Wallace: Centralized Review Of Tax Regulations

Clint Wallace (South Carolina), Centralized Review of Tax Regulations, 70 Ala. L. Rev. __ (2018):

Centralized oversight of agency policymaking and spending by the President’s Office of Management and Budget is a hallmark of the modern administrative state. But tax regulations have almost never been subject to centralized review. Scholars and policymakers have provided various incomplete justifications for excepting tax policy from centralized review, including concerns about politicizing tax administration, resource constraints within OMB, and a perception that tax is somehow different from other types of regulatory policy in ways that matter for the desirability of centralized review.

This Article undertakes a holistic analysis of the advantages and disadvantages of centralized review of tax regulations, as well as the challenges arising from such review. I conclude that none of the reasons offered in the past for a default rule of no review is sufficient in light of the normative benefits of centralized review.

The analysis here brings to the fore multiple functions of tax regulations: some rules are focused on shaping private behavior, whereas others focus on raising revenue or redistribution. I make the case that, as in other (non-tax) contexts, centralized review is a good fit for analyzing the portions of regulations that shape private behavior. For these tax rules, centralized review can facilitate productive coordination across agencies, increase political accountability, introduce analytical rigor through cost-benefit analysis, and potentially frustrate capture of the regulatory process by interest groups. As for rules that raise revenue and redistribute: the devil is in the details. This Article outlines the limitations of current centralized review conventions, and sketches some possible modifications that would make centralized review more beneficial for such rules.

The procedures and practices that shape tax regulations are particularly relevant at this moment. The major tax legislation Congress enacted at the end of 2017 included numerous broad delegations. Thus, Congress is relying on the executive branch to develop tax regulations that will reshape the tax system significantly. Recognizing the strengths and weaknesses of centralized review as applied to tax policy will help to establish consistent and productive oversight of the tax regulatory process.