Why Tax Wealth Transfers?: A Philosophical Analysis

The one-hundredth anniversary of the estate tax provides an ideal moment to reflect on the role of wealth transfer taxation in the larger scheme of the U.S. tax system. Wealth and income inequality are at historically high levels, and the responses to these issues are often reduced to a simplistic political dichotomy of “right” versus “left.” The multitude of views of the American people cannot be reduced to such simple generalities without losing important nuances. This Article identifies three general categories of political philosophical viewpoints that are commonly endorsed by both politicians and everyday Americans, and then examines the current estate tax from within the perspective of those positions. The Article concludes that maintaining a wealth transfer tax system, perhaps organized as a tax assessed on the heirs, best matches the political views of twenty-first century Americans

Utilitarianism and Wealth Transfer Taxation

This article is the third in a series examining the continued relevance and philosophical legitimacy of the United States wealth transfer tax system from within a particular philosophical perspective. The article examines the utilitarianism of John Stuart Mill and his philosophical progeny and distinguishes the philosophical approach of utilitarianism from contemporary welfare economics, primarily on the basis of the concept of “utility” in each approach. After explicating the utilitarian criteria for ethical action, the article goes on to think through what Mill’s utilitarianism says about the taxation of wealth and wealth transfers, the United States federal wealth transfer tax system as it stands today, and what structural changes might improve the system under a utilitarian framework

The Sovereign Right to Tax: How Bilateral Investment Treaties Threaten Sovereignty

Bilateral Investment Treaties, ( BITs ), are both a response to and likely at least partly responsible for the significant increase in international investments in the last fifty years. BITs provide potential private investors government assurances regarding a variety of factors relevant to their investments. Among these assurances, BITs regularly address the tax authority that the host government has with regard to the foreign investor, often protecting that foreign private investor against changes to the host country\u27s tax system. If an investor believes the host country has violated the terms of the BIT, that investor can bring a claim against the country in front of an independent arbitration panel, whose decision will be final and binding. Because the power to tax is at the heart of what makes a sovereign authority a sovereign, restrictions on a sovereign\u27s ability to tax foreign investors, which can be enforced by an external body, threaten that sovereign\u27s very essence. As a result, tax provisions in BITs and the adjudication of those provisions by arbitration bodies must be carefully examined and potentially reconsidered, to protect the sovereign rights of governments to assess tax, to evolve their tax policies, and administer the laws of their countries in the best interests of their people. This Article explains the background and use of BITs, explores theories of sovereignty, and then demonstrates that the current use of BITs to restrict governments\u27 ability to assess and collect tax within their borders threatens sovereign rights. The Article concludes by suggesting ways that the regulation of the taxation of international investments could be modified to protect sovereign rights

Revising the Tax Law: The TCJA and its Place in the History of Tax Reform

Tax reform in the United States seems like a nearly unending process. Despite this nearly constant tweaking of the law, there has not been a major revision of the tax law in the U.S. since the bipartisan efforts that led to the 1986 tax reform. The law known as the Tax Cuts and Jobs Act (or TCJA ) of 2017 (which most commentators continue to call it, and which title I will use here, although the title was not formally enacted as part of the bill, leaving the bill without an official name) represents the first major piece of tax legislation in over 30 years. Given the significance of the reform, and the unusual way in which it was passed, the TCJA deserves careful consideration, both as an item of tax history, and in detail as a major revision of the United States income tax law. This Article contributes to this project and proceeds as follows: Part I places the TCJA in the context of tax reform history in the United States; Part II explains the history of the TCJA; Part III breaks down the component parts of the TCJA and analyzes those parts; Part IV discusses estimates regarding the distributional effects of the tax law reform; and Part V concludes

Taxing the Ivory Tower: Evaluating the Excise Tax on University Endowments

The Tax Cuts and Jobs Act of 2017 introduced the first-ever excise tax imposed on the investment income of university endowments. While it is a relatively small tax, this new law is a first step towards the exploration of taxing non-profit entities on the vast sums of wealth they hold in their endowments. In this essay I take the new tax as a starting place for investigating the justification for tax exemption for universities and thinking through the consequences of changing our approach, both in the form of the new excise tax and possible alternatives. There remain reasons to be skeptical both about the design of the current tax and its ability to withstand the political efforts of the powerful set of universities who will be subject to it. Nonetheless, this new tax opens the door to a discussion of whether it is time to treat universities’ endowments more like the private equity funds they increasingly resemble

Electing Fairness: A Check-the-Box-Style Regime for Same-Sex Couples\u27 Tax Filing Status

