have asked the U.S Supreme Court to strike down the MRT as an unconstitutional direct tax that fails to satisfy the apportionment clause under Article I. All “direct taxes,” generally thought, during the country’s first 100 years, to encompass only per capita taxes and taxes on real property, are required to be apportioned among the states according to population, per Article I, section 2 and section 9 of the Constitution. In 1895, the U.S. Supreme Court held in Pollock v. Farmers' Loan & Trust Co. that the Income Tax of 1894, which included taxes on income from property, was a direct tax  on property and was unconstitutional because it was not apportioned. Nearly 20 years later, the 16th Amendment to the Constitution, enacted and ratified in 1913, affirmatively extended congressional power to tax incomes “from any source derived.” The Moores also argue that the 16th Amendment requires that for income to be subject to the income tax, it must be realized (distributed to the taxpayer in cash).

From new factual revelations not disclosed in the Moores’ pleadings, and from Reuven Avi Yonah's analysis of the structure of the holdings of the controlled foreign corporation in which the Moores own an interest, we have learned that Charles Moore was once a director of KisanKraft, that he has a close relationship with the founder, and that there were good tax and business reasons and pathways both for KisanKraft to avoid status as a controlled foreign subsidiary and for the Moores to avoid not only the MRT, but all kinds of liabilities to which they are currently exposed. The KisanKraft founder holds most of his own interests in the company indirectly through a U.S. holding company. Why the Moores invested directly in KisanKraft rather than in their friend’s holding company remains a puzzle. Avi Yonah concludes that the Moore case, with a $40,000 investment (small enough to generate some sympathy, but large enough to overcome the 10% threshold) and a $14,000 tax liability, appears to have been engineered specifically to challenge section 965. Clearly the Moores have drawn more sympathy than the multinational corporations who would enjoy a refund of their $349 billion in mandatory repatriation taxes if the Supreme Court were to hold MRT unconstitutional. (The Roosevelt Institute and the Institute on Taxation and Economic Policy have broken down by industry the tax giveaway that would result from a decision in favor of the Moores.) Nevertheless, the Court has yet to follow the recommendation of Michael Graetz (Yale, Columbia) to dismiss the case as improvidently granted.

The Joint Committee on Taxation has clarified that the implications of imposing realization as a constitutional requirement are vast, affecting not only the ability of the United States to tax foreign income under Subpart F and the global intangible low-taxed income (GILTI) regimes, but also the taxation of partnerships, S corporations, real estate mortgage investment conduits, original issue discount (interest), below-market and short-term loans, imputed rental income, as well as the mark-to-market taxation of securities dealings and insurance companies and the exit tax under I.R.C. section 877A. Daniel Hemel (NYU; Google Scholar) has further discussed what’s at stake in the case for the Moores, for Congress, and for the public.

Reuven Avi-Yonah (Michigan) has examined possible off-ramps and concluded that there's little likelihood that that the damage to the tax system of a decision in favor of the Moores can be limited. Even if one of those off ramps were taken, Mindy Herzfeld (Florida) has explained that the Moore case is not the end of constitutional challenges to the modified international tax regime developed under the Tax Cuts and Jobs Act. In Altria Group, Inc. v. United States, the company has asked the court for what would appear to be narrow relief in striking down the constitutional validity of subpart F only as applied to its specific facts regarding constructive ownership through downward attribution. As Herzfeld has pointed out, however, this would tank the application of the GILTI regime in subsequent years. The Altria case has been stayed pending the outcome of Moore.

Many tax scholars and experts, tax practitioners, businesses, nonprofit organizations, and states have written four dozen amicus (friend of the court) briefs addressing the issues before the Court. Much of the analysis has been focused on an originalist meaning of the phrase "taxes on incomes" prior to, during, and shortly after the ratification of 16th Amendment and the passage of the Underwood-Simmons Tariff Act of 1913, lowering tariff rates and introducing a new federal income tax.

