Thursday, January 29, 2009

The Job Search: An Expert's Advice

After my recent realization that I need to get a job, I contacted Tax Grotto editor Chris Bale to see if he'd be willing to answer a few questions about the current tax job market. In addition to chronicling "Movers & Shakers in the Global Tax Market" on Tax Grotto, Chris is CEO of eTaxJobs and is involved in other websites such as, so I figured he'd be the perfect person to ask about how to position myself for getting a foot in the door at a tax firm. I sent Chris a quick note asking if he'd be willing to answer a few questions to be posted here, and to my delight and amazement he promptly replied that he'd be happy to help.

The questions that I put to Chris appear below in bold with his answers following:

1. I see that some of your websites, and -- pertain to tax professionals all over the world. To what extent is your business involved with placements in the UK and to what extent in other locales?

I am based in the UK and when eTaxJobs was first launched in 2005 it had a UK only focus. This gradually grew internationally as there is considerable cross-border movement within the tax market. Many tax legislations are based on UK tax law which allows tax professionals to get up to speed very quickly in a new country. We then found that the site was attracting domestic tax professionals looking to move locally, which led to Big 4 firms in Canada, Australia, Russia, New Zealand and other countries using eTaxJobs to attract people with local tax knowledge. eTaxJobs now has a number of country specific sites and we are very strong in Canada, Luxembourg, Australia and the Middle East. However we have never really cracked the US tax market. This is on my to-do list :)Tax Grotto has no geographical bias in terms of its outlook, but because the US and UK are by far the largest tax markets globally, they dominate the news items. I would say that the split is 40:40:20 between US, UK and rest of the world.Totally Tax is a site driven by its users and we create new categories as people demand them. The directory is still in its infancy but is growing gradually.

2. What proportion of your placements are accountants and what proportion attorneys?

I should stress that eTaxJobs is just a job board and does not get involved in the recruitment process per se. Unlike in the US we are completely indepdendent and have no association with any recruitment firm. In terms of the split, we do not have hard data on this, as we rely on feedback from our clients, but the proportion is around 80:20 accountants to lawyers.

3. What types of firms do you most often deal with? Do you work exclusively with accounting firms or have you provided placement services for law firms as well?

Yes, we work with accountancy firms and law firms and boutique tax practices. We also do a lot of work with Fortune 500 and FTSE 250 companies recruiting for in-house tax professionals. Obviously a lot of our clients are recruiters and headhunters acting for others. In Europe and Australasia there is considerable movement of tax professionals between the legal and accounting professions and the historic distinction between the two for tax advice is melting.

4. To what extent do you normally deal with entry-level positions? How are these positions usually filled by the various kinds of tax firms?

We do feature these roles on our site but I would recommend that people looking for a trainee role apply directly to tax firms. There is a lot of demand for these places and fewer opportunities than 5 years ago, so it is best to invest the time and approach every hiring contract in writing.

5. How has the current economic downturn affected recruitment at the various types of firms that do tax work?

The Big 4 and law firms have certainly been hit, almost on a global basis. The sign off for new hires has been elevated to senior partner level and every new job needs to have a definite business case justified before it can be advertised. This said, they are all still hiring but not to the extent of 2008. Exceptions to this are China and Canada where the demand for tax professionals is increasing. Firms that had a strong reliance on FS tax and M&A tax have obviously taken a hit.

6. Are there any sectors of the tax job market that have been unaffected or even improved by the current financial crisis? Are there entry-level opportunities in areas such as bankruptcy, or is that work more likely to be done by those who have been squeezed out of other tax areas?

In my view transfer pricing, international executive services (ie US personal tax), executive compensation consulting and indirect tax have been relatively unaffected by the downturn. There will always be demand for tax compliance services, good for accountants but not lawyers. Yes, you are right, one option is to look at the insolvency or bankrupty markets, but by the time you have sufficient experience to be of use to a Firm, the downturn may be over and you could well be in the wrong specialism.

7. Are there any jurisdictions that are currently (or anticipated to be) "hot" in that there is a special need for people with knowledge of that jurisdiction's tax laws?

Middle East, China and Canada are all growing their tax service lines right now.

8. Looking forward past the current recession, to what extent will there be a need for American tax attorneys to work in Europe, Asia, and elsewhere?

