Wanted: Nominees With Clean Tax Returns
Incredibly, the list of Obama nominees with tax troubles keeps growing.
Incredibly, the list of Obama nominees with tax troubles keeps growing. The latest is Ron Kirk, the president's pick for U.S. trade representative, who made a host of errors that add up to about $10,000 in unpaid taxes. Kirk looks like he'll be confirmed, as was Treasury Secretary Timothy Geithner, but other nominations have been scuttled over tax issues. (Remember Tom Daschle?)
How can the president keep picking people who have so many problems with their 1040s? Is this an incredible coincidence or is Obama stuck with a bunch of very bad vetters?
It's neither. The tax troubles of so many nominees are symptomatic of two deeper problems, one with IRS enforcement and the other with the tax code itself.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Take the IRS first. Many of the tax errors that have come to light initially got past the IRS. How is that possible? For a while now, the Service has been trumpeting the fact that it's doing more audits. But it depends on what you mean by the word "audit." The increase is in the number of so-called "correspondence exams," where IRS notifies a taxpayer of a discrepancy. You're sure to get notified if, for example, you report a smaller amount for wages than your W-2 shows.
But here's the flaw in that system: The IRS can't match everything. Transactions occur all the time under the radar -- the money you pay a handyman or the rent you collect from a tenant, say -- and so the IRS has to rely on the honor system for folks to own up to that income. The simple fact is that the Service doesn't have the staff or the funds to do enough full-blown audits -- those torturous line-by-line exams -- to make people toe the line.
Does that mean we solve the problem by throwing more money at the IRS so it can do more audits? No, and that's where the second systemic problem comes in: The tax code's complexity. While it's certainly possible that some or all of the nominees called on the carpet for their tax errors knew exactly what they were doing, in many of these cases it's also very plausible that they didn't properly understand parts of the tax law. Compare today's Internal Revenue Code with the way it looked after the Tax Reform Act of 1986, which reduced the number of tax rates and got rid of a lot of breaks in the interest of simplicity, and you'll see how drastically things have changed since then.
The number and breadth of tax problems we're seeing with the Obama nominees should be a sign to the administration that tax reform needs to be a top priority. But it isn't. Office of Management and Budget Director Peter Orszag recently paid lip service to reforming the code and said that while it's an important goal, it ranks below major legislation on energy, health care and education. Given the events of the past few weeks. the president would do well to rearrange his to-do list.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
-
Why Tesla Stock Is Soaring After a Q1 Earnings Miss
Tesla came up short of analysts' expectations for its first quarter, yet its stock is roaring higher today. Here's why.
By Joey Solitro Published
-
Eight Easy Ways to Save Money Without Compromising Your Lifestyle
Saving money can be as simple as a quick phone call.
By Kiplinger Advisor Collective Published
-
Biden Proposes New Homebuyer Tax Credits
Tax Credits President Biden is calling for new middle-class tax breaks including a mortgage tax credit.
By Kelley R. Taylor Last updated
-
Will Retirees Stop Paying Tax on Social Security Next Year?
Social Security Lawmakers have proposed to eliminate taxes on Social Security benefits. Here’s what that could mean for you.
By Katelyn Washington Last updated
-
Families and Businesses Would Get Big Tax Breaks in Bipartisan Tax Deal
Tax Changes A new bipartisan tax deal could change the child tax credit, R&D expensing, and the employee retention tax credit.
By Kelley R. Taylor Last updated
-
What's Happening With the New Child Tax Credit?
Child Tax Credit The Senate hasn't passed the new child tax credit. Will it happen before the end of the filing season?
By Katelyn Washington Last updated
-
Social Media, Guns, Taxes, Abortion: New Supreme Court Cases You Need to Know
Supreme Court The U.S. Supreme Court will hear several cases this fall that could significantly impact your rights and wealth. Here are a few of them to watch.
By Kelley R. Taylor Last updated
-
What Would a Government Shutdown Do to the IRS?
IRS With a government shutdown looming, some wonder how IRS operations will be affected.
By Kelley R. Taylor Last updated
-
How Three New Supreme Court Rulings Impact Your Money
Supreme Court U.S. Supreme Court decisions could directly impact your bank account privacy, student loan payments, home equity, and property taxes. Here’s what you need to know.
By Kelley R. Taylor Published
-
Businesses Would Get Lots of Tax Savings Under House GOP Plan: Kiplinger Tax Letter
Kiplinger Tax Letter The House GOP tax plan indicates what’s to come if Republicans control Congress and the White House after 2024.
By Joy Taylor Published