Abolish the Income Tax, Abolish the IRS

Everybody hates income taxes. Some people say there are too many loopholes or too few incentives or that they’re too high or too low or that the system is rigged against (insert your favorite group here) or biased in favor of (insert your least favorite group here) or that the IRS is abusive or too lenient and — almost everybody agrees — the whole thing is corrupt and corrupting.

I know several of these complaints contradict other complaints, but you know what? They’re all true. Every single one. Our tax code is a jumbled mess of contradictions, and the IRS is alternately abusive and permissive.

At the left-leaning Daily News today, David Cay Johnston writes that “there’s a fundamental problem at the heart of the way we fund our government.” He says that there are actually two tax systems, one for “working stiffs and retirees,” and the other for “rich business owners [who] operate under a different system.” Johnson’s solution? Hire a lot more IRS auditors who will stick it to the rich.

That’s just silly, of course. The rich already pay the vast majority of income taxes. The top 1 percent pays more than 35 percent of all income tax collected; the bottom half pays only about 3 percent. Those figures come from the National Taxpayers Union Foundation from before the 2017 tax reform law, which generally cut taxes even further for the middle class, while raising them a bit on wealthy blue state residents. If anything, the bottom half of Americans aren’t invested in what happens in Washington, because they don’t have any skin in the game.

But even if they did, is putting thousands or even hundreds of thousands of additional Americans through the IRS audit wringer a good way to increase fairness?

Over on the libertarian side, Reason’s Liz Wolfe was driven to such despair by the burdens and complexities of our tax code that she got stoned before doing her taxes this year. While I don’t recommend this at all, Wolfe wrote, much to my entertainment, “I smoked a massive joint with my husband and browsed flights to Budapest and Dubrovnik before realizing that I could not procrastinate anymore and also could not fly to Eastern Europe to avoid my tax burden.” As the guy who invented drunkblogging, I don’t judge. Whatever gets you through the tax season.

At The Federalist today, Laura Baxter lists nine conservative complaints against the income tax, arguing that today should be a “national day of mourning.” Three of her arguments really stood out to me, and in no small part because they’re interrelated. And not just interrelated, but probably an inextricable feature of the income tax.

They are:

• The Tax System Is Far Too Complex

• The Tax System Favors Special Interests

• The Tax System Is Easily Weaponized

I encourage you to click over and read the whole thing.

Tax laws are written by people and people prefer certain other people or provide favors to other people in exchange for something they want themselves. And that makes our income tax system — any income tax system — ripe for corruption, graft, and abuse.

Which brings us to the Fair Tax.

The Fair Tax isn’t exactly a new idea, but it’s one worth reminding people of every April 15.

The Fair Tax would completely eliminate payroll taxes and individual and corporate income taxes by repealing the 16th Amendment. Washington would be funded instead by a national sales tax — partly offset by a monthly “prebate” paid to every household. As described by Americans for Fair Taxation, the prebate is “an ‘advance refund’ at the beginning of each month so that purchases made up to the poverty level are tax-free.” You would take home 100 percent of your pay, and determine your own tax rate based on how much you spend each month.

The IRS is abolished, replaced by a tax collection mechanism every single merchant is already familiar with. Conspicuous consumption by the rich would be met with a heavy sales tax burden, but investments in jobs and growth and innovation would be tax-free.

Other benefits include zero compliance cost for individuals, no more audits, no more loopholes, and vastly reduced opportunities for official corruption and graft. Almost as good, perhaps, is that only legal U.S. residents are eligible for the prebate, but everybody, from native-born citizen to illegal alien, pays their fair share at the cash register.

For more information, you can visit FairTax.org.