Category Archives: Taxation

Tax Justice Is Gender Justice

Source: National Women’s Law Center, November 2019

From the abstract:
The tax code sets the rules that shape our economy, reflecting and perpetuating notions of who and what our society values. It’s an opportunity to fight inequality. But today’s tax code contains outdated and often biased assumptions about family structures, marriage, participation in the paid workforce, and more that work together to perpetuate structural barriers against women, families with low incomes, and people of color. The tax code can be a barrier for realizing gender justice – but it can also be a tool. It’s time we take advantage.

Related:
Executive Summary

Reports include:
The Faulty Foundations of the Tax Code
Source: Ariel Jurow Kleiman (University of San Diego School of Law), Amy K. Matsui, and Estelle Mitchell, National Women’s Law Center, November 2019

This paper examines the outdated assumptions and gender and racial biases embedded in the U.S. tax code. It highlights tax code provisions that reflect and exacerbate gender disparities, with particular attention to those that disadvantage women with low incomes, women of color, members of the LGBTQ community, people with disabilities, and immigrants.

Reckoning With the Hidden Rules of Gender in the Tax Code
Source: Katy Milani, Melissa Boteach,Steph Sterling, Sarah Hassmer, Roosevelt Institute & National Women’s Law Center, November 2019

Low taxes for the wealthy and corporations have played a role in enabling – and in some cases encouraging – those with the highest incomes and the most capital to accumulate outsized wealth and power in our economy. Centuries of discrimination and subjugation of women and people of color interact today with widening income inequality, such that white, non-Hispanic men are disproportionately represented among the wealthiest households, while labor and economic contributions from women of color are consistently undervalued. An agenda to advance racial and gender justice must reckon with provisions in our tax code perpetuate and enable these inequities.

A Tax Code for the Rest of Us: A Framework & Recommendations for Advancing Gender & Racial Equity Through Tax Credits
Source: Melissa Boteach, Amy K. Matsui, Indivar Dutta-Gupta, Kali Grant, Funke Aderonmu, Rachel Black, Georgetown Institute on Poverty and Inequality & National Women’s Law Center, November 2019

While the U.S. income tax system is progressive overall, many aspects of the tax code reward wealth-building by the already wealthy and exclude low- and moderate-income families. Given the historical discrimination and ongoing structural barriers that have locked women and people of color out of economic opportunity, such tax provisions not only exacerbate economic inequality, but also amplify gender and racial disparities. This report considers the question: how can our tax code build on the success of the EITC and CTC to better dismantle structural barriers that impede economic security and wealth-building for women and people of color? It ultimately proposes a framework to help policymakers, advocates, and the public evaluate when and how refundable tax credits can advance equity, economic mobility, and opportunity for all.

Tax Increment Financing in Chicago: The Perplexing Relationship Between Blight, Race, and Property Values

Source: Twyla Blackmond Larnell, Davia Cox Downey, Economic Development Quarterly, Volume: 33 issue: 4 November 2019
(subscription required)

From the abstract:
Cities use tax increment financing (TIF) to trigger growth in blighted communities. Critics argue that Chicago’s broad conceptualization of “blight” facilitates the designation of TIF districts that do not resemble conventional notions of blight, bolstering their natural ability to generate capital, thereby exacerbating the gap between wealthy and poor minority spaces. This study examines Chicago’s TIF districts to determine whether blight levels and percentage of non-White residents interact to reduce the effectiveness of TIFs measured as the change in the equalized assessed valuation (EAV) of properties. Using composite indices to measure physical and economic blight, the results of a quantile regression analysis indicate that economically blighted TIFs with predominantly non-White populations outperform other districts. These findings run counter to expectations given that TIFs report high rates of growth in property values, yet they remain substantially blighted. This suggests a need to reconsider change in equalized assessed valuation as the measure of TIF effectiveness given that the “growth” in TIFs does not seem to reflect a higher quality of life for residents.

Earnings, EITC, and Employment Responses to a $15 Minimum Wage: Will Low-Income Workers Be Better Off?

