Source: UWM Report Profile
In just a few weeks, the rest of America will begin thinking, reading (and perhaps cursing) about a subject that has Bill Raabe's undivided attention all year long: taxes. Taxes are more than Raabe's business; they are his passion. Spend an hour in his Bolton Hall office and you will be convinced that tax planning can work wonders both great and small. At the highest levels of government, Raabe argues, tax planning has the power to rescue the economy and cure social problems. For business, tax planning can lead to higher profits and new markets. For the individual taxpayer, it can help keep money in someone's pocket for college, retirement, or simply a slice of the "good life.'
This optimistic view comes from a large, likeable man who could easily be mistaken for a basketball coach. However, Raabe is well-known in financial circles as an internationally recognized expert in taxation. He is the coordinator of UWM's Master of Science program in Taxation, ranked among the top 10 tax programs in the nation. Raabe joined UWM's faculty in 1979, marking the birth of the graduate tax program.
Raabe is a "tax-watcher" in the way some other guys might keep track of their favorite sports teams. Sometimes, the two go hand in hand. Raabe notes how the issue of building a new stadium for the Milwaukee Brewers baseball team has become a political tug-of-war over tax revenues. For months, the debate has raged: should the sales tax be applied to the new stadium's luxury boxes, or shouldn't it?
On the national scene, few events have attracted as much media attention as President George Bush's proposed income tax cuts. Raabe understands why Bush would turn to the income tax as a way to bolster the economy. "The government is able to make a big change quickly by making a tax law change." Raabe says.
Raabe is following the issue closely, and he has a few suggestions that the President might consider. First, he would roll back Social Security taxes. Such taxes have increased substantially since 1981, leading a general rise in payroll taxes. A cut in Social Security taxes "will be felt immediately as consumers see more money in their paychecks," Raabe says. In addition to decreasing Social Security taxes overall, Raabe suggests eliminating the salary cap on such taxes. Furthermore, Raabe would like to see all Social Security benefits become fully taxable, to make up for the shortfall caused by reducing the amount collected from taxpayers. This change would affect only upper-income Social Security recipients, as all others could use deductions and exemptions to offset the newly taxable benefits.
While Raabe's proposed changes in the Social Security system would be permanent, he also has a few short-term economy boosters in mind. "I'd offer temporary credits for certain expenditures," Raabe says. These would include an increase in the child care tax credit and a tax rebate for business. Again, a larger child care credit would have an immediate impact on families. Raabe believes such a change could also relieve unemployment. "Parents who are out there looking for work would also benefit from lower prices for child care - this change would increase after-tax income for them," Raabe says.
Finally, Raabe's plan for boosting the economy would include a temporary 10 percent rebate to businesses for the purchase of high-tech computer and communications equipment. "These are the types of purchases that businesses usually put off during a recession, so we want to give them some incentives," Raabe explains. "We also know that computers and communications equipment help to make businesses run more efficiently, and that's good for the economy." He realizes that a high-tech tax credit might mean a lot of money going to Japan, but that doesn't worry Raabe. "We are part of a global economy," he says. "And who knows? American businesses might spring up to take advantage of [this market]."
Raabe understands that his proposals could cause fainting spells in Congress. "We're dreaming here," he says with a smile. Still, behind the "dreaming" are some realistic guidelines. "If you want people's behavior to change, in this case spending behavior, then you need to design a tax incentive that will apply narrowly to those transactions and only for a short period of time. Then you'll see an immediate reaction because people will realize it's a one-time deal. If it's a permanent change, people will take it for granted and forget about it. And, putting oneself in the mind of the politician, people will forget who designed the tax cut for them."
In Wisconsin, Raabe's influence is evident. He is among a handful of UW System faculty members to receive a Wisconsin Distinguished Professorship. A quick glance at the nomination letters indicate the high regard colleagues and business leaders have for Raabe. Glowing comments from industrialist Sheldon Lubar and executives at Price Waterhouse and Miller Brewing Co. show that Raabe's influence extends far beyond UWM. In one letter, Raabe is cited for "...almost singlehandedly elevating Wisconsin's tax education program, and UWM's research and publication programs to a position of national prominence." Another letter credits Raabe for influencing tax program graduates "who are making a major impact on the Wisconsin tax community."
Despite these achievements, it's quite possible Raabe hasn't even hit his stride yet. Raabe got an early start on his career goals, have received his Ph.D. from the University of Illinois at age 24. This year he will turn 38.
Raabe's skills in the classroom have won widespread recognition. Among other honors, Raabe received the AMOCO Foundation Award for Teaching Excellence in 1983, and the Business Advisory Council Teaching Award in 1981. Recently he was selected as the Wisconsin Institute of CPA's (WICPA) Educator of the Year.
In addition, Raabe is the author or editor of 11 books, including many leading publications in the tax field. His articles have appeared in top tax journals as well as in a local newspaper - he was the co-author of a weekly column titled "Smart Money" that appeared in the Milwaukee Journal from 1985-88.
