Geithner's Copout
By Harris Sherline
February 2, 2009
In 1934, U.S. Court of Appeals Judge Learned Hand famously said, "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." -- (Gregory v. Helvering, 1934).
Judge Hand's statement refers to "tax avoidance," which is legal. However, tax evasion is not. In short, avoidance is managing one's finances within the law in such a way as to pay the least amount of tax, whereas "evasion" involves violating tax laws to minimize or eliminate income taxes.
Given the complexity of our tax laws today, which require something on the order of 66,000 pages to document, the difference is often unclear. Even those who work for the Internal Revenue Service (IRS) and tax professionals are often unable to interpret our tax laws. So, why should Timothy Geithner be expected to understand them, even though the IRS is one of the agencies he will supervise?
What did he do that should be cause for concern? In the Senate hearings to confirm his appointment to the nation's most important financial position, Mr. Geithner confirmed that he failed to pay Social Security and Medicare taxes on his income for the four years 2001 through 2004, saying it was due to "careless but unintentional mistakes." Should that matter and, if so, should it have disqualified him from being confirmed as the Treasury Secretary for the new administration?
The facts are not complicated:
Mr. Geithner failed to pay Social Security and Medicare taxes for four years (2001-2004), while he was working for the International Monetary Fund (IMF).
The IMF advised him in writing that he was responsible for paying U.S. Social Security and Medicare taxes on his earnings, which he acknowledged in writing, and they gave him the money to pay the taxes.
In 2006, his 2003 and 2004 income tax returns were audited, and he was assessed and paid $16,732 in taxes plus interest for the Social Security and Medicare taxes due for those years, a total of $25,970.
However, he did not pay the back taxes for 2001 and 2002 -- because the time within which the IRS could audit those years had expired. Although Mr. Geithner knew or should have known that he was obligated to pay these taxes at the time he filed his income tax returns, he did not do so, and he did not voluntarily pay them in 2006.
He did subsequently pay his Social Security and Medicare taxes for 2001 and 2002, but not until he had been nominated for the position of Treasury Secretary.
>> Continued -- Page 1 2
| 
