Archive for the ‘a.research’ Category

Additions for My State Tax Paper: Reciprocity, Sullivan, and Pease

January 11th, 2018 No comments

For: Getting Around the State and Local Tax Deduction Limit (January 9, 2018). Available at SSRN:


(1)  Suppose we accept that fairness (or whatever) means that state taxes should be deducted from income for federal taxation, because they pay for public goods just like donations to private charities.  Suppose John Doe has an income of $1,000,000, West Dakota has a tax rate of 10%, and the US has a tax rate of 30%, so West Dakota tax is $100,000 and US tax is $300,000 sans deductibility.  Then if we add deductibility  of state taxes from federal income, 30% of $900,000 is just $270,000 and John Doe saves $30,000 on his federal taxes.

But suppose, instead, that we don’t do that. Instead, we add deductibility of federal taxes from state income. The result is that since 10% of $700,000 is $70,000, John Doe saves $30,000 on his state tax bill. Read more…

Categories: a.research, taxes, Uncategorized Tags:

The Steele Dossier, Flynn, 18 U.S.C. 1001 (the Martha Stewart Law) and How To Reform “Materially”

January 6th, 2018 No comments

   Byron York has a good article in the Washington Examiner on what it means for the Senate to refer the Steele dossier for criminal investigation by the FBI— basically, that Steele lied to the FBI to get it to investigate imaginary happenings, which is a crime, and the Senators want the Justice Department to file charges under 18 U.S.C. 1001 or explain why not. 

  Read more…

Why the Idea of State Tax Credits and Donations Replacing Deductibility Won’t Work and How to Fix That

January 4th, 2018 No comments

The new tax bill limits the deduction for state and local taxes to $10,000.  This comes after the alternative minimum tax (AMT) already limits them if someone has enough capital gains and deductions to qualify for it, which a lot of people do.  Can states do anything to help their taxpayers? Read more…

Categories: a.research, taxes, Uncategorized Tags:

Pass-through Taxation and C-corp election; Schumpeterian motivations; politics; the financial accounting problem for earnings definition

January 2nd, 2018 No comments
​​  This is quite a technical post, but some people will be interested.

On Mon, Jan 1, 2018 at 1:02 PM, Someone wrote me about the question of whether the Passthrough tax cut isn’t a big deal ,because even without it, if we slash the rate of taxation on C-Corporations a partnership could elect to be taxed AS IF it was  a C-corporation.  It turns out there are interesting complexities involved.

Read more…

An Agapao Concordance (Love, Esteem)

September 15th, 2013 No comments

I am at work for a paper to present at the February 2014 Agape and Law conference at Pepperdine. A first step is that I’ve put together an Agape concordance for the New Testament—a list of all the verses that contain some form of “agapao”.
The file is at: agape-concordance.original

Categories: a.research, Bible Tags:

How Much of S-Corp Income is Labor Income and Hence Subject to Medicare Taxes?

September 7th, 2013 No comments

Here are a couple of comments I posted at Taxprof:

T.C. Summary Opinion 2013-62 (McAlary, is amazing. Professor Schwidetzky has it absolutely right. Suppose Dr. Roe earns high labor income some years, low in others. He becomes an S-corporation, with zero capital. That’s not supposed to change his tax situation, right? But in deciding his S-corporation labor income for tax purposes, the court didn’t use that tax principle, even though it’s Tax Court. Instead, it used the corporation law principle of something like the business judgement rule— how low a salary wouldn’t be ridiculous for that industry? So it calls for expert witnesses to tell the court how much other doctors make in labor income, even though it knows exactly how much *this* doctor made.
If Dr. Roe puts in some capital for office expenses, that only makes things a little harder. It’s actually far far easier for an expert witness to accurately estimate a cost of capital than someone’s market wage. But we can put in a simple safe harbor for tax purposes. Just require the taxpayer to keep track of how much capital he puts in and give it a return of 5% over the IRS late-payment rate each year.
For a safe harbor, we need a notice-and-comment regulation or an IRS declaration of enforcement policy. Otherwise, even just a court ruling would be OK. This decision is a S(mall) one though, so it can’t be appealed. Even if it could be, the taxpayer would be well advised not to appeal it, because the IRS was extremely modest in its tax demand, and amici following the ideas here would ask the court to more than double it. (Can a court do that in a tax case?)

