How would businesses react to the FAIRtax?
I’m fortunate to be able to walk the halls of multiple businesses as a CPA. I hear firsthand the amount of time, effort, energy, and cost that accompanies the slightest hint of a change in business-related tax law, which is substantial to say the least. Although the corporate income tax brings in only a small fraction of total income tax-related Treasury receipts (approximately 10% depending on the year), the vast majority of the 8.9 billion hours and $600 billion in income tax-related compliance costs spent each year (think tax attorneys, CPAs, accounting software, tax professional staff payroll and benefits, office space, tax consultants’ fees, etc.), is borne by businesses. While partnerships and sole proprietorships undoubtedly endure much of this hardship even though their earnings are flowing through to their individual tax returns, the fact remains that businesses of all shapes and sizes spend an enormous amount of time lobbying, anticipating, planning for, and reacting to changes in U.S. income tax law.
The question for us today is how would businesses generally react to the FAIRtax, as a replacement to the current U.S. income and payroll tax system? Let’s answer this question by exploring what all businesses are, or should be, endeavoring to deliver to their customers:
When companies have more time to focus on their core competency, they flourish! My wife is an interior designer, and she is incredible at what she does. However, tax returns, Quickbooks, Section 1031 like-kind exchanges, and tax filings are not her forte, and that’s all right. I believe it would be a much less colorful and beautiful world if everyone could navigate a company’s financial statements like I have been trained to do. The FAIRtax allows over 90% of businesses to have no concern whatsoever as it relates to tax compliance. The other 10% of companies that sell goods or services at the end-user retail level already know how to collect a sales tax, which the FAIRtax will be easily integrated into. Without the drain of worrying about and planning for income tax nuances, businesses can dive headfirst into what they love which means more innovative products, designs, and more digital enhancements into what they do and how they do it. The result is better quality products and services that might actually achieve two or two and one-half of the coveted three deliverables above. The subtle effects we don’t often explore, however, are that society, our communities, the country and even the world at large is better off because our businesses will create, design, and deliver the best of the best, which enhances all of our lives at a personal level.
One of the foundational reasons for creating the FAIRtax was to eliminate the wasted time in the boardroom and around dinner tables that was spent examining the hypothetical income tax consequences of various proposed transactions. The very impetus of the FAIRtax is grounded in the thirst for companies to not waste time or, said another way, have more time to do what they do best. As noted above, when companies have more time, they prefer to invest it in their business, innovate with R&D, become more digitally fit (e.g., better cybersecurity, incorporating bots, Artificial Intelligence, visualizations, augmented reality, and other technologies into everything the company does to become more efficient and effective). All of this of course leads to the need for better employee training and upskilling and more employees overall to further the true goals of the business, as opposed to mundanely operating a payroll and corporate income tax compliance center for example. Again, our citizens collectively spend 8.9 billion hours a year toiling with the current income and payroll tax system.
It is estimated that Americans spend $600 billion a year on income and payroll tax compliance. This figure is breathtaking, and it is not cheap, to say the least. While a modicum of retail business tax compliance cost would remain with the FAIRTax, it is safe to say that over 95% of this $600 billion annual figure will disappear upon FAIRtax enactment. This is monumental and will not only provide more income for companies, but also more time to pursue what they do best in their businesses, and fund innovative new research, hire new employees and develop the best new technologies that will make our lives better and more efficient. Other potential outcomes include companies taking on less debt to fund their massive operations, which means less debt service cost, great earnings, and ultimately greater returns for investors such as retirees with their 401-K and IRA plans.
While the senior partner of mine years ago said that only two of the three can ever be achieved, the FAIRtax does it again and breaks the mold as it relates to our learned norms in business. The FAIRtax actually delivers all three, good, fast, and cheap, to businesses and does it with cost, time, and quality to spare.
What can each of us do?
We can write letters and make calls to our elected representatives demanding that if the government really wants to eliminate the burden of filing income tax returns, they should enact the FAIRtax and do away with tax returns altogether.
The great 18th century Irish statesman Edmund Burke made a statement that applies in many ways,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
If you want to prevent the IRS from being further weaponized to punish those of us who may object to the D.C. opinions and dictates of what is good for us, then help us PASS THE FAIRTAX!
The IRS will be gone and we will pay our taxes when we make purchases. WE and not D.C. Elites will decide how much federal tax we pay!
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
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.”
Is it hopeless? When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”
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