What I'm doing on my summer vacation

Gad, but I love the summer.  First of all there's the weather.  So long as the AC in my house doesn't break, I say bring on the heat.  I like a real summer, and we've had bits of it although at times it's been too cool and wet.  The only thing I really don't like about this time of year is mosquitoes.

The horrible winter and early spring are still exacting their price re. one my favorite parts of the summer - fresh produce at the Union Square Farmers' Market.  Generally you get strawberries by mid-May, then by the start of June it goes full Technicolor.  Blueberries, red and black raspberries, apricots, soon after that peaches and blackberries, etcetera.  This year is different.  Blueberries and red raspberries were both 2 + weeks late, no black raspberries yet, and apricots and peaches may simply not happen in the Northeast this year.  That's a shame as they're way better than the stuff that gets shipped here from far away.  So I am still waiting for full Technicolor, and may have to wait until June 2015 (assuming the next winter is less awful).

OK, back to the summer positives. Weeks that aren't jammed full with appointments are one nice feature - even leaving aside classes, my calendar is never so open during the rest of the year.  And as it happens my summer travel (in the school calendar sense) has been scheduled just for May and August, so open time yawns in front of me.  But that's a good thing, and I wish there were more.

On the work front, I've just finished a draft of an article entitled "Multiple Myopia, Multiple Selves, and the Under-Saving Problem."  The piece will end up being the headline piece in a spring 2015 "Commentary Issue" of the Connecticut Law Review, where there will also be invited commentators.  I will post a draft of the article in SSRN at some point well before that, but I want to sit on it at least briefly first.  After all, while there are second bites at the apple (aka revisions before publishing), I suspect that the first SSRN draft is the one that gets read by the greatest number of people.

I've now started work on a piece that I will be co-authoring with a friend that addresses Piketty's Capital in the Twenty-First Century.  More on that in due course, including on the underlying event at which we'll be presenting the paper.

In the fall, I'll be writing a short Tax Notes piece for a conference to which I've been invited concerning certain of the perennial tax reform issues that are always on the table.  More on that in due course, after that event has been publicly announced.

And after that, I guess I'll have to see, though there are several possible candidates.  But I don't think I'll be writing much in international tax in the immediate future (as I like doing new things and changing my focus as needed to feel fresh).

Alternative (or complementary) theory to CEO narcissism

In an earlier post, I noted recent corporate governance literature suggesting that narcissist CEOs, who are identified by criteria that include their pay relative to that of other company officials, tend to perform worse in various ways, such as by reason of their taking undue risks.

There's also a recent paper suggesting that high-paid CEOs tend to perform worse than other CEOs through an entirely different mechanism.  According to the abstract:

"CEO pay is negatively related to future stock returns for periods up to three years after sorting on pay.  For example, firms that pay their CEOs in the top ten percent of excess pay earn negative abnormal returns over the next three years of approximately -8%.  The effect is stronger for CEOs who receive higher incentive pay relative to their peers.  Our results appear to be driven by high-pay induced CEO overconfidence that leads to shareholder wealth losses from activities such as over-investment and value-destroying mergers and acquisitions."

Some are born narcissistic, others achieve narcissism, and yet others have narcissism thrust upon them.  And no doubt, to paraphrase Joseph Heller's line in Catch-22 about Major Major Major and mediocrity, for some CEOs it is all three.

I let him go right afterwards

Let's hope he's still out there, happily catching mosquitoes.

Henry Simons article again

The Tax Prof blog has just posted a link to the recently published "100 years of the income tax" symposium issue of the FSU Law Review, which includes my piece, "The Forgotten Henry Simons."

As I like this piece and enjoyed writing it, even though it's in a sense between chairs - not quite either historical or analytical - and as some people have been kind enough to tell me that they enjoyed reading it - a response that I had indeed fairly centrally aimed for when writing it - I will treat this as an occasion to re-post a link to the piece, here.

Academic literature on CEO narcissism

This link on the TaxProf blog to a newly posted article called "The Effect of CEO Narcissism on Corporate Tax Policies" alerted me to the fact that there apparently is a broader literature, previously unknown to me, associating narcissistic personality traits of CEOs with the companies' playing more aggressive tax and accounting games, building larger empires through acquisitions, taking risks that lead to volatile economic outcomes, etcetera.  See, for example, this article and this one.

As it's accepted in this literature that the best measure of CEO narcissism - getting CEOs to fill out psychological surveys, presumably in a spirit of honest self-disclosure - is not realistically available, the papers use what (drawing on preexisting psychology literature) they call "unobtrusive indicators" of this personality profile.  These may include, for example, "the prominence of the CEO’s photograph in the company’s annual report; the CEO’s prominence in the company’s press releases; the length of the CEO’s Who’s Who entry; the CEO’s use of first person singular pronouns in interviews; the CEO’s cash compensation divided by that of the second-highest paid executive in the firm; and the CEO’s non-cash compensation divided by that of the second- highest paid executive in the firm." [From Chatterjee and Hambrick, which is the second of the three articles linked above.]

