Imagine you need a job and somebody's hiring. After negotiating a wage that you both can live with, work begins. But when payday arrives, before you can even take your earnings to the bank or the bar, someone else swoops in with an outstretched hand and demands his "cut"—or else.
A mob boss? A pimp? Nope: the Internal Revenue Service (IRS).
The 16th Amendment gave Congress "power to lay and collect taxes on incomes" in 1913, after the Supreme Court had previously ruled such taxes "unconstitutional and void." Later that year, President Woodrow Wilson signed the Revenue Act of 1913, instituting a progressive federal income tax nationwide.
"Congress went well toward the limits of its constitutional functions, in the estimation of many good lawyers, in the enactment of this law which grants inquisitorial powers that in the hands of careless officials would prove a menace to the country," The Washington Post warned in 1914.
A menace, indeed: Americans spent an estimated $133 billion filing their tax returns in 2024, according to the National Taxpayers Union Foundation. We also spent an estimated 6.5 billion hours preparing and filing, an additional opportunity cost of more than $280 billion. That's a lot of time and money wasted on tax filing that people would have rather spent on almost anything else.
The amount of effort and expense required is due to the tax code's complexity. In 2015, the Tax Foundation reported that "federal tax laws and regulations have grown to over 10 million words in length," a sixfold increase in six decades. Much of the complexity comes in the form of credits and deductions that taxpayers may or may not qualify for. Following the tax code to the letter, then, is nearly impossible, even for the IRS: Between January 1 and September 30, 2018, while the agency's fraud detection systems caught about $7.6 billion in fraud, "they also delayed the processing of almost $20 billion in legitimate refunds," according to a 2020 Taxpayer Advocate Service report. The agency also admitted that between January 1 and October 3 of the same year, its false positive fraud rates were between 63 percent and 81 percent.
With that amount of power comes the ability to shape society to your will—or rather, to the will of the president or Congress. Want more people to buy homes? Let them write off mortgage interest. Think everyone should carry health insurance? Subsidize their premiums through refundable credits.
That level of convolution, with voluminous layers of deductions and qualifications, also means the tax code can be weaponized against anyone. "The power to tax involves the power to destroy," wrote Chief Justice John Marshall in 1819. And as the historian John Andrew explained in the book Power to Destroy, multiple U.S. presidents have done just that. Wary of far-right groups like the John Birch Society, President John F. Kennedy established the IRS's Ideological Organizations Project, "a covert effort to discredit the right and undercut its sources of support" by revoking their tax-exempt status and disincentivizing donations; selection for scrutiny, Andrew wrote, depended on "dissidence, not evidence of tax violations." President Richard Nixon went even further, auditing and investigating people and organizations on his "Enemies List." In a 1971 memo, White House Counsel John Dean raised the matter of "how we can use the available federal machinery to screw our political enemies."
This isn't ancient history. In 2012, the IRS delayed the tax exemption applications of Tea Party–affiliated nonprofits—a move that Lois Lerner, the IRS official who oversaw tax-exempt organizations, later admitted was politically motivated. After President Donald Trump fired FBI Director James Comey in 2017 and FBI Deputy Director Andrew McCabe in 2018, the IRS audited both men. While each audit could have been legitimate, the agency's history does not justify giving it the benefit of the doubt.
But the malfeasance and inefficiency is almost beside the point. When you agree to take a job at a particular wage, you are effectively setting a price for your labor—something that you have the exclusive right to dole out as you see fit. And like with a mob boss, it is inherently dehumanizing to negotiate a price for your labor, only for the government to claim a portion of each paycheck merely as a matter of course.
If taxation is necessary to fund the government's prescribed roles, it could at least be done in a way that preserves the taxpayer's dignity. Abolish the IRS, and the income tax along with it.
The post Abolish the IRS—and the Income Tax Too appeared first on Reason.com.
