"Keep the guvmint off my Medicare"

The widespread view among healthcare reform foes that Medicare is not a government program inclines me to ask: If Obama gets away with this, what is the government going to take over next? Social Security?!?!?

Go ahead, make my day

Perhaps I can be forgiven for quoting highlights from the brief review of my book, Decoding the Corporate Tax (available here or here), in the August 2009 issue of Choice Magazine.

"Shaviro (New York Univ. Law School), a distinguished tax scholar, does a masterful job of bringing the critiques together and explaining their logic in a concise, lucid manner. The arguments involve some arcane economics, corporate finance, and law, but he manages to bring a degree of order from the complexity .... This is the first place to go for anyone seeking to understand the corporate income tax maze."

The book gets a 4-star rating and is deemed "essential."

Most amusing quote in the review: "Shaviro tries hard, at the end, to convince himself that the U.S. political system can yield reforms." Ah, that would be the self-described "Hollywood ending," complete with the old saying that "if wishes were horses, beggars would ride," that I added upon being told by readers that the ending was a bit too bleak.

Quote of the day

From Captain Beefheart, in an excellent 1978 live album called "I'm Gonna Do What I Wanna Do" (that being his verbal response to audience requests for favorite songs):

"It's very hard to do poetry in this world of Denny's staying open all night."

But no harder, I suppose, than trying to revise the introduction to my new book while riding the NYC subway and listening to said live album.

Excitement on the home front last night. Ursula (our small brown tabby) was making loud crunching noises in our room while we were trying to get to sleep. It turned out she had a small mouse in her mouth. As it no longer had a head, it had stopped struggling, but she has always been conscientious about chewing her food.

I suppose Freddy from the Friday the 13th movies is a good analogy for cats as seen through the eyes of their prey. Demonically playful, bloodthirsty, and equipped with multiple retracting blades. Luckily I get to see a different side of Ursula, more characterized by her rolling on her back, eyes half-closed, kneading with her paws in the air, and purring.

Another day, another article

I've initiated posting on SSRN my new short (7,000 words) article, "The 2008-09 Financial Crisis: Implications for Income Tax Reform," and will post the link when it's up.

The paper is based on PowerPoint slides for a talk I gave in Milan (or actually from NYC via skype) earlier this year, as per the preceding blog entry. It may appear next year in a conference volume relating to that session.

UPDATE: The link is here. Abstract is as follows:

Tax rules encouraging excessive debt, complex financial transactions, poorly designed incentive compensation for corporate managers, and highly leveraged home ownership all may have contributed to the financial crisis, but do not appear to have been among the primary causes. Even without a strong causal link, however, the preexisting case for tax reform at all these margins arguably is strengthened by the 2008 financial crisis, which suggests that tax rules not only fell short of classic neutrality benchmarks but generally leaned in precisely the wrong direction.

Oops, more delays

If there's one thing I really want to accomplish over the rest of the summer - other than taking advantage of the NYC farmers markets' fresh fruit bonanza while it lasts - it's to make serious progress on my international tax book, which has taken very definite form inside my head but needs to be extracted and actualized.

But first I had to get straight the reading list and plan of action for the seminar on corporate and international tax policy that I am teaching this fall (starting a week before Labor Day). It's all very well to assign the students reading from this handy item, but I realized that wouldn't do the job all by itself. Luckily, my syllabus is now set, leaving me much more enthusiastic about the seminar than I was a mere 24 hours ago, when I still had various unsolved obstacles. Now the main concern I have left is whether I will draw genuinely interested students, rather than people who simply seek to fulfill a course requirement or keep their classes early in the week. (My holy grail is a filter to select positively for students who are genuinely interested, although admittedly, from the standpoint of the overall NYU faculty, this amounts to attempted cream-skimming.)

Now with that done, I've reluctantly persuaded myself that it makes a great deal of sense to write a short piece on taxes and the financial crisis, for a forthcoming volume associated with the conference, at Bocconi University in Milan, that I attended at the end of April (if only virtually, by skype, due to back spasms), and reported on here. The slides on which I will base the paper are still available here.

