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									B555 – Tax Policy (2 credits)
Class Time: Mondays, 3:25-5:25, Rm. 215
Professor Ajay K. Mehrotra
Fall 2008

                                             Tax Policy

Course Description

        The aim of this course is to explore the fundamental social, economic, and political forces
that drive tax policy. Building on the concepts developed in the introductory federal income tax
class (B650), this course will combine a socio-legal and historical perspective on taxation with a
more conventional political and economic analysis of public finance issues. We will explore such
salient topics as the ideal tax base, the tax legislative process, progressivity, and the impact of tax
policies on race and gender issues.

        The course is divided into four parts. The first unit will begin with a historical,
sociological, and philosophical overview of tax policy, examining how a variety of scholars have
viewed the broad structural underpinnings of taxation. In the second unit, we will examine the
economic principles that undergird much of contemporary tax policy. Using excerpts from a
textbook that can generally be found in most introductory economics courses on public finance,
we will investigate how economists analyze the tax structure. In the third unit, we will discuss
some of the “great” articles and books that have contributed to and helped develop the
contemporary tax policy discourse. While many of these articles have become part of the canon
of American tax policy literature, a new generation of critical tax theorists has subjected the
ideas in these articles to critical scrutiny. We will also briefly explore the critical analysis of tax
policy as part of the third unit. Finally, in part four of the course we will use the tools developed
in the earlier sections to examine in greater detail several recent tax policy issues.

         The format of the course will be a combination of discussion, occasional lectures, and
frequent writing. Because this course is designed to meet the law school’s advanced writing
requirement, each student will write three brief (3-5 pp.) papers responding to selected readings
throughout the course. In addition, each week one or two students will make a presentation on
the week’s reading to initiate our discussion, as explained below. We will also use email to
facilitate discussion before and after class. Presenters should feel free to use the class email list
to highlight the readings that they will be focusing on in their presentations. There is no final
exam in this course.

        Students who have already met the law school’s advanced writing requirement, or those
who prefer to undertake a long-term research project, may choose to write one long research
paper in lieu of the three brief response papers, but only after receiving the instructor’s
permission. I will discuss this option further during the first class.




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Course Requirements

       Students will be expected to meet the following two requirements:

               1. Class Presentation and Participation – Each week a different student or two
                  will help initiate our class discussion by making a brief (10 – 15 minutes)
                  presentation of the reading(s) for that week. This presentation should be less
                  of a summary of the reading, than a set of thoughtful and provocative
                  comments and questions to help kick-start our discussion. Presenters will be
                  required to hand in a summary of their comments. All students should read
                  the assigned material and come to class ready to participate in the discussion.

               2. Response Papers/Research Paper – At the conclusion of each of the 4 units
                  of the course, students will submit a brief paper (3-5 pages, double-spaced, 1
                  inch margins, Times New Roman, 12 pt.) evaluating the readings in that unit.
                  Students must write and deliver on the due date listed in the syllabus only 3
                  response papers. This means that students may choose not to respond to one
                  of the four units. Like the class presentations, these response papers should
                  do more than simply summarize the readings; they should be a careful
                  assessment of the significance and intellectual contribution of these readings.
                  As mentioned above, the option of writing one long research paper in lieu of
                  the response papers will be discussed during the first day of class.

Grading

       The final grade for this course will be determined by a combination of two factors:
              1. Class participation (including class presentation) – 40%
              2. Response papers/Research Paper – 60%

Office Hours

       Generally, office hours will be held from 2 – 4 p.m. on Wednesdays in my office, room
261. I will also be available by appointment. Please contact me by e-mail
(amehrotr@indiana.edu) or phone (855-7443) to set up an appointment.

Course Texts

        The articles and excerpts used in this class will be available on the law library’s
electronic reserve (password: “policy”). The following required books for this course should be
available at the university bookstore:

Steven A. Bank, Kirk J. Stark, and Joseph J. Thorndike, War and Taxes (Urban Inst. 2008)

Michael Graetz, 100 Million Unnecessary Returns (Yale, 2008)

Stephen Holmes & Cass R. Sunstein, The Cost of Rights (Norton, 2000)



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Isaac W. Martin, Permanent Tax Revolt (Stanford, 2008)

Alan Murray & Jeff Birnbaum, Showdown at Gucci Gulch (Vintage, 1988)

Joel Slemrod & Jon Bakija, Taxing Ourselves (MIT, 2008)

C. Eugene Steuerle, Contemporary U.S. Tax Policy (Urban, 2008)


Preliminary Course Outline/Schedule

   I.       Socio-historical and Philosophical Overview

         Week 1 (Sept. 8) Classical Theories and Historical Perspective

                - Adam Smith, Wealth of Nations, Book 5, Chapter 2
                - Rudolf Golscheid, “A Sociological Approach to the Problems of Public
                Finance”
                - Harold Groves, “Toward a Social Theory of Progressive Taxation” (1956)
                - Bank, Stark, Thorndike, War and Taxes (2008)
                       (Articles available on e-reserve)

