Imagine for a moment America without an income tax. No more tedious record keeping of all our expenses. No more April 15th deadlines. No more insufferable complexity and exasperating forms. No more nasty audits, legal loopholes, and intrusive IRS agents. It would no longer be government's business how much money we earn and what we do with it. Such a reform would dramatically change the lives of every one of us for the better.
Could such a spectacular reform really be brought about? Yes, it certainly could. But before I explain how, first a brief analysis of some of the philosophical and psychological roadblocks that need to be confronted in laying the groundwork for totally abolishing the income tax and the IRS from our lives in America.
Feeding the Factions
The nature of 21st century American politics is that our office seekers win continual re-election, not by preserving the peace and protecting people's basic rights as the Founders advocated, but by granting privileges, subsidies and pork barrel programs to favored segments of the people.
This is known as the "big tent" philosophy of governing. It means that political parties win elections by gathering numerous disparate factions of voters in under one large tent. They do this by promising to grant all of the factions something that they want: welfare payments for lower income groups, loans and price supports for corporations, subsidies for farmers and artists, revenue sharing for obedient governors, pork barrel bills for local communities, ever-increasing funds for educational, energy, housing, and commerce bureaucracies, etc. Since government has no money of its own, it taxes the necessary money from society's productive citizens in order to become the grand benefactor of all its favored factions.
This is the modern game of social welfare politics. Our politicians basically buy their office and power. Both Democrats and Republicans play this game in order to be elected and re-elected. And no one ever challenges the game's fundamental premise -- that government has the right to confiscate some people's earnings to gratify other people's needs and desires.
This is why Republicans talk about reducing government on the campaign trail but never do any reducing in office. They are afraid to challenge this fundamental premise of social welfarism. Thus, they end up contesting the Democrats only as to where all the confiscated wealth is to be spent, never on the premise of "wealth redistribution" itself.
Noted scholar Thomas Sowell once pointed out a very useful analogy that clarifies this dilemma: If a man enters your yard and begins digging up all your daffodils and replacing them with geraniums, you don’t rush out and argue with him over which of the two flowers you prefer. You argue with him over whose yard this is.
Our problem today is that Republicans refuse to challenge the Democrats about whose yard is being dug up, i.e., about whose money is being confiscated unjustly. Republicans muster only a challenge over what kind of programs the confiscated earnings should be spent on (in other words, over which flowers are more preferable), while the Federal Government grows more and more intrusive and tyrannical with its confiscation policies.
First Step in the Process
If we are ever to rid ourselves of the income tax and the IRS, then there must be a genuine reform of this corrupt and grandiose game of buying votes with wealth transfers. A viable political party must come forth to publicly ask, "Whose yard is this?" The operating premise of liberal welfarism has to be challenged -- that government has the right to utilize progressive tax rates to redistribute people’s earnings. A uniform tax rate system must be proposed, fought for, and enacted into law. Until this is done, the social welfare game of "tax and spend, elect and re-elect" cannot be reformed. Ever-expanding, centralized government cannot be stopped.
As I have pointed out in previous articles, the reason why abolishing progressive income tax rates is so important is because there would then be no incentive for voters to try and gain their life’s status by relentlessly increasing government spending, i.e., by redistributing wealth from the pockets of their neighbors.
Progressive tax rates are the major cause of explosive government spending because they create large constituencies of voters that pay zero taxes and equally large constituencies that pay next to zero taxes. Thus, they spawn a "something for nothing" voter mindset. An irresponsible electorate then evolves to demand a steady expansion of government services. This is one of the cardinal laws of economics. If government benefits are free (or nearly free), demand for them will be infinite.
In order to overcome this infinite demand for government spending, we must eliminate the "something for nothing" aspect of our tax system. In other words, we must end all deductions, special breaks, loopholes, and rate progressivity. This will necessitate the adoption of a uniform tax system that does not convey favors to anybody.