Certainly an interesting literature that I plan to look at some more when I have the chance.

Capital levies talk published in International Tax Notes

As noted in earlier posts, on May 15 I gave a "Distinguished Lecture" at Luxembourg University entitled "Capital Levies: A Solution for the Sovereign Debt Problem?"  The talk addresses recent discussion in the EU of having countries enact putatively one-time wealth taxes in order to reduce public debt levels.

The talk has been published in today's International Tax Notes (June 16, 2014; 74 Tax Notes International 1027-1031), and its full text is available here.

Definitely written as a talk not an article - e.g., no footnotes, and the main literary references are to Aesop's Who Will Bell the Cat? and Piketty's Capital in the Twenty-First Century.  In brief, I'm skeptical about the EU capital levy proposals despite sympathy with their underlying goals.

2015 NYU Tax Policy Colloquium, this time with dates

Unless I have messed up in converting people's expressed preferences (or tolerances) into a consistent set of dates, next spring's NYU Tax Policy Colloquium schedule is currently set to go as follows:

1.  January 20 – Brigitte Madrian, Harvard Kennedy School.

2.  January 27 – David Kamin, NYU Law School.

3.  February 3 – Kimberly Blanchard, Weil, Gotshal & Manges.

4.  February 10 – Linda Sugin, Fordham Law School.

5.  February 24 – Eric Toder, Urban Institute.

6.  March 3 – Ruth Mason, University of Virginia Law School.

7.  March 10 – George Yin, University of Virginia Law School

8.  March 24 – Leigh Osofsky, University of Miami School of Law.

9.  March 31 – Shu-Yi Oei, Tulane Law School

10.  April 7 – Lillian Mills, University of Texas Business School.

11.  April 14 – Lawrence Zelenak, Duke University School of Law.

12.  April 21 – David Albouy, University of Illinois Economics Department.

13.  April 28 – David Schizer, Columbia Law School.

14.  May 5 – Gregg Polsky, University of North Carolina School Law.

Treasury regulatory authority and the carried interest rule for investment fund managers

Victor Fleischer has a short piece in today's NY Times Dealbook suggesting that the Treasury Department, at the behest of the Obama Administration, could simply flex its regulatory muscles and eliminate the current practice whereby investment fund managers commonly treat compensation that takes the form of "carried interest"  as yielding long-term capital gain that is taxed at only a 20 percent rate, rather than ordinary income that typically would face a 39.6 percent rate.

This change has of course received legislative consideration in recent years but gotten nowhere, in part due to opposition from Republicans - apart from departing Ways and Means Chairman Dave Camp, who would have eliminated the carried interest tax break as part of his ambitious tax reform plan.  (It's only fair to note, however, that not all Congressional Democrats are wildly enthusiastic about the change either.)

Vic argues that, as a matter of regulatory authority, there is "plenty of room" for the Treasury to issue regulations making this change.  He closes by noting that, while doing so might be contrary to common tax regulatory practice in recent decades, which has tended to defer to Congress when hot-button changes are on the table, perhaps we are in a new era:

"Out of deference to Congress, the Treasury Department has traditionally avoided making policy in areas where the legislative branch may act.  'But when the legislative process is as broken as it has become today,' said Daniel N. Shaviro, a law professor at New York University, 'it's simply inevitable that Administrations will care less about such comity, and be more willing to advance their policy views in controversial areas through the unilateral exercise of regulatory authority.'"

Better price for e-version of Fixing U.S. International Taxation

While Amazon is charging $39.19 for the Kindle version of my international tax book - not much of a price difference from the hardcover version - Barnes & Noble is charging significantly less for the Nook version.  $27.99, to be precise.

Yes, I recognize that Nook devices are not quite as numerous out there as Kindle readers.  But the Nook app is generally available, at least for iPads, iPhones, and the like.

UPDATE: I sent Amazon an email noting that the Nook price is lower - and, lo and behold, Amazon has now lowered the Kindle price for Fixing U.S. International Taxation to the same $27.99.   See the link here.

That's definitely a hurrah, from my standpoint.  Though this is up to you not me, I am hoping that it prompts some sales.

Next year's NYU Tax Policy Colloquium schedule

Next year, the NYU Tax Policy Colloquium will again take place on Tuesdays, from January 20 through May 5 but not on February 17 or March 17.  My co-convenor will be Alan Viard of the American Enterprise Institute, whom I am happy to welcome as a first-time collaborator on this gig.