In the wake of the United States Supreme Court\u27s decision regarding the Defense of Marriage Act in United States v. Windsor, tax lawyers and those interested in tax policy immediately wondered what consequences this change would have to the United States\u27 federal tax laws. The Internal Revenue Service issued a Revenue Ruling explaining the position it took regarding the case, which answered many questions for taxpayers whose lives were affected by the decision. Because the IRS announced that it would recognize same-sex marriages based on the state of celebration of the marriage rather than the state of residence of the taxpayer, the IRS has gone a long way towards ensuring fairness for same-sex taxpayers in the United States. However, because, as of this writing, only seventeen states in the United States (and the District of Columbia) recognize same-sex marriages, taxpayers in same-sex relationships who live in any of the remaining thirty-three states must travel to another state in order to celebrate a marriage that will be recognized for federal tax law purposes. For some taxpayers this requires traveling a great distance. For poor taxpayers, the costs associated with traveling for a wedding in another state may very well be prohibitive. This introduces a new kind of unfairness into the tax system with regard to same-sex couples, since benefits available to middle- and upper-income taxpayers will be unavailable to their lower-income counterparts. In this essay, I propose that the Treasury Department enact regulations to allow taxpayers in same-sex relationships who live in states that do not recognize same-sex marriages to elect married status for federal income tax purposes. Such a regime has a precedent in the check-the-box elective regime with regard to pass-through entities in the corporate and partnership tax context. Allowing same-sex taxpayers to elect married filing jointly status on their federal tax returns, even if those taxpayers are unable to get married in their states of residence, will ensure that all taxpayers are entitled to the benefits that Congress intended to bestow on married couples and their families

Utilitarianism and Wealth Transfer Taxation

This article is the third in a series examining the continued relevance and philosophical legitimacy of the United States wealth transfer tax system from within a particular philosophical perspective. The article examines the utilitarianism of John Stuart Mill and his philosophical progeny and distinguishes the philosophical approach of utilitarianism from contemporary welfare economics, primarily on the basis of the concept of utility in each approach. After explicating the utilitarian criteria for ethical action, the article goes on to think through what Mill\u27s utilitarianism says about the taxation of wealth and wealth transfers, the United States federal wealth transfer tax system as it stands today, and what structural changes might improve the system under a utilitarian framework

Unseating Privilege: Rawls, Equality of Opportunity, and Wealth Transfer Taxation

This Article is the second in a series that examines the estate tax from a particular philosophical position in order to demonstrate the relevance and importance of the wealth transfer taxes to that position. In this Article, I explore Rawlsian equality of opportunity, a philosophical position that is at the heart of much American thought. Equality of opportunity requires not only ensuring that sufficient opportunities are available to the least well-off members of society but also that opportunities are not available to other members merely because of their wealth or other arbitrary advantages. Therefore, an income tax alone, even one with high rates on the wealthy, would be insufficient to achieve these goals. While revenue raised via the income tax should be used to provide additional opportunities to low-income members of society, wealth transfer taxes provide the additional safeguard of preventing the heirs of wealthy individuals from inheriting wealth that would provide them with additional, unwarranted and unjust, opportunities. Given the importance of the wealth transfer taxes, this Article also examines the question of what form of tax is most consistent with Rawls\u27 position, ultimately determining that an inheritance or accessions tax best fits the role

Death, Taxes, and Property (Rights): Nozick, Libertarianism, and the Estate Tax

Over the last twelve years the estate tax has been eviscerated. Evolving from a tax at 55% on all estates over $675,000 to a tax at only 35$5.12 million per person ($10.24 million for a married couple); the estate tax now taxes only about 5,300 estates per year, as opposed to over 58,000 estates in 1999. In an era of language decrying class warfare, why abandon this project of the estate tax? Is it too late to save the tax? Are there reasons to save it? Why have an estate tax in the first place? Libertarian arguments have become standard fare in the United States, in particular with regard to debates around tax policy. In this Article, I will examine the estate tax through a libertarian lens, and explain why a hefty estate tax is consistent with the traditional libertarian position. I will begin by articulating Robert Nozick’s libertarian views on property rights, in particular the account he provides in his seminal work Anarchy, State, and Utopia. I will then defend two lines of argument against the notion that the libertarian view of property rights is violated by an estate tax. Finally, I will explain why a society can, unrestricted by moral constraints regarding the property rights of the deceased, set a default rule for post-death property rights that reflects that society’s values. The primary purpose of this Article is to dispute the moral claims to post-death property rights made by libertarians when they argue against the estate tax. I am merely trying to demonstrate that those who argue that the estate tax is an immoral violation of the private property rights of the deceased are mistaken. It is just to say that we need to determine as a society what rule to set, having no moral absolutes that would determine how we must set the rule