London Calling: Does the U.K.\u27s Experience with Individual Taxation Clash with the U.S.\u27s Expectations

The United States is one of the last countries to tax married couples jointly; most other countries have adopted individual taxation. In 1990, the United Kingdom completed transitioning its tax system from one that treated husbands and wives as a marital unit to one that mandates an individual-based system, and so it has two decades of experience with the new regime. This article provides American policymakers valuable information regarding the consequences of adopting individual taxation by examining the United Kingdom\u27s experience. First, it establishes a matrix of factors that identifies and assesses differences between the two nations that affect the predictive value of the United Kingdom\u27s experience for the United States. The article then reviews the origins and development of the United Kingdom\u27s original mandatory joint return and the forces that drove the change to individual taxation. Finally, it appraises the consequences of this revision of British law, including the improved economic position of many wives and the increased incidence of tax avoidance. Comparing the change in the United Kingdom with what would likely occur in the United States, this article uses comparative taxation to provide a guide for the United States, urging consideration of the costs as well as the benefits of changing tax units

Pre-Enforcement Litigation Needed for Taxing Procedures

Courts have opened tax guidance to procedural attack. Consequently, taxpayers who are found to owe tax may challenge the validity of the guidance implementing the tax if the procedure used by the Treasury Department in adopting the guidance failed to comply with the Administrative Procedure Act, in particular, with notice-and-comment. This increased willingness to consider tax guidance\u27s procedural defects offers little to most taxpayers unless they are also given a better means to raise procedural challenges. Under current law and in most circumstances, generally, taxpayers can bring a challenge only after they have been found to owe taxes in an audit and completed an internal IRS appeal process. This delay in the ability to challenge guidance reduces the likelihood taxpayers will challenge the procedure used to create a particular rule. Moreover, delayed litigation requires taxpayers to plan their affairs under the umbrella of guidance that might not survive a procedural challenge. To the extent procedural challenges are accepted in the tax context, this Article argues Congress should narrowly repeal its prior limitations on pre-enforcement litigation of those procedures. Everyone affected by the guidance should be permitted to litigate procedural questions for a period of time post-promulgation without the necessity of being found to owe taxes. This narrow exception would increase the certainty of tax guidance and encourage greater public participation in the guidance-formation process in a way that is sensitive to the fact that litigation imposes costs on the Treasury Department

To Save State Residents: States\u27 Use of Community Property for Federal Tax Reduction

This essay analyzes the forces that led five common law states to adopt community property regimes between 1939 and 1947. Focusing on Oklahoma, the first state to switch, this article traces these laws from initial proposals through their repeal after Congress enacted nationalized income-splitting in 1948. Earlier studies have focused on the impact of these laws, primarily on wives as secondary earners within families, and not on their development. From the various political and social forces precipitating this trend, this study explores the actual reasons states adopted these regimes and shows that an economic goal, namely reducing married couples\u27 federal income taxes, drove state legislatures. Thus, while examining state legislative processes, this paper shows the goal of federal tax reduction led to changes in an entirely separate area of state law. This analysis also provides a new perspective on the American federal system, illustrating the complex and reciprocal relationship between state and federal laws and incentives. While initially states altered their domestic laws to give their residents a benefit under the federal tax code, using the federal system to win benefits for their residents vis-a-vis those of other states, these state-law changes ultimately induced the federal government to adopt a uniform national policy on income-splitting

An Empirical Study of Innocent Spouse Relief: Do Courts Implement Congress\u27s Legislative Intent

Under existing law spouses are jointly and severally liable for their joint tax returns. As a result, the IRS may pursue either spouse for any taxes owed on those returns. Concerned that the IRS was seeking taxes from the “wrong” spouse under the joint and several liability regime, Congress expanded relief for “innocent” spouses in 1998. Many critics of this relief complain that, as it is applied, the statute offers too little relief to spouses, generally wives, who sign returns while being deceived or compelled by their mates. However, there has been no empirical study of whether the current relief is, in fact, what Congress intended. This article fills the void by first evaluating the provision’s legislative history to determine what relief Congress intended to provide when it acted in 1998. The article then examines the 444 cases appealing for relief under this provision in order to evaluate whether judges are deciding cases invoking the provision in ways consistent with that congressional objective. Thus, this article provides an empirical study of the success and failure of the innocent spouse provision from Congress’s perspective

