Mark Gergen's "How to Tax Global Capital," part 2

Here is part 2 of my discussion of Mark Gergen’s paper, “How to Tax Global Capital,” which was presented yesterday at the NYU Tax Policy Colloquium. Part 1 is here.

2. INTERNATIONAL SETTING

While the new paper, discussing how the securities tax and the complementary tax would apply to cross-border activity, is still at an early stage, the basics at this point are as follows.

First, the securities tax would only be remitted by U.S. issuers. These might be defined as issuers who are listed on U.S. securities exchanges, possibly with an election whether or not to be classified as a U.S. issuer if one is also listed on foreign exchanges. Allowing electability would reflect the assumption, which I discussed in the prior post, that the securities and complementary taxes work in close tandem. (They might be especially well-matched, however, as to publicly traded “foreign” securities, as these might have readily discoverable market values that could be used for purposes of the complementary tax, even if the issuer wasn’t required to remit under the securities tax.)

Comment: My point in Part 1 of my comments regarding principle-agent issues and the “forced dividend” issue would affect how indifferent companies and their shareholders actually were (administrative and compliance costs aside) to U.S. issuer status, even assuming that the two taxes otherwise operate in close tandem.

Second, the paper suggests that foreigners should get a rebate for inbound foreign portfolio investment (FPI) that faced the securities tax. For example, if a French individual owns $1 million of Apple stock, then she should get a rebate from the U.S. Treasury for part or all of the $8,000 of securities tax that Apple remitted with respect to such stock. How best to do this remains open at this point.

Comment: This would be a policy change, insofar as foreign shareholders effectively bear their share of entity-level corporate income taxes. While it might be a desirable change, if we believe that under present law they don’t bear the true economic incidence of this tax anyway (and absent the treaty leverage we might get from initially charging the tax but being willing to reciprocally negotiate it away), it seems likely to present implementation difficulties.

Third, the paper suggests that inbound foreign direct investment (FDI), as in the case where a foreign corporation, owned by foreign individuals, conducts business activities in the U.S., should be exempt from both taxes. (Insofar as it’s owned by U.S. individuals, they’d pay the complementary tax.)

Comment: This may be undesirable insofar as the foreign companies are earning extra-normal returns in the U.S., on which we can make them bear some of the incidence. It also would lead to “round-tripping” problems, from the use by U.S. persons of foreign entities to avoid the wealth tax, if the complementary tax wasn’t fully up to the job of taking the place of the securities tax.

Fourth, the paper suggests that no foreign tax credits be allowed when U.S. persons owe complementary tax on foreign business operations that are also subject to source-based income taxation. The rationale is that U.S. companies are good at tax planning to avoid source-based taxes.

Comment: While I am generally no fan of foreign tax credits, there are further issues raised here for those who do like them, as source-based taxation is not always wholly avoidable. Also, there might be value to being able to negotiate down each other’s source-based taxes (e.g., via permanent establishment requirements for levying a source-based tax) in the treaty context.

Fifth, the complementary tax might not apply, for administrative and informational reasons, to foreign realty (e.g., London real estate, or natural resources holdings in a Gulf State).

Comment: I would certainly want to apply the complementary tax, if sufficiently administratively feasible, in these settings.

Sixth, with regard to the fundamental challenge of levying the tax on foreign assets – which often is thought to make wealth taxation highly problematic – the paper is bullish on the capacity of FATCA-like outreach to make enforcement feasible. It notes that this could in principle be handled via either withholding or information reporting (centered in either case on third-party agents), which might have to apply to tax havens in order for the complementary tax to work well enough.

Comment: Clearly this has the potential to be a huge implementation problem, which I trust the paper, as it develops, will address more fully.

NYU Tax Policy Colloquium, week 2: Mark Gergen's "How to Tax Global Capital," Part 1

Yesterday at the colloquium, Mark Gergen presented his paper, “How to Tax Global Capital.”  A predecessor paper that provides important background for it, “How to Tax Capital,” is available here.

Herewith some background and thoughts regarding this very interesting paper. Part 1 discusses Gergen’s proposed major tax reform, as applied purely in the domestic setting. Part 2, which I will place in a separate blog entry given the length of Part 1, discusses the international aspect, which was the subject of his new paper (which, however, is still at an early stage of development).