The key demand for US tax professionals abroad is in the field of US personal tax, ie advising wealthy US executives working as expatriates.There are also opportunities for US international tax or transfer pricing experts in the major international tax jurisdictions where there is strong M&A activity ie Switzerland, UK, Singapore, HK, China, Luxembourg and Dubai.

9. For someone with a desire to work in tax, What is a more powerful credential, an LLM in tax or CPA? Can one hope to find a job with a mere JD (American law degree)?

Tough one, as I suspect it depends on which jurisdiction you are in and what type of job you want. To do tax compliance at a Big 4 I would say CPA, but obviously an LLM would suit working in a law firm doing transactional tax. The reality is that in the long term the qualification matters less than good experience. I would keep blitzing every hiring contact and not be too fussy about where you go. Get 1 year's experience and then move on when the market improves.

10. What other skills and/or credentials (language, software, etc.) would be useful for a newly-minted tax attorney in search of a tax job?

Mandarin and French open up many opportunities internationally. Software can be learnt on the job and is constantly changing anyway.

[Note: For the next question, I sent Chris a copy of my resumé to see where I might stand in the applicant pool. It shows that I have a BS and MA in economics, have worked in consulting and finance since leaving grad school, and spent a few years up to this previous May at a large management consulting firm.]
11. Looking at my resumé, can you tell me if there is anything about my background (or lack thereof) that stands out as likely to work either in my favor or to my detriment in my search for a tax job? What normally stands out on an entry-level candidate's CV?

In your favour is your previous consulting experience. You have been client facing and have a very good consultnig firm on your cv.The fact that you have an Economics background could be used to your advantage if you focus on securing a job in transfer pricing, as this is a pre-requisite for entry. There are lots of TP boutiques out there and Baker & McKenzie have a very strong global TP team, plus obviously you can look at the Big 4 firms too.The cv stacks up in terms of strong academic institutions too. For me the question mark would be why you left [your most recent job at a large consulting company]. My guess is that it was a redundancy situation ? [Note: Actually no, I just got tired of my job and decided to find something where I'd pick up some legal experience. I imagine that I'll have to dress that story up a bit when interviewing with a potential employer.]

12. What general advice would you give to law students interested in pursuing a tax career?

Don't be too picky about your first job. Get some experience under your belt, work free of charge during vacations so that you have practical tax experience on your cv and be determined. Send out applications every day and try to cover every firm that hires tax trainees.

Well I can't thank Chris Bale enough for being so generous with his time and insight. He has certainly given me some things to explore and focus on as I move toward post law school employment. The biggest takeaways are probably the following:

1. Transfer pricing seems to have shown up a few times as something I should look into. I don't know much about it beyond a min-unit in in my international business transactions class, so I'll be sure to read up and see if it sounds like something that I'm interested in.

2. I'll worry a bit less about trying to squeeze a CPA in ASAP. Perhaps that's something to worry about after snagging the first job.

3. My French is rusty and my Mandarin is horrible but improving; it can't hurt to get a little better in both of these.

4. My background doesn't sound like an automatic deal-breaker, which is good. That's a bit of a relief.

5. Bug the hell out of tax firms until one of them relents and hires me.

Monday, January 26, 2009

The Tax Canon -- Andrews '72 (Part 1)

And now back to Vic Fleischer's tax canon. This week I'll be talking about William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 Harv. L. Rev. 309 (1972). Andrews, like everyone else whose work I've read as part of this project, seems to be a titan of his field. He wrote a widely used casebook (though not the one that my introductory tax course used) and a number of well regarded and oft-cited scholarly articles.

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 the
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
contributions, equally.
So 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.

Saturday, January 24, 2009

The Tax Canon -- Mirrlees '71 (Part 2)

Well it turns out that my first guess about the bit of math that I was unsure of was pretty close to correct, and it wouldn't have mattered if I were way off anyway. Ah well. Anyhoo, I have now finished reading J. A. Mirrlees, An Exploration in the Theory of Optimum Income Taxation, 38 Rev. Econ. Stud. 175 (1971) (actually reading the tough math-y parts several times) and have a few observations to report.

