Abolish the IRS with the Flat Tax Revolution
The Trump administration could abolish the costly IRS by adopting the simple flat tax trend of state governments.
This article published in The American Spectator today, February 3, 2025: A Flat Income Tax Removes the Need for the IRS
Image credit to the Tax Foundation, “The State Flat Tax Revolution: Where Things Stand Today,” January 7, 2025.
The new Trump administration and congressional Republicans are collaborating on a new tax bill that they hope to pass into law by the end of April. The most important conditions in the prospective bill, by far, will be extending the lower income tax rates and other tax cut provisions set forth in the Tax Cut and Jobs Act (TCJA) enacted in December 2017.
The TCJA tax cut provisions are set to expire on December 31st this year. Failure to extend them will result in massive tax increases in 2026 for both individuals and corporations resulting in potentially devasting economic consequences. A report produced by the National Association of Manufacturers this month estimates that the expiration of the TCJA tax cuts would result in the loss of 5.9 million American jobs and a $1.1 trillion reduction in U.S. GDP.
Fortunately, the entire Republican congressional membership seems united in extending the tax cut provisions of TCJA. However, Republicans need to be careful not to get sidetracked with adding new provisions into the prospective new tax bill to satisfy the selfish interests of individual members. It will only serve to complicate the bill, disrupt political consensus, slow down its enactment, and possibly even derail enactment. President Trump’s ideas for lowering the corporate income tax rate to 15% and eliminating income taxes on tips and social security benefits are dynamic and worthy policy proposals. Those add-ons should be included in the bill, but, otherwise, keep passage of the bill as simple as possible.
Assuming the Trump administration and congressional Republicans enact a tax bill that extends the fundamental provisions of the TCJA, they should not stop with that legislative achievement; they should subsequently embrace a new political agenda that would fundamentally transform the American economy from one hampered with the labyrinth of socialist policies enacted over the past century to one of restoration to limited government and limited taxation as envisioned by America’s Founding Fathers. The cornerstone of such a new agenda would align with the recent grass-roots movement among various states in the American heartland: the flat tax revolution.
In 1996 and 2000, Steve Forbes ran for president on a campaign promoting free market policies, reducing the size and power of government, and, especially, his plan for a simple flat income tax. As Forbes rightly claimed during his campaigns, a simple flat income tax would eliminate the need for a massive tax enforcement agency, i.e. the IRS. Forbes often made the wry comment during his campaigns that, if his flat tax policy was implemented, he would be nice to the 100,000-plus employees of the IRS by providing them with paid job training to seek new careers.
Unfortunately for free market, libertarian-minded Americans, Forbes lost the Republican primary in 1996 to Bob Dole and in 2000 to George W. Bush. With Forbes’ departure from the national political scene after the 2000 election, the idea of a simple flat income tax seemingly vanished into oblivion. However, as American taxpayers continued to experience an ever-complicated and burdensome federal tax system, a grass roots movement for a simpler tax system has grown at the state level.
State governments often move quicker in response to the interests of their constituents than the lumbering centralized federal government. Since 2019, seven states have implemented a flat income tax – Arizona, Georgia, Idaho, Iowa, Kentucky, Louisiana, and Mississippi. This has increased the number of states with a flat income tax to fourteen. There are also nine states with no income tax – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. This makes 23 states who have rejected the socialist graduated income tax that has been in place with the federal government since the Revenue Act of 1913.
Since exiting the arena of presidential politics in 2000, Steve Forbes has continued his advocacy for free market economics and a simple, flat income tax from his platform as Chairman and Editor-in-Chief of Forbes Media and as co-founder of the Committee to Unleash Prosperity with economists Arthur Laffer and Steve Moore. The Trump administration and congressional Republicans should capitalize on the flat tax revolution at the state level by pushing for a federal flat income tax once they achieve passage of the currently planned bill to extend the tax cut provisions of TCJA.
In an opinion piece in The Wall Street Journal on December 30, 2024, Steve Forbes and Steve Moore made the case for enacting a flat income tax of 15% for both individuals and corporations. Excerpts:
Making the Tax Cuts and Jobs Act permanent would be a good start for Congress in 2025. But it’s time to take an even bigger step: creating a simplified flat tax for all. The TCJA got us close to this goal, and a few additional reforms would get it done.
Collapsing the personal-income and corporate tax rates to 15% would have huge economic benefits. America would suddenly have one of the lowest tax rates in the world, resulting in trillions of dollars of new capital flow and a spike in take-home pay.
The simplicity of a flat tax would reduce the deadweight costs associated with tax compliance—and the headaches. The White House Office of Information and Regulatory Affairs calculates that Americans spent almost eight billion hours filling out tax forms in 2024. The Tax Foundation estimates that this cost the economy $413 billion in lost productivity, and the Internal Revenue Service estimates that we spent $133 billion on out-of-pocket compliance costs. That adds up to a burden of $546 billion.
Mr. Trump has a rare window of opportunity to transform America’s economy into a fast-growing colossus by enacting a simplified flat tax. And we can’t think of a better way to drain the swamp of special-interest lobbyists, IRS agents and tax lawyers.
The benefits of a simple flat income tax would also eliminate the need for the very costly IRS, which has a budget request for the current 2025 fiscal year of $22.8 billion. As I wrote in my article published in The American Spectator on February 4, 2023, “Abolish the IRS: A Massive System Beyond Repair”:
… a simple flat income tax would provide the necessary political and operational justification for abolishing the IRS. The functions of the current IRS would be reduced enormously, allowing for a simplified tax-collection function to be transferred to a new tax-collection section of the U.S. Treasury Department and requiring a workforce of only a small fraction of the current 80,000-employee IRS.
Hopefully, President Trump and congressional Republicans will consider a longer-term plan for a simple flat income tax as they collaborate on extending the current tax cuts of TCJA.