Posted on 04/23/2015 7:05:16 AM PDT by SeekAndFind
‘Completely unworkable,” “irresponsible,” “happy talk,” “a disservice to the political process.” That’s just a sampling of what tax experts, most of them right of center, told me they think of one of the most popular lines from Ted Cruz’s stump speech, his promise to abolish the Internal Revenue Service.
Senator Cruz has been talking about the idea for a couple of years now, but it got a bit more attention when he mentioned it in the speech he gave at Liberty University to officially launch his presidential campaign. You can expect the idea to get even more popular in light of a new report from the House Ways and Means Committee that the IRS intentionally diverted funds from customer service to other purposes, spends millions on union paperwork, and more.
The basic idea, according to Cruz’s speeches and a conversation I had with a Cruz adviser, is this: If you radically simplify the individual-income-tax code, you can reduce the size of the federal tax-collection bureaucracy so much that you could then get rid of the IRS and disperse its functions across other agencies.
This is a great applause line: Americans hate how complicated their taxes are, and they hate the IRS. It’s such a good line, in fact, that other probable presidential candidates, such as Senator Rand Paul and neurosurgeon Ben Carson, have adopted it too.
The problem: The idea probably isn’t feasible and has almost no merits as a public policy.
There is no doubt that an individual-income-tax code with many fewer deductions and credits — Cruz has suggested, for instance, keeping only the mortgage-interest deduction and an incentive for charitable giving — would be easier to enforce and therefore require fewer IRS agents. (A flat tax per se would not necessarily be easier to administer than a progressive one with many rates but few deductions and credits. Everyone can read tax tables.)
But tax experts say that, while the federal revenue agency could shrink under Cruz’s proposal, it could only get marginally smaller — not nearly small enough to say it’s been “abolished.” “You’d need slightly fewer revenue agents to conduct the same number of audits,” for instance, says Alan Viard, of the American Enterprise Institute. Donald Marron, a Bush-administration veteran and former head of the widely respected Tax Policy Center, says an idea like Cruz’s could make the IRS “smaller, sure. But vastly smaller? Probably not.”That’s partly because the IRS does a lot of things besides just process complicated individual tax returns. Much of its resources, for instance, go into enforcing the corporate tax code, which Cruz’s campaign says he doesn’t have plans for yet. Meanwhile, a lot of IRS agents — quite possibly not enough — are assigned to providing customer service to taxpayers. And while conservatives are rightly wary of the civil-liberties violations that tax enforcers can commit, labor-intensive audits are important. If a lot of income goes unreported or taxes go uncollected, trust in the system breaks down, rates have to be higher, and the economy ails.
Unless we have a different kind of radical tax reform, such as replacing the income tax with a state-administered sales tax (Cruz has flirted with an idea like this but isn’t pushing it now; it has its own problems), the federal government is still going to have a huge tax-collection bureaucracy.
In an interview, though, the Cruz adviser assures me that the senator means what he says: A Cruz administration will dismantle the IRS and distribute the remaining responsibilities across the rest of the federal government. “If [tax reform is] done correctly under a Cruz administration, there would be no need for the IRS,” the adviser says. “The remaining responsibilities for collecting tax revenue would be dispersed throughout existing agencies.”
So the federal government wouldn’t end up with many fewer tax collectors, but they’d be working for different agencies. Can we do that — ditch the IRS itself for a different set of tax collectors, either in a new agency or in existing federal offices? Yes, we can, but it’s not clear why it’s a good idea, except that it sounds great on the stump.
Most explicit on this point is someone who would know best: Mark Everson, who served as IRS commissioner under George W. Bush, and actually happens to be running for president too. The idea of distributing the IRS’s functions across the federal government, he says, “doesn’t reflect any real familiarity with how the tax code works, what the responsibilities of the IRS are, or frankly how to manage the government.” Breaking up the tax agency “makes no sense” and would make tax enforcement nearly impossible, he says, because of how poorly federal agencies work with one another. “It’s hard enough to coordinate within the IRS, let alone if you have different agencies involved,” he says.
In fact, while IRS discrimination under the Obama administration against conservative political nonprofits has only increased the contempt many Americans have for the agency, the IRS does a fairly good job of collecting taxes and has relatively few scandals in its history. (A number of them can be blamed on the White House or the FBI, not the agency itself.) “If you pin down, if you put a lie detector on people who have been critics of the IRS, like [Republican senator] Chuck Grassley, they would admit the IRS is one of the better-performing federal agencies,” says James Wetzler, a left-of-center tax lawyer who spent more than a decade at the Joint Committee on Taxation and served on a commission to reform the IRS in the 1990s. This is not the highest praise; the IRS regularly fails to meet transparency requirements, for instance. But it does manage to do the job it sets out to do at a relatively reasonable cost, Wetzler says, which is enough to outshine other federal bureaucracies.
Not everyone agrees with that positive assessment. Chris Edwards, director of tax studies at the Cato Institute, says the IRS is “a typical bad federal agency.” But there’s definitely some evidence of its efficiency: The United States’ “tax gap,” the difference between taxes owed and taxes collected, compares respectably with those of other countries, and the IRS is well regarded internationally. Congress chose to task the IRS with the implementation of Obamacare, Everson points out, because the other available agencies are considered less capable.
