My paper on minimum taxes

I've finally posted on SSRN my paper on minimum taxes of various kinds. Its specific title is: What Are Minimum Taxes, and Why Might One Favor or Disfavor Them? It's available here.

The draft has a March 4, 2020 date, to reflect that I haven't yet changed it to reflect some very useful comments that I've gotten from several readers since that time. But I not only appreciated those comments, but plan to make use of them in revising / improving the paper. Only, the time for doing that hasn't quite come yet, so in the interim I thought I would solicit more feedback regarding the original version.

I kind of like the paper, if I do say so myself, but it's definitely pitched in the conceptual albeit applied space, and is aimed at people who know a fair amount about current income tax issues, in the US and internationally, rather than being for generalists. But it may be of interest to tax law professors, tax practitioners, tax policymakers in Washington and abroad, economists who are interested and steeped in applied income tax issues (especially but not just international ones), and other people who are following, say, the OECD GloBE process.

The paper's abstract goes something like this:

The alternative minimum tax (AMT), a key and at the time widely lauded feature of the Tax Reform Act of 1986, soon fell into disrepute and was subsequently scaled back, to general approbation and relief. Yet in recent years minimum taxes have come back into vogue. For example, two key international tax provisions in the 2017 tax act (GILTI and the BEAT) had minimum tax structures, and the OECD has recently issued proposed guidelines for the design of a global minimum tax, meant for multilateral adoption.

In light of minimum taxes’ surprising return to center stage, this paper explores such issues as the following:

1) the purposive, technical, and semantic contours of instruments we call “minimum taxes,”

2) why a minimum tax structure matters – pertaining, for example, to the creation of clientele effects and discontinuous marginal incentives,

3) the lessons to be learned from the rise and fall of the AMT,

4) minimum taxes’ similarity to foreign tax credit limitations and loss nonrefundability,

5) the design question of whether, if highly profitable companies’ financial accounting income were made tax-relevant, this should be done through a minimum tax,

6) how one might rationalize (or not) the BEAT’s minimum tax structure, and

7) the main issues posed by global minimum taxes, including GILTI and the OECD’s Pillar Two GloBE proposal.

Branko Milanovic review of Literature and Inequality

Branko Milanovic, who is one of the world's leading scholars on the global history of economic inequality, has posted a review here of my new book, Literature and Inequality.

The review lauds my "very skillful analysis" of the societies discussed in the books that feature in my study, and adds that "Shaviro's book could set the tone for a new type of social studies that would combine the usual empirical work with archival research and valuable fiction."

The two main dialogue points he raises in the review pertain to: (1) marriages as potentially unsettling the social order when they are made, not just dynastically, but based on all of the diverse personal elements that can shape it in daily life, and (2) the picture of how great fortunes are made in classic fiction, versus the world of Econ 101 textbooks. As he notes, the books I discuss feature plenty of "swindles, cheats, cronyism, plunder, and bribery," as distinct from acts of productive entrepreneurship. It of course figures that those methods tend to be more fun to write and read about than the meticulous work of building up a successful business. Also, as I note in the book, artistically ambitious fiction writers tend not, as a group, to be enormously fond of business or the business classes. Nonetheless, he concludes that the fictional narratives, given real world parallels, should "give us pause when entertaining a more benevolent view of large fortunes in capitalist societies."

I very much look forward to our further discussing these and other issues during the Zoom session regarding my book that is scheduled for this October.

My follow-up book-in-progress to Literature and Inequality

In my prior post, I promised a follow-up to how my plans for a sequel to Literature and Inequality have developed.

Literature and Inequality looks at 9 books, 3 from each of 3 eras. It goes:

(1) England and France during the Age of Revolution: Austen's Pride and Prejudice, Stendhal's Le Rouge et le Noir, Balzac's Le Pere Goriot & La Maison Nucingen.

(2) Victorian and Edwardian England: Dickens' A Christmas Carol, Trollope's The Way We Live Now, Forster's Howards End.

