Most large public companies offer their executives the opportunity to defer the receipt and taxation of their salary or other current compensation until retirement or some other future date, and equity compensation, which also entails deferral of pay and taxation, constitutes a large fraction of the typical executive pay package. Conventional wisdom holds that employer net operating losses (NOLs) improve the joint economics of deferred and equity compensation (henceforth together "deferred compensation") for the parties. However, empirical studies provide little evidence of an association between employer NOLs and deferred compensation use. This paper focuses on two potential explanations for this apparent disconnect. First, this paper shows that the relationship between employer NOLs and the attractiveness of deferred compensation is more complex and less predictable than is generally recognized, that a large NOL position does not necessarily produce a larger driving force for use of deferred compensation, and that in some cases employer NOLs can actually result in poorer deferred compensation economics. As a result, some employers and executives may rationally choose to ignore employer NOLs when making compensation decisions. Second, even if companies are sensitive to the existence of employer NOLs when making compensation decisions, it is not clear that research methods currently in use would detect the sensitivity. The commonly used proxies and simulations of employer effective marginal tax rates that have been employed in these studies may not adequately capture the complexity of the relationship between NOLs and the economics of deferred compensation.
{"title":"Employer Losses and Deferred Compensation","authors":"David I. Walker","doi":"10.2139/SSRN.3429803","DOIUrl":"https://doi.org/10.2139/SSRN.3429803","url":null,"abstract":"Most large public companies offer their executives the opportunity to defer the receipt and taxation of their salary or other current compensation until retirement or some other future date, and equity compensation, which also entails deferral of pay and taxation, constitutes a large fraction of the typical executive pay package. Conventional wisdom holds that employer net operating losses (NOLs) improve the joint economics of deferred and equity compensation (henceforth together \"deferred compensation\") for the parties. However, empirical studies provide little evidence of an association between employer NOLs and deferred compensation use. This paper focuses on two potential explanations for this apparent disconnect. First, this paper shows that the relationship between employer NOLs and the attractiveness of deferred compensation is more complex and less predictable than is generally recognized, that a large NOL position does not necessarily produce a larger driving force for use of deferred compensation, and that in some cases employer NOLs can actually result in poorer deferred compensation economics. As a result, some employers and executives may rationally choose to ignore employer NOLs when making compensation decisions. Second, even if companies are sensitive to the existence of employer NOLs when making compensation decisions, it is not clear that research methods currently in use would detect the sensitivity. The commonly used proxies and simulations of employer effective marginal tax rates that have been employed in these studies may not adequately capture the complexity of the relationship between NOLs and the economics of deferred compensation.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86615289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The article demonstrates why China has been relatively absent from international debates on digital taxation and concludes that while China is likely to favor a minimum effective tax approach, it will look to other countries to direct the reform.
{"title":"China’s Surprising Silence on Digital Taxation","authors":"Yue Dai","doi":"10.2139/ssrn.3428911","DOIUrl":"https://doi.org/10.2139/ssrn.3428911","url":null,"abstract":"The article demonstrates why China has been relatively absent from international debates on digital taxation and concludes that while China is likely to favor a minimum effective tax approach, it will look to other countries to direct the reform.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90765565","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study estimates the property tax expenditure for nonprofit hospitals (NPHs) in New York City using Medicare and IRS data from 2011 through 2013. After comparing the estimates to various definitions of community benefits, it is concluded that NPHs generally earn their property tax break. Evidence is also presented that using book values is a reasonably accurate method for estimating the property tax expenditure nationwide. Finally, econometric analyses reveals that net income is negatively associated with community benefits, suggesting justification for taxing higher net income hospitals and reallocating the funds to similarly sized but lower net income hospitals.
