Alex Rodriguez

When I go to the health club, which I do at least 5 times a week when my schedule permits, I like to listen to music while watching sports without sound on my TV screen. But I switch the channel if they're showing a Yankees win - although I am usually willing to see highlights of a Mets loss.

Today, I was vexed to find that all sports networks had basically gone to full-time, wall-to-wall A-Rod coverage in honor of his 3,000th hit, making all of them unwatchable for me because it was associated with a Yankees win. The Mets network was part of this as well - they appear to cover the Yankees almost coequally with the Mets (and they used to run lots of Jeter ads), whereas I have the impression that the Yankees network not only covers nothing but the Yankees, but verges on covering only Yankees wins - if they lost yesterday or it's the offseason, they show past Yankees wins.

Why am I really not particularly anti-A-Rod?  Well, it's true that he's an admitted cheater, but consider lots of other baseball and football superstars. He also appears not to be an enormously nice person, but again think about other superstars in all the major sports.  Being a jerk may both help one to become a great player, and then is encouraged by the treatment one gets from everyone.

Perhaps I like the fact that A-Rod is so NOT a "true Yankee."  First, in 2000, he wanted to come to the Mets.  But they were too stupid to want a 25 year old superstar, who had a realistic chance at that point to be the greatest player in baseball history, and who perfectly fit their needs. They preferred, not only to refuse even to negotiate with him, but also to insult him gratuitously.

Then he wanted to play for the Red Sox, but the players union wouldn't let him.  The deal would have required a modest salary giveback, which he was willing to accept, but the union, fearing the "precedent," preferred to make sure that only the Yankees would be interested.

Finally he went to the Yankees, where Jeter selfishly made him to switch to third base even though, at that time, A-Rod was a vastly superior defensive shortstop.  But Jeter didn't care about the team's welfare, as his own ego was evidently more important.  He of course has always gotten a free pass for this.  Glad though I was to see the Yankees weakening their defense (relative to what they could have done) for no good reason, I felt a bit bad for A-Rod about this, as he might otherwise have ranked either just with Honus Wagner, or else all alone, as clearly the greatest shortstop of all time.

Anyway, here's hoping that the Yankees lose the next game at which he reaches a milestone, if I am going to the health club the next day.

On the road again

I'm flying to the UK tomorrow for the 9th annual symposium of the Oxford University Centre for Business Taxation.  Next Tuesday, I'll be presenting this paper on international business taxation.  I'll post my slides when I get back to NYC the following week, or sooner if I can link to them via the symposium's website.

Should the cats get teaching credits?

The NYU Law homepage has an article about first-year reading groups, which we did at the law school for the first time last year. Two of my stealth teaching assistants are mentioned at the front of the article. Seymour would like everyone to know that only Buddy is interested in people's food. Gary and Sylvester were too shy of strangers to participate.

As the article mentions, last year my first-year reading group slogged through Piketty. This coming year, I am considering opting for a rather different approach, in which we would watch episodes of The Paper Chase (the TV series, not the movie).

I had never seen the TV show, although the movie was standard fare on college and law school campuses back in the day. But after watching the pilot episode, I can report that, while (mercifully) it's extremely dated, this potentially adds interest, and it could certainly feed discussion concerning teacher-student interactions, law as an intellectual topic, law as a profession, class, and gender. (Race, too?  I believe the pilot was all-white.)

New frontiers in fiscal language

I've long pointed out - to say I've long "argued" would suggest that there's some possible doubt, when in fact, as a matter of pure logic, there isn't - that the terms "taxes" and "spending" are not actually meaningful, at least in the ways that people often think.

The classic example was David Bradford's pretend "Weapons Supplier Tax Credit."  He explained it something like this.  Suppose Congress wants to raise income tax revenues by $10 billion, but doesn't want to "raise taxes."  This could reflect the Grover Norquist tax pledge, or anything else.

So they do the following 3-step: raise income tax revenues by $10 billion, zero out a $10 billion weapons contract with a military supplier, and enact a $10 billion "weapons supplier tax credit" (WSTC) that said company can use in return for its supplying the very same weapons, effectively for the very same price.

The combination of zeroing out the weapons contract and enacting the WSTC makes a difference of exactly zero.  The US government gets the same weapons at the same net budgetary cost, the company is in exactly the same position as it would have been otherwise, etc.  No one gains or loses a penny from doing it the new way, rather than the old way (leaving aside administrative, etc. issues). But, as a matter of formal budgetary accounting, it converts a $10 billion "tax increase" into a $10 billion "spending cut."

