Editore"s Note
Tilting at Windmills

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January 31, 2009
By: Hilzoy


What is it with these people and their taxes? First Geithner, and now, as Steve mentioned, Daschle.

I don't understand why people in public life don't just recognize that they should report anything that might even conceivably count as income, and do things right the first time.

What's more, I really don't like this, from the WSJ:

"Mr. Daschle told committee staff that he had grown used to having a car and driver as Senate majority leader and didn't think to report the perquisite on his taxes, according to staff members."

Part of what bothers me about this is the sense of entitlement: the sense that having a car and driver is just one of those ordinary things that happen to a person, not worth noticing or thinking of as compensation or a gift.

I think Obama should ditch him. But then, while I didn't get down into the weeds and figure out the ins and outs of Geithner's tax situation, I thought he should have ditched Geithner too. And while I see the problem with uncertainty about one's Treasury secretary in the middle of a financial crisis, the fact that Obama didn't drop Geithner will make it a lot harder for him to drop Daschle, and whoever else comes along.

I also have to ask: didn't this come up during the vetting? If not, why not? And if it did, what's up with that?

Hilzoy 6:07 PM Permalink | Trackbacks | Comments (65)

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This should make quite a lot of congressmen and -women nervous - they're all cheating on their taxes as far as this is concerned.

Oops. There goes a perk.

Posted by: SteinL on January 31, 2009 at 6:23 PM | PERMALINK

The problem with the driver is that the guy providing the service (his friend) should have cut a 1099 if it was income.

The government would then know that income was generated and taxes need to be paid. Also, Daschle would know he as earned income and must pay taxes.

Posted by: tomj on January 31, 2009 at 6:33 PM | PERMALINK

I agree with Hilzoy; ditch 'em both. At some point, if we as a society are supposed to have respect for the laws of the land, we can't let the political class get away with breaking those laws. At one extreme we have the war criminals of the Bush administration, at the other end we have tax cheats. But somewhere in between there's a principle involved. There will always be some "emergency" reason why we need to overlook someone's law breaking, so that's not an excuse. If laws and consequences for breaking them don't apply to Wall St. and Washington insiders, why will they ever pay attention to statutes?

And for both Geithner and Daschle, they're being hired because they're supposed to be so smart and so capable. A lame explanation of not realizing something was taxable just doesn't hold up when one is touted as being one of the best and the brightest.

Posted by: jrw on January 31, 2009 at 6:33 PM | PERMALINK

Yup, I was a little bothered by the Geithner thing. Sorry, Daschle, you have to go because Geithner should have.

Posted by: Franklin on January 31, 2009 at 6:38 PM | PERMALINK

regardless of bona fides, he should never have asked him to begin with. I voted for change- not clinton 2.0!

Posted by: effluvientOne on January 31, 2009 at 6:42 PM | PERMALINK

Easily corrected, understandable and really not that big a deal. There is so much under the table, left unsaid that might make this all make a lot more sense.
What I have to go with is the character of Obama and so far he is honest and seems to always go in the direction of the good of the people. I really don't know why it is important for him to have either one of these two on board...yet...but I wouldn't trust Bush an inch and am trying not to let that carry over to Obama.

But I agree...all dems should get the message that we now have majorities so don't screw it up with stupid tax or sex issues. Get real about why you're in government service and don't be stupid.

Posted by: joey on January 31, 2009 at 6:53 PM | PERMALINK

There's actually an excellent reason to dump Daschle, which differs from Geithner - Geithner really was indispensable for the job, whereas there's a much better candidate for Sec of HHS than Daschle: Howard Dean. I make a detailed case here.

Posted by: Aziz Poonawalla on January 31, 2009 at 6:59 PM | PERMALINK

I don't get it. I've been free-lancing for years, generating lots of 1099s and keeping track of other income and expenses, and I manage to file my taxes correctly without an accountant (with TurboTax, no less). Is it too much to ask that the political class do the same?

Tom, you may be a bright guy about health care, but you really don't know squat about daily living any more. Go retire, or at least don't aspire to public office again.

Posted by: Linkmeister on January 31, 2009 at 7:00 PM | PERMALINK

My understanding is this did come out with the vetting. At least the vetting seems to be thorough.

If Daschle was supplied with a driver by the govt while a Senator & it wasn't counted as taxable, it is understandable why he didn't think it was. Especially if there was no 1099 form sent to him, which the car service is required by law to do.

Another problem resulted from an inaccurate 1099 from his employer that had missed a month of his income.

And the other concerned charitable contributions, some of which were not listed as charities by the IRS, & some donations for which he had canceled checks but no receipt from the charity involved. I did not know myself of those 2 requirements. As far as the IRS listing is concerned, most of my charitable donations for the past several years are rightfully charitable orgs but are not organized as such under IRS rules.

