Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Aprill & Hemel's A Byrd's Eye View Of The Tax Legislative Process

This week, Ari Glogower (Ohio State) reviews a new work by Ellen P. Aprill (Loyola-LA) and Daniel Hemel (Chicago), The Tax Legislative Process: A Byrd's Eye View, 81 Law & Contemp. Probs. ___ (2018).

Ellen Aprill and Daniel Hemel’s timely and enlightening new essay described the effect of the Byrd Rule on tax legislation and policy since its adoption in 1985. Named for former Senator Robert Byrd (D-WV), the rule limits the scope of legislation that can be passed in the Senate by a simple majority through the budget reconciliation process.

The 1974 Congressional Budget Act allowed for the reconciliation process as a way for Congress to pass revenue-related legislation and avoid the threat of a “filibuster”—and specifically to avoid the supermajority requirement (now 60 votes) for cloture ending debate on a measure in the Senate. The Byrd Rule, in turn, limits the ability to pass additional measures through this process that are not revenue-related. In particular, the rule precludes provisions that are “extraneous” to the reconciliation instructions as specified in a budget resolution that must be passed first authorizing an increase in outlays or revenues up to a specified amount over a specified budget window.

As the essay describes, the basic challenge in implementing the Byrd Rule is determining which provisions (or even portions of provisions) are extraneous to the underlying budget resolution. Among other requirements, the rule prohibits provisions that do not change outlays or revenues, that increase outlays or decreases revenues beyond the reconciliation instructions, that increase the deficit in any year beyond the specified budget window, or that result in changes in outlays or revenues that are merely “incidental” to the non-budgetary aspects of the provision. The authors suggest that final requirement may the one that is most inconsistently applied, as the determination of whether a provision (or a part of a provision) is “incidental” is largely left to the discretion of the Senate Parliamentarian. 

The authors also highlight another important effect of the Byrd Rule – the proliferation of avian puns describing different aspects of the rule and its application. For example, in a “Byrd Bath” legislators meet with the Senate Parliamentarian to debate the rule’s application to proposed provisions. And provisions that are invalidated and removed from legislation as a result of the rule? Byrd droppings, of course. 

After reviewing the effect of the Byrd Rule in prior political cycles, the essay provides a fascinating and detailed study of rule’s effect in the recent attempts by Congress to repeal the ACA and in determining the shape of the tax legislation that was ultimately passed late last year. 

The Byrd Rule ostensibly promotes fiscal discipline, by requiring a supermajority for departures from the budget specified in the reconciliation instructions, encourages compromise by narrowing the scope of issues that may be considered in reconciliation, and provides a role for the minority party in the legislative process by preserving the availability of the filibuster for extraneous provisions. April and Hemel’s detailed analysis of the Byrd Rule’s effect on legislation and policy over the past 30+ years indicates, however, that the rule may at times have unexpected and adverse consequences. In particular, the authors find that the rule can create the illusion—but not the reality—of fiscal discipline, by obscuring the budget effects of the underlying budget resolution and temporary cost-increasing measures that are likely to be renewed in the future. The authors also argue that the rule can in fact block provisions that could actually promote fiscal discipline (such as Senator Bob Corker’s “trigger” provision that would have capped the deficit increase from the recent tax bill). The authors also argue that the rule can impede tax simplification measures, encourages Congress to larder the Code with temporary provisions, and reduces transparency and accountability in the legislative process.  

The essay concludes by proposing reforms to limit adverse effects from the Byrd Rule.  First, the authors argue that the determination sessions should be published and publicly available.  (Or, alternatively, one could say that information on the rule’s application should be as free as a Byrd.) The authors also argue that the rule should not be used to block provisions that could improve fiscal discipline, and it should not be used to preserve disproportionate benefits to interest groups. (Or, alternatively, one could say that the Byrd should not be caged.)

In sum, this work is important and illuminating in the current political moment, at a time when the Byrd Rule is playing an increasing role in the legislative process, and is receiving increased attention from the public and the press. One could say that, as long as the Senate remains closely divided, tax legislation will be strictly for the Byrds.

Here’s the rest of this week’s SSRN Tax Roundup:

• Subhamoy Banik (K.K. University) & Advocate Arundhuti Das (K.K. University), GST in India: Impact and Challenges, 19 IOSR Journal of Business and Management 7, 7-10 (December. 2017)
• Alberto Artamendi Gutiérrez (Independent), Implicaciones Fiscales de la Legítima Catalana: Un Buit Legal (Tax Implications of the Catalan Forced Heirship Institution 'Legítima': A Loophole), 1 InDret (Jan. 2018)
• Jean Claude Geofrey Mahoro (Independent), A Comparative Study on Advantages of Tax Incentives and Exemptions Under Rwandan and Kenyan Legal Regimes
• Kunka Petkova (Vienna), Andrzej Stasio (Vienna) & Martin Zagler (Vienna), On the Relevance of Double Tax Treaties
• Clint Wallace (South Carolina) and Ari D. Glogower (Ohio State), Shades of Basic Income, in Sharing the Gains of the Global Economy: Proceedings of the New York University 70th Annual Conference on Labor (forthcoming 2018)