One of the key questions in the study of regulation is whether the costs of regulatory compliance fall homogeneously on all businesses or whether certain firms, for instance small ones, are especially penalized. We quantify firms’ compliance costs in terms of their labor spending to adhere to government rules. Using comprehensive establishment-level occupational microdata and occupation-specific task information, we recover the proportion of a firm’s wage bill attributable to employees engaged in regulatory compliance. On average for 2002-14, regulatory costs account for 1.34% to 3.33% of a firm’s wage bill, totaling up in 2014 to $239 billion, and to $289 billion when adding capital equipment costs. Our findings reveal an inverted-U relation between firms’ regulatory compliance costs and their scale of employment, indicating that firms with approximately 500 employees face compliance costs that are about 40 percent higher as a share of total wages compared to small or large firms. Finally, we develop an instrumental variable methodology to disentangle the influence of regulatory requirements and enforcement in driving firms’ compliance costs.

New research suggests that legally non-binding statements from corporate leaders help predict corporate behavior, at least on the margin. This includes the Business Roundtable Statement commiting to ESG principles. But subsequent ESG-oriented actions can often be explained better by prudent risk management considerations than proferred ethical reasoning. Thus, commitments to ESG might be viewed as signalling a particular approach to risk management rather than an ideologically-driven willingness to sacrifice profitability.

"One-share, one-vote" corporate governance often leads to inefficient negative externalities, even when sharehold- ers care about direct harm to themselves and even if cor- porations respond to shareholder preferences. Because equity ownership is concentrated, while many externalities are more diffuse, corporate voting underweights externali- ties. But allocating votes according to the principle of "one person, one vote" creates the opposite problem: inefficiently low corporate profits. This Article presents an intermediate voting rule that limits negative externalities without under- weighting corporate profits. The rule allocates bonus votes to beneficial owners who cross a threshold ownership level at which profit entitlements approximate externality exposures. This amplifies the voice of the subset of owners with socially optimal preferences. Information problems could be mitigated through intermediary institutions that would serve as voting proxies. Voluntary adoption of this governance regime could be encouraged through tax or regulatory incentives.

We investigate how income tax reductions affect work hours. Our empirical strategy relies on the fact that, in states where taxpayers can deduct federal tax payments from state taxable income, federal tax changes are dampened. We study 2003 tax reforms (JGTRRA) that dramatically reduced federal tax rates on dividends and capital gains, and moderately reduced rates on ordinary income. Difference-in-Difference analysis indicates that work hours decreased most among high income and wealthy taxpayers who were most directly affected by the tax reductions. The decrease in hours was larger for residents of states in which the effective tax reductions were larger. Conversely, we find possible evidence that larger ordinary income tax rate reductions in the 1980s, accompanied by effective tax increases on capital gains, had the opposite effect and induced an increase in work hours. These results suggest that the effect of tax reductions may depend on the type of income targeted.

This is a a slide presentation accompanying "Pigouvian Contracts" available at http://ssrn.com/abstract=4019686Pigouvian taxes are often used to limit environmental externalities such as pollution. We argue that consumer contracts generate externalities by overwhelming consumers’ attention. Depleting each consumer’s attention harms consumers collectively because lower comprehension levels enable sellers to adopt less efficient and more one-sided terms. We propose to tax sellers in proportion to the costs that comprehending their contracts would impose on consumers. This would force sellers to internalize these costs and incentivize them to invest in contract simplification and forego strategic obfuscation. As a result, the costs to consumers of comprehending would decrease, and comprehension rates would rise. To further penalize inefficient contracts while reducing the tax burden on efficient contracts, we propose subsidizing consumer comprehension and information sharing efforts. Inefficient contracts would thereby be strongly disincentivized.

Accompanying slide presentation available at http://ssrn.com/abstract=4019705Pigouvian taxes are often used to limit environmental externalities such as pollution. We argue that consumer contracts generate externalities by overwhelming consumers’ attention. Depleting each consumer’s attention harms consumers collectively because lower comprehension levels enable sellers to adopt less efficient and more one-sided terms. We propose to tax sellers in proportion to the costs that comprehending their contracts would impose on consumers. This would force sellers to internalize these costs and incentivize them to invest in contract simplification and forego strategic obfuscation. As a result, the costs to consumers of comprehending would decrease, and comprehension rates would rise. To further penalize inefficient contracts while reducing the tax burden on efficient contracts, we propose subsidizing consumer comprehension and information sharing efforts. Inefficient contracts would thereby be strongly disincentivized.

