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Current Issue : Winter 2007-2008

Steven Dean

To Professor Steven Dean, tax law, with its infamous intricacies and seeming impenetrability, is personal. Dividing his scholarly attentions between the two related areas of federal income tax issues for business entities and policy issues surrounding tax havens, he believes that tax law policy should matter as much to individual citizens as it does to the governments that create it.

"I grew up in a tax haven, the Bahamas, and I became interested in the problems that such countries — and their citizens — face," explains Dean. His most recent publication, in the Hastings Law Journal (see abstract), challenges the "philosopher king" model of international tax law, which assumes that the net welfare of a country is the main motivator for its government's development of tax laws. Borrowing from the fields of tort law and international law, Dean argues that a better answer to the problem of tax flight is for countries to agree to treaties that address the complex reasons that tax havens allow the problem to continue.

Dean takes a realist's view of creating and enforcing such treaties: "The question," he says, "is what is causing governments to act in the ways they do? An integrated theory reveals that there are other incentives, aside from increasing gross domestic product, for a country to abide by a treaty." Call it the psychology of tax policy. This scholar is exploring scholarship from other disciplines in order to remedy the problems he has uncovered.

While the "Philosopher Kings" article focuses on tax havens specifically, his next area of research envisions havens as a niche problem in the larger issue of how to gather and disseminate tax information globally. Taking a wider, historical approach, Dean argues that the "barter system" currently in use is outdated. That method, adopted by the League of Nations 80 years ago, requires nations to agree on the identical information they will provide each other regarding the activities of taxpayers. "There are ways to improve access to extraterritorial tax information," he maintains, "which will allow countries to better adapt as the financial world continues to globalize."

Dean, who graduated from Yale Law School and came to academia from private practice at Debevoise & Plimpton and Cravath, Swaine & Moore, found that the deals he worked on as a tax lawyer gave him a realistic perspective on how to analyze tax systems. "Tax law is about the real world. It's about people," he says. "I think the system in the United States works pretty well, but we can't just assume that what worked 80 years ago works as well today."

"I am doing what I can to help resolve those problems, advance debates, and reformulate questions," concludes Dean. "I have an obligation to speak up, because it's really about individuals. All this policy comes down to how people are affected, the same way other more obvious areas of the law — constitutional and criminal law, for instance — influence our lives."

Steven Dean | Abstract

Philosopher Kings and International Tax: A New Approach to Tax Havens, Tax Flight, and International Tax Cooperation

Tax flight treaties could help to solve the $50 billion-a-year problem that tax flight (the evasion of income taxes through the use of offshore tax havens) poses for the United States. Tax flight treaties would offer tax havens a substantial portion of the increased tax revenues that they could generate by providing the United States with the enforcement assistance it needs. Those payments, potentially representing as much as half of the added tax revenue produced by tax flight treaties (and in all probability an amount that is greater than any GDP gains attributable to eliminating waste and other economic distortions related to tax flight), would give tax havens both the resources and the incentive they need to develop the administrative capacity necessary to supply the United States with income tax information. It is likely that those treaties would reduce the United States' collective well-being (particularly if measured in simple GDP terms) by transferring wealth from U.S. tax cheats to the governments of tax havens.

A simplistic philosopher king model of international tax law, the strong form of which assumes that governments engage in cross-border tax cooperation to boost their respective GDPs, would suggest that tax flight treaties could never be effective. However, the more sophisticated model developed by the international law scholar Oona Hathaway, her integrated theory, supports a more optimistic conclusion regarding the potential of tax flight treaties.


SCHOLARSHIP FOCUS Tax Havens, Tax Policy, and International Tax Cooperation

COURSES Tax: Corporations and Shareholders/International Transactions, Federal Income Taxation

  • The Incomplete Global Market for Tax Information, 49 B.C. L. Rev. ___; (forthcoming)
  • Tax Shelters and the Code: Navigating Between Text and Intent, 26 Va. Tax Rev. 879 (2007) (with Lawrence Solan)
  • Philosopher Kings and International Tax: A New Approach to Tax Havens, Tax Flight, and International Tax Cooperation, 58 Hastings L.J. 911 (2007)
"Tax law is about the real world. It's about people. The system in the United States works pretty well, but we can't just assume that what worked 80 years ago works as well today."