June 28, 2006
Trends in Tax Scholarship
Posted by Victor Fleischer

Having made it through the "extreme" conferencing of the Junior Tax Scholars conference (18 papers in 2 days -- everything is "extreme" here in Boulder, including the sports and the hail storms) ... I thought I'd offer a few words about what I observed in terms of scholarly trends in tax. 

1.  The Declining Importance of Business Law?  Of the 18 papers, only two (mine and David Walker's) were primarily addressing business law issues, although many other papers certainly had relevance for business law, including Alex Raskolnikov's paper on social norms, Adam Rosenzweig's paper on elective tax fictions, and the international papers.  Still, I think it's remarkable that so few of us are primarily interested in how tax affects business. 

Perhaps as tax scholarship matures, the field inevitably becomes more like other areas of public law, and less practice-oriented.  The great papers on budget policy/public finance (Buchanan, Gamage, Doran) certainly trend in the generalist direction.  I wonder also if the rigorous demands of appointments committees inevitably lead to tax scholars whose interests go far beyond business law.  It's no longer enough to practice for a couple of years and jump right into teaching -- you often need a PhD or fellowship to establish your academic cred, even as a tax person. 

Is this a good development?  On the one hand, it's great that all of the papers at our conference were serious, academic papers and not merely descriptive papers talking about the latest changes in practice.  On the other hand, one thing I like about traditional tax scholarship is that, more than in most fields, tax scholars bridge the gap between theory and practice.  Can we do both at the same time?   

Another explanation, perhaps, is that the student editors of law reviews don't really like business tax articles.  So maybe junior tax scholars are just responding to incentives? 

2.  Talk about the imperialism of law and economics is overblown.  Unless I'm mistaken, Neil Buchanan (Rutgers) was the only economist in the room, and none of the papers was pure modeling or quantitative.  Many of the papers incorporated economic ideas, of course, and just about all of us have internalized some of the key lessons of law and economics into our scholarship.  And so while we integrate some law and econ ideas into our scholarship, law and econ simply hasn't taken over tax the same way it has arguably come to dominate corporate law scholarship. 

3.  Intradisciplinarity, not interdisciplinarity.  So, if not law and economics, what is the methodology?  Many papers used an intradisciplinary approach -- e.g. Kristin Hickman (tax law and admin law), David Walker (tax law and accounting), Alex Raskolnikov (tax law and social norms theory), Lloyd Mayer (tax law and election law).  (See also Susan Morse's paper on tax law and Sarbanes-Oxley, highlighted here on the Glom this week.)

On a number of occasions the topic of tax exceptionalism came up -- is tax different than other areas of law?  Should it be?  Do other areas of law have lessons for tax policy?  Does tax have anything to teach other areas?  I see this sort of intradisciplinary scholarship as likely to be the dominant methodology for this generation of tax scholars. 

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Comments (7)

1. Posted by Jake on June 28, 2006 @ 19:44 | Permalink

Prof. Fleischer asks: "Do other areas of law have lessons for tax policy?"

Sure they do.

For example, take the venerable step transaction doctrine of tax law, under which "a given result at the end of a straight path is not made a different result because reached by following a devious path." Minnesota Tea Co. v. Helvering, 302 U.S. at 613 (1938). In plain English, courts may collapse a series of transactional steps that are ostensibly separate, on paper, in order to get to the substance of what the parties intended.

State courts have been doing the same thing in non-tax, commercial law disputes since at least the early 19th century, and they do it to this day. Despite this evidence, some tax scholars publish articles claiming that the step transaction doctrine (and other variants of the general substance-over-form doctrine) are aberrational creatures of tax law. Not true.

2. Posted by Gordon Smith on June 28, 2006 @ 20:42 | Permalink


Thanks for this report. I think it is interesting that only two of the papers dealt with business taxation. You seem to link papers on business taxation with practice-oriented scholarship. Why do those two go together?

3. Posted by Vic on June 28, 2006 @ 21:07 | Permalink

Fair question, Gordon. Most of my students who go on to practice tax law do so in the big firm context, which tends to lead one to business law questions. So when I think "practice," I think of corporate tax, partnerhsip tax, the individual tax questions that relate to dividend income, income from the sale of stock, and that sort of thing. But indeed that is my own bias. One could also define "practice" as CBO lawyers or Senate Finance committee lawyers, in which case the budget papers are practice-oriented; the papers on the estate tax/inheritance tax are certainly practice-oriented in the sense that they will be useful reading for estate tax and charitable giving lawyers.

Still, I would venture to say that if you polled tax lawyers nationwide on what sorts of issues they spend their time on in practice, in the aggregate most billable hours would relate to what I call business tax. Most individual tax issues -- limits on the mortgage interest deduction and that sort of thing -- are handled by CPAs and not JDs.

None of this is meant to slight the importance of pure, non-practice-oriented tax policy questions. Tax policy is incoherent, for example, without an underlying theory of distributive justice. But it's interesting to me that my generation of tax scholars is more interested in the public policy side and less interested in the practice side.

