Most of us these days are worried about the pandemic. If that weren’t enough fun, there’s also economic collapse, especially when — and the tip of the canoe is already edging out over the waterfall — states reach an imminent fiscal cliff. State layoffs, service cuts, and tax hikes contributed very substantially to the Great Recession. For that reason, fiscal relief for states is a key component of the budget deal now being negotiated.

But two Washington Post op-ed writers seem to be more worried about the next recession after this one. The duo are Penn’s Robert Inman, economist and noted austerity guru, and David Skeel, the eminent bankruptcy law scholar. In their piece, they argue that Congress should refuse aid to states except to the extent that states’ fiscal needs exceed what they would have encountered in an “ordinary” recession (the op-ed is a little old but Wharton has been pushing it out again lately as the latest budget battle reheats). Much as the Senate Majority leader argued in April, Inman & Skeel worry that helping states now will lead to “moral hazard,” discouraging them from saving for the 2030 recession (note: all made-up future dates approximate). …


This week brought a new round of announcements from universities, even very wealthy ones, that they would be cutting faculty and staff pay. Readers already know my views about schools with giant endowments asking their employees to sacrifice. Putting aside the question of whether current dining-hall workers or future millionaire donors should pay for today’s crisis (that’s a neutral framing of the issue, don’t you think?), the way that schools are trying to balance their books is particularly awful. At many of these places — and you will have to take my word for this, since most of my data come via emails from friends — universities are cutting back on retirement contributions instead of cutting salary. This is terrible tax planning, but it is a plan that has lots of support…from consultants who advise big for-profit businesses. …


These are tough times for higher education. Even name-brand institutions are announcing hiring freezes and salary cuts, among other austerity policies. This is perfectly understandable if your institution is a community college. Let’s assume the archetypical community college can’t borrow affordably, and it has no savings. It’s not going to sell off its classroom space or the dining hall. So salary cuts it is.

But what on earth explains why Stanford and Harvard are taking similar measures? These are institutions with tens of billions of dollars in endowment savings. Harvard, as I have pointed out elsewhere, could cease operations tomorrow and still cover its bills for twelve years. Equally insane, these are schools with guaranteed donative revenues that are sure to exceed their annual endowment payouts by several multiples. That is, Harvard brings in more money in donations every year than it spends out of its endowment. …


By Brian Galle, David Gamage, Darien Shanske, & Erin Scharff[1]

COVID-19 is causing mass layoffs and related economic hardship, as well as budget crises for state and local governments.[2] This essay is part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research.[3] This essay will focus on how state governments should act to reform unemployment insurance eligibility and benefits and the taxes funding these programs.

Economic downturns are the wrong time to worry about fiscal rectitude. Yet, in the past, states have contributed to national economic misery during recessions by reducing benefits, cutting public sector jobs, and raising taxes.[4] Prudent fiscal planning in the form of rainy-day funds can help to avoid this dilemma, but no state’s rainy day fund is anywhere near large enough to weather the current storm.[5] Borrowing is a painful alternative, but where savings are not enough, it must be embraced. That is especially so now, when we face not an ordinary recession but one in which state and local governmental capacity to respond to urgent physical needs of their citizens is especially in demand. State governments must thus act quickly to seek additional funds from sources that will not exacerbate economic misery for state residents. Federal aid is especially to be sought after (as — in contrast to state governments — the federal government does not operate under balanced budget constraints). …


For interested readers, I’m posting here the text of comments filed yesterday by me & about 2 dozen other tax law professors in response to proposed regulations on the deductibility of business meals. Interestingly, the President seems to share our view that it is Congress, not the Treasury, that has the power to restore the deduction. For earlier WSD coverage of the regulations, see here.

***

Dear Sir or Madam:

The undersigned are law professors who teach Federal Income Taxation.[1]


Renowned Sociologists Ran a Field Experiment to Find Out. They Concluded “No.” But They Didn’t Understand Taxes.

The trio had an incredible new plan to avoid prison. But their scheme would go terribly wrong. The year was 1976. And the plotters were not part of the Lufthansa heist crew, but three of the nation’s most prominent criminologists, sociologists who studied crime: Richard Berk, Kenneth Lenihan, and Peter Rossi. Rossi would soon serve as president of the American Sociological Association. Their paper would end up contributing to the end of the era of prevention, and laying the intellectual groundwork for the era of “tough on crime.”

The basic idea was simple, and built on a small-scale field trial one of them had run recently in Baltimore: what if, when men get out of prison, we give them money? People commit many crimes because they need money, of course, and in the researchers’ experience most recent inmates struggled to find work. Desperate, the recently-released returned to crime instead of persisting in their job search. So a cash payment should give these men time to get on their feet, and allow them to find lawful work. The Baltimore results, though small scale, were promising, with a large drop in reported property crimes. …


Discussion Draft 12/13/19

The AALS Section on Scholarship, Advisory Committee on Law Journal Reform

Introduction

No one is satisfied with today’s legal publishing. The long-standing tradition of simultaneous submission to student-edited journals has always involved tradeoffs, but the costs of that approach have grown dramatically over the last decade. Where once even top journals faced a relatively manageable task in identifying promising submissions, technological innovation now enables authors to easily submit to hundreds of journals with a few clicks. The result has been enormous practical and even ethical pressures on students and authors. Top journals receive more than 4,000 submissions annually. Selection outcomes are often driven not by merit but by insider knowledge, such as whether an author knows when journals are open to selecting articles or how to “expedite” publication offers to more-preferred journals. Increasingly, top journals are demanding exclusive submission windows, undermining one of the core strengths of the traditional structure. …


On what basis can the Treasury Department decline to turn over the President’s tax records, now that the House Ways & Means Committee has requested them? Daniel argues here, along the lines of earlier work by George Yin and Andy Grewal, that the congressional power to request tax information is limited by the scope of Congress’ “investigative” power. Hence, he says, a request has to fall within the scope of an inquiry stemming from some legitimate legislative purpose. I fully agree with him that the present request would easily be justifiable under that standard. But Congress doesn’t need to do even that much here. …


Robert Mueller’s report reportedly “did not exonerate” the President, but AG William Barr did. Working with Rod Rosenstein, Barr concluded that the President should not be charged with obstruction of justice. Besides the curious inclusion of Rosenstein — my former boss, and an individual who arguably would have co-conspirator criminal exposure if the President were convicted of obstruction — in the decision process, the letter has two features that suggest we need to see much, much more of Mueller’s report. …


Wealth taxes are popular in some circles these days. Senator Elizabeth Warren has a new wealth tax proposal out, as do a couple of think tanks. I thought it would be interesting to work through how a wealth tax should approach entities that historically have been mostly exempt from income taxes: charities, governmental entities, pension funds, and non-U.S. taxpayers. For each of these, there are potentially competing goals from the perspective of the wealth tax and the policy rationales that motivate current income tax treatment. Any outcome probably has to end up being a compromise between them. …

About

Brian Galle

Full-time academic (tax, nonprofits, behavioral economics, and whatnot) @GeorgetownLaw. Occasional lawyer. Also could be arguing in my spare time.

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