Deficits, Dollar, Federal Reserve, Individual v. Collective, Live and Learn, Taxes, Treasury, Trust

The Rangel & Geithner Tax Saga

Treasury Secretary Timothy Geithner addressed the House Ways & Means Committee on Tuesday bringing together a couple guys with sorted tax pasts. The committee is headed by Charlie Rangel, a man, like Geithner, who has had trouble navigating the roughly 67,000 page tax code.

You're not the only one scratching your head, Charlie

A more twisted irony for Rangel given the House Ways & Means Committee writes the tax code! It turns out Charlie enjoys a little real estate speculation as a hobby. He ran into a few problems making good on his tax burden after giving steep discounts to tenants and failing to report rental income. The congressman is only responsible for writing the code, though; cut the guy a break.

Geithner’s career is impressive. He was president of the New York Federal Reserve Bank and director of the Policy Development and Review Department (2001-2003) for the International Monetary Fund (IMF). The IMF is an organization providing global oversight of the financial system. Tim’s resume is tip-top.

As one of the most powerful and influential people in the world financial system, Geithner filed his return using TurboTax. Repitition can help sometimes: a financial prodigy holding incredible influence over everyone’s money uses TurboTax! At a certain point, Tim, it’s time to get yourself an accountant.

Everything might have been okay had he just used the software correctly and did what it told him to do. Sadly in Geithner’s case this is more than a user error. Tim could of steered clear of trouble had he not cashed a tax reimbursement check from the IMF on taxes he knew he didn’t pay.

But these are all “minor complications” in the vetting process. Simple “mistakes” that don’t preclude a leader from taking or keeping a position of power and influence. They’re just too qualified and too brainy.

Mr. Geithner paid his back taxes from 2001-2004, paid the interest, but did not pay the penalty fee. That was waived by the IRS, the organization Geithner now runs as Treasury Secretary. This has business owners and employees alike wondering, “Can I get a piece of the ‘Geithner Rule?'”

Best of luck. How many people get a big important, high-paying, cushy government job after the IRS pays them a visit for tax evasion? And the IRS is usually so nice about fees and penalties. They waive those all the time.

On March 3, Geithner had some telling things to say about taxes and the $2 trillion budget (once interest payments factor in) the Obama administration has crafted:

“The Budget also seeks to restore fairness to the tax code. For example, the Budget proposes to tax the compensation paid to hedge fund managers, private equity partners and others in the same way that we tax the wages paid to ordinary American workers. By closing this “carried interest” provision, the tax code will provide equal tax treatment for wages regardless of whether an individual works as a teacher or a hedge fund manager.

The Budget addresses the serious issue of the “tax gap,” the difference between what taxpayers legally owe and the amount that they pay. Building on the recently enacted proposals to increase information reporting, the Budget includes a new proposal to require additional information reporting for rental property expense payments. We will make additional information reporting proposals when the full Budget is released.

The Budget also seeks to close the “tax gap” by tackling tax shelters and other efforts to abuse our tax laws, including international tax evasion efforts.”

A man who just plugged his own eight-year tax gap wants to chastise people who “abuse our tax laws.” It’s an absolute circus and so very difficult to take seriously (fortunately I don’t have to in the land of economic wit!).

Geithner also opined:

“The Budget addresses the use of offshore structures and accounts by U.S. corporations and individuals to avoid and evade U.S. taxes. Over the next several months, the President will propose a series of legislative and enforcement measures to reduce such U.S. tax evasion and avoidance.

Our revenue provisions are designed to encourage growth and recovery, improve the fairness of the tax code and support the President’s critical priorities in a fiscally responsible manner.

Our recovery plan reduces the overall tax burden on the American economy to help get the economy back on track.

By 2011, when the economy is projected to have recovered, it will be important for the nation to put in place policies that restore fiscal responsibility. For this reason, our Budget includes revenue changes that become effective at that time. Those making less than $250,000 will not see taxes increase. The marginal rates for the top 2% of income earners will return to where they were during the powerful economic expansion of the 1990s.”

Note another mention of “fairness” in the tax code. Fairness is a relative and subjective term. What makes anything “fair” is in the eye of the beholder. Geithner wants to spur economic growth by spending $2 trillion the government doesn’t have and then bring the debt back to sustainable levels; all in the name of being fiscally responsible (though, he said fiscal responsibility must be restored so admittedly it’s on the shelf for now). He never mentions where the money for government investment is coming from, how it could affect the U.S. credit rating, and how it will devalue the currency.

war-council2

But Rangel and Geithner obviously have something figured out; they keep on trucking no matter what happens.

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