Shadow, 1991(?)-2009

Today, with a bit of heart-wrenching assistance on the home front, Shadow met his end. At age 18, his body was breaking down on several fronts, with multiple severe conditions that required a very high level of active daily care - seemingly inadequate, however, so far as we could tell, to give him a decent quality of life. At the end he had diabetes, a thyroid problem, bladder problems, kidney disease, was unsteady, and may have had bad arthritis. He would still eat, but slept and rested the remainder of the time, meowing plaintively in an uncharacteristic way and sometimes seemingly trying to keep himself awake, which I've never seen from a cat before.

He was one of the nicest and kindest creatures of any species that I have ever known. I'm not sure our species entirely deserves his extremely positive view of us - although I suppose his experiences with us were pretty uniformly good.

I first met him in a men's clothing store that was having a closing sale. We made friends right away, which I must say wasn't hard to do, and he actually was following me around the store on a short acquaintance. He made us all very happy for eight years, and I just wish we could have known him longer.

Extremely mellow and easygoing at all times, except that he sometimes felt strongly about our food. Here you can see him in happier times, ingeniously using his front paw to extract milk that had been left for a minute in a glass on the table.

Finally, a reason to live in Washington!

... So as NOT to subscribe to the Washington Post, now that it has fired its only good print or on-line political columnist, Dan Froomkin, for political incorrectness as defined from a neoconservative perspective.

I already don't and wouldn't subscribe to the Post, but living in Washington would make it more pointed.

All things considered, probably not a good enough reason to live in Washington.

Recent diversions

Mark Maxwell's novel Nixoncarver; Lily Allen (both albums but especially It's Not Me, It's You). The first is mainly for hardcore Nixon (and to a lesser extent Carver) fans; the latter should be (and is) for lots of people.

Not sure I like my new green background on the top, but it's for Iranian solidarity.

Battle of the revenue estimates

As noted in several news articles with links at the TaxProf blog, the Joint Committee on Taxation estimates that President Obama's international tax proposals will bring in about $50 billion less than the Administration had estimated, over the period from 2011 (when the proposals would take effect) through 2019.

I thought it might be helpful to show the line by line comparisons of the estimates for the main proposals applying to U.S. multinationals:

1) Defer deductions for (other than research & experimentation) that current law apportions or allocates to foreign source income that is deferred: $60.1 billion according to the Administration, versus $51.5 billion according to the JCT. I guess we could say this one is not entirely un-close.

2) Deny foreign tax credit where the associated income isn't recognized and require pooling approach for determining which foreign tax credits are made available by repatriation: $43 billion according to the Administration, versus $55.7 billion (the sum of two amounts estimated separately) according to the JCT. The JCT is higher here, and higher for changes 1 & 2 combined. I wonder if a difference in "stacking" convention is operating here (e.g., when either of two proposals, standing alone, would raise a given dollar, to which of them do you credit it?).

3) Prevent use of "disregarded entities" in overseas tax planning: $86.5 billion according to the Administration, versus $31 billion according to the JCT.

This last one seems to be the source of the big difference. Everything else, including proposals for individuals, adds up roughly the same as between the two sets of estimates over all. So evidently the big disagreement concerns item # 3 above, which would eliminate a device that multinationals use to shift income abroad from high-tax to low-tax jurisdictions without thereby (as would happen if they did it more straightforwardly) incurring a deemed dividend to the U.S. parent under subpart F in the U.S. international rules.

I must say, even without analyzing any data, I thought the Administration's estimate of the disregarded entities change seemed a bit high. I would assume that, as between the two estimates, the one by the JCT (a) treats taxpayers as much more able to find alternative routes to the same tax planning ends, and/or (b) assumes that taxpayers give up on their overseas tax planning maneuvers, since subpart F would now eliminate the benefit, and therefore they end up paying higher taxes to the source jurisdictions, rather than to the U.S. Treasury.

The Obama international tax proposals were probably DOA (in the short run at least) anyway, given the combination of (a) bipartisan opposition, (b) the existence of higher-priority legislative issues, and (c) the lack of top staff on hand in Treasury (especially given the sad recent news that Beth Garrett has withdrawn her candidacy for the Assistant Secretary of the Treasury for Tax Policy position).

A couple of quick points about the disregarded entities proposal:

(a) It merely corrects a mistake that the Treasury made in 1997 when it changed the rules for classifying ambiguous legal entities as C corporations or not for purposes of the U.S. federal income tax. The Treasury surely has the power to act unilaterally on this by fixing the regulations, only (a) under federal budget rules, the Administration then wouldn't get credit for the extra revenue (though obviously the budget deficit would reflect whatever revenue came in, and (b) Congressional leaders, hearing angry complaints from U.S. multinationals, might regard it as a breach of comity. But this doesn't mean the Administration's proposal is good - the past mistake is water under the bridge, and the question of interest today is whether the proposed legislative change would on balance be good or bad policy.

(b)The proposal clearly makes sense IF one favors the use of subpart F to prevent companies from shifting business income abroad from the true source jurisdictions to tax havens. Note that the source jurisdictions could do this themselves (and get the revenue) if they wanted, such as through tougher rules for transfer pricing and the use of debt to strip away local earnings. Perhaps they don't want to because they see it as a targeted tax break for mobile capital investment. I myself am on the taxpayers' rather than the Obama Administration's side in this debate, on the view that the proposal would result in revenue-raising for other countries not the U.S., or else simply lead to reallocation of who does foreign business investment from U.S.-incorporated to non-U.S. incorporated companies.

