Taxes, Treasury Secretary Geithner and Joe Friday

Friday, January 8, AD 2010

Being self-employed I always have the great joy of paying my taxes four times a year in estimated payments.  I just did the one due on January 15, and in the fine mood that always puts me in, I thought it was time to recall  Treasury Secretary Tim Geithner and his difficulty paying some of his taxes.

The Wikipedia article on Geithner gives an excellent summary:

Tax scandal

At the Senate confirmation hearings, it was revealed that Geithner had not paid $35,000 in self-employment taxes for several years, even though he had acknowledged his obligation to do so, and had filed a request for, and received, a payment for half the taxes owed. The failure to pay self-employment taxes, in part due to the way his employer reported his wages which was not in accordance with tax law, was noted during a 2006 audit by the Internal Revenue Service (IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. Geithner also failed to pay the self-employment taxes for the 2001 and 2002 tax years (for which the statute of limitations had expired) until after Obama expressed his intent to nominate Geithner to be Secretary of Treasury. He also deducted the cost of his children’s sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction. Geithner subsequently paid the IRS the additional taxes owed,and was charged $15,000 interest, but was not fined for late payment. As President of the Federal Reserve Bank of New York, Geithner annually completed an ethics statement noting any taxes due or unpaid, along with any other obligations. Geithner’s completed statement did not surface during confirmation hearings.

In a statement to the Senate panel considering his nomination, Geithner called the tax issues “careless,” “avoidable” and “unintentional” errors, and he said he wanted to “apologize to the committee for putting you in the position of having to spend so much time on these issues.” Geithner testified that he used TurboTax to prepare his own return and that the tax errors are his own responsibility. This statement is in conflict with statements by the Obama campaign that Geithner was advised by his accountant that he did not owe the taxes. The Washington Post quoted a tax expert who said that TurboTax has not been programmed to handle self-employment taxes when the user identifies himself as being employed. Geithner said at the hearing that he was always under the impression that he was an employee, not a self-employed contractor, while he served as director of the Policy Development and Review Department of the IMF. Geithner comments are contradicted by the Senate report that showed he was not only informed of his status, but that he actively applied for the allowance.

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3 Responses to Taxes, Treasury Secretary Geithner and Joe Friday

  • Amazing: Donald and I have a point of agreement!

    Count me a doubter from the beginning on Mr Geithner. There’s a certain breach of trust that a man chosen to a post like Treasury wouldn’t have his own treasury in order.

    On one hand, I can appreciate that Mr Obama would want a talented guy–and there’s no doubt the man is talented–on his team. My criticism is mainly that Mr Geithner was tagged as the superstar of economics from the beginning. This administration *had* to have him.

    On the other hand, even if we can concede Mr Geithner was the best, how much better than #2 could he really have been?

    Clearly, he could survive this in a way the head of the IRS might not have been able to. Or if we had been in less of an economic crisis, perhaps it would have been easier to jettison the nomination and settle for the second fiddle.

    The symbolism of it will probably not harm either the president or the head of Treasury, either in the next 3-7 years or post-administration. I suspect some people who make honest mistakes with their taxes (and those, perhaps like Mr Geithner, who don’t) won’t avoid the economic or professional harm as you’ve described here, Donald.

  • Calculating self-employment tax is Tax 101. Someone with Mr. Geitner’s resume should not have made an error in calculating this tax. He should also have reviewed his TurboTax-prepared 1040 before signing it and mailing it to the IRS. (He failed at his personal obligations.)

    Mr. Geitner is too incompetent for his current position, a crook, or both. Our government should only hire honest, qualified individuals and his dishonesty scares me more than his incompetence. (What secret deals is he cooking with whom?)

  • (What secret deals is he cooking with whom?)

    Yves Smith (“Naked Capitalism”) referred to him last spring as a ‘poster child for regulatory capture’. Seems about right.

Res Ipsa Loquitur (II)

Tuesday, February 17, AD 2009

I posted last week about the negative reception to Geithner’s bank plan. Here, for instance, was Paul Krugman’s take:

It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation….So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.

Not exactly an enthusiastic endorsement. Today’s Washington Post has some of the back story:

Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.

