Wednesday, September 28, 2022

Tax Policy Colloquium for September 27: Taub, No Income Taxation Without Basic Accommodations

Yesterday, our presenter was Jennifer Taub, whose above-titled piece is an early draft relating to a broader book project. The latter will not mainly be about tax, but aims to influence broader public debate. 

The tax piece of the project (yesterday's focus) offered what one might call an opening bid regarding how Democrats and progressives should approach federal income tax reform. It expresses linked concerns about rhetoric and substance.

On the rhetorical side, it responds to a decades-long disparity in the approaches of the two major parties. Republicans repeatedly offer large tax cuts to their friends, without regard to the long-term budgetary implications. Democrats, by contrast, worry at least intermittently about blowing up the deficit. Hence, they often will settle for saying there should be no tax increases for people below the top (e.g., those earning $400,000 or more). Taub wants to reclaim tax cut rhetoric from the Republicans, while applying it to the general public rather than to the usual targets of Republican largesse.

While Democrats have recently emphasized "taxing the rich" - which polling data suggests has gotten some positive feedback - this doesn't offer any clear direct benefit to the general public. While the revenues might conceivably be used to help fund, say, better healthcare or education, there is no clear link to which Democrats could point.

Not directly mentioned in the paper, but I think important in the background, is a concern (which I share) that the US faces a broader crisis of rising fascism, and that the fascists are aided by a widespread feeling that neither the Democrats nor conventional politics more broadly can offer anything significant to improve people's lives. "You can't have nice things." Making a visible positive difference in people's lives could help a great deal in defeating fascism.

Turning from rhetoric to substance, the paper expresses especial interest in bettering the lives of the bottom 50% or so among us. They would benefit both from having more cash to live on, and from the easing of such needless vexations as those around income tax filing (which can both be costly and yield anxiety), and over-withholding that is only refunded much later without interest.

A key term in the paper is "basic accommodations." This refers to the amount one needs to pay for such items as rent, "electricity, heat, cable ... internet .... [f]ood, transportation, insurance premiums, co-pays, [and] laundry." It thus is related to the concept of basic necessities, but is a bit more expansive, including also items that aren't life-or-death but that have become parts of Americans' basic expectations regarding what everyone should have as regular parts of contemporary life.

The paper suggests that one should not face income tax liability until one's income is great enough to fund providing these basic accommodations. And it argues that one cannot meaningfully participate in politics until these have been met.

To this end, it proposes what it calls the People's Tax Shelter (PTS). In particular, this involves creating exemption amounts of $50,000 (single), $70,000 (head of household), and $100,000 (joint return). Withholding would likewise be changed, perhaps by exempting the first $25/hour of one's wages from withholding. In addition, marginal tax rates for labor income (up to a ceiling) would not exceed those for investment income (i.e., dividends and capital gains). The paper also contemplates, as linked changes, (a) capital income tax reform (such as the Wyden proposal to tax currently, or charge interest on the benefit of deferral, for high-end taxpayers' unrealized appreciation, and (b) the enactment of a VAT.

Here are some quick thoughts on my part regarding the proposal in its current form:

1) I share the paper's concern both about the affordability of basic accommodations for millions of Americans, and about the steep decline of democratic (yes, small-d) accountability and efficacy. People feel - rightly! - that they have zero influence on public policy and that those who determine (or at least can block) policy outcomes have little concern with their welfare. But I don't think that the daily struggle to meet basic accommodations is at the core of today's pervasive political dysfunction. In that regard, we have a whole lot of other problems (e.g., the roles played by money and by the promulgation of falsehoods). Thus, I might not link the two problems in the same way that the paper does.

2) I am uneasy with calling the proposal the People's Tax Shelter. To me (although views may differ), this tends to legitimize abusive tax shelters by analogizing them to a basic structural feature such as exemption amounts.

3) While I would certainly support enactment of a VAT (assuming that the revenues are used in such a way as to improve overall federal tax and spending policy by my lights), it's not a great rhetorical fit with PTS.