I found a history of this tax issue at
which shows, I think, that an old IRS revenue ruling is the source of the problem, by saying that “reasonable compensation” had to be paid by the corporation rather than trying to define which part of a corporation’s profit was return to labor rather than return to capital. Another way to put this is that the IRS didn’t require that *capital* was limited to a “reasonable return”. Of course, using words like “reasonable” gives wiggle room so that a taxpayer could say that of his corporation’s $500,000 profit, $100,000 was a reasonable salary, $50,000 was a reasonable return to capital, and the rest was a gift from heaven and shouldn’t be taxed at all.
I didn’t look at the Glass Blocks case at , but it seems the IRS has accomplished the Immigration feat of being both incredibly lax with most people and incredibly picky with a few. The poor taxpayer’s labor income was clearly negative, but the IRS “reasonable compensation” method doesn’t let people have negative labor income. The simple method of saying everything is labor income except for an estimated return to capital would have avoided making him pay.
(One caveat is that this involves Medicare and Social Security. It seems to me that a negative-income taxpayer should be treated as making no dollar contributions to the funds for purposes of his later eligibility, but as having put in those quarters of work,which was the way charitable work was treated, It hink, back when my mother kept track of her hours as secretary of the civic symphony).

Categories: a.research, taxes Tags:

“Preliminary Injunctions in the Obamacare Religious-Objection Lawsuits II: An Amicus Brief for Mersino v. Sebelius”

August 18th, 2013 No comments

I’ve just filed and SSRN’d another preliminary injunction amicus brief, this one for the 6th Circuit in Cincinnati: “Preliminary Injunctions in the Obamacare Religious-Objection Lawsuits II: An Amicus Brief for Mersino v. Sebelius”. The abstract is below. Read more…

“Exclusive Dealing: Before Bork, and Beyond”

August 15th, 2013 No comments

Mark Ramseyer and I have just posted a draft of a paper on monopoly law: “Exclusive Dealing: Before Bork, and Beyond”. Comments are welcomed. Here’s the abstract: Read more…

Categories: a.research, Antitrust, game theory, monopoly Tags:

The Meaning of “Value” for Gift and Estate Tax Donee Limitation in Tax Code 26 U.S.C. § 6324(B): An Amicus Brief for Marshall v. Commissioner

August 14th, 2013 No comments

I’ve posted a new draft of The Meaning of “Value” for Gift and Estate Tax Donee Limitation in Tax Code 26 U.S.C. § 6324(B): An Amicus Brief for Marshall v. Commissioner and submitted the brief. I wonder if I should try to make a law review article out of this? The topic would be how “value” is used in law. Here’s the abstract: Read more…

Categories: a.research, discounting, taxes Tags:

New Jaworski Documents: The Watergate Trials Were Invalid

August 10th, 2013 No comments

Geoff Shepherd has a new Atlantic article, “The Watergate Cover-Up Trial: Justice Denied?” He has found hitherto unrevealed documents that show that the Watergate defendants were right when they charged that their judge, Judge Sirica, was holding illegal secret meetings with the prosecutors to plan legal strategy against them. In new trials they probably would have been convicted anyway, but if this had come out at the time, all of their convictions would have been voided and Prosecutor Jaworski and Judge Sirica disbarred. They would have had new trials, and probably would have been convicted anyway, but the Nixon stance that “The Democrats do illegal stuff too” would have been mightily supported. My comments to the author: Read more…

Categories: Comments, history, law. politics, Watergate Tags:

LoPucski: Making Statutes Readable

July 25th, 2013 1 comment

Professor Bainbridge tells us of Professor Lopucki’s new paper on how to format and annotate statutes to make them more readable, which uses Delaware’s corporate code as an example.

