40 Pages Posted: 16 Aug 2010
Date Written: August 15, 2010
Tax rules change frequently, and each change raises the question of how to deal appropriately with the winners and losers created by the change. Scholars have long discussed this issue of transition policy. The rich literature on tax transition policy, however, implicitly assumes that Congress or, in the case of regulations, the Treasury Department, and not the individual taxpayers who are affected by the change, will ultimately determine when the new law will become applicable to all taxpayers. This is not necessarily the case. Many tax law transition provisions include transitional elections, which cede to the affected taxpayers the authority to choose whether the old laws or the new laws will apply to them during a transition period. This deference to the choices of individual taxpayers merits special attention because tax elections reduce revenue and can increase complexity, and because the policy benefits of a law change can be enhanced or stunted by the manner in which the change is implemented. This attention has been lacking until now. To fill this gap in the literature, this article explains how transitional elections are used in the tax law and analyzes when, if ever, transitional elections should be used as part of tax transition policy. Ultimately, this article aims to help policymakers make informed decisions about whether and when taxpayers should be empowered to make individual choices about the implementation of changes in the tax law.
Keywords: tax, tax elections, taxpayer choice, explicit elections, transition policy, law changes
JEL Classification: H2, K34
Suggested Citation: Suggested Citation
Field, Heather M., Taxpayer Choice in Legal Transitions (August 15, 2010). Virginia Tax Review, Vol. 29, No. 3, 2010. Available at SSRN: https://ssrn.com/abstract=1652331