Jake Brooks (Fordham; Google Scholar) and David Gamage (Indiana-Maurer moving to Missouri; Google Scholar) have written a series of deeply researched articles that clarify the historical record, and explain that the original understanding of the Sixteenth Amendment allowed for an income tax that included potential taxes on unrealized gains. Joseph Thorndike has discussed the relevant writings of the most influential economists of the era, Edwin R.A. Seligman and Robert Murray Haig, tracking their debate. Jonathan Grossberg (Google Scholar), Kerry Inger (Auburn; Google Scholar) and Carniel Wilson, in Moore v. United States and The Original Public Meaning of "Taxes on Incomes," have examined state income tax measures from the colonial period through to and after the Civil War, showing that many such taxes were estimated and lacked any concept of, or reference to, realization. They have also examined the legislative history and discussions within influential tax and accounting bodies, including the National Tax Association and the American Economic Association. Their coverage of the discussions around the use of accrual accounting to measure corporate income in the period immediately prior to the adoption of the 1913 income tax are of particular interest, since accrual accounting does not require realization for recognition of income, and of course, requiring realization as a constitutional matter would likely scuttle the accounting system of the majority of corporations in the United States. They survey newspaper articles, expand on Thorndike's coverage of the thought of economists and experts of the era, and finally wind up discussing the congressional debates in which the primary author of the 1913 income tax, Cordell Hull, was asked about the taxation of appreciation of stocks, with Hull answering in the affirmative. 

Finally, more recently, two scholars have asked whether the Supreme Court’s inquiries in Moore and Atria should pivot away from examining whether the TCJA provisions constitute an Article I, section 2 and 9 direct tax or a 16^th Amendment income tax on the accrued but undistributed income of a foreign corporation. Instead, they ask whether the provisions may be upheld as an excise.

In  Moore: The Overlooked Excise Power, 181 Tax Notes Federal 1179 (Dec. 4, 2023), Conor Clarke argues that the MRT should be upheld as an excise tax under Article I, Section 8, which grants Congress the power “to lay and collect Taxes, Duties, imposts and Excises.” The excise power is subject to the requirement that “all Duties, Imposts and Excises shall be uniform throughout the United States.” The uniformity requirement posts a fairly low bar, since the Court has interpreted it to require only that the tax be applied uniformly wherever the subject of the tax appears throughout the country. Clarke recounts numerous cases in which Congress has imposed, and Supreme Court has upheld, excise taxes to raise revenue from business activities, including excises on both individuals and the gross receipts of companies engaged in the insurance business, and excises on retailers of foreign alcohol and foreign merchandise. Clarke notes the similarities in the subject matter of some of these taxes to that of the MRT. During the Civil War, Congress used the excise power to impose taxes on sugar refiners, advertising and insurance businesses, and license fees that scaled with the size of the enterprise or the quantity or value of output on a variety of other trades and businesses. Clarke’s analyses are further supported in other cases that Gamage and Brooks collect in what they call the “Excise Canon”.

In Flint v. Stone Tracy Co., 220 U.S. 107 (1911), the U.S. Supreme Court upheld the 1909 corporate tax on corporate earnings and profits as an excise tax on “doing business in a certain way.” Clarke argues that likewise, the MRT may be upheld as a tax of doing business as a foreign corporation. Clarke notes that in the Pollock case, which struck down the 1894 income tax, the Supreme Court expressly declined to consider the legal status of “taxes on gains or profits from businesses, privileges or employments” in view of the instances in which those taxes had been sustained in earlier cases. In Stone Tracy, the Court sought to clarify the distinction between “doing business” and “having” or “holding” property.  Clarke argues that anyone who puts their capital in corporate equities may be said to be doing business in a particular way, and urges the Court to consider that Congress has clarified the “doing” versus “having” divide by imposing the RMT only on U.S. shareholders who own 10 percent or more of the total combined voting power of the foreign corporation.  Clarke ultimately argues that the Supreme Court should remand to the lower courts to opine on whether the MRT qualifies as an excise.

Reuven Avi-Yonah also examines the characterization of the corporate tax as an excise in Effects from Moore: Does the Corporate Tax Require Realization, Tax Notes (Jan. 22, 2024). Avi-Yonah is more skeptical, reviewing the literature in view of the challenge to the realization requirement in the Altria case. He begins by recounting President Taft’s June 16, 1909 address to Congress, which states (1) that the corporate tax was an excise on the privilege of doing business as an artificial entity and of freedom from a general partnership liability enjoyed by those who own the stock, (2) that it is administrable, in that it imposes a burden at the source of income at the time when collection is easy and the corporation is able to pay, and (3) that the tax allows the federal government to collect information needed for oversight of corporate business affairs. Avi-Yonah first focuses his attention on the latter two arguments, concluding that the tax was not an excise at all, but a pathway for the government to tax rich shareholders when they could not be taxed otherwise, and to regulate businesses as an alternative to anti-trust regulation. He seems to imply either that these demands have met in other ways and / or that the corporate tax may not be an appropriate mechanism for such activities.

