The IRS was created in 1913 under President Woodrow Wilson as the enforcement wing of the US Treasury Department in order to facilitate the Income Tax legislation that was passed following the ratification of the 16th Amendment of the United States Constitution.
Part of the PR campaign that went with the passage of the 16th amendment was that it would never target the average citizen and was only to be applicable to the wealthiest among us. The top rate in 1913 was 7% (those earning half a million dollars or more). Later, rates would rise dramatically up to 67% by 1917 and have fluctuated wildly ever since. However, regardless of the rates applied the Us Government has rarely ever actually captured revenue exceeding 18% of GDP. In fact, according to the World Bank, The US government only captured 10% of GDP on average in the last few years. That is despite all tax rates being quite a bit higher than 10% currently.
The current scandal involving the targeting of individuals and groups based on political ideology is not new and has gone on since the IRS was founded. FDR was famous for using it as a weapon against political adversaries including those who formerly had supported him like Father Coughlin ( a raging catholic liberal ). Is it illegal? Perhaps, but perhaps not. The IRS targeting Al Capone is what put him away and many criminals get ensnared by the vigilance of the agents at the IRS. Of course this mkes me think about renaming them TED (Tax Enforcement Directorate). The name has a certain authoritarian ring to it and at least more accurately describes what the organization is designed to do.
If the what the IRS did was in-fact illegal, then not only should agents and leadership lose their jobs and go to jail (as you or I would for say...assault, tortious interference, perhaps use anti-stalking laws or other statutes to put them away).
However the real scandal so far is that no one is seeing the obvious solution to the problem. if the IRS is being used as a weapon and no political head of state can be trusted to run it (here's looking at you all Presidents since and including Wilson). Then we have to take that weapon away. That is abolish the IRS. Start a new subdivision of the Dept. of the Treasury and call it whatever you want...but not IRS. Throw out the US tax code in its entirety where it would apply to individuals (businesses are a different issue and far more complicated).
Repeal the 16th amendment on the grounds that it is too broad and open for abuse. Amend the constitution to allow for a flat (not progressive) income tax rate to be set by the US House by a simple majority (51%) and only allow the senate to confirm or reject said rate without changing the rate itself as all of this must originate in the House.
As a result of the new flat tax, there would be no deductions, allowances, or loopholes. There would also be no requirement to report income via a filing mechanism. Legislation can be passed requiring the employer to electronically withhold the amount and it be transmitted via EFT (electronic funds transfer) to the US Treasury upon each pay period. In your check you would see only that tax (Social Security/medicare/medicaid would be taken out before taxes in my scheme to reduce the tax hit).
The amount of time and money saved would be staggering. And the best part is that there would be no ability to socially engineer society with taxes, to use them punitively or as a form of information gathering by political entities on their enemies.
When it comes to businesses one would have to allow for them to deduct all of their expenses against revenue and only tax profit. All auditing assets would be focused on the business community rather than on families and individuals. Business rates would also be flat whether a business is a C Corp, S Corp, Pass-Through Entity (sole proprietorship/DBA/Partnership/LLC/LLP etc.). It would be a separately set rate from the individual income tax, but done through the same electronic system wherein at a given timer period the taxes would be paid based upon receipts. Most businesses file quarterly reports and that would seem a prudent method.
Of course these measures would also eliminate the distinction of the capital gains tax...which would be folded under the individual income tax...which means that the rate would likely rise by 2-5% from its current level of 15%. Tax exempt trusts would only be considered tax exempt for the current generation, that is with the current generation's passing away it would be taxed going further. So let us take the Kennedy's as an example (could just as easily use the Bush's), They have a tax free trust that allows them to live off the interest only like with municipal bonds or treasury certificates. When the eldest member of the family passes away, the next eldest who would receive the monies for the family would not receive it in a tax free manner, but rather pay an income tax like everyone else.
The time for making distinctions between citizens has come and gone. We must stand united against being divided by those who seek power. This is a tough complicated issue and it requires hard critical thinking by the US Congress because it is up to them to fund the operations of the US Government. So they must come up with a rate that is neither too high nor too low and also delivers to them the revenue necessary to adequately fund the governments constitutional activities.
That may mean however that the government's raw size for the second time in our entire history would decrease..and that means a lot of federal employees out of work. Many of them military. So Congress should see it as its duty to set aside funding for job training/retraining and even job placement centers for these people as we transition. It should be seen as our duty to do this for the military especially. The Federal government should not be seen as a jobs program writ large but as a mechanism for governance and so much of what is done falls outside of that or is well overspent. Simply examine all of the recent government loans to "green" industries that have failed, or the past frauds of the military credit cards, the continuing fraud in medicare/caid/SSI/Disability and the coming fraud that will consume the Affordable Care Act...written largely by the insurance companies themselves (yes that is why your premiums are rising massively).
Our representatives have ceased to believe in the implied fiduciary duty they have to the tax payers and constituents in the districts that gave them the job. There is no sense of honor left except among a few and even those few do not have enough bravery to push for an audacious change like this. This post barely scrapes what would have to be addressed, never mind the political interests from all sides that like having their own niche carved out. No more weaponization of taxation.
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