Background An increasing number of patients require outpatient and interventional pain management. To help meet the rising demand for anesthesia pain subspecialty care in rural and metropolitan areas, health care providers have used telemedicine for pain management of both interventional patients and those with chronic pain. Objective In this study, we aimed to describe the implementation of a telemedicine program for pain management in an academic pain division in a large metropolitan area. We also aimed to estimate patient cost savings from telemedicine, before and after the California COVID-19 “Safer at Home” directive, and to estimate patient satisfaction with telemedicine for pain management care. Methods This was a retrospective, observational case series study of telemedicine use in a pain division at an urban academic medical center. From August 2019 to June 2020, we evaluated 1398 patients and conducted 2948 video visits for remote pain management care. We used the publicly available Internal Revenue Service’s Statistics of Income data to estimate hourly earnings by zip code in order to estimate patient cost savings. We estimated median travel time and travel distance with Google Maps’ Distance Matrix application programming interface, direct cost of travel with median value for regular fuel cost in California, and time-based opportunity savings from estimated hourly earnings and round-trip time. We reported patient satisfaction scores derived from a postvisit satisfaction survey containing questions with responses on a 5-point Likert scale. Results Patients who attended telemedicine visits avoided an estimated median round-trip driving distance of 26 miles and a median travel time of 69 minutes during afternoon traffic conditions. Within the sample, their median hourly earnings were US $28 (IQR US $21-$39) per hour. Patients saved a median of US $22 on gas and parking and a median total of US $52 (IQR US $36-$75) per telemedicine visit based on estimated hourly earnings and travel time. Patients who were evaluated serially with telemedicine for medication management saved a median of US $156 over a median of 3 visits. A total of 91.4% (286/313) of patients surveyed were satisfied with their telemedicine experience. Conclusions Telemedicine use for pain management reduced travel distance, travel time, and travel and time-based opportunity costs for patients with pain. We achieved the successful implementation of telemedicine across a pain division in an urban academic medical center with high patient satisfaction and patient cost savings.

We investigate how income tax reductions affect work hours. Our empirical strategy relies on the fact that, in states where taxpayers can deduct federal tax payments from state taxable income, federal tax changes are dampened. We study 2003 tax reforms (JGTRRA) that dramatically reduced federal tax rates on dividends and capital gains, and moderately reduced rates on ordinary income. Diff-in-Diff analysis indicates that work hours decreased most among high income and wealthy taxpayers who were most directly affected by the tax reductions. The decrease in hours was larger for residents of states in which the effective tax reductions were larger. Conversely, we find possible evidence that larger ordinary income tax rate reductions in the 1980s, accompanied by effective tax increases on capital gains, had the opposite effect and induced an increase in work hours. These results suggest that the effect of tax reductions may depend on the type of income targeted.

An increasing number of patients require outpatient and interventional pain management. To help meet the rising demand for anesthesia pain subspecialty care in rural and metropolitan areas, health care providers have used telemedicine for pain management of both interventional patients and those with chronic pain. In this study, we aimed to describe the implementation of a telemedicine program for pain management in an academic pain division in a large metropolitan area. We also aimed to estimate patient cost savings from telemedicine, before and after the California COVID-19 “Safer at Home” directive, and to estimate patient satisfaction with telemedicine for pain management care. This was a retrospective, observational case series study of telemedicine use in a pain division at an urban academic medical center. From August 2019 to June 2020, we evaluated 1398 patients and conducted 2948 video visits for remote pain management care. We used the publicly available Internal Revenue Service’s Statistics of Income data to estimate hourly earnings by zip code in order to estimate patient cost savings. We estimated median travel time and travel distance with Google Maps’ Distance Matrix application programming interface, direct cost of travel with median value for regular fuel cost in California, and time-based opportunity savings from estimated hourly earnings and round-trip time. We reported patient satisfaction scores derived from a postvisit satisfaction survey containing questions with responses on a 5-point Likert scale. Patients who attended telemedicine visits avoided an estimated median round-trip driving distance of 26 miles and a median travel time of 69 minutes during afternoon traffic conditions. Within the sample, their median hourly earnings were US $28 (IQR US $21-$39) per hour. Patients saved a median of US $22 on gas and parking and a median total of US $52 (IQR US $36-$75) per telemedicine visit based on estimated hourly earnings and travel time. Patients who were evaluated serially with telemedicine for medication management saved a median of US $156 over a median of 3 visits. A total of 91.4% (286/313) of patients surveyed were satisfied with their telemedicine experience. Telemedicine use for pain management reduced travel distance, travel time, and travel and time-based opportunity costs for patients with pain. We achieved the successful implementation of telemedicine across a pain division in an urban academic medical center with high patient satisfaction and patient cost savings.

