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TaxProf Blog

Paul L. Caron
Dean
Pepperdine Caruso
School of Law

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  • Paul Caron

    Top 5 Tax Paper Downloads

    Sunday, May 2, 2004

    This week’s list of the Top 5 Tax Paper Downloads on SSRN is basically unchanged from last week, with #3 and #4 switching positions:

    1. Corporations, Society and the State: A Defense of the Corporate Tax, by Reuven Avi-Yonah (Michigan)

    2. The Dividend Divide in Anglo-American Corporate Taxation, by Steven Bank (UCLA)

    3. The Progressive Consumption Tax Revisited, by Steven Bank (UCLA)

    4. Balance in the Taxation of Derivative Securities: An Agenda for Reform, by David Schizer (Columbia)

    5. The Tax Efficiency of Stock-Based Compensation, by Michael Knoll (Pennsylvania)

    For the complete Top 10 Tax Paper Downloads over the past two months, see here.

  • Paul Caron

    10 Tax Questions Bush & Kerry Don’t Want You To Ask

    Sunday, May 2, 2004

    John Fox has published 10 Questions The Candidates Don’t Want You To Ask.

    Here is an exceprt from the preface:

    There are two days this year when millions of adults like you play pivotal roles as Americans. The first is April 15, when you pay your taxes. The second is November 2, when you vote for the people you want to spend them.

    If you’re like most of us, you’ll pick your candidates mainly by how much you like and trust them—their smiles, their voices, your sense of their integrity and capacity to lead. But policy issues also affect your choice. You’ll want to know where they stand on Iraq, terrorism, unemployment, Social Security, federal deficits. And on lots of social issues—involving housing, health care, education, marriage, and much more.

    All of which means that you’d better remember April 15 when November 2 comes around. Why? Because our tax laws cut across all of American life. Except for the U.S. Constitution, they represent the most comprehensive expression of our government’s official values. What these laws tax or exempt, reward or ignore, crucially shape who we are as a nation and what we will become.

    The people we elect every other November write these laws, and rewrite them, in every session of Congress. If we can get candidates to address welldesigned questions on the subject, we can learn more than their position on taxes. Their answers will expose their broader values.

    Few candidates will welcome this challenge. Incumbents are not going to want to explain their failure to tackle the shortcomings of our tax laws or, perhaps worse, admit that they had no idea that particular laws were so inequitable. And challengers are going to be wary of offending some of their supporters by proposing sensible policies that help people who really need it and require others to pay more.

    No, the candidates don’t want to hear these questions. That’s all the more reason to ask them.

    Here are the first 2 questions:

    Question 1: The McMansion Tax Break. Taxpayers can deduct interest on loans of up to $1 million used to buy one or two personal residences. Ask the Candidate: Would you limit the home mortgage interest deduction so that it subsidizes the purchase of one basic home, and would you redirect some of the tax savings to help qualified renters purchase a basic home?

    Question 2: The Inequitable Home Equity Break. Congress offers certain homeowners a preferential deduction for consumer loans. Ask the Candidate: Would you eliminate the deduction for interest on up to $100,000 of consumer loans (called “home equity loans”) that benefits only homeowners who itemize?

  • Paul Caron

    Law Stories Series

    Law Stories Series

  • Paul Caron

    Sales & Use Tax Simplification

    Saturday, May 1, 2004

    Gary Cornia (BYU), David Sjoquist (Georgia State) & Lawrence Walters (George Mason) have posted Sales and Use Tax Simplification and Voluntary Compliance on SSRN. Here is the abstract:

    Because of difficulties collecting sales taxes on Internet sales, several states have engaged in an effort (the Streamlined Sales Tax Project, SSTP) to simplify their sales tax systems. One hope among SSTP proponents is that a simplified system will result in Internet vendors voluntarily collecting the sales tax.

    We address two issues:

    – Will states adopt the extensive reforms proposed by the SSTP?

    – Will vendors voluntarily collect the sales tax?

    We argue that states are unlikely to adopt extensive reforms, but if they did, many vendors would voluntarily collect sales taxes.

  • Paul Caron

    Shay on Alternatives to Subpart F

    Saturday, May 1, 2004

    Stephen Shay (Ropes & Gray) has posted Exploring Alternatives to Subpart F on SSRN. Here is the abstract:

    This paper considers possible changes to the subpart F rules that would be intended to achieve a balance between deferral for a controlled foreign corporation’s active business operations and current taxation in circumstances where a controlled foreign corporation earns passive income or uses tax havens or base company techniques to erode the tax base of countries where economic activity actually occurs. While the discussion is in terms of the U.S. rules, the basic principles could be applied by the increasing number of countries that have adopted foreign controlled company rules that trigger current taxation of the company’s income in the hands of a resident.

