Category Archives: Taxation

Just Say No: Corporate Taxation and Corporate Social Responsibility

Source: Reuven S. Avi-Yonah, University of Michigan Law & Econ Research Paper No. 14-010, April 13, 2014

From the abstract:
This article will address the question whether publicly traded US corporations owe a duty to their shareholders to minimize their corporate tax burden in any way that they may be able to get away with from a purely legal perspective. First, however, to render the subsequent discussion a bit more concrete, I will describe a recently unveiled case study of corporate tax aggressiveness.

As Good As It Gets? Hard Lessons from NYC Contracts

Source: Mark Brenner, Labor Notes, June 25, 2014

Train and bus operators with Transit Workers Local 100 did better than expected, but no union was able to escape the political box created by Democrats who refuse to tax the rich. New York City teachers and transit workers just ratified contracts that will define what’s possible for the 250,000 city workers still in negotiations. The deals show how little juice is left for public sector unions trying to deliver using traditional tools at the bargaining table or in the political arena. If these are the limits in a union stronghold like New York—where one in four workers is a union member and 70 percent of the public sector is organized—the news isn’t good for conventional strategies elsewhere. What can be done better? To avoid a collision course with taxpayers, public sector unions need to upend the bipartisan consensus and put raising taxes back on the table. To achieve that, they’ll have to make an aggressive case to voters that strong public services, and the workers who provide them, are worth it—and that corporations and the super-rich should pay the tab. They’ll also have to challenge politicians, especially Democrats, who’ve made their peace with austerity….

Changes in Tax Revenue Since 1929

Source: Lydia Austin, Roberton Williams, Tax Policy Center, Tax Notes, June 16, 2014

From the abstract:
This Tax Fact examines sources of federal and state & local tax revenue, from 1929 to the present. The composition of revenues at all levels of government changed dramatically with World War II, but has remained roughly stable since. At the federal level, payroll taxes have grown dramatically, and individual income taxes remain a major source of revenue. At the state and local level, sales and property taxes account for about one-third of revenues.

Funding Challenges in Transportation Infrastructure

Source: Pew Charitable Trusts, May 5, 2014

Roads, bridges, and transit are funded through a partnership of the federal government, states, and localities. Over the past 10 years, all levels of government have experienced challenges in funding transportation infrastructure. Revenue for the highway trust fund, the source of most federal funding for the country’s roads and transit infrastructure, has fallen short of expenditures for more than a decade.

These gaps are expected to continue growing in future years. To date, the federal government has made up the difference through a combination of drawdowns from trust fund balances and, starting in 2008, transfers from the general fund. The Congressional Budget Office projects that, by the latter half of 2014, balances in the trust fund will be so low that payments to states and localities may need to be delayed and that in fiscal year 2015, balances will be completely exhausted.1 And the challenges extend beyond the federal level; state funding for roads and transit fell by one-fourth in real terms between 2003 and 2011.

The federal and state governments are having difficulty maintaining transportation investments in large part because they rely heavily on the gas tax, a declining revenue source, to pay for road and transit infrastructure. This revenue has fallen substantially in real terms across all levels of government over the past decade as a result of changing driving habits and increased fuel efficiency. In addition, federal and many state gas taxes remain a fixed amount per gallon, even as transportation construction costs increase. This means that the revenue generated by each gallon of gas doesn’t go as far as it did in the past in paying for transportation needs.

Ultimately, understanding the nation’s transportation funding challenges requires recognizing the role that each level of government plays in supporting this critical infrastructure….

States Respond to Wealth Gap

Source: Jake Grovum,, June 12, 2014

…Polls show inequality to be a growing public concern. A Pew Research Center survey this year found 65 percent of all Americans believed inequality was growing, and Gallup found similar results. Partisan differences abound: 90 percent of Democrats in the Pew poll thought there was “a lot” or “some” actions government could take about inequality. Half of Republicans said there was “not much” or “nothing” government could do.

Those differences carried over to the states, where responses in blue versus red states seemed at times as vast as research has shown the wealth gap itself to be. This year, lawmakers sought to do something about inequality, from giving tax breaks to individuals and businesses to bolstering safety net programs and clamping down on corporate pay….

Some patterns emerge from the inequality data:
∙ Among the top 10 most unequal counties, six are in the South, including two in Georgia;
∙ Eighteen of the most unequal 25 counties are in the South;
∙ Three are in the area around New York City, while the city itself has the most billionaires in the world.

Optimal Taxation, Inequality and Top Incomes

Source: Yuri Andrienko Sr., Patricia F. Apps, Ray Rees, Sydney Law School Research Paper No. 14/103, May 30, 2014

From the abstract:
In a number of high-income countries over the past few decades there has been a large growth in income inequality and at the same time a shift in the burden of taxation from the top to the middle of the income distribution. This paper applies the theory of optimal piecewise linear taxation to the issue of the taxation of top incomes. Our results suggest that an appropriate response to rising inequality is a shift towards a more progressive multi-bracket income tax system, with a more differentiated structure of rates in the top percentiles.

Misconceptions about Value-Added and Retail Sales Taxes: Are They Barriers to Sensible Tax Policy?

Source: John L. Mikesell, Public Budgeting & Finance, Vol. 34, Issue 2, Summer 2014
(subscription required)

From the abstract:
Retail sales and value-added taxes both aim to tax consumption, but lawmakers, the public, and academics view them differently. Several American states have sought increased retail sales tax (RST) reliance, some have argued for a national RST, but a value-added tax (VAT) remains anathema. Conversely, international observers strongly reject the RST in favor of the VAT. This paper examines these views from the standpoints of administration, transparency, rate increases, and breadth to see how misconceptions might be involved.

