Wednesday, January 09, 2019

AALS Tax Section panel

This past Saturday (January 5), at the American Association of Law School's Annual Meeting (in New Orleans), I was among the four panelists at an AALS Tax Section panel. The panel was organized and moderated by Shu-Yi Oei, the other panelists were Karen Burke, Ajay Mehrotra, and Leigh Osofsky, and the topic was "The 2017 Tax Changes: One Year Later." For more general background information about the panel, see here (from the Tax Prof blog).

We divided up in advance the particular topics to be discussed by each of us, and here is a very rough effort to reproduce in miniature my comments:

1) What have we learned in the past year about the economic impact of the 2017 tax act?
This morning, the Sun rose. Did we thereby learn something new  about the Solar System? No, because that is exactly what we expected. By contrast, we most definitely would have learned something new (assuming we were still around to reflect about it) if, for some extraordinary reason, the Sun HADN'T risen in the morning today.

For exactly that reason, we haven't learned all that much, in the past year, about the economic impact of the 2017 tax act. For example, there was absolutely no dispute, among serious, responsible, and knowledgeable people, that the act was going to lose a lot of revenue. And so it has - perhaps slightly on the high side, relative to "dynamic" expectations, but that is what I expected for various reasons.

We also "learned" that it did not stimulate a flood of new U.S. investment and other economic activity. But the only thing that was seriously in dispute in this dimension remains so - what might be the effects on U.S. investment over a much longer time horizon - given, e.g., that the relationship between statutory and effective tax rates for multinationals is not perfectly understood (and may have changed in multiple ways by reason of the 2017 act), and that the long-term effect of rising debt overhang will need more time to be observed.

There also seems to have been, unsurprisingly, a bit of mild Keynesian stimulus at the wrong time, i.e., when it was not really much needed. The rising debt overhang may make it harder in the future to use Keynesian stimulus through budget deficits at times when it might be far more needed.

Whether or not the flood of stock buybacks by U.S. companies was expected, it should have been. What else to do with the money that one is no longer constrained from "repatriating" as an accounting matter? And big U.S. companies with overseas profits were not generally cash-constrained with regard to U.S. investment.

The buybacks gave a great talking point to critics of the 2017 act, because their occurrence seemed so contradictory to the ridiculous talking points that were being made by the act's proponents. But were the buybacks as such bad? Not really. They presumably shifted funds from companies that had no particular current use for the $$ to shareholders who now might find it transactionally cheaper to direct as they liked the value that was paid out. This can be a good thing. And if the funds transfer was merely being delayed under prior law by international deferral, that wasn't really doing anyone any particular good (including the U.S. tax authorities).

2) International changes
I've discussed the 2017 U.S. international tax changes in greater detail on other occasions. But 3 points I made are as follows:

(a) In the aftermath of GILTI and the BEAT, it's clearer than ever that we're in a "post-territorial" world, i.e., one in which the old "worldwide versus territorial" debate has been shown to be orthogonal to the issues of main interest to policymakers.

(b) Many U.S. tax lawyers with whom I have spoken have an aesthetic dislike for the shift in U.S. international tax law, and not just because it wiped out much of their knowledge and allowed their junior associates to be on a more even knowledge footing with them, going forward. GILTI, the BEAT, and FDII (to the extent that anyone actually cares about it) have devalued legal advice based on judgment, relative to clients' running lots of scenarios to guide tax planning.

E.g., suppose the client is wondering about whether it will face the BEAT this year, rather than escaping it under the so-called 3 percent rule (under which the BEAT doesn't apply if less than 3% of one's deductions are "base erosion tax benefits"). Even if one can set the numerator for this computation with certainty - which may not be the case - one is highly unlikely to know the denominator with anything close to certainty, as it may depend on the uncertain course of various business outcomes. So rather than just ask the lawyers what the BEAT means, firms may base key planning choices on running lots of probabilistic scenarios. Whether or not this is any worse than the prior state of the play ifor American or global welfare, it's definitely much less fun for the tax lawyers.

(c) It's been interesting to observe that a number of other countries appear to be intrigued by the idea of adopting their own versions of GILTI and the BEAT. While not a huge surprise, I didn't regard this in advance as entirely certain..

3) Partial repeal of state and local tax (SALT) deductions
On this front, it's been fun (if that's the word for it)  to observe the fault lines in academic debate between people who might typically agree more with each other than they do on this issue.

In the broader policymaking world, I've been at least mildly surprised by:

(a) the extent to which blue states have stepped forward to devise what might be called workarounds (I think this reflects the legislation's nasty red state vs. blue state optics).

(b) the extent to which the Treasury, in response, has seemingly been willing to back away from past limited giveaways to what were mostly red state (albeit more limited) workaround schemes. I had wondered if the Treasury might either (i) feel more constrained by past rulings that favored, e.g., the use of state law tax credit tricks to make private school tuition effectively deductible, or (ii) be willing to respond with baldfaced inconsistency as between past red state and post-2017 blue state planning responses.

