George K. Yin, Dunwody Distinguished Lecture in Law: Is the Tax System Beyond Reform?

58 Fla. L. Rev. 977 (2006) | | | |

TEXT :: Immediately after the 1994 election gave the Republican Party control of the U.S. House of Representatives for the first time in forty years, Congressman Bill Archer (R-Tex.) held a press conference in the Committee on Ways and Means hearing room. Archer, who was in line to become the new chair of the House Tax- writing Committee, announced his intention to abandon the income tax system altogether and replace it with a broad-based tax on consumption. He would repeat this vow many times during the succeeding six years.

At the first of a series of hearings held by the Committee on Ways and Means on “Replacing the Federal Income Tax,” Archer elaborated on his thinking:

[T]oday could be perhaps one of the most important hearing days in the history of this Committee, because we are undertaking a very ambitious challenge, and that is to look at ways to replace the current Income Tax Code. . . .

. . . Many of you know that I have spoken out very strongly about this and I have reached the conclusion that after many, many efforts to reform the current system, it is unfixable, if that is a correct English word; that it is certainly too broken to be fixed. And I believe we should look at options to replace it. . . .

. . .


In my opinion, our challenge is to do no less than pull the current Income Tax Code out by its roots and throw it away so that it can never grow back. When we abolish the income tax from the books as an insurance policy, I would not mind seeing the repeal of the 16th amendment to make doubly sure that the income tax won’t rise from the dead and ever again haunt the American people. As for what replaces it, I believe the answer is a broad-based consumption tax . . . .

In subsequent discussion, Archer made plain his belief that only a transactions- based consumption tax remitted exclusively by businesses, such as a national retail sales tax, would be acceptable as a replacement, and only if it were a complete replacement for the income tax. He specifically rejected, for example, a “personalized” consumption tax involving some reporting by individuals, such as the Hall-Rabushka “flat tax” sponsored by Congressman Dick Armey (R-Tex.), who was then House Majority Leader.

This Article focuses on two aspects of Archer’s famous vow. Part I explains why a national retail sales tax is not a viable alternative as a complete replacement for the income tax. Although Archer retired from the House after the 2000 election without having made any progress on his objective-indeed, he never even introduced a bill in Congress to repeal the income tax and replace it with a tax such as a retail sales tax -subsequent events have made clear the continuing interest in this plan. For example, in the 2004 election, the Republican Senate candidate from South Carolina, Jim DeMint, ran on a platform to replace all federal taxes with a national sales tax. Although his position was sharply criticized by his Democratic opponent, he prevailed with 54% of the vote. In the current Congress, Congressman John Linder (R-Ga.) has re-introduced H.R. 25, which seeks to replace the individual and corporate income tax, the estate and gift tax, and the payroll tax with a national sales tax, and his bill has garnered about fifty co-sponsors. President George W. Bush, Speaker J. Dennis Hastert, and other prominent congressional leaders have all commented favorably about the possibility of a national sales tax. Finally, syndicated radio talk show host Neal Boortz and Congressman Linder have written a book, entitled The FairTax Book, in support of this plan, and the book reached the top of the New York Times best seller list during the latter half of 2005. Thus, it is timely to evaluate the viability of this idea. It is also fitting to discuss the idea in Florida, one of the few states in the nation without any state individual income tax and with a heavy reliance upon a retail sales tax to finance the state’s needs. If Florida can do it, why can’t the nation?

But if I succeed in Part I in establishing that a national retail sales tax is not a feasible option, are we then left with a tax system that is, in Congressman Archer’s view, “too broken to be fixed” and effectively beyond reform? Part II begins to evaluate this further claim. It describes other possible ways to replace the income tax with a broad-based tax on consumption and concludes that a proposal specifically rejected by Archer, the Hall-Rabushka flat tax, provides a viable structural framework within which a replacement tax system could be designed. It then speculates on why Archer nevertheless rejected this option and suggests that pessimism about the tax legislative process may have played a role.

Part III discusses the legislative process. It identifies two trends-a greater top-down organizational structure and an increasingly fractured and externally focused legislative body-that may justify pessimism about the successful passage of real tax reform by Congress. In short, there may be more truth than we might like to believe in Archer’s assertion that the current tax system is presently beyond reform. Part IV concludes the Article.

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