(3) Gilded Age America: Twain & Warner's The Gilded Age, Wharton's The House of Mirth, Dreiser's The Financier & The Titan.

Part 2, as originally envisioned, was going to repeat the structure of having 3 eras with 3 works each, in this case the 1920s through World War II, then the 1950s through perhaps the 1970s (i.e., the peak of the "Great Easing"), then the 1980s to the present. I also anticipated looking not just at novels, but also possibly at plays, such as Death of a Salesman, and films, such as It's a Wonderful Life and The Wolf of Wall Street.

But I have decided instead to write something shorter and more focused. Here's the current state of the play, which I have been pursuing actively while sheltering in place at home. Current working title, which may change and might require a more informative subtitle: Bonfires of the American Dream.

Here my main premise is that two deeply embedded U.S. ideological sets of values, which I dub egalitarianism and market meritocracy, are both each contested internally and in tension with each other, in ways that make extreme high-end inequality very fraught here, and which texts of various kinds can help us to understand. I propose to illustrate how texts can be used to illuminate these tensions through examples drawn from each of three formats: lectures or speeches, literary fiction, and film - rather than to draw sweeping general conclusions from a limited data set.

Part 1, of which I have completed a first draft, discusses and contrasts (1) Russell Conwell's Acres of Diamonds lecture (very famous and prominent cultural artifact from the 1870s to 1920s) and (2) the John Galt speech in Ayn Rand's Atlas Shrugged.

Part 2, on which I am making (knock on wood) good progress at present, discusses The Great Gatsby. I take an interest here not just in the text itself, but also in how its reception has varied sharply as between eras.

Part 3, on which I've done some preliminary research, will aim to discuss and contrast It's a Wonderful Life and The Wolf of Wall Street.

The whole thing will be, I hope, no more than say 45,000 words. And if the project keeps going well, I should certainly be able to finish writing a complete first draft this summer.

Branko Milanovic on literature and inequality

This new blog post by Branko Milanovic discusses issues of common interest, including his book, The Haves and the Have-Nots, which helped to inspire my Literature and Inequality. (BTW, he calls my book "new and exciting," and promises to review it in his next post.)

The Haves and the Have-Nots contains brief vignettes on Pride and Prejudice (which I also discuss, at greater length), as well as Anna Karenina (which I am currently re-reading, as it happens, but just for fun and I don't anticipate writing about it).

His discussion of Pride and Prejudice was most helpful to me, e.g., because he uses the income numbers that Austen provides in the book, along with his own research in economic history, to reveal that the "middle-class" Bennets were actually, if just barely, in the top 1% if one were to rank the era's English households by per capita income. But he offers vignettes that emphasize the numbers (and their relevance), whereas I essay deep dives that look at broader cultural issues. So they are complementary efforts.

He suggests that I ought to have discussed a Fitzgerald novel, such as Tender is the Night or The Great Gatsby, in connection with the Gilded Age. But despite the similarities between the 1920s and the Gilded Age itself, I had planned to save this for Literature and Inequality's then-intended Part 2 or sequel, as part of a post-World War I sequence that might also have included Waugh and Wodehouse.

As it happens, my thinking about a follow-up book has changed since then. I decided to do something shorter and more focused - but including The Great Gatsby. More on that in my next post.

Upcoming TPC-UNC event on income-shifting by multinational corporations

On Thursday, May 21, from 9:30 am to 12 pm, the Urban-Brookings Tax Policy Center and the University of North Carolina Tax Center will be cosponsoring a Zoom event on income-shifting by multinational corporations. I am among the speakers. More information about the event is available here, and the registration page is here.

After a keynote address by the OECD's Pascal Saint-Amans, there will be two panels. The first will discuss the empirical issues, and the second, on which I am among the speakers, will focus on evaluating the OECD's response to multinationals' income-shifting efforts.

Book event now scheduled for the fall

It's still a ways off, but it looks like we'll be having a Zoom book event at NYU Law School on Literature and Inequality, on Thursday, October 15, from 4:30 to 6 pm EST. Kenji Yoshino and Branko Milanovic will be offering comments.