Since voters would then have to pay for all government subsidies and pork barrel programs proportionately out of their own pockets, they would lose their overwhelming desire for such subsidies and programs. Voters would then begin to favor politicians who advocate "reduction" of government instead of its "constant expansion" because this is the only way they could get their own taxes reduced and more freedom into their lives. All kinds of Ron Pauls would begin to appear in congressional elections every two years because the electorate would demand it.
A uniform tax rate is thus the only way to restore a responsible electorate and legislature. And as we will soon see, it is the first crucial step to total eradication of the income tax and the IRS.
Forbes-Armey Tax Ignorance
So far, Republicans have shown little indication that they grasp the importance of such thinking. Their love affair with the Forbes-Armey flat tax plans shows either that their true motive is merely more centralized government, or that they are frightfully ignorant about the requisites of genuine reform. This is because the Forbes-Armey flat tax plans actually increase the rate progressivity of our income tax system. This they do by dramatically increasing personal exemptions for the taxpayer. A family of four’s total exemptions leaps from $16,700 under our present system to $34,000 under Armey’s version of the plan and $36,000 under Forbes' version.
According to the Dallas based Institute for Policy Innovation’s calculations (UPI Impact, November 1997), the bottom 25% of the population in America presently pays zero taxes. This means they get their government services free, which means their demand for those services is infinite. According to the IRS Statistics of Income Division, the next 25% tier pays only 3.97% of total income tax revenues. This means that they get their government services almost free, i.e., for pennies on the dollar. Thus 50% of the American electorate pays zero or next to zero taxes, which creates infinite demand for government services among these voters. This guarantees that, except for rare contrarians like Ron Paul, all politicians that come before the voters every election year are going to be pushing more and more programs and handouts. That 50% block of voters, hungry for free services, is a beast that cannot be ignored.
The Forbes-Armey flat tax plans will greatly exacerbate this problem because, by dramatically increasing personal exemptions for the taxpayer, they will greatly increase the 25% segment of voters who receive government services free. This, of course, must increase the segment of voters who possess infinite demand well above its present 50%. Surely any reasonably intelligent human can see that this will make an already rapacious government grow even faster and produce even more intrusive bureaucracies. It will firmly entrench the centralized mega-state in Washington for decades to come!
If we truly wish to reduce government, then we must truly abolish progressive rates and move toward a genuine uniform rate system for everyone rather than away from it as the Forbes-Armey plans do. This is an unalterable law of political and economic reality that must be faced instead of evaded or circumvented.
Challenging the Establishment Tyranny
Naturally the liberal establishment raises quite a squawk over any mention of tax uniformity. "Would it be wise," they ask, "to radically change our tax system so as to tax all Americans the same percentage of what they earn or what they spend? We believe that the present tax code is fundamentally more fair than a one-size fits all system."
Liberals imagine themselves as being idealistic and just on this issue, but in reality their defense of our present arbitrary tax system is motivated by that natural human desire to protect the power base that feeds one politically, ideologically, and financially. The liberal establishment's massive power base in this country is fed by the progressive income tax code. God forbid upsetting such an elastic, arbitrary system of privileges and favors that can buy so many votes so easily.
In answer to the liberal defense of today’s tax system, it is very instructive to examine the fundamental principles for which our nation stands. What wisdom on this issue can we glean from the Founding Fathers and other salient intellects throughout our history? Did they approve of a tax code that was arbitrary, progressive and privilege based? Or did they support UNIFORM rates because uniformity was the only way to avoid the evolution of class war, factions, and the tyranny of centralized government?