In other news, I should soon have 3 fresh publications out there on the at least virtual street. One is my paper for the George Washington Law Review on the long-term U.S. fiscal gap, a second is a piece for the British Tax Review on the Obama Administration's international tax reform proposals, and the third is a very short one for Tax Notes that's part of a series they should be publishing shortly on where the Volcker tax reform panel that ostensibly is hard at work should look for ideas. More on these when they come out.

And while I'm at it, I don't believe I've ever posted a link for my recently published article, Internationalization of Income Measures and the U.S. Book-Tax Relationship, which appears to be available here.

Oxford talks on U.S. international taxation

Powerpoint slides for the two talks that I gave a couple of weeks back in Oxford are now available on-line here.

The one from July 7, "Planning and Policy Issues Raised by the Structure of the U.S. International Tax Rules," is based on chapter 2 of my book-in-progress. (At least I like to think of it as my book-in-progress - I'm getting so backed up right now with other things I need to finish first that I'm starting to envy the Red Queen and Alice, for being able to stay in place by running fast.)

The one from July 10, "The Obama Administration's Tax Reform Proposals Concerning Controlled Foreign Corporations," echoes a forthcoming British Tax Review piece in which I expand on the views I first set forth here.

U.K. vs. U.S. international tax policy

My trip to Oxford earlier this month for a pair of conferences, one academic and the other mainly business and government, gave me a close-up look at how tax policymaking differs both substantively and procedurally in the two countries.

Substantively, the differences are pretty clear. The U.K. is in the process of greatly scaling back worldwide taxation of its resident corporations, whereas in the U.S. the Obama Administration has proposed heading in the opposite direction. This partly reflects differences in the countries' situations. The U.K. is obviously more deeply embedded in the "small open economy scenario" than we are, having a smaller internal market right next to the rest of Europe. Plus, corporate threats of expatriation in response to worldwide taxation play out very differently for a technical reason. In the U.S., where corporate residence depends on one's place of incorporation, companies that attempted "inversion transactions" a few years back (placing, say, a Caymans corporation at the top of the multinational chain and taking the U.S. firm out of the line of ownership of other foreign corporations) led to a huge 9/11-influenced political stink about "Benedict Arnold corporations" and the like.

In the U.K., by contrast, domestic residence follows from having U.K. headquarters. Thus, when companies threaten to leave, this apparently contributes to a very different reaction. Whereas the formalism of corporate inversion transactions helps feed the U.S. political anger about them, people in the U.K. evidently take to some extent the view that, if the headquarters truly leave, the expatriation transaction "should" work - the normative basis that people think of as underlying corporate residence has genuinely changed.

So by having a somewhat more economically substantive economic residence rule, the U.K. ends up inducing a greater sense in popular thinking that companies really can expatriate if they want to, leading to the threat of departure's having a different and stronger political valence. This in turn provides a big impetus for the drive to weaken worldwide residence-based corporate taxation in the U.K.

But all that concerns the substance of the policy, not the procedure. The latter is quite different as well. To begin with, as it's a parliamentary system, once the U.K. government announced what it wanted to do, everyone pretty much agreed that it was definitely going to happen, with only the details remaining open. Given the long-term political fragility of the Labor government, this presumably reflects some combination of the view that they can definitely serve out their time (without a no-confidence vote) and get this done before calling elections, and/or the view that the Conservatives would also be sure to adopt this policy given its pro-business direction.

Compare the fate of U.S. Administrations' tax policy proposals, which typically vary along a range from "maybe you'll get something loosely like this if you fight like hell and get lucky" to "dead on arrival."

Perhaps more surprising is the procedural differences in developing the details of the policy. In the U.S., the Administration will typically announce a full-blown (even if sketchy) proposal on which they have publicly consulted no-one. Obviously, there may be political dealings going on behind closed doors, and in the most extreme cases (such as the energy policy Cheney developed in 2001) they are pretty much explicitly written by current and past/future lobbyists on what's close to a pay-to-play basis. But given how contrary this is to the U.S. ideal of the government simply announcing its policy, in those cases the interest group input is as hidden as possible.

