Tax as Everylaw: Interpretation, Enforcement, and the Legitimacy of the IRS

Abstract

Although legitimacy is vital to any legal institution, in the case of the IRS legitimacy has been discussed and analyzed only in the face of catastrophic assaults. These include attempts by a President to use the IRS to persecute political enemies; allegations of serious abuse of taxpayers by IRS agents; and most recently allegations that conservative organizations seeking section 501(c)(4) status were disproportionately singled out for intrusive scrutiny and delay. While these instances have posed significant threats to the agency’s legitimacy, what we explore here is more subtle, more pervasive, and hence, more invidious and threatening. It is the way in which the unexamined assumption of tax exceptionalism – the idea that tax is different – has produced a situation in which the tax law and its administrators are viewed by tax professionals, and eventually by the taxpaying public, as interpreting and enforcing tax law in ways that are not understood, are therefore misperceived, and are ultimately judged illegitimate. Tax exceptionalism is not a specific idea. Rather, it is a way of conceiving of tax or, still more loosely, an attitude toward tax. At its simplest, tax exceptionalism is “the notion that tax law is somehow deeply different from other law, with the result that many of the rules that apply trans-substantively across the rest of the legal landscape do not, or should not, apply to tax.” We believe that the stubborn persistence of tax exceptionalism is due to an important but previously unidentified and unexplored feature – namely, that tax exceptionalism has two distinct aspects: a visceral aspect and an objective aspect. Taxpayers experience the tax law as different from other areas of law. No other field of law is thought to be so complex or to compel so many so regularly to bare their financial souls to the government just to be in compliance with the law. This is the visceral aspect of tax exceptionalism and we do not challenge the reality or the intensity of that experience. But we believe that the experience of difference has been reified, so that tax law is thought to be really different – objectively different in kind from other fields of law or perhaps not even law at all. It is this second aspect of tax exceptionalism – the objective aspect – which we want to challenge, for its powerful influence on tax scholarship, administration, and adjudication threatens the legitimacy of the tax law and of the agency that administers it. Our central claim is that when tax is viewed as objectively exceptional – that is, when tax is thought to be fundamentally different in kind from other fields of law – it is deprived of the analytical tools and vocabulary commonplace in other fields of law. This, in turn, imposes unnatural and unrealistic constraints on the IRS’s interpretive authority and enforcement discretion. The consequence is that what would for ordinary agencies count as legitimate interpretations and enforcement decisions appear inscrutable when performed by the IRS, contributing to taxpayers’ visceral experience of tax as exceptional and thereby perpetuating the cycle. Unmasking and then abandoning that objective aspect of tax exceptionalism has significant implications for tax law, tax administration, and the legitimacy of the IRS.