Clearly it's in the U.S. national interest, all else equal, for companies owned by U.S. individuals to pay lower taxes abroad (since the money goes to someone else, not to us). To take an opposite and pro-Administration view of this issue, one might have to either (a) believe that we still come out ahead from reciprocal anti-tax avoidance efforts, which strikes me as unlikely, or (b) view the lower tax rates abroad as likely to reduce investment and revenues in the U.S., which the empirical evidence (with good logical underpinnings) tends to rebut.

Remiss?

Not many blog entries lately, because in summer my engagements reduce sufficiently that I'm not distracted and running from one thing to another. Instead, I can focus at work on my writing, and my energy goes into that. I'm nearly done with chapter 2 (not counting a short intro chapter) of a book on U.S. international taxation that I'm fairly enthused about, in that I feel it will contain new insights and advance the debate. Not that anyone will accept them or anything, but still. A few will possibly see the merits.

My most recent book, Decoding the U.S. Corporate Tax, didn't center on bringing new insight to the practical issues in the field because they haven't engaged me as deeply. Instead, its prime strength is in explaining how and why the rich but under-appreciated economic literature in the area is important, and why none of it really fits (which is the lawyers' fault, not the economists). I do feel this makes the book valuable, as well as often fun to read. But in international tax the practical policy questions engage me more and I feel the theoretical literature has to a greater extent fallen short.

Anyhow, some other random notes. Tonight I attended (most of) an Elvis Costello concert on his country & bluegrass tour. Enjoyable, professional, nice band and sound, seems at this stage an amiable raconteur. I'd never seen him before, but I'll swear by his first 4 albums (plus Spike to a lesser extent). These days, a bit literalist and lacking in poetry as a writer. And almost the only songs I recognized were Blame It On Cain and the Velvet Underground's Femme Fatale. Still, nice to have seen him.

On a completely different subject, I'd meant to post a link to Greg Mankiw's recent co-authored paper that offers a nice little summary of the optimal income tax literature. So here it is. Next time I'm teaching a basic tax policy class I may well assign it, and people who want an intro to the field may find it useful. I had been waiting to have the chance to post a corrected link to an old paper of mine that discusses some related ideas, and that more or less started a micro-genre in the legal tax policy literature on endowment taxation. So here that is. I found to my surprise that this link has a problem - the paper as posted is lacking two charts that may help in understanding the discussion, as well as the bibliography. I'm trying to post a corrected version but it's not up yet. Better the posted one than nothing, I suppose.

Fool me once, shame on you ...

... but needless to say, fool me twice and it's shame on me. By these lights, our cat Buddy (a.k.a. the Wascally Wabbit) succeeded in shaming us the other day.

Perhaps 3 years ago, we had a period when we would occasionally let him go out into our small, fence-surrounded backyard. For a while, he just patrolled, sniffed things, and so forth, but one day, while someone's back was turned, he hopped over the fence and we didn't see him for five whole days. Since he didn't have a collar, this was a pretty big problem. We papered the neighborhood with photos and so forth. Finally one day I spotted him on someone else's second-floor terrace. He meowed at me though it was several houses down, and we were able to retrieve him.

He looked pretty good - well-fed and well-groomed, rather than in the least bit bedraggled. We were curious how he had lived those 5 days - and, for that matter, how he had gotten onto a terrace that was seemingly inaccessible, even to a cat, from the ground (nor had the neighbors seen him in their house). But he wasn't talking. I am confident that he will take those secrets to the grave (though not for many years yet - he is only about 4 and we also have a 19-year old cat).

This led to a policy of not letting him out, ever. But the years pass and one's policies loosen up. He's been so desperately eager to get outside that, over the last few days, we let him out a few times, albeit while very closely watched. Since cats are usually deliberate in their movements in territories they don't know well, we figured we would be able to grab him if he got ideas, as no doubt he eventually would. We also blocked the easiest escape routes.

Then two days ago, he was calmly sitting in the middle of the yard looking around, when suddenly he saw another cat on one of the fences between the different yards. In a quarter of a second if not less (it seemed), he (a) shot across the yard, (b) jumped to the top of a fence that's about 6 feet high (scrabbling along the side on the way up, as cats do when the jump is too high to do all at once), and (c) raced along the top of the connected fences (a functional catwalk) at least thirty feet down, and well out of our yard, in pursuit of the other cat.

You had to see it to believe it, though it was so fast that I barely did. Truly the peewee version of the Hound of the Baskervilles racing down the moor in pursuit of fresh game.

By five seconds later, we couldn't tell where he was - there were perhaps 20 possible backyards, many of them in small apartment buildings. And we didn't entirely (or perhaps at all) trust him to return. Our relations are very cordial but less intense than with our other two cats (he is very sweet but, if he were a person, we'd say he's in his own head). The saying "You can never really own a cat," is true of him, though not of all cats. Also, we don't feed him enough, by his lights, because if we did (as we used to) he'd be extremely overweight.

But the story has a happy ending. A neighbor on the other side, not previously known to us, heard us calling his name and asked if everything was okay. A fellow cat-owner, she volunteered to call her cat-owning neighbors to see if Buddy had shown up in any of their yards. He had, and I went to fetch him. When I got to the yard in question, Buddy had left, apparently startled by the stranger who had gone out to check on him.

But good old bribery did the trick. I had shown up with "greenies," a small cat treat that, in our house, he likes to chase and bat around before gobbling down. I called out to him and he looked at me, but that alone didn't seem to count for much. But when I started rattling the greenie container and actually took one out, he calmly walked over and let me grab him.

Fool me three times and ... well, we don't plan ever to let him out again, but we're also ordering a collar with contact information.