The time is long overdue for America to abolish the IRS, one of our most toxic public institutions.
Why is the Internal Revenue Service toxic? It causes a staggering misallocation of national resources, it discourages investment in favor of consumption, it uses its heavy-handed power to pick winners and losers in our society, and it is increasingly weaponized to target citizens and corporations that have fallen out of favor with the Elites.
This is not to suggest that the Federal Government should not be funded. Indeed, to the extent that the government executes its limited constitutional functions, it requires a source of revenue. But our current funding method is a tragi-comic synthesis of confusion, inefficiency, favoritism, and Orwellian intimidation.
Let’s start with misallocation of resources. The current tax code is so complex and obtuse that it requires armies of accountants, lawyers, and bureaucrats to implement. The official tax code is slightly less than 7,000 pages thick, but the more detailed guidance published by the IRS fills 75,000 pages. There is not a person alive who fully understands it. It is rife with arcane rules, deductions, write-offs, and credits that require taxpayers and their agents to sift through it with magnifying glasses and accounting textbooks searching for potential advantages or traps.
This complexity requires hundreds of thousands of personal and corporate accountants and lawyers to help decipher it, often with the aid of expensive software. It also requires tens of thousands of IRS agents to make sure that the hordes of private accountants and lawyers do not overstep their bounds. The result is a sort of spy-versus-spy comic strip wherein ordinary citizens seek tax advantages while IRS bureaucrats seek to throw them in jail if they misstep, all in an environment where nobody really understands the rules of the game. It is all an unnecessary waste of time, money, and talented resources. Everyone involved could be doing something more valuable for society.
The second issue is that the current tax code penalizes success and productivity. It taxes the income of hard-working citizens. It taxes the profits of companies that efficiently provide goods and services to our society. It taxes the returns on investments that people and companies make to create a better future. In fact, the harder you work, the more successful your company is, and the more you invest in the future, the more you will be penalized with taxes. Penalizing success in this manner is the societal equivalent of shooting everyone in the foot.
The third issue is that the current tax code picks winners and losers in our society. Buried within its 7,000 pages are provisions that benefit some people and corporations at the expense of others. These benefits and penalties quite often have a partisan spin to them. They also tend to be socially divisive because many are designed to help one class or another, one race or another, or one social status or another. And far too often, they are designed to give the Elites in our society an advantage over ordinary citizens who cannot use the tax code to shelter wealth-generating schemes. You can be certain that hedge fund and private equity fund directors are reaping far more benefit from the tax code than you are. For just one example, explore the concept of Carried Interest. Wall Street financiers donate generously to politicians each election to ensure that this luxurious tax benefit never gets eliminated. The tax code is one of the most powerful weapons federal politicians use to reward favored constituents and to penalize disfavored ones. As always, it’s the Elites versus Everyone Else.
The IRS itself is becoming increasingly weaponized, which is the fourth issue. Don’t like a certain politician? Magically (and illegally) bare his tax returns for the world to see. Don’t like Tea Party people? Audit their tax returns, no matter how innocent they seem, because an IRS audit is basically a warrantless search that can lead to asset seizures and punishments. Want to snoop on what ordinary people are doing with their money? Require all transactions of $600 or more to be reported to the IRS. Not enough IRS agents to stick their noses into every crevice of our society? Hire 87,000 more. Want to make sure that the activities of every person in every corner of the economy can be monitored? Move to a cashless society with a fully digitized currency. The IRS is fast becoming one of the key lynchpins in the ever-growing Surveillance State. Combined with the Department of Homeland Security, the NSA, the Justice Department, and the FBI, the IRS is contributing to an Orwellian situation wherein citizens have more to fear from their government than from external enemies.
If the IRS is abolished, what is a viable alternative? Consider a National Sales Tax. It is a revenue-collection method that occurs at the point of most sales in the economy. It can be handled by the Treasury Department and could be managed without the IRS.
A national sales tax does not require gathering intrusive personal data. It would collect revenue from everyone making a purchase, including illegal aliens and foreign visitors. Everyone would have skin in the societal game, and there would be no favoritism. No lawyers, accountants, lobbyists, or IRS agents would be required – they could all do something more productive for our society. No federal tax returns would have to be filed. The tax code would be reduced to zero pages, which would eliminate a great deal of confusion and troublesome misinterpretations. There would be no withholding from paychecks to fund the Federal Government. Each person would have greater control over how much they are taxed by virtue of having control over what they spend. Productivity, success, or earning income would no longer be penalized. The tax code and the IRS would no longer be weaponized because neither would exist.
In this scenario, April 15th would be just another day on the calendar, because taxes will be paid at every cash register you choose to visit throughout the year. Most states already collect sales taxes, so their collection infrastructure could be leveraged by the Federal Government in exchange for getting a small cut of the collections.
What will stop this from happening? A lot of special interests and privileged people whose oxen will be gored. Some day we will summon the courage to ignore their protestations to do something rational and fair for all. We will abolish the IRS and replace it with a national sales tax.