Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
On Abolishing the IRS
“Claire,” I hear you all say, “You spend all of your time raving about Donald Trump making nutball promises to a credulous electorate. Why don’t you ever point out that Ted Cruz’s nutball schemes make no sense, either?”
(Actually, no one has ever said that to me, not even once, but I realized it this morning while I was reviewing last night’s debate transcript, so I figured this was a good opportunity to prove I’m equal-opportunity indignant. I’m against-all-nuts. It just hadn’t occurred to me that one of Cruz’s promises is Trump-level nutty: I was so busy barreling down Trump Tunnelvision Turnpike that I forgot to turn on the Cruz Control.)
Now, like every live-blooded American, I love the words “Abolish the IRS.” I love them so much that I didn’t really think deeply about them. The words themselves had me hypnotized, like a python in a snake-charmer’s gaze, giving me a tingly-all-over yes! feeling. (How could Cruz be doing so poorly in the primaries given this absolutely beautiful campaign slogan? Those are the winningest words in the English language.)
But.
It’s not going to happen. All adults know this will not happen. Mexico’s not going to pay for the wall, and the IRS will not be abolished. Promising such a thing is an insult to our intelligence. Another one.
Don’t get me wrong. I’m all for simplifying the tax code, and I don’t think Cruz’s proposals for doing that are entirely nutty. The tax code should be at least this simple: If you don’t earn enough to afford an accountant, you shouldn’t need one to file your taxes. And obviously, the politicization of the IRS is an unspeakable breach of the public trust. Someone, for sure, should be abolished for that. Probably a bunch of someones.
But come on. You can rename the IRS. (In fact, they tried rebranding in the 1950s: The Bureau of Internal Revenue became the Internal Revenue Service. Strangely, Americans still didn’t like it.) You can lay off its management and many of its employees. You can, and should, pass a much simpler tax code, although that’s not actually something the president gets to do, and it’s definitely not something the president gets to do if he also believes Obamacare should have been struck down as a violation of the origination clause. And even if he’s wobbly about that, he’s not allowed to be wobbly about Article 1, Section 8, Clause 1 of the Constitution or the 16th Amendment. (Or at least, someone who thinks the president shall have power to lay and collect taxes is not to be trusted if he promises to appoint avowed originalists as to the Supreme Court.) “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States,” it says; those words are clear as springwater, and they’re definitely what our forebears meant. After all, taxation by monarchical decree is what got them lathered up in the first place.
So. We’re still going to have a tax-collection agency, because someone’s still got to collect the taxes. Changing the name won’t change what it is. Someone has to receive those tax returns, even if they’re on a postcard. Someone still has to cash the checks. Someone’s still got to do the audits, not least because Cruz is proposing anti-fraud reforms — meaning regulations — and someone will have to execute those reforms, unless the reform says, “From now on, America, you’re on the honor system.”
The Child Tax Credit will remain in place, and the Simple Flat Tax Plan expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms. As a result, the Simple Flat Tax will ensure that low- and middle-income Americans have greater opportunities – not only through minimal taxes, but also through better, high-paying jobs that the Simple Flat Tax will generate. Under the plan, deductions for charitable contributions and mortgage interest payments are preserved.
Employers are still going to have to report wages. Banks are still going to have to report investment income. There’s still a child tax credit. Still an EITC. Still a charitable deduction. Still a mortgage deduction. A business VAT instead of a corporate income tax, but someone’s still going to have to collect those taxes. Someone’s got to check to see if the numbers add up. Someone’s got to take Leona Helmsley to court. Cruz says he’s going to move the IRS to “some much smaller division” of the Treasury Department. But it’s still going to be part of the Treasury Department, so will all its employees literally be moved to a new, smaller office? Who’s going to pay for the move? If not, what does this (literally) mean?
Will they all be fired and replaced with new ones, albeit in smaller numbers, before they move into their new office? And would it be quite fair (or an efficient use of our tax money) to fire everyone at the IRS? After all, the complexity of the tax code isn’t their fault. They’re enforcing laws passed by Congress. (Wouldn’t it be more fair to fire Congress?) In fact, wouldn’t it be quite unfair to fire diligent employees who were in no way associated with recent scandals, only to replace them with new federal employees who will do roughly the same jobs they do? Wouldn’t there be quite a bit of waste involved in firing the best and most experienced of these employees and replacing them with new federal employees with no experience at all? Would the ones who were fired be entitled to unemployment insurance? To their federal pensions? Would the new ones also be entitled to federal benefits?
Contest of the day: Congratulations! You’re the marketing exec who won the “Rebrand the IRS” account. Choose its new name. Your goal is to make taxpayers feel good about the agency that takes their money. So good that they’ll be glad their money was used to pay your salary. Good luck.
Published in Domestic Policy, Economics, General
And to be clear, I would feel the same way about anyone behaving in that way. I’m beginning to feel like I have to track how many distortions each candidate makes. When I have to resort to deciding a candidate’s credibility, at least in part, based on the number of lies, distortions and omissions they make, it’s pretty sad. BTW, I’ve switched from supporting Rubio to Cruz.
