5 KEY PERSPECTIVES YOU CAN LEARN FROM OTHER PROFESSIONS AND DISCIPLINES ABOUT TAX POLICY

On Friday, September 29, 2006 the Office of Tax Policy Research partnered with the National Tax Association to sponsor a conference that featured a unique agenda and format. Over 150 people gathered in Washington, D.C. to attend “5 Key Perspectives You Can Learn from Other Professions and Disciplines about Tax Policy.” An exceptional lineup of participants – tax journalists, tax administrators, business tax professionals, tax accountants, tax economists, and tax lawyers – provided an extraordinary variety of perspectives and expertise on tax policy. Tax Analysts provided funding for the event.

 

	Our luncheon speaker --The Honorable William M. Thomas, Chairman of the Committee on Ways and Means -- delivered a highly entertaining and enlightening address. To view his speech, just click on his picture. (You will need a high-speed internet connection (DSL/Cable Modem/LAN) and Windows Media Player 9 or above to play the video.)
Click here for the Final Agenda and complete conference PowerPoint presentations

 

CORPORATE INCOME TAX IN THE 21ST CENTURY

On May 5-6, 2005, OTPR, in cooperation with the University of California, Berkeley's Burch Center for Tax Policy and Public Finance, sponsored a conference that was held in Ann Arbor entitled "Taxing Corporate Income in the 21st Century." The recent major legislative initiatives and the specter of further major proposals provided a unique opportunity to examine the economic effects of taxation and the interrelationship among accounting, governance and taxation issues.

Nine papers were commissioned by leading academic economists and accountants to study these issues and present their findings at an open conference. The project results were published in a volume by Cambridge University Press entitled Corporate Income Tax in the 21st Century.

The project had three parts. It examined the impact of the 2003 tax act (and the 2002 bonus depreciation provisions) on corporate financial and real behavior, with an eye on how the response clarifies the "old" and "new" views of corporate taxation. Second, it investigated the important but little-investigated interrelationships among governance, tax reporting, and accounting, including the effect of the Sarbanes-Oxley Act. Finally, the project addressed the future of the corporate and capital income taxation in the United States by examining the apparent path of tax reform proposal, and drawing on the three decades of European experience with an integrated corporate and personal tax system.

BEHAVIORAL PUBLIC FINANCE: TOWARD A NEW AGENDA

The University of Michigan Business School’s Office of Tax Policy Research, in collaboration with University of Southern California Law School, sponsored a conference entitled “Behavioral Public Finance: Toward a New Agenda” on April 23-24, 2004 in Ann Arbor. This conference built on the intellectual momentum created by the conference entitled “Behavioral Public Finance: New Directions for Theory and Analysis” that was held in February, 2003 at the University of Southern California.

Twelve papers were commissioned from leading scholars in economics, law, and psychology describing research projects that ranged in approach from theoretical investigations to field experiments to laboratory experiments to econometric analyses.
 
Behavioral Public Finance: New   Directions for Theory and Analysis

The University of Michigan Business School’s Office of Tax Policy Research, along with the University of Southern California Law School and the USC-Caltech Center for the Study of Law and Politics, co-sponsored a conference entitled “Behavioral Public Finance: New Directions for Theory and Analysis” on February 7-8, 2003 at USC.

The conference provided a forum for presentation and discussion of the latest empirical, theoretical, and normative research on the application of behavioral economics to government expenditure and tax programs. Participants included leading scholars from many generations and many disciplines working in this field.

Privatization: Issues of State and Local Public Infrastructure

The University of Michigan's Office of Tax Policy Research and Center for Local, State, and Urban Policy hosted a day-long conference in Ann Arbor on November 22, 2002 entitled "Privatization: Issues of State and Local Public Infrastructure." Approximately 40 people assembled at the University of Michigan Business School to discuss research on privatization of infrastructure by state and local governments.

Crisis in Tax Administration

Most people voluntarily pay personal income tax. They do so for two reasons, despite the cost and complexity of complying with the tax law. On the positive side, most people recognize, even if grudgingly, that payment of tax is a duty of citizenship. On the negative side, they know that the law requires payment, that evasion is a crime, and that willful failure to pay taxes is punishable by fines or imprisonment. The practical questions for tax administration are how to strengthen each of these motives to comply with the law. How much should be spent on enforcement and how should enforcement be organized to promote these objectives and to get the best results per dollar spent? These issues have moved center stage in public discussions as a result of alleged abuses by the Internal Revenue Service and resulting legislation.

