This week, Doron Narotzki (Akron; Google Scholar) reviews a new work by Christopher H. Hanna (SMU; SSRN), A New View of Taxation, 28 U. Pa. J. Bus. L. 317 (2026).
Christopher Hanna’s article explains how distinguishing normal investment returns from supernormal returns changes our understanding of familiar tax rules. Hanna connects tax theory, empirical research, and changes in the law to show why accepted conclusions sometimes need another look. His main contribution in this new article is to explain how an idea developed in the literature on consumption taxation helps us examine questions ranging from who bears the corporate tax to how retirement savings and borrowing costs should be taxed.
The article begins with a history of tax theory, moving from early arguments for consumption taxation through the definition of income, international tax principles, depreciation, tax expenditures, and the time value of money. Hanna shows how ideas developed by economists and philosophers became part of legal scholarship and eventually influenced tax policy.
Hanna develops his argument through immediate expensing, which allows taxpayers to deduct an investment’s cost when it is made. Under the familiar explanation of the Cary Brown Theorem, this deduction can produce a result equivalent to exempting the investment’s future returns from tax. However, that result depends on where the taxpayer can invest the tax savings. Drawing especially on Alvin Warren’s work, Hanna explains that an unusually profitable investment opportunity may be limited and the taxpayer may therefore have to invest the tax savings elsewhere at a normal rate of return. Under these conditions, expensing effectively exempts the normal return while leaving the excess return subject to tax. Hanna’s numerical examples make this distinction easy to follow.
The connection between theory and government practice is one of the article’s strengths. Hanna explains how Treasury and the Tax Policy Center incorporated normal and supernormal returns into their methods for estimating who bears the corporate tax. Their analyses show why raising tax rates and reducing depreciation deductions can distribute the tax burden differently, even when the changes raise the same revenue.
Hanna also uses empirical research to reconsider the economic effects of corporate taxation, and the studies he discusses suggest that excess returns represent a substantial share of the corporate tax base. Laura Power and Austin Frerick, for example, estimate that risk-free returns represented approximately one-quarter of the base during 2003 through 2013. Expensing helps explain why a tax described as an income tax may function substantially as a tax on excess profits. This provides a reason to reconsider broad claims that corporate taxation necessarily discourages investment. Hanna also recognizes an important international limit: high taxes on profits associated with mobile intangible assets can encourage companies to move those assets to lower-tax jurisdictions.
His discussion of international taxation applies the same reasoning to the original global intangible low-taxed income and foreign-derived intangible income regimes. Hanna explains how these regimes’ allowances for deemed returns on tangible assets approximated an exclusion for normal returns. The 2025 One Big Beautiful Bill Act adds another dimension. Removing those allowances broadens the foreign inclusion regime, while restored domestic expensing may preserve the domestic export-related deduction’s focus on excess profits. Hanna distinguishes the approximately 14 percent effective rate on foreign-derived deduction eligible income from the 14 percent foreign-tax break-even rate for net controlled foreign corporation tested income. The latter regime has a 12.6 percent U.S. rate before foreign tax credits, assuming the full deduction. The distinction shows why understanding a provision requires examining how it works with the surrounding rules.
The retirement savings discussion offers an especially clear example. Traditional and Roth individual retirement arrangements can produce equivalent results when tax rates remain constant and investments grow at the same rate. Hanna shows how the comparison changes when the unusually profitable opportunity is limited and the additional investment, made possible by the traditional arrangement’s deduction, earns only a normal return. The Roth arrangement then has an advantage because the excess return escapes taxation. His example identifies the assumption that changes the result and gives readers a concrete reason to revisit a familiar comparison.
Hanna’s further applications raise useful questions for future research. He identifies a possible efficiency justification for the corporate alternative minimum tax, based on expensing and the use of tax depreciation instead of book depreciation. He also asks whether some interest expense should be deductible against taxable excess returns from an expensed investment. The answer may depend on whether those returns come from capital, skill, or luck. These discussions identify the assumptions that matter and provide a clear starting point for further research.
Hanna makes technical ideas accessible while showing why they matter for tax policy. His article gives scholars a useful framework for examining existing rules and developing new research. For teachers, the examples also provide a practical way to connect tax theory with the choices reflected in the Internal Revenue Code.
Here is the rest of this week’s SSRN tax roundup:
Victor Amoguez (Independent), The CARF Ruling Against Eliseo Soriano and the RICO Question (Oct. 24, 2026)
Samuel D. Brunson (Loyola Chicago), Shareholder Democracy, Dual-Class Equity Structures, and Pass-Through Taxation (Oct. 26, 2026)
Mianmian Ji (Huazhong U. Sci. & Tech., Sch. Econ.) & Dongmin Kong (Huazhong U. Sci. & Tech., Sch. Econ.), Measuring Corporate Tax Non-compliance Risk Using Public Disclosure (Oct. 24, 2026)
Lyla Latif (U. Nairobi), Household Impact of the Draft 2027 Budget Policy Statement and Treasury Circular No. 10/2026 of the Republic of Kenya (Oct. 24, 2026)
Jennifer Levine (Quinnipiac), Financing Innovation: Modernizing the Qualified Small Business Stock Rules, 80 Tax Law. __ (forthcoming 2027)
Blaine G. Saito (Ohio State), Democratic Equality and Taxation, 6 Am. J. L. & Equality 230 (2026)
Karis Curios Junior Samba (U. Ziguinchor, Sénégal), Legal Diplomacy Between UEMOA and OHADA: Regulatory Coordination, Conflicts of Competence, and Prospects for African Integration (Oct. 24, 2026)
