[Update below]
My roommate used to work for the IRS managing databases. Perhaps this gives him a unique perspective, because recently he said this to me:
"When I hear a candidate say that their tax system idea will 'shut down the IRS', I stop listening. They don't know what they're talking about."
Why is that? Because someone is still going to have to process the forms. Let's say we have a flat tax. Great, if you're single and have one employer. What if you're self-employed? You'll have to report your income to someone, and that would be the IRS.
Let's say it's a national sales tax. It's agreed that's overly punitive for the lower income folks, because they spend their whole paycheck and therefore pay a higher percentage of their income in taxes. So national sales tax plans usually involve a break for the poor-- if you make less than x, you're exempt. OK, so who do I tell that I'm exempt? I'll have to fill out a form and someone will have to process it. That would be the IRS.
You could dismantle the IRS, get rid of its assets like facilities and computers, fire its staff, and create something else, buy all new stuff, get new buildings, and hire ex-IRS employees, but I dare you to name it something more vague than "the Internal Revenue Service". So long as revenue is generated internally in this country, someone's going to have to service it.
As if to prove my friend's point, Mike Huckabee spoke on New Year's Day and said that his Fair Tax plan would do away with the IRS. "Citing a poll conducted by FOX News, Huckabee said, 'The average American is more afraid of being audited than being mugged. This didn't make sense at first, but when you think about it, it does make sense. When you get mugged it only lasts a few seconds. When the IRS comes after you, they don't quit until they have every last dime and it could take years,' Huckabee quipped." (Iowa Independent)
Or, as my roommate put it, "every last dime you owe the government". Well, when you put it that way...
But even so, all I could think of when I heard that Huckabee quote was, the federal government is US. If we're so afraid of ourselves, maybe we should change the rules, yes? Or are those rules important to keep people from cheating, as the lawmakers clearly believe? Either way, quit telling me about how a government agency is so "bad" that we would kill it. Fix it! (Except those created in knee-jerk reactions like the Dept. of Homeland Security, of course.)
And back to my friend's point: Huck's Fair Tax plan involves a national consumption (sales) tax. And he says he'll kill the IRS. Well, who will collect the tax? And his plan involves cutting a check to every American to cover x amount of the consumption tax. (This makes it so the poor aren't paying that disproportionate amount.) Who does he think will write these checks and distribute them? And how will we know who every American is unless they fill out a form and send it to... someone? That's even assuming that the poor can get these checks-- we're talking about the homeless, the poor who rent and move a lot, students, etc. There are many problems with this plan, but not the least of the problems is how we will implement this system without an Internal Revenue Service to, hello, service the revenue generated internally.
So I have come around to my friend's opinion: if you say your tax plan will do away with the IRS, then you clearly don't know what you're talking about.
UPDATE: There's a great article on this on Salon.com (you'll have to watch a short ad before accessing their site). Listen to this:
The FairTax doesn't eliminate the IRS. It replaces the IRS with another agency -- the United States Fair Tax Federal Revenue Administration and State Tax Authority Reconciliation Service, or the USFTFRASTARS.
Hah! So, there you go. Just in acronyms alone this system makes things more confusing!
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