Then in Congress there's a lot of interest group input (obviously), and in recent years lobbyists have even been permitted to do the actual drafting (unthinkable in the 1980s and before). But even so the ideal is that the government policymakers decide, since public input is assumed (all too rightfully) to be sleazy giveaways to organized interests at the expense of the general public.

The biggest U.S. departure I can think of from this pertains to drafting regulations. The Treasury Department realizes it needs detailed input in order for regulations to be workable and to address the problems it aims at. So it solicits and receives notice & comment (as required by the Administrative Procedure Act), and makes serious use of input from affected taxpayers (and expert practitioners), even if it ultimately makes the calls itself subject to whatever White House control is being exercised (much greater in the GW Bush era than previously).

In the U.K., the Treasury announced the general details of its intended international tax policy change, but announced as well that it wanted extensive input from the business community in making workable rules that would avoid imposing excessive burdens. They more or less said they wanted to come up with something that the business community felt it could live with, although they didn't offer carte blanche to give people whatever they wanted. One big example of the input's impact: the UK government initially intended to retain their version of subpart F insofar as it taxes resident companies' foreign source passive income (such as portfolio dividends and interest), but has now pretty much agreed to give up on this point, subject only to doing what they feel is necessary to protect (a) overall revenues and (b) taxation of what is truly U.K.-source active business income.

It's easy to view this through a U.S. interest group lens, as merely a more overt and less secretive or shamefaced version of Cheney oil industry sleaze or lobbyists writing "rifleshot" tax giveaways for themselves. But, even leaving aside the distinct point that I tend to agree with this shift substantively, I get the sense that, while clearly the interest group story is a part of it (and the credible threat to expatriate is a further part of it), there also is some sense of consultation and consensus that really doesn't have an exact parallel in the U.S. setting.

The U.K.'s parliamentary system clearly plays a role in the U.S. versus U.K. procedural differences - but it doesn't necessarily explain this. After all, in the parliamentary model, it's vastly easier to shove an unpopular change down everyone's throat. I think the difference in scale may be crucial here. The U.S. is so big that wide-ranging consultation and consensus simply can't work the same way as in a smaller country like the U.K.

In Federalist # 10, Madison famously said that when you extend the sphere you create a better democratic process because there are too many interests for any one of them to be able to shove its agenda down everyone else's throat. The story here is very different and has an opposite normative spin (if I am right in viewing the U.K. example relatively benignly). Indeed, it's more of an anti-Federalist type story in which a "community" can run things with greater cooperation and consensus than a vast republic. Obviously, reflecting modern technology, the community-compatible size has greatly increased, and the underlying values being expressed are radically different.

Once again I find myself worrying that the U.S. has become unusually ungovernable by advanced-country standards.

Back in the U.S.A.

After a whirlwind week of sightseeing in London, we're back home and only slightly jet-lagged.

Although I'm a summerphile with a taste for heat (at least up to the mid-80s), London's weather was reasonably pleasant. There's seemingly a rule there that it has to spritz at least briefly every day, no matter how sunny it may look in the morning, but for the most part we had decent weather. The Underground is superior to the NYC subway in many ways - easier to use and with much more frequent trains (the tradeoff, clearly worth it for my money, is that it shuts down in the dead of night). The extremely long summer daylight hours (17+ hours at this time of year) are also exhilarating, although of course one pays dearly for this in the winter (I'm told the Sun pretty much disappears, between short hours and fog, from November through March).

There's lots of art in London that's either great or interesting - an example of the latter being my old favorite, the National Portrait Gallery, with its psychologically illuminating portraits of famous Britishers ranging from kings to poets. Though often averse to tack, I couldn't resist bringing home a Richard III towel, showing the famous painting in which he looks conscientious and careworn (the inspiration for Josephine Tey's delightful "The Daughter of Time"). But I passed up a Tate Gallery T-shirt I liked (saying "Your pizza is ready now") because the price was too high.

My most enjoyable read of the vacation was Tom Holland's "Rubicon: The Last Years of the Roman Republic," which turns the exploits of Marius, Sulla, Caesar, Crassus, et al into something at least on a par for excitement with "The Godfather." I gather it's historically sound if one forgives the rampant speculation about Romans' individual and collective beliefs and motives. Truly a compelling page-turner.

