Taxing Novelty

The advent of any new and unfamiliar economic activity sparks a flood of questions across a variety of legal fields, including tax law. This Article diagnoses the legal uncertainties surrounding novel activities as challenges of legibility in statecraft. Legibility is the process by which the state simplifies complex and often unfamiliar systems into a format that can be governed. Across broad areas of the law, placing things and activities into different legal categories is a means for the state to achieve legibility. This Article aims to incorporate the framework of legibility into existing scholarly discourse on legal categories. Through the case study of taxing cryptocurrency, this Article develops a descriptive account of how legal decision-makers render novel economic activities legible. This descriptive account uncovers ways in which achieving legibility can be challenging for these decision-makers and accompanying risks to legal systems, including the risks of legal arbitrage by powerful interest groups. The Article applies these insights to propose legal reforms specific to tax law. It advocates for tax law to move towards fewer tax categories, which can ease legibility challenges and reduce potential risks.