EDWARD J. MCCAFFERY, USC Gould School of Law
Email: emccaffe@law.usc.edu
JAMES R. HINES JR., University of Michigan at Ann Arbor Law School, National Bureau of Economic Research (NBER)
Email: jrhines@umich.edu

We argue that a spending tax, as opposed to an income or wage tax, is the “last best hope� for a return to significantly more progressive marginal tax rates than obtain today. The simple explanation for this central claim looks to incentive effects, especially for “rich people,� as both economists and commentators are inclined to focus. High marginal tax rates under an income tax fall on and hence deter the socially productive activities of work and savings. High marginal rates under a wage tax fall on and hence deter the socially productive activity of work alone. But high marginal rates under a spending tax fall on and hence deter high-end spending, which is arguably a social “bad,� and do not necessarily deter the social goods of work and savings. This is a possible empirical result. In this Article, we present the analytic arguments for it and sketch out a research agenda that might verify it. The idea is that because one can escape or defer paying taxes under a progressive spending tax by saving, an activity with positive social externalities, the efficiency costs of high marginal rates under a spending tax can be mitigated. Unless people work only in order to be able to spend on themselves, and even then only if they fully internalize in their present labor supply decisions the ultimate tax they will pay - and we argue that each of these assumptions is unlikely to hold in the extreme - a spending tax can bear more steeply progressive rates with less cost in efficiency or social wealth than can an income or wage tax. A progressive spending tax also holds out the possibility of sorting the rich or high ability into two groups, elastic savers and inelastic spenders, which could yield welfare gains unavailable under income or wage taxes, which under current technologies can only sort the high ability into workers and non-workers. Progressive spending taxes also fall on consumption financed by windfall gains, as to which unexpected good fortune ex ante incentive effects are likely to be weak.

Most of the Article sets out analytic possibilities. In the final Section, we add a sketch of a welfarist and a fairness-based argument for progressive spending taxes, and conclude with a call for a major new research agenda.

MICHAEL A. OLIVAS, University of Houston Law Center
Email: molivas@uh.edu

In spring 2008, an issue over which I have been toiling away in obscurity for years became a matter of debate for the U.S. presidential candidates. On one side the Democrats were promoting college access for undocumented students; on the other, Republicans were all for locking them out of higher education (except Governor Huckabee, who in what I think was his finest hour said that we should not hold the sins of parents against their children). What was all the hullabaloo about? A number of states and their colleges and universities have been struggling with this issue, and ten states have acted to grant residency tuition to undocumented college residents in their states. There has been litigation in state and federal courts over this issue.

Against this backdrop of state activity, the federal stage has also been bustling. The Development, Relief, and Education for Alien Minors (DREAM) Act was introduced in Congress in 2003 but has languished there, as comprehensive immigration reform efforts failed in late 2007. If passed, this legislation would allow "alien minors" to start on the path towards permanent residency and, ultimately, citizenship. It would also address, among other issues, amnesties or legalization and work authorization. Finally, an important provision would render DREAM students eligible for all federal financial-aid programs except Pell. But since the presidential campaigns began in earnest, the legislation has been stalled.

In short, there has been a surprising amount of litigation and, recently, legislation on an issue that affects only a few students, but extremely vulnerable ones. In the states, advocates on both sides have engaged in efforts to get new provisions signed into law and to prevent them from becoming law. There is likely to be federal comprehensive immigration reform at some point, which will include provisions for undocumented college students to regularize their immigration status.

In a related field, that of financial aid, there are some technical issues that affect undocumented college applicants, and citizen children whose parents may be undocumented. As a general rule, the undocumented are ineligible for federal financial aid, and in virtually all states, for state financial aid as well. Moreover, there are several technical and administrative problems that even citizen college applicants face in negotiating the complex financial aid application process. The U.S. Department of Education has issued verification guidance on "discrepant tax data" and "conflicting information" that has relevance to the treatment of undocumented college applicants or citizen applicants whose parents are undocumented. Studies indicate that many undocumented taxpayers pay taxes and file their tax returns, using ITIN's, and if they do so, those tax returns may be used by their citizen children to establish financial aid eligibility through the required FAFSA. This article reviews the overlapping regimes of financial aid, immigration, and taxation, with particular attention to he status of undocumented college students.

