Editor’s Note: Dana Trier, long-time active ABA Tax Section member and former Corporate Tax Committee chair, most recently served as Deputy Assistant Secretary for Tax Policy in the U.S. Treasury Department. In this interview, he explains how he came into tax, how he helped develop the tax practices at several firms, his role in tax reform, and other topics.
Q: Dana, how did you come into tax?
A: I did not start as a tax lawyer. I began as a corporate lawyer at Cravath, Swaine & Moore, New York. I worked for what they called the Butler Group, which was probably the most prestigious corporate practice group at that time. The group worked with a guy named Sam Butler, who, like myself, was from Indiana.
My first foray into tax was taking NYU courses at night. In those days it was not uncommon for corporate lawyers to acquire some expertise in tax. Sam Butler himself had an LL.M. in tax from NYU. I initially developed my skills in tax to be a better business lawyer. Cravath has an assignment system, and my first assignment was 18 months or so in the Butler Group. When it came time for my next assignment, I went up to the Wall Street Club with a fellow named Wayne Chapman—who had ideas for what my next assignment should be—and we talked. I won't go into all the details. Alcohol was involved. The result of that conversation was that I would split my time in my next 18 to 24 months between tax and corporate. The corporate work I did was leveraged leasing, a complex financial transaction. It was during that next year or two that two things became evident: I liked complex transactions, and I caught the tax bug. I found that the more I got into it, the more interesting tax was to me. It just was such a fascinating, interesting area, both as a legal matter and because of the policy issues involved.
Q: How did your interest in economics develop?
A: In law school I was not a tax-oriented student at all, but I was definitely into law and economics. One of the professors that I was the closest to was actually chairman of the Economics Department. His name was Peter Steiner. The economist's conceptual cast of mind, plus my interest in economic policy, was important as I moved into practice. That cast of mind naturally found its home in tax. In those days there were very few tax professors that were into economics. But as time has gone on, of course, it's practically a requirement to be hired now as tax professor at the more prestigious schools to come with an economics background.
So my natural cast of mind found tax, and it was a good fit. The thing that was a little awkward is that I still had business lawyer tendencies. I liked dealing directly with clients. I liked negotiating deals. I liked structuring deals.
Q: Why is that awkward?
A: It wouldn't have been awkward at all outside of the big city practice. If you're practicing outside the New York/Washington complex, it's actually quite common for tax lawyers to be business lawyers as well as tax lawyers. But it was always a little bit difficult to fit yourself into the New York model if you were that type of person. At its most stringent, under that model the tax people simply service the Corporate Department. And that probably doesn't fit me. I wanted a setting where I could do tax and interact with clients like corporate lawyers do. I think it's fair to say things worked out fine.
Q: Let's talk about how you built that practice.
A: I thought it was healthier for the tax department (and healthier for me) to have a tax department that performed its role very well in relation to the corporate department, but also had its own practice—a client-facing practice, where tax lawyers were important to bringing in the business, developing the business, etc. And, to some extent, I just thought it was healthier that the tax department wouldn't be second-class citizens. Cleary and Skadden, just to name two firms, did a good job of achieving that kind of work environment.
When I left Cleary to go to Davis Polk, which had a very fine tax department, one of my objectives was to develop that broader capacity of a tax department, to make the tax department quite important from the perspective of the business of the firm. You can do that in either of two ways. You can do what we tended to call tax-only work. The other way was to work integrally with other groups within the firm. At Davis Polk, that was very important in the derivatives practice. Actually, the derivatives and convertibles practice. It's also pretty important in M&A, etc. With some pride, I would say that over the decade-plus period that I was a partner, I think we made a lot of progress at Davis Polk in doing that. And lest anybody think I was particularly important or essential to all of that, I would say since I retired, they've done even better. They've built the practice further, and it's a good thing. It's a good thing for tax professionals to seek to have a broader practice.
Q: And how did you come to develop that breadth in your practice?
