In this recent excerpt from The Wall Street Journal’s Best of the Web Today, James Taranto and a reader give serious consideration to what has long been unthinkable in polite political company: abolishing the national government’s power of direct taxation. The item is at the following link, carrying the headline “Can Political Freedom Survive the Welfare State?”
A point this column has emphasized repeatedly is that if the Internal Revenue Service scandal turns out not to have been directed by the White House, the situation is much direr than if it turns out Barack Obama or Valerie Jarrett was giving the orders. In the latter case, we have a corrupt administration; in the former, a corrupt government. Reader Thomas Hodson, responding to a Friday item on the subject, has this penetrating elaboration on the idea:
The possibility you omit is that every IRS employee over GS-12 instantly recognized that the Tea Party is a credible threat to the IRS as an organization. I am quite confident that nobody had to issue any orders, directions, suggestions, hints, or blow any dog whistles for them to know what to do to defend their jobs and promotion possibilities. Indeed, the difficulty for the GS-14s, -15s, and SES-types would be to prevent this kind of activity, assuming that the 14s, etc. were so inclined, which I doubt very much. It was not an accident, either. Even if every single one of the elected federal officials were a Republican, and even if the entire federal bureaucracy were populated by Republicans, you would still get this self-protective behavior from IRS leadership and staff.
In my view, this episode reveals a problem that is much worse than the sort of political direction at which you hint. It means that the only remedy is to remove the institutional incentives for this kind of behavior. The only way I can see to do that is to eliminate the federal power of direct taxation. There is a reason that the Framers deprived the federal government of this power, being concerned as they were, especially Madison, to impede the use of government power for political ends.
This is much more than a mere political scandal. I have not been able to conceive of a clearer illustration that with the power of direct taxation, any government, even the U.S. Government, can become over time as totalitarian as it finds useful. Nevertheless, even the most limited-government-oriented commentators I have heard or read are still treating it as a political scandal.
Abolishing direct taxation sounds good to us. But how does one pay for a vast (or even only half-vast) welfare state without it? Abolishing the welfare state sounds good to us too, but even paring it back has proved tough to sell politically. If the welfare state inexorably erodes freedom, that poses a hell of a political problem for those who cherish the latter.
Regarding abolishing direct federal taxation, the question is asked, “But how does one pay for a vast (or even only half-vast) welfare state without it? The response should be that we aren’t going to pay for the vast debt, including unfunded liabilities with direct federal taxation. One advantage, and there are many others, of eliminating direct federal taxation is that we would quite digging the debt ditch deeper. With the status quo, and the perverse political incentives it creates, the debt will be increased until it is necessarily repudiated and then, as memories fade, new debt will be created.
The abuse of power by the IRS does give the discussion of reverse revenue sharing more bite. [What's "reverse revenue sharing"? Click here.]
With fifty state tax authorities in competition with each other without federal taxation numbing the intensity of that competition, can there be any doubt the abuse of taxes power would significantly diminish? Another point for me to make in my talk on reverse revenue sharing next month at FreedomFest.