You had me at abolish the IRS
[John Linder’s] bill would abolish the Internal Revenue Service and the many billions of tax forms it sends out and receives. He would erase the federal income tax system — personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax, and the earned-income tax credit — and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.
He notes that K Street defends and complicates the tax code and the corruption of various tax bills by the powers that be. Tax compliance costs alone are several billions. I’m all for it.
However, it will never pass. Congress likes doling out favors using the tax code. The tax law and accounting lobby has a ton of money to fight it. And it would require repeal of the 16th amendment or, mark my words, a few years out we’d have both a sales tax and an income tax.
April 1st, 2005 at 10:18 am
The unintended consequences of such a bill are that it makes basic goods more expensive for the lowest income brackets who would otherwise not be paying more than their local sales tax. I’m not sure that’s a good thing. I’m not sure it’s bad either as it may also inject a certain sense of ‘spending realism’.
April 1st, 2005 at 10:31 am
PB,
That is true and its acknowledged in Linder’s bill which would provide for relief for familes up to a certain income. I don’t know how the relief is actually structured in the bill as it presently reads (I don’t do tax stuff – with the exception of energy and recycling credits), but in one of his early drafts there was talk of a lump sum payment to lower income brackets as an “up front” version of tax relief. It was $1000 of something minor.
If I remember correctly, George Will addresses that in his column (I read it a couple of days ago).
As for as handing out goodies – it would still be possible with a consumption tax (ie: peants can be taxed at different rates than cigarrettes, etc.)
April 1st, 2005 at 10:53 am
I agree on the repeal on the 16th admendment.
April 1st, 2005 at 11:43 am
I’ve never understood many conservatives’ and libertarians’ fetish for a national sales tax. For all its faults, at least income tax doesn’t punish people for spending money on things that keep other people employed.
April 1st, 2005 at 1:49 pm
Claire Wolfe and Aaron Zelman wrote an intersting article about why this is a bad idea (the “fair” tax, not abolishing the infernal revenue service) including the fact that the 23% tax is really 30%. Check it out at
http://www.jpfo.org/fairtax.htm
April 2nd, 2005 at 6:23 pm
Xlrq: But the income tax does punish people for spending money on things that keep other people employed. Like establishing a business.
April 4th, 2005 at 1:33 pm
I’m always skeptical of “silver bullet” solutions such as this one. In any case, the way to minimize the impact of taxation is to make a wide, shallow tax (i.e. tax lots of stuff a little bit), not a narrow, deep one (i.e. tax a few things a lot). A case could be made for a national sales tax to supplement the income tax, introducing the former and lowering the latter, particularly if you exempted the “big three” (food, clothing, and shelter) from the tax. (And by “exempt food,” I mean groceries, not fast food and restaurants.)
To Xrlq’s question about why many conservatives and libertarians are big fans of a national sales tax, it’s because it would be a huge tax savings for many of them, at least in the short term. It’s really all about dollars and cents, there’s very little (if any) concern about “fairness” coming in to play.