Balkinization: Bizarre Contrast On Tax Paying

Comments:

Brian,

As for your digression, only the most starry eyed voted for Obama thinking we'd see a repudiation of Clinton era practices. His administration will clearly distance itself from Bush's, but he's still the candidate of one of the two parties in our two-party system. He's going to have to toe the lines set by the corporatocracy like anyone else.

As for the contrast, one is tempted to argue that class is still king when looking for explanatory principles.

Thanks, always, for leaving comments enabled.

# posted by

Robert Link : 3:41 PM

(First, re the digression, I have no sympathy for Daschle or Geithner. I think both should have withdrawn.)

The IRS program to allow taxes to be paid by illegals using bogus SSNs has always seemed interesting to me, and sensible. IRS certainly would not disclose these records to local prosecutors. The backdoor raid on the tax preparer's office seems strange, but I have heard of individual tax preparers who have threatened to rat out their clients in other local criminal investigations unrelated to immigration. If the tax preparer had been a lawyer, the office would probably not have been raided. The message may be, don't trust secrets to your tax preparer.

There is a sizeable amount of confidential data available to non-enforcement agencies such as Census, which could be used to produce aggregate statistics about the scope of the underground economy. The data could be mined to gain intelligence about how many illegal workers are using phony SSNs, and how many of those SSNs properly belong to other persons. But the agencies seem not to want to undertake such studies because one side or the other of the bitter immigration debate would find such data to be fuel for debate. So to avoid controversy, the numbers don't get crunched and published.

# posted by

JaO : 3:45 PM

Brian:

The illegals are not volunteering to pay their hard earned money in taxes out of altruism or to gain citizenship. They submitted false or duplicate social security numbers to get jobs and then the taxes were withheld from their pay automatically.

In contrast, both the "public minded" Geithner and Daschle were on the honor system to pay self employment taxes and evaded their obligations.

It is ironic, though, that the government is using tax payments to find and deport the illegals while the tax evader Geithner will be running IRS.

Hope and change?

# posted by

Bart DePalma : 3:53 PM

I will never understand how folks like Daschle get into these situations in the first place. Makes no sense at all.

# posted by

Charles Gittings : 4:51 PM

Garth Sullivan,

Maybe I'm wrong, but my understanding of how this works is that the worker does not give the IRS-issued special taxpayer ID to the employer. The employer is given a bogus SSN (which may or may not have been issued to someone else.) The illegal worker must do this or the employer will know without a doubt that he is illegal, and therefore be prevented by law from hiring him. The SSN is used for purposes of getting the job and tax withholding.

But then, when it is time to file a tax return, the worker files under the IRS tax ID and takes credit for the tax withholding done under the SSN by providing a W-2. That is why the Colorado prosecutor says the tax records may be evidence of identity theft.

# posted by

JaO : 5:20 PM

Garth:

The number of casual day labor employees a business can pay with cash without withholding taxes is very limited. Most illegals who found ongoing employment came up with social security numbers and had their taxes withheld.

Charles:

Power corrupts and that corruption is very much bipartisan.

# posted by

Bart DePalma : 5:21 PM

Having your taxes withheld and filing your tax return are two different things. The article talks about people filing their returns, not about automatic withholding.

Also, plenty of people--myself included--receive pay without having federal taxes withheld. Medicare/SS taxes are a different matter.

# posted by

PMS_CC : 5:33 PM

Mexican workers remittances to relatives in MX declined in 2008.

Daschle stood his ground on one incident involving warrantless wiretapping. There are alternative excellently qualified nominees for the HHS.

# posted by

JohnLopresti : 5:34 PM

Bart,

I haven't seen any evidence of corruption; looks more like pure carelessness to me. What do you figure someone like Daschle is worth?

Enough to hire a good tax accountant is my guess.

# posted by

Charles Gittings : 5:36 PM

I agree with Garth and JaO: filing tax returns on the part of people without legal authorization to be in this country indicates a desire on their part to establish a record, since they do it at their peril.

We can also infer, from the actions of tax dodgers who then go on to accept nominations for office, that actually obtaining office isn't their primary concern. If it were, they would have taken care, like the illegals, to have a record of compliance.

Suppose that their primary concern is, however, to make money, to enhance their appearance of being "in" with the administration (and thereby to enhance their value).

Then there is no contradiction. Perhaps, if they spent time actually in the administration, their rewards would be greater down the road -- but they'd lose money along the way.

Ian could probably back-calculate the best strategy, using game theory, for maximizing their compensation -- and I'd bet that strict adherence to paying all the taxes they owe is not a significant benefit.

# posted by

C2H50H : 5:58 PM

Garth Sullivan,

No doubt many or most such filers are motivated by a desire for citizenship eventually. Also, I think, they may even qualify for a modest refund if they overwithheld, which is typical for low-bracket workers. Their most significant tax is the Social Security payroll tax, for which they get no credit for benefits under current law.

Another factor is that it is illegal not to file a tax return if one has income, which is why the IRS provides the tax ID numbers.

