Presidential Campaign Tax Proposals

This morning -- Super Tuesday Eve Leap Day-- I gave a talk as part of the Business Law Breakfast series sponsored by the Lowell Milken Institute of Business Law and Policy at the UCLA School of Law. The talk was titled "Tax Policy 2017: Proposals and Prospects for Significant Tax Reform under the 45th President" and a PDF version of the slides I presented can be found here. (n.b.: the ppt is dated July 17, 2017-- which is what today's date would be if we didn't have leap days).

The best analysis (by far) of the several candidates' tax plans has been done by the good people of the Urban-Brookings Tax Policy Center in Washington, DC.  The TPC is the go-to joint if you're looking for down-the-middle, non-partisan expert analysis of tax policy issues. At the following embedded links you can find the TPC analysis of the Trump tax plan, the Cruz tax plan, and the Rubio tax plan.

Has Quill (and Tax-Free Internet Shopping) Passed its Expiration Date?

How is it that you can buy stuff online and not have to pay sales tax? Those who follow state/local tax--and even some who don't--will recall that this legal rule derives from two important Supreme Court decisions: National Bellas Hess (1967) and Quill (1992). The rule in these cases-- i.e., that a state cannot impose a use tax collection obligation on a vendor without a physical presence in the taxing state-- has resulted in a meaningful revenue loss for the states and put bricks & mortar firms at a competitive disadvantage. Understandably, many states have sought to avoid the limitations of these decisions. One such state is Colorado, which enacted an information reporting regime for firms that, by virtue of Quill, are excused from collecting the tax. The Direct Marketing Association challenged this rule, contending that it violates Quill and the dormant commerce clause.  Now this morning comes the 10th Circuit decision on the merits, which concludes (correctly in my view) that "the Colorado Law does not discriminate against nor does it unduly burden interstate commerce."

This is an important victory for the states and for bricks and mortar retailers.

I found especially interesting the concurring opinion by Judge Neil Gorsuch, a George W. Bush appointee.  Gorsuch's opinion is an extended discussion on the proper role of precedent in our legal order. Among other things, Gorsuch concludes that "Quill might be said to have attached a sort of expiration date for mail order and internet vendors' reliance interests on Bellas Hess's rule by perpetuating its rule for the time being while also encouraging states over time to find ways of achieving comparable results through different means."

It bears noting that Gorsuch clerked for both Justices Byron White and Anthony Kennedy.  White authored a strong dissenting opinion in Quill arguing that National Bellas Hess should be overruled. More recently, when the DMA case was before the Supreme Court (on a jurisdictional question relating to the Tax Injunction Act), Kennedy wrote that Quill should have overruled National Bellas Hess and that "the legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess."

It seems likely that DMA will appeal the 10th Circuit's ruling to the U.S. Supreme Court, though Kennedy's concurring opinion in the first DMA case suggests that they already have one vote against them.

For those interested in more in-depth legal analysis of these issues, you can find the definitive DMA amicus brief available here.

Reforming Proposition 13 to Tax Land More and Buildings Less

At THIS LINK you will be able to download a copy of my forthcoming article examining the case for reforming Proposition 13 to adopt a "split roll" regime, which would assess commercial and industrial at market value (i.e., periodically reassessed up/down based on changes in market value) and leaving residential property in the standard Prop 13 "acquisition value" regime. The basic bottom line is that the burden of such a reform would fall predominantly on land. Revenue from a split roll could help fund a reduction in the property tax burden on structures (e.g., a lower rate on new construction). Anyone interested in sound tax policy should favor this sort of shift in the tax burden from structures to land.

Data on Income and Expenditures by Decile from the BLS Consumer Expenditure Survey for 2014

I created a 2-page table from BLS Consumer Expenditure Survey data for an undergraduate seminar I'm teaching on Inequality and Tax Policy. I thought others might appreciate having this information easily available so I'm posting it here.

102 Percent Tax Rate??!! (not exactly...)

This piece by James Stewart of the NYT about taxpayer James Ross has an attention-grabbing headline ("At 102%, His Tax Rate Takes the Cake"), but midway through the piece we learn that Ross's effective tax rate as a percentage of Adjusted Gross Income is a mere 20 percent.  We then learn that Ross had an AGI in excess of $1 million, though by how much we are not told.  So it would appear that Ross's various itemized deductions (e.g., home mortgage interest, state and local taxes, charitable contributions) must be at least $800,000, such that his "taxable income" is in the neighborhood of $200,000.  There are lots of reasons--based on principles of sound tax policy--for eliminating many of the itemized deductions found in the federal income tax.  Now we can add to that list the fact that "taxable income" opens up new vistas for exaggerating effective tax burdens. There's a legitimate debate (among folks not involved in journalism or politics) about what definition of "income" best captures true economic income-- but the concept of "taxable income" found in 26 U.S.C. §63 is not in the running.

Tax Strategies for High Net Worth Individualz

Tax entertainment from the Daily Show here.

More Fun with Candidate Tax Returns

from the New York Times website