Is simpler sure to be fairer? | New NY 23rd

In 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

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