Paul L. Caron

Friday, March 22, 2019

Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Morse's When Robots Make Legal Mistakes

This week, Ariel Jurow Kleiman (San Diego) reviews a new work by Susan C. Morse (Texas), When Robots Make Legal Mistakes, 71 Okla. L. Rev. ___ (2019), and a contribution to Symposium, Lawyering in the Age of Artificial Intelligence.

StevensonRobots are all around us.  As we mere humans struggle with basic tasks, robots are churning through documents, making legal decisions, and administering public and private programs.  Due to their ubiquity in legal processes, the patterns they manifest may significantly alter the course of legal development.  Susan Morse, in her recent work on the topic, begins to unpack these patterns, exploring the incentives robots face when making legal decisions.  Specifically, Morse argues that robots tend to follow the path of least resistance, favoring legal decisions that are less likely to be challenged.  In doing so, these artificial agents shift the trajectory of laws’ development, although in what direction it is too early to say.

To lay the foundation for her argument, Morse offers a helpful typology of robot legal mistakes, divided between government and private market robots.  She explains that both government and private robots might cause overcompliance or undercompliance with laws.  The likelihood of challenge for each mistake type depends upon the robot’s wielder.  For instance, a government robot that causes overcompliance by aggressively enforcing the law is very likely to face legal challenge.  This is because a private entity stands to gain from litigating a law erroneously enforced against it.  At the other end of the spectrum, a private market robot that causes overcompliance is least likely to face legal challenge because neither private parties nor the government stand to gain from challenging voluntary overcompliance.  Similarly, a government robot that causes undercompliance—that is, allows some amount of evasion—is unlikely to be challenged.  Aside from a few narrow cases such as environmental regulation, third parties are unlikely to gain from challenging undercompliance, or they lack the legal standing to do so.

The transparency and explainability of legal decisions play a key role in Morse’s argument.  Defending against a legal challenge typically requires explaining the rationale behinds one’s position.  This is true for both human and robot decisionmakers.  If a robot’s decision is challenged, its user can defend the decision by providing explanation for its reasoning.  Where a robot cannot explain its legal reasoning, however, defending a questionable position becomes difficult or impossible.  This might happen, for example, if the robot’s decision relies upon a confidential algorithm.  Thus, Morse reasons, robots that cannot explain their positions are more likely to favor mistakes that minimize the risk of challenge.  For private robots, the result is overcompliance; for government robots, undercompliance.

An obvious question may arise here for the faithful TaxProf reader, namely:  What does this have to do with taxes? 

The answer:  TurboTax.  Robots play a massive role in tax filing and compliance via tax preparation software, which Morse considers at various points in the article.  Her reasoning suggests that TurboTax likely causes overcompliance with tax laws because the software is designed to minimize the risk of legal challenge. 

Morse suggests that this challenge-averse behavior will change the development of the law.  While surely true, I wonder exactly how.  Fewer legal challenges may mean sluggish development of legal interpretation.  Or, legal interpretation will develop based mostly on cases that fall outside the realm of robots.  In a tax context, this means fewer tax cases based on middle-income, “normal” taxpayers—who are more likely to use tax software—and proportionately more tax cases based on wealthy or otherwise exceptional taxpayers—who are more likely to hire professional tax preparers.  The resulting body of law could be more taxpayer friendly, if their advocates are zealous and judicious.   It could be less taxpayer friendly, however, if these taxpayers tend to be unsympathetic or overly aggressive.  The resulting body of law may also create greater uncertainty for unexceptional taxpayers, since the more common fact patterns will avoid legal challenge.  While uncertainty might be seen as a negative outcome, it can also potentially increase compliance, reinforcing the tendency towards overcompliance.

In the tax context, these considerations are complicated further by the fact that robots play both sides of the game.  IRS robots abound, perhaps most notably in the agency’s fraud and abuse detection system.  The algorithm that IRS systems use to flag returns for audit is very hush-hush.  Morse’s reasoning may suggest that these robots will underenforce in order to avoid a challenge in which they cannot explain their reasoning.  However, the process of selecting returns for audit is itself not subject to legal challenge, which prompts the question of how such robots fit into Morse’s framework. (Perhaps the answer is that they don’t.)

There is certainly plenty to consider here and Morse offers a clever and engaging framework for doing so. I look forward to seeing these ideas develop in future work.  If any of it is done by robots, I, for one, will not challenge it.

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

Scholarship, Tax, Weekly SSRN Roundup | Permalink


Thank you Ariel for reviewing “When Robots Make Legal Mistakes”! Sincerely appreciate your terrific precis. I agree with you that the risk of reduced law development also depends on what is happening outside the boundaries of an automated law system, because there could be opportunities for challenge there too. I suppose the idea is a reduction in controversy opportunities, not elimination, and concentrated in the sorts of taxpayers who use automated systems/compliance robots.

I was at a great conference today organized by Stephanie Hoffer at Ohio State, about AI and tax. The conversation there made me realize that I need to clarify something in “When Robots Make Legal Mistakes.” It has to do with government robots and my prediction that if these robots face the black box problem of unexplainability, they will tend toward pro-taxpayer answers in order to avoid controversy. The prediction proceeds from the premise that controversy is a realistic possibility, and what I was reminded of today is that the likelihood of taxpayer challenge to the result provided by the government varies depending on the kind of taxpayer. Specifically, lower-income taxpayers may be less likely to challenge. If so, there is a distributive effect of unexplainability in government automatic systems. For higher-income taxpayers who can afford challenge, lack of explainability may push government robots toward pro-taxpayer answers. But this pro-government trend may be less likely to result for issues specific to lower-income taxpayers (e.g. EITC). I plan to put something in the paper about this. Maybe less of a distributive effect for e.g. pollution regulations though if the likelihood of challenge does not vary with regulated party wealth as much and/or the issues that would be challenged are similar for regulated parties with different levels of resources.

Posted by: Susan Morse | Mar 22, 2019 3:34:34 PM

It gets worse. None of the major payroll vendors will issue a paycheck for an employee who only has an ITIN number. It doesn't matter if the IRS will accept the ITIN number. Nor does it matter the IRS insists the worker be classified as an employee. You can even give them a wavier, and they still won't do it. Consequently, the employer has no choice but to fire the ITIN worker.

And it goes on and on. I have said for years that tax prep software was the best friend Congress and the IRS ever had. Without the programmers, and their conservative interpretation of the rules, something like the AMT or the FTC would have been dead in the water. There is no way anyone can figure that crap out by hand.

Posted by: Dale Spradling | Mar 25, 2019 7:06:41 AM

Susie, thank you for your comments and clarification! I had been trying to decide how your framework might apply to EITC enforcement, and this explanation makes a good deal of sense. Poor taxpayers will be unable to challenge IRS enforcement decisions, while the wealthy will put up a fight. (Surprise surprise) Distributive injustice will ensue.

Posted by: Ariel Jurow Kleiman | Apr 2, 2019 7:50:22 PM