19th Anniversary of the 21st Century Taxation Blog

Today is the 19th anniversary of starting this blog!  And I'm pleased to have it be #15 on this list of 100 Best Tax Blogs to Follow in 2026.

I'd like to focus this post on space taxation. I've been interested in space exploration since I was in grade school. I wrote an article on space taxation for the 50th Anniversary of the Apollo 11 moon landing, showing not only space tax issues but that a tax article can be written tied to just about any event.  You can see this article in Tax Notes State - here.

On May 20, the ABA Sections of Taxation and Science & Technology are co-sponsoring a free webinar on space taxation (registration link). I encourage you to check it out. There are a variety of tax issues at the federal and state issues such as where certain space activities are taxed, whether tax rules for US activities (such as the deduction and credit for domestic research) includes activity in space, dealing with negative externalities of space waste, and more.

With continuing and growing space activity, particularly by for-profit companies, tax issues and a need for guidance will continue. Let's explore some of this frontier of space taxation in future blogs.

What do you think?

18th Anniversary of the 21st Century Taxation Blog

Well, I'm amazed to be marking today the 18th anniversary of starting this 21st Century Taxation Blog - and that we are still in need of having a 21st century tax system that reflects how we live and do business today. 

Today, I'll note the 2025 IRS Dirty Dozen list which was a topic of a webinar I delivered today for CCH/CPELink. I delivered a webinar on the 2024 list last year. In diving deeper into the list, I went back to its start in 2001 when there were just 8 items. I like to share with others work that I find helpful to me, so I posted by list of the Dirty Dozen items since 2001.  I categorize them into 3 broad areas:

1. Tax Shelters and Questionable Tax Minimization Strategies Involving Taxpayer Funds

2. Thefts and Other Frauds and Scams Against Taxpayers, Employers and Tax Preparers (mostly bad actors trying to get your money)

3. Fakes - Improper Reporting and Preparer Fraud (mostly improper ways to get money from the government)

See my chart here - https://www.sjsu.edu/people/annette.nellen/website/DirtyDozenTable.pdf

icymi - other items I post for reference you might find useful are lists of all Treasury regulations, and other official guidance from the IRS going back to 2011. The relevant Code sections for each item are listed and if it ties to a specific piece of tax legislation. And there are links to get the full text.  This can be useful to see what has been issued or if someone tells you there was, for example, a 2022 revenue ruling on the topic but they don't recall the number.  See the 2025 list and links to past lists here - https://www.sjsu.edu/people/annette.nellen/website/2025regs.html. 

I also have a variety of tax items posted here - http://www.21stcenturytaxation.com/

Looking forward beyond18 years of tax blogging, I want to focus more on how to improve tax and budget literacy so people can better understand their own taxes, and also understand how the system works and how to get involved in asking good questions of elected officials about tax changes as well as the logic (or lack of logic) of some existing tax rules. Quick example, only about 3% of employees earn tip income which Congress is about to exclude from income taxes. Where are the 97% of employees who don't have this type of income? Why not ask for a higher standard deduction or reduce the lowest two tax brackets to 9% and 11% (rather than 10% and 12%) to benefit far more individuals?  [For more on the tip income deduction, see my post of 2/23/25]

My goal in creating this website and blog was to highlight how tax systems can be improved to reflect how we live and do business today and to reflect principles of good tax policy.

I very much welcome comments and suggestions.

Thank you for reading!

17th Anniversary of the 21st Century Taxation Blog

Today is the 17th anniversary of when I started this blog while I was a fellow with the New America Foundation. There is always plenty to write about regarding the topic of how taxes should reflect how we live and do business and follow principles of good tax policy. Time to regularly blog is not so plentiful.

Today the topic is taxation and coin-operated claw machines that are amusement games from which the player tries to pick up a toy with the claw and drop it in the chute. I'm not sure these are all coin-operated today as some likely only take folding money and some might take your credit or debit card.

