Academic journal article Law and Contemporary Problems

Crafting Structural Tax Legislation in a Highly Polarized Congress

Academic journal article Law and Contemporary Problems

Crafting Structural Tax Legislation in a Highly Polarized Congress

Article excerpt

I

INTRODUCTION

To the surprise of many, Congress passed a major tax reform bill at the very end of 2017. (1) Skeptics had doubted this result because of the failure of many earlier tax reform efforts, Congress's inability to replace or repeal the Affordable Care Act (ACA)--or pass any other major legislation--in 2017, and the incredible incompetence (and dishonesty) of the Trump Administration generally. But doubters overlooked the tremendous amount of pressure exerted by Republican donors not to waste completely the opportunity provided by Republican control of the White House and both houses of Congress. Doubters may also have underestimated the strength of Republican interest in changing tax policy relating to businesses with cross-border income.

The new tax bill is highly complex for many reasons, including especially the hasty and secretive manner in which Congress considered it. The focus of this essay is on a category of tax legislation, termed "structural" legislation, which is complex for a different reason. Structural legislation tries to protect the integrity and existing policy objective of various networks of tax rules that are part of the tax system. The legislation is complicated because the networks are intricate and any change may affect, and be affected by, all of the other rules in the network. Examples include changes to many of the provisions in subchapters S, K, and C of the Internal Revenue Code. Although major tax reform may also be complex in part because of structural elements that carry out its policy changes, this article is concerned with structural legislation that is not part of a major reform. Rather, the legislation merely maintains the sound operation and policy objectives of existing law. Both old and new structures can benefit from having functional plumbing.

Changes in the tax legislative process have made it increasingly difficult to enact structural legislation that is not a component of major reform. Somewhat ironically, because such legislation's policy objectives are more modest than those of major reform, it may actually be harder to develop and pass in today's environment. Successfully crafting such legislation requires knowledge of the network of rules affected, sensitivity to the interactions of those rules, and respect for their overall policy objective, but without the impetus of a major change in policy. It is an example of hard, non-sexy, "good government" legislation that "merely" improves the execution of current policies by advancing the efficiency, equity, or administrability of existing law.

Prior analysts who have attempted to connect the process and product of tax legislation have sometimes ignored the details of process or considered product only on a bill-by-bill basis. This article partly disaggregates both process and product by considering the professional staff who actually craft tax legislation and subdividing such legislation into a few major categories. The purpose of disaggregation is to show that a decline in the production of structural legislation may be a natural outgrowth of changing legislator and staff interests and incentives during the past twenty-five to thirty years.

Part II of this essay reviews some important changes in Congress and its staff principally over the last twenty-five to thirty years. Part III then introduces an additional important variable--the changing composition of the professionals working on tax legislation--and considers the impact of all of the changes on the production of structural legislation. Part IV illustrates the hypothesis by examining amendments to subchapters S, K, and C of the Code as well as efforts to codify the federal statutes as positive law, and part V concludes.

II

CHANGES IN CONGRESS AND ITS STAFF

Subpart A describes four major changes in Congress that have occurred over recent periods: an increased ideological division between the parties but cohesion within them, the growing costs of campaigning, an increased external focus of Congress, and a more centralized management structure. …

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