TaxProf Blog

Legal Education:

1. New York Magazine, Everyone Is Cheating Their Way Through College. What Happens When They Get To Law School?
2. Jeff Sovern (Maryland), What Could A Hostile Federal Government Do To Law Schools?
3. Wall Street Journal, The Solution To Cheating On Exams With ChatGPT Is Painfully Old-School: Blue Books
4. Samantha A. Moppett (Suffolk), Preparing Law Students For The Artificial Intelligence Era
5. Chronicle of Higher Education, Statement On Academic Freedom And Harvard By Conservative Scholars, Lawyers, And Former Government Officials
6. ABA Legal Ed Council, Report On Law Schools With Distance Education J.D. Programs
7. New York Times, Professors Are Using ChatGPT. Students Aren’t Happy About It
8. ABA Journal Op-Ed (Austin Gergen), A Student’s Perspective On The AI Revolution In Law School
9. Note, The Tradition of History at Harvard Law School
10. ABA Journal, How Some Law Schools Are Training Students In Generative AI Wall Street Journal, How To Stop Students From Cheating With AI

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Tax:

1. Paul Caron (Dean, Pepperdine), Tax Policy In The Trump Administration
2. University of Texas Law School, 10th Annual Texas Tax Faculty Workshop
3. Bloomberg, Tax Prof Must Pay New York Non-Resident Income Tax On Days He Taught Law Students On Zoom From His Connecticut Home When Cardozo Was Closed During Covid
4. Edward Morse (Creighton), Important Developments In Federal Income Taxation (2024)
5. Blaine Saito (Ohio State), Tax Regulations In A Loper Bright Light
6. John Holden (Indiana) & Kathryn Kisska-Schulze (Clemson), The Taxable Future Of College Sports
7. Conor Clarke (Washington University) & Wojciech Kopczuk (Columbia), Measuring Income And Income Inequality
8. Alex Raskolnikov (Columbia), Law For The Rich
9. Jonathan Choi (USC; moving to Washington University), Review Of Work Requirements And Child Tax Benefits
10. Mitchell Gans (Hofstra), Has The Supreme Court Already Resolved How Loper Bright Applies To Section 7805 Tax Regulations?

Editor’s Note: If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.

Faith:

1. White House Statement, President Trump Names Three Professors To Religious Liberty Commission’s Advisory Board Of Legal Experts
2. The Dispatch (Patrick Brown), Reviews Of Ross Douthat’s Believe: ‘A Mere Christianity For The 21st Century’
3. Washington Post (John Connelly (UC-Berkeley)), Pope Leo Teaches A Lesson From Jesus That JD Vance Should Listen To
4. Wall Street Journal Book Review (Andrew Crumey), The Spiritual Journey Of Albert Einstein
5. Christianity Today (David Bahnsen), Work And The Meaning Of Life

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https://taxprof.typepad.com/taxprof_blog/2025/05/this-weeks-ten-most-popular-taxprof-blog-posts-4.html

Adam Chilton (Chicago; Google Scholar), Jacob Goldin (Chicago; Google Scholar), Kyle Rozema (Northwestern; Google Scholar), & Sarath Sanga (Yale; Google Scholar), Occupational Licensing and Labor Market Mobility: Evidence from the Legal Profession:

We study how state occupational licensing requirements shape labor mobility across U.S. legal markets. Drawing on newly collected data, we link variation in state bar exam waiver policies to lawyers’ license acquisitions, professional disciplinary records, and educational histories. We find that bar exam waivers increase the number of experienced lawyers obtaining a new license by 38 percent, but that the additional lawyers are subject to more professional discipline and tend to have graduated from less selective law schools. Our results suggest that state-level occupational licensing regimes can create a trade-off between the supply and quality of professionals in an industry.

