The Washington Times had a story this morning stating the Obama’s pick for Treasury Secretary, Timothy Geithner, was delinquent in his taxes to the tune of $35,000. The article went on to say that “Democrats said the delinquent taxes, some of which Mr. Geithner paid only after he learned that Mr. Obama was considering him for the post were and ‘honest mistake.’”
I’m guessing if this was a Bush appointee, Dopers would be all over this. Does anyone care that the perspective head of the IRS doesn’t always pay his taxes?
Even the GOP thinsk that the mistakes were innocent and technical, and the IRS had waived any penalties:
*Two senior Senate Republicans likewise gave endorsements, echoing the argument of Obama transition officials that Mr. Geithner’s failures were innocent mistakes or technicalities.
…The I.M.F., as an international organization, does not withhold payroll taxes for Social Security and Medicare from its American employees’ paychecks. Those workers are required to pay the roughly 15 percent tax themselves, as if they were self-employed.
…
Mr. Geithner fully paid his state and federal income taxes. … However, Mr. Geithner’s accountant told him he was exempt from self-employment taxes, according to Obama transition officials.
As Obama officials pointed out, and I.R.S. documents attest, the failure to pay Social Security and Medicare taxes is common among Americans who work for international organizations, including foreign embassies. A 2007 I.R.S. notice reported that up to half of such employees incorrectly file their tax returns.
The I.R.S. waived penalties for Mr. Geithner in 2006, according to an account provided by the transition office and the Senate committee. …"*
Tax rules are complicated and thus you often hire an expert. Assuming the Expert is a CPA or EA, you are generally then covered.
He followed Expert Advice and thus, failing Criminal charges, is then generally absolved of any penalties by the IRS.
He paid them. With interest. In assessing no penalties, the IRS determined that there was no wrongdoing. Frankly, I like knowing that the person in charge of the IRS is proven to be bound by the same rules as the rest of us. A similar thing happened to me before. I paid the interest, just like Geithner. No penalties, just like him. In both our cases, we depended on the competence of others. A mistake, but not something nefarious.
I think it says a lot about the problems with America’s tax code. Geithner is a smart man, nominated for U.S. Treasurer and who used to work for the IMF. Even he can’t understand the rules. Maybe it is time to throw it all out and start over.
I don’t expect public officials to be saints. I didn’t care about Clinton (“I didn’t inhale”) or Bush (“I can’t remember if I did cocaine”) when we found out about their own transgressions.
As far as I’m concerned, if the GOP and the IRS are cool with it, what makes me think I know better?
It’s not a complicated issue that he got wrong, and I’m baffled that an accountant would have told him that he was exempt. Moreover, I’ve seen at least one source say that the IMF gives its American employees some guidance on paying self-employment taxes (this was in Forbes, which is presumably somewhat adversarial to the Obama administration, so make of that what you will). Still and all, I have no problem believing that the errors were not deliberate.
However, he paid the 2003 and 2004 delinquencies when audited, but he only went back and paid 2001 and 2002 after he was nominated for Treasury. I’m willing to excuse the errors found in the audit. But when Geithner was told that he had handled this issue incorrectly for '03 and '04, for him not to go back and check for (and correct) the same errors in the previous years that he worked at IMF strikes me as much more serious and potentially much less excusable in a nominee for Treasury Secretary.
Bingo. We hear about the tax burden all of the time - well, more and more often for companies it is compliance costs that are a far bigger headache than a tax rate burden. Same with individuals - and don’t think this doesn’t have a massive impact on our competitiveness.
I could care less that Geithner fell afoul of the rules a bit - I car far more that nobody can know with any certainty what these rules are, including the man in charge of collecting taxes.
In a normal year with an ordinary cabinet nominee, this would be the sort of thing that causes a major shitstorm and torpedos the nomination.
However, as we’re in the midst of a major financial/economic crisis and there is a broad consensus that Geithner is the right man for the job of responding to the crisis, it’s not going to be a deal-killer. This is particularly so as any group of Senators who stands up to challenge Geithner will be taking ownership of the economic problems and subject to serious blame for anything his replacement does wrong. Even the Republicans who would normally go into a feeding frenzy at the first drop of blood in the water from a Democratic nominee will stifle themselves.
In the end, he’ll probably be confirmed 64-34, unlike Clinton and some others who will get 80+ votes, but it won’t make a damn bit of difference.
I’m very familiar with this issue, because American employees of the UN, even in New York, have it also. . Back when my father worked there the UN paid US taxes for its workers, but not this one. My father fought for about ten years to get Social Security considered as a tax (since it was not voluntary) and finally won.
I’m not surprised that people moving to the IMF or other such places miss this, but I am surprised that these places don’t make it very clear that self employment tax is required. My father started with the UN soon after it opened, so I suppose they were more with it back then.
At least from my personal experience, this is far from the truth. I have worked in Finance in two major global corporations (tens of billions in annual revenue). Their taxes are complicated because they arrange their business in a way to minimize taxes, dancing very close to the line between tax avoidance and tax evasion. In each case, there were overseas shell corporations, money being round-tripped all over the world, and between states in the US. Basically they are trying to move their income between states and countries to minimize their taxes. That is the major source of complexity. The tax credits, accelerated depreciation, and other complexities in the tax code are simple by comparison.
Note, there is nothing that any single government can do to make this simpler for the corporations. They corporations are taking advantage of different tax rates on different kinds of income in different countries.
That is true. But if a country were to greatly reduce or eliminate corporate taxes, wouldn’t they attract a large number of corporations to that country, allowing these companies to generate large amounts of wealth that could be taxed at the point of consumption? (Say a value added tax like many European countries have)
I was briefly self-employed, and even I knew that I had to pay social security tax. Undoubtedly Geithner knew as well. Normally I wouldn’t consider it a major sin, but for God’s sake the guy is going to be the head of the Treasury department. His tax avoidance, for something that is a simple and clear-cut issue, should disqualify him. It is not some kind of obscure and complicated issue as others are trying to depict it. Even if it was, the head of the Treasury department should not find it complicated.
Which one does not owe on all income. Please tell us exactly on which income social security tax is paid and on which it isn’t. Nor do employees directly pay social security tax, their employers withhold it for them and pay it.