I still wish we had better hard data on the scope of this activity.

# posted by

JaO : 7:00 PM

I second Robert Link's comment overall, including his thanks for leaving the comments open.

As to Tom Daschle, Matt Taibbi and Glenn Greenwald have targeted him as a particularly distasteful example of insider politics, that sounds "corrupt" to me. The tax issue alone is not what got many upset. His sanctity of marriage line alone burns.

I read secondhand that Geithner's tax issue was quite common. Anyone know if there is anything to that?

# posted by

Joe : 7:20 PM

Charles:

The corruption started when Daschle pocketed over $5 million for consulting (i.e. doing favors) for the health care industry. In doing so, Daschle declined to pay about $128,000 in taxes.

Even if we assume that Daschle was too stupid to realize that you have to pay taxes on enormous "gifts" from lobbyists, there is no excuse for failing to pay taxes on an $80,000+ monthly "consulting" check and for not paying taxes for over a year after he found out the "gift" was not tax free.

Having just finished my yearly labor of gathering every scrap of paper to give to my CPA so the IRS does not cast its malevolent gaze in my direction, this is the wrong time to be asking me to extend sympathy to this corrupt pol.

If you and I evaded taxes in this manner, our bank accounts and property would have been seized to pay the back taxes, penalties and fines, perhaps with a conviction for tax evasion for good measure.

If you still are not properly incensed, just pretend that Daschle used to have an (r) following his name when he was a Senator and was being appointed by Mr. Bush. If Bush had appointed a corrupt governor and three tax evaders to his Administration, the Dem media would have gone on an insane feeding frenzy.

BTW, both parties play this corrupt game. I would have applauded Mr. Obama's executive order to ban lobbyists from his administration if he had not already appointed 17 of them in his first 14 days.

# posted by

Bart DePalma : 7:35 PM

Bart,

128K is 2.6% of 5M, less than the sales tax in most places. It's difficult for me to believe it was anything other than sloppiness. The part that pisses me off is where he didn't disclose it to the transition team.

# posted by

Charles Gittings : 9:03 PM

Folks,

One question--suggested in Sandy's post--is whether this is simply the way our elite political/economic class now behave. (unlike ordinary wage earning folks).

Is casual under-declaration of hard-to-track consulting payments and payments in goods or services the way they do things?

Are we to believe that it was just bad luck that two of Obama's picks had versions of the same problem. Or would any random bunch of high flying political/economic players would have a few offenders?

I would like to think not, that it was just bad luck for Obama, but I suspect that is naive.

Brian

# posted by

Brian Tamanaha : 9:41 PM

This comment has been removed by the author.

# posted by

Jkat : 12:46 AM

i think mr. daschle has a character flaw .. and i'm glad he withdrew his name from consideration ..

and thank you prof. for leaving comments enabled.. i've leearned much from reading ths blog in the past year .. mostly gained from the exchanges in the comments sections .. the comments greatly amplify and expand and give background to the lead posts .. and it isn't hard to extract the wheat from the chaff .. it's a shame in my opinion to lose the benefit of the whole crop because of a concern with the chaff generated .. and seems a rather petty reaction which is truly unbecoming for supposedly large-brained creatures ..the weeds aren't that hard to ignore .. imo

thanks again ...

# posted by

Jkat : 12:46 AM

Yes, thanks for activating comments.

I must echo some of the above posters: Doubtless most of the illegal immigrants are not paying taxes and filing for altruistic reasons: They committed identity theft or fraud to get the job, subsequent withholding was difficult to avoid, and filed for the same reason most people do: To get a tax refund.

That the IRS has had a long-standing policy of enabling illegal immigrants' identity thefts is scarcely a secret. As you say, "to the dismay of the IRS", and why else should they be dismayed at it? It's one of the ways we know that high levels of illegal immigration is deliberate government policy, not a genuine result of failed efforts to enforce.

It would be an amusing irony if illegal immigrants were more patriotic than our political class. But that's not what the evidence suggests.

# posted by

Brett : 7:15 AM

Brian: "...would any random bunch of high flying political/economic players have a few offenders?"

I think to ask is to answer.

Reminds me of the joke about the good lawyer; takes care of business, never cheats on his wife, the perfect father, dies, drops like a stone at age 35. Gets to the Pearly Gates, asks St. Peter, "What did I do wrong?" Pete replies, "According to your billed hours you were 95."

All of which is to say, in the wake of Enron and Delay, I'm sure these guys thought of themselves as squeaky clean. There's still a terribly partisan disparity in mudslinging. It's what keeps Rush in cigars and pain-pills.

# posted by

Robert Link : 8:06 AM

I read secondhand that Geithner's tax issue was quite common. Anyone know if there is anything to that?

I don't know if it's common, but it's apparently an easy mistake to make. Not only does the IMF have to tell its employees, but commonly used tax software doesn't catch the issue (Jim Lindgren posted about this at Volokh).

One question--suggested in Sandy's post--is whether this is simply the way our elite political/economic class now behave. (unlike ordinary wage earning folks).

