When the means justify the ends.
Leo Katz begins “Ill-Gotten Gains: Evasion, Blackmail, Fraud, and Kindred Puzzles of the Law” (Chicago; $29.95), his elegant defense of circumvention and subterfuge, with a fable for tax day. There was once, he writes, a wealthy shoemaker who was looking for a way to lessen the burden of supporting his son, to whom he was paying, year in and year out, an annual allowance of a thousand dollars. Cutting him off wasn’t an option, because the shoemaker loved his son dearly. Nor was writing the thousand dollars off his taxes, because the I.R.S., understandably, doesn’t allow family gifts to serve as tax deductions. But the shoemaker had a brainstorm. He gave his son ten thousand dollars, and then he asked for that same amount back in the form of a business loan, promising in return to pay interest on the loan at the rate of ten per cent a year, which amounts, of course, to a thousand dollars. Voilà! With a minor sleight of hand, the shoemaker turns his family obligation into a seemingly legitimate business deduction.
This is what Katz, who teaches law at the University of Pennsylvania, calls “avoision”–behavior a little too fishy to seem like simple avoidance of illegality but not so obviously illegal as to constitute clear-cut evasion. Avoision covers those acts which lie in the awkward middle, and Katz sees the potential for avoision everywhere in the modern world. Imagine, for example, a tourist from a third-world country who comes to America and decides, at the last minute, that she wants to stay here. She then makes a series of provocative statements about her country which render her unwelcome at home and thereby qualify her for political asylum. Or what about a pornographer who, worried about running afoul of decency laws with his collection of highly explicit photographs, decides to put them in a book entitled “Sex in Marriage,” together with long, windy essays on the future of marriage. The shoemaker, the tourist, and the pornographer all adhere to the form of the law, but they violate its spirit: they have exploited a loophole. Is what they are doing right? Should they be allowed to get away with it?
I think it’s fair to say that most of us, intuitively, have a problem with avoision. Few would raise much of a fuss if the opportunistic tourist was deported, and even fewer would be fooled by the pornographer’s cynical repackaging. And if the wealthy shoemaker managed to slip his ruse past the I.R.S. we would expect him at the very least to have the decency to be ashamed of what he had done. Even the authors of the self-help tax books that proliferate at this time of year rarely present their various tax-dodging schemes without some kind of moral justification. (“What is most important is not what a tax law says, but how the I.R.S. interprets and acts on it,” Martin Kaplan and Naomi Weiss write in the best-selling “What the I.R.S. Doesn’t Want You to Know,” after reeling off a handful of anecdotes of capricious and vindictive government audits.) In fact, if the brief rise of Steve Forbes teaches us anything, it is that Americans have come to associate the paperwork, the complexity, and the game-playing surrounding the tax code with its corruption. What is the flat tax, after all, but a secular version of the tithe, an attempt to imbue what has become essentially a commercial transaction between citizen and state with the purity and simplicity of religious obligation?
This is the attitude that “Ill-Gotten Gains” sets out to confront. Katz likes loopholes. He thinks that the wealthy shoemaker has a point. And if, in the end, Katz is not entirely convincing it does not really matter. This is a heroically counterintuitive book that will make it difficult to think about tax day in quite the same way again.
The problem with the way we feel about loopholes, according to Katz, is that we don’t give them enough credit. We think of them in narrow, legal terms, as the unintended result of badly drafted laws. If the wealthy shoemaker can get away with masking his son’s allowance as a business deduction, it’s assumed that there is something amiss with the law, or with the vigilance of the I.R.S. But avoision is something that runs much deeper than that.
Katz produces one example after another from history and literature–from the confrontation between Neil Klugman and Brenda Patimkin over her diaphragm in Philip Roth’s “Goodbye Columbus” to the way Freud phrased his exit statement to the Gestapo upon leaving Vienna–to prove that avoision is a kind of basic human strategy. Consider this, for example, from Bob Woodward and Carl Bernstein’s Watergate memoir, “All the President’s Men.” Katz quotes the passage where the two Washington Post reporters are trying to get a senior Justice Department official to confirm off the record a rumor that Nixon’s chief of staff, H. R. Haldeman, was about to be indicted:
“I’d like to help you, I really would,” said the lawyer. “But I just can’t say anything.”