Louisiana Governor Bobby Jindal, with the permission of Pope Norquist, who apparently issued a ruling under his authority to interpret the no-new-taxes pledge, has done exactly this, except for a minor twist.  The WSTC equivalent is being used to convert "taxes" into "fees," rather than into "spending cuts."

Here's what apparently happened, according to the New York Times and a Louisiana paper, the News Star: Louisiana is raising taxes, in the conventional sense of the term, by $700 million, most of it from temporary (3-year) repeal of various business tax credits and exemptions, and the rest of it from permanently raising the cigarette tax from 36 cents to 86 cents a pack.

Of this amount (if one chooses to think about it this way, although money is fungible), about $350 million is going to LSU and other public educational institutions - relative to what would have happened otherwise, that is.  The funding avoids cuts, rather than increasing overall education financing.

Apparently, using "tax increases" to pay for education spending is Norquist-verboten under the no new taxes pledge.  As a result, to get Norquist's approval, Jindal needed a WSTC-style device to "cut taxes," notionally speaking, by just $350 million, rather than the full $700 million.  (There may be something missing here from the press accounts.)

Anyway, here's what these bright fellas came up with: a $350 million phantom tuition increase that would be offset, penny for penny, by WSTC-style tax credits.  Per the NYT, the legislation includes "an 'assessment' of around $1,600, called SAVE - 'Student Assessment for a Valuable Education' - on the state's public college students.  Nobody would actually pay this assessment because a student would also be granted a tax credit [presumably refundable when needed?] against that assessment.  The student's tax credit, in turn, would be transferred to the state Board of Regents, the body that runs higher education.  The board would then use the credit to draw money from the Department of Revenue.

"Under the plan [i.e., just the SAVE part of it?], no one's current tax burden would go up or down a cent.  [This can't be quite right if describing the bill as a whole - there are cigarette and corporate taxpayers versus the phantom tax credit for students.  I suspect the actual point is that no student's combined tax plus tuition bill changes by a cent.]  But the Jindal administration said the arrangement would constitute an offset to [$350 billion of?] the new tax revenue that was raised this term, and would thus keep his administration on the right side of its tax pledge.

"Lawmakers have called the provision everything from 'money laundering' to 'stupid,' and that was just the Republicans. A Democratic state senator proposed an amendment to change the name of the credit from SAVE to DUMB, for 'Don't Understand Meaning of Bill.'  (He later withdrew the amendment.)"

If this invariably "works" to turn net tax increases into fee increases, then literally all bets could be off. Perhaps Congress could pass a $1 trillion tax increase on billionaires, and offset it with a $1 trillion [something-or-other: national defense? clean air? use of the roads?) fee for billionaires that was offset by a $1 trillion Federal Fee Tax Credit.  (OK, there might be an issue with just charging the billionaires for whatever.)

But, as Oliver Wendell Holmes  once said: "Not ... while this court sits."  The court here is Grover Norquist, and just because Jindal gets a special ruling doesn't mean anyone else will unless Grover likes the applicant and/or the facts.

Joe Stiglitz, "New Theoretical Perspectives on the Distribution of Income and Wealth"

Tax Prof Blog offers a link to new work by Joe Stiglitz that is potentially significant, and that tax law profs who are interested in high-end inequality should certainly give a look.  For now I've just seen the abstracts, but I will be reading the four (I suspect short) papers when I get the chance.

It overlaps with things that I've heard Stiglitz say, e.g., at NTA last year, relating to his rejection of Piketty's theoretical explanation for rising inequality.  Piketty, of course, attributes it to r > g, whereas I am more inclined (as a U.S. observer) to think in terms of rising wage inequality, and also to say that you have to decompose r, as well as to distinguish between life cycle saving and inheritance (see here).  Stiglitz says some related things, and also has been pushing the importance of land values vs. productive capital, and of rents, both of which he thinks Piketty gives too little weight.

A few of Stiglitz's main points / claims / arguments here:

1) One needs to distinguish "wealth" from "capital."  The former I presume he defines as things with value to the holders, the latter as limited to inputs to economic production.  Stiglitz sees the run-up in land values, especially housing stock, as wealth but not capital, and hence in recent practice as increasing inequality without creating capital gluts that would be expected, from normal supply and demand, to drive down r.

2) Rents, not ordinary r, are at the heart of rising inequality in recent decades.  Land rents, intellectual property, etc., are the key elements here.

3) In his model, taxing capital, i.e., ordinary r, may get shifted entirely back to labor, and hence do nothing to address inequality (leaving aside the question of how the tax revenues are spent, which could make a difference at the low end of the wealth and income distribution).

