We need more articles like Yin’s. Not only because nowadays it is hard to find papers depicting good-old archival research on intellectual history and history of taxation. I am a speaking as avid fan of both genres as I have written in the past here on the unknown collaboration between Stanley Surrey and Justice Roger Traynor and their idea of preventive tax policy. But Yin’s extensive work with Surrey’s memoir reveals a new aspect of Surrey’s philosophy. There have been numerous articles written about the legendary Stanley S. Surrey, one of the most influential tax professionals of the twentieth century. His work has been cited in over 56,000 papers. And while Surrey passed away in 1984, only in the last 20 years, about 3,000 law review articles broadly and directly conferred, relied upon, or reexamined his work. Although many scholars focused on Surrey’s seminal work on tax policy, specifically the tax expenditures budget, Yin is taking a different approach. He has thoroughly studied Surrey’s life through his memoir and some of his less well-known commentaries to evaluate Surrey’s view of the federal tax legislative process trying to answer the question of what was Surrey’s opinion on the manner tax rules are created in the U.S. and the institution that should speak for tax equity and tax fairness?
Surrey’s wide-ranging experience at Treasury of almost 20 years, his engagement in tax projects of the American Law Institute, and involvement in tax legislation even during his time in academia provided him valuable insights about the lawmaking of tax rules. Surrey served two extensive terms in government as Treasury’s legislative counsel staff between 1937 and 1947 and as Assistant Secretary of the Treasury for Tax Policy between 1961 and 1968. These periods provided him with “front row center seat” for some of the “tax drama” that went on and an opportunity to directly take part in the legislative process. While in academia, Surrey remained engaged with his public service. He continued his involvement in the legislative process by providing testimonies, participating in congressional hearings, and consulting legislators and their staff. His scholarship provided him with a venue to reflect on the making of tax law from a more removed and neutral standpoint.
Surrey understood tax rules to be internally consistent rather than a random collection of rules. Yin argues that Surrey saw legislation as the prime route for adoption of most of his ideas, and thus focused his early scholarship on the tax legislative process. In his article The Congress and the Tax Lobbyist—How Special Tax Provisions Get Enacted from 1957 Surrey’s extensively delved into the development of tax legislation while focusing on how special tax provisions get enacted into law. According to Surrey, high statutory tax rates and complex statutes created prime conditions for the enactment of special provisions. These included preferences for capital gains, percentage depletion allowance, exemption of interest on state and local bonds, the deductibility of personal expenses and others that violated horizontal equity. He pointed to the peculiar circumstances of how these preferences were enacted and critiqued the roles played by special interest groups, trade organizations, labor unions, the tax bar, and even academics, in misleading the public. Politics drove tax legislators to “bend” the laws in favor of certain constituents. He considered Treasury as the only defender of tax equity and fairness in this process. Yet, in Surrey’s eyes at that time, Treasury and the Joint Committee on Taxation were limited and passive thus were not acting in the public’s interest.
Alas, people such as Colin Stam, Chief of Staff of the Joint Committee on Internal Revenue Taxation (aka the JCT today) whom Surrey personally criticized in his 1957 article for not fulfilling their role in providing not only technical but also substantial assistance to the members of Congress in the development of tax legislation came to scrutinize his views only four years later during his confirmation hearings to be Assistant Secretary of the Treasury. The circumstances of Surrey’s return for a second term in government were rather unusual. Along with economists E. Cary Brown and Richard Musgrave, he was requested to help the Kennedy Administration develop a plan to spur economic growth and encourage business investment. After a short discussion with President Kennedy’s office on their proposal, Kennedy invited Surrey to join his administration and step into the position of architecting his tax policy.
The tone and passages in Surrey’s article has left a bad taste in the mouths of some legislators regarding the type of advice they would be receiving from him. But according to Yin’s findings, it was Stam who stirred things up that led to Surrey’s harsh and unusual confirmation hearing. During the hearing, Surrey was confronted with the idea of going into a position with strong objection to the actions of legislators, the tax committee, and its chief staff. He was accused by senators as holding the position that the Treasury Department is more competent to deal fairly and justly in tax matters than the Congress. It was evident that although Surrey described the hearing in a letter to than Harvard Dean Griswold as simply “interesting” that he was personally hurt and deeply affected by that incident.
During his second term, Surrey’s tone and manner on the legislative process were quite different from that depicted in his 1957 article. Furthermore, Kennedy charged Surrey with enacting one of the most dubious business tax preference—the investment tax credit—surely not the type of provision Surrey would have included in his ideal tax structure. Yin suggests that some of the possible consequences of the sore confirmation conflict along with Surrey’s senior position as Assistant Secretary of Treasury were changing Surrey’s views on the tax legislation process and eventually swaying Surrey away from his ideal goals of tax equity and fairness. Yin quotes Surrey three years after his confirmation acknowledging that the hearing had adversely affected his work at the start of his Treasury service and his ability to develop a better rapport with senators and congressional staff. Surrey’s later view on the tax legislative process mostly focused on the roles of its participants rather than laying out a comprehensive vision or structure of the process. His focus during his last years was mostly seeking the legislative process that gets Treasury’s ideas enacted. Rather than a more bottom‐up approach that tries to draw meaningful input from the executive and legislative branches as well as participants outside of government, he adopted a top‐down approach that sidesteps frictions in the law’s formation but presents new risks.