Paul L. Caron

Tuesday, April 21, 2020

McMahon: The Tax Law System Is Only Incomprehensible To Some

Stephanie Hunter McMahon (Cincinnati), The Tax Law System is Only Incomprehensible to Some (reviewing Wendy Wagner (Texas) & Will Walker, Incomprehensible!: A Study of How Our Legal System Encourages Incomprehensibility, Why It Matters, and What We Can Do About It (Cambridge University Press 2019):

Wagner 2Journalists often remark that income tax rules are incomprehensible and that taxpayers cannot understand the law or the explanatory guidance created by the Internal Revenue Service (IRS). In her recent book with Will Walker, Incomprehensible!, Wendy Wagner develops a rubric to evaluate the process by which the law and agency action become incomprehensible.

Unfortunately, applying that rubric to the federal tax system is difficult because of the system’s multiple speakers and audiences. Attempting to fit this system within the rubric, however, highlights how federal tax rules’ incomprehensibility depends upon how one defines the relevant audience, a task the government has yet to undertake. ...

Given what appear to be everyone’s weak incentives to provide comprehensibility, Wagner’s analysis helps show how the federal tax system has important lessons to learn. This system is not inherently incomprehensible. Taxpayers need to be encouraged to convey information to the IRS in a comprehensible form, and the IRS needs to figure out how to differentiate guidance for sophisticated and unsophisticated taxpayers. For both speakers and audience members, cooperative communication may be collectively valued, but the tax system’s perceived gamesmanship and everyone’s pursuit of their individual interests will make comprehensibility hard to develop.

If the IRS is to communicate clearly with taxpayers, and vice versa, it will take reconciling and differentiating audiences that have conflicting abilities to comprehend the barely comprehensible. The task is not impossible, but it will remain an ongoing challenge.

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