A ruling from the Texas Comptroller of April 24, 2024 caught my attention. There are all types of taxes and one in Texas is the coin-operated machine tax! It defines the machine and like many taxes, has at least one exemption that then creates added complexity to define that exception. Here the exception is for "amusement machines designed exclusively for a child." This means a "machine that can only be used for skill or pleasure by a child under 12 years of age."

Well, what does exclusively mean and how does one really know if a machine is for ages 11 and below rather than ages 12 and more? Well, in a 2002 ruling, the comptroller defined "exclusively" as a machine "designed such that no person other than a child can use the machine." Also, "it doesn't matter if an immature adult or older child actually uses the machine" because it is the design that is relevant and the kind of prize a player can win is not relevant.  That seems odd, what if the prize is a pack of cigarettes? 

I'm sure the Texas comptroller must have better things to do than determine if a coin-operated machine is for kids age 11 and under rather than for immature adults or for anyone.

Ok, this is a bad way to draft a tax rule. At least two problems here. Coin-operated is too limiting if that means actual coins are dropped into a machine as these machines will certainly get converted to Apple Pay or debit/credit card tap as fewer people carry real money around. And there is no need for any exception here (I think that is true for most taxes - exceptions should be avoided).  If there is some need to provide relief to certain machine operators, find another way such as have them apply for a grant based on financial need (I'd say an income tax credit but Texas doesn't have a personal income tax).

And before leaving these claw machines, back in 2001, the IRS had a funny TAM on the topic. The issue was whether the items inside the machine such as stuffed animals or novelty toys or other prizes were inventory to which the unicap rules of §263A would apply. The conclusion was yes!

The taxpayer claimed that the prizes were supplies for tax purposes, but called them inventory on its balance sheet. The IRS also found that the taxpayer was selling these items and title transferred to the winner, making them merchandise!

I call this funny because either the drafter of TAM 200121006 was very skilled at using these claw machines or had never used one. I think most people put money in and don't get anything making it clear this is not the way a retailer sells goods. These should have been treated as supplies consumed in the process of providing entertainment services. The TAM does provide a good review of code, regs and cases on inventory for tax purposes.

One more relevant tax here is sales tax. As supplies, sales tax would be paid by the buyer (owner of the machine) when they buy the prizes.

Tax policy relevance here ... the Texas ruling is a reminder that just about anything can have a special tax on it, but if too special and with exceptions, it gets complicated quickly. It would be better to find a more simple and equitable way to generate revenues (equitable in that similar businesses might not have a special tax).

What do you think?

16th Anniversary of the 21st Century Taxation Blog

Today marks the 16th year after I started this blog in 2007 while I was a fellow with the New America Foundation. My goal with this blog continues to be to analyze proposals and discuss ideas for helping our tax system to reflect how we live and do business today and to meet principles of good tax policy.

There are many inequities in our tax system such as special tax deductions, exclusions and exemptions that provide a larger benefit to higher income taxpayers relative to others. Examples include the mortgage interest deduction, exclusion of gains that exist at death, and the exclusion of employer-provided health insurance subsidies.

I think many of these exist because the vast majority of people don't understand how they work. Tax literacy is low in the U.S. because we don't teach about taxes in K-12 and even in college, accounting majors are likely the only ones to take a tax course. And tax and budget policy should be taught along with basics of how taxes work.

Today, let's look at how the government, via our tax law, provides tax breaks for health insurance. The largest and more favorable tax benefit for obtaining health insurance is the exclusion for employer-provided health insurance. According to OMB and Treasury, the annual cost of this tax break (cost as in tax revenue not collected) is $237 billion for FY2024 (Table 3). At least 57% of individuals get health insurance from an employer. CBO estimates that 58% of employees under age 65 (156 million people) have health insurance from their employer or a family member's employer.

This health insurance subsidy for employees is very favorable for many reasons:

1. Regardless of the employee's income level and ability to pay for their own insurance, they still get the tax break.

2. Per CBO, the exclusion tends to cause employers to offer more favable coverage - it "encourages firms to offer health coverage with lower cost sharing (such as plans without a deductible), more covered services, and broader provider networks."

