Joel Slemrod Research Articles

Michael Keen and Joel Slemrod: review of Rebellion, rascals, and revenues: tax follies and wisdom through the ages

Michael Keen and Joel Slemrod: review of Rebellion, rascals, and revenues: tax follies and wisdom through the ages

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages. By Michael Keen and Joel Slemrod. Princeton, NJ: Princeton University Press, 2021. Pp. 536. $20.10, hardcover; $19.95, paper.

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages. By Michael Keen and Joel Slemrod. Princeton, NJ: Princeton University Press, 2021. Pp. 536. $20.10, hardcover; $19.95, paper.

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages! by Michael Keen and Joel Slemrod (Princeton University Press, 2021, Princeton, NJ, 511 pages)

<i>Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages!</i> by Michael Keen and Joel Slemrod (Princeton University Press, 2021, Princeton, NJ, 511 pages)

Rebellion, Rascals, and Revenue: Pleasingly Gaudy and Preposterous

Michael Keen and Joel Slemrod’s REBELLION, RASCALS AND REVENUE: TAX FOLLIES AND WISDOM THROUGH THE AGES (Princeton University Press, 2021) is a wonderful book, which should be read by any student of taxation. To most tax policy makers and academics, tax history may seem a bit arcane, because they believe that the study of taxation and especially public finance economics is a story of progress and that we know better how to design good tax systems than our ancestors. To this attitude, Keen and Slemrod offer a decisive rejoinder: We do not necessarily understand taxation better than our predecessors, and in fact we can learn from their experience. Keen and Slemrod’s marvelous book is not an attempt to directly effectuate tax policy or to rewrite tax history. Instead, it is a very wise excursion by two highly experienced public finance economists into the past in order to both understand the present better by comparing it to what was different, and to improve the future by learning from both past wisdom and past follies.

Putting the Public Benefit in Cost Benefit Analysis of Tax Regulations: A Response to Hemel, Nou and Weisbach

In a recent blog post and forthcoming Tax Notes article, Profs. Daniel Hemel, Jennifer Nou and David Weisbach have argued for a new way of calculating the costs and benefits of tax regulations. Hemel and his colleagues then propose a method for Treasury and IRS to calculate the social costs and benefits of tax regulations that affect revenue collections. This method, which they call the “marginal revenue rule,” builds upon recent work by economists Martin Feldstein, Raj Chetty, Michael Keen, and Joel Slemrod. They argue that revenues resulting from behavioral changes should be counted toward the social benefits of a tax regulation, whereas other revenues (what economists refer to as “mechanical transfers”) should not. For non-revenue costs and benefits, cost-benefit analysis of tax rules should proceed along the same lines as that for non-tax regulations. We write not to debate the advantages or disadvantages of the marginal revenue rule, but rather to address the underlying assumption by both Hemel et al and OMB/OIRA that “mechanical transfers” (revenues that do not result from behavioral changes) should be excluded from both the cost and the benefit side of cost/benefit analysis. In other words, a dollar in the hands of the taxpayer is worth exactly as much as a dollar in the hands of the government. However. ignoring the benefit that results from government spending of tax dollars in a cost/benefit analysis is clearly wrong, and results in anti-tax bias, given the wide acceptance of the cost associated with taxes.

Tax Rates and Corporate Decision-making

Tax Rates and Corporate Decision Making John R. Graham Duke University john.graham@duke.edu Michelle Hanlon Massachusetts Institute of Technology mhanlon@mit.edu Terry Shevlin University of California, Irvine tshevlin@uci.edu Nemit Shroff Massachusetts Institute of Technology shroff@mit.edu July 2016 Abstract: We survey companies and find that many use incorrect tax rate inputs into important corporate decisions. Specifically, many companies use an average tax rate (the GAAP effective tax rate, ETR) to evaluate incremental decisions, rather than using the theoretically correct marginal tax rate. We find evidence consistent with behavioral biases (heuristics, salience) and managers’ educational backgrounds affecting these choices. We estimate the economic consequences of using the theoretically incorrect tax rate and find that using the ETR for capital structure decisions leads to suboptimal leverage choices and using the ETR in investment decisions makes firms less responsive to investment opportunities. This paper is the winner of the American Accounting Association 2015 FARS Midyear Meeting Best Paper Award. We thank John Barrios for sharing data on the LinkedIn profiles of our survey respondents. We appreciate helpful comments from Robin Greenwood (the editor), two anonymous referees, Mary Barth, James Chyz, Bryan Cloyd, Russ Lundholm, Lil Mills (discussant), Richard Sansing, Joel Slemrod (discussant), seminar participants at the Baruch College, Columbia Law School, INSEAD conference, International Institute for Public Finance (IIPF) Annual Congress (Dublin), MaTax Conference in Germany, Stanford Summer Camp, University of California, Davis, University of Tennessee, and Virginia Tech University. Thanks to the following people for helpful comments on the development of survey questions: Jennifer Blouin, Merle Erickson, Ken Klassen, Ed Maydew, Peter Merrill, Lil Mills, Sonja Rego, Richard Sansing, Stephanie Sikes, Joel Slemrod, and Ryan Wilson. We also appreciate the support of PricewaterhouseCoopers (especially Peter Merrill) and the Tax Executives Institute (especially Tim McCormally) in asking firms to participate and in reviewing the survey document. We are grateful for the discussions with several tax executives about their role in their company. Finally, each author is grateful for the financial support of the Fuqua School of Business, Paton Accounting Fund at the University of Michigan, MIT Junior Faculty Research Assistance Program, and the Paul Merage School of Business at the University of California-Irvine. All errors are our own.