1. DOMESTIC SETTING

One could think of the income tax as falling on labor income and capital income. In practice they often are mixed.  For example, if Mark Zuckerberg sold his Facebook stock, the capital gain might look like capital income, but in true substance would mainly be labor income. The existing tax system generally doesn’t try or need to tell them apart (and if one thinks of the capital asset definition as aiming to do so, it gets this wrong, as in the Zuckerberg). Nonetheless, the distinction is conceptually important, since one might favor different policies towards the two pieces if one could sufficiently effectively distinguish them.

As has frequently been discussed (including at our week 1 colloquium), a system that provided expensing for all capital outlays, or that provided interest on basis at a suitable interest rate, would effectively exempt the normal return piece of capital income, which is the piece that it might be reasonable to want to exempt.  Thus, expensing or interest on basis can be the backbone of a well-designed consumption tax. This, in turn, may be viewed as equivalent to a labor income tax, if you spend what you earn and saving does not alter the present value of the tax liability that would have resulted from spending one’s earnings immediately.

Gergen’s novel proposal involves repealing the income tax, and replacing it with separate instruments in lieu of the labor income tax component and the capital income tax component. While this is not the main focus of his proposal, he’d replace the labor income tax with a VAT or a consumed income tax (i.e., cash flow personal tax that is like an income tax with unlimited IRA deductions for saving and inclusions for dissaving). As for the capital income tax, he’d replace it with a two-part instrument, comprised of a “securities tax” and a “complementary tax.”

The securities tax would apply to all capital represented by a publicly traded security, at its market value. It would be assessed and collected from issuers. The tax rate might be, say, 0.8% annually. (As I further discuss below, the reason the nominal rate is so low is that it is a wealth tax, rather than a capital income tax.)

To illustrate: Suppose that Apple has a current market capitalization of $650 billion (i.e., this is the market value of its equity). Suppose further that Apple has issued publicly traded debt securities that are worth $100 billion, and has non-traded outstanding debt (such as accounts payable) worth $50 billion. Apple would annually remit securities tax of (a) about $5 billion with respect to its stock (at a rate of 0.8%, (b) $800 million with respect to its publicly traded debt, and (c) zero with respect to its other debt – which is not a publicly traded security, and hence is subject to the complementary tax, described next, rather than the securities tax.

When the value of a publicly traded security reflects the issuer’s holding of other publicly traded securities, a tax credit prevents cascading application of the same tax multiple times. For example, if Goldman Sachs holds Apple stock, Goldman Sachs gets a credit for the securities tax paid by Apple. For example, if Goldman Sachs holds $100 million of such stock, it would get a tax credit of $800,000. Absent this feature, when Goldman held Apple stock, the value of such stock would in effect be taxed twice (as it presumably would increase the value of Goldman’s stock by its own value).

The complementary tax would apply to all income-producing assets other than publicly traded securities. In addition to items such as Apple’s non-publicly traded debt, it would generally apply to partnerships, other businesses, bank accounts, gold and cash held by individuals, etc. More below on its applying only to income-producing assets.

The complementary tax would apply the same rate (such as 0.8%) as the securities tax, to what I will call its “basis” although this is meant to be a proxy for its value. An item’s initial basis typically would be its cost basis (presumably, carryover basis for gifts and bequests, unless the gift is a revaluation event, as might be the case if the item had to be valued for gift or estate tax purposes). It would then be increased by a measure of the normal rate of return – say, the federal borrowing rate plus 2%.  The complementary tax would then apply annually to what I am calling basis (i.e., estimated value under this methodology). However, the basis would be changed to a market-based measure of value whenever some arm’s length event, such as the redemption of someone’s interest in a hedge fund, made this feasible. (This market revaluation principle also might apply, say, to one’s gold holdings, and it certainly would apply to one’s bank account.)

To further illustrate the complementary tax, suppose I buy or create a business for $10 million, without its having publicly traded securities. In Year 1, I pay complementary tax of $80,000. Suppose that, for the ensuing year, the deemed rate of return is 4%, and that I take no cash out of the business (which would reduce “basis”). Then, in Year 2 the “basis” is $10.4 million, and the complementary tax (at 0.8%) is $83,200.

