MAGA (not that one) is Make Accounting Great Again.
When new clients come on board, some ask why they need accounting records.. The answer is simple: Good accounting makes a business activity visible. When visible and reviewed by a competent person much can be gleaned from those numbers, graphs and various reports like the Profit & Loss Statement. That more could be answered to the question is true.
When seeking loans, lenders need to evaluate the good, the bad and the ugly in order to make decision about the health of the applying business and its management strengths or weaknesses. Many who must evaluate use various ratios like how much cash and cash equivalents are available vs the total bills payable within a short period of time. This is sometimes called the Acid Test or Quick Ratio and is useful. Other ratios provide big picture views and many are commonplace in stock analysis etc. But these reports, valuable as they are nay not be the primary reason for good accounting records.
In modern days, governments fund their activities through tax schemes like we have here in the USA that tax Income. We have other taxes too like Excise taxes, Sales Taxes, Property Taxes...the list is long. For the most part, tax schemes require representations be made by the taxpayer both businesses and individuals. To make these representations certain forms are used and completing, filing and paying is a fact of life. Good accounting done contemporaneously makes this is doable proposition. Predicting along the way is a real benefit and tax time becomes much more sensible at the year end having complete records of income, expenses, etc. Tax laws are complex and numerous. pages of text...about 70,000. Of course, most tax payers only come in contact with a few pages and leave it all to accountants and lawyers. But even they have a tough time because tax court rulings must be followed as well as IRS Audit guidelines and many other related items. I've never had a client want to pay taxes and the paperwork is a real pain in the rear.
I support a flat tax wherein everyone having income businesses too pays a flay percentage of that income. Proposals have been made for flat tax schemes some going as high as 25% some as low as 8% and many in between. The exact amount of tax is debatable but a flat tax would greatly simplify things turning the filing and paying into a few simple calculations. Tax time would be a breeze. But would it raise adequate taxes to fund government spending. Hey, the government can never have too much money, and factually when they don't they just print more. Our National debt is now roughly $26 TRILLION with a T. That's another day's subject but as said, governments have a spending problem more than a taxing problem so what is adequate taxation is a big topic. But using official budget numbers we need federal taxation annually of roughly $4 Trillion. With a GDP of $21 Trillion that suggest a flat tax rate of 19%. This would have no exemptions, deductions, credits or any of the other complexities and escape hatches IE loopholes and ALL would be required to pay. This might be done monthly, quarterly or in this digital world by the minute but it needn't be geared to the year though that is convenient. A flat tax would not eliminate the usefulness of good accounting but change it's focus back to those items and reports that help businesses grow and understand it.
Would I mind losing the tax prep part of my accountancy? NO! I am in favor of tax simplification for every Citizen and my income is far less important in face of that potential. In fact, it would be a reason to celebrate. Keep in mind that other countries still may have complex tax laws and many businesses have to deal with them no matter a change here in the USA. But is this possible? Is a Flat Tax scheme something that Congress and a President can support? In that Congress seems locked in political partisan battles nonstop maybe not. But if does, it must be accompanied by resolution and perhaps Constitutional Amendment to Balance the Budget and put an end to the printing press.
Other tax schemes suggest taxing transaction like a Value Added Added Tax or VAT or a transaction tax implemented in conjunction with an elimination of cash. These have there point as well because they take the onus off income and place squarely on consumption. Savings would not be taxed and only when using them to buy a car or refrigerator or food, medicine etc. would any tax be due. I like to idea of a national sales tax that replaces the entire tax system. it would be administered at the point of purchase just like State Sales Tax scheme are and make the buyer liable but the seller responsible for collection and transmission to the Fed. between the Fed and Sate, sales tax could eliminate all other taxes if the right percentages and collection system were used. Imagine a world that simple. Sure many might hate it because they can't cheat it but isn't that one of the major goals of our current system...it can be cheated, avoided, skirted, evaded,...
So Making Accounting Great Again would happen in my opinion if the accent were changed from tax accounting to business and expense accounting. There's plenty of benefit to accounting without taxation being the focus. I'm for that.
Best,
Donn Marier
Your Own CFO