August 25, 2020 In Remembrance

In Memory of Edward D. Kleinbard

By Joseph Bankman, Ralph M. Parsons Professor of Law and Business, Stanford University, and Daniel Shaviro, Wayne Perry Professor of Taxation, New York University

Edward D. Kleinbard, one of America’s greatest lawyers in tax or any other field, died on June 28, 2020. He was 68 years old, and the cause of death was cancer. Ed’s importance to the profession, and the many roles he served with great distinction during his career—first in private practice, then in government, and finally as a law professor—merit our honoring his name here. He belonged to a category that ought to be more celebrated than it is: great lawyers who worked at great firms and also worked to improve law and society.

After graduating from Yale Law School in 1976, Kleinbard spent more than thirty years in private practice, nearly all of it at the New York office of Cleary Gottlieb Steen & Hamilton LLP. He then spent two years as the Chief of Staff at the U.S. Congress’s Joint Committee on Taxation, before moving in 2009 to USC Law School, where he held the Robert C. Packard Trustee Chair in Law.

While at Cleary Gottlieb, Ed helped develop, rationalize and explain a myriad of finance- and financial product-related tax issues. He was known as a fierce advocate for his clients, but also as a principled lawyer. He was someone who played by the rules. Without exception, his positions were upheld when challenged, and they often were incorporated into practice and regulations.

At Cleary Gottlieb, Ed also developed the core of an important comprehensive business tax reform proposal that he called the Dual BEIT—the Dual Business Enterprise Income Tax. This proposal is widely recognized as one of the most serious and promising U.S. business tax reform proposals ever formulated. Several of its main rivals were developed by such major institutions as the ALI and the Treasury Department. The Dual BEIT, by contrast, was the work of a single individual, who was also simultaneously working full-time for his many clients.

In what the New York Times obituary for Mr. Kleinbard rightly called an “unusual move for a senior corporate lawyer,” he then decided to leave private practice first to serve Congress on Capitol Hill, and then to enter law teaching and scholarship, based on his desire to “use[] his insider’s expertise to show in particular how multinational companies avoid taxes,” and more broadly to show how taxes might be raised “as a means of combating inequality and poverty.”

Once in academia, rather than merely using the expertise that he already had, Kleinbard set out to master relevant portions of public finance and moral philosophy. His learning was informed by a sure-footed sense of how the corporate sector made tax decisions and by strong intuitions as to what was fair.

Perhaps his biggest success as an academic was to explain and document the ways in which U.S. multinationals were able to shift items of income and expense from one jurisdiction to another to reduce taxes. In many cases, income was shifted from a high tax jurisdiction (like the U.S. or Germany) to Ireland (which had a low tax) and then to an even lower tax jurisdiction. Kleinbard called these shifted profits “stateless income,” since they were ultimately attributed to tiny tax haven islands, far from where they were earned and where they would be subject to virtually no tax. The name stuck, as did his analysis of the mechanics of the process.

Kleinbard also spent much of his time as an academic documenting the growing disparity in income and wealth, explaining why he believed it was wrong, and outlining what he saw as better tax and fiscal policies. He used moral theory to inform and buttress his intuitions. He was a fan of private ownership and markets. He felt that people have a right to exploit what he called “constitutive luck”—chiefly, the genetic make-up that is part of our self-identity; but he felt we have no claim to “existential luck”—our wealth at birth, access to education, or the products of an ever-changing economic landscape. He was influenced by, and heavily quoted, Adam Smith, Catholic social justice literature, and some of Ronald Dworkin’s work. He advocated large educational expenditures to level the playing field and a progressive tax to pay for those programs while reducing the windfall to those who benefit from existential luck.

He was amazingly productive. In addition to his academic papers, Kleinbard wrote roughly one hundred op-eds; gave hundreds of interviews; testified at scores of hearings; and devoted countless hours to explaining the way of the tax world to reporters. All this helped to make him probably the most influential tax academic in the country.

His latest (and, alas, last) book, What’s Luck Got to Do With It?, is scheduled for publication in January 2021. Determined not to let his illness stop him, he gave the publisher a completed final draft the day before he entered the hospital for cancer treatment that proved unable to extend his life for more than a few months.

It is a source of profound sadness for us that his voice is forever stilled.