1. Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates Skadden Five Key Things Non-Lawyers Should Know about Tax Law and Its Policy Implications National Tax Association September 29, 2006 Pamela Olson

2. Skadden 1 Caveat  We have to assume the lawyers we have, not the lawyers we wish we had.

3. Skadden 2 Overview  It’s a Code, not an aspiration.  Literalism and hyperlexis are inevitable.  Lawyers ask: “how do we do that?” – not “why do you want to do that?”  Law is “applied behavioral economics.”  It’s all material.

4. Skadden 3 Code or aspiration  Whether the law is a code of conduct or sets aspirational standards varies from country to country.  United States laws tend to be codes of conduct.  Prescribe minimum standards of behavior.  Provide sanctions for those who fall below.  Not aspirational standards.  That is particularly true of tax laws:  “There is no duty, not even a patriotic one, to increase one’s taxes.”

5. Skadden 4  Words define the intent and scope of a law.  Laws are line-drawing exercises.  Detailed lines capturing all contingencies may reduce leaks, but add complexity.  Conservation of ambiguity.  Bright vs. fuzzy lines.  The role of serendipity and motive. Literalism and hyperlexis

6. Skadden 5  Confusion of ends and perfection of means seem to characterize this age.  Lawyers focus on questions of administration, implementation, and compliance rather than purpose. How do we do that?

7. Skadden 6  Consequences – intended and unintended  Examples  QFOBI  Expensing Law as “applied behavioral economics”

8. Skadden 7  You have to be careful if you don’t know where you’re going because you might not get there.  The effects of a focus on complying, administering, and enforcing words.  It’s not relative.  Losing sight of the bottom line.  Even footfaults are material. It’s all material