Both these guys should have been ultra vigilant concerning this, but there appears to be no intent to defraud the govt. Nevertheless, it sure doesn't look good, & it harms Obama's credibility somewhat to keep them on board.

Posted by: bob in fla on January 31, 2009 at 7:00 PM | PERMALINK

Geithner's was a common situation that happens to low-income americans as well - an employer fails to report you and you suddenly have to be an expert on what should be withheld. It's a real pain, and happens in the Silicon Valley all the time. 'Oh, you're a contractor' except the checks look pretty much the same when they get to the bank...

Daschle's situation is by far less common, but no more unconscionable. In the time he was working up for this position, he goes over his taxes, and 'OMG, I wasn't paying taxes on some of this stuff'. So he pays them before the new job comes up.

Part of it isn't his fault - the people paying him should've reported it (as pointed out) and part of it is his fault, he should've hired someone to look after his income. This is a direct result not of malice on his part of inattentiveness.

If the IRS spent as much time looking at his taxes as they do the average american in the bottom 4/5ths, he would've known something was wrong.

How is that a reason he should be considered incompetent at his job?

Posted by: Crissa on January 31, 2009 at 7:01 PM | PERMALINK

I think we need to calm down about the tax issues for these people. While I think it's important for people to pay their taxes, and pay them correctly, the unfortunate fact is that the income tax is extremely complicated. While there are some things that are easy to understand as income, other things aren't necessary so cut and dried.

While my perspective may be slightly skewed as an attorney who has had to deal with tax issues in the past, I think it has tended to make me more compassionate to those making mistakes.

If people make an honest mistake, or even a negligent mistake, I don't think it's time for a lynching. If they're willing to make amended returns, pay whatever taxes and penalties they owe, I think that should be the end of it. While a bit of ritualistic shaming is in order, I don't think it should scuttle any nominations.

While I think that Geithner's mistake is easier to forgive, Daschle's is still within the range of things I could put as a careless mistake. The car and driver is not necessarily something that a person might view as income, especially if it was a perquisite of their job before, and they weren't sent a 1099. The unreported income and the charitable donations are a bit more troubling, but that too can just be plain carelessness.

Overall, I think we should remain calm about Daschle's nomination unless something more damning comes out that makes this to be a more knowing violation.

Posted by: PatrickE on January 31, 2009 at 7:07 PM | PERMALINK

This from a strong Obama supporter: Obama is on the verge of becoming a weak and ineffective leader. This guy has to grow a pair.

Posted by: Econobuzz on January 31, 2009 at 7:11 PM | PERMALINK

Yes, officials have gotten used to things like having cars with drivers, and they've gotten used to not paying taxes on them. The latter, in large part because under Republican rule the IRS reduced auditing of the upper classes and went to pinching little schmucks for cheating on their EITC eligibility, etc.

Posted by: Neil B ☺ on January 31, 2009 at 7:12 PM | PERMALINK

keep in mind that the only reason these issues are coming up is because Obama has implemented a policy of transparency.

Anytime 'business as usual is changed, there is a transition period needed for people to catch up.

I agree that those issues did come up during the vetting. Geitner as well as Daschle paid there taxes a while ago, as soon as it was discovered.

Although I don't like it, what I'm considering is the fact that Bush's nominees and cronies NEVER disclosed anything. I'm also considering that after Obama's 8 years in office, it will be very hard for any future administration to stop being transparent.

That is what it is all about: Obama is changing the way Washington works. He's working the kinks out and eventually it should all be more open and honest.

At least have some patience and don't act like the 'moral' assholes on the right.

Posted by: bruno on January 31, 2009 at 7:14 PM | PERMALINK


Posted by: flo on January 31, 2009 at 7:19 PM | PERMALINK

I seem to remember reading somewhere that this came out before the vetting back in June '08 and he 'fessed up then and paid the back taxes. Nonetheless, while I pay someone to do mine and my husband's taxes since we have both earned income and a small business (and I'm smart but too lazy to find all of the deductions that our accountant finds for us), it does seem like Daschle should have been smart enough to avoid this problem in the first place.

Posted by: Michigoose on January 31, 2009 at 7:22 PM | PERMALINK

Daschle's big tax hit comes from the driver provided by a firm he worked for (at a BIG yearly salary). The driver has an imputed income to Daschle of 83,000. He never received notice of the imputed amount.

Discovered at some point that the driver might be an issue and talked to his accountant in 2008. Taxes on 4 times 83K is a substantial amount.

