Discussion:What are odds of a flat tax any time soon?

Just wanted to get some feedback/opinion on us tax pros' concerns about a possible flat tax and/or tax simplification.

My fear is that after 9 years of very hard effort and finally building a good tax practice it will be all for naught at any given moment.

Am i paranoid or legitemate concern?

Thanks

Will

The 1986 "simplification" from Mr. Reagan and Mr. Rostenkowski only increased our business.

thank you for your time and input !!

Will

Think about this. No matter what system of taxation, short of a national sales tax, you still have to determine taxable income. For easy returns, yes, a tax practice could suffer if a flat tax was created. But for any return that has much more than w-2 and interest, the same questions will still apply. Even with a national sales tax, the question of sale price and the nature of items purchased for resale must be determined. I have long argued that it isn't necessarily as much the tax law that makes this business complicated as it is the nature of transactions.

Having said all that, I still don't understand why one person who works double shifts at a factory, gets time and 1/2 and saves it for a rainy day should pay a higher rate of tax on any portion than another person working at the same factory regular time and "playing" on weekends. IMHO M.97CW

But seriously, as a profession I think we should be very careful to take the high road and enthusiastically promote a flat tax for the good of the country.

We don't want to be seen as oncologists who fear a cure for cancer. We would be better off being perceived as rejoicing if cancer were cured or tax simplification were achieved. We're in a unique position to see the damage tax complexity and uncertainty does.

After all, we're capable individuals and would find another way to make a living if there was less tax compliance work to do.

Totally agree with DerekCPA odds: Zero to None!

If by "flat tax" you mean tax at a single rate on gross income (or gross receipts), believe me, it wouldn't put tax professionals out of business. We'd still have to determine the base. In fact, the Alternative Minimum Tax is the original "flat tax." Simple, huh? It's not graduated rates that make taxes complicated, it's the base. And there will still, always, be issues in calculating the base.

If you want to see how "simple" a gross receipts or gross incoome tax is, check out the Washington Business and Occupations Tax or the new Ohio, Michigan and Texas taxes. People are scrambling to figure out the new ones, and the B&O tax is anything but simple, especially as applied to the "new economy."

If we went to a national sales tax, those of us who have some experience with state and local sales and use taxes would have a field day. We tend to think sales and use taxes are simple because we look at them from the consumer's point of view, but under an NST a lot more people would be sellers than are required to collect and pay over sales and use taxes to the states now. In order to raise the required amount of revenue without extremely high rates, the base would have to be much broader than the traditional sales and use tax base (generally, sales of tangible personal property unless specifically exempt, and specifically listed services) to include almost all transactions in the economy. And of course, special interests will be lined up on the steps of Congress lobbying for exemptions. Also, if you've never been through a sales and use tax audit, you have no idea how intrusive such an audit can be for a small business. No fear, it will be complicated.

27 year unbeaten streak at Arlington H.S. football??, that is insane!!

they must be on HGH all these years.

thanks everyone for putting my mind at ease about flat tax. flat is a 4 letter word after all, so i wont mention it again.

Will

It would surprise me if it ever flew but you never know it is gaining steam but I think it is because people think it would be cheaper and they hear the words "No IRS" but regardless of what you call it somebody has to collect and count the money.

I do hear people in my office talk about it and I explain that it is like our property taxes in that if the politicians decided to increase there is nothing we can do but pay it and at least with our current system we do have options of saving, deductions and so forth that gives a little leverage to the people.

Also I have been told that Congress realizes that even though what we have now is not perfect it does work for the most part and it can be controlled and the income tax business is a very good US business that supports a lot of families when you take into account the software companies, tax prep businesses, CPA's, Tax attorney's and etc.

I have been told the National Sales tax would be one of the hardest to keep up with due to all the small businesses and this is probably the hardest to enforce and collect

Something else I have always wondered is that if we did have a major change like that what about all the self employed people they are going to have to report SS wages some way or another and I am not sure about ya'll but I would not be able to keep my doors open based on the small business bookkeeping, sales tax and payroll reports and these would still have to be filed

For what it is worth I think it kind of like Health Care, it is an easy thing to gripe about but almost impossible to change

You make perfect sense. I also believe it will be almost impossible to change. You will notice I did not use the words "flat" or "value". They are no longer in my vocabulary, promise.