Bernstein thought for a moment and told the man they understood why he couldn’t say anything. So they would do it another way: Bernstein would count to 10. If there was any reason for the reporters to hold back on the story, the lawyer should hang up before 10. If he was on the line after 10, it would mean the story was okay.
“Hang up, right?” the lawyer asked.
That was right, Bernstein instructed, and he started counting. Okay, Bernstein said, and thanked him effusively.
“You’ve got it straight now?” the lawyer asked.
This is classic avoision, a perfectly transparent piece of self-justification. Failing to deny the story has exactly the same consequence as confirming it. Nonetheless, in the eyes of the lawyer the difference between those alternatives was quite real. Using the loophole allowed him to live with his own conscience, to convince himself that he had not actively violated the confidentiality requirements of his position.
It is Katz’s argument that we play these avoision games all the time, and that, far from being trivial or contemptible ruses, they embody real moral distinctions. Here is another of his many examples, involving a trolley driver whose brakes are shot. As the driver hurtles along, he comes to a fork in the track. Ahead are five people who cannot get out of the way in time. To his right is one person stranded on the track. We would all agree, I think, that the trolley driver should steer right, choosing to kill one person instead of five. But now consider an analogous situation: A physician has in his hospital five people who will die unless they receive immediate organ transplants. Two need kidneys. Two need lungs. One needs a heart. At that moment, a perfectly healthy person walks into the doctor’s office. The doctor realizes that if he sacrifices that patient he can save five lives for the price of one. But this time, it’s safe to say, no one would maintain that the physician should act as the trolley driver did. It’s not good enough to want to save lives. You have to save lives in the right way.
This, at least, is what Katz believes. He describes himself as a “deontologist,” which is to say that he thinks the morality of any outcome depends very much on how that outcome is achieved. It is in the illustration of this point that “Ill-Gotten Gains” truly takes flight. In one brilliant riff in the middle of the book’s first section, for example, Katz gleefully plunges into Jesuitical theology, since he believes that the Jesuits were the ones who raised hairsplitting and loopholes to an art. Let’s say that one wants to guiltlessly communicate an untruth. All one need do is, in the words of a Jesuit theologian quoted by Katz, “swear . . . that one has not done something, though one really has done it, by inwardly understanding that one did not do it on a certain day, or before one was born, or by implying some other similar circumstance.”
Ridiculous? Not really, says Katz. For a man to disguise himself as a woman’s boyfriend, creep into her bedroom in the middle of the night, and have sex with her is rape. But if another man met the same woman at a bar and by pretending to be a famous C.E.O. successfully seduced her his falsehood in that instance would not invalidate her consent. In other words, here are two lies, identical in their intent and in their result. Yet one is a crime and the other, however deplorable, is not. The Jesuits had a point. The circumstances under which a lie is told can make a big difference. Or consider the case of a woman standing in line for a movie who sees a man pointing a pistol right at her. If she grabs the person behind her and uses that person as a shield, we would say she was guilty, at least, of manslaughter. If she simply ducks, and the bullet hits and kills the person behind her, we would call her lucky–even if she was fully aware that if she ducked the person behind her would die.
This is how Katz resolves the question of whether the wealthy shoemaker is in the right. Here we have two identical actions–the gift of a thousand dollars from father to son. But in the first case the gift is direct, and in the second case it is not. The father gives the son an asset, and that asset, in turn, generates the income. How important is this distinction? Well, imagine that the son took his father’s ten thousand dollars, put it in the bank, and lived off the interest. And suppose the shoemaker borrows ten thousand dollars not from his son but from the same bank at an identical interest rate. This is essentially the same transaction as before, just a bit more roundabout. But now no one would deny the shoemaker his tax deduction.
According to Katz, there is an important ethical principle involved here. Suppose I had designed the world’s most powerful telescope, the only machine capable of glimpsing far- off planets. If I discovered a new galaxy and published my results under my son’s name, we would all agree that my son would not deserve the ensuing fame. It would be like John F. Kennedy’s accepting the Pulitzer Prize for “Profiles in Courage,” a book that he is often said not to have written. You can’t assign your fame to someone else. But suppose I gave the telescope to my son, and, armed with this unique instrument, he stumbled upon the same discovery. Now we would all concede that at least some of the fame due to this discovery should accrue to my son. Putting a little distance between the father and the son changes everything.
