Big bang.

IN only three days, Sen. William Roth's hearings on the IRS's trampling of taxpayers' rights triggered a far greater public outcry than six months of Sen. Thompson's hearings on campaign-finance misdeeds. Overnight polling by USA Today/CNN revealed that 69 per cent of the public believes the IRS "frequently abuses its powers." For the first time since Ronald Reagan helicoptered away from the White House on January 20, 1989, the GOP has a golden opportunity to regain the high ground on tax reduction.

The Republican opportunity is all the greater since the Clinton Administration has blundered by defending the IRS as currently constituted. Treasury Secretary Robert Rubin, sound on trade and inflation, reverted to big-government liberalism by repeating as a mantra: "The IRS is funding the government." Huh? It is America's taxpayers who pay government bills, not the tax-collection agency. What is more, Rubin and his redistributionist deputy, Lawrence Summers, have persuaded President Clinton to oppose a bipartisan recommendation from Congress for an independent IRS oversight board which would include government officials and private citizens. (Clinton wants only officials on any proposed board.) This approach is backed by the National Treasury Employees Union, Americans for Tax Reform, the National Taxpayers Union, the Institute of CPAs, the National Federation of Independent Business, the American Payroll Association, and the National Association of Enrolled Agents.

But the Republican Congress has even bigger fish to fry. The heart of the problem is an indecipherable tax code which must be completely overhauled. So the GOP must harness the nation's anger at the IRS in the service of big-bang tax reform. The GOP leadership's current plans for a business-as-usual tax cut in 1998 must be scrapped. It will lack credibility and is likely to be just as complex and ineffectual as the 1997 bill. Nor is there any sense in waiting three more years -- a political eternity -- for the 2000 presidential race. Instead, Messrs. Lott and Gingrich should create a working group -- perhaps a bipartisan panel with a three-month life -- charged with crafting a proposal to be submitted in early 1998.

The debate over Bill Archer's retail sales tax and Dick Armey's flat tax has gone on long enough and must be settled. The proposals are two sides of the same consumption-based coin. Both are broad-based single-rate systems that would disallow the multiple taxation of savings, investment, capital gains, corporate profits, interest, dividends, and inheritances. Each would be simple, each fair. Each would engender a drastic rollback of IRS authority. And each would significantly raise after-tax economic returns, making a 4 per cent economic growth path a plausible twenty-first-century goal.

Of course, there is a risk that a 17 per cent flat income-tax rate might be sharply raised by a future Congress -- unless a two-thirds super-majority is required. There is an equal risk that a 15 per cent sales tax might be supplemented, European-style, by a resurrected income tax if the Sixteenth Amendment is not repealed.

If big-bang tax reform must take place in stages, Cato economist Stephen Moore's Max-Tax plan would be a useful transition. This proposal offers taxpayers the option of paying a simple 25 per cent rate on gross income, with a dollar-for-dollar credit for Social Security and Medicare payroll taxes -- in effect, a 10 per cent tax rate for taxpayers making less than $60,000 and a 25 per cent rate for those making more than $60,000. Another broad-based option would eliminate all means-tested limits to the Roth Super IRA, allowing unlimited saving of after-tax income with only capital gains taxed at the back end. It would be a perfect vehicle for private investing of retirement-directed payroll taxes, medical insurance premiums, or education savings accounts.

The IRS revolt shows the way. Now is the time for the GOP to think big -- and act quickly.