LoPucki, Lynn M., The Readable Delaware General Corporation Law (July 10, 2013). UCLA School of Law Research Paper No. 2013-14. Available at SSRN:\

Here’s an example. Read more…

I Want Comment Triage Software

July 23rd, 2013 No comments

Nobody comments here, so it’s not a personal need, but I want to see comments on blogs and articles organized differently. First I’ll say what I want to see, and then I’ll explain why.

Each comment will be directed to one of four triage categories. These will not be the traditional “Doesn’t need treatment now”, “Needs help”, and “Too hard to help–let him die” categories. Rather, they will be: Read more…

Murray’s Cops and Progressives

July 15th, 2013 No comments

Charles Murray has an excellent long essay, “Simple Justice” from about 2005 that is useful for thinking about attitudes towards the Zimmerman case and to self-defense and threat and intimidation statutes generally. He distinguishes between Progressives and Cops. Progressives dislike self-defense, retribution, and punishment generally and who do not like to differentiate people into those who follow rules and those who break them. Read more…

An Amicus Brief for Hobby Lobby v. Sebelius on the Topic of Balancing the Equities for a Preliminary Injunction

July 3rd, 2013 No comments

I looked over the recent Hobby Lobby en banc decision and thought about it. Everybody seemed to be missing the most important things in the case. Then, yesterday, I realized that the deadline for submissions for the next stage was today (July 3) at 5 p.m. At 2 p.m. I rushed into action. I was able to use my draft amicus for United States v. Marshall as a template, though it’s a different circuit and Hobby Lobby is at District Court right now, for which there are no official rules. Read more…

Why the Rich Are Underpaid

June 27th, 2013 No comments

Prof. Tabarrok at Marginal Revolution talks about Prof. Mankiw’s discussion of taxes, the top 1%, and productivity. I had a thought: The most productive employees are paid too little, including the most productive CEO’s. Read more…

Categories: a.research, business, contracts, taxes Tags:

Preliminary Injunctions and Regulatory Tyranny

June 25th, 2013 No comments

It looks to me as if something is very wrong with the law of preliminary injunctions when it comes to the executive branch misusing its power. Here is what is supposed to happen. Smith sues Jones, asking the court to do X. For example, Smith may ask the court to stop Jones from selling a dog Smith claims is Smith’s dog. If doing X right away instead of in a year or two after a trial would prevent irreparable harm to Smith but not to Jones, then Smith can ask the court to do X immediately, via a preliminary injunction. Then, after the trial, the court will undo X if Smith loses. Read more…

Categories: a.research, administrative law, law Tags:

Measuring the Cost of Health Care— The Effect of Price Controls

June 24th, 2013 No comments

I am puzzled by how we should think about measuring the value of output in health care, or any market, when the prices are not at the competitive level.
What if the government has a maximum price of $500 for an angiogram, but the free market price would be $900?
In a free market, we measure GDP using output and market prices. Read more…

Categories: a.research, health care, price theory Tags:

“How Immigration Can Hurt a Country”

June 21st, 2013 2 comments

I’ve written an informal paper called, “How Immigration Can Hurt a Country”. Thoughtful comments are welcomed. I don’t welcome comments that just give your opinion on immigration; if you wish to comment, please make it a constructive or destructive comment on the paper.

“Can immigration (or capital inflow) hurt the welfare of a country? Yes, if there are decreasing returns to the factor, as this little paper will explain. The idea is important, and probably is new— at least, I couldn’t find it by a google search— but an economics journal would say it is obvious, I think, so I probably will not try to publish it in a journal. I will post it on the web instead. I do hope it gets into the academic literature and the policy debates. If it is received favorably, I will tidy it up and put it into journal style, adding cites and superfluous generality, and checking my arithmetic. My target audience is trained economists even now, however. Please let me know if someone has already made the external diseconomy argument. I wouldn’t be surprised if someone had done so back in the 1920’s….”