4) The proposed large rise in exemption amounts (plus VAT) brings to mind Michael Graetz's tax reform plan, the main purposes of which he well captured in his book title "100 Million Unnecessary Returns." Here, however, while there is some overlap, the focus is more on after-tax cash benefit to the people who would be removed from the federal income tax rolls. And if one is thinking about aiding these people financially, whether so they can meet "basic accommodations" or to offset a VAT's distributional effects, one faces some classic design questions. Say we are considering a $100,000 exemption amount for joint returns. The tax saving from this depends on the marginal rate at which the last $100,000 (or less) of one's income would otherwise have been taxed. E.g., if it would have been taxed at 40%, the taxpayers save $40K of tax. If 15%, only $15K. If one's taxable income was under $100,000, some of the tax benefit is lost (assuming nonrefundability and that one can't carry it over to other taxable years. 

This line of thinking naturally leads one to consider such alternatives as refundable credits. And that in turn leads one to think about universal basic income (UBI). Plus, once one has gotten to there, then, given the existing UBI debate, one may also want to think about whether one favors or opposes work requirements. And if one favors them, should jobs (and what kind) be provided (and on what terms), who is excepted from such requirements, should related aspects such as childcare and transportation be addressed too, etcetera. All this goes well beyond the contours of federal income tax reform as it often is conceptualized, but a focus on the welfare of the bottom 50% (many of whom don't pay a great deal of income tax in a given year, if any) makes it part of the relevant inquiry.

5) I wonder about the workability of relying on hourly wages to implement the reduced withholding that would pair up with increased exemption amounts. We don't always know what someone's hourly wage is (e.g., what is mine?), plus there is a risk of mismatch when the exemption amount and the withholding rule operate on different tracks (annual vs. hourly income). Better to key the two more closely together, although this would require addressing scenarios such as multiple employers?

Thursday, September 15, 2022

Tax policy colloquium: Gale and Thorpe, Rethinking the Corporate Income Tax: The Role of Rent Sharing, part 2

 My prior post set the stage for responding to the Gale-Thorpe paper's finding that, under plausible empirical surmises, firms' sharing of their excess returns with particular employees may do little if anything, to reduce one's estimate of the progressivity of corporate income taxation. Here I turn to some of the main issues that the paper's analysis raises.

1) Are highly profitable US companies' excess returns rents, or merely quasi-rents, and does it matter?

In economic theory, rents derived from ownership or control over a limited asset or resource, attained without any expenditure or effort by the resource-holder, and that exceed any opportunity cost of reaping them, can efficiently be taxed. Moreover, the incidence of the tax can't be shifted by the resource-holder to anyone else.

But there are two main problems with calling excess returns rents in practice. First, given the role of luck, observed ex post high returns don't prove the existence of a high ex ante expected return. One would not, for example, try to measure the return on investment (ROI) from New York State lottery tickets by looking just at the winners' ROI.

This leads to the quasi-rents issue that the paper indeed notes. For example, even if successful patents earn a lot, what about all the failed efforts to create valuable ones? Might taxing the resulting excess returns create efficiency and incidence issues after all?

Second, I'd argue, as did my old friend David Bradford, that excess returns are definitionally returns to labor in a certain sense. This need not mean strenuous effort, but at least the exercise of choice.

Suppose I find $10,000 lying on the sidewalk. Not being an economist (as per the old joke), I believe that it is really there, and hence I pick it up. Clearly, I have been lucky. But in addition, I walked by the spot, looked down, and stooped to clutch in my excited (?) fingers. In that sense, I think it's useful to say that this was a return to my labor (as well as to luck).

This does not mean that I "deserve" the $10,000 as the fruit of my effort, earned by the sweat of my brow, etcetera. As I'll discuss further below, there's a huge ideological component, at least in US ideology,* to saying that, because something is labor income, it therefore is personally deserved. 

*Well, not just US ideology, if you think, say, of Locke's Second Treatise.

The labor / choice component of deriving excess returns, like the ex ante vs. ex post issue in measuring excess returns, raises the possibility - excluded by definition under the concept of pure economic rents - that companies' excess returns actually can't be taxed completely efficiently and without the possibility of incidence-shifting.

