Interesting op-ed from my colleague Preston Padden, an adjunct prof here at CU and a former Disney executive.

A territorial tax system would essentially codify the deferral regime and enhance its benefits by allowing earnings to be repatriated to the U.S. tax-free. So why on earth would Washington, D.C., adopt a system that continues to reward companies that shift operations and jobs offshore and continues to penalize companies that maintain their U.S. operations and workers?

Instead, Congress should reduce the corporate income tax rate to 20 percent to attain parity with most foreign countries and enact stricter anti-deferral rules. A tax rate comparable to foreign countries would greatly eliminate the incentives to move operations and jobs offshore because of rate differentials, and the anti-deferral regime would minimize the benefits to U.S. companies from offshoring operations and jobs.

Clearly the U.S. tax system should encourage companies to retain their valuable stock of highly mobile intellectual property, including high-tech property, drug patents and films, in the United States. Moving to a territorial system would have the opposite effect.

Maintaining the U.S. worldwide tax system and enacting stricter anti-deferral rules would stop rewarding companies such as GE for moving jobs overseas and stop penalizing companies like Disney that keep their income-producing property and their jobs here.

via Padden: Tax Code Hurts Firms That Keep Jobs in U.S. : Roll Call Opinion.

I’m teaching tax policy this fall, and I’ll be teaching some of the classic articles in tax policy.  I’ll spend much of the discussion each week bringing the students up to speed on how the tax policy literature has developed since the classics.  The students will be asked to choose three topics and apply them in the context of modern tax reform — e.g., how should Congress think about the home mortgage interest deduction, or progressivity, or corporate tax integration?  What are the lessons from the tax canon?

Here’s (most of) the syllabus:

1. Report of the President’s Advisory Panel on Federal Tax Reform (2005) pp. 1-40
2. Stanley S. Surrey, The Congress and the Tax Lobbyist – How Special Tax Provisions Get Enacted, 70 HARV. L. REV. 1445 (1957)
3. Boris Bittker, A Comprehensive Tax Base As A Goal of Income Tax Reform, 80 HARV. L. REV. 925 (1967)
4. William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 HARV. L. REV. 309 (1972)
5. William D. Andrews, A Consumption-Type or Cash Flow Personal Income Tax, 87 HARV. L. REV. 1113 (1974)
6. Joseph Bankman & Thomas Griffith, Social Welfare and the Rate Structure: A New Look at Progressive Taxation, 75 CAL. L. REV. 1905 (1987)
7. Charles E. McClure, Jr., Integration of the Personal and Corporate Income Taxes: The Missing Element in Recent Tax Reform Proposals, 88 HARV. L. REV. 532 (1975).
8. Jeffrey H. Birnbaum & Alan S. Murray, SHOWDOWN AT GUCCI GULCH: LAWMAKERS, LOBBYISTS, AND THE UNLIKELY TRIUMPH OF TAX REFORM.
9. Evaluate the work of the Joint Select Committee on Deficit Reduction (reading tba)

And, if anyone finds it useful, a brief bibliography we’re using:

Bibliography

Ideal Income Tax Base

1. Stanley S. Surrey, The Congress and the Tax Lobbyist: How Special Tax Provisions Get Enacted, 70 Harvard Law Review 1145-1182 (1957).
2. Boris I. Bittker, A “Comprehensive Tax Base” as a Goal of Income Tax Reform, 80 Harvard Law Review 925-985 (1967).
3. Boris I. Bittker, Comprehensive Income Taxation: A Response, 81 Harvard Law Review 1032-1043 (1968).
4. Stanley S. Surrey, Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures, 83 Harvard Law Review 705-738 (1970).
5. William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 Harvard Law Review 309-385 (1972).
6. Daniel I Halperin, Business Deduction for Personal Living Expenses:  A Uniform Approach to an Unsolved Problem, 122 U. Pa. L. Rev. 859 (1973).
7. Mark G. Kelman, Personal Deductions Revisited: Why They Fit Poorly in an Ideal Income Tax and Why They Fit Worse in a Far from Ideal World, 31 Stan. L. Rev. 831 (1978).
8. Glenn E Coven, Decline and Fall of Taxable Income, The, 79 Mich. L. Rev. 1525 (1980).
9. Edward A Zelinsky, Efficiency and Income Taxes:  The Rehabilitation of Tax Incentives, 64 Tex. L. Rev. 973 (1985).
10. Mark P Gergen, Case for a Charitable Contributions Deduction, The, 74 Va. L. Rev. 1393 (1988).
11. Daniel Shaviro, Man Who Lost too Much: Zarin v. Commissioner and the Measurement of Taxable Consumption, The, 45 Tax L. Rev. 215 (1989).
12. Louis Kaplow, Human Capital under an Ideal Income Tax, 80 Va. L. Rev. 1477 (1994).
13. Eric M Zolt, Uneasy Case for Uniform Taxation, The, 16 Va. Tax Rev. 39 (1996).
14. Mary Louise Fellows, Rocking the Tax Code: A Case Study of Employment-Related Child-Care Expenditures, 10 Yale J.L. & Feminism 307 (1998).
15. David A Weisbach & Jacob Nussim, Integration of Tax and Spending Programs, The, 113 Yale L.J. 955 (2003).
16. Lawrence Zelenak, Taxing Endowment, 55 Duke L.J. 1145 (2005).
17. Lily L Batchelder, Fred T. Jr Goldberg & Peter R Orzag, Efficiency and Tax Incentives: The Case for Refundable Tax Credits, 59 Stan. L. Rev. 23 (2006).

