Six talks, six topics

I will be giving six talks in September, not counting meetings of my Survey of International Taxation class.  But whereas the smart-money move among time-efficient academics is to keep on giving the same talk, again and again and again (even over years), I have somehow found the opposite extreme, as I will not even be addressing the same topic twice.

The grisly (?) roster is as follows:

1) September 9, at St. Francis College in State College, PA: Informal talk to students about inversions.  What makes this particularly interesting is that these are college students, not law students.  So not only is  background necessary, but it's 90+% of what's necessary.

2) Later in the day on September 9 at St. Francis College: Larger public talk on budget deficits and associated issues.  I have made slides for this talk that I will post here afterwards. (As with #1, however, no paper.)

3) September 12, as previously noted, in-house workshop with NYU faculty re. the Jane Austen chapter from my book-in-progress on literature and high-end inequality.

4) September 19, at Moritz College of Law (aka Ohio State), "The Mapmaker's Dilemma in Evaluating High-End Inequality."  The version I'll present is a meld between my forthcoming U Miami Law Review article and chapter 2 of my literature book in progress.  Slides to be posted here after the talk.

5) September 23, at NYU conference on human rights and tax. "Interrogating the Relationship Between 'Legally Permissible' Tax Planning and Social Justice."  This is the dialogue-style article I've mentioned in earlier blog entries but have not as yet posted on SSRN.  I'll post the article either before or after the talk, and the slides after the talk.

6) September 26, at private meeting of NYC tax lawyers.  Here I will discuss my new paper, which will have appeared in Tax Notes on September 19, "Friends Without Benefits? The Treasury White Paper on the EU State Aid Cases."  I am not anticipating that very many of the attendees will agree with my analysis.

So that does it - six talks, six topics.  Work-maximizing, but I hope boredom-minimizing.

More on the European Commission's Apple-Ireland ruling

Here are a couple of interesting quotes from the public statement about the Apple-Ireland ruling by EC Commissioner Margrethe Vestager:

 [1) Explaining the grounds for the ruling]:
Apple Sales International [an Irish company] holds the right to use Apple's intellectual property to sell and manufacture Apple products outside North and South America. In exchange for this right, it makes payments to Apple in the U.S. to contribute to the development of this intellectual property - often more than 2 billion US dollars per year ....

[Ireland] endorsed an internal split of Apple Sales International's profits for tax purposes – they allocated the profits between its Irish branch and the company's head office. It is a "so-called" head office because it exists only on paper: it has no employees, no premises and no real activities.

The Irish branch was subject to the normal Irish corporation tax. However, the head office was neither subject to tax in Ireland nor anywhere else. This was possible under the Irish tax law, which until 2013 allowed for so called 'Stateless companies'.

As a result of the allocation method endorsed in the tax rulings only a fraction of Apple Sales International's profits were attributed to its Irish branch. The remaining, vast majority of profits was attributed to its "head office".

This means Apple Sales International as a whole paid very little tax on its profits.

Let me illustrate this for one tax year: In 2011, Apple Sales International made profits of 16 billion euros. Less than 50 million euros were allocated to the Irish branch. All the rest was allocated to the "head office", where they remained untaxed.

This means that Apple's effective tax rate in 2011 was 0.05%. To put that in perspective, it means that for every million euros in profit, it paid just 500 euros in tax.

This effective tax rate dropped further to as little as 0.005% in 2014, which means less than 50 euros in tax for every million euro in profit.

Our decision concludes that splitting the profits did not have any factual or economic justification. As mentioned, the "head office" had no employees, no premises and no real activities. Only the Irish branch of Apple Sales International had any resources and facilities to sell Apple products.

But under the tax rulings it was the "head office" that was attributed almost all of the company's profits – in fact, due to Apple's set-up, it was attributed almost all of the profits Apple made from selling products throughout Europe, the Middle East, Africa and India.

[2) What happens to the $14.5 billion that Apple must pay?]

