The Trump tax plan is rumored to be coming down through congress by the end of the year. Many of the conversations thus far have focused on a flat tax, a simplification of the tax code or even just the returns. If you haven’t kept up to date with the who’s and why’s, Tony Nitti at Forbes explains it here.
An idea I really like is Rand Paul’s tax plan. Now- why would a tax advisor in a niche industry be in favor of tax code simplification? Won’t that put me out of a job? The answer to that question is the same as the answer to the question that makes our industry what it is. What is the question, you ask: “What is income?” The answer- it depends.
So what is income?
Have you ever stopped to consider what really counts as income?
Is it credit card rewards? It depends. (If you’re really curious about this, take a peek at our recent article about income and credit card freebies)
Is it when you sell a house? Well, it depends.
Is it when you work at a job? Well yes- but then actually, it depends.
If you find a million dollars buried underground, is that income? Almost always yes, but the most correct answer is- you guessed it- it depends.
So, given all that confusion, wouldn’t a simpler tax code provide the answer?
After all, it seems like a few straightforward scenarios seem more complex because of the current tax law.
In addition to those simple situations which have been made increasingly more complicated by the current law, the complication further increases with more complex tax scenarios, which thankfully do not apply to most taxpayers. For example, nexus aka the physical presence tax– a headache that is now much more relevant due to the evolution of the online marketplace, most notably because of Amazon. These scenarios, which have no one-size-fits-all answer, will always require expert navigation by true seasoned tax professionals.
In every industry, and ever since the dawn of time, change is inevitable and adaptation is survival. While a major tax code upheaval could seem daunting, or bring about unwanted changes, it does not guarantee that an industry will die off overnight with these changes. It might, however, change the nature of large-scale, one size fits all, tax compliance businesses who do not focus on value of consulting services. Given that, businesses and consultants who can advise their clients no matter how complex or simple the environment is stand to gain the most. Ultimately, this could be good for the market and the consumers in that market, a tax code upheaval will sort out those who aren’t providing enough value to the market.
— Gary Vaynerchuk (@garyvee) May 9, 2016
I have a homework assignment for you- consider what you would do in the event of a reversal in the status quo in your industry- be it legislative, technological, or environmental. Are you ready for that?
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