         Week 2 (Sept. 15): Philosophical Foundations

                Holmes & Sunstein, The Cost of Rights
                Response Paper #1 Due


   II.      Economic Principles of Public Finance

         Week 3 (Sept. 22): Introduction to the Public Sector and Fiscal Policy

                - Stiglitz, Economics of the Public Sector (2000), Chapters 1 and 2.
                - Slemrod & Bakija, Taxing Ourselves, Chapters 1 and 2.
                         (Stiglitz available on e-reserve)

         Week 4 (Sept. 29): Fundamentals of Welfare Economics

                - Stiglitz, Chapters 3-5
                - Slemrod & Bakija, Chapter 4
                         (Stiglitz available on e-reserve)
                Response Paper #2 Due




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III.      The “Great Articles”: From the Canon to the Crits

       Week 5 (Oct. 6): The “Ideal” Tax Base
             - William Andrews, “A Consumption-Type or Cash Flow Personal Income Tax,”
             87 Harv. L. Rev. 1113 (1974).
             - Joseph Bankman & David Weisbach, “The Superiority of an Ideal Consumption
             Tax over an Ideal Income Tax,” 58 Stanford L. Rev. 1413 (2006)
             - Slemrod & Bakija, Chapters 6 and 7
                     (Articles available on e-reserve)

       Week 6 (Oct. 13): Tax Expenditures

              - Excerpts from Surrey and McDaniel, Tax Expenditures (1985)
              - Boris Bittker, “A Comprehensive Tax Base as a Goal of Income Tax Reform,”
              80 Harv. L. Rev. 925 (1967).
              - Richard A. Musgrave, “In Defense of an Income Concept,” 81 Harv. L. Rev. 44
              (1967).
              - Edward A. Zelinsky, “James Madison and Public Choice at Gucci Gulch: A
              Procedural Defense of Tax Expenditures and Tax Institutions,” 102 Yale L.J.
              1165 (1993)
                      (All available on e-reserve)

       Week 7 (Oct. 20): Fall Break – No Class

       Week 8 (Oct. 27): Progressivity

              - Excerpts from Blum and Kalven, The Uneasy Case for Progressive Taxation
              - Excerpts from Bittker, The Income Tax: How Progressive Should it Be? (1987)
              - Bankman and Griffith, “Social Welfare and the Rate Structure: A New Look at
              Progressive Taxation,” 75 Cal. L. Rev. 1905 (1987).
              - Slemrod & Bakija, Chapter 3
                     (All except Slemrod available on e-reserve)

       Week 9 (Nov. 3): The Tax Legislative Process in the 1980s

              - Murray and Birnbaum, Showdown at Gucci Gulch

       Week 10 (Nov. 10): Taxation and International Development

              - Burgess, R. & Stern, N., "Taxation and Development," Journal of
              Economic Literature 31: (1993) 762-830.
              - Richard M. Bird & Eric M. Zolt, “Tax Policy in Emerging Countries”
              - Deborah A. Brautigam, “Introduction: Taxation and State-building in
              Developing Countries,” in Taxation and State-Building in Developing Countries:
              Capacity and Consent (Cambridge, 2008).
                     (All available on e-reserve)



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      Week 11 (Nov. 17): Toward a Critical Tax Theory

             - Grace Blumberg, “Sexism in the Code: A Comparative Study of Income
             Taxation of Working Wives and Mothers,” 21 Buff. L. Rev. 49 (1971)
             - Beverly K. Moran & William Whitford, “A Black Critique of the Internal
             Revenue Code,” 1996 Wis. L. Rev. 751
             - Lawrence Zelenak, “Taking Critical Tax Theory Seriously,” 76 N.C. L. Rev.
             1521 (1998)
             - Dorothy Brown, “Race and Class Matters in Tax Policy,” 107 Columbia L. Rev.
             790 (2007)
                    Response Paper #3 Due


IV.      Contemporary Issues: Tax Revolts and Tax Reform

      Week 12 (Nov. 24): A Historical Sociology of Tax Revolts

            - Martin, The Permanent Tax Revolt
            - Larry M. Bartels, "Homer Gets a Tax Cut: Inequality and Public Policy in the
            American Mind." Perspectives on Politics 3 (1): (2005), 15-31.
            - Jacob Hacker and Paul Pierson. “Abandoning the Middle: The Revealing Case
            of the Bush Tax Cuts,” Perspectives on Politics 3 (1): (2005), 33-53

      Week 13 (Dec. 1): Fundamental Tax Reform?

             - Graetz, 100 Million Unnecessary Returns
                    Response Paper #4 Due




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