[O]ther countries, in the EU or elsewhere, can look at our investigation. If they conclude that Apple should have recorded its sales in those countries instead of Ireland, they could require Apple to pay more tax locally. That would reduce the amount to be paid back to Ireland.

The amount to be paid back to Ireland would also be reduced if the two companies were required to pay larger amounts of money to their US parent company to fund the research and development efforts, in addition to the annual payments they have made. As I mentioned, these are conducted by the US parent on behalf of Apple Sales International and Apple Operations Europe.

Back to me (as opposed to Margrethe Vestager).  A few quick comments:

(1) Does the bolded (in the original) conclusion with regard to Apple Sales International sound factually unreasonable, or even seriously contestable?  Certainly not to me.

(2) Note that Apple Sales International, if 2011 was typical, appears to have been paying the US parent about 1/8 of its profits.  Surely the IP was predominantly created in the US, and indeed by people working for the US parent.  I wonder if Apple has ever given away 7/8 of the upside from its IP to unrelated parties.

(3) Vestager appears to be encouraging, not only other EU countries but also the US, to claim pieces of the $14.5 billion.  She expressly notes the possibility that larger R&D payments to the US parent might be required.  This may not be feasible under US law, in particular if (as I presume) the low royalty payments from Apple Sales International back to the US parent (whether under cost-sharing regulations or otherwise) pass muster under our rules or indeed have already done so expressly through agreement between Apple and the IRS.  But that certainly wouldn't be the EC's fault.

The European Commission's ruling on Apple and Ireland

Today the European Commission announced its (internally) final ruling, subject to appeal in the European courts, concerning Apple and Ireland.  The verdict holds that Ireland gave Apple illegal tax subsidies, in the form of advance  transfer pricing rulings, and that Apple must therefore pay Ireland $14.5 billion relating to a ten-year period.  The EC press release is available here.

Apple has issued a press release stating what "responsible corporate citizens" they are, and condemning the EC's "unprecedented" interference into EU nations' tax autonomy.  They're "proud" of their contributions to the Irish economy, mainly from providing 6,000 local jobs per year, and don't threaten to leave Ireland, but do say they'll keep on fighting in the courts.

BTW, $14.5 billion of under-taxation over 10 years, relative to a reasonably defensible transfer price, divided by 60,000 jobs (6,000 per year for 10 years), amounts to more than $240,000 per job per year.  Rather a lot compared to what I presume were the average salaries.  But that isn't necessarily money that Ireland voluntarily passed up, given the tax competition point (Apple could have gone elsewhere).

In any event, while I think the EC's side of this dispute has far more legal and policy merit than Apple's side, I don't believe in being overly moralistic about this.  Apple was doing what one would expect it to do, given its incentives.

I have a lot more to say about this dispute and the other EU state aid cases, much of it focused on the US vs. EU aspect that featured prominently in the White Paper that the US Treasury released last week.  But while I will be speaking to the press, the 30 page paper I've written on the subject is embargoed (other than for limited informal sharing on request) until Monday, September 19, when it will appear in Tax Notes.  I still need to make a few small revisions to reflect the new EC ruling.

Just with regard to Apple, $14.5 billion sounds like a lot of money, even for them.  And it is a lot of money, which helps explain why they and Ireland (which wants to preserve its credibility as an offeror of special deals to multinationals) will be fighting the ruling so hard.  The stake is also large enough (especially when combined with amounts potentially due from other U.S. companies with lots of U.S. shareholders) to explain the U.S. Treasury's interest.  It's not necessarily in our national interest for large sums of money to end up in European hands rather than our hands, simply because we are us and they are them.  But that is distinct from the issue of whether we should be self-righteously fulminating about things that we probably would have wanted to do ourselves, if in their shoes.

Back to Apple, not only do they have huge cash reserves that are (metaphorically if not literally) sitting around in tax havens, but the reason for the size of the tax charge is that they shifted A LOT of profits - illegally, in the EC's view - from Ireland to tax havens during the 10-year period at issue.  Ireland's tax rate is only 12.5 percent, so the $14.5B presumably reflects more than $100B of profit-shifting over the 10 years.  So what's happened to Apple - rightly or wrongly, validly or improperly - is that they are ending up paying a 12.5% tax rate, rather than close to zero, on huge profit flows that they enjoyed over a 10-year period.  One thus might want to un-cue the violins a bit, even if one sides with Apple in the dispute.