Is casual under-declaration of hard-to-track consulting payments and payments in goods or services the way they do things?

I think that part of the answer has to do with the sheer fact that such people make more money, and do so in different ways. If you're an ordinary taxpayer whose only income is wages and who files a short form return, there's just not much room for "mistakes". I suspect that in these cases the biggest source of cheating is the failure to report cash income.

Once you get to higher income levels, however, the tax code becomes more complicated and the opportunities greater to make "mistakes". A personal note: when my kids were younger we had a housekeeper/nanny because my wife and I both work. We dutifully arranged to pay the relevant taxes. It was a ridiculous amount of paperwork and complicated her life and ours. In cases like Killefer, where only a very small amount was involved, I believe that the hassle may have been the key factor, not any intent to cheat.

All that said, I'm strongly on the side of those who are plenty sick and tired of the Washington culture which refuses to apply to insiders the same rules the rest of us at least try to comply with. Good riddance to Daschle and if Geithner resigned I'd shed not a tear.

# posted by

Mark Field : 10:49 AM

Yes, and when I see commercials for that "tax software" these days, I have to laugh.

I think the tax issue can take us off the rails. One person caught in the current web had a tax problem of less than $1000 (mostly penalties). Seemed a bit much. It's like worrying about lobbyists for anti-tobacco groups joining the Obama Administration.

Actually, I thought the Zoe Baird and Kimba Wood nannygate issue was overblown back in 1993. But, some people tried to convince me otherwise. See also Linda Chavez in 2001 -- right, THAT was disqualifying for a Bush pick.

Anyway, again Robert Link is right, and change will be messy, to degree it comes. And, I think we can handle that. Gregg replaced Richardson, and he seems like a decent choice. Hopefully, the new HHS pick will also be.

# posted by

Joe : 11:24 AM

Professor Tamanaha,

I actually know the place and time where Tom Daschle comes from very well, and his upbringing would have been considered pretty austere by almost everyone.

My take on this affair is that, up until he left Congress in 2004, he kept up at least the semblance of a lifestyle that wouldn't cause his constituents to gasp. Then he was turned out, and fell in with the Hindery crowd, so that, four years later, there remains only the husk of the person he once was.

He was certainly never exposed to that kind of money until he went to Washington. Millionaires who live in small prairie cities do it to avoid taxes, not to live high and wild (they do that on trips, and don't brag about them to the locals when they return.) And Daschle's family wasn't in that category anyway.

I'm quite sure that the chauffeur and car were considered compensation by the accountants who did his taxes, but that they thought it would never be noticed -- as it wouldn't have been, if Obama had not surprised everyone and made possible Daschle's return to "public service". I am also quite sure that ducking out on paying taxes is not merely endemic, but actually epidemic in this country, from the corporations down to the house-cleaner who runs her own business.

The only sample statistics we have indicate that, yes, it's very hard to get competent people with a track record in government and business who are untainted by tax problems, questionable associations (remember Bernie Kerik?), and, above all, troublesome entanglements with the businesses they will be called upon to regulate.

# posted by

C2H50H : 12:27 PM

I just saw a repeat of last night's Charlie Rose Show's interview of film critic David Denby regarding his recent book "Snark" and was reminded of the comment controversy here at Balkinization.

# posted by

Shag from Brookline : 1:40 PM

Regarding taxes paid by illegal immigrants, I would think much of that is withholding tax on one's paycheck. The consequence to the necessity of providing a social security number to in order to work, even if it is not your own SS. Not clear is how much of the illegal immigrant tax payments are voluntarily. However tax evasion on taxes owed cannot be helpful to those seeking legal status. Better to pay them, then suffer the consequences of a lump sum payment plus penalties, with the risk of deportment.

# posted by

Unknown : 11:08 AM

To Mark, Joe, and C2H5OH (the last is not an easy name to keep in mind!):

Despite some of my remarks about the failure of civic virtue, I think you have all hit on some truths of moral conduct - and moral failure.
1) The more complicated our lives, the more rushed we are, the more we depend on others (or software) to manage our responsibilities, the more liely we are to come acropper. There is a hymn - Quaker, Amish? - to the effect that 'it is a blessing to be simple.' Morally, there is real wisdom in this. (Think of how circumscribed Kant's life was!)
2) Very few of us have the moral vision to see ourselves as we see others (Shades of Robbie Burns, one of whose anniversaries the Scots are celebrating this year). This may be a particular failing of the privileged, but it is a human failing, as well.

I would also like to ask Shag about the book he mentions ("Snark"?) Have you read it?

# posted by

CTS : 12:04 AM

Chris,

Say rather that those who are unable or unwilling to live and tolerate complexity and equivocation in the available information are increasingly unsuited to life in today's world.

If you have trouble with my moniker, you can call call me Alky, Ethyl, or Booze. I'll even answer to Hey, You.

# posted by

C2H50H : 1:17 PM

Well, I do often feel increasingly unsuited to life in today's world.

# posted by

CTS : 2:57 PM