Conclusion In this paper, we investigated the impact of occupational licensing requirements on the labor market mobility of lawyers and on the quality of lawyers offering legal services in a state. We specifically studied the impact of bar exam waivers for experienced lawyers on their likelihood of obtaining a license to practice law in another state and on whether the lawyers induced to move by a bar exam waiver differ in quality. To do so, we assembled novel datasets on bar exam waiver policies, license acquisitions of a sample of 1.7 million lawyers, and the professional disciplinary actions imposed on lawyers in 37 states. By exploiting more than one thousand changes in bar exam waivers between pairs of origin and destination states, we found that bar exam waivers increase labor market mobility by 38 percent. However, we also found that lawyers who are induced to obtain an additional license by a bar exam waiver are of lower quality than lawyers who would have obtained an additional license without the waiver. Taken together, these results imply that, in the legal context, occupational licensing requirements create a trade-off between the supply of labor and the quality of professionals.

Given this trade-off, future research is needed to further understand the welfare implications of occupational licensing in the legal profession. Our research specifically points toward two related topics that would benefit from additional investigation. First, because occupational licensing rules appear to impact both the quantity and quality of lawyers, future research should directly investigate the welfare implications that come from expanded access to legal services relative to potential costs associated with having a higher share of lower quality lawyers. The welfare benefits of increasing the supply of lawyers may far outweigh the costs of additional lower-quality lawyers, but more research is needed to directly explore this possibility. Second, future research should explore whether bar exam waivers create lower-quality lawyers or simply redistribute them. For instance, exam waivers may produce lower-quality lawyers if they lead to experienced lawyers not learning information that could directly improve the quality of legal services they provide; alternatively, exam waivers may simply allow existing lower-quality lawyers to expand their practices to new markets without producing any new lower quality lawyers. These two possibilities have different welfare implications and suggest different strategies for trying to protect the public.

Scott L. Cummings (UCLA), Do Bar Exam Waivers Hurt Lawyer Quality? (JOTWELL):

In Occupational Licensing and Labor Market Mobility: Evidence from the Legal Profession, Adam Chilton, Jacob Goldin, Kyle Rozema, and Sarath Sanga investigate the tradeoffs of state bar licensing requirements through the lens of bar exam waiver policies. These policies permit lawyers with a threshold level of experience to obtain a state bar license without having to sit for the bar examination, effectively “waiving in.” The authors use variation in state waiver policies as a natural experiment permitting empirical analysis of whether states allowing entry through waiver experience a decline in lawyer quality, measured in relation to metrics of lawyer discipline and law school status. The variation in policies arises because some states, like California, categorically do not permit waiver, while waiver states include those that are more restrictive (with “Reciprocity” policies requiring reciprocal waiver from the originating state) and less restrictive (with “Admission on Motion” policies permitting waiver without reciprocity).

The authors conceptualize waiver policies as creating “corridors” between states that are either closed or open and codes corridors based on waiver policies from 1983 to 2019. They examine lawyer bar admissions through these corridors based on Martindale-Hubbell directory information on the state and year in which each listed lawyer obtained license(s) (1.7 million observations through 2019). They then fold in data on lawyer quality, derived from a dataset of all lawyers for whom public discipline records are available during the relevant time frame (from a total of 37 states), added to which is information on law school attended (available for roughly 90 percent of lawyers in the dataset). The authors put in an impressive amount of work assembling these datasets and demonstrates ingenuity in using waiver policy variation to conduct the experiment.

The big empirical takeaways are interesting, important, and nuanced. …

Overall, this paper should give ample food for thought to anyone who was ever curious about bar waiver policies and their tradeoffs. It is important to know that waiver policies can potentially reduce the quality of lawyers in a jurisdiction, though how much to make of this reduction is something that requires more study. Partly, how we assess this issue will depend on what the lawyers who enter by waiver are doing and whether it makes a dent in access to justice. Perhaps, in this regard, it would be useful for states with waiver policies to impose higher pro bono requirements on lawyers who waive in to ensure that the policy has a public benefit and does not simply permit lawyers to monetized more liberal entry rules.

