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Far from eliminating the IRS, a flat tax will actually increase IRS prevalence.

Texas Senator Ted Cruz was the acknowledged star at CPAC this week and for good reason. His unapologetic advocacy of conservative values and his ability to clearly convey his message orally, makes him unique in Washington, DC. It’s why both liberals and RINOs fear him. When he speaks, people listen and understand.

But even Cruz misfires once in a while and nine minutes and 38 seconds into his CPAC speech, was one of those times. Beginning at that point, he made two statements in immediate succession that taken together, made no sense.

Listen to his speech to CPAC here. While, as a whole, it’s truly inspirational, pay particular attention to the 18 seconds, starting at the 13 minute mark of the video.

Senator Cruz says, “We need to abolish the IRS and quite deservedly receives loud cheers for that statement. But as the cheers die down, he follows that statement with, “We need to adopt a simple flat tax that is fair, that every American can fill out his taxes on a postcard.” Again, he received loud cheers. It seems that both Cruz and many of the people at CPAC missed the paradox of those two statements.

Just take a moment and think about those two statements. Then ask yourself this question.

“If you fill out your tax return on a postcard, how will the government know that what you put on that postcard is accurate, if there is no IRS to audit those postcards?”

Think about it…

As long as the government taxes income, be it progressive or flat, there will, by necessity, be an IRS. You cannot separate the two. They're joined at the hip.

Sure, with a truly flat income tax, you should be able to fill out your income tax return on a postcard or at least, on the online version of a postcard. But there’s a flip side to that convenience that most people either miss or choose not to consider.

Since everyone’s flat tax return will be far simpler, it will take the IRS much less time to complete flat tax audits. Today, audits on a billionaire can take weeks or even months in real time and even more in man-hours. Audits of millionaires can take days or weeks in real time. Under a flat income tax, those audits will take maybe a few hours in both real time and man-hours. Most people's audits will take even less. So ask yourself what you think the IRS will do with all that spare time. Have you ever heard of a government agency that decided to cut its staff, because there wasn’t enough work for them all?… I didn’t think so.

The IRS has to justify its existence. So faced with all that spare time, thousands of idle auditors, agents, and attorneys and no complex tax structures to deal with, they’ll certainly use all that spare time to audit far more taxpayers than they do today, all across the income scale.

FACT: Far from eliminating the IRS, a flat income tax will significantly increase the chances that you will face an IRS audit.

If auditing a millionaire takes a week, today and it takes an hour under a flat income tax, that means that the IRS will be able to audit that millionaire and 39 more taxpayers in the same time that it used to take to audit just that one millionaire (and we aren't even considering man-hours; just real time). Under a flat income tax, the IRS could easily end up auditing 20, 30, or 40 times more tax returns… Oops!

The obvious problem is that the flat income tax talking points have been around for so many decades that honest fiscal conservatives, like Senator Cruz, have let the prevalence of those talking points influence them to not dig deeper and look at the flip side of those talking points. I know this for a fact, because I used to be one of those people. Before I started looking deeper at it, I supported a flat income tax. I know from sad experience that it’s really quite easy to be fooled by the flat income tax spin.

The flat income tax is, in fact, noting but a fall-back position for the tax and spend crowd. They tell us that a flat tax is an interim step. But that’s really just a scam. They don’t want to implement any kind of tax reform. But, if forced to do so, they want it to be a flat income tax, for two reasons and neither has to do with it being a step toward comprehensive tax reform.

  1. They’ll use a flat income tax as an excuse to delay any further talk of the FairTax (HR 25 / S 122) or any other comprehensive tax reform, claiming that we have to “give the flat income tax time to work.” They will then drag that “time to work” out for several years. In the mean time, they’ll belittle members of Congress, who continue to push for comprehensive tax reform, claiming that they don’t understand that we have to give the flat income tax “time to work.” In this regard, the purpose of a flat income tax is to stop the momentum of the FairTax and if passed, it will do precisely that. Like it or not, many uninformed voters and congressmen will buy into that, “give it time to work”argument. As we can plainly see, even our TEA Party banner-carrier for fiscal responsibility has already fallen for some of the flat income tax spin. So if a flat income tax should ever become law, you can count on it that comprehensive tax reform WILL lose significant momentum.
  2. Most of the flat income tax advocates (a.k.a. the “Tax and Spend” crowd) also know that in a few years, after a flat income tax has effectively slowed the momentum of the FairTax or any other kind of comprehensive tax reform, they can easily start adding tax loopholes back into the income tax, along with new tax brackets, claiming that they are just tweaking the flat income tax, to make it work better. A few years later, we'll be back to where we are today and it's likely to be even worse, since they'll want to make up for lost time.

Always remember that the whole idea of a flat income tax, is to be a fall back position that will preserve the ability of the tax and spend crowd to easily get back to where we are today, while undermining comprehensive tax reform. Unfortunately, it’s working.

The tax and spenders in the leadership of both parties are deathly afraid of the FairTax, since it is the only tax reform proposal that represents a significant loss of political power for Congress. That’s because, under the FairTax, the IRS is abolished, as there will be no more excuse for it. That means no more tax lobbyists and no easy way to pay back political favors. Furthermore, they won’t be able to get jobs as lobbyists, when they leave Congress, because 80% of lobbyists are tax lobbyists and those jobs will be gone.

Up to now, the tax and spend crowd has been unable to slow down the FairTax. In fact, it’s gaining momentum. A flat income tax is the tax and spend crowd’s last hope for stopping comprehensive tax reform. So they use subliminal suggestion, by saying in one breath, things like, "We need to abolish the IRS and implement a flat income tax." By using this technique, they implant the suggestion that a flat income tax would not require an IRS, which is of course, impossible.

Should a flat income tax ever become reality and people start complaining to them that not only did they not eliminate the IRS, but that the IRS is auditing 20, 30, or 40 times more taxpayers every year, than before it was implemented, those politicos will be able to say that we never "promised" that a flat income tax would eliminate the IRS. They'll simply claim that those two statements were meant as separate needs and not meant to be taken together. But by that time, it will be too late and anyone who calls for comprehensive tax reform will be slapped down with the "give the flat tax time to work" argument.

Now I don’t believe for a moment that Senator Cruz wants to undermine comprehensive tax reform. Quite the opposite, actually. But the mere fact that one of our most ardent fiscal conservatives can be seduced to champion a proposal that will undermine comprehensive tax reform, just shows the power of the flat income tax spin. How many other members of Congress have been suckered by the flat income tax propaganda?

As concerned taxpayers, we need to make sure that our elected representatives don’t fall for the flat income tax scam. We need to contact our elected representatives and tell them that a flat income tax, far from qualifying as comprehensive tax reform, is actually designed only to undermine comprehensive tax reform. If enough of us do that, they’ll take the time to actually dig into the flat income tax and learn for themselves, what a scam it really is. They'll realize that a flat income tax can't exist without an IRS and that it will actually make the IRS more pervasive in our lives.

Cruz is a solid fiscal conservative, who’s already on board, as a co-sponsor of the FairTax (S 122), so it’s not like he needs a lot of convincing. We just need to get him and other fiscal conservatives in Congress to stop for a moment and take a critical look at the whole concept of a flat income tax. When you get past the spin and a cursory look at its outside appearance, the luster vanishes and the flat income tax concept falls apart of its own weight.

Once we get fiscally conservative congresscritters off top dead center on the flat income tax, passing true comprehensive tax reform, that really does abolish the IRS, will be a breeze. Of course, the only proposal on the table that accomplishes that goal is the FairTax.