Chairman’s Report - November 20, 2015

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  • Source: FAIRtax
  • 04/09/2021
The Consequences of Evasion

Almost no one can ignore the growing evasion of the income and payroll tax system.  It is increasing each year and now likely exceeds 25% of the total income and payroll taxes collected.  There is a growing acceptance of evasion and more and more people willingly participate with people who are offering lower prices and often freely admit that they are able to charge lower prices by not paying their proper income and payroll taxes.  

A significant factor is the growing number of people working either as independent contractors or through their own companies.  This is predicted to be in excess of 40% of the work force in 2020.  While the IRS may claim 98% compliance from W2 workers, they admit that the compliance rate drops dramatically when a person is self-employed.  These workers have the ability to deduct things that relate to the their production of income.

One tax preparer told me of a client explaining that they deducted the costs of their pets and pet grooming as business expenses because “their pets keep their stress down and make them more productive.”  Of course this deduction is unlikely to be accepted by the IRS—they perform an audit.

Audit Rate Declines 

A report that the IRS released Tuesday revealed that 1.2 million individuals representing  only 0.84% of federal tax returns are being audited in the 2015 fiscal year.  The IRS expects the audits to only yield $7.32 billion--the lowest amount since 2002. 
In a speech at the American Institute of Certified Public Accountants' national conference in Washington, D.C., IRS Commissioner John Koskinen said, "If people think they're not going to get caught if they cheat, or they're just fed up because they can't get the help they need from us to file their taxes, the system will be put at risk, and voluntary compliance is likely to suffer." 

Another tax preparer told me that even the audits his clients were receiving were much less effective than before.  He believed that the more experiences auditors were working on the Obama Care implementation and many “deductions” that would have been questioned in the past were just accepted by these IRS auditors.  

Is Evasion Really a Selfish Act?

We all complain about the waste and inefficiency of government and there is much to complain about.  However, there is a function for government or our society would not exist.  This is something most people innately understand.  People also know that taxes and fees pay for the infrastructure provided by government services.  Those of us on Social Security want the checks to continue.  We want to be protected from terrorism.  
These federal services offered are largely paid for by income and payroll taxes.  When a person evades the income tax—doesn’t pay the amount that they should, they place the burden of funding the government on the others who don’t choose to evade taxes or who cannot because their taxes are withheld before they receive the money.
It is estimated that the people paying income and payroll taxes could  pay about 25% less if evasion was greatly reduced.    

Will Evasion Lead to Other Acts of Lawlessness?

If it is ok to disobey one law, why is it necessary to obey another law that you find inconvenient?  Without the fabric of law, society as we know it will disappear.  

The Solution

Some Members of Congress say that the way to handle evasion is to toughen enforcement.  However, when I ask them if they want to run for reelection as the candidate who supported increasing the number of IRS auditors and the pain of the IRS—they look at me and walk away.
The true solution to many of these problems is the FAIRtax.  The FAIRtax is much more difficult to evade because it is largely going to be collected by the large retailers whose accounting systems almost eliminate evasion.
The FAIRtax also treats everyone the same.  You decide how much tax you pay by how much you spend.  With the prebate and the fact that prices will come down, people with lower incomes will have more spendable income to use for consumption.
However, most importantly our economy will start growing again and people will have good jobs.  We can control spending because all of us will see the cost of government with every purchase.
We can all sigh with relief that we are giving our children a country where they can succeed even more than we did.

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AFFT National LOGO Store and Scrolling Signs

The AFFT national store is running a Thanksgiving special.  They are offering not only great prices but free shipping and handling through November 30th.  They are also offering many discounts on items that you will find very useful in promoting the FAIRtax. Here is a link to the very popular palm card.
AFFT National 2015-16 Palm Card

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