Daschle's employer left off one month's income in one year on the 1099 they sent. The regular process for payment was not followed as the payroll staff was on maternity leave. Daschle got the money, but it wasn't included in the end of year report sent to him and to the IRS.

The charitable contributions were to groups that might not have had all the paperwork in order. The amounts given to the questionable/ undocumented charities in question were fairly small (around 5K deductions per year) and the taxes avoided were also smallish (around $1,600 per year).

$1600 per year on an income of over a million dollars is SMALL CHANGE -- not an attempt to defraud or even cheat on taxes.

Now, if you want to beat up on Daschle, go ahead, but do it for getting lots and lots and lots of money after having been a very powerful politician. The tax problems are due to very simple errors.

What do you think this kind of review would do to any of the Congress critters?

What do you think this kind of review would do to any $1,000,000 /year 1040?

How about running George Will's taxes through a vetting program? Or Matt Drudge, Rush Limbaugh or Mark Halperin?

Posted by: Anonymous on January 31, 2009 at 7:28 PM | PERMALINK

Hilzoy; here's one for you to chew on. :)

Rush Limbaugh has a proposal in The Wall Street Journal and here's the most pertinent quote, I can certainly agree with:

The American people are made up of Republicans, Democrats, independents and moderates, but our economy doesn't know the difference. This is about jobs now.[...]Let's stop the acrimony. Let's start solving our problems, together. Why wait one more day?

Of course you'd have to ignore the drivel and distortions from the republican/conservative ideology in the rest of the article. I'm not even going to repeat that crap.

I wish someone smart (hint: Hilzoy) will flesh it out better than I can.

My opinion about Rush wanting Obama to concede 46% of the stimulus package to Republican wishes in the name of bi-partisanship: Republicans didn't even consider ANY Democratic issues while they were in power in the House and/or Senate during the entire Bush administration. Why all of a sudden the desire to be bi-partisan?

Posted by: bruno on January 31, 2009 at 7:34 PM | PERMALINK

I'm a 65 yo citizen and had hoped, will all my heart, that BO would be different, the USA needs that. I don't see that difference yet.

I guess you can't expect those who fed, or are feeding at the public teat, to have any morals/scruples when it comes to enriching themselves FIRST!

If there is a God, perhaps this is his response the the lack of virtue of those who desire to lead (may the devil take the hind end).

Posted by: tomas piedra on January 31, 2009 at 7:34 PM | PERMALINK

I agree with Hilzoy; ditch 'em both. At some point, if we as a society are supposed to have respect for the laws of the land, we can't let the political class get away with breaking those laws.

Let he who is without crime cast the first stone. I broke the law just earlier today when I went over the speedlimit. Not all crimes are equal.

And one big point is this: If these were private sector jobs and the crimes were uncovered after the employer had already decided to give them the jobs, would they be let go? I don't think so, because these crimes aren't related to the job they're being hired for. We're not hiring either of these guys to prepare tax returns, so what they did with their tax returns isn't really relevant to the job.

Does this show a certain lack of character? Sure, but who amongst us is perfect in character? And if all we knew about them was that they were tax cheats and had no other character history to go by, then that'd be one thing. But we have to take the whole picture in and not base everything on one issue. This needs to be about whether they're qualified for the job, not what they did in their personal lives. And were these private sector jobs, the employer would never know about it and if they did, they wouldn't care. I've known employees who got caught cheating on their taxes, but I've never known anyone who was fired for it.

Posted by: Doctor Biobrain on January 31, 2009 at 7:38 PM | PERMALINK

I can understand how someone with several sources of income could make a mistake when doing their taxes.

I'm not rich, but as a contractor, I work for several different companies. Plus, I have investments and bank accounts that send me 1098s. I'm looking at over 20 1099s and 1098s for 2008. Could one be missing? Could be. I do my own taxes (using TaxCut). I'll bet if someone were to review my prior tax filings, I'll bet they would find errors.

Let's face it, our tax system has become so complicated that even middle income people have trouble following all the rules.

Posted by: Dee Cee on January 31, 2009 at 7:52 PM | PERMALINK

My question would be why the Republican nominees didn't get this kind of scrutiny, or if they did, why the media did not question the issue for them and report on it.

Or do the Republicans just get to skate because everyone knows they are lying?

Does anyone really think that Rumsfeld reported all his income? I don't. Of course, Cheney was never vetted. He was just a well-known person who could be trusted.

Posted by: Rick B on January 31, 2009 at 7:54 PM | PERMALINK

Part of what bothers me ... is the sense of entitlement: ... having a car and driver is...not worth ... thinking of as compensation or a gift. Hilzoy

This isn't about entitlement. It's about whether having a car and chauffer are taxable. Apparently, it was not as a Senator. It would not be to an employee if only used while doing business for the employer. But Daschle was a consultant, which I assume means independent contractor. I suspect that was why it was a taxable event.