Short piece discussing Literature and Inequality

Westview, the neighborhood paper in my NYC neighborhood, has just published a short piece that I wrote discussing my new book.

The link is here, or for this week's entire issue here.

Given its brevity, I've pasted in the full text of my piece below:

Jewish immigrant families from a century ago, such as my grandparents on both sides, often had a distinct set of intellectual and artistic values. Suppose that, of two siblings born to a similar family, one had turned out to be Bill Gates, and the other had become the third violinist at the Philharmonic. Everyone in the family would probably have said, “It’s a shame Bill didn’t turn out as well as his sibling.”

With such a background, it was predictable that if I didn’t find a career in the arts (though I’ve written a novel, the royalties wouldn’t pay for a Fresh Direct shipment) I would at least become an academic. In that capacity, I’ve been teaching and writing for more than thirty years, mainly about tax policy, but also in related areas such as social justice, inequality, budget deficits, Social Security, and Medicare. But for fun I read works outside my fields, focusing especially on literature, high quality genre fiction, and history.

When Thomas Piketty published Capital in the Twenty-First Century, I realized that I could now combine my professional and side interests. Piketty had the great idea of using works of literature as a tool for increasing our understanding of inequality in different eras. Unfortunately, however, his discussion of such classic works as Jane Austen’s Pride and Prejudice and Honoré de Balzac’s Le Père Goriot is neither very deep nor entirely accurate. For example, he views Goriot as showing that early nineteenth century France was a pure rentier society, in which only inherited capital mattered—not what one achieved personally. This ignores the fact that Goriot is in large part the story of Eugène de Rastignac, to this day the preeminent arriviste or social climber in all of French literature.

I decided that I could do better than Piketty in using literature to help us understand inequality in different eras (although I respect his great work with economic data). In Literature and Inequality: Nine Perspectives from the Napoleonic Era Through the First Gilded Age, just published by the Anthem Press, I take a deep dive into a set of classic works that range from Pride and Prejudice and Goriot to Charles Dickens’ A Christmas Carol, Mark Twain’s (with Charles Dudley Warner) The Gilded Age, and Edith Wharton’s The House of Mirth.

My aim has been to enrich and deepen, qualitatively albeit anecdotally, what bare economic accounts can tell us about the feel of inequality, and how it was both rationalized and condemned, in different countries and different eras. I explore, for example, the cultural differences between American and English inequality, and the relationship between America’s two Gilded Ages: that which occurred during the late nineteenth century and that which exists today.

The book was fun to write, and I hope is fun to read. It does not require familiarity with the works that I discuss. Literature and Inequality is available from Amazon and other online booksellers, including in a Kindle edition, and I would be delighted to discuss it with any readers who wish to pursue a dialogue about it.

Mel Thomas

I am also saddened by the recent death of long-time Joint Committee on Taxation staffer Mel Thomas. Behind a paywall in Tax Notes, Martin Sullivan has published a tribute that begins as follows:

It was 2 a.m. when Senate Minority Leader Bob Dole wanted details on what boats would be subject to the proposed luxury excise tax. Negotiations were touch-and-go on a $500 billion bill. Only leadership and one staff member were allowed in a small conference room in the U.S. Capitol. Fortunately, that staffer was Mel Thomas, an expert on tax law and on boating.

Whether with a powerful member or a wet-behind-the-ears junior staffer, Mel Thomas always had time to share the encyclopedic knowledge he had gathered through years of study and experience. Mel was a teacher. His classroom was Congress. If he had been a professor, he would have been one of the rare breed who combined a world-class intellect with five-star teaching reviews. His imposing fullback physique did not fool anybody for a second. This old-school gentleman had a heart of gold.

Smart as Solomon. Underpaid. Behind the scenes. Nonpartisan. Dedicated. Hardworking. Never forgot it was a privilege to be on the staff. When the real work began, you wanted Mel in the room.

