The tax code at sun­set

Rather than abol­ish the IRS, phase out the cur­rent tax sys­tem

The Washington Times Weekly - - Commentary - By Colin Hanna

We are of­fi­cially off to the 2016 races. Texas Sen. Ted Cruz was the first of­fi­cial can­di­date to en­ter the GOP pri­mary con­test, fol­lowed by Sens. Rand Paul and Marco Ru­bio. Many more will un­doubt­edly fol­low. We will soon begin hear­ing an end­less stream of cam­paign plans and prom­ises, from re­peal­ing Oba­macare to se­cur­ing our bor­ders, to sim­pli­fy­ing our tax code and yes, even abol­ish­ing the In­ter­nal Rev­enue Ser­vice. A lot of th­ese pro­pos­als sound great on pa­per. Yet, when it comes to talk­ing about abol­ish­ing the IRS, can­di­dates risk look­ing fool­ish and un­electable.

Why? All of the chat­ter so far about tax re­form has lacked se­ri­ous­ness and doesn’t con­tain the kind of grav­i­tas the prob­lem de­serves. First, it’s easy to get ap­plause and head­lines by propos­ing to abol­ish the IRS, but by it­self, it’s not a se­ri­ous pol­icy pro­posal. Sec­ond, can­di­dates are propos­ing go­ing from the cur­rent code to its re­place­ment in one step. It’s just too large a task. The nec­es­sary first step, which all the com­pet­ing tax re­form ideas will al­most cer­tainly agree on, is that we first need to ter­mi­nate, or “sun­set,” the cur­rent tax code.

Dur­ing his pres­i­den­tial an­nounce­ment speech last month at Lib­erty Uni­ver­sity, Mr. Cruz called for the abo­li­tion of the IRS. Other po­ten­tial GOP hope­fuls have echoed sim­i­lar sen­ti­ments, in­clud­ing Mr. Paul. Even prospec­tive pres­i­den­tial can­di­date Ben Car­son said ear­lier this year that sim­pli­fy­ing the tax code should in­clude elim­i­nat­ing the agency.

First, I com­mend all of those who sup­port sim­pli­fy­ing the tax code. There is broad agree­ment that our cur­rent code is just too big, too com­plex and fraught with loop­holes and abuse. It’s in­her­ently un­fair and in­ef­fi­cient. In 1914, the U.S. tax code was just 400 pages long. Now, it’s bal­looned to al­most 74,000 pages — an 18,000 per­cent in­crease.

It is more than 300 times as long as the Bi­ble. Al­most ev­ery day we see an­other tax hor­ror story mak­ing the rounds. In the last two years, more than 360,000 tax­pay­ers were the vic­tims of a scam in­volv­ing fake IRS agents who threat­ened con­sumers and conned their vic­tims out of over $15 mil­lion.

In Fe­bru­ary, the tax ser­vice provider H&R Block re­ported that more than 50 per­cent of Oba­macare cus­tomers re­ceived sub­si­dies that were too large, and as a re­sult, they will have their tax re­funds re­duced or will need to send in ad­di­tional money with their re­turns. Th­ese ex­am­ples are just the tip of the ice­berg in terms of the con­fu­sion and harm caused by our out-of-con­trol tax code. And al­most all of them are the re­sult of the tax code’s com­plex­ity.

There are a num­ber of pro­pos­als be­ing of­fered to sim­plify the cur­rent tax sys­tem. Some, like Sens. Cruz and Paul, ad­vo­cate an in­come-based flat tax. Oth­ers are call­ing for a con­sump­tion-based tax such as the Fair Tax. There’s no short­age of pro­posed so­lu­tions, yet none of them has achieved crit­i­cal mass: ma­jor­ity sup­port from vot­ers.

That’s why I’m propos­ing a dif­fer­ent ap­proach to break the log­jam: Sun­set (or leg­isla­tively ter­mi­nate) the tax code first, at a date cer­tain far enough into the fu­ture so we don’t cre­ate un­cer­tainty in the fi­nan­cial mar­kets, yet close enough to the present to pre­cip­i­tate a sense of ur­gency. This idea would first unite the flat tax­ers, the fair tax­ers, pop­ulists and even some pro­gres­sives. It would then set the stage for a ro­bust de­bate on a fu­ture sys­tem that would cap­ti­vate and fully en­gage the public.

If Congress ap­proaches tax re­form from the per­spec­tive of the cur­rent code, all we are likely to see are small, in­cre­men­tal changes that may end up mak­ing the code even worse. The only way to cre­ate a sense of ur­gency about tax re­form is to, first, sun­set the cur­rent code. The sun­set date that I pro­pose is Dec. 31, 2019.

One sim­ple way for can­di­dates to show vot­ers that they are se­ri­ous and thought­ful about tax re­form is to call all of the dif­fer­ent re­form fac­tions to­gether and agree on erad­i­cat­ing the can­cer: the cur­rent code. This will not only help set the stage for a na­tional de­bate on a fairer, sim­pler and more growth-ori­ented sys­tem of tax­a­tion, but also will help the can­di­dates look pres­i­den­tial. If just one can­di­date starts, the oth­ers will soon fol­low. The op­po­site ar­gu­ment — de­fend­ing the cur­rent tax code — is sim­ply un­sus­tain­able.

Colin Hanna is pres­i­dent of Let Free­dom Ring USA, Inc.

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