Geithner's tax problem

[cashflo2u2]

Obama's pick for Treasury Secretary. The fact that he did not pay the SE tax on his income until he was caught- doesn't that mean he did not include the income on his tax return at all? At least it could mean that, and that would be tax evasion. I'm surprised no one has asked that question.

[Rustic23]

Obama: Geithner's tax errors an 'innocent mistake' -- Newsday.com

This is a Bloomberg news article. To me there are two disturbing paragraphs.

1. He received pamphlets on filing this tax. While the law may have been confusing, a man with his qualifications should have known, or should have been smart enough to get help.

2. The last paragraph which states 'he did not pay these taxes until it was clear he would be nominated'.

It appears he is a good choice for the job. However, Bernie Madoff may also be, how about some of the Enron folks. I am not saying his 'mistakes' are as serious as theirs, but right is right, and wrong is wrong. There have to be other good leaders that know when and how to pay their taxes. You and I would not get away with it!

[samclem]

Yes, maybe this year I'll make an "innocent mistake" and forget to pay my self-employment tax. And I'll hire a maid and not pay SS taxes. I'm sure the IRS and everyone else will understand.

Congress passes tax laws that cannot be understood by either the public or even the leadership of the agencies charged with implementing them, then don't seem to care if powerful, favored individuals disregard these laws.

And why do these powerful people in the public eye (both parties) consistently screw up when hiring and paying domestic help? Are they just stupid, or do they just think the laws are for the unwashed masses?

[ziggy29]

The nomination of Geithner seemed to be pretty well received by the financial markets as I recall. In the spirit of tying political discussions to FIRE, how might this relate to coming performance of the financial markets should this cause him to lose the nomination or walk away from it? And even if he survives it and becomes the Treasury Secretary, will this make him "damaged goods" and less able to gain the trust of both Wall Street and Main Street that may be necessary to begin healing the economy and get us back on track?

[youbet]

Quote:

Originally Posted by ziggy29 The nomination of Geithner seemed to be pretty well received by the financial markets as I recall. In the spirit of tying political discussions to FIRE, how might this relate to coming performance of the financial markets should this cause him to lose the nomination or walk away from it? And even if he survives it and becomes the Treasury Secretary, will this make him "damaged goods" and less able to gain the trust of both Wall Street and Main Street that may be necessary to begin healing the economy and get us back on track?

If nothing else, confirming his nomination would serve as a bit of a precedent regarding demanding (or not) ethical behavior from others in leadership roles in the financial industry. Geithner would be in a "do as I say, not as I do" position. I don't think that would be good for re-establishing confidence in the markets and our financial system in general.

[ERD50]

Well, if we all just stopped paying our taxes, we would have more money to spend, and then the economy would grow, right?

That's really not too different from what many politicians are proposing. But they cloak it in all sorts of fancy, complex rules and regulations. But basically, buy today, pay tomorrow (with no plan on how to do this) seems to be the 'fix'.

So this nomination would set the precedent - let's all just stop paying taxes. It's not "cheating", it's not "selfish", it's the patriotic thing to do to jump-start the economy.

ERD50

[samclem]

Some people are proposing a tax holiday in lieu of the government stimulus. Just don't collect any taxes (and stop withholding them) for the next 6 months--the amount not collected would approximately equal the stimulus amounts being bandied about.

Businesses wouldn't have to pay SS taxes--you can bet they'd hire people at least temporarily to take advantage of the 7% discount from SS witholding. Employees would work as many hours as they could while they could bring home all their money. How much investment would be freed up if people could sell assets without cap gains?

Best of all, the activity generated would be the result of market forces, not by the central planners making decisions about where the money should best be spent. And it would happen immediately. And I'd actually GET something from this bailout I'll be paying for.

It's not a real proposal, just an idea floated out there to highlight some issues.

[ziggy29]

Quote:

Originally Posted by samclem Businesses wouldn't have to pay SS taxes--you can bet they'd hire people at least temporarily to take advantage of the 7% discount from SS witholding. Employees would work as many hours as they could while they could bring home all their money. How much investment would be freed up if people could sell assets without cap gains?

Still depends on whether or not consumers would finally open their wallets again. Because if they only use the tax savings to put in the bank or pay off debts -- both useful financial endeavors, but not the goal of a stimulus -- then it's just the "rebate checks" all over again, on a grander scale.

No matter how much cash you put back into the pockets of people and businesses, if no one wants to spend the money it won't jumpstart the economy.