Categories: a.research, immigration Tags:

Responding to Insults with Violence–Self-Help

January 9th, 2010 No comments

Prof. Volokh has a good example where self-help beats using police.

From the Chicago Daily Herald. Throwing a rock through a car window might not at first seem like much by way of self-defense, especially if the fear is that the car will run you over. But I take it that the court’s rationale — which seems sensible — must have been that showing signs of a willingness to retaliate might deter bullies, who might worry that the next rock will hit them directly, or might even just psychologically intimidate them:

A [17-year-old] girl who hurled a rock through a car window after its occupants repeatedly drove by yelling threats and homosexual slurs [at her 15-year-old] male companion] was found not guilty of a criminal damage to property charge Tuesday by a McHenry County judge who ruled she acted in self-defense….

This is a great example of where self-help ought to be allowed. Remember the objective of criminal law— to deter bad acts in the most convenient way. Here, let us assume that the punks circling around in the car shouting insults is a bad act. Consider two public policies:

Policy 1. The victims may complain to the government, who will prosecute and fine, briefly imprison, or lightly whip the offenders if they are found guilty. If the victims throw a rock, though, they are themselves subject to criminal and civil liability.

Policy 2. The victims may throw a rock at the car without criminal or civil liability, and the punks’ behavior will be a defense against victim civil or criminal liability. The government will not itself, however, punish the punks.

Policy 1 would be completely ineffective, wouldn’t it? Well, not quite— the police could arrest the punks and inconvenience them, even if they couldn’t be convicted beyond a reasonable doubt. And I guess it would prevent abusive insults when police or TV cameras were present, though having a trial would still be costly.

Policy 2 would be cheaper— no getting third parties involved— and more effective. Not everybody would throw rocks. but the policy would work for those who would, and help deter for anybody who looked like he might. Also, the penalty is proportionate— a damaged car, not death.

One point I worry about is government failure, even with Policy 2, though. Policy 1 is subject to abuse because the government could punish someone for being insulting even if he wasn’t (that is, if the judge is corrupt or false witnesses can be produced). Policy 2 is subject to abuse because the government could refrain from punishing someone for throwing rocks even if the car occupants had not been insulting— again, if the judge is corrupt or false witnesses can be produced.

Maybe I should write on this. I should bring it up at the law-and-econ lunch today.

Categories: a.research Tags:

Details in Contracts

January 8th, 2010 No comments

From aWeekly Standard article on mistakes in numbers in the Administration’s Pantybomber report:

You’ve heard about Van Halen’s legendary backstage rider, right? The one that stipulated that all the brown M&Ms be removed from bowls in the band’s dressing rooms? It’s been immortalized as the archetypal act of prima donna pique, but the reason for it was actually practical. The band’s requirements for its elaborate stage show were complex and demanding, and failure to read them carefully and comply would endanger the performance, and possibly people’s safety. Brown M&Ms in the bowls served as a small signal that there might be other, potentially catastrophic oversights.

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The Ethics of Copyright and Unjust Laws

January 8th, 2010 No comments

Two topics I should work on are the ethics of copyright and of unjust laws. The Bible says we should obey the government, which keeps order, and that we should not steal. Some property, however, is created by law. The US government moved certain movies and books out of the public domain into copyright retroactively a few years back. That act, in itself, was theft. Ought we to obey that law? Was it moral for Disney to push for that law? Is it moral to push for its repeal?

Or think about the converse. Suppose the government said that Jews could no longer own property, and any former Jewish property was now in the public domain. Would it be moral for me to go take my Jewish neighbors’ TV set? (well– the TV set that he *used to* own).

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