Thursday, January 29, 2009
Monday, January 26, 2009
When Andrews retired from Harvard in 2007, former student Edward McCaffery said "There is much to admire about Bill’s scholarship, but what I best know and love Bill from are three articles published in the Harvard Law Review, in 1972, 1974 and 1975—known to cognoscenti simply as Andrews 72, 74 and 75." [Note that I'll be coming back to Andrews '74 in awhile as it is also included in the tax canon.]
For a peek at the substance of the 72 article, McCaffery goes on to say:
Much of income tax theory in the 20th century was dominated by theSo that's what we can look forward to: another very important work from another very important guy. If I seem less than excited, it may be because this article is substantially longer than the previous ones. On the up-side, if the most difficult math consists of I = C + S then this should be a cake-walk compared to Mirrlees '71.
so-called Haig-Simons definition of income, which holds essentially that Income
equals Consumption plus Savings (I = C + S)—that all money or wealth (income) is
either spent (consumption) or not (savings). Many have written about the income
side of that equation: the importance of finding and taxing “all income, from
whatever source derived.” The simple genius of Bill Andrews was to look to the
right-hand, or uses side. What we are taxing—in an income tax—is consumption
plus savings. This change of perspective effected a Copernican revolution in our
thinking about tax. Andrews 72 pointed out that, while the arguments for source
neutrality are compelling, those for use neutrality are far less so—just maybe,
“we” do not want to tax all consumption, like medical expenses or charitable
Saturday, January 24, 2009
Wednesday, January 21, 2009
When I started this blog, I determined that I would refrain from commenting on current and proposed tax policy because I'm just a student and really don't know what I'm talking about. There's really nothing much more unbearable than reading through a know-nothing's pontifications on the state of the universe. However, I've got two cents burning a hole in my pocket, so I'm going to throw 'em in. [I'll try to keep this from becoming a habit.]
Today's post by Professor James Maule on his MauledAgain blog discusses a proposal, articulated in a 2007 post by Robert Flach on his Wandering Tax Pro blog, to end the IRC's allowance of real estate depreciation deductions. From every angle this makes good economic sense; the deduction may have helped contribute to the overinflation of the housing market, and there is no reason to allow a deduction on an asset that is in fact appreciating in value. However, after realizing what a good idea discontinuing the deduction would be, one realizes the political impossibility of doing away with it.
My first thought was that if we can't outright do away with real estate depreciation we must be able to find away to counteract its effect. My second thought was to toughen the recapture rules -- perhaps by upping the tax paid on recapture -- and giving the option to depreciate as much (up to a point) or as little as the taxpayer thinks is economically accurate with the threat of penalties if they are found to have deducted too much when they eventually sell the property. My third thought was that this is a dumb idea (for a number of reasons that I won't waste your time by enumerating).
So here is my current thought: why not continue to allow taxpayers to profit from the fiction that their real property depreciates in value so long as there is no evidence to the contrary? The catch would be that a property value assessment for local property tax purposes would count as evidence to the contrary. If a tax assessment showed that a taxpayer had claimed too much in depreciation deductions since the purchase or previous assessment, then the service could either 1. require taxes on recapture to be paid immediately, or 2. require the rate of depreciation be adjusted match the current trend as evidenced by the change in value since the property's purchase or previous tax assessment. Certainly there are quite a few issues to work out before attempting to implement such a policy (and I won't waste your time by typing out my current list), but I cannot think of any that would be an outright deal-breaker.
Tuesday, January 20, 2009
After my morning walk and bowl of kibble, I perused my daily slew of websites and blogs. Of particular note -- aside from much about the inauguration of our new president -- was a post on Paul Caron's TaxProf Blog about the poor state of academia and professordom and such. The second section was an excerpt from a Forbes article describing the experience of law student couple who graduated with a ton of student loan debt and ended up getting divorced partially because of the financial strain.
This isn't really a new story, but I was still thinking about it a few minutes later in the shower -- it probably stuck with me because the students graduated from a law school just down the street -- when a horrible realization struck: I am those students. When I graduate in a year and a half, both I and Mrs. Goose will be paying off loans of a similar magnitude as those discussed in the excerpt. Plus I have the added responsibility/expense of a puppy of my own on the way. The couple in the article apparently had six-figure jobs and still had troubles, so my non-plan of just assuming that whatever job I take after school will be adequate suddenly seems extremely foolish. So the big realization is that I need to get serious about setting up gainful employment in 18 months or so.
To that end, I'll plan on chronicling here my endeavors to learn about the job market, how best to promote oneself, and any other tidbits and adventures that may come along. Perhaps my inevitable mistakes will prove useful to someone out there.
Monday, January 19, 2009
I have heard the name Mirrlees a number of times, but I did not until now know anything about him or his work. (This is officially the part of the blog post where I admit to now feeling stupid.) Apparently Professor Mirrlees won a Swedish prize of some sort in 1996 -- other than that he's not so notable. (This is probably where I first heard of him.)
It seems that Professor Mirrlees is an economist's economist -- the sort of brilliant person who made me realize that my efforts in grad school were pointless, thus causing me to leave with a lowly MA. He's the sort who seems to enjoy complex mathematics for its own sake, and ends up shedding light on some of mankind's more pressing problems merely by happy happenstance. Reading his mini-autobiography, one learns that Professor Mirrlees has exuded brilliance (though he would not make such an immodest claim) since boyhood, and continues to work for the simple pleasure of it. His many publications are phenomenol in their breadth as well as their complexity (so it seems to me anyway) and I hope to have the chance to read some of it in the future. (Actually, if I want to learn anything about optimal tax theory, I will have no choice but to read many Mirrlees papers.)
Most interestingly, much commentary about Professor Mirrlees' work on optimal taxation points out how much it is at odds with what most of us assume must be attributes of an efficient and effective tax system. I'll save a breakdown for my later post about his '71 paper, but suffice it to say that it is officially gee whiz stuff.
Wednesday, January 14, 2009
Anyhow, I thank Professor Maule for this post as I am sure that I am not the only law student who found it illuminating.