3. The higher one's income, the larger the tax savings due to being in a higher tax bracket. So, although a lower income person would need a larger subsidy, the larger subsidy goes to the higher income persons.

Now for contrast, compare the employer-provided health care exclusion to the Premium Tax Credit (PTC). This is available to individuals who don't get affordable coverage from an employer, are not eligible for any government coverage such as Medicare, have household income below 400% of the federal poverty line (this is waived through 2025), and purchase coverage from an exchange.  

What isn't highlighted though is that a PTC eligible person will only get the PTC if based on their annual income they cannot afford the second lowest cover silver plan. For example, using the calculator from Covered California, a 30-year old with $61,400 of income will get a $12 PTC for the year because they are deemed able to afford a silver plan that costs $435 per month (other than $12 of that annual cost). If their income is $61,500, no PTC.

In contrast, if that person with roughly $60,000 of income gets a platinum plan where the employer covers the entire cost, the employee has no out-of-pocket cost and no taxes to pay on the benefit.

Where is the equity in these two tax rules? While removing the 400% of FPL income cap temporarily from the PTC helps a bit, it doesn't change the fact that the exclusion for employer-provided health coverage is far more favorable. A single person with over $61,000 of income gets no PTC but if they work for an employer providing health insurance subsidy, they get a tax break. And that employer-provided subsidy also increases the cost of health coverage for everyone.

The CBO has some solutions regarding the exclusion - here as does the Tax Policy Center such as converting the benefit to a tax credit.

Why was the PTC designed in such an inequitable manner compared to the employer-provided health insurance exclusion?

What do you think? 

15th Anniversary of the 21st Century Taxation Blog

Today marks the 15th anniversary of my blog. I still try to post at least once per week on a tax policy matter and hope for comments and discussion to promote greater focus on various tax policy issues that exist in our current tax systems and in proposals to make tax changes. I also note where provisions and proposals meet principles of good tax policy but more often we see proposals that are contrary to good tax systems.

This year I plan to blog and write more on tax transparency so that we can all better understand how our tax systems work. I think if more people understood spending in our tax system (tax expenditures) versus direct spending (such as what you see in agency budgets), our tax system would look different.

I like this observation from a 2006 congressional report on tax expenditures:

"A major criticism of the mortgage interest deduction has been its distribution of tax benefits in favor of higher-income taxpayers. It is unlikely that a housing subsidy program that gave far larger amounts to high income compared with low income households would be enacted if it were proposed as a direct expenditure program.

The preferential tax treatment of owner-occupied housing relative to other assets is also criticized for encouraging households to invest more in housing and less in other assets that might contribute more to increasing the Nation's productivity and output."

Similar comments are made in the 2016 version of the report (see page 323 et seq).

The report also notes that home ownership rates in the U.S. are similar to those in the UK and Canada and they don't have a mortgage interest deduction. 

Basically, the mortgage interest deduction mostly helps higher income individuals purchase a more expensive home and even a vacation home too since the deduction is for mortgage interest on a principal and second home.

Today, only 11% of individuals itemize and not all of them have a mortgage. This would be a good time to repeal this deduction. It should be down via a phaseout with a longer phaseout period for individuals with income below $150,000. A better replacement would be a first-time homebuyer credit that is available only once in your lifetime and phases down as income goes up. It should be adjusted for the regional home price.

We don't often see these proposals. President Bush's 2005 Advisory Panel on Federal Tax Reform suggested replacing the deduction with a 15% credit based on the regional home price. I think we don't see such proposals because too many people believe that the home mortgage deduction is key to being able to purchase a home and don't see that the bulk of this subsidy goes to higher income individuals - basically, spending money on people who really don't need it (they could purchase a less expensive home with a smaller morgage).

So, I'm working on another paper on tax transparency focused on tax expenditures to highlight issues with them such as highlighted above.  I think a unified budget that shows both direct spending and spending in the tax law in the same document would shed a lot of light on government spending such that people would then ask questions on why subsidies for a vacation home exist or why a good deal of subsidies help higher income individuals more than lower income individuals.

