Archer's Way

Don't like the IRS? Neither does Bill Archer. And now the mild-mannered Houston congressman is pushing a radical plan to shut it down.

Twelve years ago, he passed up an opportunity to run for the U.S. Senate. It was, according to those close to him, an agonizing decision. Campaign strategists believe he could have easily taken the seat (and Phil Gramm might still be teaching economics at Texas A&M). But while the Senate is a more visible platform, Archer decided, in the end, to stay in the House and work toward chairmanship of the Ways and Means committee.

Doing that required developing seniority; Archer, as it happens, comes from a district perfect for that. For a quarter of a century, he's represented the 7th Congressional District, which had earlier sent George Bush to Congress. Stretching west from River Oaks to Katy and to the northern edge of Harris County, the 7th is a Republican fortress. Democrats don't bother to run against Archer, and since he faces little opposition within his own party, he has few re-election worries. That may be one reason why, unlike many of this Republican colleagues, Archer has refused to take money from political action committees or so-called "soft money" that may be contributed in unlimited amounts. He goes beyond broad congressional requirements in reporting his personal finances, distributing a complete financial statement that puts his net worth at $2.2 million, including the value of his stocks, real estate and coin collection, as well as his three cars (two Ford Tauruses and a 1987 Dodge truck).

For most of his career, Archer has been devoted to a single theme: reducing the size and cost of government. And that, he has come to believe, can only be accomplished by shuttering the IRS. Archer has little faith in the idea that the complexities of the income tax can simply be smoothed out, that a reform here, an adjustment there will take care of the problems he sees. His clarifying moment on that score came with the 1986 tax reform act, which was supposed to make income taxes fairer and more simple. It was a bipartisan deal worked out by then-Ways and Means chairman Dan Rostenkowski with President Reagan, but, says Archer, it actually did nothing to truly make taxes fairer or simpler. While it lowered the tax rates on ordinary income for a while, the act restricted the ability of people to establish Individual Retirement Accounts and reduced employer incentives to contribute to defined benefit plans. It also rewrote the rules for real estate partnerships, which Archer contends contributed significantly to the downfall of banks and savings and loans. Archer fought the bill and his own party's president, losing by one vote on the floor of the House. Within a few years, says Archer, every benefit from the bill was wiped out, and a hundred new forms had been added to the tax code.

For a while, Archer toyed with the idea of further reform. But he gradually became committed to the idea that, if he were ever to gain control of the Ways and Means committee, he wouldn't try to reform the income tax, he would rip it out.

He has a huge task before him. He proposes to root out a tax system that has grown so complex that, although nobody completely understands it, most people have an interest in keeping at least some part of it the way it is. A good example of this entropy occurred when Steve Forbes spent $30 million on a presidential campaign based on the flat tax. A flat tax is "flat" because it proposes a single tax rate on everyone, to be calculated on a form the size of a postcard. But that meant, among other things, taking away the home mortgage deduction, and when the real estate industry produced studies that showed home values would decline by 10 percent to 15 percent under a flat tax, the idea lost its appeal to many homeowners.

Archer himself wasn't much of a flat tax fan. While he says it would be an improvement over the present system, he feels it wouldn't go far enough. It would still leave the income tax and the IRS intact. If a national consumption tax were instituted, on the other hand, the IRS could be completely wiped out.

Tax reform at this fundamental level invokes competing theories of justice and economics. One of Archer's favorite themes is that the income tax punishes work and saving, and that it encourages aggressive spending. A tax on consumption, on the other hand, would encourage people to save, creating a huge pool of investment capital that could lower interest rates and spur productivity.

Though abolishing the corporate income tax might seem like a break for big business and a punishment for consumers, Archer insists that businesses don't really pay taxes anyway, they just pass them along to consumers in the form of higher costs of goods and services. Some experts estimate that the corporate income tax adds anywhere from 10 percent to 20 percent to such costs. While a national sales tax might add 15 percent to 20 percent to consumers' purchases, in theory that boost would be offset by companies' reducing the cost of their products as their tax overhead disappears. In addition, instead of having taxes withheld, workers would get all their earnings up front.

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