The Internal Revenue Service

When the committee hearings brought out the possibility of an Optional tax, the replacement of 1040 by the Sex Tax, the IRS knew it was in deep trouble. The vast bulk of taxpayers were included in the proposed optional taxation. The IRS rightly deduced that the intangibles of the new tax would outweigh any modification of 1040 possible. Not only had the possibility of double taxation first envisioned by the IRS as a consequence of the Sex Tax vanished, but the IRS upper echelon knew that it was in a fight for its life.

For many years taxpayers had grumbled about various features of the taxation system, but the IRS had, by a policy of divide and conquer, defeated all efforts to improve the tax code significantly. This stagnation was aided and abetted by congressmen, who, despite campaign promises and their ardent profession that they favored tax reform and reduction, continued to press for narrow and special-interest items while carefully counterbalancing any overall tax reduction with new gimmicks that increased the overall annual tax take.

The most effective scheme was, of course, inflation, which automatically increased the average citizen's tax without legislative action, silently, swiftly and steadily. The further practice of budget deficits with its resulting inflation was a wonderful retroactive tax on savings. It completed the armamentarium of the tax gatherer.

Camouflaged by pronouncements of the increasing complexity of society, hence the need for further regulation, further bureaucracy and vastly greater expenditure, the legislators were able to go about their professed course of spend and spend, tax and tax, elect and elect. Now suddenly, John Smith, with the innocence of a baby, this stripling legislator, a child in the adult world of taxation, had pointed the finger and touched the IRS. Indeed, the emperor had no clothes.

Now the team of Congress, President, and the IRS, which had functioned so effectively to raise the level of tax gatherings from a minor amount to nearly half of the total income of every American citizen, was about to be broken up. The legislative bodies were beginning to feel the pressure of the voters. Here was a tax measure that was indeed popular and a haven from the cold winds of economic reality that were beginning to blow through the halls of Congress. The President, also of the majority party, sought shelter too. His IRS was about to lose its raison d'être, sacrificed on the altar of political expediency. The President would wield the knife eventually with a government reorganization, as foreseen and promised in his campaign.

Technical explanations from key IRS actuaries fell on deaf ears at congressional committee hearings, Congressmen were simply running for cover from public dissatisfaction over taxes, running to the safe haven of public approval. The IRS could fend for itself. Forgotten were the valiant deeds of the IRS, which for so many years had muscled from the citizenry the huge amounts of money needed for the pet boondoggles of congressmen. The pork barrel had been kept adequately supplied. Now the IRS was being cut out of the action, and its howls echoed down from Capitol Hill hearings.

The IRS problem was simple. It couldn't defend its accounting kingdom against such a simple concept as sex taxation. IRS realized full well that there would have to be great staff reductions. A computer could check the Sex Tax forms, thousands per hour. No audits would be necessary. W-2s, estimated tax forms, penalty forms, all would be swept away in the tidal wave of the Sex Tax.

A special task force was formed by the IRS to intrigue congressmen with the possibility of using the Sex Tax to compound the tax program and increase the tax take. But their professional pride in double taxation, escalating tax schedules, taxing inflationary gains and various possible compoundings of these techniques with the novel Sex Tax concepts fell on deaf ears.

Most of the congressmen didn't understand taxation, particularly when adroit IRS accountant types presented proposals. Many congressmen dozed through the sessions, confident to let the IRS work out the money problems, aware that the IRS would make a decent case for the "will of Congress" to suit IRS tax-gathering ideas. The IRS had always had the advantage of being a part of the tax team. Now IRS was faced with a changed situation. They would be out in the cold.

Both national parties were taking the same position. Both, sensitive to the public that the new tax ideas were receiving, now realized what the situation was forcing. Neither party dared to turn back, lest the other score a triumph with the voters. The IRS was again caught in a publicly unpopular position, caught without either party's support.

Despite gloomy appraisals of the yield from the Sex Tax presented by a stream of IRS actuaries, the congressmen held to their course. The Sex Tax was simple enough for them to understand. Their political sense agreed with Congressman Smith's logic. They well knew that the amount of taxes collected from the fat cats and the excoriated rich was insignificant in the total take. They of all people were most aware that the rich were mainly of service to the tax department as scapegoats to take the attention of the public from some forthcoming well-planned raid on every man's purse.

If the author may be permitted an aside, he would like to explain in a technical sense why the high-income fraction of the population would not cause significant erosion of the tax base under the proposed "regressive" Sex Tax. Considering the very high incomes, it is obvious that they are high because the tax takes such a large bite. Were the tax reduced, the incomes would be reduced, perhaps not instantly but rather quickly. The balance would appear as profit to the corporation, which would be taxed at the usual corporate rate before the remainder was distributed as dividends or reinvested. Hence, the government's overall take would in the long run be scarcely reduced, if at all. Indeed, the increased investment would very probably aid the economy and generally increase the total available to the government.

Once it was made clear to congressmen that they could abandon the old bogey of "soaking the rich" for the new Sex Tax concept, which was now so popular, there was no holding Congress back. The IRS realized that the handwriting was on the wall. Perhaps this generation might call it graffiti, but the IRS had been weighed and found wanting.