What do you think?

What do you think of when you hear "tax transparency"?  Please leave me a comment.  Thanks for reading my blog!

14th Anniversary of the 21st Century Taxation Blog

I started this blog 14 years ago today as a way to share ideas and hopefully engage discussion on how to improve our tax systems to meet principles of good tax policy and reflect the ways we live and do business today. It's been enjoyable and I appreciate everyone who reads and comments on my posts!

A few thoughts of areas that need attention that we don't hear enough about (some I have blogged on):

• Repeal the kiddie tax - too much complexity and not needed. When an asset is truly given to someone else, that person pays taxes on it at their own tax rate.
• Repeal the rental revenue exclusion for renting out your home for less than 15 days (§280A(g)). Not needed and mostly benefits higher income with the home by the nice golf course where some tournament will be played.
• Fix the personal income tax to allow deductions tied to production of taxable income without any 2% of AGI limitation.  This is a basic feature of a personal income tax and we have continuted to move away from it since the Tax Reform Act of 1986 meanwhile while adding special rules that are not part of a basic income tax.
• Virtual meetings and meals are likely to stay. Let's get guidance on whether that meal delivered to your client or employee is still deductible (client one should be, but not clear about the employee; if given a gift card, likely taxable).
• Update Section 197 on amortization of intangibles to include URLs and social media assets.

And, of course, there are more areas in need of improvement.

What do you think?

13th Anniversary of the 21st Century Taxation Blog

I started this blog 13 years ago today to help promote ideas and discussion on how to improve tax systems by moving them into the 21st century ways of living and doing business and following principles of good tax policy.

Despite being 20 years into the 21st century, these topics are still needed as tax system modernization seems to move slowly despite advanced uses of technology in other areas. For example, consider the contact tracing apps being developed by Apple, Google and others that use tech features in smartphones to keep track of who you encounter so the app can let you know if anyone later (or presently) has the virus. Consider the increasing amount of technology developed for cars and other mobility tools to provide directions, monitor traffic conditions, and send alerts. These can also be used to allow, for example, our gasoline excise tax to be based on miles traveled rather than gallons of gas purchased so that even electric vehicle owners will pay for road maintenance and building.

Here are a few ideas I'll continue to explore this year:

1. Modernizing worker classification rules to reflect use of technology to enable people to find full-time employment, as well as part-time employment when there is a need to monitize one's time to generate needed cash. This is a good use of technology. Rules that require these workers, often working less than seven hours per week to be employees means they don't get to monitize their spare time because employers logically don't to go through lots of forms and filings to hire someone to work 5 hours per week for six or fewer months.

2. Improving accountability and transparency in our tax systems so more people will ask such questions as:
  a. Why is a deduction allowed for mortgage interest on a vacation home but not for other debt?
  b. Why can someone deduct mortgage interest on up to $750,000 of debt regardless of income level but the deduction for student loan debt is limited to $2,500 and not available once income exceeds a specified amount?
  c. Why do we spend over $200 billion annually to help employees pay for health insurance but do not spend the equivalent for other employees and self-employed individuals? Why not use these funds more equitably?  And, why is health insurance tied to employment? The reason dates back to the 1940s and today results in a lot of waste because the system harms normal supply and demand (as anyone with employer-provided health care knows because doctors only ask if you have health insurance rather than discuss prices and needs with you).

3. Better use of technology for tax compliance. Filing your taxes should be as easy as ordering from Amazon or similar company, or transferring money on a banking app or making a payment with Paypal, Venmo or similar tool.

What tax policy topics are on your mind?

Thanks for reading!

12th Anniversary of This Blog

I started this blog on May 14, 2007 as a way to share ideas and generate discussion on ways to improve our tax systems. My focus is to discuss and propose ideas to enable our tax laws to reflect the way we live and do business today and to reflect principles of good tax policy.