It’s crucial to the proposal’s successful operation in practice that the complementary tax be at least a decently good proxy for the securities tax. While a degree of divergence might be tolerable (and is inevitable, given the difficulty of measuring the value of non-publicly traded items) – even though this would create some distortions around decisions to issue publicly-traded securities and to sell other assets – if it gets too great, then a key underlying assumption is undermined. This is the assumption that people won’t be enormously eager to avoid the securities tax, because even if they do the complementary tax will get them to approximately the same place. If the two are close enough, then the main difference between them is administrative – the securities tax collects the tax at the issuer or entity level, while the complementary tax does so at the owner level.

Here are some main issues that I see as raised by the proposal, holding off the very challenging international issues for Part 2 in my next blog post:

1) Constitutional issue – This is basically a wealth tax, although one could try to call it a levy on mandatorily imputed capital income. (The latter characterization seems unlikely to succeed, since the “imputation” based on value is irrebuttable.) Hence, there are major constitutional issues raised under the constitutional requirement that “direct taxes” be apportioned among the states. See discussion here (at pages 46-49) in a paper that I recently coauthored with Joseph Bankman, and that subsequently appeared in the Tax Law Review.

2) Wealth tax vs. capital income tax – The two are identical, with adjusted nominal rates, if assets’ rate of return is completely fixed both across time and between assets. Thus, suppose that all assets always earn a rate of return of exactly 4%. Then a 0.8% wealth tax is effectively equivalent to a 20% capital income tax. For example, an asset worth $100 million (generating $800,000 of 0.8% wealth tax liability) would always generate a return of $4 million (generating $800,000 of 20% capital income tax liability).

Things are not so simple, however, when rates of return change across time or differ between assets. For example, if the rate of return drops to 2%, then a 0.8% wealth tax is instead identical to a 40% capital income tax. (The legislature could presumably keep changing the tax rate under one instrument or the other in order to keep them in equipoise, but this would change the burden of inertia.) Likewise, if Asset A is worth $1 million because it quadrupled in value over the last year, while Asset B is worth $1 million because it lost 80% of its value, this year’s wealth tax treats them the same but this year’s capital income tax treats them very differently.

So, even apart from the constitutional issue, one may want consult one’s own beliefs in order to determine which one seems preferable. Does one want the effective tax rate to be automatically adjusted when normal rates of return change? Does one care about asset value changes in the past year, or only about current value?

3) Flat rate structure – On the labor income piece, the VAT would have a flat rate structure, while the consumed income tax could have a nonlinear rate structure. But this lies outside the proposal’s distinctive features. The securities tax inevitably is a flat rate tax, since it’s collected at the issuer level, and the complementary tax may need a flat rate (and the same rate) as well, both to maintain parity between the two components and since, to apply a nonlinear rate intelligently to it, one really would need to know how much wealth a particular taxpayer had that was subject to the securities tax.

4) Transition issues – Lots to analyze here, although I won’t attempt it at present. These include transition gains from repealing existing taxes, transition losses from enacting the new taxes, and anomalous effects on pre-enactment contractual and other arrangements that reflected assumptions about who – as between, say, an issuer and a holder – would be charged with remitting the tax liability.

5) Liquidity issues posed by both taxes – Some of the taxpayers who were required to remit either tax might face liquidity issues. E.g., suppose (counterfactually) that Apple not only suffers huge losses in a given year, but also is strapped for free cash.

6) “Forced dividend” issues posed by the securities tax – Suppose that the tax liability pertaining to Apple’s $650 billion of stock really would be the same (about $5 billion) whether Apple remitted it under the securities tax, or shareholders remitted it under the complementary tax. (Based on what I’ve said so far, the latter would require that Apple stock not be publicly traded – a rather large and unlikely change – but, as we’ll see in the international piece, Apple might avoid being required to remit the tax if it could avoid being classified as a U.S. issuer.)

