Retired from squash

Upon reflection, I think I'm genuinely done with squash. Tennis is just much easier on my various joints and limbs.

"It's okay, Dad - you've had a great career, but you just have to stop now," is how one of my kids put it to me before I finally decided. Ah, the impressionability of youth.

On a related theme, we all went to the U.S. Open yesterday. My wife and I have been going annually, with only one exception we can recall, since moving to NYC in 1995. But this is the first time we took our kids. This actually was double the fun, although we had to shorten the day somewhat. Most controversial moment involved translating for their benefit some of the mouthing we heard from Sebastian Grosjean when he got mad at himself during the course of his (eventually successful) match with the towering Max Mirnyi. Mauvais-this-or-that was no big deal, but I also felt compelled to enlighten them when he said something-or-other putain.

Sunlight in Vermont

The title of this post is a Captain Beefheart reference - let's see who's the first to identify it.

I spent most of the last 4 days in Woodstock, Vermont (not THAT Woodstock), attending a conference that has been run by Al Warren of the Harvard Law School for many years (approaching twenty), and that is genuinely an important institution in the tax legal academy. This both in the sense that it can have important effects on people's stature and reputation in what I like to call the biz, and in that numerous subsequent publications may be strongly influenced by it. E.g., my forthcoming article in the Stanford Law Review, which I have previously linked here, changed significantly, reflecting the input of Jeff Strnad (my discussant last year) in particular.

The Woodstock proceedings are confidential to the participants (unlike my colloquium, which is open to the public). If I published inside details about it here, I not only would be in hot water, but would deserve to be. But if I may throw in another far-fetched cultural reference, it's a bit like a much less racy version of the movie Brief Encounter. Many of the same people get together every year, and the thing evolves over time. Indeed, to a serial attendee the way it has evolved over the years is genuinely sociologically interesting.

It's in part a generational story, featuring three distinctive age cohorts, my own being the one in the middle. Needless to say, in my version we're the heroes. Other versions may differ. And it's also a story about various pairs who have had fights over the years, but who at some point couldn't quite keep a straight face about it any more. From drama to schtick, which certainly qualifies as a benign evolution.

Throw in two and a half hours of outdoor tennis, an hour on the elliptical machine made tolerable by Squeeze's "Cool for Cats," and numerous desserts steadfastly avoided, and the only downside was that I missed my family.

Gonzalez resignation

Who will be named to replace Gonzalez? A friend e-mailed the suggestion that perhaps it will be Harriet Miers. But I have an even better idea - Lewis Libby.

The surge is working!!!

Not in Iraq, of course. But it's doing really well in Washington.

The great escape

Narrowly skirting disaster can be exhilarating.

Okay, let's be a bit less hyperbolic here. Narrowly skirting major inconvenience, annoyance, discomfort, and waste of time can leave one with a feeling of relief and release.

Yesterday afternoon I headed to LaGuardia Airport to take the 5 pm shuttle to Washington DC, where I was planning to attend a meeting early this morning. Economists at the National Bureau of Economic Research (NBER) are doing a whole lot of interesting research projects that are funded by the Social Security Administration, so they have a meeting where outside commentators, including several prominent law profs who share my interest in Social Security, give their thoughts and suggestions about the list of new research proposals that are being funded. Many on the list were quite interesting - e.g., Kent Smetters has a very intriguing one on the political economy of Social Security privatization and pre-funding around the world (not to suggest that the other proposals are less interesting).

Anyway, I was supposed to be at the outside commentators' meeting early this morning, but when I got to the airport last night, I realized that I was looking at many, many hours of delay. Best estimate was that we would board an hour late, sit on the runway for 2-3 hours waiting in line, and then POSSIBLY actually fly to D.C., which I gather was racked by storms.

I was discussing this with an English bloke who was waiting for the same flight but had heard more about what was happening, and who was unhappy because it looked like he was going to miss a Squeeze concert (I saw Squeeze in NYC last Friday but haven't posted about it). "You're screwed," he said amiably, but I realized I actually wasn't. I could simply go home.

How often, when you run into one of those awful travel days at the airport that any regular traveler has from time to time, can you simply check out? As in, not wait at the airport, not try to get to the train station, not try to find a hotel, but simply declare defeat (or victory) and leave. Never when you're on the road, and usually not even when you are trying to leave home. The stakes are often higher, e.g., a meeting you really have to be at, or a conference where you're presenting a paper. But this time I could simply say that I wasn't going to be there - others would anyway, and I could still participate in the meeting by phone.