Third, Avi-Yonah takes up President Taft’s “corporate privileges” explanation, and argues that the argument is inapposite, since the modern corporate tax is also imposed on businesses that do not enjoy the corporate privilege of a shield from liability, such as publicly traded partnerships. However, corporations and their shareholders (and PTPs and their members) and other business entities subject to the corporate tax enjoy many privileges, including the ability to raise capital through public trading within the United States, the enjoyment of many, many tax and other subsidies from the U.S. government, the ability to own foreign subsidiaries, and to shift, hold, and harvest those tax and other benefits abroad. Furthermore, higher-level governance is needed to solve the collective action problem associated with taxation and regulation. Even though domestic corporations are incorporated and governed at the state level, the states themselves at the time of the 1909 corporate tax were, and continue to be, in competition with one another, in a race to the bottom in terms of regulation and oversight. Historically, the corporate tax has granted insight into dealings and practices that were harmful to society. Likewise, one hundred plus years later, the collective action problem has been replicated at the global level. The argument in favor of an excise on “the privilege of doing business in a certain way” still has legs. One has only to look at the tax preferences delivered to private equity and hedge funds (which enjoy passthrough treatment as well as the “carried interest loophole”) and contrast those benefits with the ill affects of their tinkering over the last two decades to understand that we are subsidizing their increasing market power. Moreover, tax fairness retains resonance for U.S. domestic businesses that must compete with multinational entities along many lines, including taxation.

Avi-Yonah notes that while the Court had earlier upheld taxes based on the way that Congress had characterized them, the Court had more recently declined to follow that reasoning in NFIB v. Sebelius, upholding the individual mandate for health insurance as a tax rather than as a penalty. Conor Clarke agrees with Avi-Yonah on the Congressional characterization issue, though he concludes that the MRT is an excise. Avi-Yonah argues that the corporate tax does not fit well within the excise rubric. He argues that the earlier corporate “excises” were close substitutes for excises on oil and sugar, and their incidence fell largely on consumers. Avi-Yonah further questions the integrity of the Stone Tracy decision, arguing that Congress was desperate, following the Supreme Court’s Pollock decision, to find a pathway to skate clear of the direct tax controversy. He argues that it was out of expedience that Congress characterized the corporate tax as an excise. In reality, he says, it was and is an income tax. Note that the U.S. Supreme Court upheld the original income tax enacted during the Civil War as “within the category of an excise or duty.” It was the Supreme Court’s Pollock decision that recharacterized taxes on income from property as “direct taxes” on property, delivering the boon of another 20 years of tax-free accumulation to capitalists in the Northeast. Tax scholars and historians delving into the earliest applications of excise taxes, have found that excises were levied either per quantum, based on weight or volume, or based on price, consistent with common usage of the term today. If the Court wishes to restore the original meanings of “income” and “excise,” then overturning the Pollock decision would be the first step. Whether the current Supreme Court is willing to do so is the question.

Here’s the rest of this week’s roundup:

Allison Christians (McGill) and Stephen E. Shay (Boston College), The Consistency of Pillar 2 UTPR With U.S. Bilateral Tax Treaties, 178 Tax Notes Federal 499 (Jan. 23, 2023)

Charles Delmotte (Michigan State), Predistribution Against Rent-Seeking: The Benefit Principle’s Alternative to Redistributive Taxation, Social Philosophy and Policy, Forthcoming (Sept. 18, 2023)

Miranda Perry Fleischer, The Morality of Charitable Bequests, in Inheritance and the Right to Bequeath: Legal and Philosophical Perspectives, ed. by Daniel Halliday, Thomas Gutmann, and Hans-Christoph Schmidt am Busch, Routledge (2022) (Jan. 5, 2024)

Brent Glover (Carnegie Mellon) and Oliver Levine (Wisconsin), Corporate Tax Avoidance, Firm Size, and Capital Misallocation, Working Paper Series (Feb. 8, 2024)

