Kathleen Thomas Talks Tax Reform Debate
Carolina Law assistant professor Kathleen Thomas is proposing ways the federal government can enhance collection
of tax revenues by simplifying the tax compliance process for certain workers
and repealing a provision regarding sales of certain assets.
With the publication of Thomas’s related
papers and citations to three of her articles in the IRS National Taxpayer
Advocate’s 2016 report to Congress, her proposals could have an impact on tax
Thomas has recently had papers
published on the gig economy — online platform companies like Uber and Airbnb that
connect customers with vendors — and instituting a carryover tax basis system for
the sale of certain assets.
“Taxing the Gig Economy”
“Taxing the Gig Economy” will be
published in the University of Pennsylvania
Law Review in 2018. A shorter version was published in Bloomberg BNA.
Economists estimate the gig economy employs more than three
million people, a number expected to increase dramatically in the next few
years. Tax law regards those workers as independent contractors not employees, which means their taxes
aren’t withheld, their income often isn’t reported on a 1099 form, and they may
spend significant time tracking their business deductions.
proposes that platform companies withhold income and self-employment taxes and
that workers be allowed to take a standard business deduction instead of having
to log business expenses. The changes would save workers time and allow them to
prepare their tax returns much more quickly.
The paper’s proposed
reforms “would make life easier for taxpayers who are gig workers and help the
government collect more tax revenue. I am hopeful some version of these
proposals will be part of any tax reform package Congress comes up with,” says Thomas,
director of the UNC School of Law Tax Institute.
“Advocating a Carryover Tax Basis Regime”
Thomas’s paper “Advocating
a Carryover Tax Basis Regime,” co-authored with Richard Schmalbeck of Duke University School of Law and Jay A. Soled of Rutgers University, will be published this fall in the Notre Dame Law Review. A shorter version
was published in Tax Notes.
The paper calls for repealing Section 1014 of
the Internal Revenue Code, which allows people
who inherit assets such as real estate and stock to avoid paying taxes on any built-in
gains if they sell those assets. For most assets, the co-authors propose replacing
Section 1014 with a rule to allow people to inherit assets tax-free but require
them to pay tax on any built-in gains if they sell the assets.
“A large part of our
argument is that repealing Section 1014 and replacing it with a ‘carryover tax
basis’ regime is politically feasible. Because the proposal should generate
revenue by repealing a tax preference that generally only benefits the richest
Americans, we hope it will be seen as a realistic and attractive tax reform
measure,” Thomas says. “At the very least, Congress should institute a
carryover basis regime for marketable securities. This would be relatively
simple to institute due to advances in technology that make tracking
the tax basis of assets easy.”
-October 17, 2017