TaxProf Blog

Wednesday, June 30, 2004

David Brennen (Mercer) presented A Normative Rationale for Tax Exemptions for Charities at the Critical Tax Conference at Rutgers-Newark. Here is part of the Introduction:

What is the normative rationale for the federal income tax exemption for nonprofit charitable corporations? Even though this federal statutory exemption dates back to 1894, Congress has provided very little explanation for why it exists. Over the years, many scholars have pondered this normative question. However, the quest for an explanation of the charitable tax exemption has centered almost exclusively on economic efficiency. Thus, the charitable tax exemption is typically justified as an economically efficient means of providing certain goods and services to the public…. But no matter how appealing efficiency might sound, one must not lose sight of the fact that taxation, and more particularly tax law, is about much more than economic efficiency. Tax law is about broader conceptions of justice, fairness, and other aspects of a democratic society that extend beyond economic principles…. This Article explains the charitable tax exemption, in value and market terms, to demonstrate that the principal normative justification for the charitable tax exemption is embedded in the value of diversity – what this Article calls “contextual diversity.”

Tuesday, June 29, 2004

William Gentry (Williams College – Economics Department) & R. Glenn Hubbard (Columbia Business School) have posted “Success Taxes,” Entrepreneurial Entry, and Innovation on NBER. Here is the abstract:

Interest in the role of entrepreneurial entry in innovation raises the question of the extent to which tax policy encourages or discourages entry. We find that, while the level of the marginal tax rate has a negative effect in entrepreneurial entry, the progressivity of the tax also discourages entrepreneurship, and significantly so for some groups of households. These effects are principally traceable to the upside’ or success’ convexity of the household tax schedule. Prospective entrants from a priori innovative industries and occupations are no less affected by the considerations we examine than other prospective entrants. In terms of destination-based industry and occupation measures of innovative entrepreneurs, we find mixed evidence on whether innovative entrepreneurs differ from the general population; the results for entrepreneurs moving to innovative industries suggest that they may be unaffected by tax convexity but the possible endogeneity of this measure of innovative entrepreneurs confounds interpreting this specification. Using education as a measure of potential for innovation, we find that tax convexity discourages entry into self-employment for people of all educational backgrounds. Overall, we find little evidence that the tax effects are focused simply on the employment changes of less skilled or less promising potential entrants.

Tuesday, June 29, 2004

William Blatt (Miami) presented Why Did Congress Repeal the Estate Tax But Not the Gift Tax? at the Critical Tax Conference at Rutgers-Newark. Here is part of the Introduction:

Part two of the article presents the conventional explanation for the decision to retain the gift tax — that retention of the gift tax was necessary to protect the fisc. A side effect of the gift tax is that it blocks many income shifting techniques. Retention was necessary to forestall a hemorrhage in income tax receipts….

Part three of the article offers an alternative, deeper explanation for this decision … [that] must accord with someone’s values. Part three of the article then tries to define these values. This is not easy because such values are illiberal. The sociological literature describes how bequests create obligations that cannot be reciprocated, ones which bind future generations. The decision to tax gifts but not bequests preserves dynastic wealth. Seldom advanced in public debate, that effect appeals strongly to a small but powerful group in the country. Finally, part three looks for evidence of these values in the legislative arena…. Evidence of such values may also be found in the personal dynastic ambitions of the President and the Senate leadership. That group may have played a pivotal, if passive, role in retaining the gift tax.

Tuesday, June 29, 2004

Anthony Infanti (Pittsburgh) has published The Internal Revenue Code as Sodomy Statute, 44 Santa Clara L. Rev. 763 (2004). Here is the abstract from SSRN:

This article represents an attempt to bridge the gap between gay and straight understanding of the Internal Revenue Code’s impact on same-sex couples. Through a combination of personal narrative and legal analysis, I try to explain how, from a gay perspective, the Code can be viewed as just another manifestation of the fluid mixture of hostility, bewilderment, and discomfort that generally characterize society’s reaction to homosexuality. By explaining the experiences behind my perceptions of the Code, I hope to help my heterosexual colleagues to understand just how demeaning and oppressive the Code can seem to gays and lesbians – regardless of any net financial benefit that same-sex couples may receive, or any net financial detriment that they may suffer, under the Code.