By By John Hyre, Tax Attorney, Accountant, Real Estate Investor
Now I know why Democrats are always in a hurry to raise taxes: they do not figure that they will be the ones who pay them! We’ve heard a bit about this in the news. Here’s a recap, with some opinionating by a very partisan guy with knowledge about the laws in question:
Tim Geithner: Just in case you missed it, he is in charge of Treasury, which runs the IRS. If there is one guy in the country for whom “ignorance of the tax law” is no excuse, Tim is that guy. Tim did not pay his social security/self-employment taxes for several years even though his employer explicitly reimbursed him for those exact taxes. Now, REI who buy/sell properties (or read my December newsletter on the topic) know that SS/SE taxes are an issue for certain types of income – and that the IRS will not accept “gee, if only I had known” as an excuse. This guy is the IRS’ ultimate boss and was reimbursed for SE/SS taxes (wouldn’t you love to get a deal that sweet?) – and knowingly failed to pay those taxes. What kind of message does that send to America? Taxes for thee, but not for me.
Tom Daschle: Big proponent of high taxes for others. Here’s a 1998 quote "Make no mistake, tax cheaters cheat us all, and the IRS should enforce our laws to the letter." What happened:
1. Taxpayers need not receive cash to have taxable “income”. If someone pays you in real estate, candy bars or complimentary legal services, you have “income” for tax purposes and you need to report it on your return. Daschle had received hundreds of thousands of dollars worth of free wheels (limo service) from an employer (in other words, not a “gift”) which he failed to report on his tax returns. In short, he did not follow the law that he expects us to understand and follow . One law for thee, another law for me.
2. This incident was not Tom’s first problem with the tax laws. In 2004, he claimed DC residence to get a property tax exemption on his $1.9M Washington mansion. At the same time, he also claimed South Dakota residence in order to vote there and, oh yes, represent that state in the Senate. Later, the records seemed to have changed to state that only his wife declared the DC residence. One residence for thee, two for me!
Charlie Rangel: Chairman of the very power House Ways and Means Committee. For those of you unfamiliar with congressional arcana, that is the committee that writes the tax laws that we plebes must follow under pain of civil and criminal penalties. Charlie received upwards of $75,000 of rental income on a beachfront villa in the Caribbean and – you guessed it – did not pay taxes on it. To you landlords who know that “rental income” is in fact “income” and reportable to the IRS: Do you think that any of the following excuses, all made by Rangel, would fly in your case:
1. My wife and accountant handle the finances on my property;
2. The company failed to provide me timely and regular statements;
3. Did not know that someone paying the mortgage on my behalf (instead of direct cash to me) counted as income;
4. Those silly Dominicans (who managed and paid the mortgage on the property) never explained it me;
5. "Every time I thought I was getting through, they started talking Spanish." The mind reels at what would have happened to a white Republican who said that. Positively reels.
I literally write these laws, I just do not understand them. One law for me, one law for thee.
Nancy Killefer: Was to be Obama’s “Chief Performance Officer”. If that means cutting expenses, one of her strategies might have been (you guessed it) “don’t pay the taxes”. Specifically, she didn’t pay unemployment taxes of about $900 on income paid to domestic help. If you remember Clinton’s first two nominations for Attorney General (Zoe Baird and Kimba Wood), they fell out based on failing to pay “Nanny Tax”, which is similar to the tax in question here. Nancy clearly didn’t get that memo. I actually have a small amount of sympathy in the case – the tax system is very obtuse and maddeningly hard to follow. To lose a plum position over a $900 technical snafu must rankle. On the other hand, Nancy’s governing philosophy is one that favors imposition of this expensive and hard-to-follow multitude of rules on all of us. There goes my sympathy. I cannot fathom or follow the law, but you should!
Bill Clinton: You didn’t really think I could resist, did you? As part of Whitewater, it came out that McDougal had forgiven a $50,000 loan made to Clinton that Clinton had never paid on. That COD income was never declared on the Clintons’ returns. In addition, Bill contributed used underwear to charity and wrote off each pair at $5. I cannot, indeed, must not, say what I am thinking in that regard.
I did Google “Republican Tax Scandals”. Pretty slim pickings. They must be too busy water-boarding some terrorist, I mean, some innocent bystander randomly picked up by our fascist military. In the meantime, learn from these little anecdotes. If you do what are ruling class has done, I suspect that the IRS would not be very understanding.
Like many of the excuses described here, this one was phrased as a “non-excuse” excuse, a political specialty: “The company's failure to provide timely and regular statement [sic] does not excuse any failure to be more diligently pursued [sic] the actual terms of the arrangement and respond appropriately."
See our discussion of Daschle above. When you get something (free limo, mortgage payments made) in exchange for something else (lobbying services, use of the property), that “something” is income. A true gift (basically, no direct or indirect quid-pro-quo) is not taxable for income tax purposes.
Really? Do mean to say that if they had stopped paying the mortgage, you never would have noticed? THIS is the guy in charge of the nation’s finances – makes a perverse kind of sense, when you think about it.
Looks like he didn’t limit himself to screwing the interns.
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