Source: Fahad Fahimullah, Yi Geng, Bradley Hardy, Daniel Muhammad, Jeffrey Wilkins, Economic Development Quarterly, OnlineFirst, Published October 16, 2019
(subscription required)

From the abstract:
The District of Columbia will increase its minimum wage to $15 per hour in 2020. The city also provides a local refundable earned income tax credit (EITC) equal to 40% of the federal EITC. Using a computable general equilibrium model, the authors estimate the economic impact of the $15 wage policy. They also use a tax policy microsimulation model to estimate how the city’s EITC interacts with a higher minimum wage. Overall, the authors find that the higher minimum wage will produce significant income gains for most of the city’s low-wage workers, with relatively few job losses. Additionally, they forecast that most city EITC recipients will receive a lower EITC, but higher earnings more than offset the reduced tax credit. The model predicts that this policy change would largely be funded by higher consumer prices, lower firm profits, and higher business productivity. These predictions are subject to important caveats, including a local labor market that is likely inadequately characterized in a model assuming perfect competition. Economic policy makers should therefore use such modeling approaches as a powerful but ultimately imperfect tool.

The drastic power of a modest carbon tax

Source: Kara Baskin, MIT Sloan School of Management, October 17, 2019

A recent study by an MIT Sloan professor finds that a federal carbon price of $7 per metric ton of carbon dioxide in 2020 could reduce emissions by the same amount as the flagship climate policies adopted by the Obama administration.

The study’s authors say that wouldn’t be enough to put the United States on a long-term path to decarbonation, but believe the results demonstrate the potential power of a carbon tax. Recent competing bills introduced in Congress, if passed and implemented, would launch a carbon tax starting at $15, $30, or $40 per metric ton of carbon dioxide…..

Making Sense Of Incentives: Taming Business Incentives to Promote Prosperity

Source: Timothy J. Bartik, Upjohn Press, 2019

From the summary:
In recent months, “Foxconn” and “Amazon HQ2” brought immediacy to a costly and lingering subject: economic development incentives. State and local policymakers regularly dangle tax breaks and other financial incentives as lures to attract and sometimes retain businesses and the jobs they say they’ll create. Oversight of these programs is often weak or nonexistent, yet tens of billions of taxpayer dollars are spent each year on these efforts. In the cases of Foxconn and Amazon, billions were offered for each project. Are these incentives worth the price? How do we know? Are they effective at promoting job growth? Is there a better way to grow good-paying jobs in a local labor market?

These questions and more are answered in a new book by Timothy J. Bartik, Making Sense of Incentives: Taming Business Incentives to Promote Prosperity (Upjohn Press, 2019). The book is relatively brief, straightforward, nontechnical, and just what state and local policymakers need to read. It is also available as a free download.

Bartik begins by explaining the basics: What are economic development incentives? Who offers them? Why are they offered? What are the political and economic considerations involved? Why are incentives often wasteful? He then delves into the recent trends in business incentives, including how generous offers have become and whether they threaten needed public services (especially K–12 education), which types of firms tend to receive incentives, and whether needy areas tend to be targeted.

Policymakers often tout the multipliers associated with jobs created via business incentives—e.g., for every one job created another two jobs will appear as a result. But Bartik shows that these numbers are often specious, and why, while providing more realistic estimates.

Then, based on his decades of ground-breaking research, he explains what policymakers can do to improve the use of business incentives. Bartik doesn’t think incentives should be ruled out, just improved, and he explains how this can be achieved. And in his chapter on how to evaluate the success of incentive programs, he describes the program details that need to be considered, and how to use them, in order to judge whether the benefits of incentives exceed the costs.

Investigating Sales Tax Revenue Competition Among Principal Cities and Their Neighboring Cities in Texas

Source: Michael Overton & Julius Nukpezah, International Journal of Public Administration, Latest Articles, September 9, 2019

From the abstract:
While research has explored the economic importance of principal cities on regional economies, little is known about the short-run and long-run dynamic relationships between principal cities and their neighboring cities as it pertains to their sales tax revenue elasticities and the subsequent affect this has on horizontal tax competition. Using vector error correction models on data from six principal cities in Texas, the findings of this study suggest that the relationship between principal and neighboring cities is highly dynamic and unique for each principal city. The study recommends that local economic policies should reflect these unique relationships.