Contract law treats consumer attention as if it were unlimited. We instead view consumer attention as a scarce resource that must be conserved. We argue that consumer contracts generate negative externalities by overwhelming consumers with information that depletes their attention and prevents competition on contract terms. We propose a novel solution to this market failure: To force sellers to internalize the attention externalities that their contracts generate. This will be accomplished through a Pigouvian tax on the presentation of a consumer contract, proportionate to the attention costs that reading and comprehending the contract would impose on consumers.

Introduction: The COVID-19 pandemic forced rapid adoption of telemedicine for care of neurology patients. This study contributes to this literature by describing the structure and implementation of telemedicine-based outpatient neurology clinics at the UCLA Medical Center and estimates patient cost savings, before and after the California COVID-19 "Safer at Home" directive, and patient satisfaction. Methods: This was a retrospective, nonrandomized, case series study of telemedicine-based neurological management in an urban academic medical center from October 2018 to June 2020. We estimated roundtrip travel time, roundtrip travel distance, total savings, and surveyed patient and provider satisfaction with telemedicine care. We supported these findings through evaluation of 7,194 patients by telemedicine and conducted 9,189 video visits for neurological care. Results: The median telemedicine patient avoided a roundtrip driving distance of 33 miles and roundtrip travel time of 75 min. Within sample, median hourly earnings were $27/h. The median patient saved $18 on fuel and parking and $36 of time-based opportunity savings, for total savings of $54 per video visit. Eighty-six percent of patients surveyed were satisfied with their video visit experience. Conclusions: Telemedicine reduced travel time and also reduced costs for neurology patients. Patients and providers both reported high levels of satisfaction with telemedicine.

Discusses fraudulent conveyance law and the shift by bankruptcy courts toward market-implied probabilities of default and the growing sophistication of courts in applying these methods for purposes of solvency analysis. Concludes that this new market-centered paradigm—coupled with recent innovations in the financial markets and finance theory—can enable fraudulent transfer law to more effectively achieve its historical policy objectives. Explores implications for related bankruptcy doctrine.

Many scholars and courts have championed a plain meaning approach to interpreting commercial contracts between sophisticated parties. These parties are assumed to carefully draft contracts to make their rights and obligations clear and knowable if the language is enforced as written. However, recent events in the commercial lending arena have raised questions about the efficacy of this approach. Aggressive parties have combed through reams of complex documents looking for ways around seemingly clear contractual barriers. For example, Hovnanian promised to intentionally default on a debt payment to one of its wholly-owned subsidiaries in exchange for favorable financing from a hedge fund whose substantial CDS short position would have otherwise become worthless. In another case, J.Crew, faced with financial distress, found a way to divert the crown jewels from the collateral package pledged to its lenders, and instead use this value to prevent a default on unsecured notes that were coming due. Both of these transactions upended the expectations of those who put the original deals together. They raise the question: how can systems that depend on clear rules evolve, correct problems and reduce unintended consequences without resorting to a subjective standard? One approach is to crowdsource error-checking to market-participants by paying bounties to those who detect and publicize flaws in rules-based systems so that problems can be diagnosed and corrected (or, at least, their consequences mitigated) by subsequently revising the rules. This article considers such an iterative approach in the context of the Credit Default Swaps Market and the syndicated loan market.

