Centralized Review of Tax Regulations

72 Pages Posted: 29 Apr 2018 Last revised: 23 Jun 2018

Clint Wallace

University of South Carolina School of Law

Date Written: June 14, 2018

Abstract

Centralized oversight of agency policymaking and spending by the President’s Office of Management and Budget is a hallmark of the modern administrative state. But tax regulations have almost never been subject to centralized review. The Trump administration recently proposed to require centralized review of tax regulations, but it is unclear what regulations would be subject to such review or how it would be conducted.

This Article examines the normative desirability of the longstanding approach of exempting tax regulations from centralized review, and the alternative of imposing such review. Scholars and policymakers have provided various incomplete justifications for excepting tax policy from centralized review, including concerns about politicizing tax administration, analytical challenges, and ossification. I conclude that none of the reasons offered in the past for a default rule of no review is sufficient in light of the potential normative benefits of centralized review. The analysis here brings to the fore multiple functions of tax regulations: some rules are focused on shaping private behavior, whereas others focus on raising revenue or redistribution or implementing precise congressional directives. I make the case that for rules shaping private behavior, centralized review can facilitate productive coordination across agencies, increase political accountability, introduce analytical rigor through cost-benefit analysis, and potentially frustrate capture of the regulatory process by interest groups. As for the other functions, this Article outlines the limitations of current centralized review conventions, and sketches some possible modifications that would make centralized review more beneficial for such rules.

The major tax legislation Congress enacted at the end of 2017 included numerous broad delegations. Thus, tax regulations will reshape the tax system significantly, and the Trump administration is poised to begin some version of centralized review of tax regulations, although many important issues remain unresolved. Recognizing the strengths and weaknesses of centralized review as applied to tax policy will help to establish consistent and productive oversight of the tax regulatory process.

Keywords: Tax, Tax Policy, Administrative Law, OIRA, OMB

JEL Classification: K34, K00

Suggested Citation

Wallace, Clint, Centralized Review of Tax Regulations (June 14, 2018). Alabama Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3161157

Clint Wallace (Contact Author)

University of South Carolina School of Law ( email )

1525 Senate Street
Columbia, SC 29208
United States

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