PERSPECTIVE FROM A TAX PROFESSIONAL
Jade Walle is a partner in the Assurance practice of the Denver office of a Big Four public accounting firm. He has 21 years of experience in financial statement audits of domestic and non-U.S. public and private companies. Jade is a CPA, certified in Oklahoma, Texas and Colorado, and is a member of the American Institute of Certified Public Accountants, the Oklahoma Society of CPAs, and the Texas Society of CPAs. In the summer of 2016, Jade relocated to the firm’s Denver office, to serve SEC registrants in the MLP, exploration and production and mining segments.
Jade is a supporter of the FAIRtax because he daily sees the negative effects created by the income/payroll tax system. He has written extensively on these issues and appeared on numerous radio shows discussing the FAIRtax. He kindly wrote the article set forth below for us.
U.S. auditing standards deal with the term “fraud” extensively. Intentional income tax evasion is a form of fraud. In the world of accounting and auditing, we learn that fraud exists when three items are present:
a) Incentives or pressures,
b) Rationalization or justification and
Considering we are human, there will always be ample supplies of the first two legs of the three-legged fraud stool. In the accounting world, most efforts are focused on eliminating, or at least reducing to a reasonably acceptable level, opportunities to commit fraud. The simple example being that if someone feels pressure to steal cash because of personal circumstances and can justify why they need the cash as the company underpays and “owes” them anyway, but cannot open the cash register, they inherently cannot abscond with the cash.
The FairTax actually addresses the two most important aspects of the fraud triangle. First, the current income tax system taxes Americans’ income, which in its simplest form, is the fruit of our labor, our property. There is an inherent, underlying resentment when the fruit of our labor (i.e., income), is taxed, much of it taken from us in the form of payroll (FICA and Medicare) and federal tax withholdings, prior to ever receiving our income. Adam Smith, the famous Scottish political philosopher and economist (author of The Wealth of Nations, 1776), said that, “The property which every man has is his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable.” This resentment plants the seeds of rationalization and justification for many small business owners and others, as it relates to income tax evasion. The thoughts borne from this are multi-faceted and include but are not limited to examples such as, “The government wastes our money anyway,” “The government taxes me too much already,” “I can’t afford to pay that much in taxes because my small business doesn’t make that much,” or “I won’t be able to buy that Lexus SUV if I pay that much to the IRS,” etc.
The opportunity leg of the fraud triangle is the most important to cut off. Opportunity is beyond a single person’s control, beyond their thoughts, emotions or perceived needs. The October 16, 2018 U.S. Securities and Exchange Commission (“SEC”) Release No. 84429 highlights the need for any company, endeavor, country or revenue collection system to eliminate, to the extent where costs do not outweigh benefits, the opportunity for fraud. The SEC Release studied nine U.S. public companies who were victims of fraud in the form of compromised electronic communications, losing nearly $100 million, almost all of which was never recovered.
For these public company SEC registrants, their system of internal control over financial reporting should operate at a level that would prevent or detect a material financial statement misstatement. Likewise, our U.S. system of taxation should do the same as it relates to collections it should be making. The FairTax is the ultimate eliminator of the vast majority of the opportunity for evasion that our current income tax system embodies. The March 1, 2017 independent studies by Dr. Richard J. Cebula, Ph.D. and Fiorentina Angjellari-Dajci, Ph.D., demonstrate how U.S. tax evasion is now larger than ever, and growing at an increasing rate, with cumulative tax evasion conservatively estimated at $9 trillion cumulatively, over the 2017-2026 period. With state sales tax regimes, do we ever hear about massive sales tax evasion schemes like we do with the federal income tax?
Estimated evasion under a national consumption FairTax would be miniscule relative to our current system. With humanity involved, there will always be some degree of cheating, but the opportunity for evasion is drastically reduced under the FairTax. A key fact supporting this contention within the aforementioned study, found that 6.1% of active companies make up 88% of total U.S. business receipts. Said another way, the big box stores (e.g., Wal-Mart, Best Buy, Home Depot, etc.) will collect the vast majority of the FairTax, and can any of us recall telling the Wal-Mart clerk that we didn’t intend to pay the sales tax? While I would love to hear how that plays out, the reality is that in today’s world, the overwhelming majority of sales tax collections are automated, programmed into the register at retail stores, with retailer and state infrastructure already in place to collect and remit sales tax receipts (the “opportunity” element virtually eliminated), and so it would be with the FairTax.
It is important to understand that professionals who have to deal with the present income/payroll tax system recognize that the system is failing and doomed. Many are not willing to speak out like Jade because they are concerned that a change will affect their incomes and maybe even their jobs.
It has to be very difficult to believe that one’s livelihood depends on essentially ignoring the damage created by an income/payroll tax system that increasingly damages the livelihoods of their neighbors and friends and their country.
However, for most of them, their fears of losing their livelihoods are misplaced. These are capable people and the economic boom that will result from the enactment of the FAIRtax will almost certainly increase their ability to get work that pays very well. Only this time, instead of spending time trying to move paper around to save on taxes, they will actually be working to help companies expand and prosper.
