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  Yet even a cursory look at the law as it has stood since then shows that the new, reformed T & E rules fall somewhat short of the ideal—that, in fact, they are shot through with absurdities and underlaid by a kind of philistinism. For travel to be deductible, it must be undertaken primarily for business rather than for pleasure and it must be “away from home”—that is to say, not merely commuting. The “away-from-home” stipulation raises the question of where home is, and leads to the concept of a “tax home,” the place one must be away from in order to qualify for travel deductions; a businessman’s tax home, no matter how many country houses, hunting lodges, and branch offices he may have, is the general area—not just the particular building, that is—of his principal place of employment. As a result, marriage partners who commute to work in two different cities have separate tax homes, but, fortunately, the Code continues to recognize their union to the extent of allowing them the tax advantages available to other married people; although there have been tax marriages, the tax divorce still belongs to the future.

  As for entertainment, now that the writers of I.R.S. regulations have been deprived of the far-reaching Cohan rule, they are forced to make distinctions of almost theological nicety, and the upshot of the distinctions is to put a direct premium on the habit—which some people have considered all too prevalent for many years anyhow—of talking business at all hours of the day and night, and in all kinds of company. For example, deductions are granted for the entertainment of business associates at night clubs, theatres, or concerts only if a “substantial and bona fide business discussion” takes place before, during, or after the entertainment. (One is reluctant to picture the results if businessmen take to carrying on business discussions in great numbers during plays or concerts.) On the other hand, a businessman who entertains another in a “quiet business setting,” such as a restaurant with no floor show, may claim a deduction even if little or no business is actually discussed, as long as the meeting has a business purpose. Generally speaking, the noisier and more confusing or distracting the setting, the more business talk there must be; the regulations specifically include cocktail parties in the noisy-and-distracting category, and, accordingly, require conspicuous amounts of business discussion before, during, or after them, though a meal served to a business associate at the host’s home may be deductible with no such discussion at all. In the latter case, however, as the J. K. Lasser Tax Institute cautions in its popular guide “Your Income Tax,” you must “be ready to prove that your motive … was commercial rather than social.” In other words, to be on the safe side, talk business anyhow. Hellerstein has written, “Henceforth, tax men will doubtless urge their clients to talk business at every turn, and will ask them to admonish their wives not to object to shop talk if they want to continue their accustomed style of living.”

  Entertainment on an elaborate scale is discouraged in the post-1963 rules, but, as the Lasser booklet notes, perhaps a little jubilantly, “Congress did not specifically put into law a provision barring lavish or extravagant entertainment.” Instead, it decreed that a businessman may deduct depreciation and operating expenses on an “entertainment facility”—a yacht, a hunting lodge, a swimming pool, a bowling alley, or an airplane, for instance—provided he uses it more than half the time for business. In a booklet entitled “Expense Accounts 1963,” which is one of many publications for the guidance of tax advisers that are issued periodically by Commerce Clearing House, Inc., the rule was explained by means of the following example:

  A yacht is maintained … for the entertainment of customers. It is used 25% of the time for relaxation.… Since the yacht is used 75% of the time for business purposes, it is used primarily for the furtherance of the taxpayer’s business and 75% of the maintenance expenses … are deductible entertainment facility expenses. If the yacht had been used only 40% for business, no deduction would be allowed.

  The method by which the yachtsman is to measure business time and pleasure time is not prescribed. Presumably, time when the yacht is in drydock or is in the water with only her crew aboard would count as neither, though it might be argued that the owner sometimes derives pleasure simply from watching her swing at anchor. The time to be apportioned, then, must be the time when he and some guests are aboard her, and perhaps his most efficient way of complying with the law would be to install two stopwatches, port and starboard, one to be kept running during business cruising and the other during pleasure cruising. Perhaps a favoring westerly might speed a social cruise home an hour early, or a September blow delay the last leg of a business cruise, and thus tip the season’s business time above the crucial fifty-percent figure. Well might the skipper pray for such timely winds, since the deductibility of his yacht could easily double his after-tax income for the year. In short, the law is nonsense.

  Some experts feel that the change in T & E regulations represents a gain for our society because quite a few taxpayers who may have been inclined to fudge a bit under general provisions like the Cohan rule do not have the stomach or the heart to put down specific fraudulent items. But what has been gained in the way of compliance may have been lost in a certain debasement of our national life. Scarcely ever has any part of the tax law tended so energetically to compel the commercialization of social intercourse, or penalized so particularly the amateur spirit, which, Richard Hofstadter declares in his book “Anti-Intellectualism in American Life,” characterized the founders of the republic. Perhaps the greatest danger of all is that, by claiming deductions for activities that are technically business but actually social—that is, by complying with the letter of the law—a man may cheapen his life in his own eyes. One might argue that the founders, if they were alive today, would scornfully decline to mingle the social and the commercial, the amateur and the professional, and would disdain to claim any but the most unmistakable expenses. But, under the present tax laws, the question would be whether they could afford such a lordly overpayment of taxes, or should even be asked to make the choice.

