Progressive Tax Procedure

70 Pages Posted: 30 Jul 2020 Last revised: 7 Jun 2021

See all articles by Joshua D. Blank

Joshua D. Blank

University of California, Irvine School of Law

Ari D. Glogower

Ohio State University (OSU) - Michael E. Moritz College of Law

Date Written: July 17, 2020

Abstract

Abusive tax avoidance and tax evasion by high-income taxpayers pose unique threats to the tax system. These strategies undermine the tax system’s progressive features and distort its distributional burdens. Responses to this challenge generally fall within two categories: calls to increase IRS enforcement and “activity-based rules” targeting the specific strategies that enable tax avoidance and evasion by these taxpayers. Both of these responses, however, offer incomplete solutions to the problems of high-end noncompliance.

This Article presents the case for “progressive tax procedure”—means-based adjustments to the tax procedure rules for high-income taxpayers. In contrast to the activity-based rules in current law, progressive tax procedure would tailor rules to the economic circumstances of the actors rather than their activities. For example, under this approach, a high-income taxpayer would face higher tax penalty rates or longer periods where the IRS could assess tax deficiencies. Progressive tax procedure could also allow an exception for low-value tax underpayments, to avoid excessive IRS scrutiny or unduly burdensome rules for less serious offenses.

Progressive tax procedure could address the unique challenges posed by high-end tax noncompliance and equalize the effect of the tax procedure rules for taxpayers in varying economic circumstances. It could also complement the alternative approaches of increasing tax enforcement and activity-based rules while avoiding the limitations of relying exclusively on these responses.

After developing the normative case for progressive tax procedure, the Article illustrates how it could be applied in three specific areas: accuracy-related tax penalties, the reasonable cause defense, and the statute of limitations. These applications illuminate the basic design choices in implementing progressive tax procedure, including the types of rules that should be adjusted and the methods for designing these adjustments.

Keywords: Progressivity, Progressive Taxation, Tax Noncompliance, Tax Procedure, Tax Avoidance, Tax Enforcement, IRS, Tax Penalties, Means-Based Adjustments, Deterrence, High-Income Taxpayer

JEL Classification: H20, H23, H24, H25, H26, H29, K34

Suggested Citation

Blank, Joshua D. and Glogower, Ari D., Progressive Tax Procedure (July 17, 2020). 96 New York University Law Review 668 (2021), UC Irvine School of Law Research Paper , Ohio State Legal Studies Research Paper No. 559, Available at SSRN: https://ssrn.com/abstract=3653622

Joshua D. Blank (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

HOME PAGE: http://www.law.uci.edu/faculty/full-time/blank/

Ari D. Glogower

Ohio State University (OSU) - Michael E. Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

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