For more than sixty years, tax scholars have recognized conditions under which the government ceases to be a mere taxing entity—imposing a rate of tax on a business’s profits—and through the operation of tax law becomes more like an investment partner—contributing its fair share of capital to new investments and proportionately sharing in losses as well as gains. These conditions, which are satisfied by immediate expensing policies, are now common.

The investment partner analogy has been analyzed from the perspective of a taxpayer who, as a result of partnership-like treatment, enjoys returns on investment that are effectively tax-exempt. However, far less attention has been paid to the government’s perspective. The government—based solely on the operation of tax law—contributes capital to and assumes risks of investments it does not select.

This Article argues that when tax policies make the government descriptively less like a taxing entity and more like an investor, it should do what any rational investor is expected to do: identify its attributes as an investor, consider how these attributes affect its investment priorities, and seek ways to align its investments with its priorities. Taking the example of immediate expensing, this Article identifies several changes that the government might make to tax laws to better align capital investing with its own preferences regarding risk, reward, and timing.

After identifying several potential policy changes implied by the government’s investment role, this Article considers which changes make sense given the other priorities and roles of the government. In some cases, the government-as-investor perspective offers new justifications for tax policy changes that have long been advocated. In other cases, it suggests changes that should be rejected as inconsistent with the government’s competing priorities and roles. And in several cases, it reveals new policy prescriptions that should be adopted because they advance the government’s investment priorities, while at the same time advancing traditional tax goals and broader social goals. These changes could reduce distortion, increase revenues, promote economic stability, and even protect involuntary and unsecured creditors.



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