Toe in the water

I've been working on my book on literature and high-end inequality - entitled ENVIERS, RENTIERS, AND ARRIVISTES: WHAT LITERATURE CAN TELL US ABOUT HIGH-END INEQUALITY - for close to two years now.  But I have not as yet presented any of my chapters on particular literary works before any live (or, for that matter, dead) audience.

I have been able to get feedback from a handful of readers.  Also, just over a year ago I informally discussed my introductory chapter in-house at an NYU Law School summer faculty workshop.  Plus, at a couple of conferences I've discussed chapter 2, "The Mapmaker's Dilemma in Evaluating High-End Inequality," which is more of a traditional-style policy article for me.

But the literature chapters are quite different from anything I've written before, and also are less obviously suited to being presented at the typical faculty workshops and conferences where I am most commonly to be found.

Two weeks from today (Monday, Sept. 12), I will be presenting one of the literature chapters for the first time, albeit not in an open-to-the-public format - rather, at NYU Law School's internal faculty workshop.  Since I would guess that more of the faculty is interested in Jane Austen than in tax policy, I figured that this was a good setting at which to present my Jane Austen chapter.

Anyone who would be interested in my presenting this or any other of my literary chapters should certainly let me know.  As I imagine they say at car dealerships, all reasonable offers will be considered.  Plus, I generally like to travel when my schedule permits.  (I'm pretty heavily booked up through the end of November 2016, but have greater flexibility after that.)

Here is the book's outline as it currently stands.  I have written chapters 1-7 and made good progress on chapter 8 (although forced for now to set it aside, what with the approaching semester).

PART 1: WHY THE SUPER-RICH, AND WHY LITERATURE?

1. Introduction

2. The Mapmaker’s Dilemma in Evaluating High-End Inequality

PART 2: ENGLAND AND FRANCE DURING THE AGE OF REVOLUTION

3. Why Aren’t Things Better Than This? Jane Austen’s Pride and Prejudice

4. A Rising Tide Rocks All Boats: The Threat of Rising Prosperity in Stendhal’s Le Rouge et le Noir

5. The Arriviste as Morally Compromised Cat’s Paw: Balzac’s Le Père Goriot and La Maison Nucingen

PART 3: ENGLAND FROM THE MID-NINETEENTH CENTURY THROUGH THE START OF WORLD WAR I

6.  Art, Heart, and “Schmart” in Charles Dickens’ A Christmas Carol

7.  Not To Blame? Plutocrats, Capitalism, and Foreigners in Anthony Trollope’s The Way We Live Now

8.  Disconnected: Rentier Intellectuals in E.M. Forster’s Howards End

PART 4: AMERICA: LATE NINETEENTH CENTURY THROUGH WORLD WAR I

(9) Horatio Alger’s Ragged Dick

(10) Theodore Dreiser’s The Financier and/or The Titan

(11) Edith Wharton’s House of Mirth

PART 5: BETWEEN THE TWO WORLD WARS

(12) F. Scott Fitzgerald’s The Great Gatsby

(13) P.G. Wodehouse 3-pack: Thank You, Jeeves, Right Ho Jeeves, and Code of the Woosters

(14) Evelyn Waugh’s Brideshead Revisited

PART 6: THE MID-TWENTIETH CENTURY

[3 works TBD.  Definitely Ayn Rand, Atlas Shrugged or The Fountainhead.  Maybe Arthur Miller’s Death of a Salesman?  Sloan Wilson’s The Man in the Gray Flannel Suit?

PART 7: THE MODERN ERA

 (18) Tom Wolfe’s The Bonfire of the Vanities

(19) Martin Scorsese, The Wolf of Wall Street (2013 film)

One additional work?