Income Tax vs. Consumption Tax

1. William D. Andrews, A Consumption-Type or Cash Flow Personal Income Tax, 87 Harvard Law Review 1113-1188 (1974).
2. William D. Andrews, Fairness and the Personal Income Tax: A Reply to Professor Warren, 88 Harvard Law Review 947-958 (1975).
3. Alvin C. Warren, Fairness and a Consumption-Type or Cash Flow Personal Income Tax, 88 Harvard Law Review 931-946 (1975).
4. William A Klein, Timing in Personal Taxation, 6 J. Legal Stud. 461 (1977).
5. Michael J Graetz, Implementing a Progressive Consumption Tax, 92 Harv. L. Rev. 1575 (1978).
6. Alan Gunn, Case for an Income Tax, The, 46 U. Chi. L. Rev. 370 (1978).
7. Alvin Warren, Would a Consumption Tax Be Fairer Than an Income Tax?, 89 The Yale Law Journal 1081-1124 (1980).
8. Richard L Doernberg, Workable Flat Rate Consumption Tax, A, 70 Iowa L. Rev. 425 (1984).
9. Jeff Strnad, Taxation of Income from Capital: A Theoretical Reappraisal, 37 Stan. L. Rev. 1023 (1984).
10. Barbara H Fried, Fairness and the Consumption Tax, 44 Stan. L. Rev. 961 (1991).
11. Edward J McCaffery, Tax Policy under a Hybrid Income-Consumption Tax, 70 Tex. L. Rev. 1145 (1991).
12. Louis Kaplow, Human Capital under an Ideal Income Tax, 80 Va. L. Rev. 1477 (1994).
13. Daniel Shaviro, Risk-Based Rules and the Taxation of Capital Income, 50 Tax L. Rev. 643 (1994).
14. Noel B Cunningham, Taxation of Capital Income and the Choice of Tax Base, The, 52 Tax L. Rev. 17 (1996).
15. Deborah H Schenk, Saving the Income Tax with a Wealth Tax, 53 Tax L. Rev. 423 (1999).
16. David A Weisbach, Ironing Out the Flat Tax, 52 Stan. L. Rev. 599 (1999).
17. Edward J McCaffery, New Understanding of Tax, A, 103 Mich. L. Rev. 807 (2004).
18. Joseph Bankman & David A Weisbach, Superiority of an Ideal Consumption Tax over an Ideal Income Tax, The, 58 Stan. L. Rev. 1413 (2005).

Dual Income Tax

1. Harvey E Brazer, Federal Income Tax and the Poor: Where Do We Go From Here, The, 57 Cal. L. Rev. 422 (1969).
2. Eric M Zolt, Uneasy Case for Uniform Taxation, The, 16 Va. Tax Rev. 39 (1996).
3. Charles E. Jr McLure, Simplicity of the Flat Tax: Is It Unique, The, 14 Am. J. Tax Pol’y 283 (1997).
4. Peggy B Musgrave, Consumption Tax Proposals in an International Setting, 54 Tax L. Rev. 77 (2000).
5. Richard M Bird & Eric M Zolt, Redistribution via Taxation: The Limited Role of the Personal Income Tax in Developing Countries, 52 UCLA L. Rev. 1627 (2004).
6. Richard M Bird & Eric M Zolt, Dual Income Taxation and Developing Countries, 1 Colum. J. Tax L. 174 (2010).
7. Edward D Kleinbard, American Dual Income Tax: Nordic Precedents, An, 5 Nw. J. L. & Soc. Pol’y 41 (2010).