"Waiting for Godot" was predictably a bit too much to ask of our adolescents in tow (I declined to offer an advance preview of the plot, though it would have been easy to do in a sentence), but they greatly enjoyed "The 39 Steps" (enjoyable farce, though to my taste a bit too ready to rely on laughs that were easy but not enormously interesting).

A week in Oxford

I've just completed a week in Oxford (with family), attending a Summer Symposium and a Summer Conference held by the Centre for Business Taxation at the Said Business School at Oxford University. More shortly on the substance, including my own two talks (one on the main problems with the U.S. international tax rules, the other on the Obama Administration's international tax proposals). But anyway, most of the world is heading towards an exemption system for outbound investment by resident multinationals (a term of art, of course, as corporate residence isn't a meaningful concept). Today I compared the U.S., which is potentially headed in the other direction, to the boy in the high school parade of whom his proud mother says: "Will you look at that! Everyone is out of step except for my son, Johny!"

One amusing moment today came in a discussion of U.K. law. One issue is UK companies threatening to "expatriate" if the home company rules don't become more favorable. A second issue is ongoing litigation by HM Treasury on economic substance-type grounds.

On the latter, someone from the audience said something about how pretty soon some companies will be singing "the Clash song, 'I Fought the Law and the Law Won.'"

One of the speakers very promptly responded: "Or rather, 'Should I Stay or Should I Go?'"

OK, maybe you had to be there, but it was quite quick and funny in context.

I've also taken enough time off from the conference to go to Blenheim Palace and the slightly Disneyized but nonetheless interesting Warwick Castle. And the conference festivities included a humbling experience punting along the river (how Charles Dodgson could extemporize Alice in Wonderland while punting I'll never understand), and an amusing performance of Twelfth Night. Tomorrow, Stonehenge, and then a week in London.

On the road again

Last week (June 22-26) I was at an international tax conference in Berkeley. As it was devoted to looking at existing literature, I didn't hear much that was new to me while there.

Tomorrow I'm off again to another international tax conference, this one in Oxford at the Said Business School (July 6-10) and involving a number of new papers or talks. I'll be presenting twice, and hope to get the PowerPoint slides up on the NYU website, in which case I'll link them here. One concerns a chapter of my new international tax book in progress, while the other discusses U.S. trends in international tax policy with particular reference to the Obama Administration's international tax proposals.

After that, a week's vacation in London and then back to NYC as the summer bleeds away all too fast. Summer is by far my favorite time here, from a weather as well as a free time standpoint. I spend the winter cursing the cold and lack of fresh produce, and wishing the summer would get here already. Then I spend the summer half-enjoying it (at least when the rain lets up) and half-brooding about how fleeting it is.

Tax expenditure analysis at the Joint Committee on Taxation

While Ed Kleinbard was Chief of Staff at the Joint Committee on Taxation, he sought to modify and revive tax expenditure analysis, along grounds which I thought added to its usefulness and intellectual coherence. What is going to happen to JCT's tax expenditure analysis now that Ed has moved on to USC Law School?

From an interview with new JCT chief of staff Tom Barthold in the June 29 edition of Tax Notes:

TA: Your predecessor also focused a lot on the tax expenditure issue and, for example, looking at how to define expenditures. Will you continue that work, or are there areas that kind of fall into rethinking how the JCT looks at things?

Barthold: I don't currently have a special new thing that I want to do. The staff, as part of its Budget Act responsibilities, identifies and estimates tax expenditures annually. Of course we'll continue to do that. Ed Kleinbard wanted to emphasize it a little bit differently. The taxwriting committees frequently hold hearings where they say, "We want to look at the tax benefits that we've provided to topic X." When the committees look at that, that's a tax expenditure analysis. When our staff prepares background materials for committee hearings, it's often a discussion of how much does this cost, what are the distributional consequences, are there alternatives, what are the economic effects? That's really what a tax expenditure analysis is about.

