Friday, November 1, 2019
Ari Glogower (Ohio State) presents Progressive Tax Procedure (with Joshua Blank (UC-Irvine)) at Boston College today as part of its Tax Policy Workshop Series hosted by Shu-Yi Oei, Jim Repetti, and Diane Ring:
Discussions of progressive taxation in the United States—and of whether the rich pay enough in taxes—generally focus on the structure of the substantive tax law, such as the marginal rates, income brackets, deductions, and credits under the federal income tax. Despite recent reports of tax avoidance and noncompliance by high-income taxpayers, these discussions have not focused on the structure of the tax procedure rules, which govern the Internal Revenue Service’s administrative responsibilities and taxpayers’ compliance obligations.
This Article presents the case for a new system of “progressive tax procedure.” Currently, tax procedure rules—such as tax penalties and the statute of limitations—typically apply in a uniform manner to all taxpayers, irrespective of their income. Under progressive tax procedure, in contrast, these rules would vary depending on the taxpayer’s income. For example, a high-income taxpayer would face higher tax penalty rates or longer periods where the IRS could assess tax deficiencies.
Progressive tax procedure could deter noncompliance by high-income taxpayers without fostering negative perceptions of the tax administration system among the general public. It could counter the resource mismatch between high- income taxpayers and the IRS. Most critically, it could narrow the gap between the substantive tax law’s prescriptions and the actual tax paid by high-income taxpayers. While progressive tax procedure would be especially desirable when legislators and other policymakers pursue progressive tax reforms, it would be beneficial regardless of the progressivity of the underlying substantive tax law.
After developing the normative case for progressive tax procedure, the Article analyzes examples of progressive adjustments in four specific areas of tax procedure: civil tax penalties; interest charges on underpayments of tax; the statute of limitations; and the rules governing taxpayer privacy. These applications illuminate the basic design choices in implementing progressive tax procedure, including the types of rules that should be adjusted and the best ways to make these adjustments.