Distributional Impacts of State and Local Tax Policy in a Heterogeneous-agent Model

Source: Jorge A. Barro, Public Finance Review, Online First, Published September 8, 2019
(subscription required)

From the abstract:
This article presents a dynamic heterogeneous-agent life-cycle model with housing demand to evaluate the economic implications of reforming US state and local personal tax structures. Because of the extensive reliance of state and local governments on income, sales, and property tax revenue, those three taxes are explicitly modeled to generate a baseline and varied to evaluate alternative policy proposals. The results of the model show that the sales tax burden falls evenly across the distribution of income earners, while the property tax burden falls more heavily on the highest income earners. By design, the model’s income tax is progressive, so the tax burden shares rise with income. Results also show that the property tax generally improves utilitarian social welfare relative to income and sales taxation, but the magnitude of these gains depends on the availability of a state and local tax deduction on federal income taxes.

Financial Condition and Population Decline: The Challenge in Attracting Residents

Source: Daniel Hummel, PA Times blog, August 24, 2019

….Shrinking cities are under pressure by their state governments to remain solvent. This manifests itself as a singular focus on this area of public management. This has also led to an increasing reliance on non-governmental entities to provide important community services. Governance in these cities has been described as reliant on collaborations and networks between government, non-profits and businesses in a structured, but non-hierarchical way. This has raised serious concerns about democracy when these entities are providing many of the services that a city government used to provide through accountable and transparent means. It also increases uncertainty in the long-term provision of these services. These are difficult problems without simple solutions, with shrinking cities continuing to lose population…..

Tax Law’s Workplace Shift

Source: Shu-Yi Oei, Diane M. Ring, Boston College Law School Legal Studies Research Paper No. 506, Last revised: 16 May 2019

From the abstract:
In December 2017, Congress passed major tax reform. The reform included an important new provision that grants independent contractors and other passthrough taxpayers, but not employees or corporations, a potential tax deduction equal to 20% of their qualified business income. Critics have argued that this new deduction (26 U.S.C. § 199A) could lead to a widespread shift towards independent contractor jobs as workers seek to reduce taxes paid. This shift could cause workers to lose important employee protections and leave them more vulnerable.

This Article examines whether this new tax provision will create a large-scale workplace shift, and if it does, how that shift should be normatively evaluated. It argues that while tax law in general has important and underappreciated effects on work arrangements, it is difficult to isolate § 199A as the driver of a broad workplace shift. Several other non-tax legal changes and non-legal economic developments are transforming work arrangements and classification choices, and § 199A is only one factor. Moreover, § 199A is not even the only tax law change that is likely to impact classification choices.

We also argue, drawing on empirical data on contemporary workplace trends, that even if new § 199A induces a workplace shift, how this shift is evaluated must depend on the types of workers and work at issue. While an independent contractor shift may increase precariousness for some workers, empirical data suggests that for others, a shift may be less troubling, or troubling for different reasons. Our Article lays a framework for analyzing how tax law contributes to and interacts with other factors in ultimately shaping contemporary work arrangements.

Political Economy of the Parcel Tax in California School Districts

Source: Soomi Lee, Public Finance Review, OnlineFirst, Published July 16, 2019
(subscription required)

From the abstract:
This article examines the effect of home price distribution on the likelihood of parcel tax adoption in California school districts. A parcel tax is a regressive tax imposed as the same amount per unit of property regardless of property values and requires a two-thirds supermajority vote to be adopted. Despite the growing role that local parcel taxes have in funding public education, it has not been fully understood how their regressive nature influences adoption. I argue that because the regressive tax imposes different marginal property tax rates for voters, the distribution of home prices within a district determines the likelihood of parcel tax adoption. Using the Heckman selection models with California school district–level data, I find that a large gap in home values within a district significantly lowers the likelihood of parcel tax adoption.