    The paper begins with a description of the existing U.S. rules for taxation of foreign income relevant to the following discussion, with particular reference to the subpart F anti-deferral rules. In order to highlight the current subpart F rules’ technical deficiencies, the paper then reviews some of the “plain-vanilla” planning techniques used to avoid subpart F. Without endorsing any proposal, the paper next considers alternatives that would in differing respects address these deficiencies. While the author would prefer to see a more systemic approach that would broadly eliminate the deferral privilege, the conclusion of the paper is that there are potential reform proposals that likely would be an improvement over current law. These proposals at least should be considered as part of the ongoing debate over the future of subpart F.

  • Paul Caron

    Update on NY Times Article on New Technology in Tax Teaching

    Friday, April 30, 2004

    A follow-up on yesterday’s post about the New York Times article on the new “clicker” technology that I use in my tax classes: Jim Maule (Villanova) has posted on his blog a thoughtful explanation of why he supports the technology. Here’s the opening paragraph:

    It hasn’t yet been 72 hours since the NY Times article about Prof. Paul Caron’s use of clickers in his courses at the University of Cincinnati Law School and already the reactions are beginning to reverberate throughout the law academy.

    Jim addresses the concern expressed by Ann Althouse (Wisconsin) that the clickers interfere with student classroom autonomy. The former law student who runs the popular JD2B site notes that the technology “engages students during lectures and cuts down on solitaire and IM’ing (yikes!).” Exactly!

    Update, Part II: More Althouse (anti-clicker by a self-described “cranky old retro lawprof”); more Maule (pro-clicker).

  • Paul Caron

    Google Pays 59% Tax Rate

    Friday, April 30, 2004

    Although the top U.S. corporate tax rate is 35%, Google reported an effective tax rate of 59% in the third quarter (down from 70% in the second quarter) because of its treatment of employee stock options. Google takes a conservative approach and deducts costs associated with the options, thus lowering its pretax income (the denominator in the ETR calculation). As Gordon Smith points out on his Venturpreneuer Blog, Google’s 59% ETR greatly exceeds the ETRs for the S&P 500 (28%) as a whole as well as the high-tech companies in the index (32%), as calculated by George Yin in his recent article, How Much Tax Do Large Public Corporations Pay? Estimating the Effective Tax Rates of the S&P 500, 89 Va. L. Rev. 1793 (2003), blogged here last week.

  • Paul Caron

    Houck on Restrictions on Political Activities of Public Charities

    Friday, April 30, 2004

    Oliver Houck (Tulane) has posted On the Limits of Charity: Lobbying, Litigation, and Electoral Politics by Charitable Organizations under the Internal Revenue Code and Related Laws on SSRN. Here is the abstract:

    This is a history and an examination of the policies underlying the three major restrictions on political activity by public charities: lobbying, litigation and electoral politics. These restraints have been in evolution, and dispute, for nearly a century. They represent no grand plan, but, rather, a design arrived at in pieces by impulses of the moment and supported by rationales that seem increasingly thin. As the dust has settled, we have something of a hierarchy of ineffectiveness in political life, with educational activity unrestricted, litigation lightly restricted, lobbying limited in amount and manner, and campaign work permitted only, and within limits, to companion social welfare organizations. This hierarchy does not jibe easily with the high premium placed on political speech, nor the unique perspectives that chariticable organizations can bring to the marketplace. The article suggests a re-examination of the reasons for the restrictions and their redesign based on the issues, and fears, that seem to be in play.

  • Paul Caron

    More on Kerry’s 2003 Tax Return

    Friday, April 30, 2004

    Even Sen. Kerry’s hometown newspaper is questioning his 175k capital gain from the sale of his 1/4 interest in a famous Dutch masterpiece, Adam Willaerts’s “The Arrival of Frederick and Elizabeth, Prince and Princess of the Palatinate, at Flushing, 29th April 1613.” The Boston Globe asks, “Is selling 17th-century artwork for profit perhaps too . . . aristocratic for the friend-of-the-people image our junior senator would like to project?” For an in-depth analysis of the tax issues raised by the Boston Globe story, see here. For prior TaxProf Blog coverage of Sen. Kerry’s tax return, see here, here, here, here. here, here, and here.

  • Paul Caron

    Why No Increase In Standard Mileage Rate?

    Friday, April 30, 2004

    The Tax Guru asks why the IRS has not increased the 37.5 cent standard mileage rate for business in light of the increase in fuel costs since the rate was set in October. For example, the average price of a gallon of regular gasoline in New York is $1.88 now, compared to $1.75 in October.

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