PART 8: CONCLUSION

Ed Kleinbard on "Searching for our fiscal soul"

Ed Kleinbard - who, among other things, is joining the Bankman-Shaviro-Stark casebook on Federal Income Taxation for our next edition, which should be out in time for the spring semester - here gives a TedX talk entitled "Searching for Our Fiscal Soul."  It eloquently, and at times humorously, follows up on his recent focus on the importance of addressing low-end inequality in our tax, spending, and budgetary policies.

Ed's excellent recent book on the topic is available here; I favorably reviewed it here.

New article posted on SSRN!

Two days ago, the U.S. Treasury Department published a White Paper, entitled "The European Commission's Recent State Aid Investigations of Transfer Pricing Rulings."

As I was already geared up on the issue, I have now posted a 29-page response to the White Paper.  It's available here.

The title of my paper is: "Friends Without Benefits?  The U.S. Treasury White Paper on the EU State Aid Cases."

The paper's abstract is as follows:

On August 24, 2016, the U.S. Treasury Department issued a White Paper condemning recent “state aid” investigations by the European Commission, pertaining to advance transfer pricing rulings that particular EU countries had issued with respect to U.S. and other corporate taxpayers.  The White Paper represents a good-faith effort to advance the interests of the American people, which after all is the Treasury’s job in the international arena.  However its arguments, when evaluated from a neutral perspective rather than a self-interested one, are generally unpersuasive.  Moreover, the underlying tactical judgment about where America’s interests lie in responding to the state aid cases, while not clearly wrong, is at least questionable.

UPDATE: I HAVE DELETED THE SSRN POSTING, BECAUSE THE PIECE WILL BE APPEARING IN TAX NOTES ON SEPTEMBER 19.

I will re-post it on SSRN after it appears - I believe the Tax Notes standard is that one can do so two weeks after they have published.

Rapid service

I am hoping to post a short article on SSRN, concerning the Treasury's White Paper on the EU state aid cases, as soon as tomorrow (Friday).  The White Paper only came out yesterday morning, but I was geared up on the topic, as I discussed the issue (and earlier Treasury pronouncements) at a conference in Amsterdam early in the summer.

I have half a mind to call the piece "Tout Comprendre, C'est Tout Pardonner," with at least a couple of distinct meanings in mind, but I'd have to have only half a mind actually to pick that title. But unfortunately I have nothing snazzier in mind at present than "The Treasury White Paper on the EU State Aid Cases."

No partisan divide here

There's a general consensus among the humans in our household that Gary is perfect.

What have I done wrong?

According to the latest of the rancid, spittle-encrusted emails that I get multiple times daily from the Trump campaign:

"Friend, as an identified Trump supporter from your zip code, your input is missing from our Official Campaign Trump vs, Hillary approval poll."

But at least in this one they're not trying to sell me a hat, bumper sticker, or gold-level membership card.

An interesting new international tax policy development

Earlier today, the U.S. Treasury released a White Paper responding to the EU state aid cases, brought (or possibly to be brought in the future) by the European Commission.  These cases, while generally still pending, would require mainly US companies (although also Fiat) to disgorge tax benefits that they got from accommodating EU countries such as Ireland, the Netherlands, and Luxembourg,

This blog entry is just a placeholder to say that I am going to be commenting on this.  Indeed, EU press interest is such that I will shortly be talking to an Irish reporter and doing a BBC TV interview.  But I may also write a short piece on it - for example, to publish in a forthcoming IBDF volume concerning OECD-BEPS and the EU state aid cases, that's based on a tax conference in Amsterdam earlier this summer, at which I spoke.  Said piece would appear

My view on this may not make me a lot of US friends. In brief, while I accept that it is probably in the national self-interest of the US to make these arguments (in the hope that they will cause the EU to back off), I do not, in the main, find the arguments intellectually persuasive.

UPDATE: The interviews were fun.  Since I was feeling pretty frisky, I suspect that I will be quoted in a forthcoming Irish Times article by Simon Carswell, and perhaps on a BBC-TV news show tonight. It's easier to speak well to the press when one is particularly interested in and engaged by a topic.

