Law and the Limits of Government

Law and the Limits of Government

Temporary versus Permanent Legislation

Frank Fagan

Why do legislatures pass laws that automatically expire? Why are so many tax cuts sunset? In this first book-length treatment of those questions, the author explains that legislatures pass laws temporarily in order to reduce opposition from the citizenry, to increase the level of information revealed by lobbies, and to externalize the political costs of changing the tax code on to future legislatures. This book provides a careful analysis which does not normatively prescribe either permanent or temporary legislation in every instance, but rather specifies the conditions for which either permanent or temporary legislation would maximize social welfare.

Chapter 7: Sponsor’s age

Frank Fagan

Subjects: economics and finance, law and economics, law - academic, constitutional and administrative law, law and economics


As we have seen in the previous chapter, non-permanent legislation is more likely to become law than permanent legislation, a proxy for incurring comparatively lower transactions cost for its passage. Legislators, especially older legislators nearing retirement, would presumably prefer lower-cost temporary legislation if they receive compliance benefits for a shorter time and smaller magnitude. Instead, if they prefer higher-cost permanent legislation, they may receive an immediate transfer from interest groups of sufficient magnitude, or a further benefit from legislating compliance outcomes beyond their tenure, which we refer to as a legacy benefit. To the extent that permanent legislation increases total compliance over time, legislators who pay for legacy benefits may prefer to incur additional costs for its passage, even when the alternative cost structure of temporary legislation provides transactions cost savings in the short to medium term. In order to test this theory, we test for a causal relationship between the selection of a permanent timing rule and the age of the bill’s sponsor.

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