  IT has been maintained that the Code discriminates against intellectual work, the principal evidence being that while depreciation may be claimed on all kinds of exhaustible physical property and depletion may be claimed on natural resources, no such deductions are allowed in the case of exhaustion of the mental or imaginative capacities of creative artists and inventors—even though the effects of brain fag are sometimes all too apparent in the later work and incomes of such persons. (It has also been argued that professional athletes are discriminated against, in that the Code does not allow for depreciation of their bodies.) Organizations like the Authors League of America have contended, further, that the Code is unfair to authors and other creative people whose income, because of the nature of their work and the economics of its marketing, is apt to fluctuate wildly from year to year, so that they are taxed exorbitantly in good years and are left with too little to tide them over bad years. A provision of the 1964 bill intended to take care of this situation provided creative artists, inventors, and other receivers of sudden large income with a four-year averaging formula to ease the tax bite of a windfall year.

  But if the Code is anti-intellectual, it is probably so only inadvertently—and is certainly so only inconsistently. By granting tax-exempt status to charitable foundations, it facilitates the award of millions of dollars a year—most of which would otherwise go into the government’s coffers—to scholars for travel and living expenses while they carry out research projects of all kinds. And by making special provisions in respect to gifts of property that has appreciated in value, it has—whether advertently or inadvertently—tended not only to force up the prices that painters and sculptors receive for their work but to channel thousands of works out of private collections and into public museums. The mechanics of this process are by now so well known that they need be merely outlined: a collector who donates a work of art to a museum may deduct on his income-tax return the fair value of the work at the time of the donation, and need pay no capit
al-gains tax on any increase in its value since the time he bought it. If the increase in value has been great and the collector’s tax bracket is very high, he may actually come out ahead on the deal. Besides burying some museums under such an avalanche of bounty that their staffs are kept busy digging themselves out, these provisions have tended to bring back into existence that lovable old figure from the pre-tax past, the rich dilettante. In recent years, some high-bracket people have fallen into the habit of making serial collections—Post-Impressionists for a few years, perhaps, followed by Chinese jade, and then by modern American painting. At the end of each period, the collector gives away his entire collection, and when the taxes he would otherwise have paid are calculated, the adventure is found to have cost him practically nothing.

  The low cost of high-income people’s charitable contributions, whether in the form of works of art or simply in the form of money and other property, is one of the oddest fruits of the Code. Of approximately five billion dollars claimed annually as deductible contributions on personal income-tax returns, by far the greater part is in the form of assets of one sort or another that have appreciated in value, and comes from persons with very high incomes. The reasons can be made clear by a simple example: A man with a top bracket of 20 per cent who gives away $1,000 in cash incurs a net cost of $800. A man with a top bracket of 60 per cent who gives away the same sum in cash incurs a net cost of $400. If, instead, this same high-bracket man gives $1,000 in the form of stock that he originally bought for $200, he incurs a net cost of only $200. It is the Code’s enthusiastic encouragement of large-scale charity that has led to most of the cases of million-dollar-a-year men who pay no tax at all; under one of its most peculiar provisions, anyone whose income tax and contributions combined have amounted to nine-tenths or more of his taxable income for eight out of the ten preceding years is entitled by way of reward to disregard in the current year the usual restrictions on the amount of deductible contributions, and can escape the tax entirely.

  Thus the Code’s provisions often enable mere fiscal manipulation to masquerade as charity, substantiating a frequent charge that the Code is morally muddleheaded, or worse. The provisions also give rise to muddleheadedness in others. The appeal made by large fund-raising drives in recent years, for example, has been uneasily divided between a call to good works and an explanation of the tax advantages to the donor. An instructive example is a commendably thorough booklet entitled “Greater Tax Savings … A Constructive Approach,” which was used by Princeton in a large capital-funds drive. (Similar, not to say nearly identical, booklets have been used by Harvard, Yale, and many other institutions.) “The responsibilities of leadership are great, particularly in an age when statesmen, scientists, and economists must make decisions which will almost certainly affect mankind for generations to come,” the pamphlet’s foreword starts out, loftily, and goes on to explain, “The chief purpose of this booklet is to urge all prospective donors to give more serious thought to the manner in which they make their gifts.… There are many different ways in which substantial gifts can be made at comparatively low cost to the donor. It is important that prospective donors acquaint themselves with these opportunities.” The opportunities expounded in the subsequent pages include ways of saving on taxes through gifts of appreciated securities, industrial property, leases, royalties, jewelry, antiques, stock options, residences, life insurance, and inventory items, and through the use of trusts (“The trust approach has great versatility”). At one point, the suggestion is put forward that, instead of actually giving anything away, the owner of appreciated securities may wish to sell them to Princeton, for cash, at the price he originally paid for them; this might appear to the simple-minded to be a commercial transaction, but the booklet points out, accurately, that in the eyes of the Code the difference between the securities’ current market value and the lower price at which they are sold to Princeton represents pure charity, and is fully deductible as such. “While we have laid heavy emphasis on the importance of careful tax planning,” the final paragraph goes, “we hope no inference will be drawn that the thought and spirit of giving should in any way be subordinated to tax considerations.” Indeed it should not, nor need it be; with the heavy substance of giving so deftly minimized, or actually removed, its spirit can surely fly unrestrained.