TAX SYSTEMS. By JOEL SLEMROD and CHRISTIAN GILLITZER.

<i>TAX SYSTEMS</i>. By JOEL SLEMROD and CHRISTIAN GILLITZER.

Book Reviews

David Albouy of the Department of Economics at the University of Illinois reviews “Tax Systems”, by Joel Slemrod and Christian Gillitzer. The Econlit abstract of this book begins: “Presents a tax-systems approach for addressing many critical tax policy issues. Discusses the need for tax-system analysis; standard optimal tax models; multiple behavioral margins; multiple sources of costs; tax base elasticity; multiple tax-system instruments; the general model; standard instruments with new costs; endogenous elasticity; optimal observability and complexity; notches and optimal line drawing; and future directions. Slemrod is Paul W. McCracken Collegiate Professor of Business Economics and Public Policy in the Ross School of Business, Professor of Economics, and Chair of the Economics Department at the University of Michigan. Gillitzer is a graduate student of economics at the University of Michigan.”

Public Economics: Taxes in America: What Everyone Needs to Know

Julie Berry Cullen of University of California, San Diego reviews, “Taxes in America: What Everyone Needs to Know” by Leonard E. Burman and Joel Slemrod. The Econlit abstract of this book begins: “Explores how the U.S. tax system works, how it affects people and businesses, and how it might be made better. Discusses the basics of taxes; personal income taxes; business income taxes; taxing spending; other kinds of taxes; taxes and the economy; the hidden welfare state; the burden of taxation; tax administration and enforcement; misperceptions and reality in the policy process; tax myths; and tax reform. Burman is Daniel Patrick Moynihan Professor of Public Affairs in the Maxwell School and is with the Departments of Public Administration and Economics and the Law School at Syracuse University. Slemrod is Paul W. McCracken Collegiate Professor of Business Economics and Public Policy in the Stephen M. Ross School of Business, Director of the Office of Tax Policy Research in the Ross School of Business, and Professor and Chair in the Department of Economics at the University of Michigan.”

Book Reviews

Book Reviews

Taxes in America: what everyone needs to know

Despite their passion and fury, contemporary Americans are remarkably clueless about how their tax system works. But with heated debates over taxation now roiling Congress and the nation, an understanding of the American tax system is of vital importance. Taxes in America, by preeminent tax scholars Leonard E. Burman and Joel Slemrod, offers a clear, concise explanation of how the American tax system works, how it affects people and businesses, and how it might be improved. Accessibly written and organized in a clear, question-and-answer format, the book describes the intricacies of the modern tax system in an easy-to-grasp manner. Burman and Slemrod begin with the basic definitions of taxes and then delve into more complicated and indeed contentious concerns. They address such questions as how to recognize Fool's Gold tax reform plans. How much more tax could the IRS collect with better enforcement? How do tax burdens vary around the world? Why do corporations pay so little tax, even though they earn trillions of dollars every year? And what kind of tax system is most conducive to economic growth?