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.”
WHAT CAN EACH OF US DO
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.
FAIRtax POWER RADIO
#137 Questions, Comments & Suggestions From You!
Our viewers & listeners responded to our requests for questions & comments in a big way. Plus we have a number of questions, comments and suggestions from our Facebook Live episodes. So this episode is dedicated to recognizing you and your role in helping to educate the public about the FAIRtax, the most thoroughly researched tax proposal ever submitted to Congress.
What’s the relationship between the FAIRtax and tariffs? Does a contractor have to pay the FAIRtax on materials they purchase for a project they’re working on? Why doesn’t every member of Congress get onboard the FAIRtax train? Does the FAIRtax replace excise taxes? These and many other great questions and a number of comments and suggestions are addressed in this episode.
The FAIRtax Guys figured it’s time to recognize your role in making FAIRtax Power Radio THE only weekly digital TV show on the FAIRtax in the entire country.
Thank you and congratulations.
Please get engaged and help others learn about the value of the FAIRtax by turning them onto FAIRtax Power Radio - the ONLY weekly FAIRtax digital TV show in the country! Watch every Wednesday at 11:30 AM (ET). We are streaming to Facebook LIVE (www.facebook.com/fairtax). If you’re not a fan of Facebook, you can watch FAIRtax Power Radio on www.xcluded.tv at the same broadcast time - or any time.
FTPR podcasts for each show are posted on Spreaker (http://bit.ly/2oesbk7), iTunes & iHeart Radio every Friday morning. A free FAIRtax Power Radio app is available for iOS and Android. Since it’s a podcast, you can download it and play it whenever it’s convenient for you.
The Facebook videos are saved to a number of pages:
FAIRtax Official (https://www.facebook.com/FairTax/)
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Democrats for FAIRtax (https://www.facebook.com/DemocratsForFairTax/)
and many others.
www.Xcluded.tv is a subscription based site which costs $30 per year and features a number of other shows along with FTPR with no commercial interruption.
Please help us educate as many Americans about the FAIRtax as possible. Be sure to tell everyone you know about this great new format for FAIRtax Power Radio. Whether you watch the weekly video or listen to the weekly podcast, this is a great way for more Americans to learn about the best tax reform plan in Congress at this time.
Tune into our video broadcast each Wednesday. Or, if you prefer, you can listen to the podcast of the show later. You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free. Listen on Spreaker.com (http://bit.ly/2oesbk7), iTunes (http://apple.co/1Te8VdF) or iHeart Radio (http://bit.ly/2eqEG7y) on your computer or smartphone. The easiest way to listen to FTPR on your smartphone is by downloading the free FTPR app. Just search for “FAIRtax Power Radio” in your app store, download the app and start listening.
Remember, FTPR digital TV every Wednesday at 11:30 AM (ET) followed by the podcast on Friday morning. Please listen and tell everyone you know about the FAIRtax Power Radio. The FAIRtax: Once You Understand It, You’ll Demand It!
DOES SOMEONE YOU KNOW NEED A BASIC INTRODUCTION TO THE FAIRTAX?
HERE IT IS - AMERICA’S BIG SOLUTION
America’s Big Solution provides a foundation or starting point in your study of the FAIRtax and is meant for people of any age. See below.
Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it in a booklet rather than search online for Tweets, Posts and Shares? If so, America’s Big Solution is their best choice.
America’s Big Solution is an introduction to the FAIRtax written by Terry Tibbetts, author of A Spartan Game: The Life and Loss of Don Holleder, with help from Ron Maiellaro, President of the Florida FAIRtax Educational Association.
You can buy an electronic version of ABS as follows: AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle (http://amzn.to/1WIRHry), the Barnes & Noble Nook (http://bit.ly/1XeG8bH) and Apple iOS (http://apple.co/1tnqK0P).
You can purchase a print copy at the same Amazon link above for $9.25. Regardless of whether you choose the electronic format or the print format, you’ll find AMERICA’S BIG SOLUTION will give someone the boost they need to begin their study of the FAIRtax and the suggested resources to learn more. Buy AMERICA’S BIG SOLUTION now!
LINKS TO MORE INFORMATION
These links will help you promote and support the FAIRtax, make yourself familiar with the links below. We always do our best to keep our AFFT community up to date, and you can stay ahead of the curve using these convenient sites.
- The website of Americans for Fair Taxation (www.fairtax.org)
- Read the Summary of the Evasion Study.
- Welcome to the Online FAIRtax Community (member.fairtax.org)
- The website at which you can help make it happen. (www.bigsolution.org)
- The Facebook page for Americans for Fair Taxation
- The Facebook page for The FAIRtax Guys
- The Twitter page for Americans for Fair Taxation
- PopVox - Connecting people and lawmakers for more effective participation and better governing
- YouTube channel for AFFT
- YouTube channel for The FAIRtax Guys
- The Official FAIRtax Logo Store (www.fairtaxlogostore.org)
- www.Xcluded.tv - A new platform for FAIRtax Power Radio Video and other shows.
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