Is simpler sure to be fairer?

1040In an April 14 press release, “REED SEES SIMPLER, FAIRER FUTURE FOR TAX FILING SEASON” Tom Reed promotes his vision for tax reform. But would a revamped tax code, mean more money, time, and jobs for taxpayers as Tom claims?

Tom writes:

Tom Reed says next year’s tax filing season could look very different if tax reform progresses through Congress. Reed pointed to Ways and Means Chairman Dave Camp’s recent tax reform draft as the type of generational-level reform needed to simplify the code and level the playing field for taxpayers.

This statement is vague. Generational-level reform is undefined; “level the playing field” likely refers to “flat tax,” which is most likely a windfall for the wealthy. Tom likes flat taxes which lower tax rates in his bracket relative to most others.

“Families could be pleasantly surprised during future tax filing seasons when they have more money in their pockets and don’t have to spend as much time wondering how to file correctly,” Reed said. “By simplifying and making the code fairer, the average taxpayer would keep an additional $600 in their pocket and largely avoid the kind of time consuming, tedious paperwork taxpayers face now.”  

This statement is also vague.  It suggests that the reader might save $600 annually on tax preparation, but it isn’t clear how. Taxpayers looking to hire a professional to complete their 2013 tax return can expect to pay an average of $261 for an itemized Form 1040 with Schedule A and a state tax return, according to the National Society of Accountants (NSA). Fees for non-itemized returns are also low – the average cost to prepare a Form 1040 and state return without itemized deductions is only $152 (NSA). So while someone may save $600 or much more on tax preparation, it probably isn’t anyone we know.

Reed says the average taxpayer spends about 13 hours each year gathering all of the paperwork to file their taxes and 90 percent of taxpayers pay someone to prepare their taxes for them or purchase tax software to help. The tax reform draft would allow about 95 percent of filers to claim the standard deduction, saving time and money otherwise spent on outside tax preparers.

Everyone, with the possible exception of tax accountants, would like to save time and money preparing tax returns, but what is the downside? As usual, Reed doesn’t say.

“At a time when Americans in every part of the country feel like they don’t have a fair shot at getting ahead, tax reform is a huge opportunity for everyone to get ahead,” Reed continued. “We need to take advantage of this opportunity to lower tax rates for every American and in turn, create more private-sector jobs. Chairman Camp’s tax reform draft is estimated to create 1.8 million new jobs – that’s an opportunity we absolutely cannot pass up.”

Trickle down, ’nuff said.

Reed sees broad support and broad agreement that the current tax code is in need of reforming. The U.S. tax code saw its last overhaul in 1986. In the nearly three decades since, the code has grown to 70,000-pages and riddled with loopholes and special exemptions.

Tom doesn’t mention that all those loopholes and exemptions were enacted by Congress, the same foxes who now offer to fix it for us.

“Tax reform is a common thread uniting both ends of the political spectrum,” Reed said. “There is broad agreement that you cannot defend the status quo tax code anymore. We need a carefully considered plan for this type of generational-level reform and we have laid the groundwork. Through the bipartisan working groups, dozens of Congressional hearings and tens of thousands of public comments, this is certainly not a bill we are going to pass to find out what is in it. The open and honest debate will continue.”  

The bottom line ought to be an explanation of who pays more and who pays less. If Camp’s plan were revenue neutral, all taxpayers can’t pay less. The NY Times article cited below emphasizes proposed tax increases that fall on business and the rich, but the subject is complicated and I am unconvinced. Better watch our wallets when Tom talks tax reform.

An article in the Elmira Star-Gazette today by Stephen Ohlemacher noted that IRS enforcement of tax law is seriously underfunded, allowing tax cheats to avoid paying costing the treasury a bundle. Congress could save taxpayer’s money by authorizing more spending for enforcement as President Obama has proposed. This would provide simple, meaningful tax reform, but Republicans are opposed.