It was actually alot of fun to read a real economics paper for the first time in about five years. I had almost forgotten about the incredible number of limiting assumptions that cause such papers to almost never end up being about what their titles imply. I actually began reading with the idea that this paper would tell me about how to design the income tax to be as efficient as possible; it technically did this insofar as one is willing to accept the umpteen limiting assumptions that mostly bear no relation to the real world. To be fair, this particular paper is quite brilliant and did make a real contribution to the economic study of optimal taxation theory. It is just not something that a policy-maker can grab an apply without taking a huge leap of faith.

The paper begins with a list of assumptions, including a complete disregard of intertemporal issues, uniformity of preferences and utility functions among taxpayers, the disallowance of migration, perfect information, and a single type of labor and a single consumer good in the economy.  You know, just like real life.

The model is set up such that there is a finite number of laborers/taxpayers in the economy each with a different amount of output that they can produce per unit of time. That is, worker 1 can produce one widget per hour, worker 2 can produce two widgets per hour, etc. up to some maximum. The utility of each laborer is a positive function of how much he consumes and a negative function of how much he works. That is, ideally every worker would want to consume infinite widgets and work zero hours. The job of the government is to set a tax rate for each type of worker (each level of per-hour productivity) so as to maximize aggregate utility given the amount of time that each worker will choose to work. Of course each worker must choose how much to work based on how much he wants to/gets to consume which is partially a function of the tax rate. It is this interplay between optimization problems that leads to quite a few pages of fancy math.

You may have noticed that the model makes taxation choices based on a taxpayer's productivity, not his income. Mirrlees attempts to square this with the real world when he says, "One might obtain information about a man's income-earning potential from his apparent I.Q., the number of his degrees, his address, age or colour; but the natural, and one would suppose the most reliable, indicator of his income-earning potential is his income." This may be so, but the assumption that productivity is indicated by income might be one of the larger assumptions that this model uses.

After a bit of brain-hurting math, Mirrlees demonstrates his results by running a number of numerical examples (each with different assumptions about preferences, utility functions, etc.) and spits out some results that are a bit surprising. Optimum marginal tax rates tend to be relatively unvaried among different income brackets (or productivity levels) which would indicate that we might want to consider a flat tax rate. The actual flat tax rate is sensitive to the distribution of skills (or productivity) among the population as well as the income/leisure preferences. These two points aren't particularly surprising, but what is is that of all the combinations of assumptions tested, the highest optimum marginal tax rate came out to be 60% with the great majority being less than half that.

Another important result is that the income tax is not shown to be a very good tool for the redistribution of wealth (well, really consumption and utility). It seems that it would be more efficient to tax at a (low) flat rate and then use some other mechanism to achieve redistributive ends. 

Well, again, at least insofar as our world correlates to Mirrlees' world of limiting assumption.

This was fun and I look forward to reading more about optimal tax theory, but next time I'll be going back to the legal tax canon and will thus be reading William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 Harv. L. Rev. 309 (1972).

Oh, almost forgot. This time around the part that made me feel stupid was easily the amount of math that I have forgotten since finishing grad school only a few years ago. What I would have once flown through, my brain must now stare at and chug through at a snail's pace. This is something that I'm going to have to work on.

Wednesday, January 21, 2009

Real Estate Depreciation

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

Gotta Get a Job

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

The Tax Canon -- Mirrlees '71 (Part 1)

It is a great testament to my laziness that I have failed to yet finish J. A. Mirrlees, An Exploration in the Theory of Optimum Income Taxation, 38 Rev. Econ. Stud. 175 (1971) simply because I came across a bit of math that I no longer remember how to work with. To continue reading I must either: 1. assume that my current understanding is good enough (it's a pretty minor point anyway), or 2. crack a book that is sitting on my shelf at home and spend ten minutes getting back up to speed. For days now I have elected to do neither. In any case, I think I'll post some background information in the hopes that this will motivate me to hurry up and finish.

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

Apparently Tax Professors Do Actual Work

Mauled Again has a particularly timely post today about what Professor Maule goes through in preparing to teach his classes each semester. It is timely because one of the classes for which he describes his preparations is the same one that I just began yesterday -- Introduction to the Taxation of Business Entities (called Tax II at my law school.) After reading through the 27 steps required for Professor Maul to prepare to teach a class, I do have a much greater appreciation of what my professors must do to make such seemingly effortless presentations day after day. However, as a former management consultant I question the efficiency in the ordering and repetition of some of the steps on Professor Maule's checklist. For instance, it appears that he might want to wait until after he has reviewed the most recent addition of his casebook (step 13) before compiling supplemental materials (steps 4 - 7).