A: It's a combination of my personality and the accident of history. I'll start back at Cravath. This is completely accidental. Now, within the small group of people who were doing tax law at that time, a number of us were doing leasing both as tax lawyers and as corporate lawyers, and I was one of those. Mike Schler and I and others were doing tax and employee benefits. And then, of course, I did corporate before I got into tax. So right from the beginning I was actually covering more areas than anybody else was, totally accidentally. It had nothing to do with design or long-term planning. When I left Cravath, one of the partners said, "Trier, you must be doing something right because four partners say, in four different areas, that they need an associate to replace you." So I always had breadth.
I went from Cravath to a firm called Cohen & Uris, which was a great tax firm that was headed by Sheldon Cohen, the former Commissioner of Internal Revenue and Chief Counsel. That particular firm's approach was more of a generalist approach. The partners felt that they could handle whatever came in. Because I was working for those partners, I developed breadth from that experience.
Whenever you hold those higher-level tax policy positions, there's a tendency for the person who's done that to have considerable breadth. For example, consider the late Kenneth Gideon, one of my bosses at Treasury, who was the Assistant Secretary in the George H.W. Bush administration. I was his Acting Deputy. I was first Tax Legislative Counsel and then his Acting Deputy. If I had to pick one of the people who were important mentors, it would be Ken. Ken was also Chief Counsel of the IRS. The Chief Counsel has to cover all of these areas. And Fred Goldberg has similar breadth and ability. Ron Pearlman likewise had a lot of that breadth and I think he held those positions.
So if you combine my law firm and government experience with the fact that I have a voracious curiosity about things and, some say, I seem to be fearless about what I take on, I think over time it just led to considerable breadth. That is one of my hallmarks. There're plenty of people that are as good in my principal area as I am. I don't think there're so many that can cover as many different areas as I do.
Q: What was your motivation for going back into the government last year?
A: Well, my motivation going back turned out largely to be loyalty to the Office of Tax Policy. And, I would say, an additional loyalty: I'm a Republican. I have a Republican approach to tax policy and this was going to be the Republican time, so to speak. I had no motivation to increase my own prestige and marketability or anything like that. I had already had a fine career. I looked at my career as over, in terms of building a personal reputation and all that. I thought that, under the circumstances, I could help.
Right from the beginning, I knew—and I'm not, by the way, saying anything about anybody personally here—that in terms of policy perspectives on issues that would come up, I was a fish out of water. That was clear because President Trump and Secretary Mnuchin had articulated a clear supply-side-oriented approach. I'm pro-growth, but I'm not somebody that could ever have gotten up in public to say that very low tax rates are going to pay for themselves through their growth effects. I've studied these issues for a long time. It goes back, really, to the '81 Act, if you think about it. So even though I supported strong pro-growth assumptions, I clearly do not share the same views as the higher-ups in the Treasury Department on that point. So when I took the position I knew that this was not the perfect fit for me. Nonetheless, I thought, with my experience, I could really have a positive effect within the Office of Tax Policy.
Q: The time that you spent in the Office of Tax Policy was probably the most exciting time in that office in more than a generation. Can you share some of your experiences?
A: I went to work on July 10 and within a week or ten days, I was going to meetings on the Hill as the crunch was coming for formulating the tax legislation.
Compared to earlier periods, Treasury's on-the-ground role in this tax legislation was circumscribed; it was not large. There was a Treasury presence, but Treasury was not formulating the technical framework for the legislation. Speaking in terms of my role, I always understood that my role working with House Ways & Means Committee Chief Tax Counsel Barbara Angus, her colleagues, and others was to help them with as much as I could technically and also to be present so I could understand what they were trying to do. But that was a circumscribed role, certainly a significantly smaller role for Treasury than Treasury had in years leading up to the '86 Act.
