Crises and Tax

53 Pages Posted: 29 Mar 2017  

Andrew Blair-Stanek

University of Maryland Francis King Carey School of Law

Date Written: March 27, 2017


How can law best mitigate harm from crises like storms, epidemics, and financial meltdowns? This Article uses the law-and-economics framework of property rules and liability rules to analyze crisis responses across multiple areas of law, focusing particularly on the Internal Revenue Service’s numerous actions to battle the 2008-09 financial crisis.

Remarkably, the IRS’s tax-law responses to that crisis cost more money than Congress’ higher-profile bank bailouts. But many of the IRS’s responses were also underinclusive, causing preventable layoffs and foreclosures. This Article explains these failures and demonstrates that the optimal response to crises is to shift harsh property rules to compensatory liability rules, temporarily. Arranging such shifts in advance further mitigates harm when crises arrive.

This analysis also provides new insights for the broader literature on property rules and liability rules. For example, arranging temporary moves to liability rules can avoid windfalls, allow speedier relief, and encourage flexible private contracts. These lessons have practical applications in areas as far afield as how constitutional law and patent law respond to epidemics.

Keywords: Tax, Financial Crisis, IRS, Property Rules, Liability Rules, Pliability Rules, Calabresi, Melamed, Cathedral, Patent, Epidemic, Quarantine, Bankruptcy

JEL Classification: H2, H21, H12, K34

Suggested Citation

Blair-Stanek, Andrew, Crises and Tax (March 27, 2017). Duke Law Journal, Vol. 67, Forthcoming. Available at SSRN:

Andrew Blair-Stanek (Contact Author)

University of Maryland Francis King Carey School of Law ( email )

500 West Baltimore Street
Baltimore, MD 21201-1786
United States

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