{"title":"Property Tax Exemptions for Nonprofit Hospitals: What are They Worth? Do They Earn Them? Evidence from New York City","authors":"Geoffrey Propheter","doi":"10.1111/pbaf.12216","DOIUrl":"https://doi.org/10.1111/pbaf.12216","url":null,"abstract":"This study estimates the property tax expenditure for nonprofit hospitals (NPHs) in New York City using Medicare and IRS data from 2011 through 2013. After comparing the estimates to various definitions of community benefits, it is concluded that NPHs generally earn their property tax break. Evidence is also presented that using book values is a reasonably accurate method for estimating the property tax expenditure nationwide. Finally, econometric analyses reveals that net income is negatively associated with community benefits, suggesting justification for taxing higher net income hospitals and reallocating the funds to similarly sized but lower net income hospitals.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78235265","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Duran-Cabré, Alejandro Esteller-Moré, Mariona Mas-Montserrat
In the throes of economic crisis, the Spanish government decided to reintroduce the Wealth Tax, appealing to redistributive motives and its need for greater revenues. This paper studies how individuals reacted to the reintroduction of this tax by drawing on the universe of wealth tax returns submitted to the Catalan Tax Agency between 2011 and 2015. Thus, we exploit the variation in treatment exposure to analyse taxpayers' responses, in terms not only of wealth accumulation, but also of the potential avoidance strategies adopted. Indeed, our results reflect avoidance rather than real responses. They show that while facing higher wealth taxes did not have a negative effect on taxpayers' savings, it did encourage them to change their asset and income composition to take advantage of wealth tax exemptions (mostly business-related) and the existence of a limit on wealth tax liability. This translates into an elasticity of taxable wealth with respect to the net-of-tax rate of return of 0.64, or, put differently, a 0.1 percentage point increase in the average wealth tax rate leads to a reduction in taxable wealth of 3.24% over 4 years. Overall, these avoidance responses are quite marked in terms of tax revenues: they represent a 4-year accumulated revenue loss of 2.6 times the 2011 estimated wealth tax revenues. The existence of such responses mostly related to the design of the wealth tax has relevant policy implications not only in terms of revenues but also insofar as it undermines the tax's redistributive role.
{"title":"Behavioural Responses to the (Re)Introduction of Wealth Taxes. Evidence From Spain","authors":"J. Duran-Cabré, Alejandro Esteller-Moré, Mariona Mas-Montserrat","doi":"10.2139/ssrn.3393016","DOIUrl":"https://doi.org/10.2139/ssrn.3393016","url":null,"abstract":"In the throes of economic crisis, the Spanish government decided to reintroduce the Wealth Tax, appealing to redistributive motives and its need for greater revenues. This paper studies how individuals reacted to the reintroduction of this tax by drawing on the universe of wealth tax returns submitted to the Catalan Tax Agency between 2011 and 2015. Thus, we exploit the variation in treatment exposure to analyse taxpayers' responses, in terms not only of wealth accumulation, but also of the potential avoidance strategies adopted. Indeed, our results reflect avoidance rather than real responses. They show that while facing higher wealth taxes did not have a negative effect on taxpayers' savings, it did encourage them to change their asset and income composition to take advantage of wealth tax exemptions (mostly business-related) and the existence of a limit on wealth tax liability. This translates into an elasticity of taxable wealth with respect to the net-of-tax rate of return of 0.64, or, put differently, a 0.1 percentage point increase in the average wealth tax rate leads to a reduction in taxable wealth of 3.24% over 4 years. Overall, these avoidance responses are quite marked in terms of tax revenues: they represent a 4-year accumulated revenue loss of 2.6 times the 2011 estimated wealth tax revenues. The existence of such responses mostly related to the design of the wealth tax has relevant policy implications not only in terms of revenues but also insofar as it undermines the tax's redistributive role.