Tax is special. There is nothing quite like it. It has its own lingo, bar sections, courts, constitutional provisions, and even blogs. Most United States citizens are keenly aware of tax; indeed, there might not have been a United States without certain taxes. But many areas of law can make similar claims. Most citizens are aware of the criminal law; specialized blogs, bar sections, and courts exist for many types of law; and apparently “trolls” are a concern in patent law. So tax is special, but is it truly in a league of its own, different in kind from other areas of law? Is tax exceptional? “No,” argue Alice Abreu and Richard Greenstein, in a thought-provoking piece that questions the very meaning of “exceptional” in this context.
Tax: Different, not Exceptional is a wonderfully written piece that challenges the reader to consider the usefulness of the “tax exceptionalism” concept in the analysis of tax laws. Tax exceptionalism refers to the idea that tax is so different from other areas of law that it is subject to its own sets of rules and analyses. The beauty of Abreu and Greenstein’s argument is the way they make it. They start, to the potential surprise of the reader, by highlighting major ways that tax is thought to be different from other areas of law. The authors lead the reader to the edge of becoming a full-fledged tax exceptionalist before tearing the whole concept down in the crescendo of the piece.
According to the authors, tax exceptionalism finds its roots in a number of places, but, most important to the United States tax system, in the development of the income tax in the hands of economists as law principally driven by its revenue raising function and in people’s perception of tax as exceptionally different from other areas of law. These perceptions arise from a failure to internalize tax norms, cognitive biases such as loss aversion and the endowment effect, and the pervasiveness of people’s interactions with the tax law as compared to other areas of law. These sources culminate in two primary arguments for tax exceptionalism—that social policy is not a primary concern of the tax law because of its principal concern with revenue raising and that tax law demands hyper-clarity.
At this point, the reader is convinced: tax is really different from other areas of law. But Abreu and Greenstein artfully steer the reader away from concluding that those differences amount to tax exceptionalism. To do so, they pose a simple question: when is it useful to think of tax as exceptional, as requiring its own unique rules and analysis? In other words, when do all of these differences add up to something more? Their answer is that the term “tax exceptionalism” is empty because it does not describe anything useful; the differences never add up to something more that would be worth describing on its own. Rather, tax law is law with nuances that counsel in favor of certain analytical thinking, just as all law is law with nuances. Tax is different, yes, but not exceptional.
The piece offers a fantastic brain teaser for the reader: is the concept of tax exceptionalism ever useful? What would be the proverbial straw that breaks the camel’s back and changes tax from law with differences to a different kind of law? Abreu and Greenstein acknowledge the difficulty of completely proving that the tax exceptionalism concept is never useful, but they offer a multitude of examples to show that the concept is unhelpful. Even those courts or scholars that use the term do not use it to show that tax is unique, their analysis demonstrates only that tax is different. And judicial efforts doing otherwise have been corrected (see Mayo).
But the analysis is challenging and raises some questions. Perhaps the most basic question is when could tax (or any other area of law) become exceptional. What would that look like? The point of the argument is that tax is not actually exceptional, but one wonders if the goal post is set too far back. I suspect the response is that the goal should be that far back because exceptionalism demands an entirely different regime for an area of law and if we get it wrong that can be devastating to the development of that law. Another question the analysis raises is whether we could ever know ex ante if tax is exceptional. The pragmatism of the analysis depends on practical consequences of tax law; it is exceptional when it is useful to think of it as exceptional. Can tax be both exceptional and unexceptional depending on the circumstances? How is one to know looking forward?
With my brain still churning, I recommend this thoughtful piece to those interested in what makes tax law special and how we should approach it analytically. Dare I say that Abreu and Greenstein’s argument is both different and exceptional.