If, as some think, the federal income tax will be abolished, there will be MANY industries affected. Among them include:
The entire accounting industry.
That portion of what they do for those whose only contact with them is filing taxes once a year will likely just about disappear. If there is no federal income tax, the majority of what that need to use professionals just about disappears. No more H & R Block, Liberty Tax, or most other retail operations.
Businesses, on the other hand, will continue to have some need for the services of professionals. They will still have a need to see if the business is profitable, and in which products, departments, and subsidiaries. Those businesses with foreign aspects will need to keep track of those parts of the business that is affected by foreign taxes, duties, and tariffs.
A lot of the work of accountants will shift to cost accounting, profit-loss statements, and balance statements for reports to shareholders/partners/investors (present as well as potential), as well as informing the owners about the business’s status.
Real estate – a substantial part of that business is having a place to shelter income from taxes, writing off investments, and home and corporate tax deductions for mortgages. Without those tax breaks, many of the oversized homes no longer make fiscal sense. This could lead to a collapse of the high-end housing market in many states – most of them Blue States.
Buying/keeping businesses for long-range profit – such investments largely depend on being able to declare losses in the present, taking the tax break to offset other income, and being able to wait for a profit later. That might affect new businesses, particularly of the venture capital market.
The Stock Market – what holds back speculative investment for short terms is the bite of the Capital Gains tax. The markets might very well become even more volatile and unstable.
Offshore manufacturing and investment – much of the time, a substantial part of the lure is the opportunity to shelter earnings in low-tax companies. That would be ending, should the income tax go, or at least reduce the desirability of such investment.
The bond market – particularly tax-free municipal bonds. Even other types of bonds might suffer in attracting buyers.
So-called ‘gentleman’s farming’ – rather than providing tax breaks and other incentives from the federal government, the operation would have to make money by actually FARMING. This could be a bigger change, should agricultural subsidies to part-time farmers cease (which I think they should). I’m of the opinion that the farms qualifying for any assistance should be those in which at least 1/2 or more of the farmer’s time and energy are dedicated to agriculture (with the exception for family members working at an outside job for the health benefits/retirement benefits).
But, the farms owned by rich people strictly for the tax breaks would no longer make sense. In fact, investment in real estate beyond that needed for current homes and business operations, other than those renting out that property, would end. No more buying properties that are left vacant, hoping for the profit of a rising real estate market.
ALL of the many ways that the involvement of government in commerce, and how it affects the flow of money, would cease (other than the local involvement in businesses). That could disrupt much, if not most, of trade throughout the world. Our interconnected world might suddenly shrink.
What other changes could you anticipate?
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Many would wish for abolition of the federal income tax. Many will be sorely disappointed. The income tax was correctly viewed as anathema by The Founders because it was tantamount to slavery, if not outright slavery, defined as taking another man’s labor by compulsion rather than in a free exchange. It took a Constitutional Amendment to make it legal, and I am afraid we are stuck with it. To disentangle ourselves from its invasive influence at this point is probably a task that not even Damocles could accomplish. Tax consequences are, as you pointed out, a feature of every commercial transaction and in some cases, the sole consideration for such transactions. As in, “tax sheltered investment” and “tax writeoff.” An illustration: my daughter gave me a ride in her newish car the other day and showed me a feature in her “entertainent system,” which she said she included as an option because she writes off her car lease expense against her self-employment income. I could not help but be reminded of the scenario where the lady of the house announces that she has “saved” money by purchasing goods “on sale.” It never occurs that she has not saved, but spent. The income tax forces us all into such modes of illogic.
There are certain ways that governments have to encourage behavior, and merely allowing it to be legal is sometimes insufficient for their intended purpose(s), so they have varying financial pressures, ranging from tax breaks (buying favored products), tax-free purchases (food, etc.), tax exemptions (children/marriage) and even outright subsidies (college grants, agricultural, etc.). There are also ways for government to use that financial pressure to discourage behavior short of actual criminalization and incarceration – luxury taxes, tariffs, fines and penalties.
Take that away, and people will have to go back to actively allowing the government to control their lives, instead of “get that weak sauce outta here”.
The tough part will be repealing the 16th Amendment, but a good first step would be to scrap the entirety of the hyper-convoluted Tax Code, and require people to submit their tax returns on a postcard – i.e. “How much did you make last year? Write a check for X% of that amount. Mail to…” This would expose all the hidden taxes permitted by the paycheck withholding which gets covered up by the “Hey, I got a $75 refund!” annual reaction. Making it obvious what kind of harm is being done to us is the obvious first step to stopping it. (Hey, can we repeal the 17th while we’re at it?)
As much as I’d like to see the income tax done away with, I don’t believe I’ll ever live to see it happen…too many rice bowls would go unfilled, as you’ve already listed above.
I don’t see it happening in my lifetime, but I don’t see any downside to it if it did.
Tax-free munis? I have several, for obvious reasons, but the key to a balanced portfolio is balance. So cities would have to start doing things that made sense, rather than just to let rich people pay less tax? OK.
CPAs and tax preparers having to find new jobs? OK. Just because the guys bailing water out of the ship will have to find something else to do if you patch the hole in the hull, you should still patch the hull.
Stock market restructuring around production rather than tax consequences? “Don’t throw me in that briar patch, Br’er Fox!”
Real estate devaluing? Meaning young people would be able to afford a home, mom could stay home and raise kids? Like that’s a bad thing?
Etc.