4) Focusing on r versus g also misses the point that r is endogenous - it's part of what needs to be explained, not a cause of what happens.

5) A Henry George land tax would have the desired distributional effects - not getting passed on because the supply is close enough to fixed, and under the empirics can make a large practical difference in high-end inequality, without adversely affecting incentives.

6) Given life cycle saving, we shouldn't distinguish between labor and capital (David Bradford would definitely agree with this part), but rather between capitalists and workers.  He uses the term "capitalist" to mean people who make bequests, whereas workers just do life cycle saving.  So it's actually bequesters vs. life cycle savers that we need to think about.  (Though without the benefit of his model, Joe Bankman and I said something similar here.)

7) Stiglitz also draws a big distinction between what he calls debt and equity.  In a simple version of his model, workers just hold debt, capitalists hold equity.  (When I see the actual paper, I'll be looking to see if buying a diversified stock portfolio through your mutual fund is really what he means by "equity," or if it's special opportunities, start-ups, etc., as opposed to what they sell on the market once the extraordinary profit has been realized and only normal returns remain.)  Anyway, this has the result in his model that lowering interest rates enriches the capitalists at the expense of the workers, raising them goes the other way.  Thus, if we think of r as the Federal bond rate and all the other bank, etc., rates that travel with it, then raising r, not lowering it, reduces inequality.

Anyway, however all this plays out in intellectual debate among economists, it's important and I would urge tax law profs to take notice, and in particular to start thinking about how they might assess it and what its implications might be.  I may take that tack myself, but there's plenty of room in the water, and anyway my dance card is a bit full at present.

A step back (or else forward) in the orderly retreat

The aging process, I am now old enough to be qualified to say, is an exercise in orderly retreat, dragged on for as long as possible (at least until things get really bad) and fighting every inch of the way.  You can't help its happening, but you want to retreat as slowly as possible, and never to face a rout until it's forced on you.  Diet and exercise are of course key components in keeping the retreat as slow and as orderly as possible.

Every now and then, however, one must execute swift tactical withdrawals from exposed positions that it has become too costly to defend.  I seem to have reached one of those moments recently.

I played sports growing up, both because I enjoyed it and because, in my neighborhood's social structure or at least for the boys' subgroup, sports activities were coin of the realm so far as one's standing was concerned, especially if one was guilty of the faux pas of doing too well in school.  When I reached law school age, I transitioned from team sports, such as baseball, touch football, and basketball, to individual racquet sports.  First was squash, then I eventually got moderately serious about tennis.

Although always aerobically fit, first due to youth and then by reason of working at it, I was also always injury-prone.  The key problem, apart perhaps from coordination issues (although I always had decent eye-hand), was that I apparently was too loose-limbed.  So I kept spraining my left ankle, although not generally from playing racquet sports.  I also suffered a significant recurring shoulder injury when I was only 20.  It seems to have come from pitching a stickball game against a good friend.  I figured out later that I must have thrown 150 to 200 pitches, generally as hard as I could and without having trained for this at all.  Initially misdiagnosed (sports medicine was not as good back then as it has become more recently), the injury, which turned out to be rotator cuff instability and impingement, periodically plagued me until medical advances permitted me to fix it, albeit not quite to the 100% level, through arthroscopic surgery about 15 years ago.

Meanwhile, as I got older, loose-limbedness gave way to various body parts losing flexibility and becoming all too willing to strain or tear.  So I got back spasms, pulled hamstrings, and then tennis elbow when I tried to play without my legs under me properly due to the hamstring problem.  My solution to all this was periodic layoffs plus physical therapy - intensive during the recovery period, but then continuing afterwards for maintenance.  So the price of my continuing to play racquet sports - requiring "explosive" muscle and joint use, although it doesn't seem that way when you are younger - was a long list of home exercises, all of which I had to do a few times a week.  This grew increasingly boring over time, but if I wanted to keep playing I had no choice.

Eventually I quit squash because it was just too explosive - various body parts got angry from the sudden changes in direction that you need if your partner wrong-foots you.  But tennis seemed to be going OK, for the most part and subject to my keeping up the exercise regimen, until 2 years ago when I tore the ACL in one of my knees.

At that point I was icily determined not to let it stop me.  I was strongly leaning towards the elective surgery for ACL replacement, even though it is a truly horrible process.  The problem is that the newly inserted replacement ligament (taken from one's own patella or else from a cadaver) has to integrate fully with the body parts in place.  Tommy John surgery for baseball players is similar, but your leg is more foundational than your arm, since without it you can't even get out of bed.