Anyhow, I thank Professor Maule for this post as I am sure that I am not the only law student who found it illuminating.

Tuesday, January 13, 2009


So I screwed up in my last post: J. A. Mirrlees, An Exploration in the Theory of Optimum Income Taxation, 38 Rev. Econ. Stud. 175 (1971) is not part of the tax canon. It is in fact an economics paper and not a legal paper. Be that as it may, I think I'll go ahead and read it anyway. It's apparently a pretty important tax paper and it might be fun to get a feel for the difference in tone between legal and economics papers.

And now I'll go and sort out my list of articles to this doesn't happen again.

The Tax Canon -- Surrey '70

Today, finally, I'll say a little bit about Stanley S. Surrey, Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures, 83 Harv. L. Rev. 705 (1970). Clocking in at only 35 pages of very straightforward text, I should have been done much sooner -- I suppose I can reasonably blame the beginning of the new semester for my delay.

It was my intention to find a pretty picture to accompany this post similar to that seen below in part 1 of my Bittker '67 post. Unfortunately, Stanley Surrey does not seem to be as prolific as the authors of the previous two articles; the best I was able to come up with is a list of a few of his books and articles, a rant deriding his policies on the taxation of overseas income, recognition that there is currently a Stanley S. Surrey Professor of Law at Harvard, and recognition in a Washington State Institute of Public Policy article that "The idea of identifying and measuring tax exemptions is often attributed to Stanley Surrey". The best source of Stanley Surrey biographical information came from a footnote on the first page of the article itself: "The paper itself says: Professor of Law, Harvard Law School. B.S., College of the City of New York, 1929; LL.B., Columbia, 1932. Professor Surrey was Assistant Secretary of the Treasury for Tax Policy from 1961 until 1969." Sounds impressive, and I'm surprised not to have easily found more information -- or at least a photo.

The paper can be pretty well summed up by its own summary (duh):"The tax code contains a great number of special provisions which provide credits, deductions, and other tax advantages intended to achieve non-tax goals considered desirable by Congress... Professor Surrey argues that the tax incentive is generally inferior to the direct subsidy as a means of achieving social goals: that incentives are usually less equitable, since they benefit persons in high tax brackets most, and more difficult to develop and administer, since they are handled by tax committees and administrative agencies which have little expertise in non-tax social policy. He suggests a strong presumption against their use."

Much like Bittker '67, this article spends most of its time tearing down previous statements of others. Surrey presents a number of reasons generally given in favor of using the tax code as a tool of social policy (most of which seem facially pretty weak anyway) and then explains why they are flawed at best and idiotic/corrupt at worst. In most cases, the use of the income tax to bring about policy goals is counterproductive because of the progressive nature of the tax code (deductions are worth more to the rich than the poor), distortionary effects on economic activity, and because lost revenues are often in excess of the value of the change that is sought. Surrey concedes that there may be a way to design a tax incentive such that its negative effects would not be greater than those of a direct transfer program, but in such a case we would be relying on tax experts to administer social policy. It would be much better to allow the tax folks to run the tax system and the social policy folks to administer social programs.

For once I didn't feel particulary dumb while reading this article, but I did realize that I have never fully considered the purpose of income phaseouts of some tax benefits. I guess I had assumed that income phaseouts for such programs were just a means of minimizing revenue loss when in fact they are also probably in place to avoid giving the rich a larger benefit than the poor and thus directing the bulk of the program's resources on those who don't need the program to begin with.

Ok, one more down and quite a few more to go. Next time let's read J. A. Mirrlees, An Exploration in the Theory of Optimum Income Taxation, 38 Rev. Econ. Stud. 175 (1971).

Saturday, January 10, 2009

My Fancy New (Actually Used) Tax Book

Since I have been having so much fun looking up tax professors as I slog my way through the tax canon, I figured I would look up the guy who wrote the casebook for the one tax course that I will be taking this semester. According to the book, Jeffrey L. Kwall is the Kathleen and Bernard Beazley Professor of Law at Loyola. His faculty profile indicates that he's written a number of articles (nine of which show up on SSRN) on tax as well as books and articles about property law. Of the four students who rated him on, all had nice things to say -- though inexplicably they all failed to rate him as "hot". And that's about all I have to say about that; at least until I actually crack the book.

