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The 2019 Fogel Lecture by Dana Trier

Income Tax

On March 21st Temple Law students had an exclusive opportunity to hear about the 2017 tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Act”), first-hand from Mr. Dana Trier, the 2019 Fogel Lecture keynote speaker. Mr. Trier served as Deputy Assistant Secretary for Tax Policy in the U.S. Treasury Department, and was at Treasury during the lead up to the 2017 Act. Many of my peers, myself included, thought Mr. Trier might simply cover the key elements of the 2017 Act, such as the BEAT, essentially a base erosion deterrent in the form of an alternative minimum tax, and the increased taxation of CFC’s under Section 951A, the new GILTI provision. Instead, Mr. Trier treated the room to a truly fascinating recounting of his time at Treasury immediately leading up to the 2017 Act. Indeed, not only was Mr. Trier involved in the process generally, but many of his personal comments directly shaped specific provisions.

Mr. Trier first discussed the role of Treasury in passing the 2017 Act. Contrary to popular perception, Mr. Trier indicated that the Treasury Department had a de minimis impact on the formulation of the 2017 Act. He articulated that while Treasury certainly supported the broad effort of tax reform, the legislation was primarily a Congressionally-effectuated tax package. Moreover, Mr. Trier opined that the Treasury Department, including the Office of Tax Policy, were simply not properly positioned to tackle the 2017 legislation given a number of factors, not the least of which was the relatively short horizon for implementation. When asked by a student if he thought the process was “rushed,” he clarified that in his view, one must bifurcate the period in which the provisions were developed, which he acknowledges was compressed, and the time frame during which underlying data and testimony were obtained. Mr. Trier notes that while the former was rapid, the latter process was protracted and substantially predated 2017. I believe that’s a tremendously helpful distinction for those of us on the outside looking in. It highlights an underlying effort to base the new legislation on sound law, data, and policy that simply is not visible to the general public through the facade of a scurried reform effort. To be clear, that isn’t a commentary on outcomes – as Mr. Trier puts it, the legislation certainly did not achieve “nirvana.”

Speaking of outcomes, when asked what could have been done differently to obtain more favorable results, Mr. Trier mentioned that more public comments would have been constructive in developing and re-working the new provisions. Mr. Trier further indicated that he is still waiting to see what the long-term effects of the 2017 Act will be. In his view, it takes potentially decades to see the full effect of such legislation. As an example, Mr. Trier points out that tax lawyers and clients are still trying to come to terms with the effects and implementation of the 1986 reform legislation which repealed General Utilities. In Mr. Trier’s words, “until clients come to grips with what [legislation] means to them, you don’t actually understand how it works.”

Mr. Trier also touched on some of the policy concerns underlying the enactment of the 2017 Act, principally migration between entity types, which is often precipitated by changing the rates attendant to given entities. This is quite sensible, as taxpayers are always vying for favorable rates; if the variance in rates between the corporate tax rate and the highest marginal individual rate tilt in favor of the latter, taxpayers will migrate away from C corporations to passthrough entities. As a general policy matter, Mr. Trier questioned the validity of having large variances between passthroughs and corporate entities given that in his view, it reduces horizontal equity and otherwise lacks strong policy rationale. In view of this, he sees the 2017 Act as attempting to establish an intermediate rate to presumably remove tax from a taxpayer’s choice of entity calculus. However, given the present disparity between the new 21 percent corporate tax rate and the 37 percent top individual rate, it remains to be seen to what degree tax considerations will actually be mitigated.

Having the opportunity to hear Mr. Trier share his insight into the policies that drove the 2017 Act, its potential effects, and the processes leading up to and surrounding the enactment of the 2017 Act, was simply a joy – it is not often enough that students have an opportunity to hear about major legislation from a key individual that not only was “in the room where it happened,” but was paramount in developing the provisions. I think I speak for my fellow students when I say that we are deeply appreciative to Mr. Trier for his aforementioned insights, and hope he comes back to share more with us soon!

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