Tax Cheats or Tax Idiots?

INSERT DESCRIPTIONTom Daschle (Photo: Brendan Smialowski/The New York Times), Nancy Killefer (Photo: Doug Mills/The New York Times).

So today is a two-fer: both Tom Daschle and Nancy Killefer will not be joining the Obama administration, as planned, as Health and Human Services secretary and chief performance officer, respectively.

They were both undone by failure to pay taxes.

Tim Geithner, meanwhile, the new Treasury secretary, was recently confirmed by the Senate despite his own tax failures.

Good God: what does it say about the U.S. tax code that people like Geithner, Daschle, and Killefer haven’t properly paid their taxes?

(By “people like” them, I mean people who are smart and accomplished, have been through many application and vetting processes in their careers, and above all have reason to comply with tax-paying.)

Here, we’ll make it a quiz:

A. If all three of them were intentionally cheating (and getting away with it until high-level scrutiny), then it’s much too easy to cheat on taxes.

B. If all of them made honest mistakes, then the tax code simply isn’t working.

C. If there’s some combination of cheating and mistakes, then it’s too easy to cheat and the tax code isn’t working.

I’d vote for C. We wrote a column about tax cheating a while back. It included this passage:

The first thing to remember is that the I.R.S. doesn’t write the tax code. The agency is quick to point its finger at the true villain: “In the United States, the Congress passes tax laws and requires taxpayers to comply,” its mission statement says. “The I.R.S. role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.”

So the I.R.S. is like a street cop or, more precisely, the biggest fleet of street cops in the world, who are asked to enforce laws written by a few hundred people on behalf of a few hundred million people, a great many of whom find these laws too complex, too expensive and unfair.

Maybe the gross embarrassment over these high-profile tax failures will at least spur some tax-code sanity — like the Simple Return, promoted by Austan Goolsbee, who has Obama’s ear.

People like Daschle wouldn’t fill out the Simple Return, but it might free up the I.R.S. to catch tax cheats before the Senate confirmation hearings flush them out.


It certainly says something about the complexity of the tax code to have all of these issues come up.

Why not go thru all of the Congress and Senate and see how many more we can find :-)


I agree the answer is C.

The path to tax simplification starts with "vetting" everyone in Washington.

Why isn't there any mention of penalties? Shouldn't you pay the back taxes with interest and penalties - or am I missing something?


The IRS v. Congress issue regarding tax difficulties that you bring up here is an instance of the unfortunate tendency people have to blame the most direct, concrete symptom of a wider problem, the kind of conrete-bound thinking that would say ATMs are how you make money (actually come to think of it that is pretty close to how the federal reserve thinks; anyway...)


I can't believe these people don't have 'people' (nod to HR block)


I think by “people like” them:
You also mean "people who have lots of off W-2 income, and have enough wealth to hire accountants that might find creative interpretations for this fringe income." Geithner's accountant took a dedcution for summer camp as a child care expense? Really?

Also your simple return is a straw man. Most people are simple income filiers. Have you noticed that TurboTax does the simple 1040EZ for free!?


I second comment number 1. Obama could probably pay off the deficit by just auditing the Congress and Senate.

He could probably fund the stimulus package by auditing the top 2% wage earners.


Why was such an issue made of Nancy Killefer's mispayment/nonpayment of taxes? From what I read, the amount was less than $1000, and she repaid the lien several years before the Senate even became involved.


Oh I think it says a heck of a lot more about the sort of people who rise to the top of our political pyramid. This is like noting how many economists don't have dates for Valentine's Day and concluding that Valentine's Day is too complicated.


I think the question has to be asked, did President Obama know these people had problems with their taxes.

The conspiracy theorist in me thinks that he nominated these people knowing they had tax issues, in an effort to bring the tax code reform front and center in his domestic agenda.

the Gooch

Only suckers pay income taxes in this country.

It pains me to say that, since it means I'm a sucker.


Dear Hmmmmm;

If we do, we may have to vote again for a `new' bunch. What happened to their account managers.


Tax reform is at least a two-fer for Obama. It would both stimulate the economy and burnish his reformist credentials. Moving to a flat tax would do more to reduce the influence of lobbyists than any other single act.


I can see Nancy Killefer's tax mistakes I really believe she made an error. Gosh is was less than $1,000 and it was concerning unemployment tax on a domestic worker. The other two (especially Geithner's ) don't seem to be in the same class of error. (either in magnitude or intent.)

Joe D

I'm with chappy @5: "These people" don't do their own taxes, they just write the checks. Their accountants have instructions to make the taxes as low as possible. If I thought a $400 trip to the accountant could save me $1000 (likewise, $10000 to save me $35000) over doing it myself in TurboTax, I'd be there in a NY minute.

A friend of the family was an H&R Block employee for years. The few times I asked her advice about possible deductions, she laughed at me. Clearly, I wasn't paying her enough.


The unfortunate part of this is that our increasingly complex tax code has created an entire multi-billion dollar industry that's not just going to say, "Yeah, let's go the simple route." Maybe if we just transfer the CPA's who would be out of a job and move them over the IRS, then we can have more people to focus on tax compliance. The additional cost of those extra government workers is offset by more compliant taxpayers...everyone wins?


I think there is another more likely explanation beyond (a), (b) or (c).

(d) "Tax code and paper work is too cumbersome and I am already paying taxes close to 99% of my tax obligations and so IRS is not going to worry about my skipping the small taxes on household help or some freebies that received."

This is the most common rationalization on this form of mild "cheating."

David S

I think it has little to do with paying (or not paying) taxes and lot more about we the people getting fed up with the status quo and insisting on real change.

It isn't that Tom Daschle din't pay the taxes, it is that he had all that 'tainted' lobby income. In Tim Geithner's case, it isn't that he didn't pay taxes, it is only that he paid back the part that is was obligated to pay.

Obama should order IRS audits for all of congress & high executive branch positions going back as far as the law allows AND make that information public.



"Geithner's accountant took a dedcution for summer camp as a child care expense? Really?"

Summer camp is a perfectly fine child care expense for the purposes of the credit for child and dependent care expenses. The problem with Geithner's is that it was a sleepaway camp, which is specifically excluded.

I suppose this illustrates the nuances that are so easy to misunderstand.


I've made a $600 mistake on my taxes before. It's easy and I didn't do it on purpose. I'm guessing if we went through the taxes of everyone who is complaining about Geithner and Daschle, there would be some mistakes too. I mean if there was a cover-up, that's one thing, but a mistake on taxes that you paid back after you found out? That doesn't seem like that big of a deal. I think it would be more important to look at how that person would perform the job they are being nominated to do.


This story tells how congress tells us how many people cheat on taxes...yes it's those people...but of course they won't police their own members!

Enjoy the irony.