The Internal Revenue Service (IRS) claims in a February 2006 report that for every dollar spent chasing unpaid taxes, they can recover about $4 for federal coffers. To close the expected 2005 "tax gap," the IRS would have to spend $100 billion in an attempt to recover $400 billion. That’s $100 billion of our tax dollars spent to hunt us down for unavoidable errors trying to comply with the tax code.
It’s not enough that many of us have to write checks to the IRS this time of year. Congress wants to write the IRS a bigger check to chase down our unavoidable errors.
U.S. senators from both sides of the aisle are predictably enraged that taxpayers would dare underreport their incomes, and liberal media stories gleefully note that the tax gap could nearly pay off the federal budget deficit. There is a fairer and more inexpensive way for Congress to pay off the deficit — stop overspending. The media’s story angle conveniently avoids the fact that members of Congress — not taxpayers — write the confusing tax laws and authorize all deficit spending.
In response to the IRS report, Senator Charles Grassley (R-IA), chairman of the Senate Finance Committee, vowed to hunt down taxpayers who supposedly abuse the tax code by inflating the value of their charitable contributions and deductions.
Senator Grassley, why don’t we hunt down those in Congress who waste our tax dollars on failed entitlement programs and pork projects? Senator Kent Conrad (D-ND), ranking Democrat on the Senate Budget Committee declared, "It just leaps out at you as one of the most significant opportunities we have." What should leap out at you is the fact that lawmakers produce deficit spending and the confusing tax code.
Alexander Hamilton, the first Secretary of the Treasury, predicted this would happen. In Federalist Paper Number 12, written in 1787, Hamilton cautioned the negative effects of a system of direct taxation. These effects included perpetual addition of new tax laws, new collection methods and the noncompliance that would necessarily follow. Mr. Hamilton was correct, to the tune of $400 billion today.
Without an income tax code, the federal government cannot as easily monitor our economic activities, and Congress cannot write new tax laws advantageous to their preferred groups. These facts were perhaps no better articulated than by Senator Hillary Clinton (D-NY), who last year stated at a fundraiser, "We’re going to take things away from you on behalf of the common good." Translation: "We’re going to take more of your money so we can buy more votes." It is time Congress stopped robbing us of our liberties by taxing our income and our time.
We now have a significant opportunity to replace the confusing income tax code mess with a consumption tax — an opportunity that Congress has squandered. Even Hamilton recognized the advantages of a consumption tax over a direct income tax in Federalist Paper Number 21, also written in 1787,
"The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions."
Under a consumption tax such as a national sales tax, also called the FairTax (HR 25 and S 25), we would do away forever with automatic withholding, the alternative minimum tax and forced FICA deductions. We would, for the first time since 1913, regain our economic freedom.
Following the release of the aforementioned IRS report commissioner Mark Everson stated, "At some point you get to a tradeoff between liberties and closing that gap." Let’s do both, by replacing the tax code with the FairTax. The $400 billion gap will go away, and our liberties will return.
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