Friday, January 9, 2009

New Zealand Tax Factoids

Thanks to Chris Heaslip at the New Zealand Tax Blog for the heads up about two NZ Herald articles that offer a few things that I did not know about New Zealand taxation. The first is an editorial by some-time contributor Peter Whitmore arguing for the implementation of a capital gains tax. That's right, apparently New Zealand is without capital gains tax -- how nice for Kiwi investors. My first thought -- and as Mr. Whitmore points out -- is that this is foregoing a great deal of progressiveness in the tax system as one might imagine that the wealthy are likely to realize a greater proportion of capital gains than those in lower income brackets. This is possibly compounded by the presence of a goods and services tax (GST -- akin to the EU VAT) which I would suspect is regressive in nature. This doesn't jibe with my understanding that New Zealand is supposed to have a fairly progressive tax system. Maybe I dreamt that...

The second article describes how New Zealand businesses are advocating for a number of tax changes to better deal with the current recession, one of which is reduce the provisional tax that companies pay before computing actual tax owed. "Companies currently pay provisional tax on their last year's profit - plus an assumed 5 per cent annual increase - which Shaw says should be scrapped or replaced, with an assumption of a 10 per cent decrease." I find the existing 5% increase rule interesting as it seems quite arbitrary and likely to be far off for many companies in most years. I suppose it is possible that 5% is pretty close to the average annual growth, but if I were one of the many business owners for whom this is not realistic I think I would advocate for another way of calculating provisional tax. Although maybe some other such method does exist and there is a choice involved -- after all I am guessing that this quick article does not contain all of the relevant information.

Thursday, January 8, 2009

The Tax Canon -- Bittker '67 (Part 2)

So I have now made it through my second mile-marker in the tax canon, and I must say that if all tax articles are as fun to read as Boris I. Bittker, A “Comprehensive Tax Base” as a Goal of Income Tax Reform, 80 Harv. L. Rev. 925 (1967), then I am genuinely perplexed as to the what-are-you-an-idiot reaction that I get when I tell people I am interested in tax law. Professor Bittker was clearly having fun with this article; he spends sixty pages skewering proponents of a comprehensive tax base (CTB) by pointing out errors in their reasoning and sarcastically mocking them for failing to consider many of the issues that he points out. I may have been miffed had I been one of the pro-CTB commentators who inspired this article, but as it is, it makes for an amusing read.

Stepping through many aspects of the tax code -- from the various exclusions from gross income, personal and business deductions (and the fuzzy frontier between the two), timing and accounting principles, and the basis for taxation of individual income itself -- professor Bittker describes the consequences that would necessarily follow implementation of CTB principles and often ends up with a ridiculous scenereo that would make one embarassed to have ever said, "hey, we should have a comprehensive tax base." In most cases the crux of the argument is that exclusions and deductions in their current form serve legitimate purposes, and while they may be imperfect, removing them wholesale would result in drastic, counterproductive, and unjust consequences. He basically accuses CTB advocates of being shortsighted and failing to think before they speak.

As for how this article made me feel stupid: I had to look up two non-tax terms that I had not before encountered. Arguendo and rara avis, meaning "for the sake of argument" and "a rare person/thing" respectively, have not previously shown up on my radar though they both seem like useful terms (which I am sure to notice everywhere now) that one would expect to show up fairly often. Ah well yet again.

Note: Clearly I am opting for short blurbs about these articles; I can't tell if this is because it is truly preferable or if I am just too lazy to go back through many pages of notes to talk about specifics that interested me. If article #3 turns out to produce a short and fluffy blog post, then I suppose that will just have to be the norm. By the way, article #3 will be Stanley S. Surrey, Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures, 83 Harv. L. Rev. 705 (1970). Now there's something to look forward to.