Why might Apple’s managers or shareholders care which of them pays the same $5 billion amount? One could think of (a) requiring Apple to pay it as equivalent to (b) requiring the shareholders to pay it, but also requiring Apple to pay out a dividend to the shareholders in the amount of the tax. Not just liquidity issues but also principal-agent issues could make this choice consequential to the parties.

7) Owned-occupied housing and consumer durables – These could easily be subjected to the complementary tax, assuming a political and policy willingness to do so. The main question posed would be how to adjust “basis” from year to year. Should it appreciate even though the owner is presumably generating an imputed return by reason of asset use? Should economic depreciation instead apply? The latter would surely be necessary for short-lived consumer durables. One problem with not taxing this category of items is that one could imagine very rich people avoiding the tax by buying super-expensive sports cars, artworks for their personal collections, etcetera.

8) Consumer and other nontraded debt – Maybe I don’t understand the proposal correctly in this regard, but I wonder if it has a problem dealing with nontraded debt in some settings. Case 1, Goldman holds $X of debt issued by Apple. Under the securities tax, Apple pays tax on the value of the debt, but Goldman gets a credit. Case 2, I borrow $Y from my neighborhood bank. It pays complementary tax on the value of the debt obligation, but I don’t get any sort of credit. Is this a problem? Gergen thinks not, but I’m not entirely sure on what grounds. Happy, however, to be enlightened on this.

A downer list in lieu of the format that went viral

Instead of 10 favorite teenage albums, I'll list 3 albums that really disappointed me when I was still in school:

1) Television, Adventure - Quite a nice album, but Marquee Moon had been such a stunning visionary triumph that this one was (and remains) a letdown.

2) Elvis Costello, Trust - I had thought his first 4 albums (plus an odds and sods collection) were great, almost like Dylan fronting the Beatles (plus 60s organ). This one was labored and uninvolving, which is how I've also felt about almost all his subsequent work.

3) The Who, Who Are You. - The Stones had already successfully responded to the punk / new wave movement with Some Girls. Townshend seemed sympathetic and ready to do it too. Plus I had quite liked (unlike most fans) their previous album, the deeply depressive and singer-songwritery Who By Numbers, and I had also found his contributions to a joint album with Ronnie Laine quite delightful. This one I found to be a tedious waste of time, decisively ending his career as an interesting artist.

2017 NYU Tax Policy Colloquium, week 1: Lily Batchelder's "Accounting for Behavioral Considerations in Business Tax Reform: The Case of Expensing"

Yesterday we had our first meeting of the 2017 NYU Tax Policy Colloquium. This is Year 22 of the long-running series, so we're ahead of Survivor in longevity, albeit behind it in the numbers both for separate seasons (they've had 34) and separate episodes. But we're probably ahead in screen time (so to speak), as our sessions are 110 minutes long and theirs are usually just 45 minutes or so, leaving aside commercials. Then again, we don't have "Reunion Episodes" after the last session.

On a more serious note, I'm glad to be co-teaching with Rosanne Altshuler, and to have had the above-titled paper by Lily Batchelder at our first session. (BTW, the paper has just been posted on SSRN, and is available here.)  I might also mention here - indeed I evidently am mentioning here - that next year and presumably thereafter I will be co-teaching the colloquium with Lily.

Here are 5 thoughts that I had in relation to the paper, although I was not this week's lead discussant:

1) The paper rightly uses a budget-neutral framework for assessing alternatives. It compares a corporate tax system with economic depreciation and a lower rate, to one with expensing but a higher rate. (The higher rate makes the two alternatives budget-neutral.) This is the right framework because the federal government faces an overall budget constraint, making it useful to decide which of these two alternatives is better for the same bucks. Plus, there may also be an underlying political decision regarding how much the business or corporate sector should pay.

The paper, rather than asking which of these two choices is better overall (note: it also discusses using an investment tax credit in lieu of expensing), asks which would lead to greater U.S. investment. The standard view is that this would be expensing. But the paper notes that public companies whose managers care only about currently reported book income, rather than about the companies' true long-term tax burdens, will be wholly unmoved by expensing, for the simple reason that accounting rules completely ignore its effect, by reason of their treating the time value of money, with respect to when one pays taxes, as zero (!!!).

