IU Tax Policy Colloquium: Brooks, “The Case for Incrementalism in Tax Reform”

By: Leandra Lederman

Left to right: Jake Brooks, Leandra Lederman, Bill Popkin, David Gamage, Tim Riffle

On February 1, the Indiana University Maurer School of Law welcomed Prof. Jake Brooks from Georgetown Law School as the second speaker of the year in our Tax Policy Colloquium. Jake presented an early draft of a paper titled “The Case for Incrementalism in Tax Reform,” which led to a lively and interesting discussion about what incrementalism is, what constitutes fundamental reform, how politics may affect the making of tax policy, and whether and how tax law differs from other fields of law.

The paper, which is not yet publicly available, argues that “fundamental tax reform,” while sometimes necessary, should not generally be the goal of tax policy, and that instead, policymakers should take an incremental approach to changing tax laws. “Incrementalism” has a long history in political science, and was first described by Charles Lindblom in an influential 1959 article, “The Science of Muddling Through.” In general, Lindblom’s approach in that article was to reject the urge to use a formal method that involves clarifying the principal goals up front, identifying the means to achieve them, and then analyzing every relevant factor in the decision. Lindblom instead advocated the use of a more casual method that he termed “successive limited comparisons,” which ignored important possible outcomes or alternatives and did not involve distinguishing means and ends. (Page 81 of Lindblom.) Lindblom argued that this “muddling through” approach was not only what was actually practiced by administrators, but also a method for which they need not apologize because administrators are less likely to make serious and lasting mistakes if they proceed through small, incremental changes (pp.86-87). As Jake acknowledges, Lindblom wrote at a time with much more limited ability to model and process large quantities of empirical data. He notes that incrementalism has continued to be an important theory in the literature. Despite technological advances, we cannot see the future, and there remain limits to what empirical data can help us predict.

Jake’s argument is driven in part by arguments in favor of tearing the Internal Revenue Code out by its roots and starting over. I agree with Jake that such an approach seems extremely risky. Policy driven by rhetoric and “horror stories” risks being ill-conceived, hasty, driven by political rent-seeking, and even destructive, as I have written about in the context of IRS reform. But does that necessarily mean that legislative tax changes should take a Lindblom-style incremental approach?

Jake’s principal argument is that whether or not one agrees with Lindblom as a general matter, the incrementalist approach is particularly compelling for tax policy, given several differences between tax and other areas of law. For example, he argues that tax law and policy, unlike most other fields (1) has as first-order concerns both transition issues and theories of justice; (2) is especially susceptible to the vagaries of the political process; (3) is a major policy instrument for managing business cycles; (4) requires processing enormous amounts of data to make what will inevitably be uncertain predictions; and (5) is the principal policy tool for addressing distributional concerns. Fundamental reform may still be the right answer, but he argues that policymakers should understand that there is a high likelihood of getting things wrong, especially in tax. If we can achieve real benefits by making smaller, incremental changes, that may be better than taking on the risks of fundamental reform.

The “tax is different” argument is always a tricky one, in my view, because it seems to require comparing tax to all of the other areas of law. If one could identify all of the other areas as having equal substantive concerns and tax as uniquely also involving distributional issues, one could then say that tax law has a bigger scope, and one could then debate whether that counsels a more incremental approach. But someone could respond that other areas pose larger risks or uncertainties that have potentially greater effects. For example, fundamental reforms in other areas could affect whether large banks fail, stock markets crash, large parts of the country are covered by water, or even whether we enter a global nuclear war.

Beyond that, assuming we accept the argument that tax policy has more far-reaching effects than other areas, does that mean that tax law should necessarily change only incrementally? This would have a path-dependent effect, as Jake acknowledges. It could result in entrenchment of law that embodies invidious stereotypes that we have since rejected as a society. The common law proceeds incrementally, on a case-by-case basis, but statutory reform may require larger movements or moments that reach a tipping point.

In addition, as some participants in the colloquium asked, how do we evaluate, particularly up front, whether a change or set of changes constitutes fundamental reform? For example, were the 2017 tax cuts merely an incremental change or did that constitute fundamental reform? Also, do successive incremental changes risk aggregating more in transition costs than a single fundamental reform?

The discussion in the colloquium also raised for me concerns about process. Lindblom is surely correct that we typically cannot take into account every single factor relevant to a decision, obtain data on that factor, and process and weigh it appropriately, but perhaps that approach should nonetheless remain our aspiration. Otherwise, there would seem to be a bigger risk of legal changes that are made without the rigors of examining theory and existing evidence. And in fact, the rhetoric-as-policy, unscientific approach to major tax reform seems to be exactly what Jake’s paper is trying to counter.

As you can no doubt tell from this summary, Jake’s paper raises a lot of interesting issues. Thank you again to Jake for sharing this thought-provoking paper with us, and for such a great talk and stimulating discussion!


The IU Maurer Law School’s Tax Policy Colloquium series will continue on February 15, with Prof. Ari Glogower from Ohio State Law School presenting “Taxing Inequality.”

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