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https://taxprof.typepad.com/taxprof_blog/2025/05/do-bar-exam-waivers-hurt-lawyer-quality.html

Mitchell M. Gans (Hofstra), Has the Supreme Court Already Resolved How Loper Bright Applies to Section 7805 Regulations?, 187 Tax Notes Fed. 1069 (May 12, 2025):

In a recent nontax case, the Supreme Court shed some light on a question that has been the subject of much debate in the tax community: whether, in applying Loper Bright, courts should give regulations issued under section 7805 mere Skidmore deference or the higher level of deference afforded to regulations issued under a statutory delegation of discretionary authority. In Vanderstok, applying language in the Gun Control Act of 1968 (GCA) that is difficult to distinguish from section 7805, the Court gave the agency’s rule Skidmore deference, which suggests that regulations issued under section 7805 will receive similar treatment.

Effect of Venderstok on Section 7805 Regulations Section 7805 is remarkably similar to the authorizing statute in Vanderstok. It provides that “the Secretary shall prescribe all needful rules and regulations for the enforcement of this title.” Unless the IRS can successfully maintain that there is a meaningful difference between the term “carry out” (in the GCA) and “enforcement” (in section 7805) — which seems unlikely — or the Court changes course, Vanderstok may foreclose the argument that section 7805 effects a delegation of discretionary authority that triggers the higher deference standard.

To be sure, the Loper Bright Court was not entirely clear about the border between the two categories of deference. The Court gave as an example of a delegation of discretionary authority a statute “directing [the] EPA to regulate power plants ‘if the Administrator finds such regulation is appropriate and necessary.’” Another example provided by the Court: a statute that “‘expressly delegates’ to an agency the authority to give meaning to a particular statutory term.” The Court will presumably hone the distinction between the two categories as it disposes of cases involving authorizing statutes that use different language. And Congress may also take its cue from Loper Bright and be clearer about the kind of delegation that is intended.

But in the meantime, Vanderstok is the first case that offers some insight into the Court’s thinking about where the border lies. And it can be read to suggest that the type of language used in section 7805 should not be treated as a delegation of discretionary authority, making regulations issued under the section likely to receive mere Skidmore deference.

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https://taxprof.typepad.com/taxprof_blog/2025/05/has-the-supreme-court-already-resolved-how-loper-bright-applies-to-section-7805-regulations.html

Following up on last week’s post, Everyone Is Cheating Their Way Through College. What Happens When They Get To Law School?: Wall Street Journal Op-Ed: How to Stop Students From Cheating With AI, by John J. Goyette (Vice President & Dean Emeritus, Thomas Aquinas College):

Eliminate online classes, ban screens, and restore Socratic discussion as education’s guiding model.

Since OpenAI released ChatGPT in November 2022, the world of higher education has been turned upside down. Most of the pedagogical and assessment tools that have dominated college classrooms since at least the 19th century—and especially those that emerged during the Covid-19 pandemic—are no longer effective.

Cheating is rampant. Students turn to generative artificial-intelligence chatbots to do their readings, complete their take-home exams and write their papers. A January 2023 survey from Study.com found that 89% of college students had used ChatGPT to complete a homework assignment. Nearly half admitted to using it on at-home tests or quizzes, and 53% had turned in an AI-generated essay.

A student who aces a quiz without studying the material has learned nothing. The same is true for a student who completes an essay without performing research, contemplating the subject matter, refining and ordering arguments, or painstakingly choosing the exact words to express the right idea. These students fail not only to retain knowledge, but also to develop their capacities for creative and critical thinking. …

Today’s academic incentive structure rewards cheating and rarely punishes fraud or dishonesty. Such an environment destroys students’ character formation, creating long-term consequences. …

It’s time to take a step back from technology and return to pedagogical tools that have served educators for centuries. Start by eliminating online classes and banning screens in the classroom.

Colleges should also institute a more personal and in-person approach to assessment. Take-home exams, which were ripe for abuse long before AI, should be retired. Schools should instead administer in-class evaluations such as blue-book essays, oral exams and chalkboard demonstrations. …

More important, colleges and universities must restore conversation to its position of prominence in the classroom. … Oral communication has for centuries been the guiding model for higher education. The Socratic seminar exposes students to rational discourse that actively engages the mind. …

Education is meant to liberate us from bias and ignorance. By hindering the development of students’ critical faculties, AI is setting up future generations for the opposite. Technology has its place in higher education, but not at the expense of learning. Real students deserve a real education.