Most people give all the information they think may be relevant to their CPA's for tax purposes. Since Daschle never paid for the use of the car or received a 1099, there would have been nothing in his file of tax-related papers to give the CPA. Since he'd never paid taxes for work related limo service, what would have triggered anyone from acting?

Considering he ammended or is ammending his taxes voluntarily without any IRS intervention, this is much ado about zilch. I find it far more important that the person most capable of fixing our health care system is working on it.

Posted by: Danp on January 31, 2009 at 7:56 PM | PERMALINK

Daschle is way out of touch. His tax and limo problem makes Obama look bad, and gives ammo to those who say the Dems are no different than the Republicans. He's not indispensable. Even if he brought value to the table before this became public, he no longer brings that value to the table. Instead, he has become an embarrasing liability. He should go.

Posted by: Hanan Kolko on January 31, 2009 at 7:57 PM | PERMALINK

Geitner missing the proper self insurance tax because he was using TurboTax (too cheap to use a tax accountant?) and the program didn't handle the issue of income from an international organization (the IMF) properly, does not bother me.

Daschle having minor charitable deductions disallowed does not bother me unless it was donations to entities that clearly were not charities.

Daschle miscalculating income when using 1099s received by a client raises more questions -- how did he keep income records? Did he have a bookkeeper? Was it the bookkeeper's mistake or his? Did he change his records to match the mistaken 1099 and was there any inquiry about a discrepancy at the time? Was the income picked up in the next year's 1099? It's easy for those of us with one source of income to wonder how this happens, but he was running a consulting business with dozens of clients and it's easy to see how there could have been an innocent miscalculation.

The chauffer thing bothers me a little more. It does not pass the smell test. If it was from a friend rather than his employer he should have stopped to think about whether it was gift income.

Posted by: pfgr on January 31, 2009 at 8:00 PM | PERMALINK

I find it easier to forgive Geithner. Hell, I made a very similar mistake once. It's not always easy to classify different kinds of income properly. And taxes get complicated when you have wages, self employment income, interest income, oil royalties, stock options, inheritance, and capital gains all in the same year that two of your clients went bankrupt and didn't send you any paperwork. If you file a tax return that's under 50 pages long, you might not understand how smart people can screw up their taxes. But many of us do file returns the length of War and Peace. You are often faced with conflicting rules and don't have the tax law knowledge to choose which rule applies. At that point, the "when in doubt, pay later" rule applies. Basically, you decide which rule means paying less money, and go with that rule. When the IRS sends you a nasty letter, you cut another check. It's really no big deal. It's nowhere near as bad as hiding income in offshore accounts.

Posted by: fostert on January 31, 2009 at 8:13 PM | PERMALINK

Are we talking about someone who tried to bilk Uncle Sam, or someone who made a mistake? Did he correct the mistake? Did he try to cover it up?

No? You mean he claim clean and paid the balance? Holy Crap, let's string him up!

Posted by: Boronx on January 31, 2009 at 8:31 PM | PERMALINK

I once read that Bankruptcy is as American as Apple Pie. The message being that it is common. The idea that every American pays his or her tax bill by the April 15th deadline is absurd. There are legitimate reasons for delaying payments, not all personal.

Taxes paid are taxes paid; whenever they are paid.

Posted by: TBone on January 31, 2009 at 8:33 PM | PERMALINK

Geithner's tax dodging was not a mistake. He was told multiple times, he signed multiple forms, he was even give gross-up payments and was explicitly told that these were to compensate for the tax he was supposed to pay. He pocketed the gross-ups and didn't pay the tax.

The man is a liar, a tax dodger and a perjurer.

The only reason he's getting a pass here - the single sole solitary reason is that he was appointed by a Democrat.

Posted by: a on January 31, 2009 at 8:46 PM | PERMALINK

When I read Taibbi's spot on article last month, I could not understand why Daschle was touted as being the best candidate for the job. I would have thought a physician such as Dean was far superior, as he appears to care about health care from the bottom up, rather than top down.

This is what Matt wrote (http://www.rollingstone.com/blogs/taibbiunbound/2008/12/the-whore-factor.php#more)

When Obama picked Tom Daschle to be the HHS Secretary, I nearly shit my pants. In Washington there are whores and there are whores, and then there is Tom Daschle. Tom Daschle would suck off a corpse for a cheeseburger. True, he is probably only the second-biggest whore for the health care industry in American politics — the biggest being doctor/cat-torturer Bill Frist, whose visit to South Dakota on behalf of John Thune in 2004 was one of the factors in ending Daschle's tenure in the Senate.