But this seemingly big theoretical point may actually make less of a practical difference in evaluating how to tax companies' ex post excess returns than one might initially have thought. Here are several distinct points that may all lie in the direction of saying (to overstate it a hair): So what?

a) The margins that are being taxed here - e.g., pertaining to seeking to hit an ex post home run via risky investment with a high upside, along with supplying labor to the same end, may not be very elastic. Hence, the behavioral responses that result in inefficiency and incidence-shifting may be fairly modest.

b) A given country that is pondering how to tax excess returns has an externality reason for doing so. The deterrence of future highly profitable investment may have spillover effects that are global, not just local, whereas one gets the revenue. Now, perhaps one should in general be cautious about urging countries to exploit positive spillovers in this way. But, given highly profitable companies' immense global economic and political power, I suspect that the end result may not be too bad. Indeed, they may have sufficient clout for one to suspect that on balance they will be undertaxed, not overtaxed.

c) The downside of reduced risky productive effort may take a while to manifest, causing it to be borne more by future than present generations. Suppose that one thinks that  our generational policy is not in fact unduly tilted towards us relative to them (as, for example, Neil Buchanan argues here). This might then significantly mitigate one's weighing of the future harm relative to the current benefit.

2) How should we define progressivity?

Here I raise a question, not about the results of applying a given metric (e.g., how fast do tax burdens need to rise with "income" - or whatever - in order for it to count as "progressive," but rather how we should define the metric itself.

a) ECI vs. other metrics - Expanded cash income, or ECI, is the metric used by the Brookings models that underlie the analysis in the Gale-Thorpe paper. As I noted in the prior post, ECI is an imperfect standard for economic income. But economic income is itself a rightly controversial metric. Indeed, it lies oddly and perhaps uneasily in the middle, between the metrics suggested by a snapshot approach on the one side of the spectrum, and a lifetime (or even multigenerational) approach at the other side.

From a snapshot perspective, the right standard (or at least one closer to being right) is wealth. This might perhaps be expanded to include expected future earnings - at least for high-wage people who can borrow against the expectations, like working, and anticipate earning a lot more than their support needs. If one favored wealth as one's perspective, economic income arguably would undervalue the benefits enjoyed by wealth-holders, by reason of including only the current period's return to the wealth.

From a lifetime perspective, the proper metric is lifetime income + transfers received (such as through bequests). This is the classic consumption tax baseline, reflecting the view that normal returns to saving merely represent how one has chosen between present and future consumption. This perspective is used for example, in generational accounting studies as well as recent work on intra-generational accounting. From this standpoint, economic income is mistaken in including the normal return, and also confuses lifecycle effects with permanent effects. (E.g., if I have saved adequately for retirement, then in the year when I retire my income declines, due to the loss of the current year labor income component, but in fact I am no less well-off than previously).

b) Labor vs. capital - There has been a lot of talk in recent years about the tax system's unduly favoring capital relative to labor. But one might also characterize the same set of concerns, in very different language, as involving high-earners (whether from self-earned lifetime income or those from bequests) relative to low-earners.

Because of our imprisonment by misleading rhetoric, it makes a great deal of sense for people on the left, who favor a more progressive system, to say that we are unduly favoring capital relative to labor. And it makes equal sense for people on the right, who favor a less progressive system, to say it's all labor, with capital (properly defined in terms of the risk-free return that it can earn) being just a thing rather than basis for applying the vertical metric.

Once again, in American (but not just American) ideology there's all this stuff honoring labor income as deserved, earned by the sweat of one's brow, etcetera. It's a version of the "myth of ownership" that Murphy and Nagel attacked in the book bearing that name.

But high-wage needn't mean that you deserve it. You are still lucky, may be rewarded for doing bad things, may be reaping the advantages of privilege, etcetera.

To me, high-wage is a descriptive term that is entirely neutral in terms of its relationship to desert. But given how people view it, I would anticipate continued debates about whether it's actually about labor versus capital. (And I also don't want to wholly discount here the relevance of "capital" as such - a term that I may be writing about after my somewhat arduous current semester is done.) But one should firmly in one's mind distinguish between the rhetorical issues and the substantive ones.

3) Other topics

At this point in the annual cycle I am keeping too many balls in the air to devote time and space here to the many other interesting issues raised by the Gale-Thorpe paper. But here is a list of some of them:

--Rent-sharing is a very interesting topic, with multiple implications for how to think about taxation, labor markets, efficiency, etcetera.

--How should the shareholder-level tax figure in one's analysis of corporate income taxation and xcess returns?

