We Should (but will not) Abolish the IRS
We all know that the Internal Revenue Service is the collection and enforcement agency to collect the National Income Tax. Many folks may not know that the IRS is not the creature of our Founders. In fact, the IRS did not exist for the first 73 years of the American Republic.
It was created in 1862 to collect a temporary tax to finance the Civil War – on the northern side. It was a fixed 3% on those earning more than $800 per year – essentially eliminating most Americans from the tax. It was allowed to expire in 1872.
Different Supreme Courts ruled differently on the constitutionality of a direct income tax. That was settled in 1913, with the enactment of the 16th Amendment. It was initially a modest collection and accounting function — and a large percentage of Americans being below the minimum income requirement. From 1939 to 1945, however, the number of citizens required to pay the income tax rose from four million to 42 million – more than a ten-time increase in less than ten years. Today there are more than 148 million taxpayers – and a lot more who should be.
Rather than a taxing policy to meet needs, the ability to increase taxes has provided an enormous pool of financial resources to meet increasing political desires. The clever idea of “withholding” the tax from the paychecks was the means of not only guaranteeing payment, but a way to aestheticize workers from the pain of digging into their own pockets to pay the tax. Many experts have argued that without withholding, the public would never have tolerated the same level of tax increases we see today.
To coerce payment, the IRS was granted powerful enforcement policies. It could collect both interest and penalties on taxes not properly paid – in their opinion. It can seize bank accounts and property without due process – no requirement to sue in court where the taxpayer could mount a defense. Through the Department of the Treasury, the IRS has a police force that can raid and arrest – even licensed to kill. And Biden’s so-called Inflation Reduction Act provides an additional $78 billion for additional personnel for the IRS over the next eight years – almost doubling the current Agency budget.
No agency of government is more disliked and feared by law-abiding citizens than is the IRS. Do we really need the income tax to fund the government?
If we had another means – such as a National Income Tax –the IRS would not exist. We would never have to make out and file those needlessly complicated forms. We would never have to fear an audit – or have money and property seized. We would not have to fret over all those loopholes the rich and powerful use to reduce their tax burden.
There would be a saving to the taxpayers. Collecting a National Sales Tax would result in a drastic cost saving to today’s $15 billion IRS budget (not including the Biden money).
The way to do it is with a National Sales Tax (NST). Now we all know that sales taxes are regressive – tending to impact hardest on the lower income groups. That can be resolved by making the NST moderately progressive. That means no sales tax on basic foods, medicines and other essentials. High-end items would have a higher tax rate — luxury cars, expensive jewelry, designer clothes, fine wines, caviar, etc., etc., etc.
Middle class citizens could adjust their income by managing their purchases. The wealthy would bear not only their share of the tax burden, but a little more.
The government would not have to deal with millions of people in managing the collection. That would be handled by the businesses selling taxable goods and services. They would be collecting the tax at the time of purchase and sending on to the government. That is not even a totally extra burden on the business community since they already perform that service when they collect both state and local sales taxes. In fact, the business burden would be lessened by not having to withhold income taxes from employees.
In terms of downsides on the citizens, there is only one. It would require a significant increase in the price tag. Folks would have to really analyze that against their saving they receive with the elimination of the Income Tax.
Some argue that a National Sales Tax would open up another money pit for political avarice. That is why an NST should ONLY be enacted IF (🡨 big IF) … If the Income tax is eliminated by a constitutional amendment nullifying the 16th Amendment that created it. Otherwise, the critics are correct. The government would have another major means of fleecing we the people.
Now that I have your hopes up, I have to explain why it will never happen. Most of the IRS’s thousands of employees would need other jobs – and they would not be going quietly. Then there are those hundreds of thousands of independent tax accountants, financial advisors, tax preparers and tax attorneys – not to mention the tens of thousands of corporate employees in the tax departments — working with the accounting firms to search out the loopholes. And let us not forget all the lobbyists who focus on taxes – the men and women who propose the legislation creating exemptions and loopholes. Did I mention the money they donate?
The Income Tax may impose a horrendous burden on the American worker, but the industry is too big … too powerful … to be shut down – no matter how good the alternative may be. Try to find a member of Congress who would even introduce such legislation.
So, there ‘tis.