Progressivity

1. Walter J Blum & Harry Jr Kalven, Uneasy Case for Progressive Taxation, The, 19 U. Chi. L. Rev. 417 (1951).
2. Marjorie E Kornhauser, Rhetoric of the Anti-Progressive Income Tax Movement: A Typical Male Reaction, The, 86 Mich. L. Rev. 465 (1987).
3. Joseph Bankman & Thomas Griffith, Social Welfare and the Rate Structure: A New Look At Progressive Taxation, 75 California Law Review 1905-1967 (1987).
4. Daniel N Shaviro, Selective Limitations on Tax Benefits, 56 U. Chi. L. Rev. 1189 (1989).
5. Mark L Ascher, Curtailing Inherited Wealth, 89 Mich. L. Rev. 69 (1990).
6. Steven A Bank, Origins of a Flat Tax, 73 Denv. U. L. Rev. 329 (1995).
7. Martin J. Jr McMahon & Alice G Abreu, Winner-Take-All Markets: Easing the Case for Progressive Taxation, 4 Fla. Tax Rev. 1 (1998).
8. Barbara H Fried, Puzzling Case for Proportionate Taxation, The, 2 Chap. L. Rev. 157 (1999).
9. Lawrence Zelenak & Kemper Moreland, Can the Graduated Income Tax Survive Optimal Tax Analysis, 53 Tax L. Rev. 51 (1999).
10. Thomas D Griffith, Progressive Taxation and Happiness, 45 B.C. L. Rev. 1363 (2003).
11. Linda Sugin, Theories of Distributive Justice and Limitations on Taxation: What Rawls Demands from Tax Systems, 72 Fordham L. Rev. 1991 (2003).
12. Marjorie E Kornhauser, Choosing a Tax Rate Structure in the Face of Disagreement, 52 UCLA L. Rev. 1697 (2004).
13. Edward J McCaffery, New Understanding of Tax, A, 103 Mich. L. Rev. 807 (2004).
14. Louis Kaplow, Taxation and Redistribution: Some Clarifications, 60 Tax L. Rev. 57 (2006).

Corporate Integration

1. William D. Andrews, “Out of Its Earnings and Profits”: Some Reflections on the Taxation of Dividends, 69 Harvard Law Review 1403-1439 (1956).
2. Alvin C. Warren, The Deductibility by Individuals of Capital Losses under the Federal Income Tax, 40 The University of Chicago Law Review 291-326 (1973).
3. Alvin C. Warren, The Corporate Interest Deduction: A Policy Evaluation, 83 The Yale Law Journal 1585-1619 (1974).
4. Robert Charles Clark, Morphogenesis of Subchapter C: An Essay in Statutory Evolution and Reform, The, 87 Yale L.J. 90 (1977).
5. Alvin Warren, The Relation and Integration of Individual and Corporate Income Taxes, 94 Harvard Law Review 717-800 (1981).
6. David J Shakow, Wither, C, 45 Tax L. Rev. 177 (1989).
7. Hideki Kanda & Saul Levmore, Taxes, Agency Costs, and the Price of Incorporation, 77 Va. L. Rev. 211 (1991).
8. George K Yin, Corporate Tax Integration and the Search for the Pragmatic Ideal, 47 Tax L. Rev. 431 (1991).
9. Alvin C. Warren, Financial Contract Innovation and Income Tax Policy, 107 Harvard Law Review 460-492 (1993).
10. Jennifer Arlen & Deborah M Weiss, Political Theory of Corporate Taxation, A, 105 Yale L.J. 325 (1995).
11. Reuven S Avi-Yonah, Corporations, Society, and the State: A Defense of the Corporate Tax, 90 Va. L. Rev. 1193 (2004).

Tax Planning

1. Daniel N Shaviro, Efficiency Analysis of Realization and Recognition Rules under the Federal Income Tax, An, 48 Tax L. Rev. 1 (1992).
2. Alvin C. Warren, Financial Contract Innovation and Income Tax Policy, 107 Harvard Law Review 460 (1993).
3. Daniel Shaviro, Risk-Based Rules and the Taxation of Capital Income, 50 Tax L. Rev. 643 (1994).
4. David A Weisbach, Line Drawing Doctrine and Efficiency in the Tax Law, 84 Cornell L. Rev. 1627 (1998).
5. David M Schizer, Frictions as a Constraint on Tax Planning, 101 Colum. L. Rev. 1312 (2001).
6. Michael S Knoll, Put-Call Parity and the Law, 24 Cardozo L. Rev. 61 (2002).
7. Deborah H Schenk, Efficiency Approach to Reforming a Realization-Based Tax, An, 57 Tax L. Rev. 503 (2003).
8. Deborah H Schenk, Positive Account of the Realization Rule, A, 57 Tax L. Rev. 355 (2003).
9. Alex Raskolnikov, Relational Tax Planning under Risk-Based Rules, 156 U. Pa. L. Rev. 1181 (2007).
10. Daniel Shaviro, Optimal Relationship between Taxable Income and Financial Accounting Income: Analysis and a Proposal, The, 97 Geo. L.J. 423 (2008).
11. Victor Fleischer, Regulatory Arbitrage, 89 Tex. L. Rev. 227 (2010).

