Yesterday I presented my tax and accounting paper at the NTA’s annual spring meeting in
Lillian began her comments by praising my paper (to quote her slides) as “beautifully written;” she subsequently added further kind words to this effect that I will (barely) resist quoting.
Uh-oh, I thought. I felt like the proverbial person who learns that his/her blind date thinks he/she is “really nice” and has a “great personality.” But her comments were fine, both objectively and from my own particular selfish perspective.
Like all other commentators and readers of the article, Lillian focused more on the 50 percent taxable income adjustment proposal that I offer than on the general analysis. This was inevitable once I made the proposal, albeit contrary to my preferences. I would want the proposal to get, say, 30 percent of the total attention, with the general analytics getting the rest, but instead the only choice I had when writing the paper was for the proposal to get 0 percent of the attention (if I omitted it) or else 90 percent. So it goes.
Not surprisingly, Lillian was a bit of a skeptic about the proposal. (I put it this way because most people with accounting backgrounds react this way, just like tax scholars tend to hate proposals that would monkey with the income tax to serve “outside” objectives.)
In substance, her main concern was that giving taxable income effects to financial accounting income would reduce the latter’s value relevance in practice. But most of the research she cited in support of this conclusion appeared to deal with making the financial accounting treatment follow the tax definition of income, rather than simply changing the incentive structure for reporting financial accounting income while the measure that was applied (one hopes) remained the same.
Other good points that she made I will address by revising the article rather than going through them here.
Also at the same session was Jim Hines, presenting his paper (first given at NYU last fall) arguing for exemption of US multinationals; outbound business investment on grounds of capital ownership neutrality (CON) and national ownership neutrality (NON). I am a big fan of Jim and his work. But much of the paper seemed to involve arguing by analogy, which one normally would expect more from lawyers than economists. And I remain mystified by Jim’s apparent position that, when choosing between taxes that distort on various margins, one should aim for zero distortion at one of the margins (pertaining to cross-border ownership). Usually one assumes that it is better to have small distortions on all of the margins than to set any of them to zero and thereby require (in a balanced budget setting without lump sum taxes) that the other distortions be larger. Why is it so clear that exemption for foreign source income is preferable to modestly taxing outbound investment in order to finance a slightly lower domestic rate?
A final note: I missed the earlier NTA panel at which economists with various of the presidential campaigns (or affiliated with the Democrats or Republicans generally) addressed tax policy in relation to the 2008 election. Among them was Doug Holtz-Eakin, whom I have criticized in a couple of earlier posts for his role as a front man and (apparently) unapologetic spokesman for the loonily irresponsible tax cut proposals that have been emerging from the McCain campaign. But I thought of Doug, during the later panels, whenever presenters from the Treasury Department or the Joint Committee on Taxation repeated the usual boilerplate by stating that the views they were expressing were purely personal, rather than attributable to their employers.
Holtz-Eakin, I was thinking – and perhaps all of the economists working for the campaigns – would be well-advised, for the next six months, to say the opposite whenever he makes an economic policy statement: “The views I am expressing are those of the __ campaign only. They should not be attributed to me personally.”