Tax Chats

This episode originally aired on January 15, 2022.Martin Luther King Jr. is the only person to have ever been tried for perjury with regards to state income taxes in Alabama. Jeff and Scott interview Edgar Dyer about the tax perjury trial of Martin Luther King Jr. in 1960. Eddie wrote an article entitled "A Triumph of Justice in Alabama: The 1960 Perjury Trial of Martin Luther King, Jr."Fred Grey, Martin Luther King's attorney, said of the trial, "No one would have predicted that an all-white jury in Montgomery, Alabama, the Cradle of the Confederacy, in May 1960, in the middle of all the sit-ins and all of the racial tension that was going on, would exonerate Martin Luther King, Jr. But it really happened." Coretta Scott King said of the trial, "A southern jury of twelve white men had acquitted Martin. It was a triumph of justice, a miracle that restored your faith in human good."  Dr. King said it was a "turning point" in his life. Tune in to hear about this triumphal tax trial, which was a turning point for Martin Luther King.

Scott and Jeff chat with David Kemmerer, Co-Founder and CEO of CoinLedger. Our conversation focuses, in part, on the NFT Loss Harvestooor, which is a tool designed to allow investors to dispose of NFTs such that they can claim the tax deduction. The NFT Graveyard is the final resting place of NFTs that were once worth hundreds of thousands of dollars, but are now worth essentially nothing.

Scott and Jeff chat with Leopoldo Parada, professor of law at University of Leeds about the inequities that Pillar II of the OECD's Inclusive Framework impose on developing countries.

Away to Pay Taxes (to the tune of Away in the Manger)Re-release (originally released Christmas, 2021)Lyrics by Jeff Hoopes, Sung by Stacey HoopesOh Joseph and MaryThey were there for a taskThey came to the cityTo pay their taxBut as they remitted The tax on their worthOh Mary, a virginShe had to give birth They went to the cityBy Caesa­r's decreeAs taxes touched JosephThey affect you and meWhen we give birthand when we dieHow much we workAnd what car we buy  For every decisionWe weigh how we actBy counting the costAnd we do it post-tax The pros and the consIn dollars and centsWe consider the taxesBefore we commence

In honor of the fifth anniversary of the Tax Cuts and Jobs Act...I Heard the Bells (of tax reform!)Sung to the tune of I Heard the Bells on Christmas DaySinging by two of Dyreng's DeductionsLyrics of Jeff HoopesI heard the tale about the dayThey passed the law TCJAThe rate was high our firms payed muchSo they were blessed by Donald's touchThe rate brought low that fated dayWhen Congress put out on displayThat we are strong and we will beatOn taxes we will now competeFor mobile factors move and shiftTheir presence all boats will liftAnd the economy will growFor rates were high and now they're low

Scott and Jeff chat with Daniel Hemel about the House Ways and Means Committee "Report on the Internal Revenue Service's Mandatory Audit Program" that reveals substantial information about former President Trump's tax returns. Additional information was revealed in a report by the Joint Committee on Taxation.

The Tax Cuts and Jobs Act was signed into law on December 22, 2017. In honor of its birth five whole years ago, we talk with the American Enterprise Institute's Kyle Pomerleau, who had a front row seat to the passage of the TCJA. 

Scott and Jeff chat with Daniel Hemel, Law Professor at New York University about the recently enacted excise tax on share repurchases or buybacks. Daniel has thought and written about buybacks, for example, here.We discuss buybacks, dividends, and why both progressives and conservatives might be in favor of a tax on buybacks.

Scott and Jeff discuss the effect of capital gains taxes on  stock prices with Douglas A. Shackelford, former Dean of UNC's Kenan-Flagler Business School.  If the capital gains tax rate increases, should stock prices go up, down, or stay the same? Its much more complicated than you might think!

Scott and Jeff discuss what constitutes candy, for sales tax purposes, in North Carolina. The discussion ends with the verdict on craisins--are they candy? Scott is quizzed on other types of food and whether they are candy, and, scores a perfect 0/5.

Todd Castagno, an equity research analyst at Morgan Stanley, responds to a list of possible ways corporations might  react  to the tax on book income recently passed as part of the Inflation Reduction Act.  

Scott and Jeff talk about Tax Foundation with CEO and President Daniel Bunn. We talk about its missions, where it gets funding, and other tax-related issues. We discuss the pro-growth agenda of the Tax Foundation and note that there could be other legitimate objective functions for a think tank.

Tax Chats is officially one year old! In honor of this anniversery, Scott and Jeff talk through a potential rebranding of Tax Chats with a different name, then go on to discuss two tax headlines. First, they discuss windfall profits taxes on oil companies, then talk about the disclosure of Donald Trump's tax returns.Jeff also misuses the Spanish verb "recordar."