Tax Legislative Process

1. Stanley S. Surrey, The Congress and the Tax Lobbyist: How Special Tax Provisions Get Enacted, 70 Harvard Law Review 1145 (1957).
2. Boris I. Bittker, Income Tax “Loopholes” and Political Rhetoric, 71 Michigan Law Review 1099 (1973).
3. Richard L Doernberg et al., On the Accelerating Rate and Decreasing Durability of Tax Reform, 71 Minn. L. Rev. 913 (1986).
4. Julie A Roin, United They Stand Divided They Fall: Public Choice Theory and the Tax Code, 74 Cornell L. Rev. 62 (1988).
5. Jeffrey H. Birnbaum, Alan S. Murray, Showdown at Gucci Gulch: lawmakers, lobbyists, and the unlikely triumph of tax reform (1988).
6. Daniel Shaviro, Beyond Public Choice and Public Interest:  A Study of the Legislative Process as Illustrated by Tax Legislation In the 1980s, 139 U. Pa. L. Rev. 1 (1990).
7. Edward A Zelinsky, James Madison and Public Choice at Gucci Gulch: A Procedural Defense of Tax Expenditures and Tax Institutions, 102 Yale L.J. 1165 (1992).
8. Jennifer Arlen et al., Political Theory of Corporate Taxation, A, 105 Yale L.J. 325 (1995).
9. Michael J Graetz, Paint-by-Numbers Tax Lawmaking, 95 Colum. L. Rev. 609 (1995).
10. Elizabeth Garrett, Harnessing Politics:  The Dynamics of Offset Requirements in the Tax Legislative Process, 65 U. Chi. L. Rev. 501 (1998).
11. Daniel N Shaviro, Rethinking Tax Expenditures and Fiscal Language, 57 Tax L. Rev. 187 (2003).
12. David A Weisbach et al., Integration of Tax and Spending Programs, The, 113 Yale L.J. 955 (2003).

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Stop Coddling the Super-Rich – NYTimes.com.

I’ve posted a revised version of taxing founders’ stock on SSRN.  Download here.

I’ll be presenting the paper at the Law & Entrepreneurship conference at the University of Florida on Friday.

On Monday, February 28, I will present the paper at an event sponsored by the Rock Corporate Governance Center at Stanford.  That event is open to the public, but registration is required.  More details here.

Victor Fleischer — the corporate attorney turned academic who wrote a paper that prompted lawmakers to propose raising taxes on private-equity barons — is now targeting the tax treatment of founding entrepreneurs.

Fleischer is finishing up another paper that argues founders of startups should pay the ordinary income tax rate of 35 percent when selling their stock instead of the much lower capital gains rate of 15 percent.

via A dollar & a dream – NYPOST.com.

I’m back in Boulder, teaching Deals and a Deals Colloquium this spring.

It’s been nice knowing you, carried interest.  See you in 2013.

U.S. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, omitted a provision to boost tax rates on so- called carried interest from a bill to extend Bush-era tax cuts for middle-income Americans that is set for a Senate vote tomorrow. The bill also would renew dozens of expired business tax breaks to which the carried interest proposal had been attached as a budget-balancing measure.

The omission closes the door on efforts by Democrats to change the tax treatment of carried interest. Carried interest is the compensatory share of an investment partnership’s profits fund managers receive as part of their pay. The pay can qualify for the 15 percent capital gains tax treatment even though it’s a return on labor rather than capital invested.

“I think, for all practical purposes, it’s in a deep coma, not to come out until the discussion of tax reform,” said Clint Stretch, managing principal at Deloitte Tax LLP, a Washington consulting firm. “It looks like it’s dead for this year.”

via Baucus Drops Higher Private-Equity Levy From Tax Measure – Bloomberg.

I’m giving a talk at NYU today, “Innovation and Capital Gains Tax Policy,” based on my Taxing Founders’ Stock paper.  The discussants will be two terrific practitioners, Bill Weigel (Davis Polk) and David Miller (Cadwalader).

Slides: Taxing Founders’ Stock: Innovation and Capital Gains Tax Policy

Paper: Taxing Founders’ Stock