Recall what happened at last year’s Superbowl: Tom Brady received the keys to a brand new Chevy truck when he was named MVP of the Superbowl game, and then said “Oh, no, not me Chevy; you should give the truck to Malcolm Butler for making the game-winning interception instead.” And Chevy did that. If you’d been taking tax then you might have immediately thought: we just did this in class – who’s got income? Brady, because he received a prize? Are prizes income? But in any event, he gave it away, so what does that mean? And what about Butler? Did he receive a prize? Or a gift from his teammate? Are gifts income? And what’s a gift? These are all real live tax issues – indeed, this fact pattern was the first question on the tax exam last year.
What about Kim Kardashian, who was robbed in Paris? She lost over 10 million Euros worth of jewelry. Can she deduct that loss? How can the deduction help her? What if she sues the owners of the private mansion where she was staying, and wins? Is the recovery income? What about the cost of the legal fees – are they deductible? Does it matter if she sues and loses? Does the existence of the deduction depend on how rich she is?
Tax affects everything. Taking tax can change your life because you’ll see that everyday life is surrounded by tax issues, just as it is surrounded by torts, and contracts, hopefully less so by crimes. It’s the perfect 1L course because like those courses that you took last semester, it explains so much that is going on around you but that you never saw in that way before.
The tax law contains what is probably the most comprehensive expression of our values and our social policy. That’s why tax policy is always an important part of presidential elections. Deciding who should pay, and how we should measure how much they should pay, requires thinking through core values. The tax law as it exists at any given time is the concrete expression of those values.
And although we might think that the tax law’s only purpose is to raise revenue – to take money – the tax system does not do just that. The tax system not only takes, but gives. It gives so much that today, the tax system delivers more cash to the working poor that its benefits do more to lift individuals, and especially children, out of poverty than all of the other federal transfer programs, combined. Today, the tax law is the prime administrator of our social safety net and of our health care system. For healthcare, it provides both direct subsidies and imposes penalties, all of which come home to roost through the filing of a tax return.
The tax law also delivers implicit subsidies to the middle class and to the very rich. The home mortgage interest deduction is a housing program, and the credit for dependent care expenses is a child care program. Accelerated depreciation is a capital equipment subsidy. You can’t understand society, or business, or how our country functions, without understanding the tax system, and taking tax allows you to do that. It’s not about filling out a tax return or adding and subtracting numbers. It’s law.
To conclude, I want to say a word about numbers. The effect of a tax provision is illustrated in numbers because the tax is paid in money and that’s measured in numbers, but the course is not about arithmetic. I was a college psych major who couldn’t be bothered to balance her own checkbook. I took tax and fell in love because it was an intricate system which reflected social values and explained the world I saw. I came to realize that, to paraphrase a Temple math professor: Arithmetic is to tax as typing is to writing. So, don’t worry about arithmetic: Take Tax! If you can understand that 35% of $100 is $35, and that $100 minus $35 leaves you with $65, you have all the arithmetic you need for this course.
