It’s the Accountant’s Fault

Sometimes the absurdity of trying to do business and make money and then pay the appropriate taxes to the Feds and State just about knocks me over.

I’m currently doing the annual ritual of getting my taxes and financial statements in order. I am using a good accountant – conscientious and smart – and we are struggling to come up with documents that are consistent with accepted practices and have at least a distant relationship with “Truth, Justice, and the American Way,” as they used to say in Superman intros. After many many years of being involved in this process I am convinced it is almost impossible for my business to do this correctly – and probably yours, too. But I must, and I will, so my accountant and I will collaborate and come up with a plausible fiction that a banker can show to other baffled bankers and then lend money on with some confidence that it will be repaid with interest, on time.

I am a complete skeptic about accounting. On a huge scale, can anybody believe that companies like General Electric or Berkshire Hathaway can be understood by reading their annual report? If my small firm is opaque even to me, how can anybody grasp what is going on at a Citibank or BP? I certainly doubt the officers really have a clue what the numbers mean, except in a broad sense of momentum and liquidity.

I have come to the conclusion that “earnings per share” for a public firm are a fabrication concocted by financial analysts to confuse stockholders and make a bonus.

After years of dealing with accountants who are more concerned with their own bottom line than the accuracy of their clients’ books, I have concluded that there are just a few things that have real importance. The most important item is liquidity. How much cash do you have available to spend? How much do you really owe versus that cash amount or solid receivables?

Second, how big are your real margins? It is not so important to make a lot on each transaction if you have a lot of transactions like Amazon or Costco, but at the end of the month or quarter, did you make a real profit by generating fresh cash?

Overhead is important. But this is where the accountants get to have their fun and obfuscate reality. They can usually flummox the most astute layman by how they allocate expenses and indirect costs, like “depreciation,” or “freight” or even “inventory.” Can you imagine trying to put an appropriate number on the value of GE’s inventory? Impossible.

So at the end of every year, I sweat the “results” of my year and worry about government and lenders doubting my accounting fiction, which I think is better than most trashy fiction offered up to the clueless consumers of accounting fairy tales.

Question: Should rich people pay more?

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15 thoughts on “It’s the Accountant’s Fault

  1. Marc Klecka

    Rich people pay more by virtue of making more. Let’s say we have a flat tax (which we should so that ALL have a stake in the game). Ten percent of $100K is a lot more than 10% of $1K. Hearing President Obama and democrats speak of fairness makes me sick. However, I will fight on and never surrender.

     
  2. John "Jack" Frost

    The question gives rise to the many cliches associated with our economics. One that comes to mind this time of every year is: “This is a non-profit company. It was not started out that way, it the way it turned out.” First consider the high rollers who coined “Swaps” and all the esoteric terms of the new banking, while using the U.S. Treasury as a Piggy Bank to fund their exploits. Almost any story is plausible. Just ask Morgan or Bank of America and that great practitioner of sleight of mind book keeping,”AIG” The Obama sledge hammer economics is as out of date as the dinosaurs. Bolshevism as Socialism is out of date. Obama try as you might your attempt to split the classes will fail because we are well versed in individual greed. When FDR instituted the withholding system he called it a “Pay as you go effort” Wow that came as close to the maxim that you can fool all of the people all of the time.” Obama, I knew FDR, you are no FDR. For a little honesty we need to define our form of economics. WE ARE A CONSUMING ECONOMY. We depend on sales of everything. It then seems to even things we ought to tax every thing we consume and change our tax reporting to true, Earned Income.That’s my story. Gook Luck with yours.

     
  3. John

    An acquaintance of mine recently suggested that rich people shouldn’t pay a higher % of tax. What they should do is volunteer some portion of their time to government to help it manage things better. I believe it is fair to say people such as Warren Buffet or Bill Gates could bring some good changes to our government. I do not know how this process could be implemented. Perhaps when they hit 65 they donate 2 or 4 years to government service.

     
  4. Rich

    People who complain about the rich and get all bent out off shape at having to pay anything in taxes, sure don’t have a problem with buying $6 coffees or $3 bottle water.
    I think a 3 to 5 % federal sales tax, excluding food items and to garantee fixed revenue a 5 to 10% flat tax. At least with a sales tax, the rich that people think are not paying enough can’t write off that and the drug dealer or illegal that pays nothing would also contributesomething.

     
  5. Robert Erdmann

    Pay more? More than who, or what? Or just plain “pay more”? Perhaps a flat tax may be the answer, that way every one is paying their “fair share” no arguments. But to just ask the wealthy to pay more because they have more is non sense. Ann Rand’s book “Atlas Shrugged” comes to mind, a redistribution of wealth is not the answer. Putting un-employed people back to work is part of the answer, being responsible in the spending of tax dollars is another.

     
  6. Jim Goerges

    Funny how many get dupped by “Obamaisms”. Where no thought or reasoning is required! Let me reply with a Reagonism, there you go again! News flash, the rich do pay more! Do you realize government makes tax laws? We have a progressive tax code, do the math! From your article, it sounds like your as fiscally conservative as any rich person, your going to pay according to rules and not a penny more. Sounds like you are as evil as the rich! Now, how can “Obama” say a few words and people just go gaga and the press just stares at him with glassy eyes! Example remember when the left kept “death counts”? Do you remember how boldly the press made news of this? Do you know it is worse these past 6 years than ever before? So when this president gets challenged, say on the use of drones, all he has to do is say something like, “I’m no Dick Cheney”, and the press gets glassy eyed and just smiles! Funny how the left works doesn’t it!

