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Why would CPAs not desire a simplified tax structure?

15 years ago, in the United States, there was a push to simplify the tax code. One option was to charge a flat rate for all incomes and to eliminate all deductions. Another was to eliminate the income tax altogether and have a federal sales tax. Either one would be a way better system than the mess we have now, where even accountants don't know which way to process. Yet, these ideas seem to be anathema to accountant friends. I suspect they fear losing their jobs because if it were simple, no one would need them. Are there other reasons why a simple tax form is rejected?

Answers

Anonymous
(CFO) |

The two forms of "simplified" tax structures you mentioned are NOT being rejected (going with your assertion that they are) because they are "simplified" but because they are REGRESSIVE.

The value of say, $100 in tax (on whatever basis) is not the same across the income/wealth spectrum.

If lawmakers are serious about "simplifying" thet tax structure, they should begin wittling (repealing?) down exemptions. tax breaks given to individuals and corporations. Our present "tax structure" did NOT begin like what we have now. In other words, TAKE OUT THE COMPLEXITY.....NOT THE SYSTEM!

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

They are only regressive in the eyes of a progressive. $100 is a hundred dollars. Whether I am rich or poor, that $100 is just what it is. My perception of it is uniquely my own. But, what I can buy with it, is universal.

Like so much in life, things have a way of becoming overgrown and a mess. There are just times when one stops pruning, starts over and replaces the overgrown mess. Our income tax system may be that overgrown jungle mess.

Anonymous
(CFO) |

A regressive tax (or system) is NOT dependent on a progressive's or a conservative's (libertarian?) point of view. Whether it disaproportionately affects (or burdens) lower income groups or not, IS the bar (and definition). For you to argue that it is dependent on liberal or conservative (or libertarian) point of view is an unsound (weak) argument.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

S/he didn't argue from any political perspective. Only that "disproportionately" as you contend is in the eyes of the beholder.

A $100 out of $10,000 is different than $100 out of $100,000 in terms of relative proportions.

But, 15% of $10,000 is less than 15% of $100,000 and the proportions are equitable.

Our current tax system is regressive in some measureable ways. Why should one work to earn more when the proportion of the additional earnings turned over to the government becomes greater on the additional earnings? The tax brackets as we know them.

The standard answer to that question is that they make more, so they can afford more and should be taxed accordingly as you argue. That is a value decision made by some that affects others.

The counterpoint is that they are being unfairly punished for making more whereas a flat tax is fair. We all pay the same proportionally. But then your argument of regressiveness is frequently offered.

There is no "right" and "wrong" here. Just differences. You can't please everyone. But envy and greed are powerful human vices that frequently drive political decisions. There are few places where this is more apparent than when discussing tax laws. And, neither "rich" or "poor" don't have exclusive rights to those two vices.

Which answers back to the OPs question: Why not simplify the tax code?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

It's a great question and it covers the gamut of responses/perspectives:
-taxation as a social policy tool
-taxation as a way for government to fund its services
-tax compliance as a pain for everyone
-taxation as a competitive tool
-special interests seeking the continuation of the status quo (lobbyists, certain industries and tax preparers) etc.

This would be a panel discussion (or series) that would be hugely interesting:) Maybe something Proformative would like to tackle?

Robert Barker
Title: Professor of Accounting
Company: Calif. State Univ., Northridge
(Professor of Accounting, Calif. State Univ., Northridge) |

I agree with Len that this question could easily become a panel discussion. However, my response will focus on just the part about why accountants, in general, do not favor massive reform. I am an accountant, having taught accounting and taxation for more than 40 years and been a tax practitioner for some periods of time. Every aspect of our extremely complex tax code/regulations benefits some group of individuals, and was meant to do so when enacted. (I know that a lot of tax discussion focuses on business entities, but the axiom is true that only individuals ultimately pay taxes. Tax payments by business entities are merely down payments.) Accountants get both professional and personal satisfaction from knowing how to "use" the tax law to deliver available tax benefit to clients. I know I do. Perhaps that translates into fear of losing our jobs, but I don't get the sense that fear is the primary source of resistance. Whenever any change, massive or mild, to tax law is proposed, accountants immediately begin tallying which clients will benefit or be harmed, and how much. They usually are not spending time discussing whether the change would benefit the citizenry as a whole.
I would welcome significant change to the tax world. The current level of complexity makes it difficult to "deliver available benefits to clients", in part because it forces specialization of knowledge to a degree that makes it very difficult for any accountant to grasp the entire situation for a client.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

"Tax payments by business entities are merely down payments."

How dare you speak the truth in a world of sound bite, politically correct answers. ;-)

Everyone wants more taxes. As long as somebody else pays them. You know? "Those" guys. :-)

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

It would seem that a major shift in tax laws would affect so many vendors of tax services that it would spell political death for many a politician.

Could it benefit the country to change to some type of flat tax/federal sales tax scheme - probably.
Could it level the field, so everyone pays the same (percentage), sure but those who make more would still not only complain but fund those candidates who will look to change the law back.
Would the agencies morph the law through interpretations that was not the congressional intent - sure would.

So in the end would we be better off???? If I knew the answer I'd win the lottery every week....

Lewis Turner Jr
Title: Treasurer
Company: Public Utilities Reports
(Treasurer, Public Utilities Reports) |

It's surprising to me that as one poster commented above that the focus is rarely on individual taxpayers. As an CPA/Tax professional, there are two reasons I would tweak but, not eliminate the tax code currently in place.

First, if there are approximately 100 million households and approximately 50% of those households owe/pay [are subject to] any tax whatsoever, a little less than half of those not subject to tax, are entitled to the EITC. Now, regardless of whether you think the EITC should exist or not [I myself was adamantly against it in the past]. The fact of the matter is, in a world where we bail out the largest banks, purportedly worth billions, when their practices are clearly against public interest. I'm not going to throw a fit over a family with 3 kids receiving a tax subsidy [as much as $6K] that, dependent upon where they live could pay their rent/mortgage for a year, with money to spare for fixing the car, or other repairs.

Secondly, human nature being what it is, the tax would not stay flat for long. A flat rate means just that, no breaks or incentives. The minute you change that, is the minute the tax race starts all over again (with less informed/intelligent people designing the laws. you disagree just go to youtube and listen to law makers and political pundits from 40 to 50 years ago and listen to how much more informed they sound).

Also, as far as putting tax professionals out of business, it's a non growth industry anyway. There are so many do-it-yourself tax programs, and jack of all trade tax preparers, that if you haven't already found or started to develop other revenue streams, you're in for a rude awakening, anyway.

Sorry, about the length of this entry. This is a subject I've discussed and debated ad nauseam. I tried to keep the arguments as basic as possible. Regarding, the numbers from my 1st reason, I don't have a link to those statistics, I've been reading articles, books and other publications containing one of those numbers or another for the past decade.

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