Note: Camp proposes to restore a  generation-skipping transfer tax. Possibly, this is what Reed means by generational-level reform.

© William Hungerford – April 2014

http://reed.house.gov/press-release/reed-sees-simpler-fairer-future-tax-filing-season

http://www.nsacct.org/life-and-taxes/life-and-taxes/2013/12/12/taxprepfees2013

http://www.nytimes.com/2014/03/07/business/economy/from-an-unexpected-source-a-tax-proposal-that-targets-the-rich.html

 

 

 

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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21 Responses to Is simpler sure to be fairer?

  1. BOB McGILL says:

    Why is it, that you expect Tom to explain everything in elaborate detail, every time he opens his mouth, and if he did, you and most people, wouldn’t understand it anyway. In my lifetime I can’t remember a politician who ” didn’t ” talk about reforming the tax code.

  2. Anne says:

    “Fairer” seems to be another of Reed’s buzzwords (like “commonsense”) that are a weird sort of rhetoric he deploys in advance of an argument, intended to make whatever comes after seem not only logical, but inevitable–who could argue with fairness? or with common sense?–and which, I imagine, are meant to conceal the fact that he flat-out lies. I guess I’m what you’d call an “average” taxpayer–mine are maybe even a bit more complicated to file, since I’m self-employed–and this year, it took me less than an hour to gather my tax materials….for my fiancé, a small business owner, that number rockets up to about five, still well under Reed’s (I am sure invented) claim. I pay to have mine done, for just over $100; most other people I know do their own for no cost at all. This reminds me of the era of the Great Bush Tax Cut….remember how most of us got a refund check for a few hundred dollars? And how the families with annual incomes in excess of $200K saw their personal wealth increase dramatically? Under Reed’s plan, stayed tuned for more of the same…..

  3. solodm says:

    At least “fair” is a more acceptable stab at trying to convey than ” it just happened that way”, However, it looks like one more time Tom Reed has pinned his rhetoric, and hopes on a loser.

    http://www.motherjones.com/kevin-drum/2014/03/strange-suicidal-odyssey-dave-camps-tax-reform-plan

  4. whungerford says:

    Can you explain what Tom means by generational-level reform, Bob?

  5. whungerford says:

    Anne, thanks for your comment. How do you feel about the use of status quo as an adjective as in “status quo tax code?” Stunned, I imagine.

  6. whungerford says:

    Deb, thanks for your comment and the reference. I note that Kevin Drum believes as I do that lowering the top tax rate to 25 percent would produce a massive windfall for the rich.

  7. Anne says:

    Whomper-jawed! But then the needles on my inner editometer always fluctuate wildly when Reed puts pen to paper.

  8. josephurban says:

    I expect any Congressman who is proposing major legislation to have an outline of the basic reforms. What will be the new rates? What deductions will be lost or gained? What income levels will be affected ? Why does he fear being specific? Ever hear the saying: The devil is in the details? I would be happy to support a new tax code….but I would like to know what it is first, wouldn’t you?

  9. josephurban says:

    Any tax reform that does not deal with loopholes is just window dressing. I recall that in the 1950s or 1960s there were claims that the rich were being taxed at 90%. Really? Does anyone believe that the wealthiest individuals ever paid any where near that amount? Loopholes, folks, loopholes. You can publish any rate you want as long as you keep those loopholes.This is one area in which I THEORETICALLY agree with the conservatives. We need tax reform. and simplification. But when I look at their actual proposals I never see loopholes closed for the oil, timber, gas industry, etc. I never see them demanding the same tax rates for unearned income as they do for earned income. In the end, the proposals always seek to minimize the taxes on non-earned income at the expense of labor income.

  10. whungerford says:

    High income taxpayers generally benefit more from low rates than from loopholes unless the loopholes allow a percentage of income or even all income to escape taxation as is the case for some well-known corporations. The reason is that a high rate typically costs more than any fixed exclusion from income when income exceeds some threshold. An example is the home mortgage deduction for individuals. High income taxpayers don’t benefit much when the deduction is a relatively small percentage of income.

