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State Economic Woes: How Should Societies React?

State Economic Woes: How Should Societies React?. Proactive v. Reactive. ?. How many states are moving toward taxing “ voluntary transactions ”? Are taxing professional services inevitable? how do we react during this transition?. How to Position CPA Societies?.

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State Economic Woes: How Should Societies React?

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  1. State Economic Woes: How Should Societies React? Proactive v. Reactive

  2. ? How many states are moving toward taxing “voluntary transactions”? Are taxing professional services inevitable? how do we react during this transition?

  3. How to Position CPA Societies? We walk a fine line. Are we Trusted advisors to policy makers (demonstrating independence and objectivity) OR Advocates for our members? (demonstrating political strength and uniformity of mission)

  4. ? DO WE JUST SAY “NO!” Exercise political muscle Activate grassroots networks Demonstrate that we are indeed member advocates?

  5. ? Or… Should we recommend changes to tax and social policies to meet the state’s needs? Are we good citizens or good advocates?

  6. Trusted Advisor Options • Seek CPA appointments to any tax study group, blue ribbon commission, tax code or revenue commission, etc. • Low risk for politicians to establish • Studies turn into legislation • Demonstrates respect for the profession • Opens opportunities to affect future legislative policies • Members expect us to be in the loop

  7. Trusted Advisor Options • Risk to being part of the study groups • Tacit endorsement of any bonehead ideas they propose • Controversial report or legislation can anger members • Finding committed CPAs that will actually attend the meetings

  8. Trusted Advisor Options • Establish CPAs as experts in state policy • Great example is Ohio’s Report to the Legislature (by the Society) • South Carolina’s Commission on Tax Reform (3 CPAs on the Commission) • CPA State Budget Analysis (CAFR) Task Force • Kentucky’s “trusted advisor” approach: • Tax Policies that Make Sense Booklet • Pros and Cons of Tax Policy Proposals Booklet

  9. Trusted Advisor Options LOOKING FOR EFFICIENCIES AND COST-CUTTING IN GOVERNMENT • Our members have expertise in systems analysis, pension funding, economic development, business plans, government auditing, etc… • State policies often waste time, energy, resources and put tax dollars at risk. [Kentucky State Auditor} • Kentucky Airport, League of Cities, etc. • Kentucky School renovation policies • Kentucky’s 120 county governments!

  10. ? But CAN WE TRUST OUR MEMBERS TO DELIVER? WILL CPAs REALLY INVEST THE TIME AND RESOURCES TO DO THE ANALYSIS?

  11. Trusted Advisor Options LOW HANGING FRUIT: Offer Other Tax Ideas Variety of Tax Options to Replace Service Tax Property Tax Increase Restructure Individual Income Tax and/or Business Tax Sales Tax Increase Removal of Business to Business Exemptions (taxing business inputs) Excise Taxes Business Development Incentives, etc. Specialized Taxes (Gas Tax, Telecommunications, etc.)

  12. ? Does anyone have a bill? who will be the losers? Who will we Tick-off And Do we care? Will our MEMBERS’ clients and companies care?

  13. Need for Research TAX INCENTIVES How do States know if they really work? Who is doing a cost-benefit analysis? NCSL Meeting Report: CEOs can’t tell you what incentives they received,or what they saved the company, or if they were even part of their decision process What they can tell you is what it cost them in personal income tax

  14. Need for Research Position Papers make great points, but economic proof is needed • e.g., When companies move across state lines, we not only loose the service tax, we loose revenue from: • Occupational taxes • Sales taxes • Business taxes • Property taxes (as families move) • Intangible property taxes • Excise (e.g. communication taxes) • Insurance taxes • Restaurant and retail business, etc…

  15. ? Is anyone working with a consultant on economic analysis? Is this something the AICPA can help with?

  16. Need for Research • If we step forward with a plan, no matter how rational, will… • Our members blame us for supporting a tax on their services? • Will legislators purposefully misinterpret our intensions to pass only the portions they like? (The chairman of A&R stood up on the Kentucky House Floor and announced KyCPA was in favor of his entire “tax modernization” plan)

  17. ! “Sometimes being nice only causes confusion” John Cooper, Lobbyist

  18. Need for Research • If we propose trade-offs or big-picture solutions to the financial crisis, what should they be? • How do we know our proposals will work to improve economic development? • Who will be the losers in the new tax structure? • Are we willing to take the hit from those who get hurt?

  19. ? Will our members will willing to give clients bad news? How do we protect our member CPAs from angry clients or employers?

  20. Helpful Ammo • AICPA Talking Points & White Paper • COST White Paper (Council on State Taxation) • Minnesota Talking Points (website paper) • Position on elimination of business and manufacturing exemptions / taxing business inputs • Connecticut Position Papers • Tax Foundation Background Paper 2011

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