But in picking Daschle — who as an adviser to the K Street law firm Alston and Bird has spent the last four years burning up the sheets with the nation's fattest insurance and pharmaceutical interests — Obama is essentially announcing that he has no intention of seriously reforming the health care industry. And I know that lots of public policy people are hailing this pick, saying Daschle is perfect for the job ("His new leadership position confirms that the incoming Obama administration has made health care reform a top and early priority for action in 2009," Ron Pollack, the director of Families USA, told reporters), but when they say that I think they mean the following: "Out of all the bought-off Washington whores who could have been given this job, Daschle is the best one. His fake reform will go the farthest in its approximation of actual action than the fake reform of any other possible whore-candidate." Actually that probably sums up the ideological profile of Obama quite well generally — but that's another story.

Regarding Daschle, remember, we're talking about a guy who not only was a consultant for one of the top health-care law firms in the country, but a board member of the Mayo Clinic (a major recipient of NIH grants) and the husband of one of America's biggest defense lobbyists — wife Linda Hall lobbies for Lockheed-Martin and Boeing. Does anyone really think that this person is going to come up with a health care proposal that in any way cuts into the profits of the major health care companies?

Posted by: schoolpsyc on January 31, 2009 at 8:55 PM | PERMALINK

This is troubling. I agree - these people should be dumped - pronto.

Posted by: tomb on January 31, 2009 at 8:59 PM | PERMALINK

"I think Obama should ditch him."

Whew, Hilzoy. I know that living with Republican corruption for so many decades has left a lot of us drowning in cynicism... But, mistakes, even bad mistakes are NOT the same thing as corruption.

By your criteria, there would be no one in charge. I can't imagine even you'd be working.

Posted by: Jim G on January 31, 2009 at 9:03 PM | PERMALINK

I actually think this argument is horseshit. Should the president pay tax on the Beast and its driver? How about the secret service security detail?
I'm happy as a taxpayer to pay for a car and driver for the senate maj. leader. I don't consider it a perk but rather a requirement for a major government official to be able to move about and travel efficiently.
I am not a fan of Daschle, but if this is the argument against him, then I'm on his side.

Posted by: greggy on January 31, 2009 at 9:05 PM | PERMALINK

Daschle's a douche. Flush him. It can be spun as Obama's sister souljah moment. The good press just writes itself. He flushed the lobbyist tax cheat. If he keeps this bum on it's business as usual.

Posted by: grinning cat on January 31, 2009 at 9:16 PM | PERMALINK

Letsee... 65 and blind, apparently, tomas piedra.

Look, if you got a driver from your workplace, would you think to report it on your taxes or expect that it was already in the withholdings?

Posted by: Crissa on January 31, 2009 at 9:17 PM | PERMALINK

greggy, that's bullshit. A guy like Dukakis takes the fricken bus to work. Maybe Daschle gets a pass because there was already an attempt on his life otherwise fuck Daschle. As Obama said "public service is a privilege not a right" this goes double for Daschle.

Posted by: grinning cat on January 31, 2009 at 9:19 PM | PERMALINK

Dump Daschle.

Maybe Eliot Spitzer can give him so phone numbers to cheer him up.

Obama is taking a big hit to his credibility if he keeps this guy on the team.

Posted by: lobbygow on January 31, 2009 at 10:04 PM | PERMALINK

One thing is for sure, Bush didn't use the IRS as a weapon against Democrats or the IRS did it badly.

Posted by: Neo on January 31, 2009 at 10:05 PM | PERMALINK
...makes Obama look bad, and gives ammo to those who say the Dems are no different than the Republicans.

Since when did the Republicans need evidence to claim that Democrats are just as bad as they are? they say it each and everytime one of them gets caught in a scandal - regardless whether a Democrat has done it or not.

Posted by: bruno on January 31, 2009 at 10:29 PM | PERMALINK

Any time I see Geithner on TV I see a little boy who cheated on his taxes. This little boy is the head of the Treasury for god's sake, and there is no excuse on this planet to explain away his tax derilection. Send the bum home in ignominy. Let him work for Goldman Sachs where many of his buddies hang out.

Next week looks to be another disasterous week on Wall Street. The market performance in January was the worst January in history, down more than 8%. There will be talk of a banking system collapse, and before it's done I expect Citigroup and possibly Bank of America to be nationalised by Obama and Geithner. This should eventually settle the markets and a rally soon to follow. It will be a shame for Geithner to get credit for the recovery, temporary as it may be.

Posted by: Dilbert on January 31, 2009 at 10:30 PM | PERMALINK

Ha-ha. Reagan rides through history laughing all the way. I laugh with him.