PHILIP A. CURRY, Simon Fraser University
Email: pcurry@sfu.ca
CLAIRE A. HILL, University of Minnesota, Twin Cities - School of Law
Email: hillx445@umn.edu
FRANCESCO PARISI, University of Minnesota - Law School
Email: parisi@umn.edu

Although most individuals recognize the necessity of taxation, few like to pay taxes. Governments face costs to collect taxes; people expend resources to legally avoid taxation. Such expenditure represents social waste, as it is a form of rent-seeking. This gives rise to a modified Samuelson Rule which considers this additional cost of taxation. Since there is a market for tax planning methods, the magnitude of these costs depends on the market structure. We consider how a government might reduce tax planning by creating market inefficiencies or failures. We set forth a formal economic model to identify the optimal amount of tax planning the government should permit, and consider how governmentally-created market failures could be implemented.

AMNON LEHAVI, Interdisciplinary Center Herzliyah - Radzyner School of Law
Email: alehavi@idc.ac.il

Takings jurisprudence is struggling with a constant paradox. It is conventionally portrayed as chaotic and “muddy,� and yet attempts by the judiciary to create some sense of order in it by delineating this field into distinctive categories that apply to each a different set of rules are often criticized as analytically incoherent or normatively indefensible.

This Article offers an innovative approach to the taxonomic enterprise in takings law, by examining what is probably its starkest and most entrenched division: that between takings and taxings. American courts have been nearly unanimous in refusing to scrutinize the power to tax, viewing this form of government action as falling outside the scope of the Takings Clause. Critics have argued that the presence of government coercion, loss of private value, and potential imbalances in burden sharing mandate that the two instances be conceptually synchronized and subject to similar doctrinal tests.

The main thesis of the Article is that this dichotomy, and other types of legal line-drawing in property, should be assessed not on the basis of a “pointblank� analysis of allegedly-comparable specific instances, but rather on a broader view of the foundational principles of American property law and of the way in which takings taxonomies mesh with the broader social and jurisprudential understanding of what “property� is.

Identifying American property law as conforming to two fundamental principles -- formalism of rights and strong market propensity -- but at the same time as devoid of a constitutional undertaking to protect privately-held value against potential losses as a self-standing “strand� in the property bundle, the Article explains why prevailing forms of taxation do seem to be disparate from other forms of governmental interventions with private property. Focusing attention on property taxation, the Article shows why taxation is considered a “lesser evil� type of government coercion, how the taxing/taking dichotomy better addresses the public-private interplay in property law, and why taxation is often viewed as actually empowering property rights and the control of assets.

This type of systematic inquiry is very timely. American property law is nowadays located at a crucial crossroad, with its longtime foundational premises and convictions being vigorously reexamined in the face of the domestic and global economic crisis. Although it remains to be seen whether government measures taken in the months and years to come will create a major upheaval in the fundamentals of property law, it should be clear that any such major shifts will have inevitable profound influences on what may be wrongly viewed as “isolated� legal doctrines, including the taking/taxing taxonomy.

RONALD H. JENSEN, Pace University School of Law
Email: rjensen@law.pace.edu

Review of Federal Income Taxation of Estates and Beneficiaries by M. Carr Ferguson, James L. Freeland, and Richard B. Stephens. This comprehensive volume should help fill a void which tax practitioners have long endured. As the authors properly point out, though many volumes have been written on estate taxation and estate planning, relatively little attention has been given to the income tax consequences resulting from death. The present volume is a welcome and needed addition to the sparse body of literature on this subject.

ORSOLA GAROFALO, Autonomous University of Barcelona - Department of Business Economics
Email: orsola.garofalo@uab.cat
MARIO DANIELE AMORE, Copenhagen Business School - Department of Economics
Email: mario.da.amore@gmail.com

The present article investigates the impact of a variation in marginal tax rates on the labor supply of married women in Italy. We estimate the responsiveness of labor supply using a sharp change in the tax schedule induced by the Tax Reform of 1986 to shape a regression discontinuity design. The main contribution of our work is to enrich the scant empirical evidence for the Italian case. Results, largely in line with the previous literature, show that a reduction in marginal tax rate leads to a significant increase in the labor supply of married women with children. Moreover, we find that men and single women do not react to the tax change.