Tom Reed attacking “entitlements.”

What I’m willing to discuss is the way we change Medicaid to get costs under control.–Tom Reed

I care about creating a more fair tax code that encourages job creation and builds a business climate that helps our communities thrive.–Tom Reed

What is important to know about taxes:

• Who pays?
• How much revenue is required?
• How much revenue results?

Tom Reed advocates simple, fair, and competitive, which answers none of the important questions and leaves one wondering what he means.

Simple refers to income tax forms; Tom would make them shorter by modifying the current system of deductions and exemptions. This would have consequences. For example, if the student loan deduction were eliminated, those paying off student loans might pay more. It is important not to be beguiled by this:

• We the people have poor lobbyists.
• Time and money individuals spend filling taxes is inconsequential compared to what is owed.
• The current system was created by Congress–pretty much the same people who now offer to reform it.

Can we trust Tom Reed to reform tax law?

What Tom means by “fair” is less clear; it probably refers to “who pays?” Taxes may be:

• regressive
• flat
• progressive

Taxes currently are slightly progressive–marginal tax rates increase with income. Fair is subjective; some argue that flatter is fairer. Whether “fair” or not, the less progressive the taxes, the more benefit for the rich and super rich.

“Competitive” may refer to business taxes reflecting the idea that domestic businesses would be more competitive in overseas markets if free of taxes. I believe this concern is overblown–taxes don’t add to the “cost of sales,” but reduce the profits accrued by owners or shareholders. Tom Reed might like his bill collecting business to pay less in taxes, but his individual taxes would rise accordingly unless he has found a way to avoid paying them.

Tom often promotes the idea that taxes (and regulations) hurt small businesses. This idea is dubious; Tom never offers evidence in support of it. If a business is profitable, it remains profitable after taxes are paid on a portion of the profits.

We often hear the argument that corporate taxes are unnecessary because the cost is passed on to consumers. This isn’t necessarily so–only net earnings are taxed. If market conditions allow it, the impact of taxes might be passed on to consumers. However, the business might as well accept a hit on profits passed on to owners, shareholders or retained in the business. One desirable consequences of corporate taxes is that businesses are encouraged to invest earnings in the business rather than taking profits.

So what about revenue? Tom Reed is known to dislike taxes, to dislike deficit spending and debt, and to dislike spending for certain purposes particularly those which he labels “entitlements.” So whatever tax reform Tom might favor is likely to reduce taxes for some (most likely the wealthy), reduce spending for entitlements, and possibly shrink the anticipated deficit.

“Reform” like “fair” is subjective. What might seem like reform to Tom might seem like a giant step backwards to others. When discussing reform, one needs to ask:

• Who pays?
• How much revenue is required?
• How much revenue results?
• What government programs would be cut to match available revenue?

Be suspicious of reform when the goal of reform is undefined.