Reagan raised some taxes akin to fees perhaps, so? But Reagan lowered taxes overall and income taxes particularly for the rich, 25% across the board. Or how would you quantify Reagan's tax cut in sum during the course of his 8 years? 22.5%; 27.5%?

So Krugman in the NYT, best case scenario, predicts that it will cost $60,000/job created. That is $60,000/job earned with the blood (in the case of the military literally), sweat, and tears of our hardest working and most noble citizens, long term beginning in childhood, statistically and undeniably by anyone with common sense and striving toward a lack of bias.


Hmm ... why not simply do what worked in the 80s excellently, rewards the hardest working in society, put's money in hands of efficient job creators, er, uh, somewhat more efficient than $60,000/job, i.e., the private citizens and entrpreneurs, at what will cause a tiny fraction of the deficit that the stimulus package costs?

It's the same liberal Democrats that brought you the worst recession since the Great Depression ... er, uh, not this one, the one in the late 70s and early 80s. One where the poorest suffered the worst in terms of their quality of life.

I'm so happy Obama won the election; the liberal Democrats are proving how incompetent the are; and time will prove it.

The Masked Defender!

Posted by: The Masked Defender on January 31, 2009 at 10:30 PM | PERMALINK

To the Masked Defender

Go back to redstate with your drivel, listen to Rush bloviate, cling to your guns, shoot a raccoon or squirrel for dinner, and make sure you're the first at Sunday service tomorrow.

You have absolutely no concept of how the things you're talking about actually work.

Morons like you have a purpose, I just don't know what it is right now.

Posted by: bruno on January 31, 2009 at 10:44 PM | PERMALINK

The Masked Defender?

Dude, what are you, five?

Posted by: Nelson on January 31, 2009 at 11:28 PM | PERMALINK

And another thing....

Why the hell don't any of these guys pay penalties for their late taxes?? Geithner, Rangel, now Daschle -- sure, they pay back taxes pus interest, but no damn penalties. My girlfriend today found out she owes penalties because she missed estimated tax payments on $8,000 of freelance income. But Daschle can fail to pay $128K in taxes over three years and just gets off paying what's owed plus interest?

Dems need to clean house, because like it or not progressives are going to be asking the country to pay more in taxes over the long haul. Having tax cheats lead that effort is, well, fucking stupid.

Posted by: scarpy on January 31, 2009 at 11:30 PM | PERMALINK

They need to have a normal working person on their staff to help with the vetting process. Someone who would look at this for one second and say WTF out loud.

Posted by: JohnK on January 31, 2009 at 11:56 PM | PERMALINK

It's really not at all hard to figure out that free services are taxable income. It is inconceivable that Daschle is too stupid to understand this. Somebody like this would never get a security clearance. I am fed up with the high and mighty excusing each other for lawbreaking. Enough. No more tax cheats for the love of Christ. I can't even begin to imagine how many billions of dollars these two scandals have cost the Treasury - every joe six pack is going to think, those guys fail to pay $100k in taxes, why the fuck am I going to report anything?

Posted by: Bosch's Poodle on February 1, 2009 at 12:00 AM | PERMALINK

To clarify Geithner's situation. Several commenters have said that they have run into the same problem with income earned as contractors. But it is important to note that Geithner was NOT a contractor. He was NOT self-employed. He was a full-time employee of the International Monetary Fund with paid vacations, a health plan, etc. Thus when he filled out his 1040 and came to line 57, "Self-Employment Tax" and read in the instructions, "If you were self-employed...", he skipped over line 57, and went on to line 58.

It is because of the IRS's practice of referring to Social Security and Medicare taxes as "Self-Employment Tax" that most of the IMF's American employees find out, at some point in their careers, that they are "tax cheats".

Posted by: SPBayer on February 1, 2009 at 12:40 AM | PERMALINK
Daschle's a douche. Flush him. It can be spun as Obama's sister souljah moment.

No, it would be Obama's clear indication of weakness, the same way it was for Clinton when he started dumping nominees instead of standing behind them over similar irrelevant BS.

Posted by: cmdicely on February 1, 2009 at 12:53 AM | PERMALINK

I do think it makes Obama looks bad if he gets two tax cheats onboard. So, Daschle... too bad.

It would make Obama look good to take the oppty to say he will reform the tax code so that instead of 88% of Americans being so confused about paying taxes they hire someone could do it themselves.

There is just no excuse for the tax code being so full of social engineering and changes and complications. Make it simple. Make it fit on a postcard.

I'd even consider the flat tax an improvement over what we have.

