The Worst Tax Law Ever Enacted?

8 Pages Posted: 5 Jun 2020 Last revised: 10 Jun 2020

Date Written: May 10, 2020


Some tax laws are worse than others. The 1986 tax reform act is generally considered one of the best. The 2017 Tax Cuts and Jobs Act is generally considered one of the worst, although I would say it is too early to tell what its long-term impact might be, and some of its worst features (like the section 199A deduction) might be repealed in the near future if the Democrats win in November.

Another example of a generally condemned tax law is the American Jobs Creation Act of 2004. This law was a must-pass piece of legislation because Congress needed to react to the sanctions imposed upon the US by the EU as the result of its victory in the ETI litigation at the WTO. The AJCA included such beauties as a temporary participation exemption that did not create any jobs, a significant increase in the potential for cross-crediting in the foreign tax credit, and a deeply flawed anti-inversion rule that immediately gave rise to a second wave of inversions.

But these bad features were not particularly lasting. The participation exemption only lasted one year, the cross-crediting provisions were significantly revised in 2017, and the anti-inversion provision became less relevant after 2017. Any damage that was done was temporary.
To get to a bad tax law whose effects were really long-lasting, one should go much farther back to the Revenue Act of 1918.

Keywords: Revenue Act of 1918, Spanish Flu, Foreign Tax Credit, Percentage Depletion, Tax Free Reorganizations

JEL Classification: H26

Suggested Citation

Avi-Yonah, Reuven S., The Worst Tax Law Ever Enacted? (May 10, 2020). Available at SSRN: or

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
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734-647-4033 (Phone)

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