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-05-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83354099","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Part I: Billionaire Taxes, https://ssrn.com/abstract=3326615. Part II: Taxes Spending and Innovation, https://ssrn.com/abstract=3335386. How much can a passive investor with a high-risk tolerance earn on his or her capital? If history since the end of World War 2 is any guide, between 11 and 14 percent per year before taxes and inflation. After inflation, this comes to around 7 to 10 percent. With good tax planning, the rate of return net of income taxes, inflation, and fees could average around 6.5 to 9.5 percent per year. A family with $100,000,000 ($100 million) in wealth would pay an additional $1 million in taxes per year under Senator Elizabeth Warren’s ultra-high-net-worth tax proposal. That would reduce their after-tax disposable income to $5.5 million to $8.5 million per year. To put this into context, according to the Survey of Consumer Expenditures, households in the top 10 percent of income earned an average of $189,000 after taxes and spent on average $143,000 in 2017. Even after paying Warren’s wealth tax, a household with $100 million in assets could spend 38 to 59 times as much as a relatively high-income household. A household with a $100 million net-worth that lived modestly and spent only as much as the average household in the top 10 percent of income could reinvest $5.36 million to $8.36 million per year, growing their net-worth by 5.36% to 8.36% per year, on average. This is $5.32 million to $8.32 million more in annual savings than the average top-10 percent household. The analysis above implies that Warren’s proposed 2% to 3% ultra-high net-worth wealth tax would only slightly slow the increase in high-end wealth inequality but would not halt or reverse it. At a 5.36% return after taxes, inflation, and personal consumption, a fortune would quadruple in value every 27 years, and would therefore not be dissipated by typical family growth rates. (At 8.36%, it would quadruple in value every 18 years). Under Warren’s proposal, a household with $1 billion in wealth would pay an additional $19 million in taxes per year. After paying the wealth tax, other taxes, and reinvesting to stay ahead of inflation, our billionaire family would be still be able to spend approximately $46 million to $76 million per year, forever, without anyone in the family having to work a job. Every extra billion in wealth (above $1 billion) would translate into an additional $35 million to $65 million in disposable income per year, after taxes and fees and reinvesting to stay ahead of inflation. If policy makers wanted to cap personal wealth from purely passive investing at $1 billion, but did not want to tax the first $50 million in wealth, they would have to annually tax wealth above $50 million at around 12%. Assuming effective enforcement, this would potentially generate somewhere in the vicinity of $1 trillion in revenue per year. This is about enough to replace most payroll tax revenue and thereby give every worker in the co
{"title":"After Paying Ultra-High Net Worth Wealth Taxes, How Much Would Billionaires Have Left to Live on?","authors":"M. Simkovic","doi":"10.2139/SSRN.3340925","DOIUrl":"https://doi.org/10.2139/SSRN.3340925","url":null,"abstract":"Part I: Billionaire Taxes, https://ssrn.com/abstract=3326615. \u0000Part II: Taxes Spending and Innovation, https://ssrn.com/abstract=3335386. \u0000 \u0000How much can a passive investor with a high-risk tolerance earn on his or her capital? \u0000 \u0000If history since the end of World War 2 is any guide, between 11 and 14 percent per year before taxes and inflation. After inflation, this comes to around 7 to 10 percent. With good tax planning, the rate of return net of income taxes, inflation, and fees could average around 6.5 to 9.5 percent per year. \u0000 \u0000A family with $100,000,000 ($100 million) in wealth would pay an additional $1 million in taxes per year under Senator Elizabeth Warren’s ultra-high-net-worth tax proposal. That would reduce their after-tax disposable income to $5.5 million to $8.5 million per year. \u0000 \u0000To put this into context, according to the Survey of Consumer Expenditures, households in the top 10 percent of income earned an average of $189,000 after taxes and spent on average $143,000 in 2017. Even after paying Warren’s wealth tax, a household with $100 million in assets could spend 38 to 59 times as much as a relatively high-income household. \u0000 \u0000A household with a $100 million net-worth that lived modestly and spent only as much as the average household in the top 10 percent of income could reinvest $5.36 million to $8.36 million per year, growing their net-worth by 5.36% to 8.36% per year, on average. This is $5.32 million to $8.32 million more in annual savings than the average top-10 percent household. \u0000 \u0000The analysis above implies that Warren’s proposed 2% to 3% ultra-high net-worth wealth tax would only slightly slow the increase in high-end wealth inequality but would not halt or reverse it. At a 5.36% return after taxes, inflation, and personal consumption, a fortune would quadruple in value every 27 years, and would therefore not be dissipated by typical family growth rates. (At 8.36%, it would quadruple in value every 18 years). \u0000 \u0000Under Warren’s proposal, a household with $1 billion in wealth would pay an additional $19 million in taxes per