Access Denied: Procedural Barriers, Constructive Taxation, and the Limits of the Taxing Power

• In Event: Contemporary Legal Issues in Taxation

Abstract

This paper examines the concept of constructive taxation, where economic burdens arise not from explicit tax liabilities but from procedural thresholds designed by Congress that stand in the way of accessing benefits also designed by Congress. For example, married couples filing jointly with incomes below approximately $30,000 are not required to file federal tax returns and face no enforcement consequences for non-filing. However, by not filing, they forfeit refundable credits such as the Child Tax Credit, currently worth up to $1,600 per qualifying child. Therefore, the economic cost of non-filing stems from lost benefits, effectively functioning as an implicit tax.
Consider two married couples, each having one child: Couple A earns $29,999.99 and is not required to file; Couple B earns $30,000.01 and must file. Neither owes income tax due to the standard deduction, but Couple B receives the credit while Couple A does not, producing a sharp divergence in post-tax incomes ($29,999.99 vs. $31,600.01) despite practically identical pre-tax incomes.
This paper explores whether such constructive taxation falls within Congress’s constitutional taxing power and whether conditioning access to tax benefits on procedural compliance raises due process and equal protection concerns. It explores the fairness of imposing materially significant consequences through formalistic thresholds that fail to reflect actual differences in ability to pay. By relying on administrative barriers to allocate cash benefits, the tax system shifts the IRS’s role from revenue collector to gatekeeper of social welfare. This raises constitutional questions about Congress’s taxing and spending power and access to government support.

Author

• Orli Oren-Kolbinger, orli@uoregon.edu