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.

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  1. Hmmmmm says:

    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 :-)

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  2. Mike says:

    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?

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  3. Derick says:

    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…)

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  4. John says:

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

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  5. chappy says:

    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!?

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  6. Kent says:

    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.

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  7. Aaron says:

    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.

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  8. MikeM says:

    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.

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