Encouraged by some liberal groups and seen as grounds to impeach Obama by some conservative ones, the IRS's scrutiny of certain charitable groups associated with the Tea Party is stirring up controversy either way. These actions are making proponents of smaller government suggest improvements to the system. While some would be happy with a mere reformation – fewer tax brackets and tax deductions – others, like Senator Ted Cruz (R-Texas), would go as far as abolishing the IRS altogether.
Cruz's proposals can seem daring: Abolish a bureaucratic Leviathan (over 92,000 employees in 2007) and replace it with a flat tax with very few deductions (like giving to charity and home mortgage). However, this isn't a smart proposal, as the home mortgage interest deduction is partly responsible for the past (and ongoing?) housing bubble. Also, why include deductions? It opens a Pandora's Box of lobbying that will likely include more deductions in the future. Some see this initiative – there is a petition to abolish the IRS – as a way for Republicans to collect names for future fundraisers.
Furthermore, Cruz's initiative doesn't nearly go as far as Ron Paul's, who also proposes to abolish the federal income tax and make a concurrent reduction in spending, starting with defense spending, “beloved by so many who claim to be opponents of high taxes and big government,” Paul told Washington Times.
Doing so would finally end the long trail of scandals and violations of personal liberties that surround the government's tax-collection agency. According to Paul, the IRS has often been used as a tool to intimidate political opponents, from FDR to Kennedy and Johnson, from Reagan to George W. Bush, and from Clinton to Obama. Paul even went as far as saying that the IRS is used to give or reject tax exemptions according to the tastes of the current regime in D.C.
However, constitutionally, there is nothing wrong with federal income taxes because of the Sixteenth Amendment. Plus, the Supreme Court has repeatedly rejected the arguments of tax protesters. And so enters Ron Paul again, who calls for the repeal of the Sixteenth Amendment. According to the libertarian icon, an income tax is merely theft which suggests that “government owns the lives and labor of the citizens it is supposed to represent”, which is true. Try not to pay your taxes for a moment unless you have connections...
In addition, income tax is not even the biggest revenue source for government — excise tax, corporate tax, and import tariffs yield 55% of its revenues. Paul proposes that they become the source for revenues. This way, people would be free to spend their hard-earned money as they please.
It won't happen in the near future. Almost all politicians work the street in order to get elected, so special interests are still loud enough to influence politics. However, in the long run, the U.S. will have to completely overhaul its tax code if it doesn't want more of its citizens leaving for Galt Gulch.