Is the Tax System Beyond Reform?

Abstract

Immediately after the 1994 election giving the Republicans control of the U.S. House of Representatives for the first time in 40 years, Congressman Bill Archer (R., Tex.), who was in line to become the new chairman of the House tax-writing committee, announced his intention to abandon the income tax system altogether. According to Archer, the current system is too broken to be fixed and therefore needed to be replaced with something completely different, such as a national retail sales tax.This paper first explains why a national sales tax is not a viable alternative as a complete replacement for the income tax. Although Archer retired from the Congress after the 2000 election without having made any progress on his objective, subsequent events have made clear the continuing interest in this plan. The paper describes and analyzes H.R. 25, a bill to replace all income, payroll, and estate and gifts taxes with a national sales tax. This proposal was recently popularized in a book entitled, The FairTax Book: Saying Goodbye to the Income Tax and the IRS, authored by Neal Boortz and Congressman John Linder, the lead sponsor of H.R. 25.Second, the paper explains why Archer's pessimism about reforming the income tax may be well placed, although perhaps not for the reasons he had in mind. The paper explains why the current legislative process is not conducive to enacting the type of amendments necessary for real tax reform.