Friday, April 19, 2019
Michael Abramowicz (George Washington), Tax Experimentation, 71 Fla. L. Rev. 65 (2019):
Random experiments could allow the government to test tax policies before they are enacted into general law. Such experiments can be revenue-neutral, with the tax authority ensuring ex post that average tax revenues received from taxpayers in the treatment and control groups are equal. Taxpayers might thus volunteer even for experiments that would broaden the tax base, for example by eliminating deductions. Continued participation by taxpayers in such experiments would indicate that the proposed reforms are efficient at least if externalities are disregarded. Non-revenue-neutral experiments raise greater concerns about horizontal inequity, but they may be helpful in addressing questions about effects of tax rates and in increasing participation.
This Article has considered a range of possible applications of tax experimentation, from relatively small issues such as the entertainment deduction to foundational questions about the effect of marginal tax rates on labor supply and even the effect of tax policies on taxpayer health. Perhaps one reason that the possibility of tax experiments has been neglected is that it seems politically implausible that the government would randomly assign taxpayers to different tax rates, let alone assign different municipalities to different tax rules. This Article’s ambition has been to show that more modest tax experimentation, featuring revenueneutral designs and voluntary participation, might sometimes be possible, and that interpretive challenges can be addressed. Initial forays involving discrete code provisions could lead to voluntary experiments in which taxpayers receive some tax rate reward in exchange for their willingness to being assigned to any of many tax treatments. Such a program could increase the odds that the next great tax reform is based on a solid foundation of evidence.