Andrew Hayashi (Virginia), The Federal Architecture of Income Inequality, Virginia Public Law and Legal Theory Research Paper No. 2023-80, Virginia Law and Economics Research Paper No. 2023-20 (Dec. 20, 2023)

Daniel Hemel (NYU), The Low and High Stakes of Moore v. United States, 180 Tax Notes Federal 563 (July 24, 2023)

Edward F. McQuarrie (Santa Clara), IRMAA: Resistance is Futile, Working Paper Series (Feb. 7, 2024)

Aitor Navarro (Max Planck), The Multilateral Instrument (MLI) and Transfer Pricing, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2024-01 (Feb. 2, 2024)

Christine Speidel (Villanova), Anna Gooch (Center for Taxpayer Rights), Leslie Book (Villanova), Nina E. Olson (Center for Taxpayer Rights), Nancy Rossner (The Community Tax Law Project), and Amy Spivey (UC Law, San Francisco), Amicus brief of the center for taxpayer rights, the community tax law project, the UC Hastings low-income taxpayer clinic and the Villanova Federal Tax Clinic in support of the petitioner (no.12982-20), Working Paper Series (Feb. 3, 2024)

Georg Thunecke (Max Planck), Sean McAuliffe (Tuebingen), and Georg Wamser (Tuebingen), The Tax-Elasticity of Tangible Fixed Assets: Heterogeneous Effects of Homogeneous Tax Policy Changes, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2023-25 (Dec. 20, 2023)

Edward A. Zelinsky (Cardozo), Brief Amicus Curiae of Professor Edward A. Zelinsky in State of Utah v. Su, Cardozo Legal Studies Research Paper No. 2024-07 (Feb. 5 2024)

 

 

 

 

Tax Prof Blog Review: Roberts Reviews Hayashi's The Federal Architecture of Income Inequality, December 22, 2023

SSRN Review and Roundup, December 22, 2023

 

This week, Tracey M. Roberts (Cumberland; Google Scholar) reviews a new work by Professor Andrew T. Hayashi (Virginia; Google Scholar), The Federal Architecture of Income Inequality.

In The Federal Architecture of Income Inequality, Andrew Hayashi draws into question the national narrative on income inequality and the bias towards national solutions. Existing literature concludes that redistribution should be performed at the national level rather than by local governments. Undergirding this conclusion is the premise that national income inequality is the most important feature of our economic and political landscape. Hayashi shows that while some policies may reduce national income inequality and local income inequality simultaneously, that does not always occur. To illustrate his point, he examines the economic effects of several tax policy changes and proposals on both relative income inequality (using the Theil Index) and absolute income inequality (using the standard deviation of income) at the national and county level based on data from the Statistcs of Income Division of the Internal Revenue Service.

Bernie Sanders’ tax plan to increase corporate taxes, income and payroll taxes for high income taxpayers and to add a wealth tax would have reduced inequality at both the national level and at the county level. The Tax Cuts and Jobs Act, on the other hand, increased inequality at the national level and in almost every county. While the pause on student loan repayments reduced relative inequality at the national level, it increased absolute inequality in almost every county in the U.S.

Hayashi bolsters his empirical analysis with other economic research showing that many of the worst effects of income inequality are experienced only when there is sharp inequality at the local level: higher crime rates, lower growth rates, lower intergenerational mobility, and reduced outcomes for poor children. National measures ignore or conflate these impacts.

Based on this analysis, Hayashi argues that the distribution of income first must be examined through the economic and political infrastructure of the US economy and the federal state and local governments. In other words, income inequality must be examined within different contexts. Hayashi identifies these contexts as “allocative fields,” within which (1) goods, such as housing, healthcare, or political influence, are made available; (2) a currencies, such as money, educational attainment, or political connection, are used to allocate those goods; and (3) individuals, endowed with such currencies, operate indiviually or as a group. Within our federal system, the national, state, and local governments each have different allocative fields, though there may be overlap in the goods provided and the currencies employed. All U.S. residents simultaneously belong to multiple fields at the federal, state, and local levels.