Thomas Jefferson astutely summed up the essence of the tax issue when he wrote, "The true foundation of republican government is the equal right of every citizen, in his person and property, and in their management." 1
Alexander Hamilton firmly denounced the use of arbitrary (i.e., unequal) rates: "Whatever liberty we may boast of in theory, it cannot exist in fact while [arbitrary] assessments continue." 2
Philosopher David Hume declared, "The most pernicious of all taxes are the arbitrary. They are commonly converted, by their management, into punishments on industry.... It is surprising, therefore, to see them have place among any civilized people." 3
In the early 19th century, renowned Scottish economist John Ramsey McCulloch wrote, "The moment you abandon the cardinal principle of extracting from all individuals the same proportion of their income or of their property, you are at sea without a rudder or compass, and there is no amount of injustice or folly you may not commit." 4
Later in the 19th century, Supreme Court Justice Stephen J. Field wrote, "If the Court sanctions the power of discriminating taxation and nullifies the uniformity mandate of the Constitution...it will mark the hour when the sure decadence of our government will commence." 5
The reason why the Founders and all the prominent intellects of our history opposed a progressive income tax is because it violates the principle of "equality of rights under the law," which is dramatically enshrined in the Declaration of Independence as the fundamental axiom of our nation’s existence. Because different classes of society are assessed different rates under a progressive tax system, American citizens are denied an equal right to the disposal of their property (i.e., their income) and thus denied equal protection under the laws of the land.
In light of the above, it should be obvious that a progressive income tax is incompatible with "equality under the law." It is therefore unconstitutional and unjust. It goes contrary to everything our country stands for. It has no moral justification, and it has no practical ground upon which to stand.
The Naivety of IRS "Reform"
This then is the first requisite for our leaders in Congress -- to face up to the unconstitutionality of progressive rates. But equally as important, our legislators must also stiffen their spines against the bete noir of all taxpayers -- the IRS. Republicans have always been sensitive to the people's growing unrest over the IRS, but as in the past, they approach the issue in a typically naive and superficial manner.
"Yes, the IRS is known to get out of control," GOP legislators exclaim in tones of appropriate urgency. "But we intend to rein in IRS abuse." Sure. Like a coterie of schoolgirls will rein in mafia lords stomping through its neighborhood. Like massage therapy will rein in cancer.
Republicans are living in a dream world if they think they are going to "reform" the IRS in any meaningful way. The nature of the IRS and its role dictate that it will always be what it is. It must be intrusive, tyrannical, and ruthless in order to perform its job of feeding the tax devouring Gargantua that the Federal Government has become.
Consider this law of life: The nature of an entity and the nature of its role in existence dictate its personality and its methodology. Therefore, one does not sit children down with cobras as if they were Teddy Bears to be hugged. One does not try to experience a hurricane like one contemplates a sunset. Rocks cannot be transformed into orchids. And the IRS is not going to be made into a group of smiling federal receiving clerks to help us solve life's vicissitudes.
Congressional Republicans now imagine that they can somehow tame this Frankenstein they have so cavalierly built over the past 40 years. They are deluding themselves.
Trying to "rein in" the IRS with tax reforms such as the Forbes-Armey approach will be about as effective as trying to rein in a snorting rhinoceros with kite string. The IRS is out of control because the Federal Government is out of control. It operates above the law, and in an intimidatory manner, because that is the only way it can perform its job of collecting enough money to pour down Gargantua’s gullet in Washington.
The answer to this tyrannical mess is clear: Forget about "reining in" the IRS and eliminate this Orwellian agency! But to do so, we must eliminate the income tax itself. And the only way to eliminate the income tax is to reduce government spending to a low enough level so that it can be funded by flat income tax rates in the neighborhood of 7%. At this level, a national sales tax could then be substituted for the income tax and collected by the state sales tax agencies. The IRS could then be disbanded because under a national sales tax, the state sales tax agencies (already in place) can collect all tax payments and forward them to Washington.
A national sales tax is not salable at this time because it requires a 15%-23% rate at today's government spending level. So spending needs to be reduced dramatically first. The American people would readily vote for a 7% national sales tax, but they will continue to balk at a 15%-23% national sales tax. It's just psychologically too much to overcome.
The first step in gaining this goal is to eliminate "infinite demand" for government services. And as we have seen, the only means to accomplish this is to enact a true equal-rate income tax, which means no exemptions for anyone. This will effectively reverse the culture of spending in Washington and begin a steady reduction of government.