This is great stuff and an important contribution. But the current policymakers in Washington aren't necessarily doing tradeoffs under an overall budget constraint. There may be some limits in the back of their minds, or else they would simply make the corporate rate zero, but I think these are optical and have nothing to do with actual numbers (which they will finagle if they need to, never mind the Senate's Byrd Rule). So I suspect that, in their framework, such as it is, a lower rate and expensing are viewed additively, not as alternatives involving tradeoffs.

2) The paper makes some good points about transition issues. E.g., why lower the rate that corporate investments made in the past will make in the future? A second transition issue is: Why give companies a windfall from having deducted accelerated depreciation against a higher rate in the past, and then getting to include the resulting income at a higher rate in the future? The Reagan Treasury, in their 1985 "Treasury II" tax reform plan that eventually gave rise to the Tax Reform Act of 1986, tried to address this issue through what they called "depreciation recapture." In principle, both of these issues might be worth addressing if we lower the corporate rate, but don't hold your breath and expect this to happen.

3) After noting that the accounting rules deny companies any credit for the genuine economic benefit that they receive by reason of lowering their tax burdens in present value via expensing or accelerated depreciation, the paper further explains that investors would not easily be able to figure out the truth for themselves via things that are discernible from the financial statements. This leads to the question: Why don't companies try to communicate this to investors somehow? It seems as if they "should," and yet apparently they don't.

4) Suppose we agree that, because accounting treatment dwards economic reality in shaping both company behavior and investor perceptions, the tax system fails to generate the positive investment response that it "should" get by reason of allowing acceleration or expensing. Does this suggest that there are further opportunities the tax rules could try to exploit? E.g., suppose tax prepayment were required, way in advance, in zero-interest-bearing accounts, and that the accounting rules treated these as irrelevant until the tax liabilities actually accrued. Then the government would be gaining present value tax revenue, and (in the pure case) the companies would be acting as if they hadn't lost anything in present value. The example is deliberately fanciful and indeed unrealistic - but the point it makes is that, insofas as the accounting rules induce companies to ignore time value considerations with respect to their tax liabilities, there might be opportunity for policymakers to make greater use of the lacuna than merely by using economic depreciation in lieu of expensing.

5) As per my prior blog post describing a (sort of) new corporate tax reform idea, one might conceivably want to tax the normal rate of return, when earned by companies, at a lower rate than the tax rate on rents or extra-normal returns. One way to do this might be by allowing companies interest on basis, but taxing that interest at a lower rate than the corporate rate generally, The paper pushes towards taxing the normal rate of return at the same rate as rents, but one might nonetheless end up in an intermediate position.

UPDATE: Lily blogs at Tax Vox about her paper here.

Corporate tax reform idea

I am about to write and post a blog entry regarding yesterday's first session of the 2017 Tax Policy Colloquium, at which we discussed Lily Batchelder's paper, Accounting for Behavioral Biases in Business Tax Reform: The Case of Expensing.  But here I just thought I'd mention a corporate tax reform idea that I came up with while thinking about this paper, and that I believe ought to be on the list that people consider over time.

There has been a lot of discussion in recent years of the distinction between (a) the "normal" return on investment that businesses expect to get when they invest, and (b) rents or extra-normal returns. Everyone agrees that the latter should be taxed, and there are grounds for trying to tax them at a high rate. Income tax advocates want to tax the former as well, while consumption tax advocates want to exempt the former.

Even if one doesn't exempt the normal return (an issue that Lily's paper helps to illuminate), there are strong grounds for taxing it a lower rate than rents. But how could one do this in practice, given the difficulty of telling them apart case by case?

One of the main virtues of Edward Kleinbard's business enterprise income tax (BEIT) proposal is that it does exactly this. But here is a simpler, less elegant way of addressing the same issue. Or more precisely, here is a way of using the cost of capital allowance (COCA) feature from BEIT without including all the rest.  While this probably leads to a worse proposal than Kleinbard's (or at least a far more skeletal one at this point), it's worth having on the list simply so thoughtful people will have more possible choices to consider (e.g., if they think that BEIT is not politically feasible). It would go as follows.

1) Use economic cost recovery rules, rather than expensing or accelerated cost recovery - the classic income tax approach.

