–It was only a B side. The A side was Having a Party – obviously a far lesser song, although one can understand what the record company was thinking.
–The backup vocalist with the deep voice, whose call-and-response interplay with Cooke is so powerful, was Lou Rawls.
–The piano player, who does his part so beautifully although it’s simple enough that I suppose any really first-rate session pianist could have nailed it, was Ernie Freeman, who did a lot of jazz, pop, and R&B records and worked with Woody Herman, Duane Eddy, and Frank Sinatra, among others.
–Cooke must not initially have realized how good a song it was, as he offered it to fellow singer Dee Clark, who turned it down.
My current working title is Dangerous Grandiosity: Literature and High-End Inequality Through the First Gilded Age. This, too, has changed multiple times in the course of the project. I would certainly be willing to discuss alternative title suggestions with a publisher, as they can often come up with something crisp and salable.
Whether or not this book is either the best or the most important thing I’ve written, I think it is my favorite, although this partly reflects the particular tastes and values that led me to write it. (I can be very self-critical, although I generally prefer to keep that to myself.)
I’ve talked with a couple of editors / possible publishers in the past, but before I had fully nailed down the project. My aim was not just to gauge interest, of which I found some, but also to get feedback, which several gave generously and which I found very helpful.
The book clearly has more upside sales potential than my tax policy books, but also less of an automatic built-in audience, and I don’t have the same instant cred when doing something like this as when writing about, say, corporate or international tax policy. That’s fine, I’m willing to earn it and feel that the book is up to this challenge. (And I’ve gotten positive feedback about particular chapters.) But I do now face the question of how best to go about publishing it. E.g., university press versus high-brow independent press, and it really needs the right fit to get its best shot at landing audibly.
It’s available for download here.
The abstract goes something approximately like this: “This paper, published in Tax Notes on July 9, 2018, is the second half of a two-part paper examining and analyzing the three main international provisions in the 2017 tax act. Part 1 discussed normative frameworks for international tax policy. Part 2, contained herein, focuses on the base erosion and anti-abuse tax (the BEAT), global intangible low-taxed income (GILTI), and foreign-derived intangible income (FDII).”
I am thinking that this may be of greater practical interest than Part 1 to people who are looking, not just for an overview of the major international tax provisions in the 2017 U.S. tax act, but also for what I would say is a genuinely evenhanded assessment of its purposes, virtues, and defects, including suggestions for how the above rules might best be changed if one took as given the broad-gauged policy views that appear to have motivated them.
It starts: “The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives.”
The idea would be to index assets for inflation for purposes of measuring capital gain, while not adjusting anything else for inflation.
To illustrate one of the main problems with doing this, Daniel Hemel and David Kamin explain:
“Imagine that a taxpayer buys an asset for $100 that is fully financed by a loan. Assume that the real interest rate is zero, that the inflation rate is 10%, and that the nominal interest rate on the loan is 10% as well. One year later, assuming no change in the real value of the asset, the asset will be worth $110 on account of inflation. If basis is indexed for inflation, the taxpayer can sell the asset for $110 and recognize no taxable gain. Assuming that the interest is properly allocable to a trade or business, the taxpayer can claim an interest deduction of $10 with no offsetting gain, despite the fact that the taxpayer is in the same pretax position as previously. Put differently, the effort to eliminate the taxation of phantom gains leads to opportunities for the creation of phantom losses.”
Inflation is in principle worth addressing, but comprehensively – albeit subject to the complexity costs of doing so, which are less worth incurring when the inflation rate is relatively low (as it has generally been for a number of years). But addressing inflation so selectively and piecemeal, creating heightened inconsistencies all across the Internal Revenue Code, is likely to make things worse, such as by encouraging rampant tax sheltering.
There are also other obvious problems with the proposal. Its being so regressive and losing so much revenue when the long-term fiscal gap is already exploding due to the 2017 tax act, ramped-up military spending, etc., goes beyond being reckless. It is also extremely aggressive as a regulatory move, exposes the hypocrisy of those doing it (who would be outraged if a Democratic administration were half as aggressive), and (as Hemel and Kamin argue) there is a good chance that the courts, at least if they address the issue in good faith, will strike it down as beyond regulatory discretion.
What’s more, capital gains already benefit from deferral and a low rate, and even the issue of double taxation of corporate profits (where it’s a sale of appreciated corporate stock) already verges on being a non-problem due to tax rate changes, not to mention adjustments in the capital markets.
In sum, despite the fact that inflationary gain is phantom gain as an economic matter, this is a horrible proposal and not one that I believe is being advanced in good faith, either legally or as a policy matter. Rather, it is another payoff to favored constituencies, and when it’s financed (as it must be in the long run) many Trump voters will be among the main losers.
The publishers permit SSRN posting after an exclusive period. Thus, as of today, I am permitted to post Part 1 of the article, and have done so. It’s available here. I will post Part 2 next Monday (August 6).
Part 1 discusses normative frameworks for international tax policy, while Part 2 discusses the BEAT, GILTI, and FDII. I suppose that, stretching things desperately, one could say that Part 1 leaves the reader with a cliffhanger, as it sets the stage for assessing those three provisions but holds off on actually doing so. (The article would simply have been too long for Tax Notes had I published the whole thing at once.)
Although I’ve been authorized by the publisher to post Part 1 today, the usual drill is that SSRN takes it down after a couple of days on copyright grounds and I have to contact them with copies of the authorizing emails in order to get it back up. Kind of annoying, as the take-down usually occurs right when the download traffic, be it high or low overall, is at its peak. I’m going to try to forestall this by contacting SSRN upfront, but we will see if this works.