So I had a pleasant evening at home with The Fam, did the meeting by phone early this morning, and am now idly wondering, as I type at my desk, what exactly I would be going through if at this moment I were trying to return from DC to NYC on the shuttle. In New York it's been raining all morning.

It's all a matter of your baseline. A pointless roundtrip to the airport may seem costly compared to not going in the first place. But it means one got off lightly indeed, compared to going through one (or perhaps more likely two) of those horrible, endless travel days spent sitting at the airport or in a parked plane.

Now that I've learned how to pick the cheery baseline, perhaps I should be making long-term federal budget projections.

Better than the alternative

The heading to this post is what my father always used to say is the great thing about aging - it sure beats the alternative. A good thing for me to keep in mind today.

I've played tennis twice since returning from Asia, but today was my first time playing squash in 5 or more weeks. I was a bit worried about my sprained knee - I couldn't do all the exercises, without my heavy gear, while traveling, and it definitely is still subpar. Even with a strong brace, my knee particularly dislikes, and sometimes complains about, the sudden changes in direction you can need to demand of it while playng squash, and I didn't want to injure it again.

No need even to mentiion here that I still sometimes dive for balls. That doesn't actually seem to be the problem.

I needn't have worried about my knee. Early in the second game, expecting a deep ball but then wrenching forward suddenly to fetch a drop shot, I threw out my back and had to quit. I have been stiff and in a fair amount of pain ever since.

Maybe my body is trying to tell me something? I am prepared to be rational about this, but perhaps with stretching and patience, after I've healed a bit, I can still go.

Fantastic news

Word has just come out of Washington that Ed Kleinbard has been named the new Chief of Staff of the Joint Committee on Taxation. In the interest of full disclosure, I should note that Ed is a personal friend, which naturally colors my views. But our being friends reflects, among other factors, my admiration for the abilities that he will bring to the job. So I don't think it should induce any skepticism about my endorsement.

JCT chief is unquestionably a very challenging role. Friends with inside-the-Beltway knowledge about tax politics have gone so far as to call it the single worst job in America. Hyperbole perhaps, but they have a point. I hope I'm not breaching confidences if I say that I am among the people who was asked about possible interest in seeking the job. I rapidly, indeed instantaneously, concluded that I did not, even though the suggestion was flattering to one with my background as a former JCT staffer, due to what I know about the position and (perhaps more importantly) what I know about myself. This would not have been the right job for me, particularly in terms of my temperament but also my skill set, even if I otherwise wanted it.

Some people who know Ed are not convinced that he has the right temperament for it either. In the NYC practice world, he is not famous for genially tolerating stupidity or sloppy thinking, both of which one can expect to encounter frequently around Capital Hill. But he has spent more than thirty years working with clients, colleagues in the Bar, and government officials, among others, all with great success. His charisma and charm will carry him through so far as the world is concerned - I'd be more worried that his high standards will affect his enjoyment of the job than his success and effectiveness.

A couple of downsides to the job these days. First, JCT has been all but wiped out as a real player in recent years. This reflects a host of factors, including the growth of other tax staffs, more rapid turnover on the Hill with consequent loss of institutional memory and commitment, and the fact that lobbyists have such enormous power these days and have gotten so far inside the process. (As I'm currently reading Harry Potter 7, this brings to mind Voldemort's penetration of the Ministry.) The only recent JCT chief who could really overcome this was Ken Kies, but that reflected his personal connections and influence, much more than anything institutionally rooted. Second, this is not a propitious time for significant tax legislation, given the gridlock arising from the Democrats' thin majority (and Republican obstructionism of substantive measures in all areas) plus the character of (or should I say in) the White House. But perhaps 2009 will be a propitious time - there certainly will be plenty to do (whether or not Congress is able to do it), what with expiring provisions and the rising threat of the fiscal gap. Hard to tell what to expect before the 2008 elections.

On the positive side, I can't see why Senator Baucus and Congressman Rangel would have named Ed to the job, rather than someone blander and safer, unless they wanted to make use of his energy and knowledge. There certainly is room for an energetically run JCT to take the lead in analyzing issues, identifying legislative options, and so forth. Take the carried interest debate. Under Ed, I could well imagine the JCT having taken the lead in offering a comprehensive analysis of the issues and competing views, developing and evaluating proposals, etcetera. Not playing a partisan role but teeing up the issue properly so it can be better discussed and understood, and so that realistic options of all sorts will be on the table. Obviously, no JCT chief can do this, even assuming adequate staffing levels and time, if the committee chairs don't want it done. But their picking Ed strikes me as hopeful evidence that perhaps they do want it done. Again, why pick him otherwise.