2) Allow interest on unrecovered basis, increasing its amount. If we stop here, this converts the seeming income tax back into a consumption tax. This, so far, is the proposal that David F. Bradford ended up favoring. He preferred it to expensing, to which it is present value-equivalent if one gets the interest rate right, because it works better at avoiding anomalous transition effects when the tax rate changes. (Without the Bradford transition issue, once one allows interest on basis - if at the proper rate - it doesn't actually matter whether one is following economic depreciation correctly or not.)

3) The twist, borrowed from BEIT & COCA: Treat the interest on basis as taxable to the business, but at a lower rate than that under the business or corporate tax generally.  In principle, this should result in one's taxing the normal return (i.e., the interest return on basis) at a rate that is positive but below that for the rents, which in principle should be facing the regular corporate tax.

This leaves a whole lot of other things to be considered separately. E.g., what should we do about interest deductions. And I am not pushing it against BEIT; rather, I'm suggesting that one piece of BEIT could be adopted by itself even if one didn't do the rest.

What BEIT does instead of this is tax the normal rate of return to owners, rather than to the businesses, based on their "outside" basis rather than the business's "inside" basis. The reason for using inside basis instead, and in effect placing it in a separate tax base to which a separate rate applies, is simply to have more options on the table. Suppose, for example, that this proved optically superior to full-out adoption of BEIT and COCA, even if substantively inferior.

For more on BEIT and COCA, see this and this.

Radio appearance to discuss taxes and jobs

This morning at 7:15 am EST, I was a guest on a New Orleans radio show, hosted by Tommy Tucker on WLL. (This was 6:15 am New Orleans time.) The topic was our new president's trade policies, in relation to employment.

With regard to using tariffs, either generally or selectively against particular companies that move plants out, as a way of increasing employment, here's what I said. Let's travel back to 2012, when Romney was running against Obama. Some economists believed Romney's plans were better for the economy and jobs, others believed Obama's plans were better. Now let's go to the present. Not a single reputable economist in the country believes that Trump's trade policies will increase employment. And these aren't just academic economists - real businesses pay real economists real money to help them anticipate economic developments.

I noted that it might be easy to arrange a story every week about some company that supposedly moves in jobs or decides not to move them out due to Trump. Companies have every reason to court both good publicity in the country and favor with the current administration by cooperating to devise these stories, even if they aren't really true regarding what happened and why. But even if they were true, in a country where (even when things are going great) hundreds of thousands of jobs are created and lost on a regular basis in real time, they're utterly trivial in terms of the overall employment situation.

Retaliatory tariffs against particular companies might be illegal under U.S. law. They would also risk prompting retaliation by other countries that could cost us jobs and raise consumer prices. Plus, even if a particular company was affected by the threat, when you think about the level of dynamism and change in the world economy, this focus on particular companies that might move out particular jobs is a bit like trying to calm the Pacific Ocean by putting a giant concrete block at one point where the waves are a bit choppy. You can't affect the ocean as a whole that way.

A listener asked me what I would do to promote employment. I said for the short term, stimulus, such as building infrastructure, and in the long run, better education, job training and re-training, social insurance and other (such as childcare) support that makes it easier for people to work.

Then I was asked about the border adjustment plan in Ryan's so-called "Better Way." I said, this is a really interesting proposal, we could have a 3-hour academic seminar discussing it. But the big point is this. While it might conceivably lead to a good place, both the transition of getting to it and the fit between it and the rest of the tax system create gigantic problems that make me very nervous and that would need to be carefully addressed over a long implementation period - which isn't how it will happen, if it does happen.

On that note, we were done.

Not to live in the past, but ...

The last novel that I mentioned in the prior blog post reminds me of what is surely the most astounding 3-film run in the history of cinema: Hitchcock's Vertigo, followed by North by Northwest, followed by Psycho.

The first of these was so perverse and personal that, by his standards, it was both a critical and commercial failure at the time. So he decided: "I'll show them," by making one of the most delightful and perfectly commercial films ever, albeit still wholly rooted in his own distinctive feel for paranoia. Then, when the studios wanted him to just keep making more of the same, he went for maximum shock and discomfort, at a time when doing this was daring and startling.

