Disrupting the market for tax
planning.
by Weisbach, David A.
Virginia Tax Review • Spring, 2007 • response to article by Philip Curry, Claire Hill, and
Francesco Parisi in this issue, p. 943
Their market disruption examples fare better. Circular 230 and the
Thompson/McNulty memo seem like clear examples of market disruption.
Similarly, the rules regarding contingency fees seem aimed at making
pricing less efficient. There are likely to be other examples. Thus,
uncertainty may help disrupt sheltering. Anti-abuse rules have this
feature--they have uncertain content, potentially forcing taxpayers to
be more conservative than they would be if they had clear boundaries.
Similarly, refusing to provide rules in some areas may be an example of
the same strategy. Thus, the lack of rules in the debt/equity area or
with regard to what is a constructive sale may prevent aggressive
behavior. Rules against tax insurance may be a way of preventing
signaling of quality, thereby creating adverse selection. Given the
variety of examples of market disruption, I get the sense that the
government already understand the point. Curry, Hill, and Parisi do the
job of framing it and generalizing it. Their article is a worthy
contribution to the literature.
David A. Weisbach*
* Walter J. Blum Professor of Law, The University of Chicago Law
School.
(1) See Philip A. Curry, Claire A. Hill & Francesco Parisi,
Creating Failures in the Market for Tax Planning, 26 VA. TAX REV. 943
(2007).
(2) Id. at 949.
(3) See Joel Slemrod & Shlomo Yitzhaki, The Costs of Taxation
and the Marginal Efficiency Cost of Funds, 43 IMF STAFF PAPERS 172, 182
(1996).
(4) See Joel Slemrod & Wojiech Kopczuk, The Optimal Elasticity
of Taxable Income, 84 J. PUB. ECON. 91 (2002).
(5) See, e.g., David A. Weisbach, Ten Truths About Tax Shelters, 55
TAX L. REV. 201, 231-41 (2002).
(6) Curry, Hill & Parisi, supra note 1, at 949.
(7) Id. at 950.
(8) Slemrod & Yitzhaki, supra note 3, at 172.
(9) Curry, Hill & Parisi, supra note 1, at 953.
(10) State Street Bank & Trust Co. v. Signature Financial
Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).
(11) Curry, Hill & Parisi, supra note 1, at 953.
(12) Id. at 961.
(13) Id.
(14) Id. at 962.
(15) Id. at 963.
(16) Id. at 964.
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