The Tax Maven

Bill Gale talks about what is wrong with our income tax and how to make it right. He also explains what happens when death and taxes square off (spoiler alert: it doesn’t go well for the income tax). Gale describes simple measures—and some not so simple—that we can take to make our tax system work better for all of us. Find out what the “Angel of Death” tax loophole is and why it makes the tax law both unfair and inefficient. Gale also discusses how mark-to-market taxation could help us all cheat death, making the income tax more equitable while boosting economic growth.

Gale’s pencil question is about the tax treatment of churches.

Diane Ring may not actually be here from the future, but it would help to explain how she has remained one step ahead of the rest of the world for decades. She recognized the importance of power in international tax law early on, mapping the politics of states and international organizations long before anyone else realized it mattered. Today, international tax law seems to be nothing but politics. Ring shows us how we got here and what it may mean for our future. We also discuss her new research with Shu-Yi Oei that grapples with the challenges of regulating a rapidly changing world.

The pencil question is about tax policy in ancient Athens.

Professor Joe Bankman has spent years working to harness technology for taxpayers. In today’s episode, he explains what a prepopulated tax return is and why much of the world uses them but the United States does not. We discuss the disruptive power of digital and how it is remaking the tax landscape in favor big multinationals while making it harder for small taxpayers to hide their income. Bankman also offers his perspective on what we can all learn from California’s budget woes and why its situation is both better and worse than that of the nation as a whole.

The pencil question about the song “I Paid My Income Tax Today” comes from a book by Larry Zelenak.

Can tax law produce healthier babies? Those aren’t the kinds of questions most tax experts focus on, but Professor Diane Whitmore Schanzenbach shows how the design of our tax laws can affect people in profound ways. In this episode we discuss the Earned Income Tax Credit and how it has affected the lives of millions of Americans living in poverty.

The EITC has drawn low-skill mothers into the workforce more effectively than even optimistic observers in the mid-1990s might have hoped. It has also taught us important lessons about how the tax tools we use to help our most vulnerable neighbors can affect everything from whether they eat healthy food to the birthweight of their infants. Schanzenbach tells us what she has learned about the limitations and possibilities of delivering hope through the tax law.

The pencil question comes from an article by Julie Roin.

Tax laws are designed to make us all better off. But there is a famous saying in business: “If you can’t measure it, you can’t improve it.” Professor Marc Fleurbaey understands the profound challenges hidden within that simple statement. If policymakers can’t measure the potential impact of tax policies, how can they make better laws? Fleurbaey explores how we can evaluate how well off we are so that we can increase not just income and wealth, but also do better to quantify aspects of our society such as health and social relations.

Fleurbaey explains how optimal tax theory, an imperfect tool policymakers use to write our tax laws, can be improved to address similar flaws in the ways we fail to measure what really matters. He also describes the lessons Rawls can teach us about creating tax laws that reflect society’s values more accurately than merely maximizing GDP. The conversation wraps up with a discussion of a surprising carbon tax proposal from conservative economists and politicians that aims to protect both the environment and vulnerable individuals.

Fleurbaey tackles a pencil question about a New Jersey taxpayer named Zarin.

Reproductive decisions affect our lives in profound ways. One of the underappreciated challenges of navigating parenthood in today’s world of assisted reproductive technology lies in understanding the tax treatment of the significant expenses that parents bear. Professor Katie Pratt has been wrestling with difficult policy issues raised by technological change for more than a decade. Pratt explains how the tax law has failed to provide would-be parents with the clarity they need on whether the costs of fertility treatments including IVF, egg donor, and surrogate procedures.

In the world of Obergefell, the questions become both more urgent and more challenging and Pratt offers key insights and answers. Pratt’s scholarship has allowed her to build bridges between the tax and public health communities. She explains why that communication is critical to crafting effective laws by telling the story of one of the sugary drink taxes that fell victim to a simple misunderstanding. Tax laws can help improve lives and even help create them, but it takes thoughtful experts like Pratt to make sure that they deliver results.

Pratt fields a tricky pencil question drawn from an article by her colleagues Ted Seto and Sande Buhai: “Tax and Disability: Ability to Pay and the Taxation of Difference”, 154 University of Pennsylvania Law Review 1053 (2006).

Buried at the heart of the tax law are key notions about what the code can do. When economists think about tax rates or deductions, they measure them against those assumptions before they decide how high or how big they should be. Today’s Tax Maven, Yale Law School’s Zach Liscow, explains what they generally get wrong. A big part of the problem is that, however strange it might seem, economists tend to believe that only the tax law should be fair.

At the risk of understatement, this notion contradicts much of what we know about the world. As Liscow explains, the tax law can’t right every wrong. But this is what the influential school of thought known as law and economics tells us should happen. And that is what Liscow calls its “esoteric underbelly.” In fact, Liscow explains, people have pretty clear ideas about how tax burdens should be distributed. Just as they believe that damages for an injury should not be higher for a poor person than for a wealthy one, the taxes people pay should not be adjusted solely to offset injustices elsewhere in the legal system. The problem, as Liscow sees it, is when all of these assumptions and beliefs collide, those who need help the most simply just won’t get it.

Liscow faces a challenging pencil question drawn from an article by Tom Brennan (Harvard Law School).

Policymakers have to make choices based on imperfect information. Scholars such as Professor Stacie Laplante make their jobs easier by showing them what tax policy tools like “patent boxes” can deliver (increase the number of patent filings) and what they can’t (some of those additional patents may not be so great). Laplante doesn’t have all the answers, but she’s not done exploring how policymakers should promote innovation or how the Tax Cuts and Jobs Act will affect the way multinationals shift income. Also, she explains what implicit taxes are with thoroughbreds.

Laplante faces a tough pencil question about Thomas Adams, a leading figure in early 20th century tax policy—and once the Wisconsin tax commissioner—from an article by Ajay K. Mehrotra.

Allison Christians takes complex ideas and makes them not just clear, but compelling. In this episode, she describes her optimistic vision of the future of international taxation. With the world caught between too many taxes and too little tax revenue, Christians explains what digital services taxes reveal about the failures of our century old system for taxing multinationals. More importantly she explains what they might mean for our future. Could her alchemy of turning two problems (our failures to tax multinationals and to tackle climate change) into a single solution save us?

Christians also answers a pencil question from an article by Dana Brakman Reiser about a surprising episode in the history of nonprofit law.

Professor Larry Zelenak reads voraciously and writes passionately and he joins us to discuss both. We talk about the books he’s written, the books his written about and lots more. Learn why Treasury Secretary Andrew W. Mellon believed “the fairness” of taxing wages at a lower rate than capital income was “beyond question” and why some people just might actually love Form 1040. And most importantly, learn what it takes to make an elevator pitch about the value of fiscal citizenship.

Zelenak also answers a pencil question from an article by Richard Musgrave about the Investment Tax Credit (a hat tip to Professor Ajay Mehrotra at Northwestern and the Americana Bar Foundation).