The individual greatness of each of these three films is augmented by seeing how they change course and react to each other.

Books I read on the beach

Counting right before and right after my 6 days in Jamaica:

1) Theodore Dreiser, The Titan - I had initially thought that, in my literature book, I would only write about the predecessor volume, The Financier. But this one is in some ways even more interesting sociologically. It foreshadows Ayn Rand (and is much closer to that than to Horatio Alger), except that the author stands somewhat apart from the lead character's regard for his own "greatness." Someone, perhaps David Frum, called this book an Ayn Rand novel written by a socialist, and that's a good way of putting it.

2) Lindsay Cameron, Biglaw - I read this for my first-year reading group, covering 4 novels about law school or  legal practice (with the other three being by Lisa McElroy, David Lat, and me). The idea is that we read the books, then meet and talk with the authors, including Ms. Cameron this coming Wednesday. Biglaw does a great job of satirically yet horrifyingly conveying the NYC Biglaw corporate setting. I certainly hope that it's exaggerated for literary effect, rather than meant to be accurate! But I fear that it actually is all too accurate. Something to ask the author about.

3) Edith Wharton, House of Mirth - also for my literature book. Great and very sad; I was half or more of the way through before I saw my line of approach for writing about it. An odd point about the book's structure: it's all about Lily Bart having one chance after another after another after another to succeed in achieving complete financial security. But she throws all of these chances away, sometimes whimsically or self-indulgently, but often based on her actually accepting the Old Money social ideals that everyone else realizes by now are wholly fraudulent.  And she's the only one who still actually believes in those ideals (which are aesthetic, not by any means ethical).  Okay, Selden believes in them too, but they cost him nothing rather than everything.

4) Booth Tarkington, Alice Adams - interesting Midwestern early 20th century social portrait of a whimsical and ill-starred character, by the author of The Magnificent Ambersons (which I may also, though only briefly, write about in the literature book). I kept picturing a flightier Katherine Hepburn (who played the title part in the movie of Alice Adams), but the book mercifully lacked the movie's saccharine ending.

5) Margaret Millar, A Stranger in My Grave - interesting mid-century noir fiction, although the resolution was a bit pat.

6) Georges Simenon, The Mahe Circle - very dark and perverse, concerning a mad and suicidal obsession. One of his "dur" rather than Maigret novels.

7) Elmore Leonard, 52 Pickup - fun reading for the plane, though it got a bit tense near the end.

8) Pierre Boileau and Thomas Narcejac, Vertigo - The novel that was the basis for the immortal Hitchcock film. They apparently wrote it in the hope that he would option it. Set in 1940s France, and with a couple of key plot differences including a different (but also dark) ending. Obviously, I knew what the key plot twist would be before it happened. Quite good in its own way, especially if you come to it from the movie and find the transmutations interesting.

I seem to have used the word "dark" quite a lot in this blog entry. Sorry about that from a writerly standpoint, but it certainly is the word of the day for me these days.

Back in the U.S.A.

It's a shame to have left behind this:

But at least I got to come home to this:

Temporary escape

I'm leaving for a warm climate (outside the U.S.) for 6 days, returning late on January 20 as I don't teach my first class (Tax Policy Colloquium with paper by Lily Batchelder) until Monday, January 23.

Three ways a president can make money through his businesses, absent a blind trust

One is to shape government policies, procurement decisions, etcetera, to favor his businesses. A second is to get business from others who seek to curry favor (the emoluments issue). A third is to have the businesses act on inside information about impending news before it becomes public.

This should not be normal

It's not just Trump.

As Rebecca Kysar notes, courtesy of Tax Policy Center estimates:

"The House blueprint ... awards three-quarters of its tax cuts to earners in the top 1 percent ....  Even factoring in favorable macroeconomic effects, the plan would also add trillions to the country's debt, creating an unsustainable fiscal chasm."

We've been too gaslighted for too long to find this surprising. But if you step back for a second and just think about it in political, social, economic and budgetary context, its reckless and malicious irresponsibility beggars belief. In no still-sane country could such a plan even be proposed by anyone, apart from tin-hat lunatics ranting on street corners.

This is not normal.  A country in which it has become normal is not normal.