What I’d really like is for Congress to shut down the IRS, bulldoze the building(s) and cover the ground with salt. Oh, and prosecute the IRS officials who have lied to Congress. But that may be too reactionary—and a little impractical.
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The Internal Revenue Service just announced that it has lost more (likely incriminating) emails sent by employees who were in a department that was clearly harassing conservative, tea party and libertarian-leaning groups seeking tax-exempt status.
No one’s surprised, nor does anyone believe the IRS officials who claim it was unintentional. IRS credibility was already lower than a snake’s belly in a wheel rut, as we say in Texas. But these days, when IRS officials make a statement, people just roll their eyes.
So what can be done about a federal agency that has become despised, politicized and marginalized?
National sales tax supporters used to claim that by embracing that system, we could shut down the IRS. Being from Texas, which has no state income tax and so no state tax forms to fill out, I’d love that option—if it would work.
But the federal government takes in other sources revenue besides the personal and corporate income tax, such as tariffs, estate taxes, payroll taxes, federal royalties from oil and gas drilling, etc. At least some type of tax agency, even if dramatically downsized, is almost certainly necessary.
So if eliminating the IRS entirely isn’t realistic, what could be done?
Audit the IRS — Libertarians and many conservatives have long championed auditing the Federal Reserve Bank; that might be a good place to start with the IRS. We have heard from several inspectors general that the Obama administration officials have impeded their investigations, so the audit needs to be conducted by an outside group with the power to get what it needs.
For a century—actually, 150 years if we include its first iteration—the IRS has been auditing Americans’ and penalizing them if the agency didn’t like what it found; it’s time to return the favor.
Targeted budget cuts — Once Congress has a grasp of the IRS’s problems, it should begin targeted budget cuts, starting with the former IRS official Lois Lerner’s department and those hired to enforce Obamacare penalties. But that’s just for starters.
The IRS reportedly found $60,000 to produce a Star Trek parody video, among others, so there must be a bunch of money that Congress needs to reclaim.
Make document-loss a crime — They have the emails, they don’t have the emails. Wait, now they have the emails, or maybe not. At this point, I have no idea whether the IRS does or doesn’t have Lois Lerner’s and others’ “lost emails” or whether it can or can’t retrieve them. The agency never bothered to inform Congress at the time it realized it lost them (if it really did) in the midst of a congressional investigation, or about back-up servers that might have them.
So the simple solution is to require IRS officials to save all work-related communications, along with a back-up system, and if some relevant communications get lost in the future someone goes to jail.
Learn from state tax agencies — States collect taxes, too. Let’s find out which state tax departments do the best job and identify some best practices.
Most important: Simplify the tax system — The most important IRS reform Congress could pass is to simplify the tax code. Implement a low, flat (or close to it) individual and corporate income tax rate, with few or no tax breaks or credits.
“Simple” is harder to cheat or manipulate; and if the tax rate is low, fewer people or companies would try. The higher the rates and the more complicated the system, the more likely people will try to game the system.
There are no doubt honest, fair and dedicated employees at the IRS, just as there are at any federal agency. But we’ve learned that there are some, perhaps a lot, who aren’t. It’s time for Congress to clean house, and perhaps start over by creating a different tax agency.