year. After paying the wealth tax, other taxes, and reinvesting to stay ahead of inflation, our billionaire family would be still be able to spend approximately $46 million to $76 million per year, forever, without anyone in the family having to work a job. Every extra billion in wealth (above $1 billion) would translate into an additional $35 million to $65 million in disposable income per year, after taxes and fees and reinvesting to stay ahead of inflation. \u0000 \u0000If policy makers wanted to cap personal wealth from purely passive investing at $1 billion, but did not want to tax the first $50 million in wealth, they would have to annually tax wealth above $50 million at around 12%. Assuming effective enforcement, this would potentially generate somewhere in the vicinity of $1 trillion in revenue per year. This is about enough to replace most payroll tax revenue and thereby give every worker in the co","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-05-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73857674","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Place-based investment tax incentives known as enterprise zone laws have historically been used as a method for subsidizing investment in low-income communities. Scholarly and policy treatments of enterprise zone laws commonly discuss them as if there is a unified approach to designing these programs. This report finds, however, that although most (33/50) states have enterprise zone laws, these programs vary significantly in important respects — including zone eligibility requirements; eligible investment types; incentives to invest in human capital or affordable housing; and taxpayer eligibility. Understanding these variations is particularly important to understanding how past experience with enterprise zones can inform new place-based incentives, such as those that have been introduced in the federal Opportunity Zones program.
{"title":"How Do Place-Based Investment Tax Incentives Target Low-Income Communities? A Multi-State Survey of Enterprise Zone Tax Incentives","authors":"Michelle D. Layser","doi":"10.2139/SSRN.3381243","DOIUrl":"https://doi.org/10.2139/SSRN.3381243","url":null,"abstract":"Place-based investment tax incentives known as enterprise zone laws have historically been used as a method for subsidizing investment in low-income communities. Scholarly and policy treatments of enterprise zone laws commonly discuss them as if there is a unified approach to designing these programs. This report finds, however, that although most (33/50) states have enterprise zone laws, these programs vary significantly in important respects — including zone eligibility requirements; eligible investment types; incentives to invest in human capital or affordable housing; and taxpayer eligibility. Understanding these variations is particularly important to understanding how past experience with enterprise zones can inform new place-based incentives, such as those that have been introduced in the federal Opportunity Zones program.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76302136","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Countries heavily rely on tax revenue for their welfare programs, which aim to reduce inequalities. Taxes are countries’ main sources of revenue and provide funding for governmental expenditures. A country’s spending is usually divided into categories: mandatory, discretionary, and interest on debt expenditures. These include assistance programs, such as the United States’ Medicaid program, the Supplemental Nutrition Program (so-called foods stamps), and the Temporary Assistance for Needy Families program. The United States lowered its U.S. corporate income tax rate from 35% to 21% in 2018, after the enactment of the United States Tax Cuts and Jobs Act. Similarly, members of the Organization for Economic and Co-operation and Development (OECD) lowered their corporate statutory tax from their 2000 average rate of 28.6% to 21.4% in 2018. In the international context, state-to-state tax arbitration is implemented by OECD members to provide multinationals with double tax relief. In contrast, individuals do not benefit from a similar tax reduction. The United States’ highest marginal income tax rate was reduced from 39.60% to 37% in 2018, whereas 0.5% was the average reduction implemented for individuals by OECD members from 2000 to 2017. This paper analyzes whether states expect private corporations to undertake more social responsibility when considering tax benefits. States’ examination of corporates’ social responsibility includes whether private social accountabilities align with corporations’ profit-oriented natures as well as state interest in public welfare. Furthermore, this paper examines states’ alternative sources of revenues that could balance out the effects of the reduction of corporations’ tax rates and other granted benefits, including tax arbitration for multinationals’ double tax relief.