Upcoming over the next several months leading to the election, I plan to start a presidential series to discuss tax proposals of candidates, questions we should be asking of candidates regarding taxes, and suggesting ideas for improving our tax systems. I expect a lot of this will also include a look at the $1.4 trillion of spending that is buried in our tax system via tax expenditures - that is, special deductions, exclusions, rate and credits that are not crucial to the particular tax and mostly just result in higher tax rates and usually, subsidies for taxpayers who don't need them.

For example, California Senate Kamala Harris has once again proposed the LIFT Act (S. 4, Livable Incomes for Families Today) the Middle Class Act). It offers a tax credit of up to $3,000 per year ($250/month) ($6,000 if married filing jointly), based on earned income.

I think many people first react saying - why? That's a lot of money.

But, consider what the tax break is for a high income individual today with a $1 million grandfathered mortgage on their first (and/or second home) generating an interest expense deduction of about $40,000. Let's say this person also has health insurance paid by his/her employer of $15,000 (tax free), and $3,000 of tax-exempt interest income.  Let's say this person is in the top rate of 37%. The value of these deductions is $21,460 or almost $1,800 per month.  Even if this person had a marginal rate of 35% or 32% the subsidy received just for these tax breaks is more than what LIFT offers.

Of course, there are more people who would qualify for the S. 4 credit than there are folks in the top tax brackets.

But, I hope this illustrates questions we should be asking (such as why are we providing large subsidies to those who don't need them, and how much could rates be lowered if we cut back on tax breaks). Also, is the monthly credit the best way to go? What are the costs to administer? How can technology make this all a more efficient process.

If you have suggestions or questions, please post them here.

Thank you for reading this blog!

11th Blog Anniversary - Still Aiming for Improved Tax Policies - Modern Entrepreneurship

May 14, 2018 was the 11th anniversary of the 21st Century Taxation Blog. This is my 991th post.

I continue to strive to promote improved tax systems that better reflect the ways we live and do business today and follow principles of good tax policy. My goal this coming year is to have regular posts showing examples of how tax systems can be improved to be more effective.

Here is an example, one I also wrote about in 2012 and submitted to the Senate Finance Committee for the written record of their 7/10/12 hearing on Boosting Opportunities and Growth Through Tax Reform: Helping more Young People Achieve the American Dream. Here is a link to my full testimony and a link to the written record of the hearing.

How much did this hearing affect the Tax Cuts and Jobs Act (PL 115-97; 12/22/17)? Not much. While many tax breaks were cut back, some of the most costly ones, such as the exclusion for employer-provided health benefits were untouched. The individual mandate (penalty) to have health insurance was repealed starting 2019 which will cause health insurance costs to increase. The Earned Income Tax Credit was not increased. No first-time homebuyer credit for low to middle-income taxpayers was created. No changes were made to address the growing number of individuals in the "gig economy" who are self-employed.

Here is my suggestion from 2012 to support modern entrepreneurship:

Several trends indicate that workers today are more likely to be self-employed, telecommute or work in their home, and have continual needs for new technologies (such as for hardware and software). Many existing tax rules though, work contrary to support these trends. For example, worker classification rules are unclear causing some employers to label all workers as employees, making it difficult for a self-employed entrepreneur to succeed. Strict home office deduction rules, particularly the exclusive use requirement, make it almost impossible for workers and self-employed individuals to qualify for the deduction. Thus, they are not able to properly calculate true taxable income because some valid business expenses are not deductible.

Additional reforms should be considered to help young people obtain initial funding to start a business. For example, existing tax rules could be modified to provide incentives for established businesses to donate to entrepreneur grant programs where individuals could submit business plans with the hope of being awarded a tax-free start-up grant. The reforms to help fund such grant programs could come from a lowered tax rate on repatriated earnings that go into the fund, or an enhanced charitable contribution deduction for donations to such grant programs.

I'm going to update and further develop that idea - supporting modern entrepreneurship as one more my research projects this year.

What do you think?

