In the last week of 2017, the Washington Post published an article highlighting perhaps the biggest winner from the the new GOP tax plan: accountants.
The bill’s passage on partisan lines, along with the rhetoric that’s followed, is yet another indication that the two parties and their enablers in the media are more interested in staying in power than being honest with the American people or truly doing what’s best.
Many Americans have been debating this topic and as has sadly become the norm, the argument frequently becomes one between two competing narratives: one side championing a solution that will be fantastic, with the opposition predicting devastation.
How did we come to a world where so many people view one party as the Sith and the other as Jedi?
Finding common ground no longer seems to be a goal as bipartisan legislation and compromise have given way to a tug-of-war. We saw it during the Obama administration and we’re seeing it again now.
The media is complicit in a narrative that drives the left-right paradigm, with far too many pundits predicting this and any other legislation is either a windfall or armageddon. Critical thinking skills - and basic math - have been jettisoned in return for tribal loyalty.
The parties and the media continue to push competing narratives and the rhetoric surrounding the tax bill is no different. CPA Richard M. Prinzi Jr. told WaPo:
“TV has made people nervous. And exactly how depends on which news channel you watch. My Fox-watching clients want to know how much more money they can spend, and all my people who watch MSNBC think they are going to go broke if they spend anything on Christmas.”
Most objective analysts and even conservatives outside the Beltway have found things to both like and dislike about the bill. But when it comes to the real simplification that would benefit almost any taxpayer by making analysis straightforward, no dice.
I have written that any modifications of our existing tax code along the lines of the latest bill are largely a red herring because the reform we really need involves not just tweaks, but a dramatic overhaul that insulates the process from special interests.
There is no perfect tax code, but a simple one would be a better start.
Of course, if you eliminate all the complexity, it would prevent Congress from buying votes by handing out tax exemptions and deprive lawmakers of their ability to stay in power by rewarding lobbyists and donors. We simply can't have that.
If that isn’t obvious enough to most people, consider this: the nonpartisan research group Maplight, which tracks money’s influence in politics, contends that major tax and accounting organizations are not only spending funds on lobbying Congress and federal agencies, they worked to “prevent Congress from passing a proposal to implement a return-free filing system, in which the IRS would provide taxpayers with a filled-out form containing all of their information and estimate their taxes.”
Accounting Today reported in 2015 that Tennessee Democratic Congressman Jim Cooper introduced a “return-free” filing bill in 2011 that would have streamlined tax returns for most individuals, but it never even came up in the House Ways and Means Committee, which oversees the IRS.
In addition, Oregon Democratic Sen. Ron Wyden and Indiana Republican Dan Coats tried to include it in the 2011 tax reform bill. Cooper contends the lack of interest from Congress was largely due to opposition from companies such as Intuit and H&R Block.
This should come as no surprise. Reuters pointed out in 2012 the world’s biggest accounting/auditing firms are spending more than ever on both lobbying and campaign contributions.
While their spending pales in comparison to the biggest contributors such as Big Pharma, the trend is disturbing. Seven members of Congress reported owning between $57,000 to over $218,000 worth of stock in software maker Intuit, which in turn has spent over $23 million on lobbying alone since 2008.
As the WaPo points out, “complexity is a gold mine for accountants, saviors for a nation that doesn’t know its assets from its escrow.”
While there are parts of the new bill that will make things easier for some filers (doubling the standard deduction will eliminate the need for many to itemize), even this new “simplification” is making CPA’s into rock stars. Without something that is easy for the average person to understand, accountants will continue to be a necessary resource.
Regardless of any benefit, the lack of real overhaul exacerbates two significant realities. The FairTax website points out, “almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system.”
This bill is likely to make a dent in at least one area: CNN estimates about 30 million taxpayers who’ve itemized in the past may take advantage of the massive increase in the standard deduction.
On the other hand, filing may be more complex for people with business income from so-called pass-through entities including businesses and investment funds set up as sole proprietorships, partnerships, and LLCs.
Worse, as opponents have continued to claim, the bill is primarily a gift to the 1%, continuing an ongoing trend of claims that the rich and corporations don’t pay “their fair share,” while we continue to ignore those who don’t report income at all and pay nothing.
While there is plenty of seemingly otherwise harmless work paid for under the table, ranging from nannies to odd jobs, others are among society’s worst criminals. Street thugs and drug dealers, all the way up to cartels and organized crime don’t file W-2s or 1099s and get little scrutiny from most of the people who ostracize the wealthy who’ve stayed within the law.
Considering the Washington Post reported in 2013 an estimated “18-19 percent of total reportable income is not properly reported to the IRS” resulting in “as much as $2 trillion in underground economic activity, with about $500 billion in taxes that aren’t being paid to the government,” perhaps there is a better place to focus our outrage.
While the new tax bill will make it easier and cheaper for some, Americans will largely still be forced to pay people to decipher the tax code so they can try to take full advantage.
The two major parties will continue to exploit this. As Roger Harris, president of Padgett Business Services commented to Accounting Today, “Politicians can’t help themselves. They want to give you something and the best way they can give it is through the Tax Code.”
Photo Source: AP