Write-Off: The Tax Blog

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Tax Bombs

Jeff Hoopes, UNC
December 05, 2019

Countries sometimes wage tax wars. Taxes exist in a complex global environment. Companies sell across the world, are supplied from across the world, and produce across the world. What is a country to do when another country implements a policy that will hurt that country (or the firms in it) by imposing high taxes on the foreign earnings of companies from that country?  Or, another country might impose a low tax rate, and as a result, capital might flee to that jurisdiction. What is a country to do?

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Biden Piles On! Some Thoughts on Taxing Book Income

Jeff Hoopes, UNC
December 05, 2019

Senator Warren has proposed a tax on book income, which I have discussed on this blog previously (and which I found it impossible to find an financial accounting scholar who would support the idea). Recently Democratic presidential candidate Joe Biden proposed several different corporate tax ideas, one of which was, just like Senator Warren, a tax based on book income. Some details are different, but, the general idea is identical--some firms that are profitable for financial accounting purposes pay no taxes, and that feels bad. So apply a tax to financial accounting income for firms above some threshold.

The major arguments against taxing book income are outlined here, in a piece I wrote with Michelle Hanlon about Warren's plan. The upshot is that book income and taxable income have very different goals. If you think taxable income, what we pay taxes on, is broken, fix it. Don't tax book income, which will end up breaking it.  As I wrote that piece, I had many other thoughts, and more more details, that were left on the editing room floor. Here they are:

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Is a Hot Dog a Sandwich?

Jeff Hoopes, UNC
November 28, 2019

A former colleague of mine at OSU loves to talk about sandwiches. Not how they taste, where to get a good one at a great price, or whether they are best “wit or witout.” Rather, the discussion revolves around exactly how to define a sandwich. What, exactly, is a sandwich? A thought experiment: Imagine you are at a friend’s house. It is lunch time. Your friend asks if you would like a sandwich. You say yes. The friend goes into the kitchen, as you dream of pastrami, or PB&J, or tuna, or bologna.  Your friend returns with a hot dog.  Do you feel like you have been mislead? Is a hot dog a sandwich?

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Dead Birds and Taxes

Jeff Hoopes, UNC
November 25, 2019

What does a dead, stuffed, bald eagle have to do with the current wealth tax debate? A lot, actually. The eagle is part of a piece of art created in 1959 named “Canyon.” This famous work was part of a famous estate tax case in 2012. The original owner who left the estate died in 2007. A bald eagle, or parts thereof, cannot be sold under federal law. Given that the art had no resale value, the estate tax valuation asserted by the estate for the piece of art was zero.  The IRS contended that the piece of art was worth $65 million, and that an estate tax of $29.5 million was owed. What does this have to do with the wealth tax?

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The Hill: You may have to fill out a wealth tax return

Jeff Hoopes, UNC
November 14, 2019

If the U.S. institutes a wealth tax for people with wealth over $50 million, I do not look forward to calculating my personal wealth tax liability and being ready to defend the valuation of my wealth against IRS audit.  Why do I dread such a thing?

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How is Wealth like YouTube Downloads?

Jeff Hoopes, UNC
November 12, 2019

A few weeks ago, I asked my colleagues here at UNC a question: What outcome of human endeavor results in such a skewed distribution as the distribution of wealth? I told them that the answer can’t be denominated in dollars (which would mean it was pretty much just wealth). Humans accomplish many amazing things. Some are very fast, can jump very high, or can sing very well. But, the fastest person, or the highest jumper, or the best singer is, can only be so much better than a normal person (say me). I may have a standing vertical jump of 8 inches, and the best jumper 46 inches.  But, that is only less than six times as high, compared to wealth (where the wealthiest person might have a more than a million times as a normal person). Most things humans do are like jumping, running, or singing. The best can be a lot better than a normal person, but, not a million times better. Thus, my question: what else that we humans do is like wealth. So what examples did my UNC colleagues come up with?

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Baseball “Income Pools” and Income Taxes

Jeff Hoopes, UNC
November 06, 2019

What if you made $8K a year, but, there was some (small) chance you would clear a million dollars next year? Professional baseball players find themselves in this strange situation. After being hired by a baseball team, players are often required to play in the minor leagues.  Then, if that works out, they can move up the major leagues, where salaries are often much, much higher.  Very few players make the major leagues from the minor leagues.  What is a baseball player to do? How do you live off of $8K a year while waiting for your big payday (if it ever comes)? On a fascinating Planet Money episode I listened to recently, it described the phenomena of “income pools.”  As a minor leaguer in baseball, you find a few of your friends, and you form a pact—if one of you hits it big and goes to the majors, they share some of their income with their less lucky friends still laboring in the minors. It spreads risk, and provides a way that, if your friend makes it big, you share, at least a little, in some of the wealth. This episode made me think of progressive taxes.

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What do Idaho and Estonia have in Common? They may well both be overrepresented

Jeff Hoopes, UNC
October 29, 2019

One of the many amazing things about being originally from Idaho (as I proudly am) is that your vote for Senator counts more than 20 times as much as someone from California. Being from a small state gives an Idahoan much more say on what happens in the Senate (and other places!). There are some who believe this similar result exists in many different organizations beyond the U.S. Senate. In the OECD, for example, there are 36 member states, and things are done “by consensus”. This means that Estonia, which has a population of 1.3 million and a GDP of $41 billion, sits equally with the U.S., with 325 million residents, and a GDP of $19.4 trillion. How these two states should both be represented in this body is tricky. How much say should Estonia get, versus the U.S.?

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The Looming Lost Opportunity of OZs

Mary Margaret Frank, University of Virginia
October 28, 2019

My experience at a recent conference left me questioning the potential of Opportunity Zones (OZs) to create significant positive impact for members of the distressed communities. Why? Because the important stakeholders for the success of OZs do not appear to be in the same room, even at a conference where they are all gathered.

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An Argument Against an Argument Against the Wealth Tax

Jeff Hoopes, UNC
October 25, 2019

While I love arguments against ideas I think are horrible, I think it is also important to only love the good arguments. Take the wealth tax. Much was made recently about the fact that many countries had wealth taxes, but got rid of them. If given this evidence that other countries eliminated these taxes, and you assume that governments only change tax policy in policy-improving ways, then you know wealth taxes are a bad idea. Other countries tried them, but got rid of them, so wealth taxes are bad. Q.E.D. So what is wrong with that thinking?

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