Andrews & Kurth Centennial Professor of Law, University of Texas at Austin - School of Law, USA
Fixing the Constitutional Absurdity of the Apportionment of Direct Tax
Fixing the Constitutional Absurdity of the Apportionment of Direct Tax argues that the Constitutional requirement that “direct tax” be apportioned among the states according to population should never be used to make any federal tax impossible. “Direct tax” is a word like “trash” defined by what you are going to ...
Capitalize Costs of Software Development
Under current law, a taxpayer may deduct the costs of development of computer software as soon as the costs are paid or accrued. The immediate deduction of investment costs that have continuing value means that tax does not reduce the pretax return from the project. Existing law, moreover, gives a ...
Omnibus Capitalization Proposals
This shelf project proposal covers several expenditures that are allowed as expenses as soon as they are incurred under current law but should be treated as capital expenditures. Given the treatment of debt financing, capitalization is needed to prevent negative tax or subsidy for investments, many with dubious merit. The ...
Taxing the Publicly Traded Stock In a Corporate Acquisition
Under current law, if a corporate acquisition qualifies as a reorganization, the target shareholders do not recognize built-in gain on the stock they surrender when they receive publicly traded stock. The proposal would treat sale stock would be taxed as if the stock had no sale restrictions. Restrictions on votes ...
How to Raise $1 Trillion without a VAT or a Rate Hike
We should be able to raise at least $1 trillion more revenue a year within the current income tax system just by making our tax accounting better reflect economic income. Our system has too many tax pits, which absorb revenue and distort investment decisions. We allow deductions for fictitious losses. ...
Percentage Depletion of Imaginary
Costs
Of all the dispensations . . . percentage depletion is the most remarkable achievement. It enables certain taxpayers to reduce their incomes by imaginary costs. Other taxpayers are not considered so deserving. They may only deduct what they spend.
.— Louis Eisenstein, Ideologies of Taxation[1]
Tax on Insurance Buildup
Andrew Pike
Eric A. Lustig
Life insurance contracts often combine a savings or investment element with pure insurance protection that covers the risk of death during the year. Current law will tax the buildup in the value of a ‘‘life insurance contract’’ only if the policy is surrendered for its cash value ...
End Tax-Free Monetization of Wealth
Cash withdrawn from appreciated property using financial instruments has become a major source of untaxed support for the standard of living of our wealthiest citizens.
The proposal would treat cash received under a contract for sale of property or for writing an option on property as realization of gain to the ...
Taxation of the Really Big House
A. Overview
Serious long-term tax reform will need to limit the considerable tax advantages now available in owning the very largest houses and other personal-use properties. The primary return from the investment in residences and similar property is the rental value of the personal use of the house, which is always ...
Replace the Corporate Tax With a Market Capitalization Tax
This proposal would replace the 35 percent corporate tax on publicly traded companies with a low 20-basis point quarterly tax on the issuer on the market capitalization including both traded debt and equity. A low-yield corporate tax would remain for corporations that are not publicly traded, and for a transition ...
Accurate and Honest Tax Accounting for Oil and Gas
Tax accounting for the oil and gas industry does not describe the economic income from the investment. Indeed, for a broad range of reasonable assumptions, oil and gas accounting delivers anti-tax or subsidies to profitable investments. The combination of four important tax preferences generates a subsidy that is a negative ...
Don’t Let Capital Accounts Go Negative
The proposal would prevent negative capital accounts as a remedy to prevent tax shelters. It would suspend deductions that would otherwise result in the taxpayer’s adjusted basis being lower than the outstanding debt. When capital accounts are negative, the transaction is a tax shelter in which tax is negative, that ...
An Employer-Level Proxy Tax on Fringe Benefits
A. Overview
When nontaxable substitutes for cash are available, an employer and employee working in concert will inevitably shift compensation away from cash to the untaxed form. Goods and services are usually less convenient and less valuable to the employee than cash. Still, as long as the value lost is less ...
Timber!
Under current law the combination of tax preferences for timber means that timber investments are subject to less than zero tax. Tax accounting should describe the economic income from timber. This proposal would treat timber as an ordinary asset, require the capitalization of all costs incurred before harvest, and allow ...