Leaving It Up to Treasury: Congressional Abdication on Major Policy Issues in the Early Years of the Income Tax

By Zelenak, Lawrence A. | Law and Contemporary Problems, Spring 2018 | Go to article overview

Leaving It Up to Treasury: Congressional Abdication on Major Policy Issues in the Early Years of the Income Tax


Zelenak, Lawrence A., Law and Contemporary Problems


I

INTRODUCTION: TWO APPROACHES TO THE MANAGEMENT OF TAX LAW DETAIL

Should Congress enact income tax provisions "as specific, detailed, and inclusive as possible," (1) leaving few significant issues to be resolved by the Treasury Department in its income tax regulations? Or would it be better for Congress to enact a concise income tax statute--one featuring "generalized provisions which would furnish the basic structure for the income tax"--and rely on Treasury "to amplify the statute through Regulations with details to whatever depth is determined to be necessary for effective operation of the statute"? (2) At least since World War II, Congress has opted for a "specific, detailed, and inclusive as possible" Internal Revenue Code. (3)

Commentators have differed, however, as to whether Congress has made the right choice. Writing in 1945, Louis Eisenstein defended "a highly articulated [Code] section [as] frequently the most appropriate means of importing as much predictability as possible into the tax system[,]" adding that "[b]revity may well be the worse evil." (4) On the other hand, over the decades a number of observers have made the normative case for Congress leaving to Treasury more of the development of tax details. Writing in 1960, William Cary argued,

   Increasingly involved in technical revision, Congress has had
   little time for considering matters of policy--the only
   responsibility it should even contemplate assuming. It is
   performing the role formerly left to the Internal Revenue Service,
   the Treasury, and the courts, and at the same time has no thorough
   understanding of what it is enacting. (5)

Nine years later, Stanley Surrey asked, "Which agency of government--the legislature, the administrators, the courts, or the tax advisors--is to develop the detail [of income tax law]?" (6) Answering his own question, he asserted that the Treasury Department "is in reality the agency best suited to provide the needed effective control over tax detail," and proposed "a gradual shift from a highly detailed statute to more generalized provisions which would furnish the basic structure for the income tax." (7) In the late 1980s, Stephanie Willbanks argued that, among other "significant advantages," legislative delegation to Treasury of responsibility for tax detail would enable Congress "to focus on the basic policy choices inherent in the Code" and to avoid "obscur[ing] such choices ... in the details." (8)

The proponents of reform may be right. Before signing on to their agenda, however, it may be instructive to review the nation's experience--in the early years of the modern federal income tax--with a short and general income tax statute, and with congressional reliance on Treasury to resolve a number of basic questions of income tax design. As Eisenstein noted in his 1945 essay, the federal income tax was not always the complex, highly articulated statute that it is today: "The remarkably ingenuous income tax of 1913, containing but fourteen subsections, has gradually grown to the Herculean proportions of almost two hundred sections." (9)

The brevity of the 1913 income tax statute was not due to a legislative misapprehension that all the details required for a functional income tax regime could be expressed in a mere fifteen pages of the Statutes at Large. (10) Cordell Hull (D., Tenn.), the young member of the House Ways and Means Committee who single-handedly prepared the first draft of the 1913 income tax statute, explained that he had chosen to draft a concise income tax bill in the expectation that Treasury would later fill in the details. "Instead of comprising 100 or more pages," Hull remarked, "this measure briefly but [sic] succinctly prescribes each essential rule ... and leaves to be embraced in the regulations to be prescribed by the Secretary of the Treasury the manner and details of carrying out the provisions of the law. …

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