How to Handle the Establishment Backlash
As I have pointed out in previous articles, liberals and me-too conservatives will naturally attack any genuine equal-rate tax as unfair to the poor people. So if a floor is to be established under which no one will have to pay the tax, i.e., an exemption for those under the poverty level, then a provision should be included in any equal-rate tax bill stating that those who are exempted from paying are also to be excluded from voting. After all, we deny children the right to vote. Why do we do this? Because they are not mature enough to vote responsibly. The same principle applies to men and women who are exempt from taxes; they will never vote responsibly. They will possess "infinite demand" for government services.
Liberals will, of course, protest vehemently upon hearing such a proposal; but if one thinks the issue through, he will see that it is really the only solution if a large segment of voters is going to be exempt from paying taxes. There is no other way to stop infinite demand for government services unless everyone who casts a vote has a stake in doing it responsibly.
Both logic and history provide ample justification for societies to decide who among their members are to receive the franchise. All nations throughout the history of democratic governments have always determined according to certain criteria who should, and who should not, be allowed to vote. Never does any nation allow EVERYONE to vote.
For example, we stipulate that all those who are under 18 years of age cannot vote. We also say that all those who are mentally unbalanced cannot vote. So we the citizenry decide who can and cannot vote. And our decision is based upon who we feel will be responsible. Reason and experience, if used judiciously, are very good guides as to who this should be. Why then cannot we the citizenry redefine from time to time our conception of what constitutes "responsible?"
Societies have always done such defining and redefining. In 1787, the Founders required voters to be male and to own property. That, of course, is too extreme according to our way of thinking today. Women are obviously capable of voting responsibly, and so are non-property owners. The requirement of property ownership was gradually rooted out of the system over the decades by the state governments; and the states of Wyoming, Colorado, and Utah led the way for women's suffrage by granting voting rights to women in the 1890's. This culminated in 1920 with the 19th Amendment to the Constitution to allow all adult women to vote throughout America. Again in 1971 we re-evaluated our conception of responsibility when we lowered the voting age from 21 to 18. (Unfortunately this latter reform was a mistake. We should have raised the age to 25 years old; but that's another argument for another day.) The point is that we, as a society, have the right and the duty to define just who can and who cannot "vote responsibly." Our modern intellectuals and politicians have egregiously defaulted on this by allowing everyone to vote even though they don't pay anything to support the system. This must be corrected.
The major roadblock to overcome here is that we have all been taught that unlimited democracy is some sort of nirvana, and that everyone must vote in order for us to have a just, civilized society. Thus any policy to the contrary will be a tough idea to embrace. But embrace it we must, or we will collapse into dictatorship over the next two decades. Think of it this way. Is it rational to continue creating "infinite demand" for government services among 50% of the people, while attempting to reduce government? No, it's not. Just like it's not rational to try and put out a bonfire with buckets of water while tolerating a massive fire hose pouring kerosene into the fire.
The dictatorial powers that are developing in Washington today have come about because 50% of the citizenry possess "infinite demand" for government services. This demand is the kerosene hose that is allowing the fire of government to relentlessly expand. We the producers of America are becoming slaves to these tyrants and their ever-expanding fire. Continuing to go up against such an inferno with little water buckets of pseudo tax reform (such as the Forbes-Armey "flat" tax plans) is senseless and embarrassing to anyone who can think clearly.
In this writer's opinion, the ideal solution to this problem of infinite demand among the voters is to provide no tax exemptions at all, and simply require everyone to pay a 10% flat tax no matter what their income is. This would comport best with the principle of "equality under the law." Everyone pays proportionally, i.e., the same rate. Thus, the law treats everyone the same, and no one's vote would have to be denied. Such a policy would quite quickly bring about a dramatic reduction of government, and as a result, a substantial reduction of taxes. We could probably have a flat tax of 5% within a decade or two. Is it too much to ask a man who makes $5,000 in a year to pay $250 to support the government that protects his rights and preserves domestic order for he and his family? I don't think so.
