Professor’s Paper on Tax Reform Bill Among Top Papers in 2017


A paper co-authored by Fordham Law School Visiting Professor Rebecca M. Kysar and other leading tax law scholars warning of the GOP tax reform bill’s damaging effects on the tax system has amassed more than 27,000 downloads and received numerous media mentions in its first week online.

Since being published Dec. 7, “The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation” is among the most downloaded of any paper published over the past 12 months on SSRN, a widely used open-access online repository. The Wall Street Journal, New York Times, Forbes, Politico, New Republic, Financial Times, Slate, and Bloomberg have also written about the paper, which identifies some of the key weaknesses in the Senate and House tax legislation and proposes solutions for them.

Rebecca Kysar

House and Senate Republicans struck a tentative deal on Wednesday, Dec. 13, to combine their respective plans, raising the likelihood that a

vote on the bill will occur next week. Notably, the new bill would lower the corporate tax rate to 21 percent from 35 percent and set the top individual tax rate at 37 percent—a rate lower than the initial House or Senate bills sought.

GOP legislators drafted the bill through a “rushed and closed process, without adequate regard for the intricacies of the tax law and the risk of unintended consequences,” according to the authors of “The Games They Will Play.” Among these potential consequences: additional unforeseen costs could drive the debt increase over the next decade above the current $1.5 trillion projection, corporations will have added incentive to stash more money in offshore tax havens, and tax collection entities will feel a greater strain to enforce the new rules.

For Kysar and many of her colleagues, the prospect of the tax reform bill passing amounts to “a bit of an existential crisis,” she said this week during a Fordham Law interview.

“Here’s a tax system we spend our lives studying and helping to protect, and then all of these rules are introduced without a lot of foresight on how taxpayers can manipulate them and how distinctions created are problematic and easily gamed,” explained Kysar, who served as a primary drafter along with professors Ari Glogower of The Ohio State University Moritz College of Law, David Kamin of NYU Law School, and Darien Shanske of UC-Davis Law School. In total, the paper contains contributions from 13 leading tax law scholars and practitioners.

“The rushed process has really done the lawmakers a disservice here, causing them to lose out on commentary from experts that would protect them from unintended consequences,” Kysar added. “That being said, some of the consequences were intended but are troublesome nonetheless.”

The GOP tax plan appears likely to violate America’s World Trade Organization (WTO) obligations and to create tax treaty problems, noted Kysar, who wrote the paper’s international tax provisions. “I would be surprised if some legislators didn’t know about the WTO issues because similar regimes have been struck down in the past,” she said, pointing to the United States’ long history of enacting export subsidies in violation of WTO obligations. The bill’s international ramifications haven’t gone unnoticed across the Atlantic. This week, finance ministers from Europe’s five largest economies sent U.S. Treasury Secretary Steve Mnuchin a letter voicing their concerns about the bill.

“A lot of the international provisions would provide a perverse incentive causing firms to locate income and assets offshore, and perhaps this was an intentional choice to limit taxation on foreign earnings,” Kysar said. “Nonetheless, it’s in tension with the GOP’s goal of ‘making America great again’ and bringing investment home.”

While GOP legislators contend that the tax cuts will provide the working and middle class relief, tax law scholars, economists, and even some billionaires have countered that the bill will actually be a financial boon for the wealthiest Americans and will exacerbate America’s income inequality crisis.

Republicans’ last major tax overhaul—the Tax Reform Act of 1986—eliminated many tax shelters in addition to simplifying the tax code. The new tax reform bill will do the opposite, which could create repercussions that go beyond mere dollars and cents.

“It’s creating a system that is very leaky,” Kysar said, noting the current tax plan would allow for vast amounts of income to escape taxation. “The 1986 reform closed down a lot of individual loopholes. This opens up many, many more. It’s unclear how the IRS would defend the new system in this era of resource constraints.

“Once people start losing trust in the tax system there’s other ramifications,” she added. “Then people don’t feel like they need to report their income, and they really start to question the role of government.”


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