{"title":"Global Corporate Tax Rate Competition - Who Pays the Bill?","authors":"G. Almeida","doi":"10.2139/SSRN.3387544","DOIUrl":"https://doi.org/10.2139/SSRN.3387544","url":null,"abstract":"Countries heavily rely on tax revenue for their welfare programs, which aim to reduce inequalities. Taxes are countries’ main sources of revenue and provide funding for governmental expenditures. A country’s spending is usually divided into categories: mandatory, discretionary, and interest on debt expenditures. These include assistance programs, such as the United States’ Medicaid program, the Supplemental Nutrition Program (so-called foods stamps), and the Temporary Assistance for Needy Families program. The United States lowered its U.S. corporate income tax rate from 35% to 21% in 2018, after the enactment of the United States Tax Cuts and Jobs Act. Similarly, members of the Organization for Economic and Co-operation and Development (OECD) lowered their corporate statutory tax from their 2000 average rate of 28.6% to 21.4% in 2018. In the international context, state-to-state tax arbitration is implemented by OECD members to provide multinationals with double tax relief. In contrast, individuals do not benefit from a similar tax reduction. The United States’ highest marginal income tax rate was reduced from 39.60% to 37% in 2018, whereas 0.5% was the average reduction implemented for individuals by OECD members from 2000 to 2017. This paper analyzes whether states expect private corporations to undertake more social responsibility when considering tax benefits. States’ examination of corporates’ social responsibility includes whether private social accountabilities align with corporations’ profit-oriented natures as well as state interest in public welfare. Furthermore, this paper examines states’ alternative sources of revenues that could balance out the effects of the reduction of corporations’ tax rates and other granted benefits, including tax arbitration for multinationals’ double tax relief.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85478526","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-04-23DOI: 10.32721/CTJ.2019.67.1.PF.HARRIS
P. Harris, M. Keen, L. Liu
Proximity and close economic links put Canada on the front line in thinking through the effects of the US Tax Cuts and Jobs Act (TCJA). This article reviews the main channels by which the business tax provisions of the TCJA might affect Canada, and possible responses.
{"title":"Policy Forum: International Effects of the 2017 US Tax Reform -- A View from the Front Line","authors":"P. Harris, M. Keen, L. Liu","doi":"10.32721/CTJ.2019.67.1.PF.HARRIS","DOIUrl":"https://doi.org/10.32721/CTJ.2019.67.1.PF.HARRIS","url":null,"abstract":"Proximity and close economic links put Canada on the front line in thinking through the effects of the US Tax Cuts and Jobs Act (TCJA). This article reviews the main channels by which the business tax provisions of the TCJA might affect Canada, and possible responses.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82002948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The decades ahead will bring forth a convergence of increasingly capable technologies, such as artificial intelligence and robotics, that will fundamentally reshape and transform work environments by replacing average humans with ordinary job skills. Klaus Schwab, Founder of the World Economic Forum and author of The Fourth Industrial Revolution, perceptively identifies this impending paradigm shift and argues these technologies will challenge policymakers to “think strategically about the forces of disruption and innovation shaping our future.” This challenge, however, extends beyond the political realm, as emerging technologies will change our human existence. For example, Pope Francis’ 2015 Laudato Si’: On Care for Our Common Home echoed similar concerns to Schwab. His Holiness warns that technological progress that replaces the need for human-performed work would be “detrimental to humanity” because work provides dignity through the development of talents and community relationships. As technology disintermediates humans from market transactions, tax policies should rethink the purpose of paid work and focus on furthering vocational opportunities outside the traditional employment context. While innovators, such as Bill Gates, have suggested imposing a “robot tax” to fund displaced-worker retraining programs, the implementation of new tax policies alone will not foster and protect worker dignity. A solution must be crafted to provide humans with meaningful work opportunities. Policymakers will need to think strategically and balance individual economic interests with community concerns about income inequality. To mitigate the disruptive nature of the fourth industrial revolution, forward-focused tax policies should be designed and then refined to promote meaningful work and protect human dignity.