Local Sales Taxes as a Means of Increasing Revenues and Reducing Property Tax Burdens: An Analysis Using Propensity Score Matching

Source: Whitney B. Afonso, Public Budgeting & Finance, Vol. 34, Issue 2, Summer 2014
(subscription required)

From the abstract:
In keeping with previous literature, local option sales taxes (LOSTs) are shown to reduce property tax burdens as well as increase own source revenue, although the magnitude is larger than previously estimated. This article advances the literature by using more sophisticated econometric techniques to minimize self-selection bias concerns. It also addresses some of the lingering questions from previous studies. Using county data from 35 states over the time period of 1983–2004, counties with LOSTs are matched to counties that have the same estimated propensity to adopt a LOST but are precluded by their states from doing so.

Special Issue on Inequality

Source: Science, Vol. 344 no. 6186, May 23, 2014

From the introduction:
The Science of Inequality – What the numbers tell us
Gilbert Chin, Elizabeth Culotta

In 2011, the wrath of the 99% kindled Occupy movements around the world. The protests petered out, but in their wake an international conversation about inequality has arisen, with tens of thousands of speeches, articles, and blogs engaging everyone from President Barack Obama on down. Ideology and emotion drive much of the debate. But increasingly, the discussion is sustained by a tide of new data on the gulf between rich and poor.

This special issue uses these fresh waves of data to explore the origins, impact, and future of inequality around the world. Archaeological and ethnographic data are revealing how inequality got its start in our ancestors (see pp. 822 and 824). New surveys of emerging economies offer more reliable estimates of people’s incomes and how they change as countries develop (see p. 832). And in the past decade in developed capitalist nations, intensive effort and interdisciplinary collaborations have produced large data sets, including the compilation of a century of income data and two centuries of wealth data into the World Top Incomes Database (WTID) (see p. 826 and Piketty and Saez, p. 838).

Articles include:
The ancient roots of the 1%
H. Pringle
Don’t blame farming. Inequality got its start among resource-rich hunter-gatherers.

Our egalitarian Eden
E. Pennisi
Today’s economic inequality goes back thousands of years but in evolutionary time it is relatively recent.

Physicists say it’s simple
A. Cho
If the poor will always be with us, an analogy to the second law of thermodynamics may explain why.

Inevitable inequality?
A. Deaton
The distribution of wealth between and within countries stems from progress in health and wealth that began 250 years ago.

Inequality in the long run
T. Piketty and E. Saez
Everything you wanted to know and weren’t afraid to ask about income and wealth.

Tax man’s gloomy message: the rich will get richer
E. Marshall
With a massive database of income tax records, a French superstar challenges conventional wisdom on inequality.

A world of difference
Emily Underwood
New data allow researchers to map inequality the world over.

Can disparities be deadly?
E. Underwood
Controversial research explores whether living in an unequal society can make people sick.

The intergenerational transmission of inequality
A. Aizer and J. Currie
Helping needy mothers helps their children.

On the psychology of poverty
J. Haushofer and E. Fehr
Being poor exacts psychological costs, too.

While emerging economies boom, equality goes bust
M. Hvistendahl
Inequality spikes in developing nations around the world.

Income inequality in the developing world
M. Ravallion
Growth does not widen the gap between rich and poor.

Skills, education, and the rise of earnings inequality among the “other 99 percent”
D. H. Autor
A rising tide lifts some people’s boats, but capsizes others

Tracking who climbs up—and who falls down—the ladder
J. Mervis
Researchers seek new ways to understand social mobility and opportunity in America

More on the science of inequality
J. Mervis
How two social scientists got unique access to tax records, the meaning of “IGE” and more…

Offshore Shell Games 2014 – The Use of Offshore Tax Havens by Fortune 500 Companies

Source: Richard Phillips, Steve Wamhoff, Dan Smith, Citizens for Tax Justice and U.S. PIRG Education Fund, June 2014

From the summary:
Many large U.S.-based multinational cor­porations avoid paying U.S. taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens—countries with minimal or no taxes. By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in fed­eral income taxes each year. These subsidiaries are often shell companies with few, if any em­ployees, and which engage in little to no real business activity.

Congress has left loopholes in our tax code that allow this tax avoidance, which forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.

This study examines the use of tax havens by Fortune 500 companies in 2013. It reveals that tax haven use is ubiquitous among America’s largest companies, but a narrow set of compa­nies benefit disproportionately.

∙ Most of America’s largest corporations maintain subsidiaries in offshore tax ha­vens. At least 362 companies, making up 72 percent of the Fortune 500, operate subsid­iaries in tax haven jurisdictions as of 2013….

∙ Approximately 64 percent of the companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands—two notorious tax havens. Fur­thermore, the profits that all American multi­nationals—not just Fortune 500 companies—collectively claim were earned in these island nations in 2010 totaled 1,643 percent and 1,600 percent of each country’s entire yearly economic output, respectively.

∙ Six percent of Fortune 500 companies ac­count for over 60 percent of the profits re­ported offshore for tax purposes. These 30 companies with the most money offshore—out of the 287 that report offshore profits—collectively book $1.2 trillion overseas for tax purposes.

∙ Only 55 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore. All told, these 55 companies would collectively owe $147.5 billion in ad­ditional federal taxes. To put this enormous sum in context, it represents more than the en­tire state budgets of California, Virginia, and Indiana combined….