The Common Sense of a Wealth Tax: Thomas Paine & Taxation as Freedom from Aristocracy

Thomas Paine’s writing helped spur the American colonies to independence and ensure that the new nation would be a republic, not a monarchy. In light of the renewed interest in wealth taxes, this article provides a close examination of Thomas Paine’s wealth tax proposal in the second volume of The Rights of Man. Unlike Paine’s proposal to tax inheritances, his 1792 proposal to tax wealth on an annual basis is often overlooked. The article identifies Paine’s various design specifications, provides original estimates of the impact of Paine’s wealth tax proposal within his own time period and as applied to billionaires today, and discusses ambiguities in the proposal. The article then places Paine in conversation with the contemporary wealth tax policy debate and demonstrates how Paine informs both the design and evaluation of tax policy. Lastly, the article clarifies the relationship between democratic ideals and taxation, portraying tax policy as a normative expression of republican ideals

Managing Fiscal Volatility by Redefining Tax Cuts and Tax Hikes

This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts’’ and ‘‘tax hikes.’’ By adopting a new baseline for defining those terms, states can increase the likelihood of using tax rate adjustments to cope with fiscal volatility rather than more harmful spending fluctuations

Taxation and Law and Political Economy

The Law and Political Economy (LPE) project seeks to reorient legal thought by centering considerations of power, equality, and democracy. This reorientation would supplant approaches to legal thought that prioritize efficiency and neutrality, and that imagine a pre-political market “encased” from legal scrutiny or intervention. This Article seeks to advance dialogue between LPE and tax scholarship. The Article first describes the areas of intersection between the two literatures and then offers general insights each can learn from the other as a basis for further engagement. The Article describes both why taxation is central to LPE and the project’s importance for the future of tax scholarship and policy. Unlike many other areas of law, the tax system explicitly accounts for economic differences and serves an overt distributive function—two considerations that LPE would center in legal thought. Tax scholarship also reflects both the priorities and considerations at the center of LPE and the market-based frames it would supplant, and thereby offers lessons for how LPE might navigate the insights and limitations of current legal thought and reshape its future. At the same time, LPE offers an opportunity to envision new priorities and analytic modes for tax scholarship, and future possibilities for the tax system

Common Sense Recommendations for the Application of Tax Law to Digital Assets

In response to the Joint Committee on Taxation’s July 2023 request for comments on application of various Internal Revenue Code sections on digital assets, we propose a consistent set of rules to apply current law to digital assets. We highlight that the underlying economics and characteristics of transactions should be the primary concern for the application of rules and the valuation of digital assets. We believe any digital asset rules should (1) treat classes of digital assets with unique characteristics differently based on their economics, (2) minimize incentives for users to engage in tax-motivated structuring of transactions, and (3) allow the Internal Revenue Service authority to react to and regulate new classes of digital assets as they are created. We do not believe that the unique features of digital assets are a challenge to applying current law or warrant special tax preferred treatment

Colorblind Tax Enforcement

The United States Internal Revenue Service (“IRS”) has repeatedly taken the position that, because the IRS does not ask taxpayers to identify their race or ethnicity on submitted tax returns, IRS enforcement actions are not affected by taxpayers\u27 race or ethnicity. This claim, which I call “colorblind tax enforcement,” has been made by multiple IRS Commissioners serving in multiple Administrations (both Democratic and Republican). This claim has been made to members of Congress and to members of the press. In this article, I refute the IRS position that racial bias cannot occur under current IRS practices. I do so by identifying the conditions under which race and ethnicity could determine tax enforcement outcomes under three separate models of racial bias: racial animus, implicit bias, and transmitted bias. I then demonstrate how such conditions can be present across seven distinct tax enforcement settings regardless of whether IRS asks about race or ethnicity. The IRS enforcement settings analyzed include summonses, civil penalty assessments, collection due process hearings, innocent spouse relief, and DOJ referrals. By establishing that IRS tax enforcement practices remain vulnerable to racial bias, this article also challenges the IRS decision to omit race and ethnicity from the collection and analysis of tax data. The absence of publicly available data on IRS enforcement activities by race should not be interpreted as evidence that no racial disparities exist. I conclude by describing alternative approaches to preventing racial bias in tax enforcement other than the current IRS policy of purported colorblindness

Colorblind Tax Enforcement

The United States Internal Revenue Service (“IRS”) has repeatedly taken the position that, because the IRS does not ask taxpayers to identify their race or ethnicity on submitted tax returns, IRS enforcement actions are not affected by taxpayers\u27 race or ethnicity. This claim, which I call “colorblind tax enforcement,” has been made by multiple IRS Commissioners serving in multiple Administrations (both Democratic and Republican). This claim has been made to members of Congress and to members of the press. In this article, I refute the IRS position that racial bias cannot occur under current IRS practices. I do so by identifying the conditions under which race and ethnicity could determine tax enforcement outcomes under three separate models of racial bias: racial animus, implicit bias, and transmitted bias. I then demonstrate how such conditions can be present across seven distinct tax enforcement settings regardless of whether IRS asks about race or ethnicity. The IRS enforcement settings analyzed include summonses, civil penalty assessments, collection due process hearings, innocent spouse relief, and DOJ referrals. By establishing that IRS tax enforcement practices remain vulnerable to racial bias, this article also challenges the IRS decision to omit race and ethnicity from the collection and analysis of tax data. The absence of publicly available data on IRS enforcement activities by race should not be interpreted as evidence that no racial disparities exist. I conclude by describing alternative approaches to preventing racial bias in tax enforcement other than the current IRS policy of purported colorblindness

Minimizing the Harm of State Fiscal Volatility

This report’s primary concern is how U.S. state governments should respond to the fiscal volatility created by their balanced budget constraints. Applying the principles of risk allocation theory to this recurring problem, we conclude that states should primarily adjust the rates of broad-based taxes as their economies cycle, rather than fluctuating public spending

Managing Fiscal Volatility by Redefining Tax Cuts and Tax Hikes

This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts’’ and ‘‘tax hikes.’’ By adopting a new baseline for defining those terms, states can increase the likelihood of using tax rate adjustments to cope with fiscal volatility rather than more harmful spending fluctuations

Common Sense Recommendations for the Application of Tax Law to Digital Assets

In response to the Joint Committee on Taxation’s July 2023 request for comments on application of various Internal Revenue Code sections on digital assets, we propose a consistent set of rules to apply current law to digital assets. We highlight that the underlying economics and characteristics of transactions should be the primary concern for the application of rules and the valuation of digital assets. We believe any digital asset rules should (1) treat classes of digital assets with unique characteristics differently based on their economics, (2) minimize incentives for users to engage in tax-motivated structuring of transactions, and (3) allow the Internal Revenue Service authority to react to and regulate new classes of digital assets as they are created. We do not believe that the unique features of digital assets are a challenge to applying current law or warrant special tax preferred treatment