In 1998, a Republican-controlled House passed the Tax Code Termination Act to sunset the IRS effective July 4, 2002. Future Speaker Boehner vote aye. Could lightning strike twice? Gosh, it did in 2000. Too bad the world’s most deliberative body did not join in.
At the time, then President Clinton argued, successfully, that terminating the tax code without a replacement would introduce too much uncertainty for individuals and businesses. Of course, an obvious solution to that problem is passing a replacement tax code. Could anything be worse than what we have now? But these are politicians, and I digress…
How does today differ from 1998? The masochists among you should read the government’s estimate of tax expenditures. It is better than self-immolation. For the rest of us, a dose of common sense will do. Tax code complexity has exploded since 1998, largely because of tax expenditures. The future holds more of the same as “green energy,” health care and small business “growth” special deals kick in.
Viewing the tax code as a spending problem, instead of just a complexity and fairness problem, changes the debate. Americans understand excessive and wasteful government spending and they do not like it. Republicans and Democrats alike can view a tax code sunset as budget austerity, but with a smile. Viewing the tax code as a spending problem also offers a bipartisan replacement: eliminate the spending (i.e., all deductions and credits) and reduce tax rates across the board to generate the same revenue. Given a couple years notice, or a graduated implementation, the economy will self-adjust. But not too much notice, we must destroy the tax code before it destroys us.