I am among the thirteen signatories of a report thas has just been published online, entitled "The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation."
Many thanks are due to the report's lead drafters, who were Ari Glogower, David Kamin, Rebecca Kysar, and Darien Shanske. It draws on many people's analyses, including not just that of other signatories, such as me, but also numerous non-signatories who have helped to advance the rushed public conversation.
Evidently, the notion of public service, based on caring disinterestedly about the tax law's quality and effects, isn't dead in the tax academy and the tax bar, even if it appears to need a respirator up on Capital Hill.
Here is the report's Executive Summary:
This report describes various tax games, roadblocks and glitches in the tax legislation currently
The complex rules proposed in the House and Senate bills will allow new tax games and
planning opportunities for well-advised taxpayers, which will result in unanticipated
consequences and costs. These costs may not currently be fully reflected in official estimates
already showing the bills adding over $1 trillion to the deficit in the coming decade. Other
proposed changes will encounter legal roadblocks, that will jeopardize critical elements of the
legislation. Finally, in other cases, technical glitches in the legislation may improperly and
haphazardly penalize or benefit individual and corporate taxpayers.
This report is not intended as a comprehensive list of all possible problems with the drafting and
design of the House and Senate bills. Rather, this report highlights particular areas of concern
that have been identified by a number of leading tax academics, practitioners, and analysts.
In particular, the report highlights problems with the bill in the following areas:
• Using Corporations as Tax Shelters
If the corporate tax rate is reduced in the absence of effective anti-abuse measures,
taxpayers may be able to transform corporations into tax-sheltered savings vehicles
through a variety of strategies. For instance, at the most extreme, it may be possible to
shield labor income in a C-corporation so that it faces a final tax rate of only 20%.
• Pass-Through Eligibility Games
Taxpayers may be able to circumvent the limitations on eligibility for the special tax
treatment of pass-through businesses. For instance, under the Senate bill, many
employees—such as law firm associates—could become partners in new pass-throughs
and potentially take full advantage of the special tax treatment.
• Restructuring State and Local Taxes to Maintain Deductibility
The denial of the deduction for state and local taxes will incentivize these jurisdictions to
restructure their forms of revenue collection to avoid this change. This could undercut
one of the largest revenue raisers in the entire bill.
• International Games, Roadblocks, and Glitches
The complex rules intended to exempt foreign income of domestic corporations from
U.S. taxation present a variety of tax planning and avoidance opportunities. For instance,
one provision would encourage sales of products abroad, only for those products to be
sold right back into the United States. Furthermore, several of these rules are likely to be
non-compliant with both World Trade Organization rules for international trade and our
network of bilateral tax treaties. Some of these rules also create perverse economic
incentives, like advantaging foreign over domestic manufacturers.
• Arbitrage Money Machines
The variety of tax rates imposed on different forms of business income in different years
invite arbitrage strategies, whereby taxpayers can achieve an economic benefit solely
based on the timing and assignment of their income and deductions.
• Other Glitches
Other glitches in the proposed bills would haphazardly penalize taxpayers. For example,
the reintroduction of the corporate AMT at the 20% rate in the Senate bill would vitiate
key tax incentives and the basic structure of the international reforms. The proposal in the
House bill to tax capital contributions to entities could penalize taxpayers for no
Again, the report is available here.