Obama editorial demands response
I have probably weighed in once too often on the topic of politics in Accounting Today, but your near-partisan editorial bashing of the Obama administration (Feb. 15-March 14, 2010, page 3) is a step beyond the pale and demands a response.
In the past, I expected Accounting Today to be about tax planning and new accounting standards. I realize now that my expectations may have been unrealistic. Taxes are a function of politics and therefore - perhaps - politics are an acceptable topic for your publication.
In fact, our system of taxation may explain the current political situation. Our transition in the past 30 years from a county with a progressive system of taxation to a country with a regressive one has political consequences.
A progressive income tax system promotes a strong democracy. Without progressive taxation, wealth concentrates. Wealthy individuals, corporations and special interests take ownership of the political process. A good example of this is the recent Supreme Court decision on campaign finance.
According to the Federal Reserve Board, the top 400 families now control more wealth than the bottom 50 percent of the population.
We can see the damage to our democracy. Our voice in our own self-rule has diminished quantitatively.
The shift in our country's tax policy over the past 30 years, starting with President Reagan, has contributed to, if not caused, the current state of affairs.
We keep a copy of each year's CCH Master Tax Guide in our firm library. I consulted a copy from 1981, covering the 1980 tax season, the year before Reagan took office. The marginal tax rate for joint filers was 70 percent on taxable income over $215,400. Forty percent of capital gains were subject to tax in 1980, which worked out to a tax rate on capital gains of 28 percent for the highest-bracket taxpayers.
Through a series of tax acts, the Reagan administration cut the maximum tax rate on ordinary income to 28 percent. Subsequent administrations reduced the capital gains rate to 15 percent. The second Bush administration reduced the tax rate on dividends to 15 percent.
Slashing taxes on the wealthy precipitated increased taxes on the middle class. In order to replace the tax revenues lost to lower income tax brackets for the rich, Republicans increased the self-employment tax and the Social Security tax and imposed an income tax on Social Security benefits.
According to the 1981 edition of the CCH Master Tax Guide, the self-employment tax rate was 8.1 percent in 1980 and it applied only to the first $25,900 earned (adjusted for inflation, the $25,900 converts to $68,109). Today the self-employment tax rate has climbed to 15.3 percent and applies to the first $106,800 earned. Republicans, who claim to support small business, have more than doubled the tax burden on small business. In the past 30 years, payroll taxes have also increased. In 1980, the FICA and Medicare tax was 6.13 percent on the first $25,900 of earnings. In 2009, the FICA and Medicare tax is 7.65 percent on the first $106,800 of earnings.
After increasing taxes on the working middle class, the Reagan administration turned to the retired middle class. On page 35 of the 1981 guide is a checklist of "Items Which Are Not Taxable." Included on this list is Social Security. Today middle-class retirees pay federal income tax on 85 percent of their Social Security benefits. Just as the Alternative Minimum Tax applies to more and more Americans because the exemption amount is not indexed to inflation, the threshold for determining taxability of Social Security has been frozen at $32,000 for joint filers since 1984.
We need a return to a progressive income tax system, with corresponding reductions of the payroll taxes that are crippling the middle class. A progressive tax structure will return the political process to the people.
We need a return of the income tax brackets in effect during the Nixon administration, when the highest tax bracket was 70 percent. We should consider restoring the tax brackets in effect during the Eisenhower administration, when the top rate was 90 percent. With the higher income tax brackets in place, wealthy interests will have less money to spend on lobbyists and campaign contributions. After these corrupting influences have moderated, a functioning democracy will be restored.
Harry Bose, CPA
Read & Bose, PC
Read & Bose, PC
Two years vs. 30 hours
I disagree with Robert Harris' statement, "They all believe, correctly, that more education strengthens the CPA's singular responsibility to protect the public interest" ("Misguided on the 150-hour rule," April 19-May 9, 2010, page 8) and the educational and licensing bodies' support given to the 150-hour rule.
The additional 30 credit hours do not have to be related to making the student a better accountant or in any way relate to protecting the public related to the services provided by a CPA. The hours can be in any subject. Further, the additional hours are required early in an individual's career.
I value education. I have an MBA and an MBT. However, it is my opinion that practical experience is far more valuable in an individual's early career than the additional 30 credit hours. My MBA was received within two years of graduating with my BS. In my opinion, this education was far less valuable to me than my practical experience at a then-Big Eight firm and less valuable than my MBT received after 24 years of hands-on practical experience.
It is my opinion that two years of practical experience make better accountants than the currently one year of experience and the additional 30 credit hours.
Thank you for article, which has finally motivated me to place my thoughts in writing on a subject that is important to the profession. I do not believe my opinion will matter in the places where the decisions are made; however, it needs to be heard.
I understand the reasons why the educators support the additional credit hours, as they have a bias to furthering their own careers and the continuing growth of their programs. However, I have never understood the American Institute of CPAs' position in supporting the additional 30 credit hours over practical experience, unless it is trying to make the CPA profession appear to be on an educational level equal to attorneys.
Rick B. Smith, CPA
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