Some allocative fields may be susbstitutes. For example, when a citizen finds it difficult to attain political influence at the national level, she may find a substitute by seeking to acquire influence at the state or local level. Hayashi notes that other policies may be complements, “in that one may not work well without the other.” He explains that advocating for local policies will not be successful without some measure of local control; therefore a bid to establish “home rule” at the state level would be consistent with those efforts and intervention by the wealthy to prevent the devolution of power would be at cross-purposes with that goal.

Along these lines, many federal laws delegate responsibility to the states for administering policies and allocating benefits to state residents. Such efforts will be frustrated if the state and local governments lack institutional infrastructure to allocate such benefits, or if the state legislature intervenes and reallocates federal resources to other uses. For example, after failing to deploy all of its federal COVID funds to help its residents, the Alabama State Legislature reallocated those funds toward building a new prison. Other states planned to use federal funds from the American Rescue Plan to cut taxes for their higher-income citizens, until the Senate modified the act to bar use of federal funds for such purposes. These kinds of legislative actions will likely complicate an analysis of the spillover effects of public goods, fiscal externalities, and redistributive policies, as well as proposals to subsidize jurisdictions with weaker redistributive preferences, or to provide for equalization payments between states to internalize those spillover effects.

Hayashi notes that one of the main concerns about inequality is its effect on politics. Individuals with higher income have greater access and ability to influence government officials and law. When redistributive polices are put into effect, the rich may vote with their feet and move to avoid them. Relatively wealthier populations also tend to redraw the jurisdictional boundaries around themselves to limit access to local resources, redrawing the lines for municipal districts, school districts, and voting districts. As long as those at the upper end of the income scale justify income inequality as tracking merit, their influence is likely to result in policies that exacerbate inequality. Furthermore, if discrimination is the source of, or has laid the groundwork for inequality at any level, then state and local governments are likely to do little to redress this issue.

Hayashi notes that “it's worth emphasizing the contingency of all this. If a greater share of consumption were allocated by non-market mechanisms, then money income would lose power as an all-purpose means of realizing one's goals.” Never is this more apparent, in the context of aquiring political goods, than in a state like Alabama. The lack of home rule, or even limited authority in most counties and municipalities, and constitutional limits on taxation result in communities that lack the power to raise funds to improve their schools, to provide for local healthcare infrastructure, or even to support mosquito control, without first seeking a constitutional amendment (which must be approved by the state legislature prior to being submitted to a vote by the entire population of the state). The state’s history and ongoing acts of discrimination compound these challenges.

Hayashi argues that we have a duty to determine whether a policy will reduce income inequality along each political and economic field. He clarifies that national efforts that reduce inequality at the very top and bottom of the income distribution will provide the most effective pathways to reduce inequality at all levels. He argues that, for national policy, the only way to be certain we have addressed inequality is to place a national priority on reducing poverty. By taxing the richest to benefit the poorest at the national level, we may also reduce income inequality by improving geographic mobility. On the other hand, for zero-sum policies, and for those in which the wealthy have different preferences from everyone else, he argues that allocating decision-making to the municipal or county level may be more appropriate, since income inequality is usually lower at those levels. Hayashi relates other possibilities. We may tinker with the allocative fields themselves. For example, we might change the currency by which we allocate important goods in fixed supply within a field. He explains that, if money were no longer equated with speech, and somewhow “kept out of politics,” political influence would be allocated on the basis of votes. Likewise, if housing and health care were publicly provided, the strong link between inequality and access to these goods would be broken.

Whether any of these options are viable at the state and local level is something to be explored in each state. When we take this deeper dive, advocacy in favor of “federalism” no longer obscures the true impacts of these policies or its darker “states’ rights” history. With The Federal Architecture of Income Inequality Hayashi has given us ample food for thought. In places like Alabama, where a very centralised state government controls even local decisions, allocating more resources at the federal level (and bypassing the state), as we do with the Earned Income Tax Credit and with national insurance plans like Social Security, may be the only pathway to meet the needs of the poor. Fortunately, Hayashi has provided an excellent analytical framework and set of tools to aid our investigations.