Posted by: Clem on February 1, 2009 at 2:48 AM | PERMALINK

It's really not at all hard to figure out that free services are taxable income. It is inconceivable that Daschle is too stupid to understand this.

It's also inconceivable that you are too stupid to realize that if someone does not know part of the tax code, that does not imply that they are either stupid or a cheat.

Posted by: Boronx on February 1, 2009 at 3:08 AM | PERMALINK

ie they knew they f'd up...if they didn't know they f'd up..wtf guys...ditch em...can they still do both?...while your at it universal heathcare...dont screw up now...

Posted by: kevin k on February 1, 2009 at 3:31 AM | PERMALINK

i have to admit i skipped about half the comments so far, so maybe this has been said already.

i think that the standards obama is applying to his nominees are very high.

i'm a student, and i know i dont report the sumulative value of the checks i get for the holidays or my birthday to the irs. this, of course, makes me a tax cheat.

cheating on your taxes can be remedied quite readily, by reassessing your tax liability and paying the difference. this is of course different from, for example, bush-era policies of torture to extract information, where the violation of law cannot be counteracted in such a direct way.

practically everyone is a tax cheat to some degree or another. it's sort of the nature of the beast. if daschle made good on his oversight, that's good enough for me.

and, i should add that anyone who has a case of the screaming fantods over his nomination should have EXACTLY THE SAME LEVEL OF SCRUTINY LEVELED AT THEIR OWN INCOME.

the level of abuse does not have to rise to duke cunningham levels in order to undercut the criticisms of those opposing daschle's nomination.

Posted by: rageahol on February 1, 2009 at 3:49 AM | PERMALINK

Maybe he was traumatized and still has PTSD from the weapons-grade anthrax he received in the mail from "Bruce Ivens."

Posted by: Richard Bruce Cheney on February 1, 2009 at 4:04 AM | PERMALINK

"Thus when he filled out his 1040 and came to line 57, "Self-Employment Tax" and read in the instructions, "If you were self-employed...","

That one line has caused me more problems than anything with the IRS. I have often been both an employee and self employed. The instructions are clear enough in most situations. But what if you are employed by a company and are contracting with them at the same time? I've done that. Chances are, your accounting practices are different from you client/ employer. You inherently run into the issue of which income falls under which category. And it's complicated by the factor that you are doing the exact same work in both cases. So you relax and expect the nasty letter. The problem is that we argue over something where three different groups have different accounting methods that produce different results. None are either right or wrong. So you wait to here what the IRS has to say. They are the only one who can threaten you with jail, after all. But you can't guess what their opinion will be. You can assume that if you accidently overpay, the IRS won't be refunding the money. So, you err on the underpaying side.

Posted by: fostert on February 1, 2009 at 5:08 AM | PERMALINK

"Why the hell don't any of these guys pay penalties for their late taxes??"

Well, he paid penalties and interest, just like the rest of us do. The interest is reasonable, better than a credit card company would charge. I really have no idea about the penalties. Sometimes they are light, and sometimes they are what you'd expect from a loan shark. Only an Alchemist can figure out how those penalties are calculated. Who knows what the Penalty Gnomes might say? A typical IRS accountant certainly cannot figure them out.

Posted by: fostert on February 1, 2009 at 5:32 AM | PERMALINK

I REALLY, REALLY, REALLY wish we could get a link to an article by an experienced tax lawyer on how the IRS would view these cases if the errors were found during an IRS audit. It would be much more informative than all the ignorant bloviating we have been seeing in both blog posts and comments.

He didn't report car and driver as taxable income. If I understand it correctly, this service wouldn't be taxable if it had been used strictly for business, and the employer probably should have given him a 1099. This is the biggest dollar amount and it points to a lifestyle most of us can't relate to, but I doubt Hilzoy has any more idea than I do whether the IRS would regard it as an innocent mistake or tax fraud.

He didn't report one months income that was left off his 1099 for that year. He probably should have noticed that big a difference but given many different sources of income, it isn't too surprising he didn't.

Out of 3 years of charitable contributions, Obama's vetting team found less than 6% that either went to charitable entities that weren't properly registered to the IRS or where Daschle had the canceled checks but not the form from the charity that is required to claim any donation over $250. This is absolutely a non-issue.

Posted by: tanstaafl on February 1, 2009 at 5:52 AM | PERMALINK

Amusing. Clearly the whinging twat author has never been in a complex tax situation, and with the mind numbing idiocies of the American tax system. The Daschle item seems rather clearer (although non-obvious to me that one should pay tax one such items, but if your Fisc says so...), however having had international employment in the US, I can attest that IRS guidance is mind numbing and that few American tax advisors understand international tax implications. Of course for the Geithner situation, he is an American, but his IMF salary was in the international grey zone - and as someone noted supra, the whinging twats who only have had to file a simple return rather than one of your insane 50 pg declarations with all the ambiguities on treatment, have no bloody clue. Hiding money in off-shore accounts or deliberately routing salaries in off-shore companies, there you have a case. Not paying your social security bloody worthless imposition?

