What Would an Independent I.R.S. Look Like?
The Harvard economist (and blogger) Greg Mankiw has written an excellent primer on the Federal Reserve’s power to influence the economy, making much of the the fact that the Fed is politically independent and can therefore afford to ignore public sentiment more than politicians can.
His piece got me thinking about what a lot of people have been thinking for years: what would happen if the I.R.S. were independent as well? If you’re interested in the subject, you might want to check out this 1998 testimony before the Senate’s Finance Committee by Margaret Milner Richardson, a onetime Commissioner of Internal Revenue. She was all in favor of independence — no big surprise, perhaps, considering her former position; but her points are well worth considering.
I still feel, as we wrote a couple of years ago, that the I.R.S. is like a big police force charged with enforcing a bunch of rules that are unpopular, constantly disputed, and set by someone else.
Judging from a pair of very interesting posts on Marginal Revolution about taxation (including this one, about who pays what share of tax and this one, about how tax money is spent), and also judging from some of the comments following our recent post about charitable donations, there are a lot of other people who feel, like me, that taxation is an inherently political enterprise as it is now configured. The I.R.S. is a convenient scapegoat, but let’s be real: if the I.R.S. were even half as independent as the Fed, would politicians (especially in campaign mode) get to constantly play yo-yo with taxes, as they do now?
FWIW, there is a pair of interesting tax-related articles in today’s Wall Street Journal. This editorial bemoans a new effort in Congress to impose an e-commerce tax, and this op-ed makes an impassioned pitch by Leo Linbeck for the FairTax. Among the questions raised by the latter: “Is it really in everyone’s interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes?” Like I said, there’s no way such a fight can be fought with a politically beholden I.R.S. Which makes Linbeck’s argument, as compelling as it may be, the ultimate Catch-22.