Law Professor Argues New Pass-Through Rules (199A) Are Horrible
The successful job creators are pretty rare and a lot of them are very tax-sensitive. So 199A has created a strong incentive to create your own job. If you do, you can be making pretty good money (over $300,000 with a low earning spouse)and getting the 20% benefit regardless of what you do and whether you employ anybody. If you are making really good money, though, you have a strong incentive to have W-2 employees, as opposed to a bunch of gigsters.
The professions where the partnership form is common and most of the business owners are actually people just practicing the craft exclude the big earners from the benefit.
It may well be that most of the benefit is going to the children and grandchildren of yesterday’s jobs creators – the new gentry. The original version of the tax bill in the House was custom designed for the new gentry. What ultimately passed benefitted a much broader class of people whose income is not from W-2 employment or simple investment – the job creators, their progeny and working stiffs who make their own jobs.
The Thinking Behind The Tax Cuts And Jobs Act – Assuming There Was Some
I spoke with Professor Sugin about her article. One thing that we both seem to agree on is that TCJA is not well thought out tax reform as was the Tax Reform Act of 1986. I asked her if this type of deep thinking about the tax law comes across in her teaching. What she told me was that the law school classes will give students a sense of the arc of themes that run through the law and holistic views of the statutes, which will inform students when they get into the details of practice.
The other thing I learned from our discussion which I probably should have known about is what the economists call the “optimal tax model”, which is kind of the holy grail of economic thinking about taxes – designing a tax system that minimizes “deadweight loss” from the economic distortions that taxes create. For example, taxes on labor encourage leisure – at least if you are using “homo econimicus” as your model of human behavior.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.