Why a Wealth Tax is Definitely Constitutional

Wealth tax reform proposals are playing a major role in the 2020 presidential campaign. However, some opponents of these wealth tax reform proposals have claimed that a wealth tax would be unconstitutional. Other prominent critics have argued that wealth tax reforms are probably unconstitutional, so that, after review by the courts, the “likeliest outcome is that a wealth tax will raise exactly zero dollars.” These claims are wrong. More precisely, these claims are wrong conditioned on wealth tax legislation being carefully drafted so as to ensure its constitutionality. As we will explain in this essay, properly drafted, wealth tax reform legislation is definitely constitutional and thus capable of raising substantial revenues to fund new spending programs. Constitutional scholars disagree about whether a new federal wealth tax would need to be uniform or apportioned in order to be constitutional. We explain how wealth tax legislation could be drafted to ensure its constitutionality regardless of how the Supreme Court ultimately decides on this question. In particular, we explain how Congress could design an apportioned federal wealth tax made equitable through the use of a fiscal equalization program, and could legislate this as a fallback option in case the Supreme Court were to rule against an unapportioned federal wealth tax

Managing California\u27s Fiscal Roller Coaster

This article analyzes the causes of California\u27s budget crises and prescribes institutional mechanisms for improving California\u27s budgetary management

Charitable Contributions in Lieu of SALT Deductions

State governments are considering new charitable tax credits designed to circumvent the 2017 federal tax overhaul’s cap on state and local tax deductions. Will these plans work? This essay argues that the answer is: yes, but with some qualifications

How Should Governments Promote Distributive Justice?: A Framework for Analyzing the Optimal Choice of Tax Instruments

A particular methodology derived from public finance economics has become very influential in the legal literature on taxation and related topics. Sometimes called the “double-distortion” approach, this methodology forms the heart of Louis Kaplow’s book “The Theory of Taxation and Public Economics” and is also the foundation of prominent work by other leading tax legal scholars such as David Weisbach and James Hines. This Article develops an extended critique of how the double-distortion approach has been used to make legal policy arguments. In doing so, this Article constructs a framework for analyzing how governments can optimally raise revenues and promote distributional equity through the design of both tax systems and legal rules

Foreword—King v. Burwell Symposium: Comments on the Commentaries (and on Some Elephants in the Room)

As an introduction to the Symposium, this invited response essay reviews the pieces submitted for the Pepperdine Law Review symposium on the King v. Burwell case. The thrust of this essay’s response commentary is to praise the submitted essays for their excellence and insightfulness, but to suggest that the submitted essays nonetheless might benefit from focusing more on the role of the political mobilization that resulted in the King v. Burwell dispute. Ultimately, this essay suggests that what may have motivated the Supreme Court to develop and apply its new “deep economic and political significance” test in this this case may not have been anything inherent to the content or subject matter of the disputed provision itself. Rather, the motivation was likely a response to the political mobilization of epistemic communities around interpretations based on incompatible worldviews that occurred subsequent to the passage of the legislation being interpreted

Perverse Incentives Arising from the Tax Provisions of Healthcare Reform: Why Further Reforms Are Needed to Prevent Avoidable Costs to Low- and Moderate-Income Workers

Called “Obamacare” by some, the Affordable Care Act (or “ACA”) is the most extensive reform to the American healthcare system since the creation of Medicare and Medicaid in 1965. The ACA promises many improvements to American health care. While recognizing the importance of these improvements, this Article focuses on how the ACA’s tax provisions will create avoidable costs for low- and moderate-income workers. This Article argues that – once key tax-related provisions of the ACA come into effect in 2014 – the ACA will create perverse incentives with respect to a number of important decisions affecting low- and moderate-income Americans, including: the ACA will deter low- and moderate-income taxpayers from accepting jobs with employers that offer “affordable” health insurance; the ACA will discourage many low- and moderate-income taxpayers from attempting to increase their household incomes; the ACA will penalize many low- and moderate-income taxpayers who choose to marry and will incentivize many low- and moderate-income taxpayers to divorce; the ACA will dissuade employers from hiring low- and moderate-income taxpayers and will encourage employers to reduce the salaries paid to some low- and moderate-income employees; the ACA will prompt employers to shift some low- and moderate-income employees from full-time positions to part-time positions; the ACA will tempt employers to implement a number of other costly strategies for circumventing the ACA’s employer mandates and penalties; the ACA will induce employers to stop offering “affordable” health insurance to at least some low- and moderate-income employees, and – if this occurs to a significant enough degree – the budgetary cost of the ACA may greatly exceed the official projections issued by the Congressional Budget Office. We ought perhaps to accept these perverse incentives were they a necessary cost of achieving the ACA’s many positive goals. But the ACA could have been drafted to attain its desirable ends without creating most of the perverse incentives analyzed by this Article. Moreover, there is still hope of enacting further reforms so as to preserve the ACA’s positive features while mitigating or eliminating these perverse incentives. Ideally, these further reforms would be enacted at the federal level. However, if the federal government fails to act, this Article explains how state governments might pass legislation to mitigate the ACA’s perverse incentives

A Way Forward for Tax Law and Economics? A Response to Osofsky\u27s Frictions, Screening, and Tax Law Design

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Resolving the Paradox of the Consideration Doctrine: The Implications of Inefficient Signaling and of Anti-Commodification Norms

This paper addresses one of the central problems of contract law, a puzzle that has troubled generations of contracts scholars: Why do we only enforce promises backed by consideration? Or, how can we justify insisting on the bargain context, but not requiring that the bargains be adequate? The lack of a theoretical solution to this puzzle has plagued the application of the consideration doctrine in courts of law. We resolve this paradox through two innovations. First, using a game theory model based on asymmetric information, we dispute the common wisdom that the law should honor parties’ intentions as articulated at the time of contract formation. We show how parties’ expressed intentions may not conform to their underlying desires. Crucially, the mere fact that parties take advantage of a legally binding option does not imply that they desire the existence of that option. When courts create an option for the legal enforcement of promises, parties can essentially be forced into exercising that option. How then can the law determine which promises to enforce? Our second innovation shows how social norms against commodification limit the availability of the consideration form. Where previous scholarship has assumed that anyone so wishing can invoke nominal consideration, we argue that anti-commodification norms make even nominal consideration unavailable within certain social contexts. Moreover, the contexts in which norms block the use of consideration are precisely the circumstances where creating a legally binding option would be most likely to harm both promisors and promisees. Ultimately, what matters is not whether the parties actually do offer consideration, but rather whether they can voice consideration. Only when norms allow the use of consideration should we conclude that parties truly desire the option to have their promises legally enforced

The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation

The 2017 tax legislation brought sweeping changes to the rules for taxing individuals and business, the deductibility of state and local taxes, and the international tax regime. The complex legislation was drafted and passed through a rushed and secretive process intended to limit public comment on one of the most consequential pieces of domestic policy enacted in recent history. This Article is an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage and describes key problem areas in the new legislation. Many of the new changes fundamentally undermine the integrity of the tax code and allow well-advised taxpayers to game the new rules through strategic planning. These gaming opportunities are likely to worsen the bill’s distributional and budgetary costs beyond those expected in the official estimates. Other changes will encounter legal roadblocks, while drafting glitches could lead to uncertainty and haphazard increases or decreases in taxes. This Article also describes reform options for policymakers who will inevitably be tasked with enacting further changes to the tax law in order to undo the legislation’s harmful effects on the fiscal system