I suspect that a redacted though still accurate version of this colloquy might read as follows:

TA: Your predecessor sought to revive and change tax expenditure analysis. Will you continue that work?

Barthold: No.

California's budget crisis and the upcoming federal budget crisis

California is teetering on the budgetary cliff these days, issuing IOUs in lieu of meeting its obligations because it can't adopt a plan to close the budget gap even though it is wealthy enough to do so without serious difficulty.

The IOUs remind me of the line in Duck Soup, where Groucho asks Ambassador Trentino for a personal loan until payday and offers a 30-day note. "If it isn't paid in 30 days, you can keep the note."

Living across the country from California, and thus not myself directly facing the main consequences as this plays out, the question that occurs to me is whether this is a harbinger of future U.S. budgetary problems. I am inclined to think that it is.

Obviously, the federal and California situations are easy to distinguish. The U.S. government presides over an even bigger economy, from which exit by tax base factors is costlier. The U.S. borrows in its own currency, and thus has a one-time option to default implicitly through inflation, although this is a bit of a nuclear option given the likely macroeconomic consequences. And the federal government doesn't have Proposition 13 or the other various fiscal hamstrings adopted in California via the statewide ballot process.

But the key point in common is that California's crisis is an entirely self-inflicted wound, reflecting the political system's inability to respond adequately, even when everyone knows (in broad outline) what it has to do, since it's consumed with ideological posturing and chicken games. That is already a problem on the federal level as well, and there is no particular reason to believe that it will ease.

Shadow, 1991(?)-2009

Today, with a bit of heart-wrenching assistance on the home front, Shadow met his end. At age 18, his body was breaking down on several fronts, with multiple severe conditions that required a very high level of active daily care - seemingly inadequate, however, so far as we could tell, to give him a decent quality of life. At the end he had diabetes, a thyroid problem, bladder problems, kidney disease, was unsteady, and may have had bad arthritis. He would still eat, but slept and rested the remainder of the time, meowing plaintively in an uncharacteristic way and sometimes seemingly trying to keep himself awake, which I've never seen from a cat before.

He was one of the nicest and kindest creatures of any species that I have ever known. I'm not sure our species entirely deserves his extremely positive view of us - although I suppose his experiences with us were pretty uniformly good.

I first met him in a men's clothing store that was having a closing sale. We made friends right away, which I must say wasn't hard to do, and he actually was following me around the store on a short acquaintance. He made us all very happy for eight years, and I just wish we could have known him longer.

Extremely mellow and easygoing at all times, except that he sometimes felt strongly about our food. Here you can see him in happier times, ingeniously using his front paw to extract milk that had been left for a minute in a glass on the table.

Finally, a reason to live in Washington!

... So as NOT to subscribe to the Washington Post, now that it has fired its only good print or on-line political columnist, Dan Froomkin, for political incorrectness as defined from a neoconservative perspective.

I already don't and wouldn't subscribe to the Post, but living in Washington would make it more pointed.

All things considered, probably not a good enough reason to live in Washington.

Recent diversions

Mark Maxwell's novel Nixoncarver; Lily Allen (both albums but especially It's Not Me, It's You). The first is mainly for hardcore Nixon (and to a lesser extent Carver) fans; the latter should be (and is) for lots of people.

Not sure I like my new green background on the top, but it's for Iranian solidarity.

Battle of the revenue estimates

As noted in several news articles with links at the TaxProf blog, the Joint Committee on Taxation estimates that President Obama's international tax proposals will bring in about $50 billion less than the Administration had estimated, over the period from 2011 (when the proposals would take effect) through 2019.

I thought it might be helpful to show the line by line comparisons of the estimates for the main proposals applying to U.S. multinationals:

1) Defer deductions for (other than research & experimentation) that current law apportions or allocates to foreign source income that is deferred: $60.1 billion according to the Administration, versus $51.5 billion according to the JCT. I guess we could say this one is not entirely un-close.