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Editor’s Note: If you would like to receive a daily email with links to legal education posts on TaxProf Blog, email me here.

https://taxprof.typepad.com/taxprof_blog/2025/05/how-to-stop-students-from-cheating-with-ai.html

Wall Street Journal, They Were Every Student’s Worst Nightmare. Now Blue Books Are Back.:

When this year’s college graduates first arrived on campus, there was no such thing as ChatGPT.

They had to use their own brains for math homework, econ problem sets, coding projects, Spanish exercises, biology research, term papers on the Civil War and the Shakespeare essay that made them want to gouge their eyes out.

Now they can just use artificial intelligence.

Students outsourcing their assignments to AI and cheating their way through college has become so rampant, so quickly, that it has created a market for a product that helps professors ChatGPT-proof school. As it turns out, that product already exists. In fact, you’ve probably used it. You might even dread it.

It’s called a blue book.

The mere thought of that exam booklet with a blue cover and blank pages is enough to make generations of college kids clam up—and make their hands cramp up.

But inexpensive pamphlets of stapled paper have become a surprisingly valuable tool for teachers at a time when they need all the help they can get.

All of which explains how a paper company in Pennsylvania has unexpectedly found itself on the front lines of the classroom AI wars.

Most blue books for sale in campus bookstores and on Amazon for 23 cents apiece are made by Roaring Spring Paper Products. The family-owned business was founded more than a century ago in Roaring Spring, a small borough outside Altoona that has become the blue-book capital of America. The company now sells a few million of these classic exam books every year and all of them are manufactured in the U.S., said Kristen Allen, its vice president of sales and marketing.

And yes, I asked her if everybody makes jokes about Dunder Mifflin when they find out she works for a paper company in Pennsylvania.

“Nobody,” she said. “It’s weird—and it’s sad. I love ‘The Office.’ ” …

This new golden age of blue books is not something that anyone would have predicted a few years ago, when remote school put them on the verge of extinction. But after sales tanked in 2020 and 2021 due to the pandemic, they have picked up in recent years because of AI cheating.

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https://taxprof.typepad.com/taxprof_blog/2025/05/the-solution-to-cheating-on-exams-with-chatgpt-is-painfully-old-school-blue-books.html

(Sponsored Post) Tax Notes will present Reimagining the IRS: A Historic Conversation on Wed., May 28. The webinar is free, and CPE credits are available to attendees who meet the requirements.

On Wednesday, May 28 from 2 to 4 p.m. ET, Tax Analysts will bring together four former IRS commissioners for a powerful and timely conversation. Daniel Werfel, Charles Rettig, Lawrence Gibbs, and John Koskinen will share in a historic panel discussion on how to structure a more effective and efficient IRS. This rare gathering of leadership voices, spanning decades of agency stewardship, offers an unparalleled opportunity to hear directly from those who have shaped the IRS from the inside out. In today’s climate of budget constraints and administrative downsizing, the stakes have never been higher for the IRS. The agency requires the right balance of funding, staffing, and expertise to meet its critical mission, yet the path forward is complex. This discussion goes beyond politics to focus on how to ensure the IRS can uphold its core responsibilities of collections, privacy, and customer service. The speakers are former IRS Commissioners Daniel Werfel, Charles Rettig, Lawrence Gibbs, and John Koskinen. The moderator is Tax Analysts’ President and CEO, Cara Griffith.

Register for the Event

https://taxprof.typepad.com/taxprof_blog/2025/05/tax-notes-taxing-issues-webinar-reimagining-the-irs-an-historic-conversation.html

Edward A. Morse (Creighton; Google Scholar), Important Developments in Federal Income Taxation (2024):

This outline covers significant developments in federal income taxation arising during the past year. It offers a selective treatment focusing on items likely to interest practitioners and advisors within a broad range of professional practices. Tax Court decisions (regular and memorandum) and appellate cases receive greater attention on account of their legal significance; Tax Court summary opinions and unreported appellate cases are generally omitted. Other trial decisions in the district court and claims court receive only limited attention due to their comparatively limited impact on tax law development.