Here’s the rest of this week’s roundup:

Benjamin Alarie (Toronto), AI and the Future of Tax Avoidance, 181 Tax Notes Federal 1809 (Dec. 4, 2023)

Benjamin Alarie (Toronto), Rory McCreight (Blue J Legal), and Cristina Tucciarone (Blue J Legal), 180 Automated Tax Planning: Who’s Liable When AI Gets It Wrong?, 180 Tax Notes Federal 2297 (Sept. 25, 2023)

Daphne M. Armstrong (UNC - Chapel Hill) and Stephen Glaser (UNC - Chapel Hill), Does Tax Complexity Discourage Entrepreneurship?, Working Paper Series (Dec. 18, 2023)

Monika Bolek (Lodz), Jovan Shopovski (European Scientific Institute), and Robert W. McGee (Fayetteville State), Attitudes toward Tax Evasion in Poland, 128 Studia Prawno-Ekonomiczne (Studies in Law and Economics) 95-116 (2023)

John L. Campbell (Georgia), Mark E. Evans (Wake Forest), Wei Shi (Deakin), and Kerui Zhai (Deakin), Financial Constraints and Tax Planning: International Evidence, Working Paper Series (Dec. 20, 2023)

Jesse Chan (Boston University) and Darci Fischer (Boston University), Do Energy Investment Tax Credits Foreshadow Environmental Outcomes? Evidence from Electric Utilities, Working Paper Series (Dec. 20, 2023)

Travis Chow (Hong Kong), Edward L. Maydew (UNC - Chapel Hill),  and Guoman She (Hong Kong), Cross-Border Income Shifting, Information Exchange, and the Physical Flow of Tangible Goods, Working Paper Series (Dec. 20, 2023)

Cary Coglianese (Penn) and Mark Nevitt (Emory), It's Time to Cut the Hidden Climate Tax, Regulatory Review (University of Pennsylvania Law School) (Dec, 19, 2023)

Roger Colinvaux (Catholic University of America), Brief of Professor Roger Colinvaux as Amicus Curiae in Support of Defendants-Appellees and Affirmance: American Alliance for Equal Rights v. Fearless Fund Management, LLC et al. (11th Cir. No. 23-13138), Working Paper Series (Dec, 14, 2023)

Mark J. Cowan  (Boise State), Joshua Filzen  (Boise State) and Troy Hyatt (Boise State), The Pipeline, Graduate Accountancy Programs, and the 150-Hour Rule, 181 Tax Notes Federal 1051 (Nov. 6, 2023).

Tatiana Falcao and Bob Michel, Towards a Comprehensive Cryptocurrency Income Tax policy for Countries in Africa, Working Paper Series (Dec. 20, 2023)

J. Clifton Fleming (Brigham Young), Acknowledging (Celebrating? Regretting?) Sixty Years of Subpart F, 51 INTERTAX 519 (2023).

Brett Freudenberg (Griffith), Melissa Belle Isle (Griffith), Colin Perryman (Griffith), Kristin Thomas (Griffith), and Ashliegh Cohen (Griffith), Students’ professional identity and a fully online tax clinic, in International Handbook on Clinical Tax Education 240-258 (Lawton, et seq., eds. 2023).

Yehonatan Givati (Hebrew University of Jerusalem) and Andrew T. Hayashi (Virginia), Tax Law Enforcement and Redistributive Politics, Virginia Law and Economics Research Paper No. 2023-2, Accepted Paper Series (Dec. 21, 2023)

Justice Susan Glazebrook, To tax or not to tax: capital gains in New Zealand, Working Paper Series (Dec. 20, 2023)

Lukasz Gruszczynski (Kozminski) and Réka Friedery (Hungarian Academy of Sciences), The Populist Challenge of Common EU Policies: The Case of (Im)migration (2015-2018), 42 Polish Yearbook of International Law 221-244 (2022)

Maret Güldenkoh (Tallinn University of Technology Estonian Maritime Academy), Simplified Entrepreneurial Activity in Estonia, 30:1-2 Estonian Discussions on Economic Policy 104 (2022)

Philip Hackney (Pittsburgh), Written Testimony of Philip Hackney for the Hearing on Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape (U.S. House Ways & Means Subcommittee on Oversight, December 13, 2023), U. of Pittsburgh Legal Studies Research Paper No. 2023-49 (Dec, 14, 2023)

Andrew T. Hayashi, Technology, Markets, and the Income Tax Frontier, Virginia Public Law and Legal Theory Research Paper No. 2023-83 (Dec. 21, 2023)