By smuggling you are referring to illegal imports? Customs agents would face more challenges as it’s the equivalent of an across the board tariff. Still it would be a problem for multiple production and distribution stages as they all have to report the value added tax they collected on their sales. Customs agents cost but they aren’t IRS with total control of everyone. The VAT will not reduce income tax rates unless they are reduced as part of the radical tax reform as they were in New Zealand. Moreover the change I’d make in Cruz’s proposal is to link the income tax rate of 10% to a VAT of 10%. That makes it even more difficult to change. Nobody wants to pay more sales taxes. I’d add a temporary surcharge to enable privatization of SS or to fund the entitlements until they are reformed.
How’s this: “Bureau of Taxes Macht Frei.”
I already pay almost 10%. A VAT makes everything another 10% more expensive.
The IRS is the closest thing America currently has to the NKVD.
And no one’s going to like it any better if we give it a new name, either.
“Department of Things We Do Together.”
The IRS has become, like other branches of our system, too big and complicated. How much money can be saved by simplifying the tax code (not sure Cruz’s idea is good) and reducing the people that process it by half (hire foreigners and they train-kidding). That would save money from salaries and benefits alone Someone said a flat tax is a great idea, but whose to say the next president won’t raise it (quite a bit)?
The aggressiveness of the IRS against certain segments of society (audits etc. on specific groups or people and the rude, unhelpful attitude (recorded on tape) of IRS workers towards people applying for 501C status) is one reason to scale it way back.
The other is the insanity of having to report to them whether we have health insurance, and if not, pay a hefty penalty. I was told when I applied for health insurance during open enrollment that what I chose – what I could afford (private insurance through United Healthcare) was not really considered full coverage by the Obamacare rules (then what the hell is it?), and I will still have to pay the penalty!
This is why we are seeing an political implosion! If I have to pay taxes, I don’t want them wasted on overblown, bureaucratic crap, nor do I want to pay a penalty for something that is costing me too much, with less coverage, under the Obamacare rules…New name? Accountability, Spending & Savings Dept., aka ASS.
I consider Cruz’s tax plan to be the worst part of his entire platform. But I hope, after congressional resistance, he’d see sense and go with a more basic flat tax approach.
Well, yeah, and I figure if anybody knows this, it’s Cruz.
Voters expect presidential candidates to hold all sorts of policy positions that aren’t really the President’s business. I figure what Cruz’s rhetoric signals is that he’ll be especially supportive of bolder tax reforms in Congress.
I’m honestly a little suspicious of candidates who never express any fantasy of radical reform. Sure, it annoys me when candidates sell their fantastic visions as campaign promises, but to never express any visions lacks, well… vision. Some of us only make it up the next flight of stairs because we’re reaching for the stars, and you learn something about a guy by learning what his fantasies are.
I’m annoyed, too, by the same stuff on the postcard that annoys anonymous – my first thought was also, “How’m I gonna calculate that stuff without a worksheet?”
Cruz’s plan also leaves in the mortgage interest deduction, which I understand Cruz believes it would be better to abolish, but its presence is so hugely popular that Cruz left it in.
But since Cruz is acutely aware of the limits on the Executive, he’s gotta be aware that every Presidential candidate’s tax plan is more a pipe dream than anything else. Might as well make it a nice pipe dream.
These approaches also have the benefit of keeping private information from Federal hands.
Of course. It falls 100% on consumption rather than savings and investment. That is a worthy goal. We have the lowest savings rate in the industrial world so that our spending spills over into the current account deficit and imports. The only reason it isn’t worse is that we repress investment through taxes and regulation. In the case of Cruz like reforms the payroll tax and corporate profits taxes which are partially shifted forward would be eliminated so that the final goods prices need not be much more expensive. I don’t know how much is shifted forward as it is a very complicated measurement.
What is a pipe dream is to believe that the tax code can be reformed meaningly from within. It is so dense, opaque and gigantic that it is unknowable but each interest knows its little piece and will defend it to the death. Tossing the whole thing and replacing it with a simple idea is possible. The professional lobbyists care most about relative loses to their competitors, i.e. other lobbyists. They can live with all competitors losing since everyone is absolutely better off except the wholly favored crony and even there it’s relative not absolute. This is doable with strong leadership coming out of a new White House and selling it to the American public. I have no idea if the kind of change I’m advocating here is in the cards, but a simple idea built on the high ground of simplicity, transparency and coherency can be sold to our cowardly Congress. Cruz is the only person who comes close to making such a proposal.
This is also true.
Pipe dreams aren’t necessarily impossible. They’re long shots, though.
As you say, some shots are longer than others.
One of the key aspects of Conservatism is the understanding that when you make radical changes, you’re likely to screw up. It’s easy to observe this in any business of any size. Put a new sales bonus plan in place? No matter how carefully you think it out, you’re likely to find you’ve done something you didn’t intend…disincentivizing the sale of a new product that is critical to you company’s future, discouraging cooperation across sales territories, encouraging some form of gamesmanship you hadn’t even imagined. And so with a wholesale replacement of the existing tax system by something else. Much better to pursue a few useful and saleable incremental changes. For example:
You’re not going to be able to sell an elimination of the corporate income tax, no matter how many economists you get to say it’s a good idea. But you *may* be able to sell immediate expensing of capital investments. You *may* be able to sell an environmental tax credit to all American corporations based on the theory that our companies must comply with more stringent environments rules than their competitors elsewhere. And so on.
For the name, “Iron Fist inside Velvet Glove”?
The Department of Your Fair Share
That’s what the Progs whine about incessantly.