As for community service, Raabe is a frequent speaker to academic, civic and corporate groups. He also founded UWM's Student Tax Clinic, representing elderly and low-income taxpayers whose tax returns are under audit by the IRS. As co-chair of Wauwatosa's Economic Development Committee, Raabe works to increase business development in the area.
Not that Raabe's life is all facts and figures. He vigorously pursues an interest in music through a variety of singing groups. (He was a member of the Milwaukee Symphony Choruses from 1985-90). Sports was such an important part of Raabe's early life that he won a basketball college scholarship; now Raabe is a member of the UWM Athletic Board. Family is a priority too. Raabe and his wife Nancy, music critic for the Milwaukee Sentinel, are the parents of two children, ages 1 1/2 and four months. The family lives in East Troy, about 12 miles southwest of Milwaukee. Raabe is a native Milwaukeean, and his parents still live in the area.
Raabe credits sports for teaching him the fundamentals of a successful career. "Athletics give you a sense of working well on a team, says Raabe, leaning back in his office chair. "That [can be compared to] estate planning. You always want to be in control of the project, and that's not possible to do because you're engaging other professional as well as the client. A lot of people have an interest in [the outcome]: relatives, alma maters, maybe a hospital. The project takes on a coordinating, teamwork approach."
Athletics also taught Raabe about conflict, competition and the value of winning. These days, he plays a high-stakes game. "It's the taxpayer versus the IRS, with the U.S. Treasury being the ultimate winner," says Raabe in a more serious tone. "We can't [believe] television commercials that say the IRS is your friend. It's not. The IRS often takes untenable positions to enhance revenues or to strike a precedent it can use against some other taxpayer. There's a competitive edge that comes in." For Raabe, that's the fun of it. "In academia, there aren't many settings where one can so clearly measure winning and losing."
Raabe isn't one to back away from conflict, whether on the playing field or in court. "Clients love to be a fight with the IRS, but often they eventually back off," he says. They don't want to make waves or invite trouble for future years or get on the IRS's bad list. Most of those are myths, but people still hold them."
In Raabe's eyes, taxation is a profession in transition. He believes the next decade will bring great changes as the tax professional takes on more of an advisory role. "The days when tax practitioners [are called in] after the fact to see how someone's income fits on a tax return are close to ending," he says. In the future, tax practitioners will be selling brainpower. They'll become part of the thinking and planning process. The number-crunching work will be done by [others], probably paraprofessionals in law offices and accounting firms."
The tax practitioner of the future also will need to be especially sensitive to a client's needs. "It's almost a consulting role," Raabe says. "In the past we've forced five or six different techniques on taxpayers instead of listening to them to identify their goals. One of the things we do in the UWM graduate program is to teach students not to be bound to a package of tools, but to be sensitive to what the client is looking for. It's a different way of thinking."
Tax practitioners will need to be as skilled at working with computers as they are working with clients. As tax laws become increasingly complex, it will take an arsenal of high-tech computerized support systems to cope with them. Raabe predicts that computerization will not only revolutionize how taxation is practiced, but how it is taught. His research (financed by a grant from Price Waterhouse) indicates that on your computer keyboard or tap your mouse and an image will appear onscreen to solve your problem."
The typical classroom scene will be a thing of the past, says Raabe. And what will replace it? Raabe envisions an "interactive" classroom where students can see and respond to a presentation beamed to them on a video screen via satellite. "If a student has a question that the teacher can't immediately answer, the teacher can relay the information the next day by electronic mail."
Such futuristic thinking is vital to the continued success of UWM's tax program, which exists in an increasingly competitive environment. When the program began in 1979, there were only about 30 similar programs available across the U.S. That number has increased to 110 programs nationally. Yet despite increasing competition, the number of students enrolled in UWM's program continues to rise (about 100 students are currently in the program).
After graduation, most of the UWM program's students choose to remain in Wisconsin. They have made a tremendous impact especially in the Milwaukee are, where they are in great demand by law and accounting firms as well as in corporate tax departments. About 80 percent of those enrolled in UWM's tax program are returning professionals seeking to advance their careers. Graduates can earn starting salaries that Raabe has been told are among the highest in the nation for tax professionals: about $40,000, which can increase to $75,000 in five to seven years. Another popular option for graduates is to become a self-employed tax consultant. Such consultants offer a wide variety of financial services to clients for fees of up to $200 an hour.
The reason companies are willing to pay top dollar for UWM tax program graduates can be summed up on one word: profitability. "Our graduates are up-to-speed in the latest tax planning ideas, so companies can see an immediate return on their investment," Raabe says. As part of his mission to make UWM "a trailblazer among business-school tax programs," Raabe was instrumental in adding a required course international taxation to the curriculum. The course is designed to help Wisconsin businesses take advantage of international markets. Only two other tax programs in the U.S. have a similar required course.
However. technical knowledge is only part of the tax student's training. Communication skills are increasingly important. "Tax professionals need to get along with others, delegate and share information," Raabe says. "They need to speak and write clearly, and to make a good impression at a meeting. In the classroom, I'm as much an English teacher and a communications teacher as a tax instructor. On an oral presentation I'm as likely to make the comment 'don't slouch' as I am to note 'you're interpreting this ruling incorrectly.' On a term paper, I might write 'you need more commas' of 'use a diagram here.'"