Daniel J. Hemel (NYU), Redistributive Regulations and Deadweight Loss, Working Paper Series (Dec, 16, 2023)

Yves Hervé and Lorraine Eden (Texas A&M), Shapley Value in Dispute Resolution: Lessons in Transfer Pricing from a Life Sciences MNE, 112 Tax Notes International 753-768  (Nov. 6, 2023)

Darryll Keith Jones (Florida A&M), Towards a Constitutional Revocation of Terrorism's Tax Exemption, Working Paper Series (Dec. 20, 2023)

Lloyd Hitoshi Mayer (Notre Dame), Charity Law & Blockchain Technology: Using Old Wineskins for New Wine?, The Tax Journal (forthcoming Spring 2024)

Ruth Mason (Virginia), The Advocate General’s Opinion in Apple: Two Steps Forward, One Step Back, 112 Tax Notes International 1315 (Dec. 4, 2023)

Robert W. McGee (Fayetteville State), Studies in Tax Evasion: A Bibliography, Working Paper Series (Dec. 14, 2023)

Robert W. McGee (Fayetteville State), Jovan Shopovski (European Scientific Institute), and Monika Bolek (Lodz), The Ethics of Tax Evasion in Islam: A Literature Review of Theoretical and Empirical Studies, Working Paper Series (Dec. 18, 2023)

Deanna Newton (Pepperdine), Closing the Opportunity Gap, North Carolina Law Review (forthcoming 2024)

João Félix Pinto Nogueira (Catholic University of Portugal), Francisco Alfredo Garcia Prats (València), Werner C. Haslehner (Luxembourg), Eric Kemmeren (Fiscal Institute Tilburg), Georg Kofler (Vienna University of Economics and Business), Michael Lang (Vienna University of Economics and Business), Christiana HJI Panayi (Queen Mary University of London), Stella Raventos-Calvo (AEDAF), Isabelle Richelle (Independent), and Alexander Rust (Independent), Opinion Statement ECJ-TF 4/2023 on the decision of the EFTA Court of 4 July 2023 in Case E-11/22, RS - Compatibility with fundamental freedoms of a municipal surcharge distinguishing between residents and non-residents for the purposes of the applicable rate, Working Paper Series (Dec. 20, 2023)

Andrei Petroia (Academy of Economic Studies of Moldova) and Nina Surdu (Academy of Economic Studies of Moldova), Extended view on the pandemic crisis’ impact on the financing mechanism of the health care system in the Republic of Moldova, Working Paper Series (Dec. 10, 2023)

Chris William Sanchirico (Pennsylvania) and Reed Shuldiner (Pennsylvania), Circular Partnerships, U of Penn, Inst for Law & Econ Research Paper No. 23-46 (Dec, 19, 2023)

Jason Schwebke (Texas Tech), William Brink (Independent), Victoria Hansen (UNC - Wilmington),  and Charles Killdeer (Central Florida), Pre-Populated Tax Returns: Individual Taxpayer Adoption and the Effect on Compliance, Behavioral Research in Accounting (Forthcoming 2024)

Maarten Sigle (Nyenrode Business), Sjoerd Goslinga (Leiden), Lisette E. C. J. M. van der Hel (Nyenrode Business), and Ryan J. Wilson (Iowa), Tax Control and Corporate VAT Compliance: An Empirical Assessment of the Moderating Role of Tax Strategy, Journal of International Accounting, Auditing and Taxation (Forthcoming 2024)

Laura Snyder, What a Decision on Affirmative Action Teaches About Taxation, 51 Rutgers L. Rec. 102 (2023).

Kevin Standridge (Duke), Market Reactions as Macroeconomic Barometer: Quantifying the TCJA's Effect on GDP and Wages, Working Paper Series (Dec. 20, 2023)

Florian Striefler (Max Planck) and Savvas Kostikidis (Independent), Cross-border Loss Relief in the European Union After W AG, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2023-17 (Dec. 15, 2023)

Jasper Vikas (National Law University, Delhi), Resolution of Debts and Insolvency and Bankruptcy Code, 2016: The Status of Government Dues and Taxes, Insolvency and Bankruptcy Code 2016 (IBC 2016), Section 53 of the IBC 2016, Accepted Paper Series (Dec. 19, 2023)