In this episode Scott and Jeff discuss Sales Taxes with Whitney Afonso. We discuss sales tax basics, including the difference between who remits the tax and who bears the burden of the tax. We discuss the purposes of sales taxes. We discuss the regressivity of sales taxes. And we discuss how even Fancy Nancy had to deal with the unexpected pain of sales taxes in Shoe-la-la!

In this episode we talk about the tax consequences of student loan forgiveness. Generally, debt forgiveness is treated as income, and is therefore taxable. If the Biden Administration's current plan to forgive portions of student loans comes to fruition, the forgiven amount would normally be taxable. Provisions have been made to make student loan forgiveness tax free at the federal level. Some states, including North Carolina, would still treat the loan forgiveness as taxable, and borrowers would owe state taxes on the forgiven amounts. We discuss that issue, along with other issues related to taxes and higher education in North Carolina, along with the general business climate and taxation in the state of North Carolina with Senator Phil Berger, President Pro Tempore of the NC Senate.

Scott and Jeff discuss recent headlines from the New York Times:Opinion | There Is a Tax That Could Help With Inflation - The New York Times (nytimes.com)The Purpose of Extra-Large Marshmallows? A U.K. Court Weighs In. - The New York Times (nytimes.com)Lawsuit Seeks to Block Biden's Student Debt Cancellation Plan - The New York Times (nytimes.com)Endowment Tax on Wealthiest Universities Netted a Fraction of Predictions in 2021 - WSJ

Scott and Jeff discuss several people Jeff has invited to be on the show, but who have (as of yet!) been unable to make a Tax Chats appearance. Scott guesses why Jeff invited each person to be on Tax Chats.  The "John Edwards Tax Shelter", gas taxes and electric vehicles, soda taxes, and taxing assault rifles are all briefly discussed. 

Scott and Jeff discuss Pillar 1 of the OECD's Inclusive Framework with Heydon Wardell Burrus of the Centre for Business Taxation at Oxford University.

Scott and Jeff chat with Larry Zelenak, Professor at the Duke Law School about taxes in sitcoms. Larry has documented the extensive list of episodes that use the federal income tax as a major component of the plot. His work documenting these facts can be found in these two articles:"Six Decades of the Federal Income Tax in Sitcoms""Seven-Plus Decades of the Federal Income Tax in Sitcoms: An Update"In the episode, we refer most frequently to three episodes:3Rd Rock From the Sun, Season 4, Episode 12 "Dick and Taxes"Roseanne, Season 2, Episode 22 "April Fool's Day"The Simpsons, Season 9: Episode 20 "The Trouble with Trillions"

In this episode, Scott and Jeff discuss the some of the fascinating details related to the taxation of tobacco. We often think of the tax system as a tool to raise revenue. But the tax system is also used to encourage or discourage behavior. Taxing tobacco is one example of this type of tax, but the existence of the tax creates many strange incentives that affect the way people behave, including, counterintuitively, smoking more under some circumstances.

Jeff quizzes Scott about the tax status of the Royal Family in England.Long live the Queen.

Despite our best efforts to inform the world about the perils of taxing financial statement income, the Corporate Alternative Minimum Tax based on financial accounting income passed as part of the Inflation Reduction Act. Jeff and Scott discuss the adjustments to financial accounting income that are part of the act, and describe how these adjustments will result in a situation where some firms will report high profits to shareholders and low or no tax, despite the minimum tax.

Scott and Jeff discuss a program called Tax Inspectors Without Borders with Rusudan Kemularia, Head of Tax Inspectors Without Borders. The program is part of the OECD and is connected with the OECD's BEPS as part of an effort to help provide developing countries with the tools necessary to enforce tax laws in the complex international tax arena.

Jeff and Scott discuss some interesting tax-related observations Jeff made while visiting Oxford University and Mannheim University in England and Germany.

Scott and Jeff discuss the $80 billion in additional funding that has been allocated to the IRS as part of the Inflation Reduction Act, or IRA. They also discuss the fact that the IRS owns and uses a variety of guns, ammunition, etc. They break down some of the fear-mongering headlines that have recently been in the press.

In this special episode, we compile several recordings that we have made over the past year related to the proposed alternative minimum tax on financial accounting earnings. The recordings are very much related to two op-ed articles Scott published in the Wall Street Journal, found here:Don't Let Warren Politicize Accounting - WSJElizabeth Warren's War on Accounting - WSJJeff has also written on the topic, including this letter to congress and an accompanying WSJ article that goes along with it:Letter to CongressAccounting Experts Ask Congress to Change Proposal on Minimum Corporate Tax - WSJThis episode is longer than usual, but we believe the information is worth consuming.