2) Deny foreign tax credit where the associated income isn't recognized and require pooling approach for determining which foreign tax credits are made available by repatriation: $43 billion according to the Administration, versus $55.7 billion (the sum of two amounts estimated separately) according to the JCT. The JCT is higher here, and higher for changes 1 & 2 combined. I wonder if a difference in "stacking" convention is operating here (e.g., when either of two proposals, standing alone, would raise a given dollar, to which of them do you credit it?).

3) Prevent use of "disregarded entities" in overseas tax planning: $86.5 billion according to the Administration, versus $31 billion according to the JCT.

This last one seems to be the source of the big difference. Everything else, including proposals for individuals, adds up roughly the same as between the two sets of estimates over all. So evidently the big disagreement concerns item # 3 above, which would eliminate a device that multinationals use to shift income abroad from high-tax to low-tax jurisdictions without thereby (as would happen if they did it more straightforwardly) incurring a deemed dividend to the U.S. parent under subpart F in the U.S. international rules.

I must say, even without analyzing any data, I thought the Administration's estimate of the disregarded entities change seemed a bit high. I would assume that, as between the two estimates, the one by the JCT (a) treats taxpayers as much more able to find alternative routes to the same tax planning ends, and/or (b) assumes that taxpayers give up on their overseas tax planning maneuvers, since subpart F would now eliminate the benefit, and therefore they end up paying higher taxes to the source jurisdictions, rather than to the U.S. Treasury.

The Obama international tax proposals were probably DOA (in the short run at least) anyway, given the combination of (a) bipartisan opposition, (b) the existence of higher-priority legislative issues, and (c) the lack of top staff on hand in Treasury (especially given the sad recent news that Beth Garrett has withdrawn her candidacy for the Assistant Secretary of the Treasury for Tax Policy position).

A couple of quick points about the disregarded entities proposal:

(a) It merely corrects a mistake that the Treasury made in 1997 when it changed the rules for classifying ambiguous legal entities as C corporations or not for purposes of the U.S. federal income tax. The Treasury surely has the power to act unilaterally on this by fixing the regulations, only (a) under federal budget rules, the Administration then wouldn't get credit for the extra revenue (though obviously the budget deficit would reflect whatever revenue came in, and (b) Congressional leaders, hearing angry complaints from U.S. multinationals, might regard it as a breach of comity. But this doesn't mean the Administration's proposal is good - the past mistake is water under the bridge, and the question of interest today is whether the proposed legislative change would on balance be good or bad policy.

(b)The proposal clearly makes sense IF one favors the use of subpart F to prevent companies from shifting business income abroad from the true source jurisdictions to tax havens. Note that the source jurisdictions could do this themselves (and get the revenue) if they wanted, such as through tougher rules for transfer pricing and the use of debt to strip away local earnings. Perhaps they don't want to because they see it as a targeted tax break for mobile capital investment. I myself am on the taxpayers' rather than the Obama Administration's side in this debate, on the view that the proposal would result in revenue-raising for other countries not the U.S., or else simply lead to reallocation of who does foreign business investment from U.S.-incorporated to non-U.S. incorporated companies.

Clearly it's in the U.S. national interest, all else equal, for companies owned by U.S. individuals to pay lower taxes abroad (since the money goes to someone else, not to us). To take an opposite and pro-Administration view of this issue, one might have to either (a) believe that we still come out ahead from reciprocal anti-tax avoidance efforts, which strikes me as unlikely, or (b) view the lower tax rates abroad as likely to reduce investment and revenues in the U.S., which the empirical evidence (with good logical underpinnings) tends to rebut.

Remiss?

Not many blog entries lately, because in summer my engagements reduce sufficiently that I'm not distracted and running from one thing to another. Instead, I can focus at work on my writing, and my energy goes into that. I'm nearly done with chapter 2 (not counting a short intro chapter) of a book on U.S. international taxation that I'm fairly enthused about, in that I feel it will contain new insights and advance the debate. Not that anyone will accept them or anything, but still. A few will possibly see the merits.

My most recent book, Decoding the U.S. Corporate Tax, didn't center on bringing new insight to the practical issues in the field because they haven't engaged me as deeply. Instead, its prime strength is in explaining how and why the rich but under-appreciated economic literature in the area is important, and why none of it really fits (which is the lawyers' fault, not the economists). I do feel this makes the book valuable, as well as often fun to read. But in international tax the practical policy questions engage me more and I feel the theoretical literature has to a greater extent fallen short.