Introduction

Introduction

Taxing ourselves: a citizen's guide to the debate over taxes

As Albert Einstein may or may not have said, hardest thing in the world to understand is the income tax. Indeed, to follow the debate over tax reform, the interested citizen is forced to choose between misleading sound bites and academic treatises. Taxing Ourselves bridges the gap between the two by discussing the key issues clearly and without a political agenda: Should the federal income tax be replaced with a flat tax or sales tax? Should it be left in place and reformed? Can tax cuts stimulate the economy, or will higher deficits undermine any economic benefit? Authors and tax policy experts Joel Slemrod and Jon Bakija lay out in accessible language what is known and not known about how taxes affect the economy, offer guidelines for evaluating tax systems, and provide enough information to assess both the current income tax system and the leading proposals to reform or replace it (including the flat tax and the consumption tax). The fourth edition of this popular guide has been extensively revised to incorporate the latest information, covering such recent developments as the Bush administration's tax cuts (which expire in 2011) and the alternatives proposed by the President's Advisory Panel on Federal Tax Reform. Slemrod and Bakija provide us with the knowledge and the tools -- including an invaluable voter's guide to the tax policy debate -- to make our own informed choices about how we should tax ourselves.

Report of the Committee on Economic Statistics

The current members of the Committee on Economic Statistics are Katharine Abraham, University of Maryland (chair); Robert Feenstra, University of California, Davis; Dennis Fixler, Bureau of Economic Analysis; Barbara Fraumeni, University of Southern Maine; David Johnson, Census Bureau; Dale Jorgenson, Harvard University; Charles Schultze, Brookings Institution; Matthew Shapiro, University of Michigan; and Jack Triplett, Brookings Institution. The Committee met by phone four times during 2007, in January, March, May, and October. In January 2007, the Executive Committee gave the Committee on Economic Statistics standing authority to organize up to three sessions each year for inclusion in the program of the annual meeting of the Association. The Committee has organized three sessions for the January 2008 meeting, one titled “Innovation, Intangibles, and R&D,” a second titled “Reconciliation of Seemingly Inconsistent Data Series,” and the third titled “The Output of Banking and Finance.” Each includes a mix of academic and statistical agency participants. Topics being considered for sessions at the January 2009 meeting are health accounting, matching survey data to administrative records in the production of statistical information, and the development of consistent industry production accounts. The committee wishes to cast its net widely to identify papers suitable for inclusion in the sessions it organizes and, for January 2010 and beyond, plans to develop a process for soliciting proposals for papers in topic areas of potential interest. The Committee also has undertaken the task of commissioning reviews of needs for data in particular subject matter areas. One such report on needs for data in public economics has been completed by a group chaired by Joel Slemrod. Report of the Committee on Economic Statistics

Fiscal Reform in Columbia: Problems and Prospects. By Richard M. Bird, James M. Poterba, and Joel Slemrod.

Previous article No AccessBOOK REVIEWSFiscal Reform in Columbia: Problems and Prospects. By Richard M. Bird, James M. Poterba, and Joel Slemrod.Sally WallaceSally Wallace Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by National Tax Journal Volume 60, Number 4December 2007 Published for: The National Tax Association Article DOIhttps://doi.org/10.17310/ntj.2007.4.09 Views: 2Total views on this site © 2007 National Tax Association. All rights reserved.PDF download Crossref reports no articles citing this article.

The Crisis in Tax Administration. By HENRY J. AARON and JOEL SLEMROD.

<i>The Crisis in Tax Administration</i>. By HENRY J. AARON and JOEL SLEMROD.

