Paul L. Caron

Tuesday, November 8, 2022

Cummings: Tax Exceptionalism Is Overblown

Jasper L. Cummings, Jr., Tax Exceptionalism Overblown, 177 Tax Notes Fed. 225 (Oct. 10, 2022):

Tax Notes Federal (2022)In this article, Cummings argues that the concept of tax exceptionalism has been wildly overstated and used mostly by tax avoiders, and he contends that, unlike some good ideas, the concept isn’t worth overstating. ...

A large crop of professors, brief authors, and article writers have gleefully claimed that some amorphous malady they call “tax exceptionalism” is dead, citing Mayo’s statements about National Muffler. The claim serves as an all-purpose ground for winning most any argument with the IRS. The flaws in their scholarship might be overlooked if they weren’t so darn happy about it. They all seem delighted to assert that the IRS and Treasury were taken down a peg by the Mayo opinion, often without noticing that Mayo held for the IRS and applied Chevron deference to a Treasury regulation. So if you want to take the IRS down a peg, Mayo isn’t your best cite.

The professorial criticism of a claimed insularity of tax professionals didn’t begin with National Muffler or Mayo or even professor Kristin Hickman. It dates to at least the early 1990s, when Paul Caron penned “Tax Myopia, or Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers [13 Va. Tax Rev. 517 (1994).] ” Again, a catchy title coupled with amusing criticism of the sometimes-self-important group known as tax lawyers kicked off a season of derision for pastimes such as trying to discover the meaning of the code by reading legislative history. Caron was able to enlist professor Boris I. Bittker in his cause.

And yet, the conclusion of the Caron article is puzzling in the hindsight of 30 years: “A symbiotic relationship between tax and nontax law will deepen our tax understanding while providing a fertile area in which to test and refine nontax principles.” Presumably, that thought reflects the “law and economics” or “law and anthropology” trends that had swept law schools. But whatever that means, this observer has not seen any such symbiotic relationship develop unless you mean that more taxpayers are asserting real and imagined APA rights in litigation with the IRS. I do not call that testing and refining anything other than tax reduction.

But why the glee? Reasons vary. Many are doing it for money, mostly the tax litigators who make arguments for a living and can appropriate almost any cite to their cause. Other glee-filled commentators have bought into a politically motivated IRS. Others are not so much anti-IRS as they are pro-wee-little taxpayers who have been unfairly taxed by overreaching IRS published guidance; the law school clinics are in this group. Others were seeking tenure by writing presumably provocative articles.

Still others understood what the Supreme Court said in Mayo and liked the deference result, as long as Treasury regulations are under the thumb of the Office of Information and Regulatory Affairs, the result of a Trump-era order, bringing tax regulations more directly under the control of the White House. ...

This article shows that Mayo didn’t do what the gleeful say it did. It didn’t end or even address tax exceptionalism or myopia. It isn’t even a cite for the existence of tax exceptionalism. There may be a version of tax exceptionalism, but it has nothing to do with Mayo or even Chevron deference.

The exceptionalism is that the tax law is and has long been effectively a code, existing in the realm of code law that characterized European legal systems, but not that of England, which was based on the common law. Code systems are administered by agencies. In contrast, to take the starkest example, bankruptcy law is rooted in the equity branch of the common law and has been fitted only partly into a codification.12 That codification is notoriously imprecise in comparison with the tax code. And for a reason: Bankruptcy law is designed to have a lot of play in the joints and give its judges lots of discretion; tax law is not. In contrast, the last thing either liberals or conservatives should want is an IRS that has the power to say: “Well maybe you ought not to have to pay that tax after all,” or “maybe you should pay a little more.” So yes, tax is exceptional in that way. ...

So no, Mayo didn’t end tax exceptionalism. But once again litigators can apply professor Martin D. Ginsburg’s aphorism: Whenever the commissioner fashions a stick to beat upon the head of the taxpayer (here protecting the tax system), it will turn into a large green snake (here tax exceptionalism) that bites the commissioner on the hind parts.

Scholarship, Tax, Tax Analysts, Tax Scholarship | Permalink