The U.S. economy is growing more slowly than it can and should be growing because it does not invest enough in infrastructure, science, and education. There is an important procedural obstacle to funding public investments — a process of scoring the economic effect of legislation. This process is driven by assumptions that are biased in favor of low taxes and against public investment. This budget scoring process systematically underestimates the benefits of public investment and systematically overstates the costs of taxation and debt. The power of the budget scoring process to derail legislation that would fund public investment is amplified by a think tank, the Penn Wharton Budget Model (PWBM). The PWBM assumes that taxes and debt have devastating effects on economic growth and assumes away much of the benefit of public investment. These strong assumptions are not consistent with the breadth of estimates in relevant empirical literature. The director of the PWBM, Kent A. Smetters, recently responded to criticisms. This article summarizes the original critique of flaws in the PWBM analysis and discusses PWBM’s response (or non-response) to each substantive point. Readers may wish to review the original critique before proceeding. For the original critique, see: Michael Simkovic, Biased Budget Scoring and Underinvestment, 166 Tax Notes Federal 757 (2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3539734.

Empirical studies routinely find evidence that public investments in education, science, and infrastructure have as high or a higher rate of return than private capital invested more broadly, and that such public investments are complementary to and crowd-in private investment. This implies that public borrowing or raising taxes to fund more public investment would increase the rate of economic growth and provide budgetary benefits. However, when scoring the effects of legislation, the Congressional Budget Office and the Penn Wharton Budget Model, a think tank, use dubious assumptions that systematically put a thumb on the scale in favor of shrinking the government and against NPV-positive public investment. Rather than help correct shortcomings in CBO's approach, the PWBM often amplifies them, making assumptions that are even less plausible than those of the CBO. PWBM’s errors are not random such that they offset each other, but rather have a single systematic direction — all of the problematic assumptions and methodological problems put a thumb on the scale in favor of low taxes on the ultra-wealthy. PWBM, like CBO, assumes away the short-term benefits of public investments while treating private investments more favorably, even though many private investments — in particular those relating to development of new technologies — take a long time to produce positive cash flows. The PWBM assumes away the long-term benefits of public investment for reasons that are irrelevant and patently wrong under established principles of valuation. The PWBM elevates the role of arbitrary timing assumptions instead of focusing on lifetime IRR and NPV. The PWBM assumes crowding out of investment, when the empirical evidence is as strong, if not stronger, for crowding in. The PWBM assumes a coming crisis when both financial markets and ratings agencies suggest that this is very unlikely. The PWBM assumes that the United States is overwhelmingly a closed economy with respect to international investment when the evidence suggests that it is overwhelmingly open. The PWBM assumes a shortage of capital, when negative real risk-free interest rates point to a capital glut. The PWBM assumes that only the extremely wealthy can supply sufficient capital, and that changes to taxes and spending that benefit middle- and upper middle-income individuals will not enable these groups to serve instead as suppliers of capital. The PWBM assumes that the wealthy react to higher taxes by saving less, when it is possible that they react by working harder or consuming fewer luxuries. The many problems with PWBM’s analysis raise serious doubts that the PWBM’s analysis can be used as a guide in selecting policy choices that will increase economic growth or improve the well-being of most U.S. citizens. Congress’s counter-productive approach to scoring legislation should be revised to more accurately reflect the well-established benefits of public investment and the ambiguous effects of taxes or public borrowing.

We estimate the increase in earnings from a law degree relative to a bachelor’s degree for graduates who majored in different fields in college. Students with humanities and social sciences majors comprise approximately 47 percent of law degree holders compared to 23 percent of terminal bachelor’s. Law degree earnings premiums are highest for humanities and social sciences majors and lowest for STEM majors. On the other hand, among those with law degrees, overall earnings are highest for STEM and Business Majors. This effect is fairly small at the low end of the earnings distribution, but quite large at the top end. The median annual law degree earnings premium ranges from approximately $29,000 for STEM majors to $45,000 for humanities majors.

Securities laws prohibit open‐end mutual funds from borrowing more than one‐third of their capital structure because of concerns that too much borrowing may harm investors. This is the first article to examine the performance of open‐end funds that borrow money within these permissible limits. We construct a database from annual filings of open‐end domestic equity mutual funds covering 17 years from 2000 to 2016. Eighteen percent of funds borrowed money for leverage within that time. We find that borrowing funds underperform their nonborrowing peers by 62 basis points per year on a total return basis, while also incurring greater risk. After accommodating for the greater risk taking, we find that borrowers underperform by 48 to 72 basis points annually. By contrast, funds that use derivatives and other financial instruments perform about as well as unlevered mutual funds, before and after adjusting for risk, and with less volatility. This suggests that many mutual funds use derivatives to hedge risk rather than as a substitute for leverage through the capital structure. Thus borrowing may present a greater risk than derivatives, which have received more attention than borrowing. Fund investors and regulators would benefit from greater transparency into mutual fund capital structure.