The ignorant Leftist ranting on calling someone a tax cheat over what is effectively a minor error due to complex codes (thanks to "progressive" social engineering) really disgusts. Class envy at its worst.

Posted by: The Lounsbury on February 1, 2009 at 6:00 AM | PERMALINK

The Lounsbury - I assume that in England "twat" is less offensive than it is here. But here it means the same as the second "nothing" in Shakespeare's Nay, if he do nothing but speak nothing, he shall be nothing here..

Posted by: Danp on February 1, 2009 at 7:50 AM | PERMALINK

I think people are missing the big picture here. Which is,that this mess is just another symptom of the way Obama has completely surrounded himself with, and been totally co-opted in policy terms by, creatures and servants of our permanent plutocratic ruling class. Rather than being an outsider to that class, or a class traitor like FDR, Obama himself is a grateful recent inductee into it with plenty of favors to return (just like Bill Clinton before him). That's not change I can believe in.

Posted by: Steve LaBonne on February 1, 2009 at 8:41 AM | PERMALINK

And, once again, at 12:53 AM, cmdicely cuts to the chase with the most pertinent comment. Terse, and well said.

Posted by: berttheclock on February 1, 2009 at 8:57 AM | PERMALINK

The reason this is bad and that Dascle, at least, should be cut loose is that very legitimate-sounding hay will be made of this, most effectively by those on the right who want taxes for upper incomes cut. They will sell those cuts as "tax code simplifications".

After all, if these big shots can't figure out their taxes...

Posted by: winner on February 1, 2009 at 10:50 AM | PERMALINK

The problem with that argument, as this case shows, is that it the difficult part of filing taxes is determing how much income do you owe taxes on? What constitutes income? What deductions are you entitled to?

Once you have that figure, computing the actual tax you owe is a simple matter of looking up a number on a table. Or for very high numbers, plugging it into a relatively simple formula on a calculator.

A flat tax wouldn't help simplify any of the 3 problems Daschle ran into. It wouldn't make the bookkeeping for a typical small business even the slightest bit less complicated. It would only make calculating profits on your stock portfolio easier if, like Forbes, you reduces the capital gains tax to 0% so that you didn't have to file a return for stock profits at all.

Posted by: tanstaafl on February 1, 2009 at 11:09 AM | PERMALINK

Three points:

1. This is GOP mischief-making. They want to block national health care, and this is the first shot of the war. If Daschle were applying for a job as president of a university, as head of a large non-profit, or as an executive of a corporation, this delay in paying taxes would not block his hiring. Daschle is well-qualified for the job, which is what the Senate (and the jackal press) should be looking at. The Republicans are not against Daschle; they are against everything Obama says or does. Like the attacks on Hillary Clinton because her husband is one of the largest charitable fundraisers on the planet, this is just an example of the GOP's using every possible weapon to derail Obama's agenda.

2. Obama owes Daschle. He was an early supporter when Obama could find few big-name Democrats willing to buck the "inevitability" of Hillary Clinton. It would be very, very awkward for Obama to dump him and would make members of both parties in the Senate think badly of his personal and political loyalty. The Senate is not going to turn against one of its own unless Obama blinks.

3. If Obama's enemies are not willing to allow him to get his cabinet confirmed before throwing bombs, perhaps his friends in the blogosphere will show a little more patience?

Posted by: Steve High on February 1, 2009 at 11:21 AM | PERMALINK

Steve LaBonne
It is pretty tough to bring a bunch of outsiders into Washington and expect to get things done right away. You need an outside vision [Obama] and insiders to make the change [Daschle, Clinton, Biden et al]. If you only bring in outsiders then you spend at least two years trying to get your footing. That is one reason Bill Clinton lost the House in his first term.

Posted by: MattL on February 1, 2009 at 12:22 PM | PERMALINK

180 degrees WRONG, MattL. That's the only way TO get things done! (See under: FDR, Brain Trust.) Washington insiders NEVER have any new ideas. They got where they are precisely due their incapacity to have any (which makes them unthreatening to the powers that be).

FDR was not even close to being as as smart or well-informed as Obama, but he had two crucial attributes Obama conspicuously lacks: openness to unconventional ideas and willingness to experiment.

Oh, and a third: willingness to take on the opposition instead of compromising.

Posted by: Steve LaBonne on February 1, 2009 at 6:49 PM | PERMALINK



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