10th Anniversary Blog Post

On 5/14/07, I started this blog.  While we are 17 years into the 21st century, many aspects of our tax administration system and rules are stuck in the 20th century. Also, we tend to ignore trends to see how they should shape tax systems and compliance.

I started the 21st century taxation website and blog while I was a fellow with the New America Foundation. The focus for fellows was to get new ideas out to lawmakers and the public, such as through op eds in newspapers. In addition to that, I started the blog and am glad I did. It's fun and a good way to connect to lots of people via the Internet and search engines.  The blog gets over 12,000 hits per month.  And it connects me with other bloggers - on tax, technology and more, which continues to be fascinating.

Here are a few items I expect to be blogging in my 11th year:

• Federal tax reform and how the proposals stack up against principles of good tax policy and reflect how we live and do business today.
• How to pay for lower tax rates that will certainly be part of tax reform. There are lots of special exclusions, deductions, credits and preferential rates that cause rates to be high today and limit the tax system in meeting principles of good tax policy.
• How to modernize worker classification rules and why.
• How new and existing technologies should be used to truly simplify income tax compliance and perhaps even reduce the tax gap.
• State tax oddities and how to address them.

Anything on your list that is not on mine?

Comments?  Please leave them.  Thanks for reading!!

9th Anniversary of the 21st Century Taxation Blog

Today is the 9th anniversary of when I started this blog!  I try to post at least once per week and this is my 871th post!  I get about three to five thousand views per month.  That keeps me going.

I started this blog when I was a fellow with the New America Foundation, charged with getting new ideas out, such as through op eds and articles.  I thought the blog would be a good additional technique and was a new thing back in 2007.

My goal continues to be focused on tax policy matters.  More specifically, how to modernize our tax systems and ensure they meet principles of good tax policy.

For this 9th anniversary, I'll note one topic I plan to focus on more over the next year - increased transparency in our tax systems and better tax literacy for all individuals.  More on this later (although I did recently post on it - 4/16/16 post.

8th Anniversary of the 21st Century Taxation Blog

Today marks the 8th anniversary of this blog!

I started it years ago for reasons that still strongly exist today - to help promote dialog and discussion on the need to help tax systems reflect today's ways of living and doing business and to follow principles of good tax policy.  I don't plan to give up!

How is this for a modern tax system - why can't my W-2 and 1099 data be gathered by an electronic system (software, a blockchain (!), a secure server) and populated onto my electronic return. Why can't I use a webpage to input any information not on a W-2 or 1099, and the return magically be filed?  For many people, why can't they do this at a kiosk while at the grocery store?

What do you think of that or what modernization approaches do you suggest considering today's technology?

Thanks for reading!

7th Anniversary of 21st Century Taxation Blog

Today - May 14, 2014 marks the 7th anniversary of this 21st Century Taxation Blog. I started this blog when I was a fellow with the New America Foundation.  I was charged with getting new ideas out into the mainstream, such as through op eds.  Given the times, I thought a blog might also be a helpful approach.  I think it has.  I aim to post at least weekly and now I also blog at SalesTaxSupport.com and Biowebspin and my blog entries are picked up by Proformative and Tax Connections.  I've met people I likely would not have met if I had not been blogging.  And, it's fun.

My initial aim hasn't changed.  I aim to critique proposals and existing rules as to whether they meet principles of good tax policy and help move our tax systems into the 21st century ways of living and doing business.  I also suggest some ideas of my own. And I've got a variety of websites related to tax reform at http://www.21stcenturytaxation.com/.

Here are two reforms I'll offer today:

1. As part of federal income tax reform, repeal Section 263A - the unicap rules.  These rules were not really needed when enacted as part of the Tax Reform Act of 1986.  Their main purpose was likely as a revenue raiser to help lower rates. These rules apply to large retailers (over $10 million of receipts) and producers of tangible property (whether for self-use of sale). We have other rules governing capitalization of benefits that provide long-term benefits (Section 263(a)). We have longstanding rules on what a producer of inventory needs to capitalize (similar to what is required for books). Also, today, companies likely employ more just-in-time inventory practices than in 1986.  Unicap requires calculations and recordkeeping beyond what is required for financial statements. It is only a timing difference. Let's really simplify the federal income tax law and repeal it.  [See 2008 post and link to a "trends" and tax reform table at the end.]

