Yesterday was tax day. I belong to a Rotary Club here in Plattsburgh, and one of my fellow Rotarians (who happens to be a prosecutor) made this joke during the meeting: “Remember that tax evasion is a crime; tax avoidance is a duty.”
While that statement was said in jest, it brings to point a reality of civic responsibility. We obviously need tax dollars if we are going to provide governmental services, but it is hard to sustain services if everyone is trying to avoid paying taxes. Taxpayer avoidance is not something new. The philosopher Plato wrote, “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.” I concur with Plato that there is a certain civic duty in paying taxes; but I also agree with Arthur Godfrey, who once said, “I'm proud to pay taxes in the United States; the only thing is I could be just as proud for half the money.”
Part of my job as a business counselor is to help my clients get financing for their businesses. A key component of their loan application is a recent history of tax returns. The problem is that many of my clients have taken on the position that tax avoidance is their primary duty, so their businesses show little or no income. That may be well and good when it comes to tax time, but it certainly limits the prospects of getting financing based on the strength of the business.
To defend my banker friends, I need to add that if you really think about an enterprise, the tell tale sign of success is profit. So why should a bank lend money to a business that has not shown the fiscal ability to generate profit from their efforts? Yet I have had numerous bankers tell me about their loan applicants who wink at them and say, “Our tax returns don’t provide a true portrayal of our financial situation.” Let me add that making such a statement will not contribute to the chances of getting a favorable lending decision.
It’s a point to ponder. Yes, it is good to show profit to position a business for growth. Yet at what point is there so much being taken in taxes that business owners doesn’t see enough reward for their risk and hard work?
I am not taking a position either for or against tax avoidance. I was not part of any of the "Tea Parties" yesterday. Yet the discussion of taxes, civic responsibility and economic development should be revisited by our lawmakers with an understanding of what it takes to start and run a business.
With apologies to William Shakespeare, I offer this “Taxpayer Soliloquy”:
To pay or not to pay: that is the question.
Whether 'tis nobler in business to suffer
The slings and arrows of outrageous tax burden,
Or to take arms against a sea of taxing agencies,
And by opposing not pay them? To hide: to deduct;
No more; and by deducting to say we end
The heart-ache and the overly taxed income
That earnings, 'tis financial summation
Devoutly to be kept! To hide, to deduct;
To hide: perchance to go too far: ay, there's the rub;
For in not paying taxes what consequences may come
When we have overcooked the books and get caught,
Must give us pause: there's the IRS
That makes calamity of our accounting;
For who would bear the whips and scorns of their audit?
The tax agency is wrong, our accounting is reasonable,
The complex changes to tax code, the laws confusing,
The insolence of tax collectors and the interest and penalties!
That patient merit in trying to understand the rules,
When the business might have to pay taxes
Even without making money? Who would be so foolish,
To grunt and sweat running a business,
To give all the earnings to the IRS,
The unforgiving agency from whose wrath
No business can survive, puzzles the will
And makes us rather bear paying tax bills we have
Rather than pay the vendors, at least we won't go to jail if they are unpaid?
Thus conscience does make cowards of us all;
And thus to run a successful business
Is sick with the thought of paying all earnings to the government,
And enterprises of great growth potential,
With regard to taxation and regulation, see no benefits for their risks and toils,
So lose the opportunity for economic development.
I will conclude this post with a little humor from Will Rogers:
"Be thankful we're not getting all the government we're paying for."
