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The President's Power to Tax

88 Pages Posted: 2 May 2016 Last revised: 10 May 2017

Daniel Jacob Hemel

University of Chicago Law School

Date Written: August 15, 2016

Abstract

Existing statutes give the President and his Treasury Department broad authority to implement important elements of the administration’s tax agenda without further congressional action. And yet only infrequently does the Executive Branch exercise this statutory “power to tax.” Instead, the President often asks Congress to pass revenue-raising measures achieving what the President and his Treasury Department already could accomplish on their own. And even when Congress rebuffs the President’s request, present and past administrations only rarely have responded by exercising the regulatory authority they already possess. Contrast this with the fact that present and past Presidents have stretched the limits of executive authority in a taxpayer-friendly direction—even over Congress’s expressed preferences.

This article attempts to explain the peculiar patterns of executive action and inaction observed in the tax policymaking domain. It draws on public choice theory and game theory to build a strategic model of interactions between the Executive and Legislative Branches. The model generates several counterintuitive implications. Among others: a strong anti-tax faction in Congress may increase the probability that revenue-raising regulatory measures are implemented; judicial deference to Treasury regulations may reduce lawmakers’ willingness to pass revenue-raising fixes to existing tax statutes; and statutory rules requiring legislation to be “deficit-neutral” may discourage the administration from taking deficit-closing regulatory actions.

Keywords: presidential power, tax, treasury regulations

JEL Classification: H2, K34, C7

Suggested Citation

Hemel, Daniel Jacob, The President's Power to Tax (August 15, 2016). 102 Cornell Law Review 633 (2017); University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 762; U of Chicago, Public Law Working Paper No. 581. Available at SSRN: https://ssrn.com/abstract=2773329

Daniel Hemel (Contact Author)

University of Chicago Law School ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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