Tax Cheats in the Cabinet

I have never met Secretary of the Treasury Timothy Geithner nor Secretary of Health and Human Services-designate Tom Daschle. I am sure both are capable men although the claims for Geithner’s "unique" capabilities struck me as a bit overblown. But, I am disappointed that after two years campaigning about bringing change to Washington, President Barack Obama has seen fit to move forward with not one but two Cabinet nominations in which the nominees are apparently tax cheats. One such case can be excused as misfortune, to paraphrase Oscar Wilde, but to have two looks like carelessness.

But, it is difficult to believe that the tax errors in question were mere carelessness. We were told that Mr. Geithner made a common mistake: People who work for the World Bank and the International Monetary Fund do not have their payroll taxes withheld, but they do owe that tax and must pay for it the way self-employed taxpayers do yet it is a "common" mistake to fail to do so. It sounds to me more like this mistake is represented as a perk when you get hired at the World Bank or the IMF. Indeed, this perk was worth 43,000 dollars to Mr. Geithner.


Daschle’s tax problems look even more like evasion. He failed to pay taxes on a luxury car and driver that were afforded to him by one of his employers. It is not clear whether or not the employer provided a 1099 form for the service and Daschle knew enough to inquire last summer about the matter. But, he did not pay the back taxes until last month. Why? I can only think of one reason: He thought he might get away with it. The only way the matter was going to become publicly known was if Obama won the presidency and subsequently nominated Daschle for the post, and then it would come out. But, why fork over $140,000 in back taxes unless you do get nominated.

There are three conclusions from this episode. The first, which will trouble some the most, is that President Obama is willing to make exceptions for his friends. This does not trouble me but, then, as a Catholic I go to confession a lot. The second is that the people who wrote the tax code do not even understand it and that it is past time to go forward with a radical tax simplification scheme. Indeed, I think these unhappy circumstances suggest that Mr. Geithner and Mr. Daschle should be taxed with leading the panel that works on tax simplification.

The third conclusion is the most troublesome. I do not doubt that Mr. Geithner and Mr. Daschle are very, very bright and that the United States will benefit from their service. I do worry about a Democratic Party that is led only by people who make enough money to have a 140,000 dollar tax mistake. Chesterton once wrote: "The real argument for the House of Lords is that it is in one sense democratic. It consists of a huge number of entirely ordinary and accidental men. Any of these dull men might, perhaps, have been respectable enough to be summoned on a jury; none of them, perhaps, would have been so ambitious or wicked as to be elected for the House of Commons."

Ambitious or wicked? The problem with the way our culture views ambition and wickedness is that we view them as events, and as rare events at that. Bernie Madoff is wicked. Hillary Clinton was ambitious. But, ambition, not only for vulgar ends but for fame, finds a flicker in every human heart and original sin, and the wickedness that flows from it, is a part of our human inheritance. This is why we need rules, even rules that apply to our friends, even rules that apply to gifted public servants. This is why President Obama should be worried about the nominations of Mr. Geithner and Mr. Daschle. His meritocratic world has few checks on ambition and wickedness and, not being a Catholic, he is unused to the spirit of human sympathy and solidarity that comes from frequent confession. And, as mentioned, it is now incumbent upon the President to propose the kind of tax simplification that will finally make rich people pay their fair share of taxes.


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10 years 1 month ago
Also troubling is the mantra accompanying Geithner's red carpet ride into the Cabinet. He is the best for the job, we're told, and we need the best. Hero worship. To the extreme. I'd say it's less about the president's "friends," and perhaps more about people with whom the president has a comfort level. Who among us haven't known employers who would make curious decisions about personnel? Have you seen the comic in which the boss in on the phone to his secretary, "Call a staff meeting; I need to be pampered!" The person at the top of a cabinet department needs to be a good administrator. I would hope the president has more talent in Treasury under Geithner. One man's ideas are going to lead us out of the wilderness? Right. And if there are an adequate number of good economic minds in Treasury, maybe we didn't need Geithner after all. That said, ponder how many times IRS reps are going to have to hear from taxpayers, "It was an honest mistake; just like the secretary's." Or something on that theme. Treasury's moral standing to collect back taxes and deal with tax cheats has taken a big hit. Apparently, President Obama thinks they can handle that.
10 years 1 month ago
Geithner's mistake is understandable. The World Bank/IMF should either quit the practice of not withholding these taxes or request that U.S. employees be exempted from taxation altogether. The current hybrid of having people who are responsible for these taxes not facing withholding does not work well for anyone (either the taxpayer - unless they successfully evade, or the people of the United States). As for Daschle, I can see how someone would think that the car service provided by the employer would be an employer business expense, rather than a personal service. I guess it depends on where Daschle was being driven and why. If we was driven primarily to functions where he did business for the firm, then he should dispute that this is a personal expense. How many executives have a company paid driver and count this as personal income? General Officers get a driver - are these considered a personal benefit? I don't think so. The President is driven by the Secret Service and the Mayor of Washington by his security detail in the MPD. Peronal expense? Hardly. Of course, if the former Senator's driver chauffered Mrs. Daschle to Safeway, that is another matter. For many people, having a driver is a necessity, not a perk. What is sad here is not that Dascle avoided his taxes, but that he felt he could not fight what might be an arbitrary policy because he is reentering public life.
10 years 1 month ago
Well, finally, some critiquing. I have another possibility: Obama is inexperienced and is dependent on the party establishment for these picks. Duh. Now, when are we going to get to Obama's extending Bush's torture policies?
10 years 1 month ago
If one of us at the middle-class worker level makes a mistake on our taxes, the consequences can be draconian. The IRS is notoriously unamused by the smallest error, which is why each year I spend a great deal of money (according to my budgetary standards) to have a professional person prepare my tax return. I'm incensed by big shots who make "honest mistakes" in the thousands or tens of thousands of dollars, while the Real People can incur large fines or jail for far smaller "mistakes."
10 years 1 month ago
Geithner's "mistake" was a bit more than. It is one thing to be ignorant of tax law and thus break it, but quite another to know it and break it. The IMF, where Mr. Geithner worked, reimburses employees for their payments on the IMF self-employment tax. As he admitted during the confirmation process, Mr. Geithner accepted these reimbursements despite never having made the payments. So the excuse that he did know that he had to make these payments when he accepted reimbursement for them is not believable. Another grand example of rules for thee, but not for me. Besides, doesn't anyone find irony in the fact that we are asked to believe that the only person to navigate the troubled economy is one who can't his own paperwork straight?


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