I had to wait before deciding on the surgery, since I didn't want to ruin my summer and then I couldn't do it while teaching.  But by the time I could have had the surgery, I was already back on the tennis court, wearing a bulky knee brace.  After a bit, I was actually moving about as well as I did before the injury (and mobility was always my #1 asset), although I could clearly tell in some other settings that the injured knee is far from 100%.  Carrying a heavy suitcase upstairs, for example, makes my knee get angry and start to threaten me.

One thing that playing tennis without an ACL requires, however, is serious ongoing commitment to the exercise program.  I did what I had to, but it came at the expense of my being willing to put in the time for all my other injury maintenance exercises.  So a couple of months ago I suffered another nasty hamstring pull (in the leg that still has an intact ACL).

Getting over that, and back onto the tennis court, would have been a far easier matter than overcoming a torn ACL.  But this time around, I found that I had simply lost the will to do it.  Too many years of rehab and home exercise programs.  Too much time out of my day - and on the subway, on NYC's least reliable line, the F train - in order to play indoors in New York City on a Hartru court (concrete is far too wearing for multiple body parts).  Too much frustration when I'd play below the level I expected of myself, by reason of being too busy, and traveling too much, to play enough to maintain that level.  So I decided, at least for now: Forget it.

I must say, I've been greatly enjoying NOT doing my home exercise program, NOT riding on the F train, NOT losing 3 hours out of my day twice a week (the minimum to maintain a decent playing level), and NOT experiencing the frustration of playing badly.  So I have no current inclination to go back.  And while this conceivably could change someday, especially if I find myself in a warm-weather climate, I'd have to be super-careful about ramping up again first through a renewed set of strengthening exercises for multiple body parts that at present seem to be applauding my choice not to play, through their compliant and complaisant silence.

Summer research to date

I have just finished a first draft of an article entitled "Taxing Potential Community Members' Foreign Source Income," which I will be presenting at a Citizenship and Taxation Symposium, to be held at the University of Michigan Law School on October 9.  Not quite ready to post it on SSRN, however.

Oddly, it is the same length in pages (46) as my recently posted article on international business taxation, entitled "The Crossroads Versus the Seesaw: Getting a 'Fix' on Recent International Tax Policy Developments."  This one is posted on SSRN, and I will be presenting it in less than two weeks (on June 23) at the 9th Annual Symposium at the Oxford University Centre for Business Taxation.

Next up, I am going to be writing a short piece (supposed to be in the ballpark of 10,000 words) for a forthcoming book that colleagues elsewhere are organizing on the timing of legislation.  I've previously written at length about issues of legal transition, which would be a good fit here, but as those isuess don't currently grab me I'll be writing instead about conceptual problems associated with defining "constant policy" across time.  Most of us would agree that, say, inflation indexing of income tax rate brackets and Social Security benefits increases policy constancy between years, compared to keeping dollar amounts nominally fixed when price levels are changing.  But that's an easy case, and there are plenty of harder ones out there.

After that, I plan to return to my book-in-progress on high-end inequality as viewed through the lens of literature.

Jotwell post on work by Knoll, Mason, and Viard on discrimination against interstate commerce

Jotwell, or "the journal of things we like lots," is a website that seeks to "fill[] a telling gap in legal scholarship by creating a space where legal academics can go to identify, celebrate, and discuss the best new scholarship relevant to the law."  The gap, of course, exists primarily because so many of us are mainly engaged in doing our own work, and secondarily because there often is stronger motivation to attack, than gratuitously praise, other work.  (Just as chimps shriek and wave branches around when they see rival troupes, rather than inviting them to come in.)

I've agreed to write a Jotwell "jot" annually.  Two years ago, I wrote something about Benn Steil's book about Bretton Woods. Last year, I addressed Piketty.

This time around I have written a piece, just posted here, lauding recent scholarship by Michael Knoll, Ruth Mason, and Alan Viard that addresses the legal definition of discrimination against interstate commerce, and that appears to have completely persuaded the Supreme Court majority in the recent state income tax law case, Comptroller v. Wynne.  I'm glad to give these individuals (all admittedly friends) some well-deserved praise, and I also briefly address the direction of legal scholarship and offer an overview of the underlying issue and their arguments.

The discerning and well-informed reader may note that I share these authors' lack of enthusiasm for "double taxation" as a useful analytic frame, as you can see, for example, here. My work to this effect addresses issues in international, rather than state and local, taxation, but there is something in common (pertaining to an instinct for substance over formalism) as between the two sets of issues.