Two new papers on SSRN

I have posted two new papers on SSRN, comprising my new writing so far this year.

One is entitled "Time Is, Time Was: Evaluating the Use of the Life Cycle Model as a Fiscal Policy Tool.." It's available here.

The abstract goes something like this:

What time periods should we use in tax and other fiscal policy to evaluate people’s circumstances, and thus to determine either how they are being treated, or how they ought to be? This question is both fundamental and pervasive.
Standard economic reasoning offers grounds for entirely basing one’s thinking on lifetime models. In particular, the closely related permanent income and life cycle hypotheses support employing a purely lifetime perspective in evaluating people’s circumstances and treatment. The resulting model posits that people make decisions on a lifetime basis, seeking to optimize lifetime utility in the face of both (1) period-specific declining marginal utility of consumption, and (2) whatever preferences they happen to have as between consumption in different periods. Accordingly, in the presence of complete markets (including a lack of borrowing constraints), the question of when one earns a given dollar ostensibly makes no difference regarding when one spends it on consumption. And equivalently, when one pays a given dollar of tax will make no difference regarding how much one spends in any period.
This model applies the same basic logic as a two-goods model in an Economics 101 casebook (featuring, say, pizza and movies), but in a far more complex setting in which its application is considerably more challenging. Despite its ruthless simplification, it likely has some degree of descriptive accuracy. People surely do make some plans across very long time horizons, such as early-life career choice, and subsequent planning (however imperfect it may be) for retirement.
Yet the factors that undermine life cycle view’s accuracy and normative relevance are not limited to borrowing constraints. Also of crucial importance are people’s tendency to treat different periods as effectively separate, and a number of other constraints that would prevent them (even if so minded) from equalizing the marginal utility of consumption as between periods.
In sum, therefore, the life cycle model is not sufficiently descriptively accurate to be treated as more than an important orienting benchmark. Like such other “it doesn’t matter” theories as the Coase Theorem, the Efficient Markets Hypothesis, and the Modigliani-Miller Theorem, its value lies more in its showing us where to look for falsifying conditions, than in its actual empirical validity.

The other is entitled "Ancillary Benefits and Income Versus Consumption Taxation in Liam Murphy's and Thomas Nagel's The Myth of Ownership." It's available here. And the abstract:

Nearly twenty years after the publication of Liam Murphy’s and Thomas Nagel’s landmark book, The Myth of Ownership, it is instructive to revisit the tax base debate (concerning the relative abstract merits of income and consumption taxation) that were prominent in my own interactions with them at the time. In retrospect, I believe that they were right to question the simplistic models that might appear to establish the clear theoretical superiority of “ideal” consumption taxes over “ideal” income taxes. However, our debate at the time also focused on their claim that unconsumed wealth’s ancillary benefits to the wealth-holder – for example, its augmenting one’s “security, political power, and social standing” – importantly contradicted the models' treatment of “savings and wealth [as entirely] subsidiary to consumption and deriv[ing] their value entirely from it.” In retrospect, our mutual sense at the time that ancillary benefits stood at the heart of the income versus consumption tax debate now appears to be misplaced. While what one makes of such benefits may be analytically relevant, it is probably less important than questions of political risk and of lifetime versus shorter-period distributional assessment.

Both will be appearing in edited volumes, relating respectively to an upcoming tax conference at Oxford and a 20-years-later set of responses to Murphy and Nagel.

SSRN follies

Earlier today, I decided to post on the Social Science Research Network (SSRN) two papers that I have written since the start of the year. Once they're up, I planned to link them here and make minor efforts to publicize them to potentially interested readers.

But one of them has been pulled by SSRN due to bizarro malfunctioning on their part that I have as not yet been able to get them to correct.

The paper at issue is called "Ancillary Benefits and Income Versus Consumption Taxation in Liam Murphy's and Thomas Nagel's The Myth of Ownership." It revisits my friendly disagreement with the authors, about twenty years ago, and my rethinking of my views since that time, regarding the relative merits of income and consumption taxes.

Here is the first email I got from SSRN about it:

"The SSRN Processing Team has added the following comment to your submission, Ancillary Benefits and Income Versus Consumption Taxation in Liam Murphy's and Thomas Nagel's The Myth of Ownership (Abstract ID 4459236):

"SSRN's medical screening process has begun. While under review, your paper will be temporarily removed from public view and your My Papers page."

