Whatever the Fate of the Fair Tax Act, Congress Should Still Abolish the IRS

Getting rid of the much-despised tax agency would be a good idea. It’s unlikely to happen anytime soon.

Watching a good idea enter the corridors of government is like dropping a seed into a desert: There's so much potential there, with virtually no chance of taking root. So it is with a proposal in the House of Representatives to overhaul the tax system and, importantly, abolish the abusive and intrusive Internal Revenue Service. Unfortunately, the very things that make that tax agency so widely despised by the public make it highly prized by politicians.

"Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the tax code with provisions that work for the American people and encourage growth and innovation," Rep. Buddy Carter (R–Ga.) announced of his proposed Fair Tax Act. "Armed, unelected bureaucrats should not have more power over your paycheck than you do."

Reason's Joe Lancaster already did a good job of breaking down the bill, which would swap our enormously complex income tax system for a national sales tax. There are tradeoffs in the idea, as is inherent in just about any policy shift. But one of its most attractive qualities is that, in discarding income taxes, it would get rid of the financial inquisitor that's required by a system that monitors and takes a piece of everybody's wages and salaries. That inquisitor is the IRS, which many Americans have good reason to fear and hate.

"The Internal Revenue Service was once again under fire on Capitol Hill Tuesday, as a Senate committee launched another round of hearings, this time focusing on alleged abuses of power inside the tax agency," CNN reported back in 1998. "In the first of four days of testimony from taxpayers and agents, the Senate Finance Committee heard instances of the IRS stepping over the line, including stories of retaliation against whistleblowers and raids on taxpayers' homes that may not have been justified. Some of the harshest criticism was aimed at the agency's criminal investigation division, as witnesses complained that the investigators used excessive techniques and were out of control."

The tax agency pulled in its horns, sort of, for some years after that. But government officials with a propensity for spending every dollar they can get their hands on and more constantly fret about closing the "tax gap" between the IRS's actual take and what they might collect in a hypothetical world populated by compliant Stepford citizens. So, last year the Biden administration and its legislative friends gave the tax collectors $80 billion to hire new employees and step up enforcement efforts.

Who do those new agents target? We're always promised that the IRS will be sent only after the sort of mythical rich people who don't hire lawyers and accountants and shift their political donations when they're angry. But it inevitably goes after people who can't fight back.

"Despite the infusion of new funding earmarked for the IRS via last year's Inflation Reduction Act, the agency continued historic trends of hassling primarily low-income taxpayers, with relatively few millionaires and billionaires getting caught up in the audit sweep," Reason's Liz Wolfe noted of data from fiscal year 2022.

The IRS, and this will certainly shock you, is also often unleashed against people those in power just don't like. It turns out that the tools of the financial inquisition can be effectively used to torment politicians' enemies. Most people will remember when the Treasury Department's own inspector general for tax administration called out the IRS for targeting Tea Party groups under the Obama administration. But that was nothing new or rare.

"Since the advent of the federal income tax about a century ago, several presidents—or their zealous underlings—have directed the IRS to use its formidable police powers to harass or punish enemies, political rivals, and administration critics," The Christian Science Monitor's Gail Russell Chaddock reported in 2013. She documented six White Houses, Democrat and Republican, who did just that.

"What do you expect when you sue the president?" an IRS employee reportedly told the conservative group Judicial Watch in 1999 when its officials complained about an audit.

Unsurprisingly, a history of intrusiveness, abuse behavior, and political weaponization has not endeared the IRS to the public. Many people resent the tax agency and shun its employees.

"You go to a party, and if you say you are from the IRS, half the people move into the other room," Richard Schickel, a retired IRS senior collections officer, told Bloomberg for a story about rock-bottom morale at the agency. "After a while, your wife and relatives get tired of listening to your stories. They say, 'How could you take those people's houses and their businesses?'"

"To some employees, the taxpayer is the enemy," Schickel wrote of his former IRS colleagues in a 2015 book about his experiences.

The federal agency's frankly appalling history means that dismantling the IRS and replacing the tax system it oversees with something less complex that doesn't enable such a dangerous apparatus could be expected to be fairly popular with the public. Obviously, that should depend on it not being replaced with something worse, but more IRS really doesn't look like the way to go.

However, the public doesn't decide on our tax system, the legislative and judicial branches of the federal government do. And Rep. Buddy Carter and his allies aside, most members of the political class see the IRS as a means for milking the population of as much money as possible in a doomed effort to catch up with spending schemes that the Congressional Budget Office projects will outstrip revenue for as far into the future as it looks.

"The deficits in CBO's baseline budget projections … hover around $1.0 trillion in 2022 and 2023, before increasing to $2.3 trillion by 2032," the CBO forecast in August 2022.

But politicians are forever hopeful that the IRS can squeeze us hard enough to close that gap. If it can't they still like having it around as a political weapon for use against their enemies. President Biden has already said he's opposed to the bill, even if it somehow won passage in both the House and the Senate. That's why prospects for the plan to replace the income tax with a sales tax and ditch the IRS are rated as slim to none.

Getting rid of the IRS that has tormented Americans and served politicians as a bludgeon against their critics since its founding would be a very good idea. And government is where good ideas go to die.