This is the word on how the government ought to analyze proposed tax regulations: Greg Leiserson and Adam Looney: A Framework for Economic Analysis of Tax Regulations: "Treasury and the IRS should conduct a formal economic analysis of regulations in two cases. First, for regulations that implement recent tax legislation, the agencies should conduct an analysis if they have substantial discretion in designing the regulation and if different ways of doing so would vary substantially in their economic effects. Second, for regulations unrelated to recent legislation, the agencies should conduct an analysis if the regulation would have large economic effects relative to current practice...
...The economic analysis conducted in these cases should focus on the revenues raised and the economic burden imposed on the public as a result of the agencies’ exercise of discretion or the new application of existing authority. The revenues raised and the burden imposed reflect the fundamental tradeoff in taxation, and thus determine a regulation’s costs and benefits. However, the analysis should not attempt to quantify the net benefit or net cost of a regulation as doing so would require the agencies to make controversial assumptions about the social value of revenues and the appropriate distribution of the tax burden. Treasury’s Office of Tax Analysis is well-equipped to provide estimates of revenues and burden as they can be built from analyses the Office already produces: revenue estimates, distributional analyses, and compliance cost estimates...
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