Comments and Discussion

Comments and Discussion James Poterba and Joel Slemrod James Poterba: This paper by Malcolm Baker, Stefan Nagel, and Jeffrey Wurgler asks whether the division of corporate earnings between retentions and payouts affects consumer spending. The authors bring novel insight and a creative empirical strategy to bear on a question that has a long pedigree in empirical macroeconomics. Early attempts to model aggregate consumption related consumer spending to disposable income and household wealth. Estimates of the marginal propensity to consume out of income were typically an order of magnitude greater than estimates of the marginal propensity to consume out of wealth. Taken at face value, such estimates implied that if a firm reduced its retained earnings by a dollar, thereby reducing its share price, and paid a dollar of dividends, consumer spending would rise by the difference between the marginal propensity to consume out of disposable income and the marginal propensity to consume out of wealth. Some researchers argued that, to avoid this stark result, consumption should depend on corporate retained earnings as well as disposable income. This suggestion led to an empirical debate about whether consumers "pierce the corporate veil" and recognize the firm's underlying earnings, or fail to do this and instead consume at different rates out of different components of corporate earnings. In contemporary textbook models of consumer behavior, current household spending depends on the present discounted value of current and future labor earnings and on current financial assets. In the absence of taxes and other institutional rigidities, a dividend payment, as opposed to a capital gain, should not change a household's net financial assets and therefore should not affect consumer spending. Yet the possibility remains that different ways of transmitting earnings to shareholders have different effects on consumption. Various models in behavioral economics can [End Page 277] justify such an outcome. This paper offers intriguing evidence in support of these models. In linking this paper and its findings to the debate concerning the corporate veil, it is important to recognize that even if one does not reject the null hypothesis that consumers have equal propensities to consume from dividends and other components of equity returns, the corporate payout decision may still affect consumption. To illustrate this possibility, assume that a project generates a dollar of after-tax corporate profits for an equity-financed firm. The firm could distribute the dollar as a dividend payment, or it could retain the dollar. In the latter case the firm's share price would be higher, by dV, than if the earnings were distributed to the shareholders. The change in consumption spending from the dividend payout would be MPCdiv, and the change in the retained earnings case would be MPCcgdV. Even if MPCdiv = MPCcg, which is the proposition that the authors study, it is still possible that distributing earnings could affect consumption if dV is not equal to unity. Tax considerations could break this equality, for example if retained earnings may be distributed in the future by repurchasing shares and therefore face a lower tax burden than dividend payments. Corporate governance factors may also come into play. If a dollar of retained earnings may be reinvested by the management team at a rate of return below that demanded by the marketplace, but not low enough to warrant shareholders incurring the costs of removing the managers, then dV may be less than 1. Previous researchers have found it difficult to distinguish the consumption impact of dividends from that of accruing capital gains, because there are few exogenous shocks to corporate distribution policy that cannot be plausibly linked in other ways to consumer spending. This paper presents two ingenious tests of whether households consume at different rates from dividend income and from accruing capital gains. By presenting empirical findings suggesting that dividends increase consumption more than do accrued capital gains of equal value, this paper suggests that policies that encourage firms to distribute earnings may increase aggregate consumer spending. The identification problem confronting earlier studies is easily summarized. In time-series data, most of the variation in the mix between dividends and retained earnings is due to shocks to corporate earnings. Such shocks may affect consumer...

The Future of Capital Income Taxation*

Fiscal StudiesVolume 27, Issue 4 p. 399-420 The Future of Capital Income Taxation* Alan J. Auerbach, Alan J. Auerbach University of California, Berkeley (auerbach@econ.berkeley.edu)Search for more papers by this author Alan J. Auerbach, Alan J. Auerbach University of California, Berkeley (auerbach@econ.berkeley.edu)Search for more papers by this author First published: 23 November 2006 https://doi.org/10.1111/j.1475-5890.2006.00040.xCitations: 15 * This paper was presented as the 2006 IFS Annual Lecture in London on 4 September. The author is grateful to Anne Moore for research assistance and to Ethan Auerbach, Len Burman, Michael Graetz, Jim Hines, Joel Slemrod, Al Warren and an anonymous referee for helpful discussions and comments on earlier drafts. AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume27, Issue4December 2006Pages 399-420 RelatedInformation

Taxation and Big Brother: Information, Personalisation and Privacy in 21st Century Tax Policy*

Taxation and Big Brother: Information, Personalization, and Privacy in 21st Century Tax Policy Joel Slemrod University of Michigan October 3, 2005 Revised January 10, 2006 This lecture was given at the Annual Lecture to the Institute of Fiscal Studies, London, on September 26. I am grateful to Katherine Blauvelt for research assistance and extended conversations that clarified my thinking on a number of issues.

Reviews of the 2005 Economic Report of the President

The Journal of Economic Literature (JEL) regularly reviews books of interest to the economics profession. The Economic Report of the President (ERP) falls under that purview and beginning this year, the JEL will be reviewing the ERP. Toward that end, I have asked a handful of very prominent economists to review the 2005 ERP. Reviewers were chosen to reflect expertise on what I guessed would be key issues. Reviewers were given the following instructions: The ERP in principle should provide an accurate assessment of the consensus professional views of economists on any given issue, based on the research to date. Does the discussion in the ERP in fact accurately summarize what we as economists know? Reviewers were given free rein over what material they would review in the ERP but were urged to focus on their areas of particular expertise. In the reviews that follow, Joel Slemrod reviews the discussion of tax reform. Joe Farrell reviews the ERP's chapter titled “Innovation and the Information Economy.” Gordon Hanson reviews the chapters on international trade and on immigration. Robert Hall reviews the discussion of the adverse macroeconomic impact of rising oil prices while Jonathan Gruber reviews the ERP chapter titled “Expanding Individual Choice and Control.” Many thanks to the reviewers for the quick turnaround.