Archive for February 2nd, 2009

I have been following, with great interest, the sagas of Pres. Obama’s nominees for various administration positions. I guess in his effort to create a diverse Cabinet, he wants all kinds of Americans represented. Tax cheats are Americans too.

Timothy Geithner’s nomination went through, despite the $30,000-plus in self-employment taxes he forgot to pay. Now it turns out that Tom Daschle has the same problem. Leave aside the issue of the car and driver, and not knowing that this was taxable income, rather than a public-funded job perk that this former Senate leader apparently assumed would follow him through life. According to this article, he also failed to report $80,000 worth of consulting income.

To be fair to Daschle, he’s not alone. Plenty of sole proprietors do fail to report their income, because in the absence of withholding or reporting, it’s easy to pull off. The IRS has studied the issue, and found that a whopping 57% of non-farm sole proprietor income goes unreported. When you pay your kid’s math tutor, for instance, you probably don’t issue a 1099. And so, some of these math tutors — and consulting former senators — decide that if there’s no form, there’s no income, or at least no income that should be taxed. Taxes are for the rich. Or the little people. Or people with W-2 income. Or something. But if you can get out of it because you’re betting the IRS won’t hear about it, why not?

The answer, of course, is that if everyone did what Geithner and Daschle did, the U.S. Treasury would soon go broke. If 100 million households elected not to pay $30,000, that would be $300 billion gone from the federal treasury. If 100 million households made the “unintentional error” of failing to pay $100,000, that’s $1 trillion gone, or approximately 40% of U.S. government receipts.

On the other hand, given that our law makers are now debating a $800+ billion stimulus package, maybe Daschle was just drawing a line in the sand about what he thought the stimulus should be. Every household should get to avoid paying $100,000 in taxes to the federal government. At least that would actually get the economy moving again! Call it the Daschle stimulus (though, Mr. Secretary, if anyone pays you royalties for use of the name…. that’s taxable income too).