National Tax Association
September 29, 2006
Five Key Things Non-Lawyers
Should Know About Tax Law
and Its Policy Implications
Walter Hellerstein
Francis Shackelford Professor of Taxation
University of Georgia Law School
Overview
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“No Taxation Without Representation”
Is Not a Rule of Law
Every Tax That Is Unfair Is Not
Unconstitutional
A Tax Is Not an Assessment of Benefits
One Person’s State Tax Incentive Is
Another Person’s Discriminatory Tax
You Owe a Tax on Things You Buy
Regardless of Where You Buy Them
“No Taxation Without
Representation” Is Not
A Rule of Law
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Residence and Source Bases for Taxation
Residence-based Taxation Without
Representation
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Political Principle
Source-based Taxation Without
Representation
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Discrimination concerns
Administrative concerns
Every Tax That Is Unfair
Is Not Unconstitutional
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Federal Constitutional Restraints Are Limited
Limitations on Federal Taxing Power
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Limitations on State and Local Taxing Power
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Exports, “Direct” Taxes, Geographical Uniformity, Due Process
Equality and Uniformity
Extraterritoriality
Burdens on Commerce
Interference with Federal Supremacy
Finer Tuning Must Come From Legislative Branch
A Tax Is Not
An Assessment of Benefits
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Any Other View Would Undermine View That
Government Exists to Provide for Common Good
A Tax Is the Means of Distributing the Burden of
the Cost of Government
Taxpayers Generally Have No Right to Any
Specific Quid Pro Quo for Taxes Paid
Whether a Tax Should Be Designed as an
Assessment of Benefits Is a Different Question
One Person’s State Tax Incentive
Is Another Person’s Discriminatory Tax
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Reduced tax on stock transfers to encourage
trading on New York exchanges
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Tax exemption for pineapple wine to encourage
fledgling Hawaii wine industry
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Boston Stock Exchange v. State Tax Commission, 429 U.S. 318 (1984)
Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984)
Income tax credit for machinery and equipment
to encourage new investment in Ohio
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Cuno v. DaimlerChrysler, Inc
126 S. Ct. 1854 (2006
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386 F.3d 738 (6th Cir. 2004), reversed on other grounds,
Key Policy Questions:
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Who should draw the line: courts or Congress?
Where should the line be drawn?
You Owe a Tax on Things You Buy
Regardless of Where
You Buy Them
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Consumption Should Be Taxed Where
Consumption Occurs
Value Added Taxes and Retail Sales/Use Taxes
Levy Tax on Goods on Destination Basis
Legal Liability at Destination Is Indisputable
Key Practical Question Is Enforceability
Key Policy Issues:
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Fairness and Efficiency versus Administrability
OECD, EU, and U.S. Subnational Initiatives