--To what extent does the existing US federal income tax fall on excess returns as compared to normal returns? How should these two components be defined and measured?  How different would tax incidence be, say, under a VAT or DBCFT?

--Since rent-sharing incurs in part through self-dealing by corporate managers, what are the links between the issues raised here or in the paper, and issues of corporate governance?

Tax policy colloquium: Gale and Thorpe, Rethinking the Corporate Income Tax: The Role of Rent Sharing, Part 1

 This past Tuesday, we had our first public session of the year for Year 28 (!) of the NYU Tax Policy Colloquium. Our guest was Bill Gale of the Brookings Institution, discussing his co-authored (with Samuel Thorpe) paper Rethinking the Corporate Income Tax: The Role of Rent-Sharing.

 A couple of preliminary side notes: Public sessions will be available through Zoom while they are live.  We had some technical issues with this at the session, which I am hoping will be cleared up in the future. There are also some issues regarding remote participation in live vs. hybrid classes that I am trying to get my hands around.

Second, we had a post-session dinner with 9 attendees (students plus colleagues at NYU and elsewhere), for the first time in 3 years. What a relief to be lurching towards post-pandemic normality, even if (given Covid's continued threat) we are not entirely there yet.

Okay, onto the paper itself. It raised a bunch of interesting issues, and I will offer a brief run-through here regarding the main ones and my thoughts about them.

1) Background - What the US corporate rate should be is a big political issue these days. The 2017 act lowered it from 35% to 21%. But it likely would have been raised somewhat, either this year or last, by the Democratic majority in Congress if not for Manchin's and Sinema's opposition. If the Democrats keep the House and add at least 2 Senate seats in the 2022 elections, it is plausible that the corporate rate will indeed be raised next year. So there is a real-time public policy debate going on here.

There is also a rich and ongoing economic literature regarding  the incidence of the corporate tax. I see this paper as fitting into what I would call "Stage 5" of this debate.

Stage 1: As in the classic Harberger 1962 paper, the view that saving and investment are inelastic in a closed economy supports the conclusion that the incidence of the corporate tax falls on all investors, suggesting that it is progressive.

Stage 2: A shift to the view that the US has a small open economy in which investment capital can easily exit leads to the view that the incidence of the corporate tax falls on local resource owners (including those who would supply labor), suggesting that it is not so progressive.

Stage 3: The view that corporate profits consist largely of excess returns that are reasonably viewed as rents supports viewing the corporate tax as borne by shareholders, suggesting that the corporate tax is progressive (as well as fairly efficient).

Stage 4: The view that rents are to a significant degree shared with workers, whose wages rise with the profits that result from earning rents, arguably suggests that the tax might not be so progressive after all, at least if one thinks about progressivity in standard "capital versus labor" terms.

Stage 5: Here is where the paper comes in. Relying on empirical evidence that excess returns are mainly shared with high-income labor, and basing vertical distributional rankings on ECI (expanded cash income), the paper concludes that the corporate tax is actually fairly progressive after all, and indeed comparably so to where the incidence / progressivity literature was at Stage 3.

The core results are provided in Table 2 at page 36 of the paper. Choosing the values that the literature arguably suggests are most plausible (regarding both the % of rents that are shared, and who gets them as between higher-wage and lower-wage workers), the corporate tax is arguably slightly more progressive than prior Brookings models (with rents but not rent-sharing) had shown, albeit slightly less progressive as to the top 1%.

This supports taking a favorable view of increasing the corporate tax rate, at least within the range that Democrats appear to be contemplating, and indeed all the more so if one views the excess returns as rents that can efficiently be taxed. (More on that below.) Even the slight estimated decline in progressivity as to the top 1% arguably calls merely for using different instruments to reach that cadre, if one's normative views support doing so.

Before moving on to other issues, I'll just mention one concern about the data. Even if one agrees that economic income is the right vertical rankings metric, ECI inevitably falls short of it, in particular by reason of its excluding unrealized appreciation. This could conceivably become a significant concern, upon a fuller evaluation than one can give it in a law school colloquium session.

E.g., consider that owner-employees' ECI depends on their W-2 wages, plus various other things but not unrealized appreciation generally. This could be an especial concern when the likes of a Jeff Bezos or an Elon Musk or a Larry Ellison really doesn't care how much he pays himself, since to a degree (despite less than 100% ownership) it is like the left pocket sending funds to the right pocket.

