President Barack Obama is having trouble filling his Cabinet with people who have paid all the taxes they owe. That is a problem for Obama, who has been forced to acknowledge that he has "screwed up."
It may also be a benefit for the millions of working Americans who live in fear of receiving an audit letter from the Internal Revenue Service, not because they have knowingly cheated on their taxes but because the tax code is so complicated that they cannot be absolutely sure they have not.
That includes just about everybody, because the concept of "income tax" has grown immeasurably from its original definition. The federal government taxes income - in all its many permutations, including some that certainly do not seem like income to the person who has supposedly gained by receiving them - in order to fund its operations. Many state governments do the same thing.
The government also uses tax law to discourage some activities and encourage others. For example, the U.S Senate has added to the current economic stimulus package an $11 billion provision to allow people to deduct, from their federal income tax, the sales tax and loan interest costs related to buying a new car - with the goal of encouraging consumers to behave in a way that helps out automobile manufacturers and the many people and industries that are dependent on them. Social engineering aside, every such tax break adds a new wrinkle to the tax code, a new line on a form and a new way to get the tax bill wrong.
To avoid fearing a "Tom Daschle tax problem," the New York Times this week advised taxpayers to assume they will some day be appointed a Cabinet position, and then inform their accountants of that fact. In other words, consider paying taxes as an investment. That is good advice. Too bad the reality is not quite that simple. Daschle may have told his tax preparer to minimize his tax bill (which is what everyone wants) or he may not have; he probably did not specify the ways in which he wanted to fudge and he may not even have been aware that that the benefit he failed to declare was taxable income.
It is somewhat difficult to feel sorry for Daschle, who apparently missed declaring the value of a car and driver that was part of his compensation for consulting work. Daschle does have access to accountants. In one sense, it is equally difficult to feel sorry for Nancy Killefer, Obama's nominee for a position called "chief White House performance officer." Killefer did not pay the proper taxes for the nannies she employed - a problem that does not befall people who do not employ nannies.
Except - it does. Paying individual babysitters, housecleaners, health aides, etc., "above the table" is complicated and time-consuming. It requires an accountant, a payroll service, or at the very least a good bookkeeping system, which is something that few families have. It is not popular with the workers themselves, who are willing to give up benefits such as unemployment and disability insurance, workers' compensation coverage and those essential Social Security "quarters" in exchange for a little more undeclared income. Immigration law comes into play, as do the emotions that surround it. Yet more employers would be willing to pay a little extra to make sure they were in good standing with the IRS, if only the IRS made that easier to accomplish. When even professional tax preparers get so many returns wrong, it is time for a change.
Politicians are required to follow the tax code they have, rather than the code they wish they had. Go ahead; thump them hard. Obama is right: This nation should not have separate sets of rules for ordinary people and important people. It should have one set of comprehensible rules that taxes everyone fairly.
Much attention is focused on people who "cheat" on their taxes, especially when those people are in positions of power. Creating a system that prevents that from happening would benefit those who have to pay more because of them, those who cannot figure out what they ought to pay, and those who pay too much because of complicated rules - in other words, honest taxpayers.