Raabe says he's responding to feedback from the companies who his students. "They want someone who knows his or her stuff, but who also dresses and acts like a professional. If we are ahead of the game at UWM, it's because of our sensitivity to these things. We try to make our graduates attractive to the companies and clients that will hire them and use them in a consulting capacity."
Raabe keeps in touch with students, too - he supervises about 20 students' graduate thesis projects each year. The process begins with setting high goals. "We encourage work that will get published in a tax journal," Raabe says. "In a year, about four or five of these papers do get published. So we know we're dealing with the highest level of quality." Always conscious of the bond between the university and industry, Raabe says the "luckiest situation" is when a student pursues a graduate thesis subject that ties in with a project from his or her workplace.
Raabe strongly supports the notion that teaching and research go hand in hand. "It's easy to see [the beneficial relationship between the two] in taxation because issues come up in the real world that can immediately be put to use in a classroom. Our students are interested in late-breaking developments in tax laws-they have to be, because that's the way they will make their living. Some of the research I do for Price Waterhouse immediately comes back into the classroom, and some techniques I develop in the classroom go to Price Waterhouse.
"We're lucky that way. Taxation is a profession that keeps feeding its resource side, through the university, because that's how the profession renews itself."
Raabe's own research has been channeled into three areas: gift, estate and financial planning; state/local tax laws; and applying technology to the tax profession. The first area was a carefully calculated move. "I saw the direction that the profession was going and what clients were looking for," he says. "Estate and gift planning can do a lot of good for taxpayers. Someone who doesn't think about [this area] soon enough or at all ends up paying for it. I can save big dollars for clients." It also provides Raabe with some job security. "It's a way to continue our relationship since estate and gift planning focuses on larger, longer-term projects."
A special need in this area is long-term health care planning. We're going to see almost desperate measures on the part of taxpayers to keep what they see as theirs away from the government or nursing homes," Raabe predicts. "Besides the IRS, there are other government agencies with designs on your money and they come at you at a time when you're not in the best of health of mental capacity. You need to think all these things through ahead of time." Raabe suggests that older people work with a financial planner five years before going into a nursing home to begin sheltering assets.
On a larger scale, Raabe has done research on tax support for small business in Wisconsin, especially in regard to international markets. "Small business is hostage [to government]," Raabe says. "Business often can't affect, even indirectly, how the law gets crafted. It's really too bad, because business can get hung out to dry very quickly with a well-intentioned but poorly executed set of laws.
Property tax has been a focus of Raabe's research since 1983. His projects range from a ranking of the effective state and local tax burdens of all the states and local tax burdens of all the states and large U.S. cities, to an analysis of the impact of tax-exempt groups and assets on property tax rates for businesses and individuals. Raabe examines the "hidden property tax costs" to homeowners and businesses that are caused by tax-exempt institutions. Another interesting project involves developing a model to identify inequities in property tax assessments, and the most cost-effective way for taxpayers to challenge these inequities when they arise. "When the model is completed, it will apply to every business owner and homeowner in the country," Raabe says. "Right now there are no systematic guidelines to assist a property owner who believes that he or she has been over-assessed."
A third area of research interest is applying technology to the tax profession. Raabe has an undergraduate degree in computer science, and he hopes to use this knowledge to integrate computer technology and he hopes to use this knowledge to integrate computer technology and interactive videos into the boardroom as well as the classroom.
Occasionally, Raabe's knowledge and reputation are put to the test in a different arena - the courtroom. Raabe has been brought in as an expert witness to testify in several court cases, including one of the most publicized trials in Milwaukee history. The 1990 case involved Leigh Ann Conley, a beautiful young model, and an 80-year-old man, David Kritzik, who showered Conley and her sister with money and gifts. Their relationship came into question after Conley failed to pay taxes on the money Kritzik paid her prior to this death. The case centered on the issue of intent: was the money paid "for services," as Conley's sister first alleged, or was it, as she later said, a gift? Conley faced a prison term and stiff penalties if the verdict went against her.
Conley's defense attorney contacted Raabe to testify on the tax laws involved in the case. Raabe then had a lengthy interview with Conley. "Based on some letters written by Kritzik and Conley's own story, I'm certain [the money] was intended as a gift to her," Raabe says. "The money should have been non-taxable, but the jury didn't see it that way." Despite Raabe's testimony on her behalf, Conley was sentenced to prison. She served six months before the case was overturned by a judge who agreed with Raabe's interpretation of the tax law.
Being a tax expert doesn't make Raabe immune from feeling frustrated when taxes deplete his own pocketbook. He confesses that filling out a tax return sometimes causes an unpleasant twinge. But Raabe tries to take a philosophical approach - something others might keep in mind as tax time nears. "I usually don't mind paying taxes," he says, smiling. "It's a reasonable price to pay for living here. I look at Texas, New Jersey and Illinois, all lower tax states, and I say that I'd rather live here. I hope that that's the majority view."