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Chairman's Report - November 10, 2017

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Chairman's Report - November 10, 2017



One of our Congressional allies called me and said that they were in back-to-back meetings with people who all came in and said that they were favor of tax reform but only if they could keep their preferential treatment.


This reminds us the statement of Russell Long, long-time Chairman of the Senate Finance Committee, who said, "Tax reform means, 'Don't tax you, don't tax me. Tax that fellow behind the tree.


There were two articles in Accounting Today that I think are illustrative of the meaning of this "fake tax reform".  One is written by Roger Russell and the title says it all, Reform Bill Leaves Tax Pros Plenty of Work To Do.


Many believe that the "tax industry" is very much concerned about real tax reform because most of these professionals bill for their time and the expertise they have gained with the current income/payroll tax system.  These people have children in school and home mortgages and should be worried about tax reform--shouldn't they?  As this article points out, the tax preparation industry is not worried.  


They like the fact that the "fake tax reform" will still be very complicated, and businesses and individuals will still have to calculate their tax and file returns..


Mr. Russell quotes some estate planners who are happy that the estate tax is not repealed and they speculate on the Democrats getting into power and stopping the proposed phase out of the estate tax.


Here Comes A Bigger IRS


The second article is by Michael Cohn and is entitled, Koskinen Warns IRS Will Need a Bigger Budget to Implement Tax Reform.  This article primarily quotes from a press conference given by outgoing Commissioner Koskinen this past Monday.  


Koskinen says that the IRS really wants tax reform but insists that the proposed "reforms" will require many more IRS personnel.  What?  If it is a simpler tax code, why do you need to add more IRS personnel?


The real answer is that you are replacing one section of an incomprehensible income tax code with another that is equally incomprehensible.  




What we are seeing is the D.C. shell game.  They say it is tax simplification but the IRS says they need more personnel.  The tax preparation industry is breathing a sigh of relief because this "Swamp Dance" will really maintain or even increase their business.


As a "recovering" tax attorney, I recall my clients not being as concerned with the tax rates as with how long they could rely on the current system not to change.  Like turning an aircraft carrier, it takes a while to change the plans of a business based on one set of tax facts to a new tax system.  


This "fake tax reform" is very disruptive to any business planning and will continue to be as long as Congress and the Swamp can avoid real tax reform--the FAIRtax.


Look at the estate tax and its effect.  For those fortunate enough to have accumulated enough wealth to be subject to the estate tax, this is further lunacy.  In the proposed bill, they are promised a higher exemption and that the estate tax will actually phase out in six years or so.  However, most of the pundits speculate that increasing the exemption and phasing out the estate tax will be difficult to do and since it only applies to a very small number of people, Republicans will trade this for other parts of the proposed legislation.


Remember, in 2010 the estate tax was reduced to zero but, if you didn't die in that year, but the following year, your estate had a $1,000,000 exemption and a 55% rate.  Congress and the Swamp love this because people representing our wealthy citizens routinely lobby Congress and flow money into their campaign coffers.


The Swamp and Congress should recall the Mae West quote, "Don't keep a man guessing too long - he's sure to find the answer somewhere else".  The people are getting tired of guessing about how badly things are going to be when Congress and the Swamp promise tax reform.  


We are very likely going to find the answer by electing people who really do care about us.


The truth is the truth.  Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:


“If you want a picture of the future, imagine a boot stamping on a human face—forever.”



Call up the local or D.C. offices of your House Member and two Senators and you can use the following script:

  • I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
  • After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
  • Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
  • Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
  • In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
  • They probably will say their boss believes that simplifying the income tax will handle the problem.
  • Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax.  So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
  • Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
  • Point out that Evaders do not self-identify by putting an “E” on their income tax return.
  • 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
  • Ask if the Member is in favor of this?
  • If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
  • Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.  


If you can see your Member or attend a town hall and ask these questions, you can be even more effective.





Using an article “24 Outrageous Facts About Taxes In The United States That Will Blow Your Mind,” The FAIRtax Guys point out some absurd features of the income tax and contrast this to the simplicity and efficiency of the FAIRtax.  We all know that a tax code that consumes over 70,000 pages is by very definition absurd, but did you know that you work from January 1st to April 23rd just to pay your taxes? Did you know that in 1913 the lowest tax rate was only 1% and the highest rate was 7%?  And did you know that these 24 outrageous facts would completely disappear if we enacted the FAIRtax? Listen to The FAIRtax Guys give a lesson in REAL tax reform by pointing out the absurdity of the current federal income tax system. 


Last week, The FAIRtax Guys discussed how to take full advantage of a Town Hall Meeting with your Congressman or Woman to promote the FAIRtax and force your legislator to take a position on the FAIRtax. One to one contact, with many of your fellow citizens to help you out, is a great way to steer the discussion on tax reform toward the FAIRtax.  Listen to The FAIRtax Guys explain how you can make sure that the FAIRtax is discussed every time your legislator meets the public. 


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