What Innocent Spouse Relief Says about Wives and the Rest of Us

Every time spouses sign joint returns, knowingly or not they accept joint and several liability, meaning that either spouse may be held liable for all of the tax due on the joint return. Although joint and several liability facilitates tax collection, it may conflict with a spouse’s claims to have signed the return while being lied to, abused, or manipulated. The question for Congress is how to balance these competing demands. Innocent spouse relief provides some tax relief for spouses Congress does not believe should be jointly and severally liable. The existence of this relief also offers an opportunity to explore how the government views married women, as wives have always composed the lion’s share of seekers and recipients of innocent spouse relief. The relief currently provided is both over- and under-inclusive by (1) not offering relief to all spouses or former spouses who are unable to assess the validity of their returns and (2) offering relief to some who both knew of, and helped orchestrate, tax evasion. This Article argues that the existing innocent spouse relief regime should be replaced with one that respects joint filers’ agency when signing joint returns and affords relief only when a joint filer was unable to exercise that agency. In the event that a spouse is coerced into signing the return, relief needs to be speedier and less burdensome in application than under today’s law. This approach would increase the equity of the tax system and reduce the administrative costs on both the taxpayer and the government

Tax as Part of a Broken Budget: Good Taxes Are Good Cause Enough

The federal budget is a myth. Despite being a myth, Congress uses the budget to limit its choices by linking its revenue-raising and spending powers under a federal debt ceiling. Through its self-imposed limits, Congress puts tremendous pressure on how it calculates its budget, and that calculation generally assumes any tax provisions will raise revenue when the law becomes effective. However, many tax provisions require additional direction to ensure they operate as the budgetary process expects. That task falls to the Treasury Department and the Internal Revenue Service (IRS) as a bureau of the Department. Consequently, limiting the production of tax rules that implement, interpret, and sometimes limit possible interpretations of tax statutes is problematic because their projected revenue is used to balance the budget. Nevertheless, these Treasury Department rules are under attack on the grounds that their issuance fails to comply with the Administrative Procedure Act (APA). The APA generally requires notice and comment for the promulgation of rules, a costly process in terms of time and agency resources. This Article argues that there should be a wider acceptance of the good cause exception for the speedier issuance of tax regulations and other IRS-level implementing materials in order to satisfy Congress’s revenue expectations

What Innocent Spouse Relief Says about Wives and the Rest of Us

Every time spouses sign joint returns, knowingly or not they accept joint and several liability, meaning that either spouse may be held liable for all of the tax due on the joint return. Although joint and several liability facilitates tax collection, it may conflict with a spouse’s claims to have signed the return while being lied to, abused, or manipulated. The question for Congress is how to balance these competing demands. Innocent spouse relief provides some tax relief for spouses Congress does not believe should be jointly and severally liable. The existence of this relief also offers an opportunity to explore how the government views married women, as wives have always composed the lion’s share of seekers and recipients of innocent spouse relief. The relief currently provided is both over- and under-inclusive by (1) not offering relief to all spouses or former spouses who are unable to assess the validity of their returns and (2) offering relief to some who both knew of, and helped orchestrate, tax evasion. This Article argues that the existing innocent spouse relief regime should be replaced with one that respects joint filers’ agency when signing joint returns and affords relief only when a joint filer was unable to exercise that agency. In the event that a spouse is coerced into signing the return, relief needs to be speedier and less burdensome in application than under today’s law. This approach would increase the equity of the tax system and reduce the administrative costs on both the taxpayer and the government

To Save State Residents: States\u27 Use of Community Property for Federal Tax Reduction

This essay analyzes the forces that led five common law states to adopt community property regimes between 1939 and 1947. Focusing on Oklahoma, the first state to switch, this article traces these laws from initial proposals through their repeal after Congress enacted nationalized income-splitting in 1948. Earlier studies have focused on the impact of these laws, primarily on wives as secondary earners within families, and not on their development. From the various political and social forces precipitating this trend, this study explores the actual reasons states adopted these regimes and shows that an economic goal, namely reducing married couples\u27 federal income taxes, drove state legislatures. Thus, while examining state legislative processes, this paper shows the goal of federal tax reduction led to changes in an entirely separate area of state law. This analysis also provides a new perspective on the American federal system, illustrating the complex and reciprocal relationship between state and federal laws and incentives. While initially states altered their domestic laws to give their residents a benefit under the federal tax code, using the federal system to win benefits for their residents vis-a-vis those of other states, these state-law changes ultimately induced the federal government to adopt a uniform national policy on income-splitting