[samclem]

Quote:

Originally Posted by ziggy29 Still depends on whether or not consumers would finally open their wallets again. Because if they only use the tax savings to put in the bank or pay off debts -- both useful financial endeavors, but not the goal of a stimulus -- then it's just the "rebate checks" all over again, on a grander scale.

(Speaking theoretically here, because this thing will never actually happen) It's not quite the same as the rebate thing, since the amount you would save is directly proportional to the amount of income you get during that six months. Yes, folks would have more income and could therefore likely spend more (ala the rebate), but there would also be a huge impetus to produce more income during the golden six month tax-free window. Two other impacts that assure this would never happen: The people who generate the most income get the most benefit, and people would come face-to-face with the real burden of the income tax. "Hey--I liked keeping that money I earned."

But, you are right, the general consensus is that we need to encourage people to spend money they don't have in order to make things better. If they can't or won't borrow it themselves, then the government will borrow it. Luckily, this behavior has never caused any problems for us in the past.

[ziggy29]

Quote:

Originally Posted by samclem But, you are right, the general consensus is that we need to encourage people to spend money they don't have in order to make things better. If they can't or won't borrow it themselves, then the government will borrow it. Luckily, this behavior has never caused any problems for us in the past.

Well, that's the conundrum. For years I think most of us know that both governments and consumers were spending beyond their means and that much of the growth was fueled by unsustainable debt.

On one hand, it serves no long-term good for that unsustainable debt to keep increasing like a runaway freight train. On the other hand, if behavior "corrects" too quickly, that runaway train slams to a crashing halt against a brick wall. Ideally the train could have slowly and somewhat steadily slowed down to a crawl, but obviously that didn't happen.

In other words, we had to come to a landing. We just came to a crash landing instead of a softer landing.

[Rustic23]

Sam,
a Six month tax holiday does not work as it does not give money to those that pay no taxes, unless you include the payroll tax. Including payroll tax may be a good idea as half of that is paid by business.

[jazz4cash]

The IRS relentlessly chides employees that thier tax returns must exceed the standard requirements for the general public. Even filing for an extension can be grounds for a negative employment review. I find it offensive that these policies would be disregarded for the individual at the head of the Treasury Dept.

[youbet]

Quote:

Originally Posted by ziggy29 Still depends on whether or not consumers would finally open their wallets again.

But we don't want consumers to finally open their wallets again, do we? After all, this is the FIRE board. We cheer frugality! We have thread after thread after thread after thread admonishing folks who don't get all their clothes at the Salvation Army depot or who don't know how to live on $15k/yr.

So Mr/Mrs/Ms Consumer...... Zip those wallets and purses closed! Or you risk being the subject of a FIRE Board thread for your silly spending habits!

[clifp]

Now Now Youbet. Everybody else is suppose to be spending money in order to get the economy going again. We the smart frugal types are suppose to save our money. The irony is that I suspect one way or another have run out of people to borrow money from eventually Uncle Sam will come after us savers.

Die broke is going to be my new motto.

[Independent]

The facts as I get them from the NYT are:
He was supposed to pay self-employment taxes (SS and Medicare) while working for the IMF.
The IMF tells its employees they are responsible for these taxes.
He didn't pay them for 2001, 02, 03, 04
The IRS audited 03 and 04 in 2006, found the error, and he paid the back taxes.
He didn't do anything about 01 and 02 until he was being "vetted" about the ST job.
http://www.nytimes.com/2009/01/15/op...eithner&st=cse

I understand that the IRS insists that its employees be very careful about their own taxes. The ST job involves overseeing the IRS.

Given all that, I don't think I could vote to confirm him.

I don't see much connection specifically to retirement issues. There is a general question about "Are we serious about cleaning up our financial system, or will it always be tilted toward insiders?" This has a hint of insiders get special treatment about it.

[unclemick]

Somehow - the idea that a guy who has tax issues with the IRS might become their boss strikes me as poetic justice.

I wonder if he has a guillotine in his basement gathering dust.

heh heh heh -

[cashflo2u2]

As far as I know every tax software package will automatically create a Schedule C and SE (self employment tax) when you include self employment income (usually from a Form 1099 Misc) on your Form 1040. My question is did he not even put the income on his return or did he disguise it as some other form of income to avoid the SE tax. This goes to integrity. KEEP THE BUM OUT!

[OAG]

I guess all of them do not, but that is no excuse, IMHO in this case: How can I declare 1099-MISC (not SE!) income on Line 21 using TurboTax? - Yahoo! Answers.

In round number this is tax evasion of about 15% of the taxes due.