If this is too horrifying to contemplate for the advocates of "compassionate conservatism," then such conservatives need to seriously rethink what has to be done to save our country. Is not the underlying source of all government growth today the fact that we have become a nation of voters and legislators who are living irresponsibly and totally out of control? Thus our paramount concern must be to RESTORE A RESPONSIBLE ELECTORATE AND LEGISLATURE. But this cannot be done if voters get their services free. The only way voters will act responsibly is if they are contributing proportionately to the cost of government. This is not rocket science; it is simple, basic, observable human nature. To blind ourselves to this truth (as liberals have done for 90 years) is inexcusable.
To all pundits throughout America who profess to favor a free society, if you are too squeamish to demand eradication of the primary source of exploding government, then our society is doomed. You might as well fold up your tents and head to the local pub to wallow in inebriation every day, rather than to your computers and printing presses to try and influence your fellow man as to the true meaning of our country. If you can't bring yourselves to tell the truth to the people, then you have no business presenting yourselves as educators, writers, galvanizers. You have fashioned a make-believe world and are merely playacting as patriot intellectuals.
Four Steps to Ending the Income Tax and the IRS
Radical tax reform is the great unifying cause that can break the stranglehold collectivism has over our country's politics. Americans are ready to scrap the income tax. Yet this monumental policy reform will not happen unless conservatives, libertarians and independents unify behind the only viable path to that goal. The path is constructed of four steps:
1) We must truly end progressive rates by enacting an equal-rate tax for everyone. It would start at a revenue-neutral rate somewhere between 10%-15%. 2) This reform will allow us to then dramatically reduce government spending to a level that can be funded with 7% rates and lower. 3) This will allow us to then substitute a national sales tax for the income tax. 4) This will allow us to then abolish the IRS because the state sales tax agencies can collect all payments and forward the money to Washington. Voila! No more income tax, and no more IRS. The federal Leviathan would be stopped. A constitutional amendment could then be passed prohibiting the Federal Government from taxing the incomes of the American people in any way whatsoever.
History is strewn with the wreckage of societies whose leading pundits and politicians locked themselves into an erroneous mindset and refused to budge from their flawed perspective in moments of great crisis. Let us hope that will not be the case with America on this issue. The times we live in call for bold, innovative leadership, not misinformation and business as usual. Our present tax reformers on both the left and right are putting forth nothing but dreadful plans; and the Leviathan is chortling with glee at their imbecility. America needs a Patrick Henry and a Samuel Adams to come forth. She needs clarity and a principled stand, not the pusillanimous ambiguity that oozes today from our wishy-washy solons on the Potomac.
1. Letter to S. Kercheval, 1816. Saul K. Padover, ed, Thomas Jefferson On Democracy (New
American Library, no date), pp. 34-35. Emphasis added.
2. Harold Syvelt, ed., The Papers of Alexander Hamilton, vol. III (New York, 1962) p. 104. Cited in Charles Adams, "Our Income Taxation: The Darker Side," Manassas, VA: Citizens for an Alternative Tax System [no date], p. 6.
3. David Hume, The Philosophical Works, vol. 3 (London, 1882) pp. 356-360. Cited in Adams, Ibid, p. 6.
4. J.R. McCulloch, Taxation and the Funding System (London, 1845), pp. 141-143. Cited in Charles Adams, For Good and Evil: The Impact of Taxes On the Course of Civilization (Lanham, MD: Madison Books, 1993), p. 365. Emphasis added.
5. Justice Stephen J. Field, Pollock v. Farmers Loan and Trust Co., 157 U.S. 607 (1894). Cited in Adams, Ibid., p. 370.
Americans for a Free Republic
April 15, 2005
Nelson Hultberg is a freelance writer in Dallas, Texas and the Executive Director of Americans for a Free Republic www.afr.org. His articles have appeared in such publications as The Dallas Morning News, Insight, The Freeman, Liberty, and The Social Critic, as well as numerous Internet sites. He is the author of Why We Must Abolish The Income Tax And The IRS (1997) and Breaking the Demopublican Monopoly (2004). He is presently finishing a book on political-economic philosophy entitled Reality's Golden Mean: The Case for Libertarian Politics and Conservative Values.
-- Posted Thursday, 14 April 2005