A few noteworthy administrative developments are also included, but their discussion is not comprehensive. Some employment tax cases are covered in part IX. Part X concludes with brief commentary on legislation. This outline reflects developments reported through November 26, 2024.

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https://taxprof.typepad.com/taxprof_blog/2025/05/important-developments-in-federal-income-taxation-2024.html

This week, Adam Kern (San Diego; Google Scholar) reviews Steve Rosenthal (Tax Policy Center) & Robert McClelland (Tax Policy Center; Google Scholar), Taxing Capital Gains at Death at a Rate Higher Than During Life, 186 Tax Notes Fed. 2417 (Mar. 31, 2025).

In left-leaning tax policy circles, much energy has focused on taxing unrealized gains. There are two main reasons why. First, the wealthiest Americans hold lots of unrealized gains—perhaps as much as $13.4 trillion—and they will avoid income tax on those gains if they simply hold their appreciated assets until death. Second, this and other aspects of current law encourage taxpayers to hold assets even when selling would make sense from an economic perspective. That “lock-in” effect is a powerful distortion.

A targeted solution to this first problem—and a partial solution to the second—is to deem death to be a realization event. If death is a realization event, unrealized gains will eventually be taxed, and the incentive to hold assets until death will be relaxed. Proposals along these lines date back to the Kennedy administration, and they were revived by Presidents Obama and Biden.

In a new paper, Steven Rosenthal and Robert McClelland argue that those earlier proposals don’t go far enough. Prior proposals to deem death a realization event would apply the preferential rate for capital gains (currently 23.8% for top-earners, including the tax on net investment income) to any gains realized on death. Rosenthal and McClelland would go further. They propose to apply the ordinary rate (currently 40.8% at the top, again including the tax on net investment income) to gains realized on death. Thus, capital gains at death would be taxed at a rate higher than during life.

The authors’ core insight is that there’s no good reason to apply a preferential rate to gains realized at death. According to the standard rationale for the capital gains rate, a preferential rate is needed to encourage realization despite the tax code’s powerful incentives to hold. But death is, in effect, a forced sale. Since there’s no need to encourage that involuntary realization of capital gains, we might as well tax the gains at the ordinary rate.

Building on that insight, Rosenthal and McClelland build out a detailed policy proposal with several features:

• First, the tax would target ultra-wealthy taxpayers. Anyone whose net worth is less than $100 million would be exempt, and the tax would gradually phase in for those whose net worth is between $100 million and $200 million.
• Second, gifts made while living (inter vivos) would also count as realization events. If inter vivos gifts were not realization events, taxpayers would still have access to unlimited deferral: they could simply gift property repeatedly without ever realizing gain. Nonetheless, the authors propose that gains realized upon gifting should be subject to the capital gains rate, not the ordinary rate. That would encourage property to circulate before death.
• Third, and relatedly, Rosenthal and McClelland propose to allow taxpayers to elect into mark-to-market treatment (again, at the capital gains rate). This would allow taxpayers to retain property that has personal significance (such as a family business) without deferring or avoiding tax.
• Finally, sales or gifts made within three years of death would be deemed to occur at death. This is to prevent deathbed gifts and below-market sales.

The authors estimate that this proposal, if enacted, would raise approximately $851 billion over the next ten years.

Of course, deeming death to be a realization event is not the only way to tax unrealized gains. Rosenthal and McClelland compare their proposal to five prominent alternatives: providing carryover basis at death, treating borrowing as a taxable event, mark-to-market accounting, lookback interest charges (aka “retrospective capital gains taxation”), and prior proposals to treat gratuitous transfers as realization events. The authors argue that their proposal has various advantages over these alternatives. Some are administrative, some political, and some are fiscal: the authors estimate that their proposal will bring in considerably more revenue than many alternatives.

