It seems like every day now a new figure in the government is getting into “trouble” for tax issues. I use the word “trouble” lightly because most of them are getting no more than a slap on the wrist when if it were you or I, we would certainly be feeling the wrath of the IRS. During the election, the now President Obama promised us “change” in Washington. I guess this is his definition of “change.” Never before have I seen so many tax-happy politicians skirting their own taxes. Let us review the short list. I will not go into great detail on any of them, but just list the highlights (otherwise, it would be a book – hey, there is an idea!)
Timothy Geithner. This is one of the more publicized issues at least in the national media. President Obama’s Treasury Secretary designate owed $34,000 in back taxes when he was selected. Geithner failed to pay self-employment taxes for several years and was busted during an IRS Audit. I don’t even begin to comprehend how this is acceptable. The man is going to be the Treasury Secretary, yet he can’t file and pay his own taxes accurately? He is supposed to be over the IRS, yet he can’t even manage his own taxes? It is beyond me how President Obama could have had such poor judgement in this selection. The fact that Geithner is the Treasury Secretary is shocking.
Tom Daschle. President Obama selected the former U.S. Senator from South Dakota for the job of Secretary of the Department of Health and Human Services. It was uncovered that Daschle cheated his fellow taxpayers when he failed to disclose and pay taxes on hundreds of thousands of dollars of income. Of course Daschle was sorry about the incident after he “realized” the errors on his return.
Rahm Emanuel. There is increasing pressure on President Obama’s Chief of Staff over Emanuel’s rent free residence of 5-years at a Capitol Hill townhome owned by Rep. Rosa De Lauro (D-Conn) and her husband, pollster Stan Greenberg. Emanuel did not pay taxes on his rent-free use of the townhouse, and he also did not disclose this on his congressional ethics forms. During the time that Emanuel lived in the townhome, he served as the Chairman of the Democratic Campaign Committee and rewarded Greenberg’s firm with massive polling contracts. Many experts agree that this “free rent” was taxable income and could have totaled more than $100,000 over the five year period. Read more on Emanuel’s tax and ethics issues here: Rahm’s ‘Rent” Is Just the Tip of Ethics Iceberg
Hilda Solis (D-Calif.). The confirmation hearings for Labor-secretary appointee Hilda Solis were delayed last week when it was learned that Representative Solis’ husband, Sam Sayyad, had tax liens filed against him. USA Today uncovered 15 tax liens dating back to 1993 against his business. Both Solis and Sayyad deny that they knew about the tax liens and went out last week to pay them in full. See more from USA Today at Tax snafus add up for Obama team
Nancy Killefer. President Obama’s selection for the government’s first Chief Performance Officer failed to “perform” in the payment of her nanny taxes. Unlike many of the other appointees, Killefer had the dignity to withdraw her candidacy. The interesting thing is that she only owed $947 ($298 of back employment taxes, $600 in penalties, and $49 in interest). Not a large amount, but it was enough to have a lien placed on her home. I don’t know why so many people in Killefers position keep getting hit with Nanny tax issues. Don’t they know by now that they have to pay these taxes?
Charlie Rangel. His tax issues are almost too much to detail here. It seems every time I turn around, this guy has done something illegal. Whether the issue is Rangel receiving the homestead exemption on a home he owned in Washington while living in rent-stablized apartments in NY City or contributions or pledges made to the Charles B. Rangel Center for Public Service or Rangel’s failure to pay taxes on $75,000 in rental income on a beach house, the important thing to remember here is that Rangel is the Chairman of the House Ways and Means Committee. That means that he is the head honcho of the committee that makes the tax law. Yes, you read that right. And he can’t pay his taxes accurately? He obviously knows the laws – he helped write them! I am not sure why Rangel is still in office. He is obviously not ethical. Why hasn’t Obama spoken up and requested that he resign for the good of the Country?
Rangel’s tax cheating has become so publicized that Congressman John Carter (R-TX) introduced H.R. 735, “The Rangel Rule Act of 2009″ which would add a new section to the Internal Revenue Code that would prohibit the IRS from charging penalties and interest on back taxes. According to the press release, “under the proposed law, any taxpayer who wrote “Rangel Rule” on their return when paying back taxes would be immune from penalties and interest. Don’t count on this passing a vote, but it is nice to know that someone in Congress knows that Rangel is unethical and that it isn’t fair that the rest of us have to pay penalties and interest and he doesn’t.
Marion Barry. While Marion Barry isn’t part of the Obama Administration, he is a Washington D.C. Council member. His failure to file his 2007 taxes has resulted in a request by prosecutors to urge a judge to revoke Barry’s probation for his past tax offenses and throw him in jail. Barry’s excuse was that his kidney issues have “dominated’ his thinking and that he has been unable to get them filed. I might give the guy a break over this except for the fact that to my knowledge, he still has time to participate on the D.C. Council, and the fact that he has had chronic tax issues. I wonder if Barry is trying to get a Cabinet Appointment here? He would fit right in.
A couple of weeks ago, Politio.com asked the offices of all 99 sitting Senators to complete a short survey to say who prepared their taxes, whether and errors had been discovered on the returns they had filed, and whether they have ever had to pay back taxes. Fifty-six senators responded to the survey, of which eight stated errors had been found in the past and of which 6 states that they had been required to pay back taxes. Click here for details on the Politico.com survey.
Many fear that all of these high level tax cheats will result in taxpayers being more likely to cheat on their returns. The IRS estimates that approximately $300 billion in taxes owed each year goes uncollect every year. Seems like a good deal of this shortfall is in Washington.
Also of note is what is happening to these nominees. Many of them are actually making it through! Imagine what would have happened if Reagan or Bush had nominated these jokers. The Democrats would have never let them be confirmed and they would be back on the street. There is a good editorial on this in the Wall Street Journal: Driving Mr. Daschle
Chad is a Charlotte CPA
who works with small business owners and invidiuals on a monthly basis to provide them with proactive guidance and advice on how to grow their business, minimize their tax liabilities and grow their bottom line. You can find our more about Chad by visiting his profile here: Chad Bordeaux