The more perceptive of the IRS staff realized that it was time to move and sought other places within the federal bureaucracy. Many were disappointed, for most agencies were stuffed to the gills with accountants, or should one say staffed. This is not to say that there was a corresponding reduction in the other agencies; rather the opposite trend occurred. Nearly all agencies set about to expand their services in pursuit of the new Sex Tax concepts.

Usually upon the executive invocation of a crisis, bureaucratic activities could be rapidly expanded. The energy crisis was a good example of where everyone could get into the act. By the time everything was properly organized, the cost of administering the government's program was nearly as much as the total cost of the energy consumed, but it was considered an excellent example of responsive government.

In the interest of those not well informed of governmental processes, shall we say bureaucratic processes, for they are basically the same in all governments, a detailed study of the machinations of the IRS minions is well worth recording in full. What can be given here is only a sketch of the activities initially spawned by the threat of the Sex Tax.

Upon first hearing of the Sex Tax, the service was rocked by a wave of jubilation. To a man the tax gatherers were moved by admiration and contemplated Smith's idea with an awe that must have rivaled the wise men who observed a star in the east. A new tax day was dawning for the IRS.

Yes, a new day was dawning! The optional feature of the Sex Tax was the guarantee of their downfall. Even the IRS had grown tired of the old tax concepts; they had been stretched as far as they could go. The minuscule change of Congress each year merely provided busywork for the echelon of the IRS hierarchy that dealt with tax rulings. It was getting a little dull. The battle between tax gatherer and taxpayer, or rather tax collector and tax preparer was at a standstill. New regulations meant new opportunities for tax avoidance. Battle lines seesawed back and forth. But this war was being fought by mercenaries, each side being rewarded for its efforts and primarily interested in the fight, not the outcome. They needed each other like the prostitute and policeman. Together they formed an ecosystem.

When the truth dawned that there would be no opportunities created for fancy footwork by the accountants and no chance to issue more complicated tax rules, a wave of despair flooded over the IRS and lapped onto the beaches of tax-related civilian institutions. The idea of a simple gross tax, without escalation, without chance of avoidance, was prehistoric. It smacked of Roman days. What chance had the accountants on both sides? Why, the simple tax form would not be a desideratum; it would be a reality. How could one complicate a form that assessed only a gross tax? Everyone would pay the same tax, All one needed was his name, Social Security number, and his signature. Disgusting! H&R was panic-stricken! Had they known that in a few years the income tax would be entirely phased out they would have committed hara-kiri on the spot. Fortunately:

Nature from mankind withholds the book of fate
Except the page wherein prescribed his present state.

POPE

The ruling minions of the IRS gathered in solemn assembly to consider the disaster. What messages could they relay to Congress that would preserve their bureaucratic province? Certainly there had to be a separate form; it couldn't be tacked onto 1040 or 1040A.

The logic of using a separate form, which evolved at the meeting, was based on the premise that there were some poor souls who would not even have to file the 1040A, those on relief, unemployment insurance, or worse.

Yet under the new tax concept they weren't poor. They possessed, in their loins, riches beyond those of a Paul Getty, powers that could not be equaled by some captains of industry, powers that financiers might covet and for which they would give their all to recover.

Yes, there had to be an additional form required. But when the IRS had said that, they had said it all; further they could not go. All their accountant wizardry could not transmute the simple into the complex. The Sex Tax was simple, all-inclusive, fair, and effective--a taxman's nightmare.

In desperation the IRS officials met with H&R. In the dead of night the supposed antagonists conferred. Businessmen had been jailed for similar collusion, but this meeting could be rationalized under the necessities of the bureaucratic process. Who could prosecute the government's own agents for protecting their monopoly, for looking to the government's bureaucratic advantage-no one.

H&R could offer no succor; after all hadn't they for years been campaigning for a simpler tax form? True, a tax form so simple that anyone could fill it out would have robbed them of their business, but they had been confident that they could walk the fine line between too simple and too complex to increase H&R profits. They wanted the mass market, a quick fill-out form that would maximize profits. But this change was to be a disaster for H&R. They didn't realize there would be an eventual replacement of the entire 1040 tax form. It would be some years before they and the country would realize that a simple gross tax without political implications of redistributing wealth, without punitive social aims, without complexities engendered by special interest groups would solve the nation's tax problem. With this realization would come for H&R despair and finally merger into a productive corporate enterprise.

H&R could offer the IRS no help. Disappointed tax agents wended a weary path back to their hotel, chins down. They had also met with the Association of Tax Accountants, the Association of Tax Counselors, and indeed with all of the organizations that were derivatives of the tax establishment. All, all in vain. Even before the potential implications of the Sex Tax were apparent to the tax experts, the IRS sensed disaster. They felt that their expansion potential was curtailed. The year-by-year intrusion deeper into the citizens' pocketbook that had carried them from a few percent of income to nearly forty percent collected for taxes had crested. Never again would taxmen dominate American consciousness, even for a few months at tax time. The IRS couldn't know it but with exquisite bureaucratic sensitivity they began to perceive it. Their end was approaching.