Our presenters, listed for convenience in alphabetical order, will be as follows:

(1)   David Albouy, University of Illinois Economics Department

(2)   Kimberly Blanchard, Weil, Gotshal & Manges

(3)   David Kamin, NYU Law School

(4)   Brigitte Madrian, Harvard Kennedy School

(5)   Ruth Mason, University of Virginia Law School

(6)   Lillian Mills, University of Texas Business School

(7)   Shu-Yi Oei, Tulane Law School

(8)   Leigh Osofsky, University of Miami School of Law

(9)   Gregg Polsky, University of North Carolina School of Law

(10)  David Schizer, Columbia Law School

(11)   Linda Sugin, Fordham Law School

(12)  Eric Toder, Urban Institute

(13)  George Yin, University of Virginia Law School

(14)  Lawrence Zelenak, Duke University School of Law

As a whole, our speaker list for next year, as compared to this past year, is weighted a little bit more on the "law" as opposed to the "economics" side of the interdisciplinary spectrum.  This is partly a byproduct of the vagaries of rotating through various people whom I have wanted to invite, but it is also partly deliberate, in terms of what I think is the best fit for our students and audience.

I should have the actual schedule, with speakers assigned to particular dates, available shortly.

Rising tax competition

In Fixing U.S. International Taxation, I emphasize the question of what countries should do about their international tax rules if acting unilaterally - that is, in the absence of strategic interactions with other countries ranging from cooperation to retaliation (as under a tit-for-tat strategy).  This reflects my considering the unilateral scenario as very important, and as not having previously been either given enough attention or adequately analyzed.  But I hold no definite brief against either the feasibility or the desirability of cooperation.

Meanwhile the OECD's BEPS project has been going on, reflecting efforts at the achievement of broad multilateral cooperation that, as I am careful to say in the book, both (a) can change the relevant policy calculus and (b) is great if it can be pulled off.  But I do admittedly express a bit of mild skepticism on the latter score.

Today's Reuters has an article by Tom Bergin that throws a bit of cold water on cooperative hopes, at least in one particular setting.  Bergin notes that the UK's recent shift towards engaging in tax competition, and perhaps even towards competing with Ireland for popularity with US companies as an appealing tax haven, has not gone unnoticed by those companies.

As a small country, the UK certainly has good reason to consider approaching international tax policy in this way.  And the US, if inclined to complain, does not have entirely clean hands itself.  (Thus, consider how our check-the-box rules have helped US companies reduce their tax liabilities in EU countries, leading to a bit of finger-pointing by people in the EU but accompanying US reluctance to do anything about it.)  But the UK's taking this approach is certainly not great for the US, in particular if we want to rein in tax planning by our multinationals on either a unilateral or a multilateral basis, given that the UK is one of the best substitutes out there for US legal activity (common language, similar legal systems, geographically closer to us than most countries outside of the Americas, etc.).

Semantics and substance

Al Warren has published a piece in SSRN that evidently was inspired by my work on how international tax rules can affect resident multinationals’ incentive to minimize their foreign tax liabilities.  As readers acquainted with the field may know, I have emphasized the importance of considering the marginal reimbursement rates (MRRs) that companies face in particular circumstances.  For example, if paying $1 of foreign tax would reduce the present value of a given U.S. company’s expected U.S. tax liability by 60 cents, that company faces a 60 percent MRR.

Warren has added a useful semantic point to my analysis.  It has occurred to him that with, say, a 35 percent U.S. corporate tax rate, permitting taxpayers to claim as a foreign tax credit 35 percent of the foreign taxes they pay would create the same MRR as a normal deduction, while a roughly 285% deduction (i.e., deducting just over $2.85 if one paid a dollar in foreign tax) would create the same MRR as a normal foreign tax credit.

Oddly, Warren’s piece could be read as implying that I focus on the labels of deduction versus credit, rather than on rules’ actual effects.  But that of course cannot be so, as the entire purpose of my MRR concept is to look past labels to measure the effective U.S. tax benefit that resident companies obtain from paying foreign taxes.  Consider, for example, the following passage from my book, Fixing U.S. International Taxation:

“[I]t would be a considerable surprise if the unilaterally optimal solution involved having, at any given margin, a company’s U.S. taxes increase by a dollar when it reduced its foreign taxes by a full dollar (i.e., the creditability result, whether or not it formally reflects offering foreign tax credits). Instead, the optimal solution might involve companies reaping a worse-than-deductibility, albeit better-than-creditability, marginal result from reporting profits in tax havens.”

Despite any possible confusion, I am glad that Warren was able to learn and benefit from my work, and that he has offered an interesting extension.

Fixing U.S. International Taxation available on Kindle

My international tax book is now available on the Amazon website, on Kindle.  Link is here.  I do wish the price were a bit lower.  But then again, I'd probably have been willing to sell it for a dollar, and then waive the dollar upon request; which perhaps helps to show why authors don't get to set prices when using commercial publishers that have expenses.

I gather that the book should also be showing up soon on other platforms for electronic download.