As the federal income tax deadline approaches, it’s time to reflect on how well the Internal Revenue Service is serving the American people, and whether we might do well to abolish it.
Recent polls reveal that 64% of Americans believe their taxes are too high. Perhaps an even greater percentage despise the IRS and support Republican efforts to abolish it. In January 2023, Rep. Buddy Carter (R-Ga.) introduced the Fair Tax Act, which included language to abolish the personal income tax and rein in the IRS.
But nothing has come of the Fair Tax Act, and even that bill would simply shift taxes from the personal income tax to a national consumption tax similar to European VAT taxes. America does not need another form of taxation, especially one where the level of tax can easily be raised, as with state sales taxes. What America needs is lower spending levels and the elimination of all taxes on individuals.
This country belongs to its citizenry, and they have the right to decide how they are taxed and how their taxes are spent. But for a very long time, they have not exercised that right.
As I see it, the IRS has lost all credibility and needs to be eliminated. Imagine the total amount Americans would save — not just in taxes paid, but in the cost of record-keeping and filing. According to the Tax Foundation, these costs include $20 billion in filing costs alone, along with 1.352 billion hours of individuals time (at $50 per hour, equivalent to $67.6 billion), plus an additional 5 hours of record-keeping (much greater, or course, for complex returns) amounting to $41,75 billion. Thus, the total cost of preparing and filing federal taxes is $129.35 billion.
This figure does not include the administrative cost of collecting taxes ($14.32 billion, FY 2022 figure) and the cost in terms of wasteful and unnecessary federal spending and corruption (a figure that government is reluctant to reveal but that would, I believe, fall between 20% and 30% for the entire federal budget, or between $1.23 trillion and $1.84 trillion out of the $6.13 trillion total spending in FY 2023. In a 2022 congressional investigation, it was estimated that “hundreds of billions” of COVID funds were lost to fraud.
The Tax Foundation argues for a “simpler, more transparent tax system,” which might “greatly reduce the cost of compliance for U.S. taxpayers.” The simplest tax system is the elimination of all personal income taxes, to be replaced with no new form of taxation and reduction of federal spending.
Some will ask whether eliminating the personal income tax and the IRS would reduce revenues needed for national defense, Social Security, and other necessary programs. The reality is that an elimination of the personal income tax would save money: the $144 billion spent annually filing and collecting federal taxes and the portion of fraudulent and wasteful spending funded by individual taxpayers, whose taxes fund over half of federal spending. If 20% of that component is lost to waste and fraud, then an additional $607 billion would be saved by eliminating personal income taxes. National defense, Social Security, and other necessary programs would be funded from increased revenues from other existing taxes. (The Laffer Curve demonstrates that lower tax rates may actually increase revenues.)
Revenues from corporate income taxes, sales taxes, and tariffs would adequately fund all necessary federal programs, provided that federal spending was reduced by 20% and economic activity increased by 30% over time — both reasonable assumptions. Eliminating personal income taxes would free up some $3 trillion for investment in the private sector of the economy. Assuming the long-term average return on capital of 10% across all sectors, that $3-trillion investment would generate $300 billion in earnings. Given the current effective tax rate of 22.3% for U.S. corporations, that $3-trillion investment would garner $67 billion in additional annual revenues for the federal government, an amount that would snowball every decade. Clearly, government could continue to be adequately funded without personal income taxes.
So, if 85% of the American taxpayers are “frustrated by the tax code” and only 20% trust government to spend their money wisely, why do they not vote to abolish the IRS and eliminate the personal income tax? At present, the greatest obstacles to doing so include President Biden, who has stated that he would veto any bill eliminating the personal income tax; the U.S. Senate, where Sen. Schumer opposes tax reform of any kind; and the U.S. House of Representatives, in which even the Republican majority has refused to advance the Fair Tax Bill. In other words, the entire federal establishment.
I recall many times when the president promised lower taxes for “everyone earning less than …” and to simplify the tax code to the point where most taxpayers could fill out their taxes “on a postcard.” The only presidents in recent history even to reduce taxes were Reagan and Trump. Trump claims to have achieved “the largest tax cut in history,” and he is not far from the mark. But even Trump in his first term did not eliminate personal income taxes, abolish the IRS, or noticeably simplify the tax code. Maybe he will in his second term.
April is the perfect month to begin reform, which might begin with a phone call or text to one’s representatives in Washington. Those representatives are responsible to the people who elected them. If they fail to act on eliminating the IRS and the personal income tax, they should be voted out of office.
And don’t let them talk you into a flat tax or national sales tax. We must demand no personal income tax, and no IRS. It’s April; it’s springtime. Time for new beginnings, and for abolishing the IRS.
Jeffrey Folks is the author of many books and articles on American culture, most recently Heartland of the Imagination (2011).
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Image via Library of Congress.
