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The Tax Accountant and the FairTax: Compatible Indeed.
In the early seventies, I chose accounting as a college major not merely because the starting salaries were among the highest in the nation, but because I rightly saw that being proficient in the “language of business” would prepare me for so many directions in my career. In 1986, two things happened: one was the passage of the Tax Reform Act. The other was my personal entry into the field of financial planning that ultimately led me into investment advisory services. Lamentably, I did not immediately let go of the tax practice that provided so much security to my family. Instead I held onto it for about 10 years. I can now look back and say that the very best business decision of my career was to finally give up tax prep in 1997. It was then that my other business was able to truly flourish and it did so within a year. Have I had to give up all that I learned as a tax practitioner / accountant? Hardly.
What I learned very well was that the first rule of investment is diversification. The reason is the miti ga tion of diversifiable risks. One of those is regulatory risk. Nearly all businesses have some risk that one of the governments can cause it great damage at the stroke of the legislator’s pen. In my opinion, the tax-preparation business has always been, and remains, an example of extreme regulatory risk. The continuation of the business is very dependent upon the perpetuation of the tax code—the more complex, the better for that business/industry alone. Any industry who’s very existence is created and maintained solely by regulatory fiat is not really a business and will eventually fade if democracy rules. One that fulfills human and societal need will flourish.
Whether Fair Tax (H.R. 25) passes or not, it would be smart for all tax practitioners to diversify their investment in their careers. Nearly all of us who have mastered one of the more difficult curricula in college and then passed one of the most rigorous professional exams known to humanity are smart enough to do many things. In the repeal of the tax code, little or no re-tooling would be necessary for a tax accountant to shift his or her priorities to that of capital creation through improved profitability. Let me explain. In our capitalistic society, the true goal of any business enterprise is making a profit. From Wall Street to Main Street , business people become obsessed with increasing their profitability from one quarter or one year to the next. This goes far beyond the mere reduction of expenses (including taxes). It runs to the very heart of business and the measurement of it rests primarily with accountants.
To pose the threat of loss of jobs in the tax prep industry as a reason to resist passage of Fair Tax, is analogous to the buggy whip manufacturer who resisted the introduction of the automobile. Whether you view it from a micro point of view (being good for the citizen) or from a macro view (being good for the nation), Fair Tax has, at its core, a promise for us that far outstrips the potential of the automobile to do good for our nation and its citizens.
Scott Neal , CPA
P.O. Box 2010
Lexington , KY 40588
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