The authors make a strong case that prior proposals to treat death as a realization event do not go far enough. But I wondered whether the same point could be made about their own proposal. Why tax capital gains realized on death at the ordinary rate? Why not go higher? The authors anticipate that many taxpayers will not actually pay the rate applied to capital gains realized on death; instead, the upon-death rate will encourage them to realize their gains during life. If that’s right, our principal concern in setting the upon-death rate shouldn’t be whether it will distort consumption-savings or labor-leisure choices (since it’s probably not going to be the effective tax rate that many people pay). Rather, our principal concern should be whether this rate provides the right incentive to encourage realization while living. It’s not obvious that the top marginal rate on ordinary income is optimal for this purpose—indeed, it would be surprising if that rate, designed for different policy objectives, happened to be exactly right.

Of course, questions could be raised about the political feasibility of both the authors’ proposal and an even higher rate on capital gains realized upon death. The authors touch on political feasibility only briefly, noting the unpopularity of some alternatives like mark-to-market accounting. President Biden’s failure to reform the step-up in basis on death even with a Democratic trifecta suggests the difficulty of any reform in this area. At the same time, the authors’ proposal may have political advantages over previous efforts, particularly its targeted focus on the ultra-wealthy.

All told, this is an illuminating and thought-provoking article. Rosenthal and McClelland have developed a novel and thoughtful policy proposal—one that is interesting in its own right and sheds new light on the problems that it strives to solve.

Here’s the rest of this week’s SSRN Tax Roundup:

• Stephanie Antonio, Florinda Vigonte & Marmelo V. Abante (World Citi Colleges), Regulating the Digital State: A Narrative Review of Challenges, Issues, Impact, Innovations in E‑Governance Taxation Systems, and Best Practices with a Case Study of India (May 19, 2025)
• Reuven S. Avi‑Yonah (Michigan), Fixing the Tariffs (May 20, 2025)
• Reuven S. Avi‑Yonah (Michigan), Should the States Return to Worldwide Combined Reporting? (May 15, 2025)
• Federico Bertocchi (University of Bergamo), The Taxing Rules of Dividends Distributed to Non‑Resident Collective Investment Vehicles: The Insufficient Evolution of National Legislation in Light of the Fundamental Freedoms (May 19, 2025)
• Dolan Bortner (Stanford), Private Inequity: Business‑Law Solutions for Better PE Health Care (May 19, 2025)
• Travis Corbin (Brigham Young) & Matthew S. Johnson, Investing, But Better: Reforming the Investing in Opportunity Act (May 20, 2025)
• William Demitia & Abdallah Ali‑Nakyea (both University of Ghana), Ghana’s Current Transfer Pricing Regime: Exposition and Critique (May 21, 2025)
• Marilyn Hajj (University of Virginia), Waiter, Extra Tip, No Tax: A Policy Assessment (May 20, 2025)
• Peggy Kirk Hall (Ohio State), Jesse Richardson (West Virginia) & Kristine Tidgren (Iowa State), Legal and Policy Issues for a Growing Agritourism Industry (May 19, 2025)
• Siddharth Hemani (Jindal Global University), Achieving Tax Certainty in Cross‑Border Transactions (May 19, 2025)
• Jacob Hooper (George Mason), Drawing Representation from Taxation: A Tax‑Based Approach to Redistricting (2025)
• Jeffery M. Kadet (University of Washington), Sourcing of Cloud Services Income: Submission Commenting on T.D. 10022 and REG‑107420‑24 (May 22, 2025)
• Robert Kovacev & Omar Hussein (Miller & Chevalier), Fast‑Tracking IRS Internal Operations Through Generative AI (May 20, 2025)
• Robert Kovacev (Miller & Chevalier), Machine Versus the Tax Man: AI Inventors and the Research Tax Credit (May 20, 2025)
• Aitor Navarro (Max Planck Institute), Protecting EU Financial Interests in the Collection of Tax‑Based Own Resources (May 19, 2025)
• Noam Noked (CUHK), “Congress‑Proof” International Tax Reforms (May 19, 2025)
• Pedro David Nieto Olvera (Instituto Politécnico Nacional), Políticas Fiscales de China 2025 (China’s Fiscal Policies 2025) (May 19, 2025)
• Moritz Scherleitner (Aalto), Greening EU Corporate Income Taxation: Reflections on How EU Tax Policy Could Support the Private Sector in Funding the Green Transition (May 19, 2025)
• Amedeo Rizzo (University of Oxford) & Giorgio Hassan (SDA Bocconi), Addressing the Use of AI by EU Tax Authorities: Towards a Common Framework of Taxpayer Protection (May 19, 2025)
• Gregory Shaffer (Georgetown) & Michael Waibel (Vienna), Preface: The Field of International Economic Law (May 19, 2025)
• Jeimmy Lorena Viracacha Pena (Independent), Trademarks Have No Passport: Toward a Transnational Protection Based on Reputation and Legal Best Practices (May 19, 2025)
• Elaine Wilson (West Virginia), The Hidden Cost of State Income Tax Repeal: A Case Study of the West Virginia Neighborhood Investment Program Credit (May 19, 2025)
• Saud M. Alholiby Albin Zaid, Mubarak M. Alkhaldi & Mohammad A. Alghamdi (King Faisal University), The Zakatability of AI: A Dual Analysis from Sharia and Saudi Law (May 19, 2025)