Here is my response:

"This makes no sense. Why would this paper require "medical screening"? It has nothing more to do with medical issues than it does with the Man on the Moon. Please restore the paper for public viewing ASAP."

I also called SSRN and spoke to a live human who said she would get a further response from their reviewers. It came within a couple of hours, and read as follows:

"Dear Daniel,

"Your paper or analysis may be framed around a legal, economic, or other topic question; however, if the data that is used in the analysis is medical or health related, we must use caution around both patient and health information. We conduct medical screening on any such papers that include medical or health data to provide complete transparency and to follow best practices around any health data. Due to the caution that is required around health care or medical preprints for prevention of harm and to meet required reporting standards, SSRN screens these papers to ensure they have appropriate declarations around competing interests and funding as well as ethical approval and trial registration, where appropriate."

Here is how I responded:

"I’m sorry to have to repeat this, but nothing in the paper is IN ANY WAY WHATSOEVER medical or health related. It’s about philosophers and tax policy.

"My paper does NOT use any data - much less data that is medical or health related. It is not within a billion miles of having anything to do with patient or health information. There is absolutely nothing even remotely related to medical content OF ANY KIND.

"Please correct its erroneous suspension as soon as possible."

[Added 5 minutes later:] Now, looking back at all this, I think I've finally guessed the nature of the problem. If  you do a Google search for "ancillary benefits" (a phrase which is in my paper title), you can get something like this:

"Ancillary benefits are secondary health benefits provided alongside group health insurance to cover things like prescriptions and medical bills incurred during hospital stays."

 By contrast, when I speak of "ancillary benefits" in the paper, I am referring to Murphy's and Nagel's discussion of the benefits people may enjoy by reason of wealth-holding other than getting to consume the wealth - for example, its augmenting one's "security, political power, and social standing."

While this makes the whole thing less incomprehensible, I am not at present finding it very mollifying. 

2023 NYU Tax Policy Colloquium

The 2023 NYU Tax Policy Colloquium will have 6 public sessions, each of them on a Tuesday afternoon from 4:25 to 6:25 pm (and to be followed by a small group dinner). Our speakers will be as follows:

September 12: Christine Kim, Cardozo Law School

September 26: Rebecca Kysar, Fordham Law School (visiting at NYU)

October 10: Jeremy Bearer-Friend, George Washington Law School

October 24: Kimberly Clausing, UCLA Law School

November 14: Ajay Mehrotra, Northwestern Law School

November 28: Edward Fox, University of Michigan Law School.

As an aside, while future years are a bit up in the air right now, it is possible that I will resume having weekly public sessions of the Tax Policy Colloquium (with the class meeting in the mornings to discuss the papers before the public session), even on a solo basis without a co-teacher, in which case we'll be back to having 13 papers a year instead of 6.

Should Fox News get to deduct the damages it is paying to Dominion?

There has been a bit of (naive?) outrage out there about the fact that Fox News will presumably get to deduct the $787 million of damages that it has agreed to pay Dominion, thus greatly reducing the after-tax cost (and in effect sharing it with US taxpayers, although it is true that on the other side Dominion will presumably be including and paying tax on its recovery).

From a standard tax policy standpoint, there is actually nothing wrong with this - indeed, it is the correct answer. As I discussed with a Lever News journalist here:

“If your business model is to tell lies so that you’ll get viewers and have lots of advertising revenues, then, odious though this business model may be, the tax system’s job is to tax you on the profits that you actually make from it,” Daniel Shaviro, a professor of tax law at NYU, told The Lever. “And those profits are indeed reduced when you are successfully sued by the victims of your malicious falsehoods.”

But there is another side to it. As suggested by the public outcry when Dominion settled instead of forcing a trial, Fox's malign behavior was and remains grossly under-deterred. Dominion was able to collect for the private harm imposed on its business by Fox's willingness to spew lies into the public realm, but no one gets to collect for the vast public harm that it malignantly inflicted. My own personal view is that the damages for that, if they could be measured and collected, would be many times greater, in billions of dollars, than Fox's entire business is worth.

But there is no law in place allowing such collection for the public harm. And, no such law would be politically feasible (e.g., to deter Fox in the future) even if it were easy to design and clearly constitutional. And, even if such a law were easy to design, it would risk being held unconstitutional, even by an honest Supreme Court. And, holding such a law unconstitutional might even be the best thing, all told, given the possibility that such a provision could be misused to deter free speech that has greater value than Fox's simply poisoning the public realm by lying for profit.

