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Abolish the IRS As We Know It and Restore the Power of the States
Raymond Richman, 5/20/2013

The recent scandal involving the IRS illustrates the out-of-control growth of the federal bureaucracy. Instead of limited powers of the federal government and reservation of all powers to the states not specifically granted to the federal government, spelled out in the first ten amendments to the U.S. Constitution, the reverse is now true. The states are not only dependent fiscally on the federal government but it is they who have limited powers. In this paper, we propose to limit the powers of the IRS and reassert the predominance of the States.

The IRS would, under our proposal, administer only an income tax on wages and salaries. Since most wages and salaries are taxed at the source, corporations and other employers will pay over to the IRS nearly all of the wage taxes collected. Recipients will have only a simple return to file, dealing mostly with allowances for dependents. Most will have to file no return at all. The billions now spent by the IRS in administering a tax code of many thousands of pages will be reduced 95 percent.

Taxes on interest, capital gains and corporate income would be replaced by a form of tax on wealth, a tax on the capitalized value of all business enterprises. Given the total value of business enterprises, a very small rate of perhaps 3 percent, together with the tax on wages and salaries, would yield more than the current yield of the personal and corporate income taxes.

States would be responsible for all taxes on real estate. It would, like the tax on businesses, be based on the capitalized value of houses, apartment building, office buildings, farms and other rural land, and other real estate as each state can determine. It could be integrated with current real estate taxes or not as the States decide. All of the taxes collected would be reserved to the States. The states will be in competition with one another.

Half of the total revenue collected by the federal agencies charged with administering the taxes on wages and salaries and businesses would be paid to the States. To support federal expenditures above the amount yielded by the wages and salary tax and the tax on businesses, the Congress of the United States would have to request additional funds from the States.

We are sure that many Americans believe that the U.S. is en route to inevitable decline. But what is the alternative? The entire world is hell-bent on fascism whose economic definition is government owned and government dominated and regulated private enterprises. China is a good example but increasingly the Japanese and Eurozone countries are following suit.

America has always been the innovator. The Constitution is a unique document but beginning with FDR’s new deal and attack on the courts, it has deteriorated to the point where it is the leading innovator of new products but most of the products are outsourced, produced abroad. This is the result of the enormous growth of the federal government. The IRS scandal is only the most recent evidence. It is either the end of the IRS as we know it or the end of the greatest experiment in democratic government, the United States of America.  


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Comment by doris de simas, 5/31/2013:

My family agrees!!  Someone please do somthing!!

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]