I remember that in the 80’s a teacher once told a class that I was in that one objection to going to a flat tax* (I’m assuming this means both state and federal) would be that it would put a lot of accountants out of work.
So, a couple of questions:
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[li]Would there be massive accountant job losses?[/li][li]Since there’s more than just income taxes, would a lot of accountants be able to stay employed by shifting their practices to work with people or businesses on other kinds of taxes?[/li][/ol]
*Yes, there are other objections, but since this is GQ I’d like to stick just to this one since it will, or should, have factual answers.
Many accountants specialize in income tax returns for individuals and small businesses and would be affected by a flat tax. They may be able to shift focus, but for many this will require schooling ranging from a few workshops to obtaining a new degree. For example, CPAs who do individual taxes may be able to go into auditing, but EAs will not have this option.
The majority of accountants only work on two tax returns a year. I do one federal return and one state. In my job I “keep the books”, issue and read reports and staff supervision.
The definition of an accountant’s job I like best is they “collect, record and report financial date in a meaningful and useful manner”.
Flat tax would be a minor item when it comes to accountant’s job security.
A flat tax rate has NOTHING to do with complexity. With a graduated tax you figure out your taxable income and then look up your tax payment in a table. With a flat tax rate you figure out your taxable income and then multiply it by the flat rate. Since math is hard, the IRS will just put have a table to look it up any way.
The hard part is figuring out what is taxable income. For wages it is pretty straight forward, but lets say you have a rental property. You need to take the rent, subtract property taxes, utilities, upkeep, depreciation and other expenses. If you sell stock you need to figure out the basis and take into account any stock splits. If you own a business you have all kinds of expenses to worry about. Cost of goods, labor, advertising, capital expenses on new equipment, and on and on. And it’s not like you can just ignore depreciation. Assume that you invested $5000K in equipment and had $200K in profit. That year you would pay no tax. The next year you would owe taxes on everything, but have no way of accounting for the fact that the previous year you spent $300K more than you made.
Flat tax = simple is just another lie like Death Panels that rich people use to pull the wool over the eyes of poor people. Its perfectly possible to have a simpler tax system than we have now and keep graduated rates and it is just as easy to have a flat rate and have a complicated tax system full of loopholes.
If we were to have a flat rate and make it revenue neutral, then 98% of Americans would pay more than they do now and the rest would pay much less.
Yeah, the flat tax would put accountants out of business is only true in a fantasy world with absolutely no deductions and every penny of tax comes off of one income number. It will never happen because it can’t in any real world society.
That accountants do only two tax returns a year is about equally wrong. Most accountants work for businesses, including individuals who work for themselves. The vast majority of these would need to file tax returns at least quarterly, and probably have special tax needs as well. That’s not including audits, IRS recalculations or disagreements with previous years’ numbers, or revision or amendments to current year returns.
Our tax system is never going away. But if we could believe in the fantasy of a tax return so simple that accountants wouldn’t be necessary, they’d be gone in the blink of an eye. Who would care? Buggy whip makers didn’t keep the car from taking over. A thousand professions have been lost to changes in the world. If accountants were threatened who could possibly believe they’d have the power to stop the future?
Well yeah, since this is GQ I’m not too interested in if it (job loss) would be good or bad, just if it would happen. And I know that if a flat tax ever were to happen, it would be in the far, far future. So this is pretty much a hypothetical.
So anyway, the two of you are saying that a flat tax would have very little effect on accountant job security. Thank you.
You’d be surprised. People are afraid of simple math and their own finances. They will gladly pay someone else to do their 1040-EZ instead of risk it themselves.
The flat tax will be proposed as a simple, flat rate with no deductions. Then the Senator from Kansas will add a deduction for farmers. And the Representative from California will add a deduction for retraining unemployed software engineers. The Senator from Michigan will want a deduction for UAW union dues. AARP will make sure that their donations go to representatives who give a break to seniors. The real estate, banking and construction industries will get together to protect the mortgage interest deduction. Some bleeding heart will protect low-income families and some right-wing type will protect Warren Buffett (“to create jobs by encouraging capital investment”). And so on.
By the time the bill comes out the other end… Well, it’ll be a lot like what happens when you eat a hamburger and it comes out the other end.
Even if it is passed? H&R Block doesn’t really make money on taxes. They make money selling rapid refunds. As long as a flat tax has refunds, there will be plenty of folks out there willing to pay $400 to get that refund 10 days sooner.
In any event, it won’t bother me at all. My core clients are business owners and the self-employed. A flat tax won’t simplify their filing requirements.
The OP’s premise is like any other job / career path is subject to economic, market and political forces. I believe Darwin addressed the same thing on a much larger scale.
The Internal Revenue Code is such a cluster f***. I’ve taken every tax course to become a CPA and every tax course offered in law school, and I would never do my own taxes.
The talent and effort expended enforcing and complying with the IRC is a monumental waste.
That said, the economics will continue and accountants will be needed to account for it, no matter what the tax structure is. Even if it’s all a sales tax, there will be accountants cranking out bartering spreadsheets.
Agree with Flipshod. I’m an accountant and I pay to have someone else do my taxes. Actually, I pay to have someone else take the liability and risk of doing my taxes. I always do them myself and compare the prepared version against mine so we can discuss discrepancies. Sometimes I am right, sometimes they are, sometimes who knows.