From that standpoint, if one could deny Fox deductions for the damage award - this time, and in the Smartmatic case, and in future instances where it was contemplating defaming private parties while also poisoning the public realm - it would seemingly be a good thing. Only, how could one design such a rule to avoid the political and constitutional problems, and to avoid over-deterring potential torts where there is no negative externality? Maybe it can't be done, but even so there is reason to regret (even if just idly) that Fox must remain under-deterred.

All hands on deck

 The Supreme Court has asked for amicus briefs regarding whether it should grant certiorari in the case of Moore v. United States, in which taxpayers challenged the constitutionality of the transition tax in the 2017 tax act regarding undistributed earnings from controlled foreign corporations (which were taxed at a low rate in combination with the repeal of deferral, under which they would have been taxable upon repatriation).

The taxpayers' challenge is based on the view that Eisner v. Macomber (1920) makes realization  a constitutional prerequisite to taxing income (without apportionment between the states) under the Sixteenth Amendment. The Ninth Circuit rejected this challenge, based on extensive post-Macomber precedents, and held forthrightly that realization is not a constitutional prerequisite to taxing income. 

Macomber has never been expressly overruled by the Supreme Court, but by 1940 (in Helvering v. Bruun) it was very openly refusing to follow it outside of its particular facts, which related to stock dividends. There has probably been no time since, until the right-wing takeover of the court accelerated in the last few years, when there would have been any chance of the Court's relying on it to block a provision such as the 2017 transition tax. But Chief Justice Roberts cited Macomber as apparently still good precedent in his 2012 opinion upholding Obamacare (National Federation of Independent Business v. Sebelius) - a sly nudge that (to mix my metaphors) may now be on the verge of bearing fruit.

It is difficult to exaggerate how destructive a Supreme Court decision reviving Macomber's constitutionalized realization requirement could potentially be. In addition to ruling out efforts to tax unrealized appreciation (e.g., through new legislation such as that proposed by Senator Wyden), it might also conceivably, depending on how broadly it was worded, make impossible the taxation of original issue discount (OID) bond interest until the due date. This, in turn, could unleash tax sheltering that might cost the federal government billions of dollars in revenue, most or all of it from the upper income brackets. That prospect, however, may actually be enticing to several members of the Supreme Court, who appear to want to blow things up.

Not that it would necessarily make much of a difference, but responsible members of the legal tax academy ought to weigh in on this issue if the Supreme Court grants certiorari in Moore v. Harper.

ChatGPT strikes (out) again

 Here is what ChatGPT thinks my novel, Getting It, is about. Not a word of this (attribution of authorship aside) is correct:

"Getting It" is a book written by Daniel Shaviro, a tax law professor at NYU School of Law. The book explores the current state of U.S. tax policy and suggests reforms that could improve the fairness and effectiveness of the tax system.

Shaviro argues that the U.S. tax system is overly complex, inefficient, and inequitable, and that it fails to achieve its stated goals of raising revenue and promoting economic growth. He proposes a number of reforms that would simplify the tax code, reduce tax evasion and avoidance, and ensure that the wealthy pay their fair share.

Some of the specific proposals in the book include replacing the income tax with a consumption tax, increasing taxes on the wealthy and corporations, and reforming the estate tax. Overall, the book is a thought-provoking and accessible exploration of one of the most important and contentious issues in American public policy.

By contrast, here is what the book description at Amazon says.:

"Young D.C. lawyer Bill Doberman, who fancies himself the James Bond of the Potomac. is a liar, a conniver, a phony, a hypocrite, and a cad, and those are his good points. But will they be enough to win him the much desired booby prize of partnership at Ashby & Cinders?

My "Law, Literature, and Social Science" seminar

I have posted on SSRN a syllabus and the weekly discussion questions for the seminar, "Law, Literature, and Social Science," that I am now teaching for the second time. Conceptualizing and executing it took a TON of work, and I feel it's been a successful class both times. Also, I feel that it's fairly novel, albeit perhaps idiosyncratic. Given the unlikelihood that I could either publish this work conventionally or monetize it any way, I thought I'd share it, in the hope that others might find it of interest. It's available here.