REP. BILL ARCHER, R-Texas, who heads the tax-writing committee in the House of Representatives, wants to "tear the income tax out by its roots and throw it aside so it can never grow back again."
In a recent interview, the chairman of the House Ways and Means Committee finally revealed his thoughts on overhauling the federal income tax code. Archer had kept his cards close to the vest since last November, when he caused a stir by suggesting that the Internal Revenue Service be abolished.Archer's comments began to overshadow the GOP's Contract With America, so House Speaker Newt Gingrich promptly asked him to keep quiet on the subject until after the first 100 days were over. Archer is expected to officially endorse a tax-reform plan next month, but he agreed to give us a sneak preview of what's ahead on the tax front now that the contract is history.
Archer said he wants to replace the income tax with a broad-based tax on consumption, such as a national sales tax or a value-added tax. He added that Gingrich is now "very excited" about the idea, which would let Americans keep their entire paycheck and then contribute their share of taxes as they buy goods and services.
Archer believes the tax would have to be set between 15 percent and 20 percent to raise as much revenue as the current income tax, yet he knows that no reform plan will be foolproof. "I've had to say recently on a lot of issues up here that perfection is frequently the worst enemy of improvement," Archer said.
To begin with, replacing the income tax would save taxpayers the 5.4 billion hours they now spend filling out tax forms each year. "I'd like to get the IRS completely out of our individual lives," said Archer. "The cost of compliance is enormous under the current code. It's a total dissipation of wealth with no benefit to anybody."
The consumption tax Archer envisions would encourage Americans to save because it would not touch bank accounts or investments. Pharmaceuticals and medical supplies would also be exempt, but food would still be subject to taxation. While the elimination of popular deductions on mortgage interest and charitable contributions is certain to bring controversy, Archer thinks it's a nonissue because Americans are going to have more money in their pockets in the long run.
Archer is most excited about tapping into the so-called "underground economy" as if it were an oil well in his Houston congressional district. He believes a consumption tax would collect most of the $200 billion in potential tax revenue that flows down the drain each year because of Americans who hide their income. Drug dealers and others who currently pay no taxes would be hit any time they use their illicit proceeds to buy cars or other luxury goods.