Ultimately, legislation is always passed by the Hill, and at the end of the day, the processes of Congress take over. This time, however, the role of Treasury was less substantial than it has been historically in other tax legislation. That doesn't mean that I didn't personally enjoy my participation in the process. I remember a meeting of the House Ways & Means Committee where we happened to be discussing the pass-through provisions that were being developed on the House side. The Joint Committee was present, the House Ways & Means Committee staff was present, I was present, and a few other Treasury people were present. That was such a good, professional experience. It may have been ill-fated, but it was a good, professional experience. I remember thinking to myself, "this is why I came back. This is stimulating, these are good people, we're trying the best we can."
I suppose I am a big personality, so it's kind of hard to keep me in the box. But even though my role was naturally circumscribed, I still did enjoy that type of experience just like I really enjoyed working with Hill staff back in the Eighties. It was a frustrating experience, I think, for all of us at some level. In spite of the frustrations, I liked getting to know these people, I liked thinking about the tax legislation. I'll keep thinking about it. On balance, it was a good experience.
Q: Practitioners now grapple with all of these changes that range across the Code. In your mind—you were there at the creation—is there a coherent policy behind some or all of the changes that we can consider to help animate our thinking?
A: I think there is a core to the international changes and there are two or three themes on the domestic side. Of course, to get revenue raisers or enact tax expenditures, there're a bunch of things that don't fit into a particular theme. Obviously, this was not domestically driven legislation as much as it was international corporate-driven legislation.
On the domestic side—and this is something that I want to articulate more as time goes on—the pass-through provisions are one of the core elements, like them or not. It's a truly unique approach to the issues. I intend to speak about it more going forward. But I would say in general that I think the second-best case for the pass-through provisions is stronger than people think it is. I'm not saying that they're not problematic in many ways, but I think that people are criticizing them with too broad a brush. And I'll develop those themes as time goes on. The other theme, which I think of as being articulated by Kevin Brady most centrally, is the expensing, pro-growth, low tax rates theme.
On the international side, I think there is what Danielle Rolfes has called a complexification issue. I think it's a significant issue.
But I do think there's a structure, a very modern structure and a lot of structural thinking. I don't like the idea that this is unsophisticated legislation. In many ways it's very sophisticated. It might not have been pulled off perfectly. That's a different issue. But you have territoriality. You presumably no longer have the lock-in effect that you had in the past. You have what Mark Prater articulates as the "carrot and stick approach" of the GILTI / FDII regime. You have the first large-scale attempt, whether or not you agree with the details, of a base erosion provision that deals with the interface between inbound activities and payments abroad. And, putting it together, this is a pretty comprehensive provision. Now each one of those components may be flawed in particular ways, we'll know more about them four or five years from now. I would say this was a revolution.
I don't think it's fair to say there's no theme there. There's a comprehensive approach. One thing that the Republicans are not getting quite enough credit for is that those international provisions are not just a giveaway. In other words, a lot of people are complaining, and multi-nationals may be able to do certain kinds of tax avoidance. But those multinationals are not necessarily happy with where the GILTI regime came out. And they're not necessarily happy with the way the BEAT regime came out.
Q: I think you're right. Most practitioners and taxpayers are coming to realize that territoriality is very much the exception rather than the rule now.
A: And pure exemption is certainly not the rule.
Q: Let's talk a little bit about teaching and its role in your career and in your life. How important do you think it is?
A: I have this discussion all the time. When you look back at your career, there are themes that are obvious. In my case—and I always say this to my friend, Eric Solomon, that he and I are similar—when the whole story's been written about us, they have to say that we were practitioners, we were tax policy officials, but we were also schoolteachers. It was an important component of what we did and what we liked to do and how we define ourselves.
There're a number of us like that in the tax profession. If we go back to the generation that had a formative effect on me, I can pick out two names, both of whom happened to be involved in the ABA significantly, and they happen to have been very good friends. One is my teacher, Carr Ferguson, whom I first got to know when he taught me tax-free reorgs in the fall of 1976. And the other was his good friend, the late Marty Ginsburg. The reason I call myself a schoolteacher is Marty always called himself a schoolteacher. And, even though I didn't really know Carr, his example when I took his class and I got an A from him, he was always a model. Marty was always a model.