I got to know Mel when I was on the JCT staff between 1984 and 1987. We didn't work on the same matters, but it was a small staff and he had a large footprint. He was beloved by staffers - but at times less so by lobbyists! - either despite or because of his demanding rigor and excellence. A favorite quote: "You're wrong, but go ahead."

Ranjana Madhusudhan

I''m very sad to learn of the death of Ranjana Madhusudhan, former president of the National Tax Association, as well as Chief Economist for the New Jersey government, whom I always enjoyed seeing at the annual NTA meetings.

Zoom session last Thursday concerning my minimum tax paper

Courtesy of Leandra Lederman, here from youtube is the video of my Zoom presentation last Thursday regarding my new paper on minimum taxes. It includes a run-through of my slides for the talk.

Recent virtual travels.

Yesterday I greatly enjoyed virtually presenting, via Zoom, my new paper (soon to be posted on SSRN), What Are Minimum Taxes, and Why Might One Favor or Disfavor Them? The session was hosted by Leandra Lederman at Maurer Law School, and but for the pandemic I would have presented it there physically. Today, I was equally glad to present the paper virtually at the Critical Tax Conference, hosted by Neil Buchanan at U Florida Law School.

Although I like meeting in person with my colleagues at other schools when it is safe to do so, better Zoom than nothing. An hour from now, I will be attending my first-ever Zoom cocktail party, marking the end of the Critical Tax Conference's first day. I'm pretty sure it's BYO cocktail, as physical delivery by Zoom of actual drinks is still just on the drawing board.

Here is an abstract for the minimum tax paper:

The alternative minimum tax (AMT), a key and at the time widely lauded feature of the Tax Reform Act of 1986, soon fell into disrepute and was subsequently scaled back, to general approbation and relief. Yet in recent years minimum taxes have come back into vogue. For example, two key international tax provisions in the 2017 tax act (GILTI and the BEAT) had minimum tax structures, and the OECD has recently issued proposed guidelines for the design of a global minimum tax, meant for multilateral adoption.

In light of minimum taxes’ surprising return to center stage, this paper explores such issues as the following:

1) the purposive, technical, and semantic contours of instruments we call “minimum taxes,”

2) why a minimum tax structure matters – pertaining, for example, to the creation of clientele effects and discontinuous marginal incentives,

3) the lessons to be learned from the rise and fall of the AMT,

4) minimum taxes’ similarity to foreign tax credit limitations and loss nonrefundability,

5) the design question of whether, if highly profitable companies’ financial accounting income were made tax-relevant, this should be done through a minimum tax,

6) how one might rationalize (or not) the BEAT’s minimum tax structure, and

7) the main issues posed by global minimum taxes, including GILTI and the OECD’s Pillar Two GloBE proposal.

And finally, courtesy of Leandra Lederman, here is a virtual snapshot of the Maurer session yesterday:

Literature and Inequality update

I'd still prefer a lower price (authors are that way), but the Amazon Kindle price for Literature and Inequality has been lowered by 25 percent.

BTW, here is the back cover blurb from Daniel Markovits of Yale Law School, author of The Meritocracy Trap:

"Literature and Inequality is an eye-opening and powerfully affecting book. By rereading literary classics through the lens of high-end inequality, and by emphasizing their fascination with the contest between patrimonial complacency and meritocratic ambition, Shaviro opens a new window into familiar texts. And by confronting us with the lessons of his readings, Shaviro compels a new reckoning with the rising high-end inequality and regenerated caste system that increasingly plague our own age."

A coupla pictures

Just to lighten the mood, here are a coupla pictures. The first is me doing some writing yesterday. I have a new project that's going well at the moment. No mask because it's secluded private space.

And this, taken from the files (it just happened to be on my laptop) is the roundabout that gets mentioned in Penny Lane. I took this photo some years ago, during a side trip in Liverpool while I was attending a tax conference in Oxford. This year's in-person conference, which I had planned to attend, has of course been canceled.

Why are they so wrong?

