Wednesday, May 4, 2016
Daniel Hemel (Chicago), The President's Power to Tax, 102 Cornell L. Rev. ___ (2016):
President Obama and his predecessors have used their regulatory authority to implement significant elements of their domestic policy agendas across a wide range of issue areas—including the environment, immigration, labor, and health care. But recent administrations have been much less willing to exercise regulatory authority in the realm of tax. More precisely, recent administrations have been reluctant to take regulatory actions that raise revenue (although quite willing, in certain cases, to take regulatory actions that move the law in a taxpayer-friendly direction). This is not because the Executive Branch lacks the legal authority to adopt significant revenue-raising tax reforms via regulation: as this article demonstrates, the Executive Branch’s “power to tax” under existing statutes is broad. Nor is it because the President is satisfied with the tax status quo: recent Presidents have repeatedly asked Congress to amend the tax code via legislation. Yet in many cases, the change that the President asks Congress to make is a change that the Executive Branch already has authority to make on its own. What explains the reluctance of recent administrations to raise revenue through regulatory action?
This article seeks to answer that question. It draws on public choice theory and game theory to build a strategic model of interactions between the Executive and Legislative Branches in the tax policymaking domain. The model generates several counterintuitive implications. Among others: a strong anti-tax faction in Congress may increase the probability that revenue-raising regulatory measures are implemented; judicial deference to Treasury regulations may reduce lawmakers’ willingness to pass revenue-raising fixes to existing tax statutes; and statutory rules requiring legislation to be “deficit-neutral” may discourage the administration from taking deficit-closing regulatory actions.