So I'm very glad about this appointment from the standpoint of the public interest, and more guardedly glad about it from the standpoint of a friend and fellow member of the NYC tax policy community (which will have to do without Ed for a while).

One nice thing about returning to NYC

Our cats, although well cared for while we were away, appear to have missed us terribly. I infer this because, ever since our reunion with them, they have been expressing their burning love for us (to the extent consistent with the feline temperament). They also have made it clear that they keenly remember all the details of their daily feeding rituals.

Hedge funds / carried interests

During my month out of the country, I was sufficiently in touch via the Internet & e-mail to realize how dominant the hedge funds / carried interests issue has remained in Washington tax policy thinking. This bemused me a bit, on the view that, of all the important things in our society that tax policy can affect, this doesn't necessarily rise to the top as Issue # 1. As always happens when an issue takes off politically, symbolism is clearly an important part, here relating to the general trend of rising inequality in the U.S., in particular or at least at the very top, and the policymaking trend in recent years of doing less to address inequality rather than more. The hedge fund managers with their multi-million dollar paydays and deferred 15 percent tax rate are just one piece of the larger picture, but are naturally felt to stand for the whole thing.

Not to deny that there is significant money at stake here. And the transactionally related issue of the Blackstone IPO slicing a big hole in the previously prevailing rule that publicly traded entities are taxed as C corporations adds to the importance of what's going on with the hedge funds, as that could conceivably reshape the choice of entities landscape a bit. So the issues certainly merit attention, even if their comparative prominence is a bit peculiar.

While I feel strongly impelled to comment on publicly prominent tax issues like this one, I do have an "art for art's sake" side that prefers issues to be intellectually interesting rather than publicly prominent (albeit that actual social importance counts heavily in my metric as well). But I am starting to think that the issues here are indeed pretty interesting for their own sake, on the conceptual as well as the practical design level.

One seemingly under-appreciated issue in debate so far concerns the significance of the corporate tax to how we think about the hedge fund managers who pay little tax on huge compensation deals. Suppose the manager gets $100 million, is taxed only at the 15 percent capital gains rate, perhaps a couple of years down the road, and that the other partners are tax-exempt so that their not deducting the fee is irrelevant. There is still one more level to consider, if what the partnership does is invest in C corporations. What about the corporate-level tax on those corporations? Does it matter to the analysis?

Let's start outside the hedge fund realm with Bill Gates. He builds a hugely profitable company (and suppose for simplicity that he owns 100%), but suppose further that he pays himself no salary or dividends and profits purely from stock appreciation. We then have a rising billionaire who appears to be paying no tax.

Suppose, however, that Microsoft is being taxed on its annual economic income at the full statutory rate. This would seem to make the problem go away (leaving aside the question of whether the rate structure is progressive enough). After all, if we taxed Microsoft under a flow-through approach like that used for partnerships, we would think of Gates as reporting all its income and paying tax on it. Likewise if we had an integrated corporate tax with shareholder-level credits for corporate-level tax paid, assuming the corporate rate and his were the same. So the only reason Bill Gates appears to be getting away with murder, under actual law, is that he does not bear the nominal incidence of the corporate tax since Microsoft is treated as a separate taxpayer. (Questions of the economic incidence of the corporate tax would be unchanged by placing the nominal incidence of the tax on him as in the flow-through or corporate integration scenarios.)

Obviously, this view places heavy emphasis on Microsoft's being fully taxed. Corporate-level tax planning might defeat this result. Also, it assumes that we have no reason to like a two-level corporate tax.

How does it apply to hedge funds and carried interests? I am still learning (from Victor Fleischer and others) about what's really happening on the ground in this area, and I note Victor's comment, from his widely-circulated "Two and Twenty" draft, that a hedge fund is a "compensation scheme masquerading as an asset class." But let's consider for now four categories of business activity that fairly commonly use this structure. Two that have been less commented on are oil and gas activities and real estate activities, on which it is enough for now to note that these activities often receive highly preferential tax treatment - weakening the argument that corporate-level taxation does the trick, although arguably converting the nature of the problem from inequity to inefficiency.