I am not entirely sure how stock option grants fit into ECI. My guess is that they might enter into it when they become includable for tax purposes. But stock option tax planning often results in their being  taken into income at far less than what one might think is actually true value as discernible to insiders at the time.

To be sure, an owner-employee who underpays herself given her benefit from stock appreciation in effect causes the Brookings model to classify the underpaid earnings in entity-level capital income, which it apportions mainly to high-income individuals given its empirical assumptions. But at this point it occurs to me - and the relevance of this point requires further reflection than I have had  time to give it - that rents are shared very unequally among shareholders.

This is the familiar "early bird" point. Suppose we agree that Amazon and Apple are earning huge excess returns that we might or might not call rents. Should you and I immediately start buying lots of Amazon and Apple stock? Not necessarily, because the expected future returns are built into the stock price. It's the early movers, the people who had shares before these firms' outsized success became general public knowledge, who captured huge excess returns relative to what they paid for the stock. (Leaving aside for now the important "sweat equity" point that they may have invested labor for which they were fully compensated at the value that became manifest ex post - I will get to this in a bit.

Is the "early movers" point an important one that might lead corporate tax incidence models, even without rent-sharing, to underestimate the incidence of the corporate tax. Suppose that the early bird windfalls go especially to people who turn out (because of those returns) to be higher in the distribution than shareholders generally. I'll just note this question for now and move on, albeit in my next post rather than this one.

Wednesday, August 31, 2022

Possible writing project

Right now I'm deep under water, what with the start of a new semester in which I'm teaching both my Tax Policy Colloquium (covering a bunch of new papers every year) and my first-ever Law and Literature seminar (with a novel or shorter work each week). Plus I have several works in progress that I need to get back to once I can, which will not be right away.

But as I think about down the road, I have a project in mind that I am wondering about - would it be of interest? - Is it publishable? - Would it attract interest in the field? - etcetera. It would be a book, but unlike all of my previous books a collection of essays, mostly but not all previously unpublished, that are linked thematically only at a broad level.

As background, some years ago I wrote a piece about Henry Simons, available here. And this past summer I wrote a piece about Stanley Surrey, available here. The latter hasn't appeared in print yet, but I've promised it to a volume of pieces about Surrey in the aftermath of the belated publication of his memoirs.

It occurred to me: What if I had a book of such pieces, about prominent 20th century American tax academics? Each piece would take whatever angle I thought was interesting with respect to that individual, as opposed to attempting biography or comprehensive review. For example, if I wrote about E.R.A. Seligman, the question that would interest me starting out is why on earth did he write that crazy American Economic Review piece / amicus brief in Eisner v. Macomber that led to the absurd result in that case? (This is not suggested muckraking - he was evidently a high-minded guy, but somehow he got onto this train, and I don't know if there's anything in his archives, if they exist, that would shed light on his intellectual process.)

Others I might write about include a couple of people I knew well - Walter Blum and David Bradford. Very possibly, William Andrews, whom I also knew decently well. Plus definitely Boris Bittker, and I'd think about whom else. But definitely not anyone in the Warren-Graetz generation or younger.

Obviously this would not be anything remotely approaching a book with mass market appeal. But maybe enough appeal within the biz to be worth doing? Would a university press consider publishing such a thing? I just don't know - offline feedback welcome!

Monday, August 29, 2022

The Rolling Stones' early to mid-1960s singles

 When I go to the health club, I need to listen to music to get through the drudgery, and for it to work I really need to be familiar with what I'm listening to.

The last few times, I've been playing my way through the Rolling Stones' collection of singles through about 1972, called the London Years or something like that. Have often had the Beatles in mind while listening, since they were operating in parallel at this time. Some quick thoughts:

1) When the Stones play standard blues stuff, they're very good, but not I think brilliant or revelatory.

2) On the other hand, Jagger and Richard were utterly brilliant pop singles songwriters. E.g., although Satanic Majesties was a bust album (albeit, with a couple of good songs), they wrote some of the era's definitive psychedelic singles.

3) While their production and finish could sometimes be more slapdash and less thought-through than the Beatles', that was more of an issue on the albums' second-tier cuts. Their singles are imaginatively and cleverly produced, with orchestra etc. added for color effectively.

