Thursday, February 5, 2015
Susan C. Morse (Texas) presents Safe Harbors, Sure Shipwrecks at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Jason Oh and Alexander Wu:
Safe harbors and sure shipwrecks are rule-standard hybrids that appear throughout statutory, regulatory and case law. Safe harbors guarantee compliance, and also leave open the question of compliance for fact situations not described by the safe harbor. Sure shipwrecks provide a conclusive noncompliance result and also leave open the question of compliance outside the sure shipwreck. Safe harbors and sure shipwrecks produce asymmetric behavioral incentives for persons subject to them. Like bright-line rules, safe harbors encourage behavior to converge from both sides of the line drawn by the safe harbor. This is because of the advantage of a zero chance of liability within the safe harbor. Sure shipwrecks generally encourage convergence only from the noncompliant side of the line. Ex ante versus ex post policy making, overinclusion and underinclusion, interest group influence, and other factors also affect safe harbor and sure shipwreck policy making.