Yes, President Trump, Abolish the IRS

Commerce Secretary Howard Lutnick said it plainly on Wednesday: Trump’s “goal is to abolish the Internal Revenue Service and let all the outsiders pay.” Whatever may become of the External Revenue Service that Trump has announced as a goal of his administration, it is clear that the IRS has outlived its usefulness, if it ever had any at all, and needs to be shuttered. The tax code today is far too voluminous for anyone to master, and too laden with loopholes and traps to be much more than a tool for soaking anyone the government decides to soak.

The current tax code has been referred to as “Byzantine,” which is odd in light of the fact that the U.S. could do well to have a Byzantine tax code right now. As Empire of God: How the Byzantines Saved Civilization explains, the real Byzantines’ tax code made perfect sense and could not be easily weaponized. Financial journalist James Picerno wrote in May 2013 that “the Byzantine empire that the IRS oversees is a net drag on the US economy. The fact that we, as a country, move heaven and earth to collect 15%-20% of GDP as taxes through time by way of 72,000 pages of tax code is, well, ludicrous.”

Picerno’s reference to the “Byzantine empire” here obviously was meant to refer to a tangle of unnecessary practices and accompanying regulations. In an October 2011 response to “right-wingers” who are “always complaining about the ‘Byzantine’ tax code,” social anthropologist Brian Palmer asserts that “modern historians are quick to point out that modern contempt for Byzantine government is based more on bias than on fact.”

This was because, as Palmer notes, during the Byzantine period, the Roman Empire’s actual tax system wasn’t “Byzantine”: “Byzantium’s two-pronged system would have made Steve Forbes proud. There was a flat tax on all citizens. Farmers paid an additional tax based on the size and quality of their land and their annual production. While the equation was straightforward, putting it to work was not. The Byzantines used alphabetic, rather than Arabic, numerals that were notoriously difficult to crunch.” This two-pronged tax system, with one tax collected per person, i.e., a capitation tax, from capita (“heads”) and the other on the basis of ownership of iugera, land.

“A flat tax on all citizens” is the epitome of simple justice. Contrast this to tax policies during the Great Depression. The top individual US income tax rate was 25 percent in 1931; in 1932, President Herbert Hoover, who was, contrary to his reputation, an advocate of big, interventionist government, increased it to 63 percent in 1932. Franklin Roosevelt increased it to 79 percent in 1936; by 1944 it was a staggering 94 percent.

Roosevelt described “those in the higher brackets” as those making over $50,000. So someone who made $100,000 in 1931 would take home $75,000 after taxes; by 1944, he was only left with $6,000. While a businessman may be able to sustain a business and take care of his other expenses on $75,000, by the time his income has been reduced to $6,000, his ability to maintain his business has likely been extinguished altogether. Meanwhile, the taxes on the lowest wage earners increased from 1.125 percent in 1930 to 4 percent in 1932. In practical terms, this meant that someone who earned $4,000 a year paid fifteen dollars in taxes in 1930 and $160 in 1932, a significant increase for someone with limited resources.

Imagine, by contrast, paying a flat tax, as in the Roman Empire: everyone would pay, say, a ten percent tax on his income. The $100,000 earner would pay $10,000, and the poor man who earned $4000 would pay $400. Today’s big government authoritarians would say this represented “the rich not paying their fair share.”

The Romans also understood a principle that some American politicians have grasped, but which seems to elude all too many others with extraordinary persistence: lowering taxes not only relieves the burden on the working man but stimulates the economy in general by allowing for increased spending. Some of the most successful of the Roman emperors demonstrated that they knew that penalizing those who provided employment for others would only increase unemployment and end up penalizing the working man, not just “the rich.” They imposed measures that aided the common people of the empire rather than increasing their burdens. That sounds just like what Trump and his team are trying to do.