Tax Regulation, Transportation Innovation, and the Sharing Economy

16 Pages Posted: 17 Dec 2014 Last revised: 16 Mar 2015

See all articles by Jordan M. Barry

Jordan M. Barry

University of San Diego School of Law

Paul L. Caron

Pepperdine University - School of Law

Date Written: December 15, 2014


Many emerging companies’ business models center on helping consumers to share assets in new ways. This “sharing economy” has already experienced tremendous growth and attracted considerable investment capital and talent. Yet, as is often the case with economic innovations, existing regulatory structures have hindered the growth of the sharing economy, reducing its popularity and slowing its development.

This Article explores the tension between innovation and regulation, both in general and in a specific context: the intersection of the transportation sector of the sharing economy and the qualified transportation fringe benefit rules of Internal Revenue Code Section 132. We illustrate how regulators’ legitimate concerns combine with the uncertainty surrounding new ways of doing business to create regulatory environments that place new industries at a disadvantage. We also argue that two of the most common approaches that regulators adopt to foster new industries – expanding regulation to encourage new industries and restricting regulation to spur innovation – are both flawed. In tax and other areas of law, these approaches tend to operate cyclically, with each coming into fashion for a time until its flaws are deemed unbearable and it gets replaced by the other. This cycle will continue until someone comes up with a better innovation.

Keywords: Tax, Regulation, Innovation, Sharing Economy, Fringe Benefits

JEL Classification: K20, K34

Suggested Citation

Barry, Jordan and Caron, Paul L., Tax Regulation, Transportation Innovation, and the Sharing Economy (December 15, 2014). University of Chicago Law Review Dialogue, Vol. 82, p. 69, 2015; Pepperdine University Legal Studies Research Paper No. 2015/2; San Diego Legal Studies Paper No. 15-180. Available at SSRN: or

Jordan Barry

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Paul L. Caron (Contact Author)

Pepperdine University - School of Law ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States
310.506.4266 (Phone)

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