Random Thoughts on Tax Day

Happy April 15!  Yeah, right.

In the Wall Street Journal today, John H. Cochrane, a professor at the University of Chicago Booth School of Business, argues for an Alternative Maximum Tax.  Add up all the taxes you pay – Federal income tax, Social Security or Self-employment taxes, the new Medicare surcharge, state and local income and sales taxes, property taxes, unemployment taxes, real estate transfer taxes – you name it, you include it.  When you reach 50% of your income, the Federal government starts to give you back money.  I like it, but it will never come to fruition.  It makes too much sense.

I was reminded again this year that a business really should keep a double entry set of books.  The first codification of the system occurred near the end of the 15th century by the Franciscan Friar, Luca Pacioli.  While it is certainly not foolproof, a set of double entry books is a pretty good error detection system.   I predict the system will be around for at least another 500 years, if not forever.   It is not that difficult to implement.  Quickbooks makes it easy.

By the way, Quickbooks is dangerous.  I am not saying that I don’t like Quickbooks; I am just saying that it can be dangerous.  When I was younger and more foolish, I liked fast cars and wild women, even though they were both dangerous.   A person can make the silliest entries into Quickbooks and it obeys blindly.   I think Intuit should build in a diagnostic message for when somebody thoughtlessly throws in some numbers.  It does not have to be a sophisticated analysis or explanation. Maybe Quickbooks could show on the screen and emit an aural message:  “That is really dumb!”  Just a thought.

So, tonight if you see semi-lifeless creatures shuffling in the dark around midnight, they are not the Living Dead.  They are tax professionals at the end of a long hard busy season.

Vance

Washington and Ferrets

I’ve enjoyed the advent of Eastertide.  As was the case with most CPAs in public tax practice, I did not get any time off.  However, I went to a beautiful sunrise service and had a nice early brunch with my bride before returning to the office.

What I appreciate the most is the fact that Congress is on a break of almost two weeks.   Hasn’t it been nice for a few days to have something (anything!) other than Washington name-calling and bickering at the forefront of the news?   Congress is far away from fixing the yawning budget deficit.   Democrats are still looking for more money from the top “one percenters.”  Republicans have their paring knives poised over expenditures.  There hasn’t been any compromise and there won’t be any in the foreseeable future.

Nevertheless, there are tax changes in the offing.  Proposals to improve tax compliance are surfacing.  The ideas include expanding information reporting, more funds for IRS enforcement, and limiting opportunities for identity theft in the tax system.  A proposal to increase the staggering of tax filing deadlines is moving along.  These “domino” due dates will make it easier for taxpayers to report accurately the income from returns such as income from partnerships, S corporations, and trusts.  Generally, these kinds of proposals are being fairly well-received on both sides of the aisle.

In other – only tangentially related – news, the Tax Court recently ruled that Ms. Villareale could not deduct her charitable contributions of $250 or more to a ferret rescue organization that she cofounded and for which she served as president and managed its finances.  She did not issue to herself timely and properly-prepared acknowledgements.  I wonder:  From what do you rescue a ferret?  Have you ever tried to catch a ferret?  Have you ever had a ferret in your bed?  I have.  Catching a ferret is darn near impossible, but probably easier than Democrats and Republicans agreeing on comprehensive tax reform. 

Vance