2. As part of eliminating the continued deficits in the Highway Trust Fund, let's explore a gas tax that is not based on how many gallons of gas you purchase. Instead, let's find a way to tie it to how many miles you drive.  With people driving more fuel efficient cars, including ones that don't even require purchase of gasoline, the current system is outdated. Oregon experimented with a vehicle miles traveled approach and there are studies out on alternatives. [See 2010 post and 2014 post.]

What do you suggest to move our tax system into the 21st century?

Thanks for reading this blog!

6 Year Anniversary of Blogging!

I started the 21st Century Taxation blog on May 14, 2007.  I'll keep blogging because it's fun and, well, our tax system has still not moved into the 21st century!  In most states, particularly California, the sales tax applies to consumption of 20th century items (tangible personal property) rather than also 21st century items (digital goods, entertainment and personal services). Tax rules for retirement plans assume people stay at jobs for long times and that all workers can afford a retirement plan. Our federal income tax still operates mostly like it did when the US did not face much competition from foreign companies.

Tax reform is on the congressional agenda now. Whether the parties will reach some type of compromise on the needed reforms? Will they be able to make appropriate change in a revenue neutral way?  Will some special rules be ended only to create new special rules? Will a reformed system be simpler than our current system?

We'll see.

What do you think?  Any particular tax reform topics you'd like to see in future blog posts?

Thanks for reading!

Four Years of Blogging!

I started this blog May 14, 2007. Some of the first topics I posted were about weaknesses in the California sales tax, such as the base being too narrow and the use tax gap. So, what has changed?! Well, the California sales tax rate is 1 percentage point higher today (and a few more weeks). This is unfortunate. It would be better to broaden the base and lower the rate and start phasing out the application of sales tax to business purchases.

The use tax gap exceeds $1 billion per year. Changes in the last four years are minimal in effect in closing this gap. A requirement for businesses without a seller's permit, and at least $100,000 of annual gross receipts to register was added, but I'm not convinced the cost-benefit is there. Instead of creating a new filing regime, there are ways to better enforce the requirement to pay use tax on your income tax form. Improvements there include mandating that anyone who does not file a quarterly sales tax report to have to enter a number of the income tax form use tax line. The "look up" table to be added starting for 2011 tax returns will help because if anyone doesn't keep records of how much use tax they owe, they can just use the lookup table to get figure (3/19/11 post).

But, we still need a lot more education about the existence of the use tax, a more clear line on the Form 540 and instructions, as well as public information on the benefits of lowering the rate and broadening the base.

I'm sure the sales tax topic will continue to show up in this blog. I expect though that the fifth year of this blog will be focused more on federal tax reform and moving our tax systems into the 21st century and reforming them to better meet principles of good tax policy. Congress has held several hearings on tax reform this year and we are expecting a reform proposal from President Obama. Should be plenty to blog about!

Thank you for reading and commenting! I hope you continue to do so!

Why this blog? Third Anniversary!

I started this 21st Century Taxation blog on May 14, 2007 (first post is here). I'm amazed that I've been posting ideas, critiques and articles on the topic of tax policy and reform for three years. I'm not amazed though that in 2010 we still have a desperate need to modernize our tax systems.

I started the blog as part of my work as a fellow with the New America Foundation. That work was focused on improving California's tax system, which is why the 21st Century Taxation website has a lot of reports on California tax reform. My term with the New America Foundation ended a few years ago, but my passion for the topic, which also stems from my work with the AICPA, ABA and California Bar Tax Sections, my teaching and research and my professional and civic duty to help improve our tax systems, has not dropped. I hope my posts are helping to broaden understanding of principles of good tax policy and ways to improve our tax systems and encouraging dialogue on the topic.

I welcome any suggestions for improving the blog.

Thanks for reading and commenting!!