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Proponents of law reform have tended to concentrate their energies on evaluating legal rules and institutions and suggesting that they be replaced by "better" laws or institutions, while paying relatively little attention to the process of transition. Recent scholarly efforts to address problems resulting from changes in law have tended to focus on efficiency and equity considerations which argue for compensating persons who are adversely affected by a revision.
This Article concentrates on a related aspect of the transition problem—the question of setting effective dates for new rules. Although this question has received some attention in legal commentary, these efforts have largely consisted of rhetorical condemnations of retroactivity. The recent enactment of the Tax Reform Act of 1976, a major substantive revision of the Internal Revenue Code, coupled with announcements from President Carter that another substantial tax revision is impending, provide an auspicious occasion to reexamine attitudes about one problem of legal transitions—setting effective dates for changes in the income tax laws.
Tax legislation is an excellent vehicle for analyzing retroactivity issues. First, the legislature is relatively free to set whatever effective dates it chooses because constitutional constraints are few. Second, recent tax legislation reflects a wide variety of effective date provisions with Congress using no discernible principle of date selection. Finally, the dollar amounts at stake when tax provisions are revised are sufficiently high that practitioners are alert to the effective date issue and can be expected to argue their clients' cause to legislators. With that incentive, at least some legislators can be expected to address the issue explicitly and carefully.
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