One way to explain to lawyers why income effects don't create deadweight loss

All tax law profs who read any economics know, because it says so in any Public Economics (or for that matter Price Theory) textbook, that income effects, unlike substitution effects, don't give rise to deadweight loss.  But sometimes they don't have the right intuitive handle on why this is so. I happen to have just thought of a new way of putting it (I think) crisply that I'll plan to use in the future as needed.

For a typical set-up, say I'm saving for retirement, and all of a sudden a new tax on saving is imposed.  It's a tax increase for me, not a re-jiggering of tax computation schemes, and the money is going to be spent on someone else.  So will I now save less for retirement?  (This is not yet the deadweight loss question, of course - but I'll get there momentarily.) To make things really simple and straightforward, let's assume that the pre-tax rate of return to saving stays the same, so the after-tax rate of return is reduced by the tax.

The analysis everyone knows goes as follows.  The substitution effect indicates saving less, because I am now at the margin unable to buy as much retirement consumption, per unit of reduced current period consumption, as I could have absent the tax.

However, the income effect indicates saving more.  One way to put this is that my budget line has shifted inward. The packages of current consumption plus retirement consumption that I can afford have grown smaller, since I can no longer buy as much retirement consumption per unit of forgone current consumption.  If I am optimizing by equalizing the marginal utility of the last unit of consumption in both periods, I will want to share the hit between current period consumption and retirement period consumption, rather than having the latter take the entire hit from the reduction in the after-tax rate of return.

Standard bottom line: the net effect on my current period saving is theoretically indeterminate.  But now we get to the efficiency analysis.  Let's assume here (counterfactually, I think) that there are no externalities whatsoever associated with the amount saved, so we are thinking just in terms of deadweight loss from prospective savers' decisions.

Now one gets to the point that substitution effects indicate inefficiency, whereas income effects do not.  Again, to people with legal rather than economic training this may seem like just some sort of bizarre thing they've learned that doesn't seem to make intuitive sense, even though they know it is correct based on the weight of authority.  So how can we make the intuition more salient?

Let's start with the case where net saving is exactly the same as before, since its reduction by reason of the substitution effect precisely equals its increase by reason of the income effect.  How can there be no change in total saving, yet now there is inefficiency?

To explain that, let's break apart the two sets of cases.  Forgone saving by reason of the substitution effect means there were instances where a transaction was out there, ready to be made, and the tax wedge prevented it from happening.  E.g., suppose the pretax interest rate is 5%, and that if I had saved and invested $100 in period 1, someone would have been willing to pay me up to $105 in period 2. Say I'd require at least $104 in period 2 to be willing to do this, but the tax rate on saving is 40%, so I'd have only $103 after-tax.  The deal doesn't happen, and there's lost surplus of $1 (from the excess of what they were willing to pay me over what compensation I required in order to be indifferent).  The deadweight loss from this is not affected by the fact that some other transaction might be taking place that wouldn't have otherwise, in which someone saves and invests more because the income effect induces them to want to save more.

So finally to the point, why don't income effects indicate inefficiency?  E.g., isn't there a "change" if I save more because the new tax has knocked me down a peg?  Answer, yes is there is a change relative to the counterfactual scenario where the tax hadn't been imposed, but change relative to some alternative scenario isn't the point.  Changes in behavior by reason of income effects are an example of re-optimizing.to get the best result you can under your new circumstances.

Here's another example.  My uninsured home is destroyed by a hurricane, so I decide to work more due to the income effect.  Or, I win $10 million in the lottery, so I decide to work less due to the income effect.  Each of these is a "change" in behavior, relative to the scenario where the trigger event didn't occur, but neither is "inefficient."  (Of course, I'm better off than previously if I win the lottery, and worse off than previously if the hurricane strikes, but that's a separate point.)  Rather than there being inefficiency from the "change," it means that I'm re-optimizing.  I would be failing to make the best choices for myself, as between work and leisure, if I couldn't re-jigger my choices to reflect the new information and/or my new circumstances.

