Taxing Novelty

Abstract

This Article aims to incorporate the framework of legibility into existing scholarly discourse on legal categories. Legibility is the process by which the state simplifies complex and often unfamiliar systems into a format that can be governed. Across broad areas of the law, placing things and activities into different legal categories is a means for the state to achieve legibility.

Through a case study of the appropriate tax treatment of cryptocurrency, this Article develops a descriptive account of how legal decisionmakers render novel economic activities legible. The advent of cryptocurrency has sparked a flood of questions across a variety of legal fields, including tax law. This Article diagnoses the uncertainty surrounding the appropriate taxation of cryptocurrency as a clear example of the challenge of legibility in statecraft. The case study’s descriptive account uncovers ways in which achieving legibility can be challenging for legal decisionmakers and accompanying risks to legal systems, including the risks of legal arbitrage by powerful interest groups. The Article applies these insights to propose legal reforms specific to tax law. It advocates for tax law to move towards fewer tax categories, which can ease legibility challenges and reduce potential risks.

Keywords: taxation, tax law, legal theory, legal categories, legibility, cryptocurrency, blockchain, law and technology

JEL Classification: K00, K10, K34, H20, H26