Part I: Billionaire Taxes, https://ssrn.com/abstract=3326615.Part II: Taxes Spending and Innovation, https://ssrn.com/abstract=3335386.How much can a passive investor with a high-risk tolerance earn on his or her capital? If history since the end of World War 2 is any guide, between 11 and 14 percent per year before taxes and inflation. After inflation, this comes to around 7 to 10 percent. With good tax planning, the rate of return net of income taxes, inflation, and fees could average around 6.5 to 9.5 percent per year.A family with $100,000,000 ($100 million) in wealth would pay an additional $1 million in taxes per year under Senator Elizabeth Warren’s ultra-high-net-worth tax proposal. That would reduce their after-tax disposable income to $5.5 million to $8.5 million per year. To put this into context, according to the Survey of Consumer Expenditures, households in the top 10 percent of income earned an average of $189,000 after taxes and spent on average $143,000 in 2017. Even after paying Warren’s wealth tax, a household with $100 million in assets could spend 38 to 59 times as much as a relatively high-income household.A household with a $100 million net-worth that lived modestly and spent only as much as the average household in the top 10 percent of income could reinvest $5.36 million to $8.36 million per year, growing their net-worth by 5.36% to 8.36% per year, on average. This is $5.32 million to $8.32 million more in annual savings than the average top-10 percent household.The analysis above implies that Warren’s proposed 2% to 3% ultra-high net-worth wealth tax would only slightly slow the increase in high-end wealth inequality but would not halt or reverse it. At a 5.36% return after taxes, inflation, and personal consumption, a fortune would quadruple in value every 27 years, and would therefore not be dissipated by typical family growth rates. (At 8.36%, it would quadruple in value every 18 years).Under Warren’s proposal, a household with $1 billion in wealth would pay an additional $19 million in taxes per year. After paying the wealth tax, other taxes, and reinvesting to stay ahead of inflation, our billionaire family would be still be able to spend approximately $46 million to $76 million per year, forever, without anyone in the family having to work a job. Every extra billion in wealth (above $1 billion) would translate into an additional $35 million to $65 million in disposable income per year, after taxes and fees and reinvesting to stay ahead of inflation.If policy makers wanted to cap personal wealth from purely passive investing at $1 billion, but did not want to tax the first $50 million in wealth, they would have to annually tax wealth above $50 million at around 12%. Assuming effective enforcement, this would potentially generate somewhere in the vicinity of $1 trillion in revenue per year. This is about enough to replace most payroll tax revenue and thereby give every worker in the country a double digit percentage pay raise on their first $130,000 in earnings, or give every employer equivalent savings on labor costs. A wealth tax of 5% to 10% per year would be similar to hurdle rates that are used to handicap hedge fund and private equity managers’ incentive compensation, rewarding wealth managers only when they produce returns that exceed what they should be able to accomplish with minimal skill and little effort. A similar ultra-high net-worth wealth tax rate might help distinguish persistently talented investors, leaders, or entrepreneurs from those whose growing wealth is the result of past success and good luck. In contrast to such starkly meritocratic policies, Warren’s relatively modest 2% above $50 million and 3% above $1 billion wealth tax would preserve the freedom and security that come with family wealth by making available to passively invested ultra-wealthy households millions or tens of millions of dollars every year.

Part I: Billionaire Taxes, https://ssrn.com/abstract=3326615.Part III: After Paying Ultra-High Net Worth Wealth Taxes, How Much Would Billionaires Have Left to Live on?, https://ssrn.com/abstract=3340925.Key Takeaways: - Innovation is the product of teamwork.- Engineers and scientists play a critical role.- Scientific research is insufficiently rewarded financially.- Taxes can boost innovation by funding human capital investment and basic research.- The amount of investment is important – who owns financial assets is not.In formulating taxation and public investment policies, we should carefully consider data and the peer reviewed literature. Claims that we can drive more innovation and growth through a higher concentration of resources in the hands of a small number of billionaires — while providing fewer resources to middle and upper middle-class knowledge workers — are not empirically supported.