Scott and Jeff discuss "carried interest" with Vic Fleischer, Professor of Law at UC Irvine. Carried interest is a special type of income that is taxed at favored capital gains tax rates, and is often associated with high earning individuals who manage private equity partnerships. One prominent example of someone who had significant income from carried interest was former presidential candidate Mitt Romney. 

Scott and Jeff learn from Ashley Jackson how the Taliban create a tax. We discuss how the tax system evolved initially to generate revenue to fund the Taliban objectives, until it became a symbol of its legitimacy. We talk about how the tax system evolved from a system of forced extractions to the point where customer support numbers became available to report mistreatment.

Scott and Jeff discuss the creation of schedule M3 with Lillian Mills, Dean of the McCombs School of Business at the University of Texas at Austin. Lil was instrumental in the creation of schedule M-3, which is form filed with the IRS that reconciles taxable income to financial accounting income.  We talk about the opportunities that exist for academics, policymakers, and regulators to work together, and the unique environment that led to the creation of the M3. We also discuss some recent policy proposals that would impose tax on financial accounting income.

Scott and Jeff discuss some of the prominent arguments against progressive taxation.

Scott and Jeff discuss the tax status of churches in the U.S. with Lloyd Mayer, Professor of Law at Notre Dame University.  We discuss the basics of tax law as it pertains to Churches. We also discuss special tax benefits that apply to ministers and other church employees. We consider the tradeoffs that exist between providing churches with tax benefits and relying on them to provide certain types of public goods and services vs taxing churches and relying on the government to provide those goods and services.

Scott and Jeff ask Andy Grewal to describe administrative law, and why it is so important for taxes. We discuss how significant portions of tax laws are left to interpretation by the IRS or Treasury, and how these interpretations can have a material effect on the experience of taxpayers.

Scott and Jeff discuss income shifting by multinational corporations with Jennifer Blouin. We talk about Jennifer's research that suggests some estimates of the amount of tax revenue the U.S. loses to income shifting are as much as ten times too large. These estimates are important because they drive policy discussions, including debates in the U.S. about tax reform, and abroad, through the OECD and other organizations. The conversation builds on some of Jennifer's recent work related to income shifting, including a paper entitled "Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?" available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3491451.

Scott and Jeff discuss the effect of taxes on the economy with Professor Arthur Laffer,  for whom the Laffer Curve is named. The Laffer Curve shows the likely relationship between tax rates and tax revenue. We hear the famous story of drawing the curve on a napkin. We ask  Professor Laffer about the Laffer Curve, we get his opinion on the revenue maximizing tax rate, and his opinion on the effect of tax rates on revenue raised.

Scott and Jeff are joined by Rita de la Feria @delaFeriaR to discuss her new paper (co-authored with Maria Amparo Grau Ruiz) called "Taxing Robots".  The abstract of her paper reads in part: "In recent years, the idea of taxing robots has been progressively gaining momentum. The potential impact of automation on employment, and consequently on income tax revenues, has led many to defend the introduction of a tax on robots, or on the use of robots, to either compensate for the potential revenue loss, or to slow down the process of automation. This paper argues that whilst automation presents significant challenges to tax systems, the introduction of a new tax on robots –or on their use– is not an effective mechanism through which to address these challenges." We discuss the idea of taxing robots, whether the tax is different from a tax on other types of capital investment, the behavioral motivations for a desire to tax robots, and other issues.

Scott and Jeff discuss whether the Tax Cuts and Jobs Act (TCJA) was effective. Often referred to as the Trump tax cuts, or the Trump Tax Reform, recent commentators have argued that it was highly effective. For example, Tyler Goodspeed and Kevin Hassett argued in the Wall Street Journal the TCJA "delivered as promised" by increasing investment, wages, and government revenues. Academic research, however, paints a more nuanced picture. Jeff keeps a list of academic studies that evaluate different aspects of the TCJA on the UNC Tax Center website called The TCJA Effects Tracker. We discuss why articles in the popular press that claim victory or defeat are almost always oversimplified.

Scott, Jeff, and Paul Kiel discuss the series of articles published by ProPublica based on a massive leak of private tax return data on the wealthiest individuals in the United States. The series of articles can be found here: https://www.propublica.org/series/the-secret-irs-files.We ask about privacy, transparency, tone, influence, leaked data, and more.

Jeff explains why quarters have ridges, and what it has to do with taxes and inflation.

Scott and Jeff discuss the idea of carryover basis with Kathleen Thomas. Currently, when someone dies with appreciated capital gains, they get a step-up in basis, meaning their estate pays no taxes on their accumulated gains. The downside is they have to die. An alternative would be to carryover the basis the the person who died had, which would make many tax planning strategies more difficult.