The way I got to know Marty is I started teaching in Georgetown in a business planning class. It was actually a JD class. It was taught by the corporate law professor and the tax law professor. Marty taught the corporate tax part of one section, and I taught the corporate tax part of the other section, and we got to be friends. And occasionally I'd be invited over to his home. He was famous for his short-sleeved shirts and doing all the cooking for Ruth Ginsburg and himself. I think that Marty, in particular, was in many ways a role model for people like Ed Kleinbard and Jim Peaslee, and many other people of my generation. We thought that the role of a tax lawyer was not just to be a practitioner, but was to think more broadly about the system, to participate in the reform of the system. As you know, not only was the ABA very heavily involved in that kind of activity, but the New York State Bar Association as well. And I was a member of both for much of my career. And to some extent I followed in their footsteps. Carr still teaches, and my guess is I will teach for years to come. And Marty was teaching up to his death. So that's just part of the way I define myself. And, as I said, I think Eric's very similar in that regard.
Q: You're between jobs right now. Do you want to share with us your thoughts on next steps?
A: One thing for sure, for better or worse, I still have a considerable level of energy left. I think that's one trait among my peer group: some people have maintained their energy and interest into their 60s or 70s. I think Carr is, fair to say, a phenomenon. He's kind of the Warren Buffet of tax law and he's still quite energetic. So I think the time has come for me to get back into actual practice at a fairly significant level, though of course not at the same level as when I retired, seven or eight years ago.
The other thing that influences me is that I really did need this past period with freedom to explore things. After retirement, I got my master's in applied economics at Johns Hopkins. I taught some more. I needed that period of rejuvenation, and now I think I can be more satisfied going back to practice and going to work every day—with not nearly as heavy a load as I had during the middle two or three decades of my career. So I think that's what's going to happen, which is surprising. I mean, if somebody years ago had asked me whether I would want to do that, at this age, I would have been surprised by the question.
Obviously, my role cannot be the same as it was. But I do look at the new tax law as unfinished. And I don't intend to be quiet about how to finish it. In other words, I'd like to have input into how to refine what has been done, how to rationalize what has been done. When I return to tax and return to practice, I will continue to pay attention to the different component parts of this legislation, writing articles and giving speeches on how I think it might be improved.
Q: How optimistic are you that Congress will return to the tax law and make changes, either technical corrections or substantive changes?
A: I'm not optimistic.
It's plausible to me there would be technical corrections some time after the November election. As I've said publicly (and I don't mean to be damning Congress), I think from the Treasury's and IRS's perspective, they have to assume the worst as a practical matter, and assume they're not going to get technical corrections. They may get technical corrections, and they certainly should be talking to their counterparts on the Hill about possible changes. But I would not personally expect there to be technical corrections before the election, at the minimum.
My honest view is that tax reform is a process. My friend Paul Oosterhuis has often said this publicly. And I think the more serious issue about our era today is whether our political system is capable of correcting the tax law. If we go back to my formative times, as I've said, it was the '81 Act, '82 Act, '84 Act, '86 Act. There was '87 legislation, '88 legislation, '89 legislation. There were adjustments all through that period. I'm a bit worried as to whether our system is well set up for adjustments to what was done last year. And that's an issue.
Q: Any last words?
A: You remember Lou Gehrig, the luckiest man alive? It was an accident that I got into tax law. I don't know how anybody would have thought I would have gone up to that conversation up at the Wall Street Club around Valentine's Day 1976. None of us thought that I was going be in the Tax Department, but I ended up in the Tax Department. It turned out to be a good thing. It's an area that just permits a rich career, I think.
Q: That's a great finish. Thanks, Dana.
A: Thank you. ■