Diary

Serious Way to Remove IRS: Next Year.

The IRS has a history of being used as a political weapon. One article of impeachment against Nixon was his attempt to merely influence the IRS. Something must be done to rein in the power of the IRS. There has been a lot of talk about getting rid of the IRS. Some propose a flat tax or a sales/vat tax; however, none of these reforms has the political support necessary to pass and would take years to implement even if passed.

Therefore, I propose a different idea that actually abolishes the IRS as we know it. Next year.

It empowers states, protects taxpayers, and restores balance between the federal government and the states. Most importantly, it is simple to implement.

The idea is to have states enforce our income tax laws. No more IRS. Why would the states take on this responsibility? Simple. Give them a percentage of the tax collected. Any state not wanting to collect taxes could contract with another state or private company to process their taxes. Many states already base their state taxes on the federal forms so these states could easily enforce existing tax law. Independent arbiters would interpret the tax code as written to handle appeals from taxpayers who feel their tax bill was improperly calculated.   The only function at the federal level would be through Congress writing the tax laws. 

One might ask: How can we be sure that states would collect the proper amounts? Wouldn’t each state have an incentive to interpret the tax laws in a way that saves their residents money? To ensure this does not happen, the percentage of income tax given to each state would need to be sufficiently large enough, say 10-20% so that each state would have an incentive to collect the proper tax amount. While this percentage sounds large, it is small compared to the 38% of income taxes (individual and corporate) that are currently transfered to states*1 for various federally encouraged programs.

As states gained more revenue, more federal functions could be given to the states.

Of course not all states will immediately take over the IRS’ tax collection function, but it will be easy for them to do. There are tax accountants in every community and since tax law interpretation would done by independent arbiters– rather than the IRS– a less combative environment would result. Complying with taxes will be easier than ever. I could even imagine states allowing more rule of thumb methods of tax estimation.

Under this program, the IRS could never again be used as a political weapon and it could start next year.

*1  In 2014, $1600 billion in income taxes were collected and $600 billion in transfer payments were made to the states. Source: usgovernmentspending.com and usgovernmentrevenue.com