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This week, Assaf Harpaz (Georgia, Google Scholar) reviews a new work by Rifat Azam (Interdisciplinary Center Herzliya; Google Scholar), The Global Minimum Tax and Intra Western Tax Competition, 44 Berkeley J. Int’l L. ___ (2026).

Implementation of the OECD’s two-pillar solution, including the Global Minimum Tax, has been thrown into disarray following President Trump’s January 2025 memorandum declaring that “the Global Tax Deal has no force or effect in the United States.” The U.S.’s withdrawal from the Global Minimum Tax carries significant implications for global tax competition and multilateral tax cooperation.

In a new paper, Rifat Azam challenges the prevailing narrative under which the Global Minimum Tax should be lauded as a triumph of multilateral tax cooperation. Instead, Azam argues that the Global Minimum Tax represents a tactical maneuver within a fragmented international economic framework.

The article examines the conflicting interests among Western states, highlighting the EU’s pursuit of strategic autonomy and the U.S.’s shifting policy priorities. Moreover, it explores the ways countries can employ to circumvent the Global Minimum Tax and continue engaging in new forms of tax competition.

The article begins by articulating the GloBE rules, with helpful examples for the application of the UTPR, IIR, and QDMTT. While negotiations were purportedly inclusive, Azam contends that GloBE unfolded within a world order dominated by Western hegemony – an outcome of political negotiation between the EU and the Biden administration. Azam argues that the Global Minimum Tax disproportionately harms developing countries which often rely on tax incentives to attract investment (e.g., R&D), and stimulate economic growth. Additionally, developing countries were largely excluded from the OECD’s negotiation processes, with many lacking the administrative resources to implement its outputs. This section could benefit from a more detailed discussion, and some nuanced distinctions would be useful. For example, distinguishing between the economic interests and capacities of large market economies, least developing countries, and small island states (which are often tax havens). After all, many developing countries are adversely affected by BEPS and have supported a Global Minimum Tax. Meanwhile, some developing countries engage in BEPS and create negative fiscal externalities for other countries, including developing ones. Even if the Global Minimum Tax was substantively negotiated between the U.S. and EU, is it uniformly detrimental to all developing countries (and, if so, why did so many countries agree to it)?

The article proceeds to outline the interests underlying intra-western tax competition. Azam writes that the Global Minimum Tax is the result of Europe’s selective refortification and its pursuit of autonomy. He identifies several points of contention between the U.S. and EU, with the primary conflicts surrounding the taxation of U.S.-based Big Tech which generate substantial revenues in Europe. While European countries have been advocating for more robust taxation of these firms, the U.S. has continued to be protective of its digital technology giants. Also, Azam highlights the tension between U.S.’s domestic international tax regime (GILTI and BEAT) and the Global Minimum Tax, describing Senate Republicans’ opposition to the latter.

