Tax planning at the ballpark.

AuthorEzrati, Lester D.
PositionTax shelter abuse explained with baseball metaphor - Reprint

The ongoing controversy about corporate tax shelters and what to do about them has attracted much attention lately. Whether you view the problem as one of perception or reality or both, it is clear that advocates on both sides of the issue have proven creative in their rhetoric. One analogy that captured my attention was the comment by Deputy Treasury Secretary Lawrence Summers that action was necessary to staunch corporate tax shelters because the corporation that enters into a questionable transaction is like the fan who stands up at the ballpark. As Mr. Summers explained in his address to TEI's Midyear Conference, his concern is that if one person stands up, more will follow, until all will be standing up, straining to see the game. All spectators, he argued, would be better off if all remained seated. Anyone who has been a ball game will agree with Mr. Summers that it is generally more pleasant to watch the game from a seated position rather than standing the entire game.

On April 27 -- not coincidentally just hours after I testified on TEI's behalf concerning corporate tax shelters at a Senate hearing -- I traveled to Baltimore to attend a baseball game and had a chance to put Mr. Summers's analogy to the test. As I entered Camden Yards to watch the Orioles take on the Kansas City Royals, I considered how large and how relentlessly a penalty should be imposed on the standers. My thoughts began to swirl as I considered how the baseball equivalents of the Clinton Administration's tax shelter penalties would be applied.

Since subjecting her company to a 40-percent penalty would be a career-ending move for any vice president of taxes, I thought it appropriate to compare the proposed tax shelter penalty to a lifetime ban from all baseball games. Subject to how egregious the stander was, this could be extended to all sporting events and perhaps all events where standing is to be discouraged.

Entering the seating bowl, I realized that there were all sorts of standers in my way. For example, just as I was getting settled, the public address announcer instructed everyone to stand for the national anthem. Surely this was a standing that the Commissioner (Bud Selig or Charles Rossotti) would say was "contemplated by Congress." We all stood, sang the Star Spangled Banner and then most sat down. Not everyone did, however, and because a few folks remained standing -- people watching I guess you would say -- I wasn't able to watch the ceremonial...

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