I have been struck by the tendency of conservative intellectuals, including some I know (and am too fond of personally to rake over the coals in public) to get the pandemic so wrong. Non-Trumpists are included in this group; it's a more general ideologically driven myopia. They of course are going to want to forget it (and avoid learning from it) later on, but the lessons are worth considering even without any finger-pointing or shaming component.

Hostility to scientific (and all other) expertise, within the adjoining ideological swamp in which they swim, is one factor here, although some of these folks are genuine intellectuals. A second, of course, is reflexive anti-government sentiment, so that any sort of coordinated national response, especially at the expense of economic output of the sort that GDP measures, is immediately suspect. (Quick test: If, pre-Great Recession, you didn't believe in Keynesian policy responses to severe downturns, did you learn from that? Some did, e.g., Richard Posner, but others didn't.)

But another important contributing intellectual fallacy is over-estimating the extent to which relatively benign and sustainable equilibria will rapidly and spontaneously emerge in all "markets," including, say, the interaction between viruses (or other micro-predators - the particular substrate doesn't matter to over-generalizers) and their hosts.

Suppose, for example, that one has in mind the model of economic equilibrium in the market for consumer goods - Econ 101-style - along with the usual raft of assumptions suggesting that it will always spontaneously and instantaneously emerge in the absence of centralized interference, which of course is assumed, for its part, to be certain of miscarrying. (BTW, trained economists who actually understand economic theory in greater-than-Econ-101 depth realize that these models do NOT predict when or how fast equilibrium will emerge in multiply constrained real world conditions.)

Whether and when a relatively benign and sustainable equilibrium might emerge is really a matter of how the numbers play out in very complex and multifaceted settings where we don't know any of the inputs. But benign, sustainable equilibria don't always emerge, even in the very long term if too much gets destroyed along the way.

Consider the Black Death, American chestnut blight, Dutch elm disease, and the global overkill by hominins of large landed species that didn't coevolve with them. In each case, one who was sufficiently committed, intellectually and emotionally, to believing in the rapid, inevitable triumph of spontaneous order and the invisible hand would presumably "predict" that the runaway phenomenon will stop itself. And it is indeed true that some of the relevant forces will always be pushing in that direction. But those forces don't necessarily prevail in any particular setting or time frame.

Global warming is of course another example. Many of the same people who are embarrassing themselves with respect to the pandemic have likewise been doing so on climate change, apparently because their ideology demands that they predict that the benign (from our standpoint) feedback effects will overtake the adverse ones - although in fact it is purely a question of how particularized phenomena happen to play out mathematically.

Unfortunately, if the rapid emergence of (at least relatively) benign spontaneous order in all "markets" (defined as broadly as possible) is your religion,  then you are going to be very wrong sometimes.

Preview of Literature and Inequality

Most of the book's first 49 pages can be viewed for free here.

The Amazon Kindle version and preview aren't up yet, but I hope soon. The B&N Nook version appears to be live.

Fall 2020 NYU Tax Policy Colloquium

At this point, we obviously do not know what the fall 2020 semester will look like, be it at NYU Law School or anywhere else. But the possibilities surely include its taking place more or less as normal, or else perhaps via Zoom.

In any event, the schedule was 99% set when the coronavirus stoppage got rolling, so I figured, why not take the last couple of steps to complete it.

I should note that I don't yet know for sure who will be my co-convenor. That, actually, was up in the air even before the transformation.

