Friday, February 09, 2018

Talk in Duke yesterday regarding the passthrough rules

Yesterday I was at Duke Law School to give a talk on the passthrough rules, based on a short paper that I plan to post on SSRN next month. (It will be appearing in the British Tax Review.)

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"The passthrough rules ought to be repealed as soon as possible.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."

Not a rave review, admittedly, but a more measured tone because it was justified there.

2 comments:

mounika said...

Hello
Nice article thanks for sharing with us
TAX preparation in Mckinney

Annie Joe said...

HOW I BECAME A VICTOR AFTER SO MANY FAILED ATTEMPT OF GETTING A LOAN.

I feel so blessed and fulfilled. I've been reluctant in applying for a loan i heard about online because everything seems too good to be true, but i was convinced & shocked when my friend at my place of work got a loan from Progresive Loan INC. & we both confirmed it and i also went ahead to apply, today am a proud owner of my company and making money for my family and a happy mom. Well i'm Annie Joe by name from Pauls Valley, Oklahoma. As a single mom with three kids it was hard to get a job that could take care of me and my kids and I had so much bills to pay and to make it worst I had bad credit so i couldn't obtain a loan from any bank. I had an ideal to start a business as an hair stylist but had no capital to start, Tried all type of banks but didn't work out until I was referred by my co-worker to a godsent lender advertising to give a loan at 2% interest rate. I sent them a mail using their official email address (progresiveloan@yahoo.com) and I got a reply immediately and my loan was approved, and I was directed to the Bank site where I withdrawed my loan directly to my account. To cut the story short am proud of my hair stylist company and promise to testify to the world how my life was transformed.. If you are in need of any kind of loan, i advise you contact Progresive Loan INC and be financially lifted Email: progresiveloan@yahoo.com OR Call/Text +1(603) 786-7565