Wodehouse, a fave of mine, is similar. His books are always skillfully done, but some have immense comic inspiration coursing through them, while others are more like rote exercises that make light reading but are disposable and forgettable.
A few examples of Category 1 (genius) for Dr. Seuss: Green Eggs and Ham, The Sneetches, Cat in the Hat & its sequel, One Fish Two Fish Red Fish Blue Fish, And To Think That I Saw It On Mulberry Street.
Also in Category 1, and of particular interest to law and economics types: The Lorax. I believe that people have even written about it in the biz. E.g., it offers a classic illustration of externalities and common pool problems. (Exam question: Could these have been solved by assigning the Once-ler ownership rights to all Truffula trees?)
But The Lorax also seems to posit a violation of rational choice by the Once-ler, who completely fails to anticipate that the trees are running out until the last one faces the axe. We know people sometimes fail to exhibit appropriate planning depth, but it isn’t really explained here.
Anyway, today’s NYT has an article discussing a recent article in Nature (available here, but it may be restricted-access) about The Lorax.
First point of interest, the backstory: Ted Geisel (Seuss) “was fighting to keep a suburban development project from clearing the Eucalyptus trees around his home. But when he tried to write a book about conservation for children that wasn’t preachy or boring, he got writer’s block.
“At his wife’s suggestion to clear his mind, they [went on a Kenyan safari] ….. And if you haven’t guessed by now, it was there that The Lorax took shape – on the blank side of a laundry list, nearly all of its environmental message created in a single afternoon.”
This is how inspiration tends to work, even if you aren’t a Seuss.
Per the Nature article, this more particularly involved his seeing an acacia tree, along with patas monkeys that commensally use it without harming it. So it was the original truffula tree, and they helped inspire the Lorax himself.
The NYT article continues: “[S]ome have worried that [the] Lorax … isn’t really a good teaching model because he comes off as a self-righteous eco-warrior with unfounded anger.” Well, right at the start, the narrator calls his voice “sharpish and bossy,” and he continues to act that way throughout the story.
Per an interview that the NYT writer, JoAnna Klein, conducted with Nathaniel Dominy, the Nature paper’s lead author, while “[t]he prevailing sense among literary critics is that the Lorax is too angry …. [i]f you see the Lorax not as some indignant steward of the environment, but instead, as a participating member of the ecosystem [that is being threatened], then I think his anger is so much more understandable and I think forgivable.”
That’s a reasonable point, but it’s also part of Seuss’s aesthetic to have the spokesman be shrill and hence a bit self-defeating. It’s a part of his combining moral lessons with an aversion to the smug sententiousness of prior children’s literature that he found, not just boring, but insulting to his child audience. So he frequently complexifies a book’s stance and impact by standing apart from the messenger (in cases where he assigns someone the role of being “right” – which he only does occasionally).
For another example of the same thing, consider Green Eggs and Ham. This is a book with a clear moral message for children: be openminded, try things, expand your horizons, etc. But who is the messenger for this point? The very annoying and over-zealous Sam-I-Am. There’s something distinctly odd and off about Sam-I-Am’s persistence, which is part of the fun even though he’s right.
More examples of moral complexity in Seuss: Should the kids tell mother what happened in the Cat in the Hat? Are the child’s fantasies (which he must keep to himself) more important and valuable than the mundane truth that his parents demand, in And To Think That I Saw It On Mulberry Street?
So we can combine the Nature article’s explanation for why the Lorax is so shrill – he’s personally threatened, and hence feels justifiably defensive and anxious – with understanding how Seuss uses this type of strategy to help make his best works far more memorable and powerful than 99.9% of the young children’s literature that is out there.
Not to repeat it all, but I discussed why the Tax Court decision is so bad here, and an amicus brief to the 9th Circuit, lead-authored by Clint Wallace, that I signed here. So it’s great that the Ninth Circuit has now reversed, based on a very thorough discussion of the relevant legislative and regulatory history, along with Congress’s and the Treasury’s underlying policy concerns, and adopting arguments very compatible with (and similar to) those in our amicus brief.
The Tax Court decision did not merely permit taxpayers to game the system in a manner that is entirely contrary to the logic behind cost-sharing (which is itself flawed, but better than having absolutely no constraints). It also seemed to reward an aggressive taxpayer strategy that I was concerned we’d see more of in the future. (And we still may.) This is to spend lots of money making lots of bogus arguments in the notice and comment phase of regulatory issuance, and then to get the regulation struck down as “arbitrary and capricious” unless its preamble is written, not to inform taxpayers and advisors as has been the general past practice, but instead as a litigating document that responds carefully and fully to each argument made in notice and comment, no matter how meritless and frivolous.
The Ninth Circuit is to be commended for getting it right. Now, it’s true that it relies on the Chevron standard for reviewing administrative regulations, which may well be on the Supreme Court’s chopping block in the near future. But in this particular case, it shouldn’t matter, as the IRS regulation at issue, concerning the treatment of incentive compensation in cost-sharing arrangements between affiliates, was not only a reasonable interpretation, but clearly the most reasonable interpretation, and indeed perhaps the only reasonable one.
UPDATE: The 9th Circuit’s Altera decision is now available here.
SECOND UPDATE: Leandra Lederman blogs about the decision (including key administrative law aspects) here.
Last week, Tax Notes published part 1 of my article, The New Non-Territorial U.S. International Tax System, and this week it published part 2.
Part 1 discusses normative frameworks for international tax policy, while part 2 discusses the BEAT, GILTI, and FDII. As per the above photo, part 2, which is presumably of wider practical interest, made the cover.
Consistently with editorial permission, I’ll be posting the entire article on SSRN on July 30.