The week before April 15 my latest book was published, titled “End the IRS Before it Ends US – How to Restore a Low Tax, High Growth, Wealthy America.”
The timing was exquisite. The title drew two questions: Can you really mean getting rid of the IRS? Don’t we need some agency collecting federal taxes?
When we think about getting rid of the IRS we focus on two different goals.
The first is getting rid of the IRS “as we know it.” The second is, can we end the federal income tax?
We can and must end the political targeting of conservatives and Republicans by FDR, John F. Kennedy, LBJ, Clinton and now — on steroids — Obama. This has gone on too long and it is getting worse.
On April 15 this year seven bills to restrain and reform IRS abuses passed overwhelmingly through the House of Representatives. These bills were written and pushed by taxpayer heroes Peter Roskam (R-Ill.), Kenny Marchant (R-Texas), and Jim Renacci (R-Ohio). They would implement a Taxpayer Bill of Rights, prevent the IRS from taxing gifts to non profit organizations, prevent IRS employees from using personal email accounts for official business (à la Hillary Clinton), and makes it a firing offense for IRS employees to target individuals and groups based on ideology.
As with most good things in life this may require a different president to be enacted into law. But the anger of the American people is strong enough that the Senate and president might act to take this issue off the table before the 2016 election just as Bill Clinton signed Welfare reform (after vetoing it twice) to save himself in the 1996 election.
I think reining in the IRS abuses will take more than passing a few strong laws and enforcing them. One notes with sadness and fear that there were NO whistleblowers in the IRS. No one stood up for the conservative and Tea Party leaders abused by the IRS. The lower level staff did not object to following political orders from their political appointee supervisors. The rot goes to the core. It may take a generation to wash out a culture that corrupt and deeply embedded.
But if we did cleanse the present IRS staff, they would still be the sword and shield of the Sixteenth Amendment that allowed the federal income tax, and would be tasked by law to keep collecting 20 percent of everything Americans earn. The tax code and associated regulations contain over 73,954 pages and takes Americans six billion hours to comply with the paperwork — before we cut the painful check.
Is a pleasant, honest, even-handed IRS much of an improvement? Yes it would be, but it is certainly not enough.
I believe we can and will reduce the federal income tax over time to where we can consider repealing the Sixteenth Amendment and ending the federal income tax. Is that really possible? Well, to start, we didn’t always have government at the federal, state, and local level take 30 percent of our income taxes (and with deficit spending, government spends even more). In 1774 Americans — colonists at that point — paid one to two percent of their income in taxes. Total.
Federal taxes were only 3.0 percent of GDP in 1900, 2.0 percent in 1910, 6.7 percent in 1920 and 8.3 percent in 1940.
We managed the federal government without an income tax until 1913. Today, nine states have no income tax. As late as 1960, twenty states did not have an income tax.
The book outlines 14 different lies the Friends of Government tell to talk us into raising taxes on ourselves and our families. A few examples:
“This new tax will help reduce an old tax.” The State of New Jersey in 1965 had no income tax and no sales tax. New Jersey did have a painful property tax. So the politicians said, let us put in a sales tax to reduce the property tax. Ten years later in 1977, New Jersey had an expensive sales tax and property tax and the pols recommended an income tax to fix this. Now New Jersey taxpayers have high property taxes, income, and sales taxes. When you have a tapeworm, swallowing a second one does not discipline the first one.
“This will be a temporary tax.” Said Congress when they put the tax on long distance phone calls in to pay for the (presumably temporary) “Spanish American War.”
The tax lasted more than 100 years.
“This is a tax on the Rich.” When pols say they will tax the rich they have not finished the sentence: “I will tax the rich…first…then you.” The Alternative Minimum Tax was structured to hit 155 high-income earners who were paying no or little in taxes. Today it hits millions.
So what do we do now? The first step is to stop the bleeding: no new taxes. No tax hikes. The Taxpayer Protection Pledge organized by Americans for Tax Reform now has 218 members of the house and 49 Senators who have made this commitment. Ninety percent of the Republicans in Congress have signed and kept the pledge. It stopped the 2011 budget deal from including the $1.4 trillion in tax hikes Obama and the Democrats wanted. It stopped any tax hike from 1993 and 2009, the two years the Democrats had complete control of the House, Senate, and White House.
Step two is to focus on spending. This was aided by the Tea Party movement of 2009 and 2010 that changed the makeup of congress. Earmarks were banned. Once a sign of virility and power, earmarks are now seen as a sign of corruption and bad government.
The measure of success or failure for those of us focused on defending and expanding liberty is the percentage of the economy consumed by government spending. It was 24 percent after Obama’s first assault on taxpayers — the “Stimulus,” TARP 2.0, The trillion dollar plus up to the budget — and fell to 20 percent when the GOP won the battle of the budget in 2011 and enacted spending limits enforced by the Sequester. That spending limit now lasts ten years.
Step three is to add more states to the nine that now have no state income tax. Kansas has passed a law that will phase out its state income tax by ratcheting down the income tax whenever revenues grow by more than two percent a year. Over time, normal growth will phase out the Kansas personal income tax. Maine’s Governor Paul LePage has announced this is his goal. Mississippi’s House of Representatives passed such a law. Arizona, Louisiana, Oklahoma, Nebraska, and Missouri leaders have pointed to Kansas as the model to follow.
Step four is to enact the Paul Ryan budget plan at the national level which has already passed the U.S. House four times. It reforms entitlements and block grants to the states the major welfare programs. This will save six billion dollars in a decade and put us on a path to reduce spending in half from its present unsustainable trajectory by 2050.
The best way to eliminate the income tax is to reduce spending by reforming government programs to cost less over time and demand less tribute in taxpayer dollars.
Those possible reforms are outlined in the book and many already exist in legislation: The Ryan Plan. Moving all pensions from defined benefit to defined contributions at the federal, state, and local level. Selling off federal land and spectrum. Allowing drilling on federal land and offshore. Reducing the number of government employees by attrition. Re-establishing an “anti-appropriations committee,” once called the Byrd Committee whose only job was to recommend cutting government programs. Establishing another BRAC commission to allow military bases the Pentagon does not need to be reorganized or closed down.
The path forward is clear. Do not raise taxes. Focus on spending restraint. Reform government to cost less and reduce the tax burden as spending as a percentage of the economy declines. Someday we will be able to live without the federal income tax. I won’t miss it.
Norquist is president of Americans for Tax Reform