The other two categories that have been widely mentioned are (1) the classic hedge funds that try, a la Long-Term Capital Management, to exploit market inefficiencies in stock pricing to generate profits for the investors, and (2) private equity funds that take ownership positions in under-performing companies, raise the stock value, and then flip the stock. In distinguishing these two, I don't mean to imply either that everyone is a clean case of one or the other, or that statutory rules could be drafted that conveniently and accurately sliced the world into these two categories - only that they are conceptually different.

In both cases, the carried interest rule may mean that the manager, who has the market power vis-a-vis his investors to extract most of the economic return, conceptually has labor income on his efforts that is taxed at only the 15 percent capital gains rate. But does the corporate-level tax on the companies that issued the underlying stocks make up for this?

I'm still just starting to think about this, and reader feedback is welcome. But the private equity fund case strikes me as pretty close to the Bill Gates example. The restructuring generates extra corporate-level income that is taxed if the corporate tax is well-functioning. If this is fine when you continue to hold the stock, selling it and paying tax at 15 percent while the corporate-level tax continues certainly doesn't make things worse.

But the hedge fund manager who outsmarts the market by anticipating in advance where value is headed looks to me a bit different. He (or she) hasn't increased corporate profitability, but merely discerned it faster. This may have social benefits, as it is part of having an efficient marketplace in which people can get the portfolios they want and in which money moves around to track true value, but the private gain from being one second faster than anyone else (and thereby generating a huge profit) substantially exceeds the social gain. Lots of it is simply an externality, via the shift of profits from those who discern value a bit more slowly to those who discern it a bit faster. And this analysis doesn't apply to the private equity fund case unless we view that as a tournament-style competition to be the one who gets to add the value.

One way of looking at it is that the private equity fund manager's efforts really are taxed by the corporate tax system (again, assuming its effectiveness), while the hedge fund trader's efforts aren't taxed in this sense. But, since we could easily start splitting hairs about whether it matters that the values discerned by the hedge fund manager are after-tax values (since this is what investors presumably care about), perhaps it's clearer to say instead that there is an incentive to over-invest in what the hedge fund manager does, but not necessarily in what the private equity manager does, so we should want to tax the former at a higher rate than the latter. Once again, of course, I have transmuted the distributional issue into one of efficiency, reflecting that, when activities are lightly taxed, they attract extra input that may bid down the pre-tax return.

Final point for now: the point about inequity being converted into inefficiency depends on efficient markets. But is this entirely the right assumption here? Capital markets do strange things that the standard Chicago-style ECMH (efficient capital markets hypothesis) cannot easily explain. The hedge fund managers, of course, are directly posited to be exploiting market inefficiencies. Or else perhaps they are being paid in some cases on the fiction that they can do better than monkeys throwing darts at the wall to determine investment choice. In general, how competitive is this market, with its arguably strangely uniform structure for arranging compensation? I don't want to argue here against using conventional economic tools to understand what is going on here, but the possibility of big anomalies should not be prematurely ruled out.

Back in NYC

Yesterday I returned from a month in Singapore & SE Asia (with spouse & kids), responsible for the paucity of recent posts. Definitely an interesting experience.

Singapore, where we spent the first 2 weeks, is better as a place to live than touristically. But there are a few good sites there. Most memorable, perhaps, was a feature at their aquarium that my kids were not alone in liking. The Singapore aquarium has a petting tank (!) with various small sharks and rays, including sting rays (presumably juveniles from their size) that have had their stingers removed.

The sharks pretty much just sit there on the bottom of the tank - these apparently don't have to keep moving in order to breathe - and let you feel their skin, which feels a bit like that of a snake. But the rays, which feel amazingly silky and smooth, keep surfacing and butting their heads against you in the hope of being fed small bits of fish. Quite a novel experience.

The other activity in Singapore that I enjoyed most was going to neighborhoods such as Chinatown, Little India, and Arab Street to wander around & then dine in small restaurants with very good and authentic food.

The class I was teaching in Singapore ended up being a great experience. It made me a lot more anxious than teaching usually does, because I was going solo for 3-1/4 hours a day, 4 days in a row on successive weeks, trying to teach very complex economic and tax policy ideas to a class of 17 or so students who were very good, and also very engaged, but who had next to no background either in tax law & policy or in public economics. This made it feel, the evening before each class, like I was going to be high-diving without a net. Would I be able to explain things well? Would the class run too fast or slow? Definitely an intense experience, but one that worked out really well. I felt that I was in reasonably good form on 7 of the 8 days, with a couple going really well. And on the day that I thought went badly, it was clear that I was unhappy about this & not blaming them, establishing a bit of credit for good faith.

