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Monday, May 26, 2014

Finding common ground in GOP: Abolish IRS

Ed.: The following column is re-printed from the May 21, 2014 issue of The Stuart News.

by Dom Armentano

The current anemic economic recovery and the serious difficulties with “Obamacare” would seem to make Democrats vulnerable in the upcoming congressional elections and in the 2016 presidential campaign. Yet whether Republicans can get their own act together to take advantage of those obvious vulnerabilities is very debatable.

Consider the following: Republicans are split on immigration reform — some support the current proposal before Congress, but many are sharply opposed. Republicans disagree on what to do about Obamacare — most want outright repeal, but some moderates believe the Affordable Care Act can be reformed and made workable.

Most importantly, perhaps, Republicans are bitterly divided on basic questions of U.S. foreign policy — some (like Rand Paul) support less interventionism abroad, while others (like John McCain) want to continue and even expand the U.S. role in world affairs.

These are all important issues, but none is likely to be resolved in the short run. However, there is an important campaign issue that easily connects with voters and that could unite Republicans now — the abolition of the income tax and the Internal Revenue Service, and their replacement with a national sales tax .

Economists have determined that a national sales tax (the so-called “Fair Tax”) of approximately 20 percent could provide sufficient revenue to fund necessary governmental services — something that even the current income tax fails to accomplish. The tax would be collected by retail merchants (like state sales taxes) and remitted to the U.S. Treasury, totally eliminating the requirement for any individual income taxation, including employer withholding.

In short, individuals and households that earn income from wages or savings and investments would finally be able to keep and spend everything they earned. Period.
The economic advantages of eliminating the IRS are substantial. After all, there are strong work and investment incentive effects associated with wage earners and investors that can keep and spend their entire pay check. Just to provide some perspective, Florida residents sent $122 billion in income tax payments to Washington in 2012. Allowing residents to keep that income and allocate it efficiently would strongly enhance work incentives and spur economic growth.

But, even aside from that, the income tax system now imposes a massive “dead weight” welfare loss on society that is shamefully wasteful. Think of the time and money saved when all compliance costs and IRS audits are eliminated; when property seizures and threats of wage garnishment are history; when itemized deductions, credits and W-2 forms are scrapped, and when “unreported income” or income earned in the “underground” economy are no longer issues of IRS concern.

Filing tax returns would disappear completely and so would the billions of dollars of bills from accountants for tax preparation. Even the environmental greenies would heave a sigh of relief — eliminating more than 73,000 pages of IRS tax rules and regulations would save countless trees every year.

But, even if all of these considerable economic advantages evaporate, there is still an overriding civil liberties rational for abolishing the IRS. As the recent IRS scandal over the selective oversight of conservative tax-exempt organizations has demonstrated, the IRS can be used as a weapon for partisan political advantage. It can be used by those in power, Republican or Democrat, to reward friends and punish enemies.

This is a fundamental corruption of the democratic process and can no longer be tolerated. Eliminating the IRS and adopting something like the “Fair Tax” will end it.

Dom Armentano is professor emeritus in Economics at the University of Hartford in Connecticut and a 20-year resident of Vero Beach.

Copyright © 2014 Scripps Media Inc. 05/21/2014

Visit the WEBSITE for the national movement for the Fair Tax.

Fair Tax legislation…

TPP: Repeal the 16th Amendment…

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