In the wake of the tax misadventures of Obama nominees Tim Geithner, Tom Daschle, and Nancy Killefer, the question is, “Can’t anyone inside the Beltway get their taxes right?"
Sadly, the answer is, “No, they can’t. And neither can the rest of us.”
This not in any way to rationalize what these folks did. These sophisticated political heavyweights made mistakes, some pretty egregious, and are now being brought to account for them.
But could you have survived the scrutiny they have gone through? Once they were nominated, every line of their tax returns was flyspecked by investigators from the Senate Finance Committee and other green-eyeshade types. Mistakes were, as they say, made. And they were caught.
In truth, if most of us had our returns picked over this way, we too would be fingered as tax scofflaws, or perhaps as suckers who paid more than we owed. Sure, some of us would be cheating. But many of us would be victims of an insanely complex law we cannot possibly understand. Either way, there is something very wrong with a Code that is so complicated that it encourages both confusion and cheating. And, sadly, Congress and Obama seem poised to make it even more complex.
Look at what tripped up these nominees. Nancy Killefer, who withdrew today as Obama’s nominee to be his chief performance officer, reportedly failed to pay a few hundred dollars in D.C. unemployment tax for a household worker. It was not even the well-known Nanny Tax that did her in. I have no idea what her circumstances were, but as we have seen time and again, getting the tax liability right for such an employee is not easy.
Tom Daschle, who withdrew today as Obama’s nominee to be health reform czar, got tripped up by the definition of income. Should he have known that an employer-provided car and driver is taxable when used for personal purposes? Probably. But how many self-employed people and small business owners finagle a tax deduction for that car they use for their business, most of the time.
Treasury Secretary Tim Geithner, who survived his brush with the tax code, got tangled up in the payroll tax. This is another odd corner of the law--especially when employers don’t withhold for you, as his did not.
The University of Michigan’s Joel Slemrod, estimates that it costs individuals $85 billion-a-year in time and money to prepare their taxes. Businesses spend another $40 billion. This is nuts.
Whenever Barack Obama muses about what might have happened to health reform if Daschle had been around to help steer a bill through Congress, he also can think about this: The stimulus he wants so badly is going to make the Tax Code more complicated than ever. If he is looking for yet another reason to change course on tax policy—and soon—he should just ask Geithner, Daschle, and Killefer.
