Monday, January 25, 2021
Jonathan Choi (Minnesota) presents Beyond Purposivism in Tax Law virtually in California as part of the San Diego-Davis-Hastings Tax Law Speaker Series:
The existence of tax shelters is one of the most important and persistent problems in tax law. And the traditional solution has been purposivism: if tax benefits are only granted when consistent with statutory purpose, then abusive tax shelters should theoretically be impossible. But this solution is incomplete. Although tax shelters claim benefits that exceed statutory purpose, so do many generally accepted tax strategies, like check-the-box elections and UPREITs. Purpose alone cannot separate abusive tax shelters from ordinary tax planning.
This Article therefore argues that we must go beyond purposivism in tax law, complementing purposivist techniques with either structuralism, pragmatism, or formalism. Structuralists find cohesive general purposes in the structure of the tax code; pragmatists apply normative judgments when statutory purposes run out; and formalists apply rules, like canons of construction, that provide determinate answers even when statutory purpose is ambiguous.
Of the three, structuralism suffers from some serious defects, especially that it reflects an unrealistic view of the legislative process and that it is difficult to apply in practice. Pragmatism and formalism are more appealing, but entail tradeoffs: pragmatism generally leads to better results in any particular case, while formalism provides consistency that is important for tax planning. Ultimately, this Article advocates a hybrid approach, where agencies apply pragmatic purposivism for ex ante guidance, but agencies and courts apply formalist purposivism for ex post adjudication.