The article then critiques the paradoxical effect of the Global Minimum Tax, which, instead of eliminating tax competition, merely redirects it into less transparent forms such as subsidies and refundable tax credits. Azam describes Pillar Two as a competitive tool for regulating the global digital economy, which he refers to as a “cartel of governments” – all benefiting from increased tax revenue. Nonetheless, most countries already have corporate income tax rates above 15%, so there remains an incentive to reduce corporate income tax rates. Thus, tax competition will continue but with a different “floor” and in new, less transparent domains. The GloBE rules do not limit all forms of competition, and Azam suggests that countries will utilize various tax credits (e.g., broad use of qualified refundable tax credits) and subsidies to engage in global tax competition. In addition, Azam cautions from the abuse of the QDMTT, in which QDMTT-compliant jurisdictions will not collect that revenue or collect it only on paper. In this context, the author may consider possible paths forward that could address these challenges. For example, what mechanisms could be developed to prevent tax competition in the wake of GloBE, and should these measures be multilateral?

In summary, the article makes several important scholarly contributions. It frames the narrative of the Global Minimum Tax as one defined by contrasting U.S. and European interests, rather than commendable multilateral cooperation. Furthermore, it underscores the paradox at the heart of Pillar Two: instead of reducing global tax competition, it may incentivize it. The article is especially timely given the crossroads in international tax cooperation and considering the U.S. proposal to extend key international tax provisions enacted under the TCJA.

Here’s the rest of this week’s SSRN Tax Roundup:

• Leyla Ates (Altınbaş University), Tax Information Production, Sharing, Use and Publication, UN FACTI Panel Background Paper 2 (May 28, 2025)
• Rifat Azam (IDC Herzliya), The Global Minimum Tax and Intra Western Tax Competition, 44 Berkeley J. Int’l L. (2026) (May 23, 2025)
• Andrés Báez (Max Planck Institute), Irrelevant or Even Worse? The Vicious Dilemma of the New Tax Treaty Preamble, 73 Can. Tax J. 1 (2025) (May 27, 2025)
• Katherine Cousins & Dominic de Cogan (Sheffield & Cambridge), Chapter 33 United Kingdom (May 23, 2025)
• Wei Cui (UBC), Policy Forum: Comparing Canadian Output-Based Pricing Systems, 73 Can. Tax J. 77 (2025) (May 27, 2025)
• Nicolin Decker, The Federal Trust Layer™: A Smart-Law Infrastructure for U.S. Financial Governance, Statutory Compliance, and Algorithmic Public Trust (May 28, 2025)
• Douglas W. Elmendorf, Glenn Hubbard & Zachary D. Liscow (Harvard Kennedy School, Columbia, Yale), Policies to Reduce Federal Budget Deficits by Increasing Economic Growth (May 28, 2025)
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Editor’s Note: If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.

https://taxprof.typepad.com/taxprof_blog/2025/05/weekly-ssrn-tax-article-review-and-roundup-harpaz-reviews-azamsthe-global-minimum-tax-and-intra-west.html

Rifat Azam (Interdisciplinary Center Herzliya; Google Scholar), The Global Minimum Tax and Intra Western Tax Competition, 44 Berkeley J. Int’l L. __ (2026):

This article provides a critical and timely analysis of the Global Minimum Tax (GMT) in the context of intra-Western tax competition, following the recent executive order by President Trump disavowing prior U.S. commitments to the OECD’s Global Tax Deal. Initially hailed as a landmark in international cooperation, the GMT reveals deeper geopolitical dynamics, including the persistence of Western dominance and emerging conflicts between the United States and Europe.

The article argues that the GMT represents less a triumph of multilateralism and more a strategic maneuver within a fragmented international economic order. It explores the divergent interests of Western powers, with the European Union pursuing strategic autonomy and the United States grappling with domestic legislative gridlock and shifting policy priorities.

Editor’s Note: If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.

https://taxprof.typepad.com/taxprof_blog/2025/05/the-global-minimum-tax-and-intra-western-tax-competition.html