Taxes: So Complicated, Even the Folks in Charge Can't Get It Right

Let me begin by saying that this is in no way meant to be a statement about a political party. Rather, it is meant as a statement about the complexity of the U.S. tax code.

Charles Rangel, chairman of the House Ways and Means Committee, the committee that basically writes tax legislation, is under investigation for a few things. The one I’m concerned about is his failure to pay taxes. He says it's an honest error. I say, no kidding. The tax code in this country is unbelievably complex. In fact, it’s so complex that the guy in charge of writing tax legislation — Charles Rangel — can’t get it right.

But that’s old news. What prompted this post is news that Obama’s nominee to be the new Treasury Secretary, Tim Geithner, is also under fire for … you guessed it … failure to properly pay taxes. Apparently, he didn’t pay self-employment taxes owed, and some other stuff. Again, I am not judging him either. I just find it ironic that the proposed head to the Treasury Department — of which the IRS is a part — found the tax laws so complex that he didn’t pay his taxes correctly and on time. What’s more, one of the excuses he gave is that this type of error is “common”? COMMON? The folks who work at the IMF commonly make this type of income tax error?

This is the best evidence yet that our tax laws are so over-the-top complex: that the two main guys responsible for enacting our tax laws, writing the rules and collecting the money from folks like you and me can’t get their own taxes correct.

Comments

[Moon Kil Woong:]

Haha, well at the rate we are going taxes are going to be very simple. $0 jobs and earnings and no capital gains = $0. Gee, I guess the government is really helping to clean up this mess.

Jan 14 01:32 PM

[fatcat:]

Guess its time for the Fair Tax or consumption tax....national sales tax...call it what you like.

Jan 14 01:56 PM

[Storm Cat:]

I agree the tax code is ridiculously complex. But do you really believe they didn't pay their taxes because they didn't undertstand the tax code? Rangel failed to report and pay tax on rental income. That's not a complex part of the code.

In any event, what do you think would happen if you had either of the tax code violations you reference above. I doubt highly you'd get the same slap on the wrist.

Jan 14 01:57 PM

[Syl:]

On my 2006 tax return I showed that I exchanged one mutual fund for another fund within the same family of funds. In other words I traded any equl value of one fund for an equal value of another fund. Bulletin #110 specifically says this does not constitute any capital gain or capital loss. The major fund family sent a report to the IRS specifically saying I was trading one fund for another of equal value. Did the person reviewing my tax return accept this? Absolutely not. That person insisted that I had made a sale and would be required to list the cost of each fund. Both the receiveing fund and the exchanging fund. I sent copies of the funds records to this IRS person, but she still insisted that I had sold the first fund and bought the second. As I tried to explain, I did not receive one dime nor did I pay one dime for this exchange. Either the forms are too complex or the personnel in IRS are not adequently trained and worse yet, the employed personnel receive little or no supervision.

As a last resort I paid the IRS $39 for a copy of my tax return and they, after eight weeks, notified me they could not find a complete copy of my return. My original return was sent to the St. Louis office, but in my efforts I had to try to work with an employee in Texas. They did finally mail me a check of $39 to replace the original I had sent to them for a copy of my return. I'm still wondering what happened to that part of my return that was lost.

Finally, rather than pay an attorney a large fee I decided to pay the amount supposedly owed and then remembered that a former employee once told me "When you get into an argument with a skunk, you are going to lose."

Jan 14 02:26 PM

[mahony:]

The tax laws will not be fixed. Congress is to screwed up to get anything done efficiently.

Jan 14 02:44 PM

[gdg:]

Storm Cat is right. Neither Rangle nor Geithner made honest mistakes based on a too complex tax code. And Geithner (despite knowing about it in 2006) failed to correct the identical "mistake" on all returns filed while he was with IMF until after he was nominated for Treasury and knew he'd have to face confirmation hearings.

Neither man is fit to serve in a position of public trust. With Rangel, that's up to his constituants. But Obama, for sake of his own credibility, should withdraw Geithner.

Jan 14 03:41 PM

[Don Fishback:]

Don here -- Just to be clear. I tried to write this without rendering judgment as to these two guys' motivations. I'll admit that the only explanation is one of two things, both of which are indictments. Either they're cheats, or the tax code is too complex. Take your pick.

Jan 14 05:56 PM

[BerkeleyBob:]

The media has reported statements by WMF employees pointing out that all employees in Geitner's position were repeatedly advised to pay both halves of the social security tax and that WMF did not withhold. They probably paid and issued a 1099. Self-employment status is not that complicated. It is reasonable to assume that Geitner chose not to pay and his delay in reimbursement until shortly before his nomination is not readily excused. I doubt any CPA would advise non-payment. The lapse in his housekeeper's immigration status is a relatively minor problem. The tax situation is not.

Jan 15 12:00 PM

[Don Fishback:]

Yeah, after I posted this, more info has come out. It certainly makes it seem that he knew what he was doing. Especially the part where he first only paid what they could get because the earliest years had gone past their statute of limitations, so the IRS couldn't get him. Then, when Obama's folks came calling, he paid his true obligations in full (even though no law required him to do so).

Jan 15 02:18 PM