Two Republican candidates, Mike Huckabee and Ron Paul, have both called for the elimination of the IRS and the income tax. Instead, government revenues would come from a national sales tax, with adjustments so as not to penalize lower income households*.
Abolish the IRS, and put an end to payroll taxes, witholding taxes, income taxes, and capital gains taxes- rewarding earnings, savings and investment, while shifting the tax burden to consumption, which we can all agree we do too much of anyway. It makes great sense. Maybe our citizens would discover the pleasures of saving money, and if they did, they'd be investing it in our future, and earning tax-free profits on our growth. We have the reverse now, where we deepen our debt hole, increasing a negative investment in the future.
Could there not be a huge appeal in this idea? Even beyond the visceral shout of joy we may feel at the idea of ending the IRS and the income tax, surely one of the greatest causes of anxiety and trouble for the citizen, the IRS is also the foundational rationalisation for the government's invasion of personal privacy, which has lately run amok. Abolishing taxes on income and earnings, and making up the revenue with a modified VAT, makes a lot of sense in an age of toxic over-consumption, shrinking income in the middle class, and negative savings rates; tax consumption, not earnings and savings.
I wonder if abolishing the IRS can emerge as a pivotal issue in 2008. For one thing, politicians and talking heads are fundamentally lazy, and this one sounds like it could be complicated. And there must be tens of millions of people who live off the whole income tax lollapalooza; they'll want to keep this quiet too.
More importantly perhaps, we measure the health of our economy by the growth in consumer spending, regardless of growing debt. You hear the monthly reports, 'Consumer spending, which represents 72 percent of the economy, grew in the last quarter....'
This is a pretty stupid way of measuring the health of the economy.
Changing our measures along with abolishing the IRS, we might hear instead something along these lines: 'Economists are buoyant on the nation's health- over the last month, earnings increased 5%, individual savings increased 4.8% , and investment increased 4%, while consumption grew at 1.5%...'
Unfortunately, this is an idea that is not part of any of the democratic candidates' policy promises.
*In France in the 70's for example, VAT rates were at the maximum on luxury goods, and diminshed to zero on necessities. Huckabee has proposed a 'prebate' of the percent of the individual's income that would be collected in the VAT. (This opens the door to federal inspection of income records, which could snowball into a mini-IRS. The French solution avoids this.)
