Stephanie Hoffer (Indiana-Indianapolis; Google Scholar) presents Tax Legislation in Crises at Indiana-Bloomington today as part of its Tax Policy Colloquium hosted by Leandra Lederman:
Congress, during crises, uses tax law as an instrument of mitigation. A legislature convened in crisis, though, faces unusual informational, political, and time constraints. Tax legislation tends toward complexity. Passing complex legislation under unusual constraints likely precludes thorough contemporaneous consideration of the distributional or other policy effects of the legislation on a diverse group of stakeholders. Perhaps as a consequence, tax legislation passed in times of crises typically builds on prior crisis legislation and contains many recurring provisions.
This essay examines recurring provisions in crisis-motivated tax and presents preliminary observations on a study of tax legislation passed in response to national crises during the years the 2000 – 2020. The study period includes the September 11 terrorist attacks, hurricanes Katrina, Rita, and Wilma, the 2008 housing market collapse, the Great Recession, and the COVID pandemic. The study examines which kinds of provisions recur under which circumstances, for whose benefit, and at what cost.
The broader work of which this essay is a part addresses three hypotheses. First, crisis tax legislation is formulaic, generally including a number of provisions drawn from prior tax crisis bills. Second, subsequent crisis tax legislation tends to expand the scope of provisions repeated from earlier crisis tax legislation. Third, among recurring provisions, privately-directed outlays via tax expenditure will outweigh Congressionally-directed outlays.
Over the study period, observable trend emerged from Congress’s use of tax legislation as a means of providing relief in crises. First, crisis tax legislation is, to a large degree, formulaic. Every bill in the study period repeated provisions that had been contained in prior crisis relief bills. Second, subsequent crisis tax legislation tends to expand the scope of provisions repeated from earlier crisis tax legislation. Third, many recurring provisions have, as a prerequisite to access that the taxpayer claiming them have a specified kind of asset or a particular level of income or liquidity. Considered in isolation, these provisions raise distributional concerns that may not be rectified by counterbalancing provisions in other parts of the legislation. Finally, recurring provisions tended to ossify over the study period, with some making appearances in permanent codification or in prepackaged suites of relief, with very little evidence that Congress had considered their efficacy as relief provisions, their secondary or tertiary effects, or their distributional consequences.