Substitution, of course, also involves reoptimizing, but in light of an externality (disregarding taxes paid because at the margin they benefit others, not oneself).

Endful summer

Yesterday while working out on the elliptical machine at the health club, I played the Beach Boys 60s hit collection, Endless Summer, in tribute to my increasingly painful awareness of how endful (so to speak) rather than endless this summer actually feels at this point.  I will be teaching my first class in 10 days, and just have SO much to do both before and after that date.  I also played Endless Summer because it's mostly such a great collection.

It has a few relatively obscure, yet great, classics (e.g., "Let Him Run Wild"). Among the more numerous extremely well-known tracks, I've always been struck by the gap between the gorgeous beauty of the production of "California Girls," and the aggressive triteness of the lyrics - somehow this heightens the song's power.  There's something moving about the sheer waste of it.

Also, "Fun, Fun, Fun" is feminist without meaning to be - it shows how the young woman gets exploited (one presumes, sexually) once her father is stupid enough to disempower her, whereas, until then, she can run circles around all the young men who are pursuing her for their own purposes.

Tomorrow, I anticipate playing Ultimate Painting's Green Lanes, a charming recent alt-rock acoustic album (maybe slightly echoing the Velvet Underground's eponymous third album, along with just a touch of the Grateful Dead) by a London duo. I like this album, but inadvertently dropped it a few months ago from my active playlist, before having played it enough to retire it deliberately.  (Not literally dropped from my Spotify roster - but I have so many things there that I forget what all of them are.)

So, about my all-too-endful summer - in addition to teaching International Tax starting on September 1, I will be co-teaching the high-end inequality seminar (with Bob Frank) that I have blogged about, during the second half of the semester (October 24 - December 5).  So during that period I will be teaching for 7 hours a week, which is a lot what with prep and everything else.

Plus, I have committed to writing too many tenure, etc. reviews, basically because, while I don't like doing them, I aim to be a good sport.

And I'm in the middle or I hope late stages, with three good friends (Joe Bankman, Kirk Stark, and our new co-author, Ed Kleinbard) of writing a really substantial revision - and I think improvement - to our "Federal Income Taxation" casebook.  Having 3 colleagues on the project saves lots of time on balance, since one only has to do 25% of the primary work.  But it also leads to spending a lot of time on coordinating efforts, commenting on each other's chapters, etc.  We anticipate that it will be available for the spring semester.

I also have a bunch of talks scheduled for the fall semester.  On September 9, at St. Francis College in Pennsylvania, I'll be giving 2 talks, one on deficits and fiscal gaps, and the other on corporate inversions.  It will be fun to talk to undergraduates and non-law university academics.

On September 19, at the Ohio State University Law School, I'll be presenting a version of my forthcoming U of Miami Law Review article (adapted from chapter two of my book in progress on literature and high-end inequality), entitled "The Mapmaker's Dilemma in Evaluating High-End Inequality."  I've presented this piece before, but not often or recently.

On September 23 at NYU, I'll be giving a talk (based on the dialogue-style paper that I've blogged about previously) at the Human Rights and Tax conference that the Centre for Human Rights and Global Justice has organized here.

On October 7, I'll be a commentator at the 6th annual NYU-UCLA conference on tax policy, to be held at UCLA and concerning tax policy and upward mobility.

On November 10, I'll be giving my somewhat long-in-the-tooth (by now) paper on citizenship and taxation, at the NTA Annual Meeting, plus probably commenting or moderating on some other panel or panels.

Also at least three other panels, talks, etc., in the NYC area.

I'm also trying to push forward my book on literature and high-end inequality.  The books on which I have written chapters so far are Austen's Pride and Prejudice, Stendhal's Le Rouge et le Noir, Balzac's Pere Goriot, Dickens's Christmas Carol, and Trollope's The Way We Live Now.  Currently I'm in the middle of writing about Forster's Howards End, which was going well but I unfortunately will have to shelve it for a while, and return to it when I can.  After that, a trio or quartet of post-Civil War U.S. novels, two of which will be Horatio Alger's Ragged Dick and Dreiser's The Financier and/or The Titan.  A third will probably be Wharton's House of Mirth.  But I might conceivably also add (or sub in), say, Howells's Rise of Silas Lapham or Twain's Gilded Age - although I am finding that three novels in a given time period / geographical slice seems to work well.