After that stage we flew to Ho Chi Minh City, aka Saigon. For an American who grew up during the Vietnam War, definitely a notable experience to be there. It's a hectic and chaotic place. Crossing the street is a bit like playing a video game, only lots more dangerous. Continual hubbub with cars and millions of motorbikes. No one yields more than an inch short of collision. Touristically not that great from the standpoint of individually memorable sites, although the War Remembrance Museum was interesting. But my wife and I have always liked the aspect of traveling where you are trying to navigate in a foreign city, e.g., just trying to find a travel agent's office, and thus dealing with the map, crossing the streets, seeing the life there, going to markets, etc. So from that standpoint it was quite good for us though not for our kids.

Our big mistake on the trip was falling between two stools, the one that would have worked for my wife & me and the one that was best for our kids. E.g., if you go Ho Chi Minh or Hanoi (which we did later, see below), a central touristic focus should be getting out of town to some interesting sites nearby. From HCM, the obvious place to go is the Mekong Delta. From Hanoi, Sapa (mountains and hill tribes) and Halong Bay (limestone caves). But these side trips didn't seem feasible from the kids' standpoint, so we ended up just going to HCM and Hanoi.

Anyway, from HCM we proceeded to Siem Reap, Cambodia, the access point for Angkor Wat. We saw lots of amazing temples in different states of preservation. We also had a riverboat tour, seeing very poor people who live on the river or near it. Cambodia is a desperately poor country, beyond anything we'd seen apart from hill tribes in Thailand some years ago, and our guide was telling us about the corruption there, which has led him to be a tour guide even though he has a law degree. Highly recommended as a travel site.

Hanoi was less ramshackle than Saigon, a bit more appealing aesthetically (e.g., it has a nice lake in the center of town, maybe a mile walk to circumnavigate). Crossing the street here is even harder than in Saigon, however. One memorable bit involved the marketplace where they sell roast dog. Think of a skinned & barbecued whole pig if you've seen that, only it's definitely a dog, the whole body, which they slice with a giant cleaver if someone just wants part ... Our kids declined to go see this, and I can't say I blamed them, but I myself wouldn't have missed it.

Our final stage, definitely chosen for the kids though we enjoyed it too, was a beach resort in Phuket. The place we went, Le Meridien Phuket, has a private beach, so you can avoid the insane hubbub that makes most of Phuket so unpleasant, although for dinner you pretty much have to deal with it. One high point, I suppose, was taking second place in the resort's weekly ping pong championship. 15-year old Abdul of Bahrain, a tall, gangly kid who had a devastating forehand slam and seemingly a 20-foot wingspan, was the winner, although I had two match points against him. Good PR for America that I lost?

It is a bit awkward to be an American abroad in the age of Bush. I kept introducing myself as from New York City, to which they would answer "Oh, you're American." I realized that hardly anyone out there would understand the cultural distinction that I meant to draw by identifying myself as a New Yorker, rather than as an American, but I kept on trying anyway.

The Libby pardon

A clear obstruction of justice and act of monstrous if utterly unsurprising hypocrisy. I believe it is literally impossible to support this act unless you do not believe in the rule of law. Then again, that covers about 80 percent of the D.C. policy elite, such as the pathetic David Brooks, who has already fired up a yes-sir column.

You're only as good as your last class

One funny thing about teaching, even after 20 years, is how each class goes differently. So you never quite entirely get past the highs and lows. I've been doing this intensive-schedule tax policy class at Singapore, where you go for 3-1/4 hours (with only short breaks) 4 days in a row. Then, after a long weekend, four more days in a row.

I thought my first two classes went well. Fired up for the first one, sluggish start then strong recovery for the second. But today, for the third class, which (like the others) started at 12 pm local time, I decided at about 8 this morning that I didn't like my layout for the first third of the class. So I spent what should have been my usual morning prep time revising that portion. Bad idea. I showed up for class not having done adequate day-of-class review of the last two-thirds. Result, even though I know the material quite well: much harder to explain things coherently and clearly, and to keep in mind what sorts of threads to pick up and which to avoid.

Oh well. Tomorrow is another day.

