Redistribution in Favor of Status Quo

To say Jim Chen has stolen my thunder would be an understatement. But since I have already penned this, here goes. In a response to my blog identifying state-subsidized LLM in Tax programs as hard to defend, on another blog Professor Scott Schumacher writes: “why single out tax programs? . . . Are competent tax attorneys any less valuable to society than the competent contract attorneys that Harrison apparently believes are worthy of the public's largess? When you get right down to it, I doubt many citizens are happy to support any programs in the law schools.”

I will attempt to respond but first, a number of caveats. To begin with, Professor Schumacher has hinted at the harder question: Why subsidize legal education at all? I guess I would put it a little differently and say why subsidize without a guaranteed return on the public investment in the form of required public service? Second, I question the subsidization of the teaching of LLM students but not of the scholarship of their professors. Those who write about tax policy – both broadly and narrowly defined – may be producing the most important legal scholarship. Third, Professor Schmacher does not seem to defend an LLM program as much as say “what is the difference?” That is what I will take a crack at. Fourth, my comments are about law schools. I am similarly baffled by public subsidization of MBA programs and numerous others in which the students are likely fully to internalize the benefits of whatever they produce. Finally, this is an empirical question and I concede I do not know for sure. What I am also sure of is that responding with an example does not advance the discussion.

So, to the question: Is a tax LLM different? First, look at what law schools do. One thing is that they redistribute wealth or income from the public at large to people who jump through a series of hoops and make it into law school and to their professors. Now, unless someone thinks the redistribution itself is producing a "good" there has to be more.

The obvious "more" is that law schools should produce legal services that have value but which the market does not produce in sufficient quantities. First, this could mean that they produce legal services that are affected by market imperfections, including free-riding. Among the market imperfections, and contrary to what I think some economists would say, I include services to protect “goods” that are not subject to monetization – civil rights, environmental protection, etc. Second, to the extent we believe that all people have a right to effective representation, we operate to depress lawyer fees by making sure the supply of attorney services is high. (An inefficient way to achieve that outcome to be sure.)

I am not convinced that subsidizing post-LLM tax study contributes to the first objective. My hunch is that we could stop the subsidization of post-JD degree tax education today and there would be little or no unmet demand for the tax advice LLM graduates offer. The value of most tax advice would be fully monetized. I can think of few, if any, free-rider problems. Regardless of how the courses are taught, I think what is learned by most is Retaining Wealth I, Retaining Wealth II, and so on. Thus, the only justification for subsidization would be to depress the cost of tax advice. Maybe this is a defensible goal. If that were the goal we would have to revamp most of what is taught in an LLM tax program and include courses like “Tax Advice for the Poor and Working Poor.” But that is covered in the basic JD course. So whatever wage-depressing rationale may exist can hardly be traced to an advanced tax course. In any case, that’s my story and I’m sticking to it.