{"title":"Zero Economic Value Humans?","authors":"Hilary G. Escajeda","doi":"10.2139/ssrn.3356677","DOIUrl":"https://doi.org/10.2139/ssrn.3356677","url":null,"abstract":"The decades ahead will bring forth a convergence of increasingly capable technologies, such as artificial intelligence and robotics, that will fundamentally reshape and transform work environments by replacing average humans with ordinary job skills. Klaus Schwab, Founder of the World Economic Forum and author of The Fourth Industrial Revolution, perceptively identifies this impending paradigm shift and argues these technologies will challenge policymakers to “think strategically about the forces of disruption and innovation shaping our future.” \u0000 \u0000This challenge, however, extends beyond the political realm, as emerging technologies will change our human existence. For example, Pope Francis’ 2015 Laudato Si’: On Care for Our Common Home echoed similar concerns to Schwab. His Holiness warns that technological progress that replaces the need for human-performed work would be “detrimental to humanity” because work provides dignity through the development of talents and community relationships. \u0000 \u0000As technology disintermediates humans from market transactions, tax policies should rethink the purpose of paid work and focus on furthering vocational opportunities outside the traditional employment context. While innovators, such as Bill Gates, have suggested imposing a “robot tax” to fund displaced-worker retraining programs, the implementation of new tax policies alone will not foster and protect worker dignity. A solution must be crafted to provide humans with meaningful work opportunities. Policymakers will need to think strategically and balance individual economic interests with community concerns about income inequality. To mitigate the disruptive nature of the fourth industrial revolution, forward-focused tax policies should be designed and then refined to promote meaningful work and protect human dignity.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81831734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent empirical evidence suggests that domestic firms avoid taxes at least to the same extent as multinational firms. We extend this finding by developing an approach to estimate the average statutory tax rate from publicly available data that implicitly weights all statutory tax rates a firm is exposed to by the corresponding taxable income. Based on this new approach we decompose tax avoidance into two separate components: tax-rate avoidance and tax-base avoidance. We find that U.S. multinational firms make substantial use of tax-rate avoidance, for instance, their foreign average statutory tax rates decrease from 1988 by 0.6 percentage points each year to around 16 percent in 2014. U.S. domestic firms by definition do not take advantage of low tax rates in non-U.S. countries, however, we find that U.S. domestic firms make substantial use of tax-base avoidance and are more effective in tax-base avoidance than U.S. multinational firms. Overall, our findings on tax-rate and tax-base avoidance of U.S. multinational and domestic firms explain the recent evidence that effective tax rates of domestic firms are at least as low as effective tax rates of multinational firms and substantiate existing doubts that multinational firms, in particular, are the most aggressive tax avoiders.
{"title":"Measuring Corporate Tax Rate and Tax Base Avoidance of U.S. Domestic and U.S. Multinational Firms","authors":"Niklas Lampenius, T. Shevlin, Arthur Stenzel","doi":"10.2139/ssrn.3374548","DOIUrl":"https://doi.org/10.2139/ssrn.3374548","url":null,"abstract":"Recent empirical evidence suggests that domestic firms avoid taxes at least to the same extent as multinational firms. We extend this finding by developing an approach to estimate the average statutory tax rate from publicly available data that implicitly weights all statutory tax rates a firm is exposed to by the corresponding taxable income. Based on this new approach we decompose tax avoidance into two separate components: tax-rate avoidance and tax-base avoidance. We find that U.S. multinational firms make substantial use of tax-rate avoidance, for instance, their foreign average statutory tax rates decrease from 1988 by 0.6 percentage points each year to around 16 percent in 2014. U.S. domestic firms by definition do not take advantage of low tax rates in non-U.S. countries, however, we find that U.S. domestic firms make substantial use of tax-base avoidance and are more effective in tax-base avoidance than U.S. multinational firms. Overall, our findings on tax-rate and tax-base avoidance of U.S. multinational and domestic firms explain the recent evidence that effective tax rates of domestic firms are at least as low as effective tax rates of multinational firms and substantiate existing doubts that multinational firms, in particular, are the most aggressive tax avoiders.","PeriodicalId":54058,"journal":{"name":"EJournal of Tax Research","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2019-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2139/ssrn.3374548","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72432887","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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