Taxes

Maybe We Need More Tax Cheats in High Places

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Americans for Limited Government wants the Senate Finance Committee to block the appointment of Lael Brainard as undersecretary of the treasury for international affairs because of her imperfect compliance with the tax laws. The Associated Press reports:

[Brainard] was late in paying real estate taxes in 2005, 2006 and 2007. The report by the Senate Finance Committee staff also challenges the accuracy of a deduction Brainard claimed for running an office from her home. The challenge led Brainard to reduce the deduction on her 2008 return.

"Enough is enough with the tax cheats in the Obama Administration," says ALG President Bill Wilson. I'm not so sure about that. Perhaps the Treasury Department, and the IRS in particular, should be run entirely by "tax cheats," with the proviso that no American be punished for any of the infractions that the department's leaders have committed. Sort of a Lord High Tax Collector arrangement.

Even though I work from home and have a room set aside for that purpose, I am pretty sure that an audit (or a somewhat less likely review by the staff of the Senate Finance Committee) would reveal something wrong with my deduction for said office (e.g., although the room is supposed to be used only for business, just this morning I recklessly allowed our 3-year-old daughter to draw a picture there). Who among us can confidently assert that he has complied with every jot and tittle of the Internal Revenue Code, a set of requirements so vast and vague that five different accountants (or five different IRS employees) are apt to give you five different answers to the same tax question?

I sympathize with the argument that elevating "tax cheats" to high positions in the department charged with administering the tax system creates the impression that public officials are above the law. But the real scandal is that complying with the law is so difficult you can't be sure you're doing it right even when you consult experts.

In February Katherine Mangu-Ward argued that "when Tom Daschle, Tim Geithner, and other politicians cheat on or screw up their taxes…they're just doing what the rest of us do every year." More on tax code complexity here and here