Larry Zicklin facilitates corporate tax law discussion in virtual panel

Jared Maloney

Baruch College alumnus and business school namesake Larry Zicklin hosted a virtual panel on Oct. 11 to discuss how corporate tax law is and should be interpreted in the United States.

As part of his “Zicklin Talks Business” webinar series, Zicklin was joined by accounting professor Michael Meisler and law professor Daniel Halperin as panelists.

The discussion began with Zicklin posing a few questions. They include: Do corporations have an obligation to pay the amount that was intended by lawmakers? Do they only have an obligation to their shareholders? In the case of the latter, are they thus required to avoid as many taxes as possible?

Halperin argued that the state of current tax laws encouraged most corporations to try to cheat the system, despite the increased risk of audit from the Inflation Reduction Act.

“The law should require people to determine reasonable basis by looking at the spirit of the law,” Halperin said, adding that corporations would rather do that than focus solely on the technical wording.

Meisler argued that the situation was more nuanced. He said that corporations have an obligation to save money through any possible way and that a law’s “intent” is not always clear.

“The taxpayer has an obligation to pay their fair share, but not more than that and what’s fair is in the eye of the beholder,” Meisler said.

Both panelists agreed that looking through legislative history was important to analyze a law’s intent, even if they are dated in regard to the technological advances that have emerged.

Zicklin asked if consultants and lawyers serving taxpayers have a responsibility to adhere to the tax law’s intent and spirit, or if the responsibility only lies with the taxpayers themselves.

Halperin believed that it was the responsibility of tax lawyers and consultants to always keep their clients in the loop. He said he worked with lawyers in the past who had taken an “aggressive” position in dealing with tax laws that clients were unaware of, thus risking audit without the clients’ knowledge.

Meisler noted that while smaller companies had a relatively low risk of being audited, larger companies were under audit almost constantly. He noted that “for some larger companies, they were basically constantly under audit,” and in the case of the largest companies, “the IRS basically had an office there.”

Meisler also reiterated that the situation could be more nuanced than it appeared, with lawyers having to react quickly to rapidly changing situations.

The panel went into whether the U.S. corporate tax rate itself was too low. The United States currently has the lowest tax rate among the G-7 nations, and the United States raised close to only 1% of the gross domestic product in corporate tax revenue in recent years.

This prompted a deeper discussion into inequity within the U.S. tax code as panelists debated the cost and benefits of raising certain forms of tax.

This discussion debated whether individuals or corporations should be taxed more heavily and whether the wealth tax and estate tax should be raised.

Meisler and Halperin also discussed how the middle class had an increasingly more significant tax burden and how businesses in technology, real estate and private equity are optimizing their ability to avoid taxes. They also debated on whether a federal value added tax — or “VAT” — and consumption tax would potentially solve part of the problem.

Meisler argued that a consumption tax and VAT would be regressive and politically unpopular. He said a disproportionate amount of the burden would fall on lower-income citizens.

“In every country that introduced a VAT tax, the party that introduced it was voted out the following election,” Meisler said.

Halperin noted that a consumption tax might be effective in getting taxes from individuals who aren’t declaring their wealth on their incomes.

He said that given the many ways the wealthy could hide their income, a consumption tax might be the best option at this time, adding that “if we’re not likely to get their income, we should at least tax their consumption.”

Zicklin concluded the panel with a comment regarding how the tax rate incentivizes entrepreneurs and businesses.

“I never met an entrepreneur who had a good idea for a business and said to himself or herself, ‘I think the tax rate is too high, and I’m not going to create this new gizmo,’” Zicklin said.