4) One greatly appealing feature of the early Jagger is his vulnerability. This got lost when he became a preening superhero.

5) Brian Jones was a great rhythm player and especially welcome, as the 60s went on, for his mania about finding interesting and odd instruments to play instead of just guitar.

6) Bill Wyman was a simpler bass player than McCartney. Much less melodic range and counter-melody. But very in-the-pocket and effective, often just what the music seemed to need.

7) Obviously Charlie Watts was a great drummer. He and Ringo seem to have done similar, very interesting things in the high psychedelic period. (E.g., Rain vs. Ruby Tuesday or Dandelion.)

8) Stopping here because I haven't quite reached 1968 yet, a year in which they dramatically changed and started pushing towards the high point of Exile on Main Street.

Wednesday, August 17, 2022

Ten thoughts about the new book minimum tax

 Now that the Inflation Reduction Act has been signed into law, I thought I'd add some quick comments about it - or specifically about the book minimum tax. which reaches the "adjusted financial statement income" (AFSI) of "applicable corporations." In general, an applicable corporation has had annual AFSI averaging $1 billion over the last three years. (But this is a bit of a one-way ratchet - once on, something extra is needed to get one off the list of companies subject to the tax.)

AFSI is the net income or loss reported on the company's "applicable financial statement," but with certain adjustments. Perhaps the biggest adjustment is that accelerated depreciation deductions, to the extent in excess of those already taken into account in the book measure, are subtracted from AFSI and thus do not lead to minimum tax liability.

For a U.S. company, this is in effect a worldwide tax at a 15 percent rate, with foreign tax credits being allowed. So the marginal reimbursement rate (MRR) for foreign taxes paid generally is 100% until one reaches the limit. There are also rules for foreign-parented multinational groups that have either US subsidiaries or foreign subsidiaries with a US trade or business. In general, affiliated groups are taxed as if they were a single company. However, as got a lot of attention in the press, Senators Sinema and Thune succeeded in removing from the final version a provision that would have aggregated the income from unrelated portfolio companies under common ownership of an investment fund or partnership. This may help, e.g., with their avoiding the $1 billion AFSI test.

With that as background, here are ten quick comments:

1) From an empirical standpoint, it will be very interesting to see how this works out. Who ends up paying how much under it? We are going to learn a lot from what happens in the next few years - not just the payment of minimum tax, but also effects on how much US and foreign tax one pays because the provision affects the payoff to minimizing them.

2) For big companies that are guaranteed to meet the $1 billion AFSI test, the most obvious tax planning idea is manipulating AFSI. That, in turn, would most obviously involve manipulating reported book income.

Accounting professionals almost unanimously HATE the incentives that this creates. But it is worth noting that the managers in publicly held companies often appear to be interested in overstating financial statement income relative to "true" or economic income. This pushes the other way, so it doesn't automatically need to result in overall distortion being worse. More complicated, certainly.

Studies of the book income preference that was in the corporate AMT for the years 1987-89 showed a lot of increased manipulation, leading (the authors concluded) to a less informative measure for financial markets. But note that the provision at issue there was pre-announced as being for 3 years only. An ostensibly "permanent" measure may play out differently.

3) A second way of reducing one's minimum tax liability is to make more investments that can be expensed for tax and thus also for AFSI. But if these are real investments then there are certainly issues of expected pretax profitability that will be important to the resulting behavior.

4) Paying more foreign taxes, or at least not incurring costs to avoid them, is another tax planning response. A 100% MRR for foreign taxes does not on its face make one want to pay more of them, and note that the minimum tax also in effect has a 100% MRR for US corporate income taxes otherwise paid. But there are still various margins here that tax planners will explore. Beyond being less willing to incur real costs in avoiding foreign taxes, one may also have extra reason to try to incur taxes in lieu of other expenses that would merely be deductible from AFSI.

5) The tax presumably discourages mergers that would lead the parties to collectively meet the $1 billion AFSI test (where they would individually fall short). But it encourages mergers between companies that would be subject to the minimum tax and those that are paying more than 15% globally. In effect, the latter's "excess" global tax payments go to offset the former's minimum tax liability instead of being "wasted."

