President Bush has steered two good tax cuts through Congress. Lower tax rates and reduced taxes on dividends already are yielding good results for the economy and helping to make America more competitive. But faster economic growth should not be the only goal of tax policy. The President and Congress also should drain the political sewers and put a big dent in corruption by replacing the internal revenue code with a simple and fair flat tax.

Our tax system has become a monstrosity. With more than 1,000 forms, notices, and publications, the tax code is a Byzantine labyrinth of special interest loopholes, preferences, deduction, exemptions, credits, and shelters. This creates rampant discrimination as people with similar incomes often have wildly different tax burdens depending on how they earn their income and how they spend their income.

This Rube Goldberg system is scandalously unfair, but also is a huge drain on our economy. Some of America’s best minds are focused on tax code compliance and loophole-mining instead of seeking new ways to produce better products and more attractive prices. The aggregate cost of lawyers, lobbyists, and accountants — not to mention the 5.4 billion hours required each year to fill out tax forms — is about $200 billion according to the nonpartisan Tax Foundation.

This “hidden tax” is enormous, amounting to more than $1,000 for every American taxpayer. Some say compliance costs don’t matter because two-thirds of the burden falls on business, but this is a preposterous assertion. Any cost imposed by business is going to be passed on to individuals, whether in the form of lower wages for workers, higher prices for consumers, or reduced dividends for investors.

So what does all this mean? We know the internal revenue code is a disgrace. We know it imposes high compliance costs. And we know the current tax system is a web of special interest loopholes that create winners and losers based on political access instead of economic merit. (We also know that high tax rates and double-taxation of saving and investment hurt the economy, but that is a topic for another day.)

For all these reasons — and many others, we should repeal the current tax code and enact the flat tax. Imagine how simple April 15 would become if we only had two simple postcard-sized forms. Just think how much time and money we would save if filing a tax return was no more complicated than helping a second-grader complete his math homework. And wouldn’t it be great to have a tax system that got the government out of the business of social engineering and back-door industrial policy.

But if a flat tax is such a great idea, why are we stuck with the current mess? Most people think the answer is class-warfare politics. In part, they are correct. There are some politicians who fan the flames of hate-and-envy. They genuinely seem to believe in the old saying, “From each according to his ability and to each according to his needs” — though, to be fair, it is doubtful that any of them realize that this is a Marxist slogan. These people want the tax code to punish success and they often are so ideologically motivated that they are willing to fight for punitive tax laws even when the net result is that the rich pay less money because high tax rates encourage tax avoidance and tax evasion.

While class warfare is part of the story, special interest politics are the real obstacle to tax reform. Simply stated, there is a huge $8.4 billion lobbying industry in Washington that benefits from a complicated tax system. If the tax code was ever fixed, these people would lose a lucrative source of income since businesses and entrepreneurs no longer would need to have hired guns in Washington to plead for special favors (or to seek protection from special penalties). The lobbying industry also has an ally in the tax preparation industry. Companies like H&R Block oppose the flat tax since it would destroy their business.

But the lobbyists are the most powerful enemy of tax reform. Former House Majority Leader Dick Armey produced an excellent paper explaining why special interests and lobbyists oppose the flat tax. As the paper explains, there are 125 lobbyists in Washington for every member of Congress. Moreover, the number of lobbyists is closely correlated with the number of words in the tax code. In other words, a vicious cycle is at work. More tax code complexity leads to more lobbyists, and more lobbyists lead to more tax code complexity.

The bad news, of course, is that these lobbyists have a vested interest in protecting the status quo. These people earn very lucrative incomes, and the last thing that they want is a simple and fair flat tax. Perhaps a personal story will demonstrate this phenomenon. In the last 10 years, I have given several hundred speeches and presentations about tax reform and the flat tax. I have spoken to very left-wing groups. I have spoken to housing associations and charities. In almost every case, I have been treated with respect and consideration. Indeed, I even think my presentations have changed a few minds.

But I will never forget the time I spoke to a group of lobbyists for Fortune 500 corporations.? Perhaps because I was naiíve, I began my speech thinking that these people were going to be big supporters. After all, how many times had I heard liberals talk about the flat tax as a boon to big business? In reality, I was lucky to leave the room alive. Not only were these lobbyists against the flat tax, they were the most vicious audience I have ever encountered. It did not take long for me to realize that these people viewed tax reform as a threat. They probably earned, on average, more than $500,000 annually because of the current tax system. Little wonder, then, that they raked me over the coals.

The inside-the-beltway lobbyists are extremely powerful, and many politicians are loath to upset these people since they help direct so many campaign contributions. Adding insult to injury, many politicians and congressional staff are perfectly happy to maintain this corrupt system because they intend to become lobbyists themselves. And since their ability to earn big fees is closely tied to their “insider” status and their ability to explain complicated tax code provisions (which they wrote!), it should come as no surprise that tax reform is not a big goal for many people in Washington.

Last but not least, we shouldn’t forget the IRS. With nearly 100,000 employees, the IRS is one of the biggest bureaucracies in the federal government. It does not take a rocket scientist to understand that IRS bureaucrats also despise tax reform. This means that there is an iron quadrangle – lobbyists, tax preparers, bureaucrats, and Congress – of interests aligned against tax reform.

That is the bad news. The good news is that the American people are on the right side. Polling data continues to show that voters want to junk the current system and adopt the flat tax. The 2001 and 2003 tax cuts were small — but important — steps toward fundamental tax reform. With a little more leadership from the White House, the flat tax may not be such an impossible dream.