Cruz’s modest proposal is to eliminate the agency and replace the tax code it enforces with a flat tax, “where the average American can fill out our taxes on a postcard.” The flaws with a flat tax are well known, especially so soon after a presidential election that featured flat tax proposals from nearly every Republican candidate. The primary flaw is that a flat tax is steeply regressive. It would raise rates for low- and middle-income Americans, while providing the wealthy with a tax cut.
But beyond the standard issue of fairness, Cruz’s specific proposal is incoherent. The problem is with his very next sentence after the familiar line about shrinking the tax return down to postcard size: “Put down how much you earned, put down a deduction for charitable contributions, for home mortgage, and how much you owe.”
Cruz suggests maintaining charitable deductions – in effect, a statutory diversion of public dollars to groups designated to be fulfilling a charitable purpose. This would require some legal definition of what qualifies a group to receive such subsidy, and then some process to assure that those groups that claim to meet such definition are in fact in compliance with it. It is difficult to imagine how a system of charitable deductions could exist without the agents and bureaucracy Cruz proposes to abolish, at least without opening the door to vast waste, fraud, and abuse.
Cruz is only the latest of many Republicans to allege a clear and Watergate-like connection between President Obama and the Cincinnati IRS office’s actions, despite an Inspector General’s report finding no such conspiracy. The IG’s report states that the IRS used “inappropriate criteria to identify organizations applying for tax-exempt status,” and that every staffer it interviewed attributed the origination of those criteria to “first-line management” in the agency’s “Determinations Unit,” not to political officials or the office of the president. The IG’s report includes multiple recommendations for how agents and bureaucrats can establish and enforce the appropriate criteria upon which tax-deductible charitable giving depend.