UPDATE: Well, I feel it's been going better recently.

Singapore

Five days ago, I arrived with my family in Singapore, after a very long flight (more than 24 hours, door to door). We're now acclimated, to the extent of having a temporary subscription to the Singapore version of netflix.com, and have been wandering the very humid city seeing the sights. I think I want to go into the import business, so that U.S. people can sample dragonfruit, a very strange-looking and aptly named import from Vietnam that, once cut open, tastes something like a crisper, tarter version of a kiwi.

Amazing construction boom in Singapore - it's radically transformed since my one other visit here, back in 1990. Without intending any sort of endorsement of anything, it's amazing, as a U.S. citizen, to be in a place that actually appears to be well-governed. Not exactly what I am used to these days.

Yesterday I taught my first session of an intensive 26-hours-over-8-class-days plunge through Tax Policy, and felt pretty good about it - excellent students, from all over the world. I don't know if it's something I said, probably not, but when I was explaining welfarism I got a question to the effect of: Why would anyone believe that anything other than people's subjective wellbeing is important? Hard for me to answer as that's the way I look at it as well.

If J.K. Rowling weren't alive and read this, she'd be spinning in her grave

My kids and I decided to try to think of the dumbest possible ending to the Harry Potter series. Although there are many possibilities, here's our favorite so far:

Right at the peak of Harry's climactic showdown with Voldemort, he wakes up in his plush bedroom with the Dursleys and realizes that - it was all a dream! Even the Dursleys being mean to him!

"Oh, Aunt Petunia, I've had the strangest dream!" And he tried to tell her about it, but the words failed, although he managed to express how sad a lot of it had been, and how mean his loving family.

"Well, it's all over now, Harrykins," said his beaming aunt, smothering him with kisses. "Would you like some extra porridge? Dudley insisted on leaving it for you."

Fade to black.

Abu Ghraib

An article by Seymour Hersh in this week's New Yorker makes it clear that the military engaged in a massive cover-up regarding higher-level involvement in and knowledge about the torture at Abu Ghraib and elsewhere. By higher-up, I mean it's clear to the forcibly retired General Taguba that Bush and Rumsfeld were likely involved in ordering torture, deliberately ignoring the evidence that their wishes were being all too fully carried out, and then squelching the investigation so that it would only reach the low-level grunts.

I've said it before in this blog. We often hear about torture as a means, as in the ticking time-bomb scenario. But to these people, torture is the end, not a means to some other end.

Why? Mainly just to establish that they can, because if you can do this then you can do anything.

Any other reasons? Well, one might ask why Bush as a tweener or adolescent dynamited frogs, as he apparently did. The child is father of the man.

Hedge fund managers again

Funny how issues arise in Washington and become all-consuming for their designated 15 minutes. Right now, it's hedge fund managers, along with the Blackstone deal that somehow cleverly avoids corporate status under federal income tax law for what is effectively a publicly traded firm. (I'm not up to speed at this point on just how they manage this.)

Back on the hedge fund point, which I blogged on recently, I got an invitation from wsj.com to participate in an on-line two-person blog forum this week discussing the merits of the proposed legislation that would get rid of the managers' ability to take most of their compensation at a 15% marginal rate. They said I could blog pro or con, and the whole thing would be wrapped up within a few days. Tempting, and I definitely would have liked to do it (I would have blogged pro the legislation) so long as the opposing debater was a responsible grown-up not a Norquistian freak.

But I had to pass as I will be on the road, flying to Singapore to teach Tax Policy at the NYU @ National University of Singapore program, at the time when the exchange is supposed to take place.

One point I would have made is that, under a properly designed consumption tax, the hedge fund managers would definitely be taxable at the full statutory rate, whether directly or indirectly. Say it's a consumed income tax with yield-exempt savings accounts allowed only for "arm's length," i.e., third party market transactions. The managers would have to expense, and would pay a positive tax, upon consumption, on their more than market interest rate of return (assuming they're good enough to add value through their labor). A properly designed X-tax or flat tax would likewise avoid providing the benefit of the low rate, although exactly how this would work out as a practical matter, in light of these rules' generally disregarding financial instruments and eliminating double taxation of corporate equity-financed income, would take a bit more figuring out than I have time for pre-trip. E.g., we might have to think of it as operating via the corporate-level tax on the underlying equities. But clearly a 15% tax rate on substantially positive real returns that conceptually are labor income would not be the fruit of any well-designed and properly operating progressive consumption tax.

