Tax in the Cathedral: Property Rules, Liability Rules, and Tax

Article — Volume 99, Issue 6

99 Va. L. Rev. 1169
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The distinction between property rules and liability rules has revolutionized our understanding of many areas of law. But scholars have long assumed that this distinction has no relevance to tax law. This assumption is flatly wrong. Tax law currently uses both property rules and liability rules, and the choice between them has real consequences. When a taxpayer violates a requirement for a favorable tax status, tax law either imposes additional tax proportionate to the harm (a liability rule) or imposes the draconian penalty of taking away the tax status entirely (a property rule). This recognition has three key implications. First, Congress can and should draw on the rich property and liability rule literature to draft better tax legislation and to reform the tax code. Second, novel variations on property and liability rules can be used to rethink the remedies given to the IRS. Third, tax law will enrich the literature on property and liability rules across many other areas of law. 

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  Volume 99 / Issue 6  

On Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership

By Jordan M. Barry, John William Hatfield, and Scott Duke Kominers
99 Va. L. Rev. 1103

Tax in the Cathedral: Property Rules, Liability Rules, and Tax

By Andrew Blair-Stanek
99 Va. L. Rev. 1169

Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors’ Bargain

By Mark J. Roe and Frederick Tung
99 Va. L. Rev. 1235

Forgotten But Not Lost: The Original Public Meaning of Section 4 of the Fourteenth Amendment

By Stuart McCommas
99 Va. L. Rev. 1291