August 10, 2004 | Commentary on Taxes
Even people who disagree about tax cuts usually agree that our tax system is a mess. It should be repealed and replaced with a system that treats all taxpayers fairly and equally.
Now that the speaker of the House of Representatives has announced he wants to dismantle the IRS, perhaps we have the chance to do just that.
Two great ideas for achieving this goal are on the table - the flat tax and the national sales tax. They may seem different, but the flat tax and the sales tax are different sides of the same coin: The flat tax takes a small slice of your income as it's earned; the sales tax takes a small slice of your income as it's spent. Both proposals share the following attractive characteristics:
Ideally, both President Bush and Congress will launch a national debate on which tax reform plan would be best for America - which shouldn't be too difficult, as President Bush already has publicly praised the 13 percent flat tax in Russia, and Speaker Dennis Hastert is just one of many tax-reform advocates on Capitol Hill.
To be meaningful, this debate should include potential pitfalls. For instance, if we adopt a flat tax, how can we ensure that politicians don't create new loopholes? And if we adopt a sales tax, how do we make sure the politicians don't pull a bait-and-switch, implementing a sales tax but then conveniently "forgetting" to repeal the income tax? Many European nations have adopted a form of national sales tax, but none have eliminated their income-tax systems. As a result, national sales taxes have been used to finance a big expansion in the size of government - which helps to explain why so many European nations are economically stagnant.
There's no question tax reform will prove an uphill battle. Special-interest groups will fight to protect the loopholes and shelters they have placed in the current system.
But this doesn't mean the battle can't be won. Nobody thought President Reagan would be able to cut America's top tax rate from 70 percent to 28 percent. Nobody predicted 15 years ago that the Soviet Union would disappear and be replaced by a more democratic Russia with a 13 percent flat tax. If the American people demand a fair and simple tax system, the politicians will have no choice but to comply.
Daniel J. Mitchell is the McKenna fellow in political economy at The Heritage Foundation.
First appeared on FOXNews.com