Tuesday, January 6, 2009

The Tax Canon -- Bittker '67 (Part 1)

I have now spent about an hour reading about Boris Bittker, the author of the next stop in my journey through the tax canon entitled A “Comprehensive Tax Base” as a Goal of Income Tax Reform, 80 Harv. L. Rev. 925 (1967). Professor Bittker died in 2005, and the outpouring of fond memories from members of the community of tax scholars is a testament to the massive impact that his work had on the field. (One can read a number of dedications and memories here and here.) Though tax was the primary focus of Bittker's career, he also made large contributions to constitutional law and the question of slavery reparations. Based on the glowing reviews that I have come across, I hope to one day read some of his non-tax work.

And now for what is becoming my standard admission of idiocy: it seems that if one has heard of only one tax professor, then one should have heard of Boris Bittker. I have heard of a few tax professors -- even one or two who didn't teach me tax -- but have not heard of Boris Bittker until now. It seems I am starting this study of tax law for the bottom of a well of ignorance. Ah well.

On last note about the '67 article: in his dedication to the memory of Professor Bittker, Professor John Simon says of "the quest for a 'comprehensive tax base'... Boris thought
it to be a mirage". So we can look forward to hearing all about how the idea of a comprehensive tax base is a load of nonsense.

Monday, January 5, 2009

My Fave Five

There are five countries with whose tax systems I would like to become familiar. There is no compelling reason that I can think of to choose any five countries over any others, so I have chosen the following haphazardly based on compulsion. If there is any reason to dump any of these in favor of a "better" country/tax code/job opportunity/au pair, then perhaps I will do so. As it stands, I hope to begin learning about taxation in the following countries in the coming months:

1. New Zealand
- I read somewhere that New Zealand has one of the most progressive tax regimes in the world.
- There is no cooler name than "All Blacks". 
- There is no greater rivalry for Australians than Kiwis, so I shall endeavor know the enemy.

2. Hong Kong
- British common law swirled up with communist China: there are sure to be some amazing changes here in the next half centure.
- Jackie Chan is silly.

3. Ireland
- Has become a global (or at least European) business center based in large part on its tax policy.
- I get along well with terriers and a dog owned by a guy named Sullivan.

4. France
- I hear tell that tax evasion is the French national pastime. 
- Les Comperes is a cinematic marvel.

5. Brazil
- Seemingly the least "popular" of the BRIC economies. (Who wants to be another rider on the China bandwagon?)
- Ronaldinho may one day need tax advice.
- It will be interesting to see what the tax codes of Brazil and New Zealand have in common with regard to agricultural exports.

So there's the list. Look forward to hearing me blather on about these five great nations in addition to the good old US of A.

The Tax Canon -- Blum & Kalven '52

The first stop in my trip through Vic Fleischer's Tax Canon is Walter J. Blum & Harry Kalven Jr., The Uneasy Case for Progressive Taxation, 19 U. Chi. L. Rev. 417 (1952) (I downloaded it from JSTOR as it seems neither Lexis nor Westlaw go back to 1952). Blum and Kalven were both University of Chicago law professors who were among the "towering figures who redefined and reconstituted the University of Chicago Law School after World War II" Blum (unrelated to the superstar jockey of the 1960s of the same name -- thank you wikipedia) seems to have been one of THE tax scholars of his day whereas Kalven was one of THE all-around legal scholars of his day, authoring works on torts and first amendment issues as well as tax policy. (Apparently, Kalven wrote half of the materials available on Amazon.)

So what do these guys have to say about The Uneasy Case for Progressive Taxation? A whole lot, and the case that they make is indeed uneasy at best. The article begins by defining a progressive tax as " whose rate increases as the income of the taxpayer increases; under it a taxpayer with ten times the total income of another would pay something more than ten times as much tax." and then stating that the purpose of their essay is to answer the question, "On what grounds is a progressive tax on income to be preferred to a proportionate tax on income?" Beginning with the notion that it just makes intuitive sense to most of us that those who are rich should pay more in taxes (as a proportion of their income) than should the poor, they move through a number of frameworks with which to analyze the validity of our collective hunch that a progressive tax is just and desirable.

Under the (quite believable) assumption of diminishing marginal utility, Blum and Kalven discuss at length the various ways in which we might seek to tax individuals according to the utility that they would be forced to give up and/or their ability and relative willingness to pay the taxes needed by the state. What is truly fascinating is that no matter what economic logic is applied to the case of progressive taxation, the best that the authors are able to show is that a progressive tax is not worse than a proportional tax. I was expecting a mathematical proof that a progressive tax should be strictly preferred to a proportional tax, but apparently there is not one available -- and certainly not for lack of trying as the authors frame the progressive tax in a number of clever ways that I certainly would have never thought of.