     
  7. John Otto

    Another Ayn Rand book “The Virtue of Selfishness” is kryptonite to the Obomamites. Unfortunately the “where’s my free stuff” hard core Obama supporters will have difficulty getting through the title. The “Rich” are already paying too much, the mutts in Washington – both sides of the isle are using the money from the rich to get reelected. In my opinion, Democrats are more guilty of this, but the Republicans had their shot and blew it.

    So what this all boils down to is learn to live on less. Vodka and cabbage is in our future.

     
  8. ms

    The better off you are, the more loopholes you have to avoid paying taxes.

    Greed knows no boundaries. Many in the upper 2% share Mitt Romney’s view of the world when he gushed about Chinese working conditions and said the following:

    “When I was back in my private equity days, we went to China to buy a factory there. It employed about 20,000 people. And they were almost all young women between the ages of about 18 and 22 or 23. They were saving for potentially becoming married.
    And they work in these huge factories, they made various uh, small appliances. And uh, as we were walking through this facility, seeing them work, the number of hours they worked per day, the pittance they earned, living in dormitories with uh, with little bathrooms at the end of maybe 10, 10 room, rooms. And the rooms they have 12 girls per room.

    Three bunk beds on top of each other. You’ve seen, you’ve seen them? (Oh…yeah, yeah!) And, and, and around this factory was a fence, a huge fence with barbed wire and guard towers. And, and, we said gosh! I can’t believe that you, you know, keep these girls in! They said, no, no, no. This is to keep other people from coming in.”

    Keep growing the divide between the haves and have-nots and us poor working class stiffs won’t have any money to buy that cheap junk Made In China.

    The past 4-1/2 years worse than the Bush years? That’s a laugh. Not too many investors on Wall Street believing that anymore. The stock market has been improving every year since Obama took office, and with the economy improving, the deficit has also been shrinking every year.

    I think its good fat cats start paying taxes at the same rates as everyday people. And if you don’t like the American way of life, you can always pick up your marbles and move to Baja.

     
  9. Kelly

    MS…what a joke.

    I’m gonna go out on a limb and guess you’re not in the top 1%, or 2%, or 5% or even the top 20%.
    I can guess all that just from your entitlement attitude that it’s ok to take more as long as there’s more to take.
    I earned what I have by sacrificing my personal life to work and learn enough to reach the top .05% and I have to continue sacrificing for as long as I want to stay there. I’m fine with the choices I’ve made, even when they didn’t work out at first and required even more work before they would and I don’t force anyone to do business with me through the power of unchecked monopoly like the government or Obama’s buddy GE.

    I would tell you to wake up but there’s no point.
    I would tell you to hate me but you already do.
    I WILL tell you I’ll do everything in my power to earn more money and keep more of it, as the law allows.

     
  10. Jim Goerges

    Lloyd, you rich business owner, wondering if it is the accountants fault, what says you????

     
  11. Dick Crosby

    How about this?
    1. Get rid of all corporate taxes. Zero! But they be required to invest a certain % of earnings in R&D, either singularly or in collective groups, and a certain % reinvested back into the structure of the business, and a certain % to charity (not their own), and a % to the stockholders, and a % to the employees, and the rest to themselves. Some combination of the above depending on the nature of the business(s).
    2. Shitcan the IRS, and all other taxes presently imposed by the federal and state governments. Tell ’em to go find work.
    3. ALL tax collected by the “government” from the people, is at the LOCAL level, as con-figured by contiguous boundarys. That is county to county, etc., at let’s say a flat 10% of county sales, or whatever is sustainable, and/or necessary, to perform “necessary and required” county duties. (A sales tax.)
    4. The state then gets 10% (or whatever), from each of their counties, and has to live on
    that amount to do their necessary “stately” duties.
    5. The federal government then gets the same % as the states, to do whatever it has to do to guard the country, and the other “necessary” duties and obligations that it (the big guy) has to do. AND it has to live and exist within its allotted allowance (funds). AND once the percentages are determined over a fixed (Like10 year, or whatever), trial & error period, it/they cannot be arbitrarily adjusted by the governing bodies. Make it the law, enforceable by the supreme court.

    Something similar to, but different than, Herman Cain’s 9-9-9 idea. I don’t know. The present system(s) sure stink! In any event, get rid of the IRS, as presently constituted.
    I guess what I’m proposing is a flat sales tax starting at the local level. No other taxes!
    Am I nuts, or what?

     
  12. Kelly

    If you’re a voting American you should pay the same taxes a percentage of your income as any other voting American.
    No deductions or write-offs of any kind.

    Put another way, if you don’t pay taxes, you can’t vote.

    I think as long as every voting American has equal skin in the game they may think about their choice to spend. Conversely, as long as they’re spending somebody else’s money they won’t give it the consideration it’s due.

     
  13. Bill

    To answer the question, should the rich pay more in taxes?, the answer is yes.
    All you flat tax folks out there really haven’t doen your homework it is simple math ,,a flat federal tax would decimate the working poor, which thanks to the “conservative” movement since Reagan has grown quite large in this country. Our progressive tax system will not change because it works.

    Kelly,
    You sir are an Idiiot. There is not one single American that doesn’t pay taxes. What do you think that SS taxes, medicaid taxes, property taxes, sales taxes , these aren’t real taxes?

    ” WILL tell you I’ll do everything in my power to earn more money and keep more of it, as the law allows.”

    That is your right. However you should know that rificulous statement makes you sound like a small petulant chiild, yelling MINE! MINE! MINE!
    just saying 🙂

    Bill

     
  14. Jim R

    Marc Klecka said: “Hearing President Obama and democrats speak of fairness makes me sick. ”

    That’s funny, because for me, just hearing Obama speak makes me sick.
    Jim

     

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