While reports like this week’s House Ways and Means investigation on IRS funding priorities are embarrassing, they’re not evidence that the agency is any more incompetent or corrupt than your average federal agency. Inane bonus structures, incompetent handling of budget cuts, millions of dollars and thousands of hours spent on union purposes via a practice called “official time” — these are standard, if still shameful, federal failures that won’t go away if you move IRS agents to a different office building.
When I spoke with the Cruz campaign, they didn’t even attempt to make a case for abolishing the agency. Cruz is “not going to get rid of one bureaucracy only to create another,” the adviser says (other, existing bureaucracies would have to get bigger, it goes unsaid). When pressed about why dispersing IRS functions across other parts of government would be an improvement, he offered no clear justification. “It will be vastly more efficient to put the people who are doing jobs that still need to be done into agencies that have existing infrastructure” for similar purposes, the adviser said, without offering any reason why that would be “vastly more efficient” than the current situation. I also asked whether the idea is that, in light of the nonprofit-targeting scandal, the agency is so corrupt that it has to be dismantled; I didn’t get an answer.
Many Americans surely do just want to end the IRS, period. They don’t need any convincing. But one would hope for a little more seriousness from a presidential campaign — an explanation of why doing this should be a key priority in the important task of tax reform.
Some moves toward a better, more pro-growth tax system could actually mean more federal employees, not fewer. Republican tax plans, for instance, generally propose moving to what’s called a territorial tax system, ending the taxation of income American citizens and companies earn abroad. That would require new IRS resources, AEI’s Viard says, to make sure that companies don’t exploit this change to evade taxation. Taxing employment benefits such as health insurance just as wages are taxed, usually a conservative priority, could also mean more IRS work, because the value of those benefits has to be assessed. Plenty of ways of making taxes easier to file, such as offering the option of pre-filled tax forms, would free up businesses’ and individuals’ time and money for productive purposes, but would probably require more IRS employees, too.
Tax experts agree that the main problem with America’s tax system is the Congress that wrote it, not the agency that administers it. That is where tax-reform efforts should be focused.
Cruz has months to flesh out his stump speech with a broader policy agenda. The implausibility and unseriousness of one of his favorite campaign promises, though, is not a heartening sign.
— Patrick Brennan is opinion editor of National Review Online
Thou shall not steal. No ifs, ands or buts. No exemption for majority vote. Something conservatives need to get through their heads. Something Christians need to get through their heads. We have become a nation of thieves and it will not end well.
With the wealth concentrated in certain states, that apportionment, though fine in theory, wouldn’t work out at all. And, to fairly apportion according to wealth would take something IRS-like to determine.
Worthy goal, and at least we could come a bit closer by stopping deductions for local taxes.
Taxes for Revenue are Obsolete:
http://www.garynorth.com/public/9036.cfm
How many of those were K Street pimps, whoring out the tax code for $50 million for a chance to put your loophole into her?
People like John McCain, Nancy Pelosi and Harry Reid remain in office well beyond their expiration date because they can manipulate tax law to favor the interests of big money donors.
Ted -—and anyone else, for that matter-— will have a tough time getting any dramatic reform through Congress.
Too bad I never took NR.
That means I can’t cancel my subscription.
as originally proposed by Steve Forbes in 1996, it wasn’t as simple as multiplying your income by a rate.
Forbes’ proposal was something like this:
* Singles are taxed 20% of any income above $24,000
* Married couples are taxed 20% of any income about $36,000
Of course people still need to determine — WHAT CONSTITUTES INCOME?
And that my friend, is where the IRS still comes into the picture.
I don’t know, but it has to be simpler than the cluster that we have.
If enough of the American people want it done, it will be done.
Not could be done, but will be done.
Get that straight.
Sorry to you political hacks but abolishing the IRS is going to be an election issue. You can’t make it go away.
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Exactly right.
A consumption tax is far superior, and one of its best features is removing any requirement for personal information to be supplied to the government. Just imagine the productivity increase associated with no tax preparation across the board!
A free country should not require its citizens to be accountants reporting to the government!
A 25% tax rate, or even an 18% rate, would be considerably higher than most people are paying today. I doubt they would go along with that.
“How would this make the states send fiscally responsible Reps? It’s still the same people electing those reps, it would just have the national/state budgets rolled together.”
States cannot postpone bankrupty by currency manipulations like the feds do, so the consequences of not sending fiscally conservative reps would be felt quite immediately.
I don’t get why an alleged conservative feels the need to suck up to the IRS.
While I would agree that its unlikely to get rid of all tax colledtors, wonderful an idea as it may be, there are several alternatives. First and foremost being parceling it out to the states, all but a handful of which have their own income tax. It also puts the states in a very favorable position of holding the checkbook. It woould also be a lot easier to administer.
So the author is wrong. Use even the merest amount of creativity you can find several alternatives to the IRS.
Really? Self employment opens up a bevy of opportunities. Did you make use of a sec 105 plan to cover all your medical insurance and medical expenses? How about a one person 401K?
While I agree that spending $100 just to save $40 in taxes is stoopid, there are ways to legally and legitimately minimize the bill.
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