Economic Analysis of Tax Regulations: An Assessment of the First Year

Tax Notes, May 20, 2019

6 Pages Posted: 26 Jun 2019

See all articles by Jerry Ellig

Jerry Ellig

George Washington University - Regulatory Studies Center (deceased)

Date Written: June 19, 2019

Abstract

This article reviews the quality of the economic analyses for the most important (economically significant) tax regulations reviewed by the Office of Information and Regulatory Affairs in the past year. The primary strength in the IRS economic analysis of these regulations is that it recognizes that many important benefits and costs of tax regulations flow from tax-induced distortions (or prevention of distortions) in private parties’ decision-making. The analysis also acknowledges the economic inefficiency of expenditures by individuals or organizations to capture or avoid wealth transfers (that is, tax avoidance). But there is also significant room for improvement. The IRS needs to assess the economic efficiency of statutory provisions before it can know whether its regulations help or hinder economic efficiency. It should stop trying to justify “clarity” as a benefit of tax regulations and instead strive to quantify the number of affected taxpayers, tax revenue, effective changes in marginal tax rates, and benefits or costs that arise from changes in behavior from tax rate changes.

Keywords: regulation, tax, tax regulation, tax code, IRS, cost-benefit, benefit-cost

JEL Classification: H25, H26, K23, K34, Z18

Suggested Citation

Ellig, Jerry, Economic Analysis of Tax Regulations: An Assessment of the First Year (June 19, 2019). Tax Notes, May 20, 2019, Available at SSRN: https://ssrn.com/abstract=3406860

Jerry Ellig (Contact Author)

George Washington University - Regulatory Studies Center (deceased) ( email )

805 21st St. NW
Washington, DC 20052
United States
703-375-9410 (Phone)

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