Quantifying Legislative Uncertainty: A Case Study in Tax Policy

65 Pages Posted: 29 Aug 2015 Last revised: 20 Dec 2016

Jason Oh

University of California, Los Angeles (UCLA) - School of Law

Chris Tausanovitch

University of California, Los Angeles (UCLA) - Department of Political Science

Abstract

Whether a legislature will or will not enact law is often uncertain. This Article offers an empirical model for quantifying that uncertainty, and it develops this argument in the context of federal income tax rates. Specifically, we estimate a model of legislator preferences on tax rates and show that the political process can be well understood in terms of the preferences of key legislators. We use our statistical model to quantify the uncertainty of tax rates and forecast the direction of likely rate changes in the future.

This argument has several implications for policymaking and the analysis of legislative uncertainty more generally. First, quantifying legislative uncertainty offers insight into the behavioral effects of the law. How people respond to the law depends on their perception of the law’s future trajectory. Second, our analysis allows us to explore the stability of major legislative reform. Our methodology allows us to demonstrate that reforms are sometimes predictably unstable. Such reforms can have the perverse result of increasing future legislative uncertainty.

Keywords: Legislative Uncertainty, Political Uncertainty, Empirical Legal Methods, Tax Policy

Suggested Citation

Oh, Jason and Tausanovitch, Chris, Quantifying Legislative Uncertainty: A Case Study in Tax Policy. 69 Tax Law Review 485 (2016); UCLA School of Law, Law-Econ Research Paper No. 15-13. Available at SSRN: https://ssrn.com/abstract=2652459 or http://dx.doi.org/10.2139/ssrn.2652459

Jason Oh (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

Christopher Nicolas Tausanovitch

University of California, Los Angeles (UCLA) - Department of Political Science ( email )

Los Angeles, CA
United States

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