How far should we go in accepting Katz’s deontological fixation? Does he go overboard in his adherence to form? This is the question raised, indirectly, by a Yale University law professor, Stephen L. Carter, in his new book, “Integrity,” an essay-length exploration of the consequences of the decline of public morality. Carter argues that integrity requires three things: “(1) discerning what is right and what is wrong; (2) acting on what you have discerned, even at personal cost; and (3) saying openly that you are acting on your understanding of right from wrong.” Like Katz, Carter believes that an action should be judged by how it came about, by its adherence to rights and rules, by its form. But Carter’s idea of form is far more restrictive than Katz’s. Carter’s precepts don’t seem to make much of an ethical distinction, for example, between the man who posed as a woman’s boyfriend in order to seduce her and the man who posed as a C.E.O. Neither had discerned right from wrong. Neither was acting on what he had discerned and certainly neither was “saying openly” that he was doing what he thought was right. Carter locates the morality of an act in its intention: Did the man deliberately mislead in the aid of the seduction? Katz is much more sensitive to the particulars of the act’s execution.
A good example of this difference is found in an anecdote Carter tells at the beginning of his book about an incident he once saw while watching a football game on television. A player who had failed to catch a pass thrown his way rolled on the field, scooped up the ball, and jumped up, exultantly, as if he had caught the ball after all. The referee, shielded partially from the play, was so misled by the player’s acting that he ruled the pass complete. The player, Carter concludes, lied, and he presents this incident as a telling example of the lack of integrity in American public life.
For the sake of argument, however, let’s add two new wrinkles to the story. Suppose that the player, after scooping up the ball, didn’t go through the pantomime of exultation. He simply ran over to the referee and loudly and hotly began insisting that he had caught the ball, even though he knew that he hadn’t. Or suppose that the player, after attempting the catch, made no attempt to convince the referee that he had caught the ball at all. He was tired, and sick of playing football, and no longer interested in winning, so he shrugged and walked away, indifferent to the outcome of the game. Carter’s rules, I think, end up lumping the faker, the arguer, and the quitter together: in one way or another, they all fail his integrity test.
Now, let’s imagine how Katz would think about this incident. In the first instance, I think he might make the case that the faker was practicing avoision. Football, after all, deliberately does not use instant replay to review close calls. It relies on the judgment of referees, even though that judgment will occasionally be flawed, or there will be plays (like this one) that the referees cannot see. That’s the loophole the player was exploiting–the inherent subjectivity of the way the rules are enforced. Notice as well how he chose to exploit this loophole. Carter says that the faker lied. But that’s not quite right. It was the arguer who lied. He purposefully and directly misrepresented what happened on the play to the referee, putting himself clearly outside the realm of good sportsmanship. By contrast, the faker didn’t say anything at all. What he did was bluff, and if Carter doesn’t see a difference between lying and bluffing then I hereby extend to him a permanent invitation to my poker game.
That leaves us with the quitter, who is the only player who does not attempt to mislead. But isn’t he really the worst of the three? Sports–organized games–can continue to function if players attempt to mislead one another, because there are referees who (most of the time) will catch and punish that conduct. But sports can’t survive if players no longer try. The quitter, whose actions make him appear to be the most honest of the players, actually threatens the integrity of the entire game.
The point of all of this is that Carter’s rules, for all their superficial appeal, turn out to be somewhat unsatisfying. Because he won’t go as far as Katz in scrutinizing the form of actions, he ends up papering over some fairly important distinctions. Yes, in some broad moral sense all three of the players lack a certain integrity. But there isn’t a football player in the world who wouldn’t rather play with fakers than with arguers, or with arguers than with quitters.
This is not to say that Katz prefers those who play avoision games to those who act with perfect integrity, although it is sometimes tempting to read his book this way, since he spends so much time and enthusiasm talking about the people searching for loopholes and not a great deal of time talking about people who play fair. What Katz is trying to do is show that the loophole is not an arbitrary creation, that the ambiguities of our law reflect deep ethical conundrums that cannot be wished away. There is, in other words, a certain deontological dignity to our tortuous circumventions of the I.R.S. If the Jesuit theologians of the seventeenth century were here today, Katz believes, they would probably all be accountants, which is, when you think about it, probably the nicest thing anyone has ever said about the tax system.