Buried at the heart of the tax law are key notions about what the code can do. When economists think about tax rates or deductions, they measure them against those assumptions before they decide how high or how big they should be. Today’s Tax Maven, Yale Law School’s Zach Liscow, explains what they generally get wrong. A big part of the problem is that, however strange it might seem, economists tend to believe that only the tax law should be fair.
At the risk of understatement, this notion contradicts much of what we know about the world. As Liscow explains, the tax law can’t right every wrong. But this is what the influential school of thought known as law and economics tells us should happen. And that is what Liscow calls its “esoteric underbelly.” In fact, Liscow explains, people have pretty clear ideas about how tax burdens should be distributed. Just as they believe that damages for an injury should not be higher for a poor person than for a wealthy one, the taxes people pay should not be adjusted solely to offset injustices elsewhere in the legal system. The problem, as Liscow sees it, is when all of these assumptions and beliefs collide, those who need help the most simply just won’t get it.
Liscow faces a challenging pencil question drawn from an article by Tom Brennan (Harvard Law School).
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