To study these issues, the Office of Tax Policy Research and the Brookings Institution, commissioned ten original studies on tax administration which were presented at a two-day conference on November 7-8, 2002 at Brookings in Washington, DC. The results of these studies will be published by Brookings Institution Press and publicized through press briefings and op-eds for leading newspapers. The studies examined theories of tax administration; actual practice of tax administration, including recent modifications initiated in response to legislation; proposed modifications in that practice; design of tax laws to facilitate compliance and enforcement; and practices in other nations from which the United States might learn.

World Tax Competition

One of the conspicuous features of the world economy at the end of the 20th century is that economic activity is far more mobile than at any other time in human history. The international mobility of productive factors carries with it the possibility of unbridled tax competition between governments eager to attract businesses and high-income individuals.

The prospect of international tax competition generates a decidedly mixed reaction. Some observers worry that tax competition undermines the ability of countries to provide the programs and social safety net that citizens deserve, and reduces the ability of governments to levy progressive taxes on all sources of income. Others feel differently, arguing that tax competition induces nations to provide efficient services and to resist the temptation to overtax the returns to productive activities such as saving and investing. The two sides differ sharply on what policies to pursue in the face of the globalization of commerce and the growing interaction among economies. The first camp favors cross-country agreements to harmonize or coordinate tax systems, supplemented by the exchange of information among tax authorities. The latter camp rejects such initiatives, viewing them as cartel-like agreements among countries struggling against the inevitable force of globalization and minimal government intervention in commerce.

Policy responses to competitive tax pressures might greatly benefit from advice grounded in careful empirical investigation. For example, tax coordination schemes often encounter the criticism that they simply provide enhanced opportunities for tax havens (low-tax countries that refuse to coordinate their tax policies with others) to lure tax bases away from high-tax countries. In the absence of hard evidence on the potential impact of tax havens, this criticism is difficult to evaluate. Existing behavior patterns offer useful information concerning the role of tax havens in the world economy, but in order to analyze these patterns properly, it is again necessary to amass a large amount of reliable data.

To help understand the process and impact of world tax competition, the Office of Tax Policy Research, in cooperation with the Institute for Fiscal Studies, commissioned a series of academic research papers on this topic. The research findings were presented at a conference held on May 24 and 25, 2001, in London, England, to which were invited leading academics and also representatives of governments, international organizations, and business and citizen groups, such as labor and environmental organizations. For more information, contact otpr@umich.edu.

This project is designed to integrate the theory, evidence, and policy development associated with global tax competition, to fill in gaps in current understanding, and to provide a solid theoretical and empirical foundation for further research in this area. It is intended to improve the institutional grounding of theoretical models of tax competition, to interpret evidence in the light of rigorous and consistent economic models, and to evaluate policy proposals in light of the theory and evidence.

Rethinking Estate and Gift Taxation

Controversy over the estate tax arises due in part to the population it affects-the wealthy. Advocates of the estate tax argue that, because it selectively burdens the affluent, the estate tax helps achieve the desired degree of progressivity in the tax system. Opponents argue that the economic costs of the estate tax are high precisely because it discourages economically important behavior -saving and investment, hard work, and innovation - that creates wealth. Important parts of the economy, including the nonprofit sector, have keen interests in estate tax reform, since charitable contributions are affected by estate tax rates and structure.

Political interest in the estate tax has intensified in recent years. The 1997 tax act phased in an increase in the exemption amount and introduced a new small business preference. These changes will not, however, end the controversy, as evidenced recently by prominent American politicians who have called for the complete abolition of the estate tax. The debate is likely to intensify for two important reasons. First, the projected federal budget surpluses have reoriented political attention away from deficit reduction and toward tax cuts. Second, the enormous wealth creation of the 1990s raises the estate tax stakes, as the newly created wealth begins to pass through estates and raises speculation about the ends to which it will be put.

The Office of Tax Policy Research, in partnership with the Brookings Institution, sponsored a conference entitled Rethinking Estate and Gift Taxation which was held in Washington, D.C. on May 4 and 5, 2000.

Ten original studies of the estate and gift tax were commissioned focusing on empirical analyses of the effect of estate and gift taxation on saving and investment, portfolio choice, business organization, avoidance activities, and charitable contributions. In order to put the findings of the empirical studies in perspective, the project also included foundational papers on the estate tax, covering basic facts, experience in other countries, the tax law environment, and the underlying economic theory of how it affects the behavior of potential donors and recipients. These papers were issued as OTPR Working Papers  and published in 2001 by Brookings Institution Press.

