“Tax Cheat” Bill Introduced

Updated September 15, 2009

A number of federal government political appointees in the current Administration have received attention for their tax foibles. The list is a long one – Kathleen Sebelius (Health and Human Services Secretary) made “unintentional errors” over three different tax years and voluntarily coughed-up over $7,000 in back taxes plus $878 in interest after being nominated. The President’s first nominee for Health and Human Services Secretary, Tom Daschle, withdrew his name over tax issues. Also included in the list is Treasury Secretary Timothy Geithner. He said his underpayment was because of the tax software that he used. The Senate didn’t seem to mind, and confirmed him as the head of the IRS anyway. But, don’t try the “Turbo Tax” defense in court. In late August, the U.S. Tax Court rejected a taxpayer’s attempt to use Mr. Geithner’s excuse. Other federal political appointees with tax issues include U.S. Trade Representative Ron Kirk, Labor Secretary Hilda Soldis and Nancy Killefer who was nominated Chief Performance Officer but withdrew her name after it surfaced that she had failed to pay D.C. unemployment compensation tax and employment taxes on her household servants. More recently, the President's nominee for the Treasury Department’s top international position (Lael Brainard) is receiving attention for improper home office deduction. Brainard’s husband (Kurt Campbell) has already been confirmed as Assistant Secretary for East Asian Affairs, so if they filed a joint return, any improprieties on the return are his problem also.

Perhaps the politician with the biggest tax problems at the present time is Charlie Rangel (D-N.Y.). He’s the Chairman of the U.S. House Ways and Means Committee – that’s the committee that originates the tax laws. Now reports are out that Mr. Rangel filed a false financial disclosure report for 2007 which failed to report at least $500,000 in assets. He failed to report a credit union account, investment accounts and his ownership of three tracts of real estate in New Jersey. Rangel also didn’t report more than $1 million in assets on required financial disclosure forms dating back to 2001. He also didn’t report or pay taxes on his home in the Caribbean – he said he didn’t understand the tax rules that he wrote. He came clean on that one, but IRS only made him pay approximately $10,000 in back taxes without any penalties or interest.

Well, Congressmen John Carter (R-TX) has had enough. He’s a former judge with over twenty years of experience on the bench. Earlier this year he introduced H.R. 735, the “Rangel Rule Act of 2009” into the House Ways and Means Committee. The bill would require IRS to treat all U.S. citizen taxpayers like Rangel, Geithner and the others – pay just what is owed with no interest or penalties. All a taxpayer would have to do is write “Rangel Rule” at the top of the first page of the tax return. Kind of like keeping a tab down at the old General Store – just keep track of what you owe and when you get the funds, just come in and pay the bill. No interest, no penalties.

It will be interesting to see where the bill goes, and if Rangel is replaced as Chair of the Ways and Means Committee. Here’s betting that this Congress will do nothing on the former, but that there may be enough political heat to impact the latter. But, wait a minute…Pete Stark would be Rangel’s replacement. Do some research and you will discover why Pete Stark is the reason Mr. Rangel may just get to keep his job.