Why Abolishing the IRS is a Recipe for Economic Disaster

Below is a summary of my YouTube video and podcast regarding abolishing the IRS.

Key Points:

• The current political chaos and talk of abolishing the IRS only increase concerns about financial instability.
• The idea of eliminating the IRS, recently championed by President Trump, ignores history. Those who forget their history are …
• Applying a 1913 financial model to today’s complex global economy is impractical, akin to reverting to outdated medical practices.
• The practical implications of abolishing the IRS are unclear, especially concerning proposals to use spousal tax returns for student loan repayment calculations.
• Self-employed individuals already face challenges securing loans; the absence of tax returns would exacerbate this issue significantly.
• The proposal to abolish the IRS while simultaneously wanting to use tax return information for loan calculations demonstrates a lack of coordination and logical thinking.
• Attempting to determine loan obligations without tax information and expecting the financial system to function smoothly without the IRS is a recipe for economic disaster.

Listen to this podcast.

No One Likes the IRS, But Get Rid of It?

I want to discuss incompetence, particularly how the current chaos seems to fuel political instability, which in turn breeds financial instability. One glaring example of this, in my opinion, is the talk around abolishing the IRS.

It’s interesting because this idea has been floated around before, by people like Senator Rick Scott. This led to President Biden mentioning Senator Scott at the State of the Union, which led Republicans and Senator Scott to quickly backtrack after the negative reaction. Now, Trump seems to be championing this, suggesting that things were better financially before the IRS existed in 1913. This notion just doesn’t align with historical reality.

I’ve even had people post the same on my social media page, but they don’t seem to understand that the Great Depression was partly triggered by tariff wars – a concept whose negative effects we’re witnessing even now.

To think that a financial system from over a century ago would work in today’s complex global economy is, frankly, absurd. It’s like telling your doctor or dentist to revert to 1913 medical practices – you wouldn’t want that. Unless you like pain, which is what you are feeling right now. Financial pain.

My confusion really sets in when I consider the practical implications of abolishing the IRS. Just the other day, the Trump administration, in a lawsuit filing, stated it would look at a spouse’s tax return to determine student loan repayment amounts, even for those married but filing separately.

• This is What Happens When You Vote Against Your Self-Interests

So, if we’ve gotten rid of the IRS, how exactly are they planning to access these non-existent tax returns to assess a spouse’s income? And more importantly, why should my spouse’s income dictate my financial obligations, like student loans? Can you imagine a credit card company doing that? It should be based on my debt and interest, plain and simple.

Let me illustrate with a hypothetical: If I were married to someone like Jennifer Lopez, would her significant income be used to calculate my student loan payments? Suppose I were a dentist, a profession often burdened with high student loan debt (I recall figures around $323,000 from a while back), I might not even earn enough to cover a loan payment based on my income. It just doesn’t make sense. Would this logic apply to mortgages or car loans? Of course not.

Furthermore, in a high-profile marriage, a prenuptial agreement would likely exist, clearly separating our finances. So, would the government disregard this legal agreement when it comes to student loans? It can’t do that. And again, without the IRS, how would they even access her income information, assuming she’s a W2 employee? You can’t have it both ways – either the IRS exists, or it doesn’t.

Ever Try to Get a Bank Loan?

This also raises questions about how anyone, particularly self-employed individuals like myself (since graduating law school in 1999), would secure loans for essential things like cars or homes without tax returns.

Banks already struggle to understand the income of self-employed individuals, or at least pretend they do. I remember a few years ago, trying to get a mortgage for just over $400 when my rent was $1550.

Despite a significant deposit and years of consistent rent payments at $1,550, the bank was hesitant because they couldn’t easily interpret my income. They even suggested I pay off my car loan – a tax benefit for me – before they’d approve the mortgage. It took explaining how to simply reclassify business expenses as personal income for them to understand. That didn’t work. I even argued the position considering the equity in the property, it’s only to their advantage that I default on the mortgage.

Note: Logic doesn’t work with lenders either.

 If banks struggle with this now, how will they assess loan applications without any tax records at all? It might be slightly easier for W2 employees, but for 1099 contractors, it seems impossible.

This whole situation feels like a prime example of the left hand not knowing what the right hand is doing. We see this kind of inconsistency frequently, and it contributes to the very chaos that breeds political and, ultimately, financial instability.

Proposing to eliminate the IRS while simultaneously wanting to use spousal income (gleaned from non-existent tax returns) to calculate loan repayments is illogical. And considering reports of significant potential staff reductions at agencies like the CDC and even the IRS (Internal Revenue Service), it makes me wonder how any of these proposed systems would even function.

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Trying to apply non-existent tax information to determine loan obligations and then expecting the financial system to operate smoothly without the IRS for essential loans is beyond comprehension. It’s a recipe for disaster, and frankly, it seems like those proposing these ideas haven’t thought through these basic issues. This kind of chaos is precisely how an economy can unravel – it’s that simple.

But of course, I’ll prove my point even easier as we see consistently with the Trump administration when they make statements, then take them back when they realize their errors. Before I finished this blog post, guess what? That idea has been scrapped for now because it was a “mistake.”

Mistakes have become the norm. While this issue focused on a lawsuit filed by the American Federation of Teachers because Income-Driven Repayment plans were removed from the Department of Education website, we have seen other major mistakes. Take, for example, DOGE clawing back Social Security funds.

Incompetence also has its consequences. It affects our safety and our wallets.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only. This transcript was edited for clarity.