  ONE of the most marked traits of the Code—to bring this ransacking of its character to a close—is its complexity, and this complexity is responsible for some of its most far-reaching social effects; it is a virtual necessity for many taxpayers to seek professional help if they want to minimize their taxes legally, and since first-rate advice is expensive and in short supply, the rich are thereby given still another advantage over the poor, and the Code becomes more undemocratic in its action than it is in its provisions. (And the fact that fees for tax advice are themselves deductible means that tax advice is one more item on the long list of things that cost less and less to those who have more and more.) All the free projects of taxpayer education and taxpayer assistance offered by the Internal Revenue Service—and they are extensive and well meant—cannot begin to compete with the paid services of a good independent tax expert, if only because the I.R.S., whose first duty is to collect revenue, is involved in an obvious conflict of interest when it sets about explaining to people how to avoid taxes. The fact that about half of all the revenue derived from individual returns for 1960 came from adjusted gross incomes of $9,000 or less is not attributable entirely to provisions of the Code; in part, it results from the fact that low-income taxpayers cannot afford to be shown how to pay less.

  The huge army of people who give tax advice—“practitioners,” they are called in the trade—is a strange and disturbing side effect of the Code’s complexity. The exact size of this army is unknown, but there are a few guideposts. By a recent count some eighty thousand persons, most of them lawyers, accountants, and former I.R.S. employees, held cards, granted by the Treasury Department, that officially entitle them to practice the trade of tax adviser and to appear as such before the I.R.S.; in addition, there is an uncounted host of unlicensed, and often unqualified, persons who prepare tax returns for a fee—a service that anyone may legally perform. As for lawyers, the undisputed plutocrats, if not the undisputed aristocrats, of the tax-advice industry, there is scarcely a lawyer in the country who is not concerned with taxes at one time or another during a year’s practice, and every year there are more lawyers who are concerned with nothing else. The American Bar Association’s taxation section, composed mostly of nothing-but-tax lawyers, has some nine thousand members; in the typical large New York law firm one out of five lawyers devotes all of his time to tax matters; and the New York University Law School’s tax department, an enormous brood hen for the hatching of tax lawyers, is larger than the whole of an average law school. The brains that go into tax avoidance, which are generally recognized as including some of the best legal brains extant, constitute a wasted national resource, it is widely contended—and this contention is cheerfully upheld by some leading tax lawyers, who seem only too glad to affirm, first, that their mental capacities are indeed exceptional, and, second, that these capacities are indeed being squandered on trivia. “The law has its cycles,” one of them explained recently. “In the United States, the big thing until about 1890 was property law. Then came a period when it was corporation law, and now it’s various specialties, of which the most important is taxes. I’m perfectly willing to admit that I’m engaged in work that has a limited social value. After all, what are we talking about when we talk about tax law? At best, only the question of what an individual or a corporation should fairly pay in support of the government. All right, why do I do tax work? In the first place, it’s a fascinating intellectual game—along with litigation, probably the most intellectually challenging branch of the law as it is now practiced. In the second place, although it’s specialized in one sense, in another sense it isn’t. It cuts through every field of law. One day you may be working
with a Hollywood producer, the next day with a big real-estate man, the next with a corporation executive. In the third place, it’s a highly lucrative field.”

  HYPOCRITICALLY egalitarian on the surface and systematically oligarchic underneath, unconscionably complicated, whimsically discriminatory, specious in its reasoning, pettifogging in its language, demoralizing to charity, an enemy of discourse, a promoter of shop talk, a squanderer of talent, a rock of support to the property owner but a weighty onus to the underpaid, an inconstant friend to the artist and scholar—if the national mirror-image is all these things, it has its good points as well. Certainly no conceivable income-tax law could please everybody, and probably no equitable one could entirely please anybody; Louis Eisenstein notes in his book “The Ideologies of Taxation,” “Taxes are a changing product of the earnest effort to have others pay them.” With the exception of its more flagrant special-interest provisions, the Code seems to be a sincerely written document—at worst misguided—that is aimed at collecting unprecedented amounts of money from an unprecedentedly complex society in the fairest possible way, at encouraging the national economy, and at promoting worthy undertakings. When it is intelligently and conscientiously administered, as it has been of late, our national income-tax law is quite possibly as equitable as any in the world.