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6 Responses to Res Ipsa Loquitur (II)

  • Another view of the limits of Governments and economic policies:

    “The third issue, I would like to mention here today, is the current financial and economic crisis. I recently spent three full days discussing this topic at the World Economic Forum in Davos and my feeling is that the rationality and the economic science have been suppressed or forgotten. The very unpleasant, day by day deeper economic crisis should be accepted as a standard economic phenomenon, as an unavoidable consequence and hence a “just” price we have to pay for the long-term playing with the market by the politicians. Their attempts to blame the market, instead of themselves, are unacceptable and should be resolutely rejected. Their activities, aiming at “reforming” the economic system, are all very doubtful and I as said in Davos: I am getting more afraid of these reforms than of the crisis itself. ”

    Václav Klaus, Foreign Policy Lecture Series, Foreign Policy France, Ledoyen Restaurant, Paris, 11 February 2009

    Full text here:

    http://www.klaus.cz/klaus2/asp/clanek.asp?id=pwMGFzzPU1MJ

  • While Klaus is known for taking controversial positions, I think the debates around the stimulus package have clarified his point fairly well: we don’t know that it will work, but we hope (and have some reason to expect) it will be better than nothing. Time will tell.

  • The haste of our Hope and Change President and enlightened Congresspersons in enacting the Porkapalooza Bill speaks loudly. As though releasing pent-up energies building up since 1965. Possibly since 1933. As in always one or more reasons not to do it. Those pesky wars. Roaring economic times or the lack thereof in the 30s. Those even peskier GOP Presidents- Ike, Tricky Dick, Ronaldus Magnus, Bush pere et fis. Those really annoying elections of 1994, 2000, 2004 that held back the tide. By November 4, 2008 the stars and planets aligned in their favor. The Messiah of Hope and Change ascended to the White House. Another two years of enlightened Dems running Capitol Hill. A GOP dismayed and flummoxed. And we can’t wait write write write get it done Speaker Pelosi’ trip to Rome may be in jeopardy. Listening to our all-news radio station this morn- story of how City Hall bureaucrats pour over the 1000-plus pages of the Porkapalooza Bill, rightly dividing the word of truth to see how much cash funnels to Philly. Where it better help our beleaguered police department, pronto- Officer John Pawlowski, fine young Catholic law enforcement pro, gunned down like a deer in the woods Friday night. Sixth such murder of an officer in a year. Leaves a greaving bride pregnant with first child. No sympathies coming from Washington. Why? If Porkapalooza is the first of such bills, why need state or local governments? And who would care in D.C. of such heroes as Officer Pawlowski? Thus we interpret Hope and Change.

  • we don’t know that it will work, but we hope (and have some reason to expect) it will be better than nothing. Time will tell.

    I think that’s part of it, but another big chunk (and I fear it’s actually the larger part of the motiviation) is that as a matter of self defense people are always more inclined to do something rather than do nothing in a situation with a lot of pressure — even if the information and reason they have available to them suggest that a less interventionalist course might actually be the best one.

    If you say, “We’re already doing everything that we can, and now we just want to execute to our plans and hope for the best,” you leave yourself wide open to all sorts of, “But if he had done this,” claims. If, on the other hand, you constantly come up with and execute new plans (even plans that use up resources without helping — possibly even make things slightly worse) you can always point back and say, “We did everything we could. Surely things would have been even worse if we hadn’t acted.”

    So in an attempt to assure approval people will often do incremental actions that are actually helpful, just so that they can claim to have “done everything”.

  • I would agree that the 1) something must be done, 2) this is something, therefore it must be done line of thinking was a primary motivation for the stimulus package. I would add a third: cramming in eight years worth of projects from the Democratic Congressional wish list.

    Larison thinks the Democrats will come out of this fine, regardless of the outcome. At least they can say they did something. That’s quite possible, but it seems to me they over-played their hand somewhat. As discussed previously, almost half the funding won’t even be spent until 2011; the Democrats basically refused to make any concessions on the bill, saying basically, ‘we won’.

    If it doesn’t work out, I think they will be vulnerable to the charge that they acted irresponsibly; pursuing their own pet projects instead of policies like payroll tax deductions that most economists support. The ‘we were trying everything’ line only works if people think you are sincere. I am not sure the Democrats effectively made the case that their motivations were for the public rather than their party.\

    On the banking plan, the article seems to suggest they’ve (rather clumsily) decided on a somewhat less interventionist approach than they originally planned.

  • but we hope (and have some reason to expect) it will be better than nothing.

    It may do what it is intended to do, but that is far worse than nothing. This is not a stimulus bill, it is a vast enlargement of the Federal government, it creates new entitlements and distributions which will never be rolled back, and to boot… it will not likely help the economy even in the short run.