OTPR, together with the Robert D. Burch Center for Tax Policy and Public Finance at Berkeley, and the Fund for Tax and Fiscal Research and John M. Olin Center for Law, Economics and Business, both at Harvard Law School, sponsored a Workshop on International Taxation, held in Berkeley, California during the week of June 21-25, 1999.

This workshop provided an overview of the state of research in the economics and legal literatures on various aspects of international taxation. The workshop featured leading American academic tax specialists, including both economists and tax lawyers. The purpose of the workshop was to stimulate research activity on international tax issues and to improve scholarly communication between legal and economic researchers working on international taxation.

The workshop met daily for five days in intensive sessions, each session starting with an introductory presentation, with discussion to follow. Topics for the five days of the workshop were:
• International taxation: Neutrality and efficiency in stylized systems.
• International "competitiveness" and international capital flows.
• International taxation in practice: Taxation and foreign direct investment.
• The effect of tax rules and special tax incentives on the behavior of multinational corporations.
• Tax competition and tax reform.

On October 24-25, 1997, over 130 policymakers, accountants, lawyers, and economists gathered in Ann Arbor for a conference entitled Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Fifteen original papers by some of the leading scholars in public finance were featured. Among the important and controversial new findings are evidence that the 1986 tax cuts did not induce more labor supply from high-income Americans, and that the 1993 tax increase affected primarily the timing of executive compensation, triggering a huge amount of stock option realizations in 1992.

The project also generated new findings on the tax sensitivity of charitable contributions, capital gains realizations, and a wide range of other aspects of economic behavior such as entrepreneurial activity. These new findings shed light on the likely revenue consequences, distributional impact, and economic growth effects of both fundamental tax reform -- such as a flat tax or a retail sales tax -- and more incremental tax changes such as a tightening of capital gains loopholes and estate tax easing. These research papers were issued as OTPR Working Papers  in the spring of 1998, summarized in the OTPR Newsletter, and were published in 2000 in a volume by the Russell Sage Foundation and Harvard University Press entitled Does Atlas Shrug? The Economic Consequences of Taxing the Rich.

OTPR and Tax Analysts, Inc. jointly sponsored a conference on Life Without the Income Tax: Paradise or Pandora's Box? held in Washington, D.C. on September 22, 1995. Over 75 academics and policymakers heard experts from business, government, and tax practice examine issues concerning fundamental alternatives to the income tax, including potential benefits and unforeseen implementation problems. The papers presented at this conference are OTPR Working Papers No. 95-1  and 95-2 . Also commissioned for the project but not presented at the conference itself was Working Paper No. 95-3 .

More than 70 academics assembled on September 11-12, 1992 to hear nine OTPR-commissioned papers on the subject of Tax Progressivity and Income Inequality. The question of tax progressivity -- the distribution of tax burden by income class -- is a central one for tax policy, and has been prominent in the political skirmishes over taxation in the last several years. The conference was written up by the New York Times, and several of the papers were widely cited in the tax policy debate during 1992 and 1993. These papers were issued as OTPR Working Papers  and collected in a volume published in 1994 by Cambridge University Press entitled Tax Progressivity and Income Inequality.

Policy Alternatives for Transfer Pricing was the subject of an OTPR conference held on October 24-25, 1991. Over 50 business people, government experts, and academics convened to offer and debate policy reforms. Two papers, written by academics, were commissioned and commented on by business people. These papers were published together in Tax Notes magazine, a leading weekly for tax practitioners.

On December 7-8, 1990, OTPR sponsored an internationally-attended conference on Why People Pay Taxes: Tax Compliance and Enforcement. Over 70 academics and government representatives gathered to hear 12 OTPR-commissioned papers written to explore the effectiveness of the traditional deterrent approach to enforcement, as well as the positive incentives to tax compliance. In 1992 these papers were published by the University of Michigan Press in a book entitled Why People Pay Taxes: Tax Compliance and Enforcement.

Over 60 people attended a conference on Do Taxes Matter? The Impact of the Tax Reform Act of 1986 (TRA86), held in Ann Arbor on November 10 - 11, 1989. At the conference were presented nine papers, commissioned by OTPR, written by leading tax experts. Each author was asked to address a different sector of the economy and how that sector was affected by TRA86, carefully reviewing all the evidence accumulated since its enactment. The differences between projections and eventual effects were reconciled with an eye for drawing out the lessons for future tax policy changes. The research papers were issued as OTPR Working Papers, summarized in the OTPR Newsletter, and collected in the 1989 MIT Press volume entitled Do Taxes Matter? The Impact of the Tax Reform Act of 1986.