The Income Tax: A Century Is Enough

October 4, 2013










Fisher was right. In recent decades conservatives and libertarians have championed consumption-based taxation, which is basically the tax structure that Fisher envisioned. The Steve Forbes and Dick Armey flat taxes, for example, have consumption bases. Under such a base, savings and investment would not be double-taxed, and thus economic growth would be maximized.

Perhaps the greatest recent champion of tax reform was former Princeton economist David Bradford. He made powerful arguments that consumption-based taxation would be much simpler than the current income tax. Some of the most complex parts of the income tax, such as capital gains and depreciation rules, would disappear under the flat tax. Consumption taxes have more coherent tax bases than income taxes, and thus would not require all the ad hoc rules.

We haven’t succeeded in scrapping the income tax yet, but fiscal conservatives have moved the system more toward a consumption base. Provisions such as 401(k)s and Individual Retirement Accounts, for example, help to reduce the punitive treatment of savings under the income tax.

But much more needs to be done. Thomas Jefferson noted of internal taxes that they “covered our land with officers and opened our doors to their intrusions.” That’s certainly true of the income tax. Indeed, Jefferson would be horrified by the power of today’s IRS to break down our doors and seize our property, and he surely would have led a revolt on seeing the powers added to the IRS under Obamacare.

The Jeffersonian goal of abolishing internal taxes seems distant, but we can make the federal tax system much simpler, more efficient, and respectful of limited government. After a century, it’s time to scrap the income tax and replace it with a consumption-based flat tax.

This article appeared in Daily Caller on October 3, 2013.

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