So yes, my endful summer is ending all too soon, with all due respect to the returning (and new) students who can energize me, and who make professors' professional lives less solitary than they would otherwise be (not that there's necessarily anything wrong with that).

Plus, I love summer and hate winter from a climate standpoint.  Lovely though the fall often is in New York, it's often ruined for me to a degree by the fact that I know what's coming next.

No blue background for me

As I prepared to head out to the beach this morning, I got a couple of emails from TV shows that wanted a talking head (or presumably several) to address, in taped studio interviews, Hillary Clinton's (and Tim Kaine's) tax return release today, and/or the recent discussion in the NYT of Trump's refusal to release his tax returns.  But luckily I don't agree with Gore Vidal, from the phrase of his that I believe I have quoted here before, re. how important it is to be on TV whenever possible.  (Although I would have done the sessions had I been in NYC today.)

The main thing I gleaned from looking quickly at the Clintons' 2015 tax return, which I know others (such as folks at the Tax Policy Center) discerned as well, was that Trump's new tax "plan" would have enabled her and Bill to cut their effective tax rate by more than 50%, and thus to save more than $1 million in taxes.  They made almost all their income via speeches and books, which they put (because that is where it goes) on Schedule C, business income.  Since Trump plans a 15% rate for non-employee business income that apparently includes that from sole proprietorships, this would seem to mean that they would get a massive rate cut (and tax cut) from his proposal.

One could restate Trump's proposal, I suppose, as equivalent, for the most part, to a flat 15% income tax plus fines of up to 18% for the crime of being an employee rather than a business-owner.

This week's beach reading

Penelope Mortimer's 1962 novel The Pumpkin Eater, JK Galbraith's 1990 novel (!) The Tenured Professor, Eleanor Perenyi's 1946 memoir More Was Lost, Ian McEwan's 1998 novel Amsterdam, most of Bill Bryson's 1996 comic travelogue Notes From a Small Island, and part of an old favorite, E.F. Benson's farcical (from 1920) Queen Lucia.

Nice view alongside that train wreck

It's really not worth commenting in general on Trump's foolish and frivolous new tax "plan," but here are two quick takeaways about the issues associated with two features.

First, he appears to have adopted a version of one of the stupidest ideas to emerge in tax policy for many decades - the idea, from Sam Brownback's calamitous Kansas tax "reform," that a low business tax rate should extend to all business income, such as partnerships, even with no second level of tax a la the current corporate income tax. The Kansas plan, which exempts such income from the state income tax, means that, say, in a law firm the secretaries, paralegals, and associates are taxed on their labor income, but the partners are not taxed on their labor income. At the time, even some people far more sanguine than I am about the Ryan-style tax cut playbook pointed out that this was idiotic, and events have confirmed this. It's not only upside down taxation, like the pre-French Revolution system of exempting nobles from general taxation, but distorts real activity and encourages pointless tax planning games. Trump would adopt this thoroughly discredited idea, albeit with a 15% (in lieu of 33%) rate and extending it to sole proprietors. So now the idea is: At all costs, don't ever be an employee! Makes a lot of sense.

Second, on a more favorable note, there is something or other about people who work getting to deduct childcare costs, perhaps based on an average measure of some kind rather than based on actual costs incurred. While this can be validly criticized on some grounds - e.g., no effect if you're too low-income to owe tax, and should the benefit be tied to your marginal tax rate - there are also arguments in favor - e.g., in some settings childcare expense really is a marginal cost of deciding to work. So the issue merits further discussion and debate, albeit perhaps not in the context of the current U.S. Presidential campaign (where there are bigger fish to fry, such as whether the rule of law will survive).

Every time I think I'm out, they pull me back in

Reminders of income tax law, amid my one-week beach vacation in New Jersey.