Last year, on April 14th, Dave and I sat down to do his taxes. We used, if I remember correctly, free H&R Block software to which we were directed by the IRS.
As we started to go through his W-2 form, his refund went to a level that made him giddy. Then, we began to enter a 1099 form, for miscellaneous income. After entering that information correctly, the refund, much to Dave’s dismay, plunged to $25.
After a little research, we discovered the miscellaneous income was subject to federal income tax, medicare, employer social security, and employee social security, none of which had been paid yet, because it was “self-employment income”.
Nevermind that this was April 14th. It was clear that the H&R Block program was right, and that the magical refund would never materialize. Dave owed taxes. He paid them. That was that.
I call this incident to mind, because it is virtually the same problem faced by Obama’s Treasury Secretary-Designate, Tim Geithner, when he was working for the IMF. Granted, Geithner probably faced forms and sums that were much more complicated than any we faced on that Tax Eve. Nonetheless, my own experience has given me a point of view I certainly wouldn’t have had otherwise.
Dave and I had a long conversation about whether or not Geithner knew what he was doing. Who’s to say, really? He was earnest and repenting in his interview with the Senate Committee. His failure to pay these taxes, I would say, is barely indicative of his ability to be an effective Treasury Secretary for the United States in a time of peril. Macro v. micro or something like that.
Susan Collins, of Maine, disagrees. The Senator has let the President know that she will not be voting in favor of Geithner’s nomination, and has not minced words in saying so:
Our current economic crisis is, in part, a crisis of confidence. If we are to return to prosperity, the American people must have confidence in those who would chart our course. Mr. Gauthier’s (sic) professional background and experience should inspire that confidence. They are overshadowed, however, by the personal issues regarding his own tax returns.
When these issues first arose, they were cited as examples of the baffling complexity of our tax code and of the need for reform. They were described by the nominee himself as “careless mistakes.” As more details have emerged, it has become clear to me that this is not merely a matter of complexity leading to mistakes, but of inexcusable negligence.
Mr. Geithner failed to pay self-employment taxes while working for the International Monetary Fund. He failed to make these tax payments despite the fact that the IMF repeatedly reminded him of this obligation. He signed paperwork acknowledging this obligation. He received extra compensation that he acknowledged at the time was for the purpose of paying this obligation. Yet when he filed tax returns for the years he was employed at the IMF, he did not pay self-employment taxes.
Let’s just say, Collins doesn’t end there. If you care to read more, you’re welcome to view the whole text of her letter.
I can’t say I blame Collins; if she’s not going to be the deciding vote, let her vote her conscience and let the chips fall where they may. I’ll be interested to see what happens.
Update: I think we all know by now that Geithner was approved by the Senate and sworn in last night. I didn’t think Collins alone would torpedo it, but Obama better hope Geithner doesn’t slip up at all; I feel like the Repubs will point to this as evidence.