Abolish the IRS; a National Sales Tax Is Fairer

The tales of the Internal Revenue Service abuse are frightening. Hearing them surely prompts in us all an anxious wipe of the brow and a soft, “there but by the grace of God.”

Apologies and promise of closer administrative and legislative oversight are fine, but in the end inadequate. The IRS simply should go.

Back when a certain self-financing millionaire sought to be president, there was much discussion of a “flat tax,” but in truth, the flat tax does absolutely nothing about the IRS. Whatever rate applies, the flat tax still applies to “income.” The idea of toting up “income” sounds simple enough, but when the government gets done with it, it would entail a code book the size of the Los Angeles telephone directory. It also would likely perpetuate a grabbag of indecipherable forms incapable of being prepared anywhere near the IRS-estimated hours for completion.

The national sales tax as a replacement for the income tax holds greater promise. In one bold deduction as it were, a national sales tax would eliminate the IRS and with it, its overrealized potential for intimidation. Also gone would be federal income tax withholding and up to $250 billion wasted dollars spent by taxpayers and their employers in preparation and compliance costs. In short, every wage earner’s and business’ bottom line would start to look more like the top.

What’s more, a national sales tax puts incentives where they need to be, on savings, for us and the government. America has one of the lowest savings rates in the industrialized world, and personal bankruptcies are at an all-time high. The savings encouraged by a sales tax also would drive lending rates down to tax-free bond levels, and that means as much as $100 billion per year in lower federal borrowing costs and more money available for mortgages and business expansion. The decrease in mortgage rates also might help secure Southern California’s slowly recovering housing values and arguably even enhance them. Eliminating the income tax would make U.S. goods for export cheaper, thereby making American products more competitive abroad.

No tax system is problem free, but a national sales tax that could be efficiently piggybacked on the existing state sales tax system in 45 states and the District of Columbia comes close. A national sales tax would have to be 15% to 17% so as not to worsen the deficit, most economists say. Without question, this raises consumer prices, but it also discloses the true cost of government, and in this, simplicity is the harbinger of honesty. Wages without tax withholding in most cases would match or exceed the price jumps. Taxing conspicuous personal consumption is highly equitable. And tax fairness can be further ensured by exempting medicines and other necessities.

Like money saved, donations to charities would go untaxed under a national sales tax plan. If we are serious about making welfare more of a personal, face-to-face and local community concern, we should not need the dead weight of a convoluted income tax simply to inspire deductible contributions to private charity. Even under a national sales tax, however, nonprofit groups might prompt us to be virtuous with new authority to issue a type of scrip in exchange for donations that could then be used to partially offset sales taxes on consumer purchases.

So here’s the thing, Congress. Go ahead and hold your hearings, complete with understandably weepy fellow citizens and hooded government desperadoes, but when you are finished investigating yourselves, abolish the IRS and substitute an uncomplicated and responsible national sales tax system in its place. It is the only way to restore the economic and personal freedom that the IRS, by definition, denies.

And to those members of Congress who will immediately proclaim that it cannot be done, let them reread their Montesquieu. “The real wants of the people ought never give way to the imaginary wants of the state,” he said. Working Americans deserve a tax system that is clear and unambiguous in meaning and application. The present income tax code mocks and unnerves the people of America and the rule of law.