I am starting to think this issue requires a bit more thought than I have time for right now. But that's the great thing about blogging as opposed to scholarship and even journalism - tentative first drafts are allowed, as I see it.

Tell a vision

Today's pre-Father's Day treat for me was an afternoon in Central Park seeing what was billed as the last concert ever by the great late-70s NYC rock band, Television. If you're not familiar with them, imagine a punk rock (for lack of a better word) version of Derek & the Dominoes, only a thousand times more original and interesting.

They were preceded by the Dragons of Zynth, best described as venturesome & imaginative but not all that compelling, and the Apples in Stereo, reasonably fun candy-coated Beach Boys-influenced indie pop. The day started warm and sunny but then rained steadily through the Apples' show, notwithstanding that (or perhaps because?) most of their songs have lyrics about how the sun is shining.

Then a long wait, the sun came back, and finally Television came on. I have waited to see them for thirty years, so a half-hour of roadie set-up wasn't too bad. I did see Tom Verlaine, the group's leader, with a back-up band in DC some time in the early 1980s, but it wasn't the same.

Worse news, the group's second lead guitarist, Richard Lloyd, wasn't there - apparently in the hospital; hope he's okay. That kills the whole point, I thought initially - one of Television's amazing features is the tradeoff between two guitarists who play very different lead styles. And indeed the replacement did nothing but strum rhythm and play fills, so there was something missing, but still it was one of the best concerts I've seen.

Verlaine plays in his own head, more than to the audience. Kept tuning and re-tuning his guitar at first, and complained about the lack of a sound check and that the City's sound system was "crap." Though this came out as good-humored, not petulant, and he did seem to like having a large and appreciative crowd that knew many of the songs. Great rhythm section, melodic and distinctive lead playing, he gets just amazing sounds in the high ranges, memorable riffs, the songs have an architecture, and even if ten minutes long they are always going somewhere. The songs and playing do what the group's name promises.

UPDATE: For those who are interested, Richard Lloyd's website reports: "I am sorry to report that Richard is currently unwell. He has been in hospital Intensive Care for 8 days with pneumonia as a primary medical problem. This has responded to treatment and he has shown some improvement and is now free of the breathing apparatus."

Two excellent CDs I've been listening to lately

The first is the Unicorns' Who Will Cut Our Hair When We're Gone, which I bought some time back and played a lot for a while but have recently taken out again. Despite an at times almost too high whimsy level, one of the handful of best new releases of the last several years.

The other is Ray Davies' Other People's Lives, which I didn't play much the first time around. It's really quite good although the playing (his vocals aside) is, if solid, a bit generic. Still standing as one of the finest songwriters of the rock era, and I'd rate this outing above any other release of the last ten years by any of the old war horses with the exception of Dylan's Modern Times.

The most important story of our generation (at least until tomorrow)

I admit it to my shame, while preparing lecture notes for summer teaching I have been checking in periodically on the Paris Hilton news. So far, it turns out that she was handcuffed and has been crying, and that 96% of those responding to a CNN poll are agin her. No word yet on what the judge is going to do. Give her credit for one thing, she is helping to bring us together.

About the summer teaching: I will be doing a course on Tax Policy in Singapore, at a newly established NYU @ National University of Singapore program there, starting in a couple of weeks. 3-plus hours a day, Monday through Thursday for two weeks, then two weeks' vacation with family in Vietnam and Cambodia, perhaps with a resort in Thailand thrown in as well. This may affect blogging, though I will have internet access most of the time.

The class will be an interesting challenge, given the packed-in intensity of doing it in so short a time period, plus the fact that I don't as yet know what to expect from the students. I want to spend the time discussing & explaining a bunch of things that I think are really interesting and important, but there isn't always suitable reading that covers what I'd like. The subjects for the 8 days are (1) public economics background, (2) horizontal equity, (3) progressivity, (4) income versus consumption tax, (5) corporate taxation, (6) corporate tax shelters, (7) international taxation, and (8) deficits / long-term budget measures and issues.

The complexities of trying to plan open-endedly for varying possibilities in class dynamics make it all the harder to resist checking periodically for new Paris updates.

I have learned to purr

At least, that's how Ursula, our small brown tabby, appears to interpret the sound of my electric shaver. When she hears it in the morning, she runs upstairs and jumps up onto the bed, ready for a lovefest.