Tax Problems For Daschle, Geithner and Other Obama Nominees Show Need for Reform

It's time to simplify the tax code.

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By Mary Kate Cary, Thomas Jefferson Street blog

I'm not going to comment on the specifics of the tax problems that have faced some of our political leaders over the last six months, because I don't know all the facts. And I'll leave aside the questions raised about the vetting process, and about the business-as-usual aspects of the confirmation process. I'll let others tackle those issues.

But let's take a look at the big picture.

The Secretary of the Treasury—the former head of the Federal Reserve Bank of New York, a man who served in three different administrations at the Treasury Department and who now oversees the IRS and enforcement of the tax laws—failed to pay back taxes for four years.

The Chairman of the House Ways and Means Committee—a 19 term congressman who currently heads the Congressional committee that writes our nation's tax code—failed to pay taxes on five years of income from a rental property.

The former Senate Majority Leader, a man who has served in Congress for thirty years and who voted time and again on various tax laws—owes over $100,000 in back taxes and penalties.

And this just in ... the President's nominee for Deputy Director of the Office of Management and Budget and Chief Performance Officer for the entire federal government—a job overseeing the federal budgets to spend our tax money—has withdrawn from consideration due to tax problems.

These are all smart people who are very good with numbers. They have a better-than-average ability to read legislative fine print. They are experts who write, enforce, administer, or deal with tax money and tax laws every day. Presumably they employ well-qualified accountants to do their personal taxes. These are professionals who are called to public service and who are otherwise law-abiding citizens.

Doesn't the fact that every one of them—and their professional accountants—have had major difficulties abiding by the tax laws say something about our tax code? If the top tax people in the United States can't seem to pay their taxes correctly and legally, maybe there's a bigger problem here. Maybe it's time to simplify our tax laws.

Conservatives have been calling for a simpler tax code for years. Back in 2005, here's what Steve Forbes wrote in the Wall Street Journal about his proposed flat tax—one rate across the board at the federal level of 17 personal on personal income and 17 personal on corporate profits:

The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's maze of deductions and to reduce taxes—from deducting donations of old socks to making unwanted investments. The waste of brainpower—at a time of increasing global competition—is incalculable.

The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. Half their efforts are directed at wangling changes in the tax code. Few people realize that our health-care system, with its runaway costs, is, in fact, the ultimate product of the tax-code distortion in our economy. And last, but most definitely not least, we simply pay too much in tax. When you take into account all the taxes, fees and tolls paid to the government, the typical American pays somewhere around half or more of his income in taxes. Why do we the people accept this?

Our current tax laws are already a barrier to economic growth—and now they're becoming a barrier to public service. It's time to simplify the tax code.