4. Posted by Anthony Ilardi on June 29, 2006 @ 10:24 | Permalink

Prof. Fleischer's observation is interesting. I am a practiioner in a large firm, where, not surprisingly, my practice focuses on business transactions, particularly subchapter K. I have also, like many practitioners, taught as adjunct --in my case in MST and LLM programs.

Tax practitioners are generally regarded by their colleagues in practice as the most theoretical of lawyers (maybe there is some merit to exceptionalism), and, historically, the least differentiated from academics because of this theoretical approach. To a certain extent, part of that theoretical approach is grounded in policy considerations, but, it appears, not at the level that may be extant at law schools today. Nonetheless, I think every tax lawyer worth his or her salt somewhere in his or her training needs to understand policy issues. (I also think every tax lawyer should spend some time in a court room, but that's me). Obviously, not every course should be pure polic. But, if the tax courses in the JD program can excite the students about tax, there is enough opportunity to focus on nuts and bolts in an LLM program or in practice.

5. Posted by Jeff Lipshaw on June 29, 2006 @ 11:23 | Permalink

First, what a small world. Tony Ilardi and I used to practice together. He is a first-rate tax lawyer.

I'm not sure if the characterization of tax lawyers as the most "theoretical" is quite right. Tax is exceptional, I think, because it is certainly one of the most quantitative of practice areas; hence, the same kinds of minds that deal with with the abstractions of mathematics deal well with tax. The complexity combined with the abstraction leaves most others left with the sense that tax lawyers speak as oracles, in touch with some kind of Kabbalah.

The irony is, of course, in all of the risk containment work that lawyers do in the course of a transaction, the bottom line of what those theoretical or abstract tax lawyers do is most apparent to the business people. (I think it's fair to say that in most public corporations the tax lawyers report to the CFO and not to the general counsel.) Some of the worst deals I've ever seen were those in which there were substantial tax issues, and the legal and operational structures designed to address them so biased the human interactions that the businesses failed. (Doing the same thing to create financial reporting results, say, consolidation of sales so that the company can show top line growth, used to create the same problems, but the accounting rules have toughened up.) So often the job of the generalist is to say, yes, we can structure the deal this way, and save $X, but the resulting business will be so hamstrung (in perception or reality) that in the end you would have been better off paying the tax, or abandoning the transaction in favor of the next best alternative. (To take an example with which I was familiar, there was industrial logic in combining two consumer businesses into a single independently run joint venture in Europe, but (a) it could not be done as a tax free reorg in most European tax jurisdictions, and thus triggered a massive amount of gain on which tax had to be paid, and (b) with the breaking of the consolidated groups at the parent level(the organschaft in Germany), substantial NOLs would be lost. So the parties created a "virtual joint venture" of management and supply contracts in which the merger never "took" because the people and assets never lost their parents' identities.)

One of the classic initial meetings in doing a deal is looking at the four or five page schematic that the tax department has constructed, and which advantages your side, but which the other side (a) probably won't understand, and (b) creates all sorts of other due diligence and liability issues. But it does save tax dollars (on which the tax department is measured and compensated). Just as much as business lawyers need to have some passing familiarity with tax policy, having tax lawyers understand their own exceptionalism in the business world (a scholarly and teaching endeavor!) seems to me a laudable goal (then they turn into great business tax lawyers like Tony.)

6. Posted by andy on June 29, 2006 @ 15:29 | Permalink

i'm curious as to whom "good" tax scholarship should speak to. seems like one of the nice things about tax (as opposed to many other disciplines) is that an academic need not sink into irrelevancy; academic tax articles (and treatises by academics) are often useful to the tax practitioner, whereas it seems that a CLS or legal realism professor has no choice but to focus on the obscure.

i don't think it's terribly unusual for a tax prof to chime in on a live controversy, and then see that scholarship mentioned when that controversy is resolved (e.g. the fourth circuit cited prof. ethan yale's article in rejecting the government's strained interpretion of 357(c)(3). 436 F.3d 431, 437).

given that it is considerably easier for a tax prof's scholarship to be useful (because of the 'academic' nature of tax practice)than it is for a professors in other disciplines, is it at all surprising that tax professors are less inclined to inject "law and economics" or "legal nihilism" theories into their scholarship?

perhaps i am a pessimist, but i think the reason that "interdisciplinary" approaches plague the traditionally academic areas of the law is that all that needs to be said in a given area has been said-- i don't think anyone could possibly say anything new about constitutional interpretation unless he adopted a ground-breaking anthropofeminirealist perspective on the matter.

contrarily, if one focus on tax, or bankruptcy, or ERISA, etc., it seems much easier to chime in on unresolved debates and present useful scholarship. until the legions of debates pervading the tax code are resolved, i'm not sure that there is much use for a "Romance Languages Approach to IRC 61," and i'm not sure if tax scholarship moves in the direction of providing such scholarship that that would be a good thing.

i've taken the limited view that the primary purpose of scholarship should be to assist a judge/lawyer/lawmaker, and am arguably assuming my conclusion. if the purpose of scholarship is to speak to other academics, then, admittedly, tax scholarship is deficient for its failure to incorporate the teachings of other discliplines.

7. Posted by Bob on July 2, 2006 @ 17:50 | Permalink

Just in case you need another scholarship for college visit www.bookscholarship.com

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