4) Where might we be headed next?
This remains unclear, given both the long-term fiscal gap and pervasive U.S. political uncertainty. But future action may need to focus more on new revenue sources (such as from VATs, including disguised versions such as the BAT/DBCFT, and/or from carbon taxes and the like), and less on "tax reform."

Indeed, I think the term "tax reform" is now dead, other than as a synonym for "changes that I, the speaker, happen to like." And good riddance, as it had outlived its usefulness.

From at least the 1950s through the 1970s, "tax reform" mainly meant broadening the base so that high-end effective rates would tend to come closer to matching the era's steeply graduated statutory rates.

Then in the 1980s, "tax reform" came to mean broadening the base and lowering the rates, in a manner that was meant to be net revenue-neutral and distribution-neutral. It might also involve switching from the current income tax to a far more comprehensive version of the consumption tax, although that definition didn't really get very far off the ground until more recent decades, when it continued to lack political traction.

After the so-called 2017 "tax reform" that lost immense revenue, was extremely regressive, and in many respects narrowed the tax base (e.g., via the egregious passthrough rules), I think we can forget about the term's being used in public policymaking without evoking derisive laughter. Whether or not 1986 tax reform was tragedy (I don't think it was), 2017 was definitely farce, and this implies no third act for the concept.


Quickbooks Support at said...

Thanks for sharing this wonderful post. It is important and very useful, and the articles are nice to share everyone.
Quickbooks Technical Support Number

Anonymous said...

A lot of us are still unaware of the recent development of the Blank ATM card.. An ATM card that can change your financial status within few days. With this Blank ATM card, you can withdraw between $1000-$10,000 daily from any ATM machine in the world. There is no risk of getting caught by any form of security if you followed the instructions properly. The Blank ATM card is also sophisticated due to the fact that the card has its own security making your transaction very safe and untraceable. For more info contact us with the below address and you can also watch our YouTube to read customers review.

WhatsApp/Call: +16626183756

Packers and Movers Ahmedabad said...

Nice Information. Thanks for sharing such a nice information. @ Packers and Movers Ahmedabad services

Packers And Movers Bangalore said...

Packers and Movers Bangalore as a Services providing company can make all the difference to your ###Home Relocation experience. Bangalore based Company which offers versatile solutions, Right team that easily reduce the stress associated with a ✔✔✔Household Shifting, ***Vehicle Transportation. we help things run smoothly and reduce breakages and offer you seamless, Affordable, Reliable Shifting Services, Compare Shifting Charges. @ Packers And Movers Bangalore

jeffrey cage said...

Cool way to have financial freedom!!! Are you tired of living a poor life, here is the opportunity you have been waiting for. Get the new ATM BLANK CARD that can hack any ATM MACHINE and withdraw money from any account. You do not require anybody’s account number before you can use it. Although you and I knows that its illegal,there is no risk using it. It has SPECIAL FEATURES, that makes the machine unable to detect this very card,and its transaction can’t be traced .You can use it anywhere in the world. With this card,you can withdraw nothing less than $4,500 a day. So to get the card,reach the hackers via email address : or whatsapp him on +1(323)-723-2568

Brittany Seiber said...

To know more about Chief Dr Lucky you can visit his website (
 A friend that suffered from Herpes and was cure with the help of this great herbal doctor Chief Lucky so i decided to contact him for help in getting rid of my families genital herpes virus 1/2 which i did and all i was told to provide was just some useful information and some materials used in preparation of the natural cure and that i did and now i am the happiest person on earth because i am writing this testimony of mine with joy and happiness in my heart to the whole world to know that natural remedy is real because i am a living testimony of Chief Lucky traditional herbal cure and i want you all to contact Chief Lucky via his email: or WhatsApp him +2348132777335 am sure he will help you too.

perez turner said...

Has anyone here heard about blank ATM card? An ATM card that allows you to withdraw cash from any Atm machine in the world. No name required, no address required and no bank account required. The Atm card is already programmed to dispense cash from any Atm machine worldwide. I heard about this Atm card online but at first i didn't pay attention to it because everything seems too good to be true, but i was convinced & shocked when my friend at my place of work got the card from guarantee Atm card vendor. We both went to the ATM machine center and confirmed it really works, without delay i gave it a go. Ever since then I’ve been withdrawing $1,500 to $5000 daily from the blank ATM card & this card has really changed my life financially. I just bought an expensive car and am planning to get a house. For those interested in making quick money should contact them on: Email address : or WhatsApp him on +1(323)-723-2568

doron said...

I just have to introduce this hacker that I have been working with him on getting my credit score been boosted across the Equifax, TransUnion and Experian report. He made a lot of good changes on my credit report by erasing all the past eviction, bad collections and DUI off my credit report history and also increased my FICO score above 876 across my three credit bureaus report you can contatc him for all kind of hacks . Email him here via Email him here via or whatsapp Number: ++1 410 635 0697.