The voices of Tax Policy Center's researchers and staff
Not everyone, it seems, agrees with my assessment of the failure of the Obama Three to properly pay their taxes. I argued that they were among millions of us who got their returns wrong. Others, however, feel they should have known better.
From Paul Caron, the esteemed blogger at TaxProf:
"These are not rocket-science kinds of tax issues. I take them at their word, but on the other hand, these were not cases of something really esoteric."
From Missie Burman, who hangs around tax wonks, but is a normal person herself:
Despite a good deal of forelock pulling and groveling, Tom Daschle failed to convince a Senate Committee that when he overlooked his obligation to pay income tax on the use of a car service, to the tune of $104,000, it was because it was a nontaxable gift. Really, Senator Daschle, how long were you on the Hill? How many tax bills did you help push through? How many confirmation hearings did you sit in on? How many of your own tax returns have you signed? That was INCOME!
Just like me, you might not have an advanced degree in economics or law, but in your line of work--public policy, legislating, lobbying, and Cabinet-seeking—you probably understand that the ‘do as I say, not as I do’ philosophy can catch up with you. There goes the Health & Human Services gig—more’s the pity.
But you and Treasury Secretary Geithner signaled important messages to ambitious policy wonks everywhere: Pay your taxes, or forget about your political dreams!
If there’s a silver lining to this debacle, maybe the IRS will start getting amended tax returns from political wannabees who suddenly discover underpayments or remember some conveniently forgotten income. Maybe inside-the-beltway accountants will get more aggressive with their clients, urging them to pay up or kiss that political appointment goodbye.
A better idea still might be to offer political appointments to everyone with income over $200,000. Based on the recent news, the IRS audits should produce a boatload of money. Of course, a few honest folks might squeak through, but they seem to be in short supply in government. And think of all the jobs that would be created.
Or maybe the IRS should just hire a whole lot more auditors to examine the tax returns of the over-privileged. That would be an honest stimulus.
From my TPC colleague Eric Toder:
I am troubled by your implication that tax cheating results from complexity that we can somehow fix with simplification. Tim Geithner’s case is a little unusual because of the unique treatment of income from international institutions – no payroll tax withholding, but taxpayers files as employees, not self-employed persons. Still, his tax responsibilities were made clear by his employer. In the other two cases, I can’t see how any reasonable simplification would make a difference. Tom Daschle failed to report the supply of a car and driver as income: Surely we don’t want to make such employee fringe benefits tax free. Nancy Killefer failed to pay household employee taxes: Surely we don’t want to exempt these workers from employment tax.
Yes, all the new credits President Obama is proposing would clutter up the code, add complexity, and cause some taxpayer errors. But the biggest source by far of the tax gap is underreporting of schedule C income. And most of that is simply the failure of self-employed and small businesses to report all their receipts. How would simplification fix that?
Yes, complying with the tax law takes effort and many people either don’t bother to count all their income or forget. They don’t cheat deliberately. And anyone can make a mistake. The IRS has resisted efforts to classify underreporting as either inadvertent error or cheating. Except in cases of blatant criminality, audits simply reveal how much the taxpayer owes, not the person’s motives. Still, I don’t understand why prominent people who might be considered for political jobs don’t take the time and effort to do their taxes right (or hire someone who will) and don’t fix errors as soon as discover them. You would think that after Zoe Baird and Linda Chavez, people would understand this.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.