Anyway, with full hopes (whether or not confidence) that this will actually happen, here is what we hope to have on tap:

SCHEDULE FOR FALL 2020 NYU TAX POLICY COLLOQUIUM

(All sessions meet from 4:00-5:50 pm in Vanderbilt 208, NYU Law School)

1.     Tuesday, August 25 – Steven Dean, NYU Law School

2.     Tuesday, September 1 – Daniel Shaviro, NYU Law School

3.     Tuesday, September 8  – Natasha Sarin, University of Pennsylvania Law School

4.     Tuesday, September 15 – Adam Kern, Princeton Politics Department and NYU Law School

5.     Tuesday, September 22 – Henrik Kleven, Princeton Economics Department

6.     Tuesday, September 29 – Leandra Lederman, Indiana University Maurer School of Law

7.     Tuesday, October 6 – Michelle Hanlon, MIT Sloan School of Management

8.     Tuesday, October 13 – Steve Rosenthal, Urban-Brookings Tax Policy Center

9.     Tuesday, October 20 –Michelle Layser, University of Illinois College of Law

10.  Tuesday, October 27 – Clinton Wallace, University of South Carolina School of Law

11.  Tuesday, November 10 – Owen Zidar, Princeton Economics Department

12.  Tuesday, November 17 – Abdoulaye Ndiaye, NYU Stern Business School

13.  Tuesday, November 24 – Lilian Faulhaber, Georgetown Law School

14.  Tuesday, December 1 – Erin Scharff, Arizona State Sandra Day O’Connor College of Law

My book Literature and Inequality is now live

I realize that such things seem trivial right now, but my new book Literature and Inequality has now gone live, as per the Anthem Press link here and the Amazon link here.

UPDATE: Barnes and Noble has a better price for Literature and Inequality.

Remarks from 2019 Fordham international tax conference

Sometime back in October 2019, Fordham Law School hosted a symposium entitled "The Future of the New International Tax Regime." Remarks (including mine) from the session, which featured a number of well-known international tax scholars, have now been printed in physical form by the Fordham Journal of Corporate and Financial Law, and are also available online.

You can find the full proceedings here. My remarks are at pages 250-258 if you go by the numbered physical pages, aka pages 33-41 within the posted file.

Literature and Inequality book launch, cover art

With events being canceled all over the place, I realized that it was time to make things official, and scrap the once-firm plans for the following book event:

New York University School of Law

invites you to a discussion of

Literature and Inequality: Nine Perspectives from the Napoleonic Era Through the First Gilded Age (Anthem Press)

with author

Daniel N. Shaviro, Wayne Perry Professor of Taxation

Branko Milanovic, Stone Center Senior Scholar, Visiting Presidential Professor

The Graduate Center, CUNY

And

Kenji Yoshino, Chief Justice Earl Warren Professor of Constitutional Law

Monday, April 13, 4:30 p.m.

All things permitting, including in particular the state of life here more generally, I anticipate this event's being rescheduled for the fall.

Meanwhile, here is an advance look at the book's cover art:

New article (coming soon) on minimum taxes

I've just completed a new article draft, entitled "What Are Minimum Taxes, and Why Might One Favor or Disfavor Them?" It addresses, among other topics:

(1) the purposive, technical, and semantic contours of what the term "minimum tax" is generally used to mean, along with the reasons why these matter - relating, for example, to the creation of clientele effects and discontinuous marginal incentives,

(2 the lessons to be learned from the rise and fall of the alternative minimum tax (AMT),

(3) the Biden versus Warren design question of whether, if one gave tax consequences to highly profitable companies' financial statement accounting income, this should involve the use of a minimum tax structure or a standalone structure,

(4) the relationship between avowed minimum taxes and provisions, such as loss nonrefundability and applying foreign tax credit limitations, that set a zero percent floor on a particular tax rate,

(5) the issues posed by global minimum taxes, including GILTI in U.S. law and the OECD's recent GloBE minimum tax proposal.

In general I am quite skeptical about minimum taxes, although there may at times be optical or political economy reasons for preferring them to a given, limited set of realistically available alternatives.

I'll post it on SSRN soon, but probably not until I get some feedback from presenting it. The problem with posting too soon is that some of one's readership looks at it too early, before it's been improved. Barring travel restrictions from the coronavirus, I'll be presenting it at the Critical Tax Conference in Gainesville, FL, on April 3 or 4, and then at the Maurer Law School's 2020 Tax Policy Colloquium (in Bloomington, IN) on April 9. Also possibly in Oxford this summer, if international travel is feasible.