Anyhow, some other random notes. Tonight I attended (most of) an Elvis Costello concert on his country & bluegrass tour. Enjoyable, professional, nice band and sound, seems at this stage an amiable raconteur. I'd never seen him before, but I'll swear by his first 4 albums (plus Spike to a lesser extent). These days, a bit literalist and lacking in poetry as a writer. And almost the only songs I recognized were Blame It On Cain and the Velvet Underground's Femme Fatale. Still, nice to have seen him.

On a completely different subject, I'd meant to post a link to Greg Mankiw's recent co-authored paper that offers a nice little summary of the optimal income tax literature. So here it is. Next time I'm teaching a basic tax policy class I may well assign it, and people who want an intro to the field may find it useful. I had been waiting to have the chance to post a corrected link to an old paper of mine that discusses some related ideas, and that more or less started a micro-genre in the legal tax policy literature on endowment taxation. So here that is. I found to my surprise that this link has a problem - the paper as posted is lacking two charts that may help in understanding the discussion, as well as the bibliography. I'm trying to post a corrected version but it's not up yet. Better the posted one than nothing, I suppose.

Fool me once, shame on you ...

... but needless to say, fool me twice and it's shame on me. By these lights, our cat Buddy (a.k.a. the Wascally Wabbit) succeeded in shaming us the other day.

Perhaps 3 years ago, we had a period when we would occasionally let him go out into our small, fence-surrounded backyard. For a while, he just patrolled, sniffed things, and so forth, but one day, while someone's back was turned, he hopped over the fence and we didn't see him for five whole days. Since he didn't have a collar, this was a pretty big problem. We papered the neighborhood with photos and so forth. Finally one day I spotted him on someone else's second-floor terrace. He meowed at me though it was several houses down, and we were able to retrieve him.

He looked pretty good - well-fed and well-groomed, rather than in the least bit bedraggled. We were curious how he had lived those 5 days - and, for that matter, how he had gotten onto a terrace that was seemingly inaccessible, even to a cat, from the ground (nor had the neighbors seen him in their house). But he wasn't talking. I am confident that he will take those secrets to the grave (though not for many years yet - he is only about 4 and we also have a 19-year old cat).

This led to a policy of not letting him out, ever. But the years pass and one's policies loosen up. He's been so desperately eager to get outside that, over the last few days, we let him out a few times, albeit while very closely watched. Since cats are usually deliberate in their movements in territories they don't know well, we figured we would be able to grab him if he got ideas, as no doubt he eventually would. We also blocked the easiest escape routes.

Then two days ago, he was calmly sitting in the middle of the yard looking around, when suddenly he saw another cat on one of the fences between the different yards. In a quarter of a second if not less (it seemed), he (a) shot across the yard, (b) jumped to the top of a fence that's about 6 feet high (scrabbling along the side on the way up, as cats do when the jump is too high to do all at once), and (c) raced along the top of the connected fences (a functional catwalk) at least thirty feet down, and well out of our yard, in pursuit of the other cat.

You had to see it to believe it, though it was so fast that I barely did. Truly the peewee version of the Hound of the Baskervilles racing down the moor in pursuit of fresh game.

By five seconds later, we couldn't tell where he was - there were perhaps 20 possible backyards, many of them in small apartment buildings. And we didn't entirely (or perhaps at all) trust him to return. Our relations are very cordial but less intense than with our other two cats (he is very sweet but, if he were a person, we'd say he's in his own head). The saying "You can never really own a cat," is true of him, though not of all cats. Also, we don't feed him enough, by his lights, because if we did (as we used to) he'd be extremely overweight.

But the story has a happy ending. A neighbor on the other side, not previously known to us, heard us calling his name and asked if everything was okay. A fellow cat-owner, she volunteered to call her cat-owning neighbors to see if Buddy had shown up in any of their yards. He had, and I went to fetch him. When I got to the yard in question, Buddy had left, apparently startled by the stranger who had gone out to check on him.