Scott and Jeff discuss Biden's proposed Mega Millionaire Minimum Tax with David Gamage, one of the thought-leaders behind the proposal and its variations. We discuss the basics of what the minimum tax might look like. We discuss the strengths and weaknesses of this type of tax. The tax is intended to force very wealthy individuals like Jeff Bezos or Mark Zuckerberg to pay more tax, even if they do not have much income as currently the tax code currently defines income. We also discuss the idea of "notional equity" as a way for the government to strengthen its taxing authority. 

Scott and Jeff discuss progressive taxation. While most agree progressive taxation is desirable, there is less agreement about how much progressivity is desirable, what it even is, and if our current tax system is progressive.  Scott and Jeff tackle these issues by asking each other questions about taxes on income, property taxes, taxes on cigarettes, and other scenarios. They conclude that progressivity is a slippery subject, and, claims about progressivity should be carefully considered.

Scott and Jeff discuss the reasons a corporate tax makes sense. The answers might surprise you. Among the least compelling arguments: corporations have a lot of income, corporations use infrastructure, corporations have special legal status. Among the most compelling arguments: corporations make efficient collection agents, corporations have cash, and taxing corporations allows the government to see what they are up to. 

Scott and Jeff discuss Crypto taxes with Tyler Menzer, PhD student at the University of Iowa studying the tax implications of Crypto currency in the marketplace. We briefly discuss some of the basics, but, also discuss slightly more complicated crypto issues like airdrops and staking.

Scott and Jeff talk with Rich Prisinzano of the Penn Wharton Budget Model about revenue scoring. Scott, Jeff and Rich discuss topics such as how precise revenue scores are, how private revenue scores are different from those provided by the government, how politicians might use private revenue scorers to get the best "price" for a piece of tax legislation, etc. They end with how Rich would think through scoring a hypothetical (and fictional!) tax proposal, the "Dividend Cut Tax". 

Scott and Jeff discuss tax justice with Amy Hanauer, Executive Director of Citizens for Tax Justice and its sister organization, ITEP (Institute on Taxation and Economic Policy). We ask Amy what a fair tax system would look like. We discuss problems with the current tax system. We touch on methods the government uses to redistribute income, like the earned income tax credit and the child tax credit. We briefly discuss corporate taxes, and Amy shares her view that corporations do not pay enough taxes. 

Jeff explains how some non-profits owe income taxes on the unrelated business income, but, how because of the mission of the Girls Scouts, they don't pay taxes on the proceeds from the cookies sales.

In this episode, Scott and Jeff discuss why financial accounting rules and tax accounting rules are different. They give some examples. They talk about some firms that have reported very high income while also paying very low taxes. They also talk about how the opposite happens, but doesn't get much media attention.

Scott and Jeff discuss Cannabis taxation with economist Caroline Weber. We chat about the history of cannabis taxation, the advantage of legalizing cannabis to make it easier to tax, the use of taxes to set a price floor, and other issues related to cannabis taxation. We also discuss whether the taxes collected from Cannabis production and sales are used to remedy some of the social ills that might arise from widespread cannabis use. 

Scott and Jeff interview Grover Norquist, president of Americans for Tax Reform (ATR). We discuss the Taxpayer Protection Pledge, which has been signed by many national and state-level politicians, including past presidents, many senators, sitting governors, and others. The signing is mostly partisan, with Republicans mostly signing, and Democrats rarely signing.Grover Norquist discusses his views on taxes and government, and argues that there is never a good reason to increase income tax collections.Grover Norquist describes how he believes raising taxes can lead to political trouble for Republican politicians.

Scott and Jeff discuss tax boycotts. Some corporate mangers say they are careful with their tax planning because they don't want to make their customers mad--customers might not buy things from a company they perceive as overly aggressive with their taxes. In this episode, Scott and Jeff discuss a recent study by Jeff and co-authors Scott Asay (U Iowa), Jake Thornock (Brigham Young University), and Jaron Wilde (U Iowa) called "Tax Boycotts". We describe how the scorn of consumers might harm corporations that avoid taxes. Jeff and co-authors searched high and low for evidence of consumer boycotts related to tax avoidance and were unable to find any evidence. The conclusion is that, although managers might perceive one cost of tax planning is the potential for consumer boycotts, in fact the costs rarely materialize.

Scott and Jeff talk with Ken Kies about TRA86, the last major tax reform since the Tax Cuts and Jobs Act. Ken was the Chief Republican Tax Counsel of the House Ways and Means Committee during the process of passing TRA86. How bipartisan was the TRA86? Was Ronald Reagan involved in the details? How much did the lobbyists matter? This episode gets into the details of TRA86 from someone who was on the front lines of tax reform when it happened.