Paul L. Caron

Thursday, February 5, 2009

Johnston: Why Was Geithner Treated So Much Better Than IRS Employees?

Tax Analysts David Cay Johnston has published Tim "Not to My Recollection" Geithner and Justice Wilson, 122 Tax Notes 661 (Feb. 2, 2009):

Timothy Geithner is one lucky man ... because when he cheated the government on his payroll taxes, he wasn't working for the IRS.

Had Geithner been working at the IRS, here is what he could have expected for being suspected of shorting the government tens of thousands of dollars in payroll taxes: He might have been rousted from bed before dawn in a commotion that terrified his children and embarrassed his wife when it awoke the neighbors. He would have been treated like a scheming criminal and, while not subjected to what the Bush administration euphemistically called "enhanced interrogation techniques," he would have been scared enough to suffer a stroke or heart attack, like some of those grilled by the agents from the Treasury Inspector General for Tax Administration. ...

Any suggestion by Geithner that it was just a mistake, that the law is too complicated, or that the software made him do it would have drawn derisive laughter and worse, based on what IRS clerks whom TIGTA went after have told me and have testified about in proceedings aimed at saving their jobs.

Section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998 provides that "in general . . . the Commissioner of Internal Revenue shall terminate the employment of any employee of the Internal Revenue Service if there is a final administrative or judicial determination that such employee committed any act or omission," including "willful understatement of Federal tax liability, unless such understatement is due to reasonable cause and not to willful neglect."

The Treasury inspector general has interpreted that law as a license to go after people who made, the record later showed, minor or innocent mistakes, including some mistakes caused by the government.

That Geithner was treated to one standard of justice while lowly IRS clerks face another can, however, become a turning point for our tax system and produce change for the good. And what is the new administration about but the promise of change for the good?

Geithner now has the power to end this kind of official discrimination, which should offend every American because it mocks the promise of equal justice under the law.

Geithner can start fixing it by directing us down the road to a tax system that is simple, fair, and just. Whether that day dawns will be up to Geithner -- it will be a public test of his skill, his character, and whether he learns from his past. ...

[W]e should keep in mind that we want competent leaders running our government, not supposed saints. The case of James Wilson, the framer of the Constitution who drafted the language counting slaves as three-fifths of a person, provides perspective and shows how public good can be refined from the crucible of financial error.

In the early days of our republic, a real estate bubble arose, bursting in the panic of 1796-1797 and causing problems not unlike our own today. Wilson was among those wiped out. Wilson's creditors pursued him relentlessly, even having him jailed briefly while he was a Supreme Court justice.

Wilson continued to serve as an associate justice until he died in 1798, his creditors hounding him to his last breath. Wilson's tragedy helped prompt Congress to use its power under Article I, section 8 of the Constitution to establish a bankruptcy law, the first to put us on a road toward relieving debtors so that they can get on with their lives and businesses. Commerce has grown and the whole nation has prospered because we forgive our debtors in some circumstances.

Our republic survived a sitting Supreme Court justice being jailed, and we can live with a Treasury secretary who paid his taxes in full only because he was up for a Cabinet post.

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