Taxing problems in Washington

Congress likes to talk about simplifying the tax code — which, bear in mind, is solely its own creation — but never does. Perhaps the tax problems of three of President Obama’s nominees to top posts will prompt it to act.

Nancy Killefer, Obama’s choice to be White House performance czar, withdrew over $946.69 in back taxes, interest and penalties for a brief period when she failed to pay the unemployment compensation tax for her household help. This is the recurring nannygate problem that came to prominence when it tripped up then-President Clinton’s first two choices for U.S. attorney general.

Thomas Daschle withdrew from consideration as secretary of Health and Human Services over $140,167 in taxes and interest because he failed to treat the use of a company-provided car and driver for three years as taxable income.

Treasury secretary Timothy Geithner was roughed up in his confirmation hearings because of $34,023 in payroll taxes from a two-year stint with the International Monetary Fund. Either he didn’t know or it failed to register that Americans who work for international organizations that do not deduct for Social Security are liable for both the employer half and their own half of the federal payroll tax.

These are smart people, surely honest, and presumably with access to good professional tax advice and if they mess up on their taxes for whatever reason it’s certainly probable that a lot of other people are coming up short for Uncle Sam because they don’t understand the tax code, they’re forgetful or they’re simply tax dodgers.

David Barlett and James Steele, authors of "The Great American Tax Dodge" estimate "as much as $600 billion — more than two-thirds of the government’s stimulus package — is lost each year as a result of tax fraud and avoidance."

Congress could greatly cut that shortfall by fully funding the Internal Revenue Service and its collection and enforcement arms. It makes no sense for Congress to enact tax laws and then cripple the agency that’s responsible for carrying them out. But going back to the Reagan years, the lawmakers have seen better political mileage in beating up on the agency.

Congress likes to pretend that the IRS somehow just appeared but the Constitution says quite clearly all bills for raising revenue shall originate in the House, and the Senate may concur or amend. A simplified tax code would make people more likely to comply and easier to catch if they do not. And, as fast as we’re going into debt, that $600 billion could really come in handy.