6) There is an AMT credit, so that if one (say) has a 10% global rate in Year 1 and a 20% global rate in  Year 2, one gets to offset the Year 1 minimum tax liability against one's Year 2 US regular corporate tax liability. But I gather that a Year 2 minimum tax credit couldn't be used against Year 1 liability. Plus, one doesn't get a US minimum tax credit against foreign tax liabilities that proved to be high in the "wrong" year.

7) Companies subject to the tax will have an incentive to do careful planning under the provision. E.g., they may want to ensure that their global rate on AFSI, as computed under the rule, stays at about 15% annually rather than fluctuating up and down (although the AMT credit does address this issue to a degree).

8) I have written elsewhere about my view that, all else equal, minimum taxes are generally not a great approach. But there is a "compared to what" issue in the provision's defense (just as there is with respect to its use of book income) given that other, arguably superior, provisions were not going to be passed.

9) While the new book minimum tax is not identical to Pillar 2 of the OECD/G-20 global tax  reform framework, Reuven Avi-Yonah and Bret Wells have recently argued that it moves significantly in the direction of increasing US compliance therewith.

10) One thing we learned from the 1986 Act's corporate AMT is that these provisions may tend to die the death of a thousand cuts over time. Lobbyists seeking to narrow the corporate AMT base often find that this is sufficiently lacking in salience to be easy pickings legislatively. Hence the 1986 corporate AMT moved far in the direction of undoing itself even before it was officially repealed. I would certainly be unsurprised if this happened again. Indeed, it has arguably already started with the depreciation change, which might conceivably prove to be a harbinger of future legislative efforts taking out additional items.

Sunday, July 03, 2022

Updated Surrey piece

 It turns out that the Stanley Surrey piece I posted on SSRN was not actually my most current draft. I somehow posted one that lacked the brief Conclusion  that goes at the end. The truly current version (which I believe is the same as that which I posted, except for its having the Conclusion) is available here.

Friday, June 24, 2022

Fall 2022 NYU Tax Policy Colloquium speaker schedule

 Here is our schedule of public colloquium sessions with speakers for fall 2022. Assuming that COVID restrictions continue to decline, all sessions will be fully live, and will be followed by dinner nearby with the speaker and a group of about 8 people total (including interested students). All sessions will meet from 4:25 to 6:25 pm, in the NYU Law School main building, Vanderbilt Hall, room 202.

1) Tuesday, September 13: William Gale, Brookings Institution.

2) Tuesday, September 27: Jennifer Taub, Western New England University Law School.

3) Tuesday, October 11: Bridget Crawford, Pace Law School.

4) Tuesday, October 25: Alex Raskolnikov, Columbia Law School.

5) Tuesday, November 15: Goldburn Maynard, Indiana University, Kelley School of Business.

6) Tuesday, November 29: Ariel Jurow Kleiman, Loyola Law School, Los Angeles.

A few quick additional notes: (a) I am hoping that we will be able to offer "hybrid" attendance by people who are interested in the sessions but can't make it to our NYU site. But don't know yet how the law school will be operating in this respect.

(b) In general, these public sessions meet every other week, Each is preceded by a class-only session discussing the same paper just with the students (albeit possibly with the author's participation, in person or remotely). However, the November 15 session comes three weeks after its precursor, because Tuesday, November 8, is Election Day. Also, our first week of class is Tuesday, August 30, but this will be a general introductory session for the students, not focused on a particular paper.

(c) Back in the days when we had 14 public sessions instead of 6 -  because the semester was a week longer, and I had a co-convenor with whom to share the work - I took a certain pleasure in the concept: "And now for something completely different." In other words, each week's paper might have absolutely nothing in common with that from the week before. I both found this personally refreshing and felt that it helped to show the students just how intellectually diverse and far-ranging a field tax policy is or can be. The downside was that it could be a bit overwhelming for people.

(d) This fall, by contrast, with just 6 papers, I feel the optimal approach is a bit different. There will be greater topical continuity, and something of a general theme. Most of the papers will address issues around inequality, in one way or another - although I have told the authors that this should not entirely get in the way of their writing and presenting whatever is of greatest current interest to them (and would work for us). Still, this focus will largely hold. That said, there will be a wide diversity of approaches among our speakers, who differ greatly in their interests and methodologies. Also, inequality itself is a very broad topic, as the papers will collectively help to make clear.