But good old bribery did the trick. I had shown up with "greenies," a small cat treat that, in our house, he likes to chase and bat around before gobbling down. I called out to him and he looked at me, but that alone didn't seem to count for much. But when I started rattling the greenie container and actually took one out, he calmly walked over and let me grab him.

Fool me three times and ... well, we don't plan ever to let him out again, but we're also ordering a collar with contact information.

Latest publication

A short article of mine, "Internationalization of Income Measures and the U.S. Book–Tax Relationship," just came out in the National Tax Journal. Not available on-line (other than the abstract), and I don't seem to have posted it on SSRN, but the cite is 62 N.T.J. 155-67 (March 2009).

The abstract is as follows:

Taxable income and financial accounting income are measures that use the same name but serve different purposes, leading to some differences in how they might ideally be defined. However, concern about managerial incentive problems may support integrating them, either to increase the accuracy of amounts reported or to reduce the resources that managers expend on reducing taxable income and increasing reported earnings. Political incentive problems, on the other hand, arguably support separating the measures, so that legislative eagerness to control the tax base need not promote politicization of accounting standards. The case for a largely one–book system may grow stronger, however, if pressures for international convergence in defining income on both the tax and accounting fronts lead to reduced politicization of both.

Doug Holtz-Eakin talks up new conservative think tank

I admit to having been hard occasionally on Doug Holtz-Eakin during the 2008 presidential campaign. I had three reasons for this: (1) at times he deserved it, (2) I expected better from him, and (3) he risked harming his entire profession's public reputation through egregious flacking that should have been left to others in the McCain campaign. The strangest thing about his flacking was its inconsistency - one day he'd spout a silly talking point that was beneath his station (so to speak), and the next day he'd make a responsible comment about the long-term fiscal situation (which of course neither candidate wanted to highlight).

Anyway, Doug has now resurfaced via his statement that he's developing a proposal for a new think tank that he calls a “Center for American Progress for the right.”

This in turn prompts Paul Krugman and Matt Yglesias to note the already large supply of conservative think-tanks (such as AEI and Heritage) with exceptionally deep funding. They posit that, since the Republican Party and the conservative movement have gone stark raving mad, institutions that align with them, in Yglesias' words, must "not [be] prepared to accept anything other than 'tax cuts' as a solution to anything. Consequently, they’re not really even prepared to accept the premise that other problems exist. Tax cuts can’t solve climate change, so there must be no such thing! Tax cuts can’t curb inequality, so there must not be a problem with growing inequality."

This is a bit unfair. AEI, for example, is a mixed bag. On the one hand, it was the venue the other day for the Cheney speech, about which the less said the better. But it also still features intelligent and responsible commentary, such as (just to give one example without prejudice to others) this.

The problem is that, when an institution gets too deep in bed with really bad apples (or demanding funders), the good people doing good work there suffer a labeling or guilt by association problem. Or they may need to watch what they say and avoid pursuing some ideas too far. Thus, Holtz-Eakin could accomplish something by creating an institution that stuck to the high road. But the tricky part is getting the funding and prominence needed to pick off the good people from compromised institutions. Making this all the harder, those institutions have good reason to treat a few high-minded people very well. The labeling confusion goes both ways - the institutions gain luster from good and honest work done there, just as the people doing that work risk losing a bit of their own luster.

In discussing his initiative, Holtz-Eakin talks a bit too much for my taste in terms of reviving the Republican Party. It's certainly extremely important for our national welfare - as numerous people on the left have noted - that the Republicans return to planet Earth and to our country's traditions (not to mention those of the Enlightenment). It's also true that hypothetical Republicans who had returned to sanity and decency would be the natural constituency for a policy shop lying on the side of the spectrum that is more pro-market and less focused on inequality. But I would say that the smarter and safer way of getting to that end state would be to utterly ignore the Republicans for now, and wait for them to come calling in 2014 or so. As I would have hoped Holtz-Eakin had already learned, engaging with them now is a recipe for debasing oneself without improving them.

Possible early hire, if Doug is serious: Bruce Bartlett.