Something that struck me while reading this paper was a sudden realization of my own idiocy. I have always thought that of course the rich should be taxed more heavily as the loss of utility that stems from losing a single monetary unit is always going to be less for someone with more money than for someone with less. What I never considered was the next logical step that the authors point out: if we are going to tax based on marginal utility lost as defined by a utility function uniformly applied to every individual, then we will need to tax the richest individual at 100% for any amount in excess of the income (or wealth) of the second richest individual, and then tax them both at 100% for all amounts in excess of the third richest individual, and so on until we have raised the required revenue or everyone has the exact same wealth. Well duh. Clearly this is not something we would advocate outside of socialism, but it never crossed my mind as the logical consequence of my cursory thoughts about taxation. So if there's one thing I have learned it is that my brain isn't good for much beyond chasing sheep.

Further hand-wavey attempts are made to justify a progressive tax on the philosophical basis of equality. As one might expect, there are plenty of arguments in favor of greater equality within a society, but there are an even greater number of problems with any particular mechanism of bringing about greater equality; such is the case with a progressive tax as the vehicle for social harmony. As in the more economics-focused arguments, there is no knock-out reason that progressivity should be viewed as a good thing, but there is no reason to believe otherwise either.

In the end, as the authors point out, the reader is left only with his original general feeling that a progressive tax is probably a good thing. No proof has been given to back up this feeling, but at least there has been no solid contradictory evidence either. Overall it seems like a progressive tax is the direction that society ought to go in (or already has gone in, even long before the article was conceived) but because there is no way to measure the benefit of progressivity, there is no known way to design a progressive tax so as to maximize its effectiveness and minimize its costs.

Now look at that, I've read a whole tax paper. I've only scratched the surface of my notes -- I will have to debate whether or not to go into greater detail the next time around or just keep it light and fluffy. Next up: Boris I. Bittker, A “Comprehensive Tax Base” as a Goal of Income Tax Reform, 80 Harv. L. Rev. 925 (1967).

Saturday, January 3, 2009

The Tax Canon (Legal Edition)

My first order of business in familiarizing myself with the basics of tax theory and policy will be to read the materials listed in Vic Fleischer's 2003 blog posting entitled A Rookie's View of the Tax Canon (which I came across by way of a link on Paul Caron's TaxProf Blog). I will be reading the articles in both professor Fleischer's take on the modern tax canon as well as what he lists as the "established" tax canon. Hopefully this will give me some understanding of where things currently stand (at least as of 2003) and where things have been in the past. But maybe this is a bad idea -- why don't you let me know if it is.

It is my hope to read one article per week, but only time will tell how successful this will be. For shorter articles I may get away with a single post whereas for longer ones I may post periodically throughout the week as I work my way through.

I will be going through the tax canon chronologically because, hey, why not. This means that I will begin with Walter J. Blum & Harry Kalven Jr., The Uneasy Case for Progressive Taxation, 19 U. Chi. L. Rev. 417 (1952). It looks like it'll be a hoot.

Also, it is my intention to familiarize myself with taxation in the economics and finance literature. I have yet to find a "canon" or "Top Ten Tax" list or anything along those lines in either field and have instead been haphazardly noting articles and other sources that look important. If anyone knows of a more systematic approach, please do let me know.

Friday, January 2, 2009


To those among you who will feel compelled to question how a four-month-old miniature Australian Shepherd is qualified to author a blog about the study of taxation, I have a confession to make: I am not actually a tax student. I am in fact only a part-time JD student with a background in economics and an interest in taxation. This blog is not intended to provide any insight beyond that which can be provided by any reasonably intelligent herding dog. I hope that the blog will serve as a useful tool in guiding my own study, and perhaps also provide some utility to other tax students or to tax professors who might enjoy reveling in the ignorance of their pupils.

I hope that my efforts to gain some expertise in taxation will be helped along by ongoing documentation on this blog and that you and I will be somewhat entertained by whatever may come of this. If nothing else, this will be a fine use of time that would be otherwise wasted on the chewing of socks.