  11. pystew says:

    There is not much new in this Tax Day press release. Compare it to the one Reed sent a year ago. It sounds a lot like today’s. Yes, Bob, I think that for $174,000 a year we should get some details in his Press Releases. I agree with Bob that politicians always talk about changing the tax code, but not much gets done. Reed is following that model.

    I don’t think anything will get done because the John Boehner doesn’t want to do anything until after the election. The republicans will never agree to close loop-holes because that would mean compromise and that is not in the Tea Party dictionary. Also their deep pocket Corporate PACs contributors won’t permit it.

  12. BOB McGILL says:

    The devil is in the details? No it isn’t, it is in a news paper article you read. I have never seen a local paper quote anybody right. Most of the politicians I know won’t even talk to a reporter.

  13. BOB McGILL says:

    gee , last year my income was about what Tom makes and the tax rate was around 40 %. When you add all the other things it’s closer to 60%, remember I don’t have the kids, mortgage, and other write offs. Not much better off than a socialist country.

  14. BOB McGILL says:

    MOTHER JONES ? It’s too bad they don’t still have MAD Magazine ( or do they ) you could quote a really reliable source.

  15. BOB McGILL says:

    http://www.dailykos.com/…/-Origins-of-English-Generalization-and-Narrowing Cached
    Generalization: There are many examples in English of semantic change through generalization. For example, the term “aroma” originally referred to the
    If you don’t understand what little he did say, where would you be if he went into detail ?
    🙂

  16. Anne says:

    “Generational” and “generalization” are two different words. I’m pretty sure Reed also doesn’t quite understand what he was saying.

  17. whungerford says:

    Here is the press release from a year ago. Tom then promoted “comprehensive tax reform” suggesting that no detail of tax law would be left unexamined. Then he suggested not only reduced cost for tax preparation, but also revenue reductions and cuts in government spending.
    http://reed.house.gov/press-release/reed-wants-taxpayers-keeping-more-their-own-money

  18. josephurban says:

    Bob. “The devil is in the details” is an old saying. It means that while you can make general statements or proposals sound like one thing (Fair Tax Act, Family Responsibility Act, Affordable Care Act, etc) BUT until you actually investigate the specific elements you really don’t know what you are being asked to support. It is an old saying and has nothing to do with reading newspapers.

  19. josephurban says:

    I am glad to see Mr Reed supports eliminating tax loopholes. Does he want to eliminate ALL of them or some of them? Do you know which ones? There were no specifics in the press release. Does he have a list of loopholes he opposes somewhere else on his website ?

  20. josephurban says:

    Good point. Some examples of the tax law shielding higher income would be the fact that Social Security and Medicare (I think ) taxes are not taken out of income tax above a certain level. Nor are those taxes taken from non-earned income. So, for workers at lower levels these taxes take a much higher percentage bite out of their checks. Wouldn’t the same apply to homeowners who can deduct interest from very high mortgage payments ? As opposed to apartment renters, for example? I can see the need for simplification and fairness in the tax code. But, as in any law, what I see as simple and fair will be different from someone else.Hence the need to know the real details of any tax reform scheme before passing judgment..

  21. whungerford says:

    On July 1, 2013 Tom wrote: ” We need to make the United States easier to invest in and a simpler, fairer, less costly tax code that eliminates special interest loopholes will go a long way in allowing businesses to hire and invest.” Tom didn’t explain what he considers special interest loopholes–typically he leaves such details to the readers’s imagination. While eliminating loopholes might make the tax code simpler and fairer, it is unlikely to make it less costly to business unless rates are lowered as well.

    I have not seen a list of special interest loopholes from Tom, but a Google search for “list of tax loopholes” produces many hits.

    https://reed.house.gov/press-release/rep-tom-reed-and-small-business-advisory-board-talk-business-uncertainty
    .
    ..

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