Audit them all
posted by Jason Mazzone
Tom Daschle, former Senator and nominee for Secretary of Health and Human Services, didn’t fully pay his taxes. Apparently, Daschle didn’t tell his accountant about a free car service (worth a whopping $250,000) and consulting income (another $88,000) over a three year period. Tax laws are complex and so perhaps Daschle didn’t realize at the time that these things constituted taxable income. Regardless, the perception Daschle leaves is that powerful people don’t pay everything they owe.
In the world of tax compliance, perceptions matter a good deal.
A well-known experiment for the Minnesota Department of Revenue showed that people who believe that tax compliance is high report their own income accurately and pay in full. In other words, people pay what they owe if they believe everyone else is also paying what they owe.
This phenomenon is not unusual to taxes. Willingness to abide by other laws is also influenced by perceptions of whether other people are complying. Some years ago, a colleague and I conducted a study to determine which factors determined whether individuals illegally downloaded and shared copyrighted music files. We found that a strong predictor of downloading and sharing was the perception that other people were flouting the law. Indeed, perceptions of general behavior were better predictors than whether people saw a risk of being caught or facing a significant penalty. People who thought that most people didn’t infringe copyrights were less likely to do so themselves.
News stories at tax time about tax cheats and the IRS cracking down are likely to undermine tax compliance. So, too, stories that Daschle (and others) under-reported are likely to have a negative effect on compliance. Overall, it is likely that most members of Congress and high-ranking members of the Executive branch (and the judicial branch for that matter) faithfully pay what they owe. So here is a proposal: let’s audit them all. The details of their returns need not be released, just final information on whether they owe back taxes. (Some might even be entitled to a refund!) News that Daschle is an exception to the pattern of overall compliance would be good tax news indeed.
February 2, 2009 at 5:18 pm
Posted in: Tax
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Responses (12)
Brett Bellmore - February 2, 2009 at 9:40 pm
“Overall, it is likely that most members of Congress and high-ranking members of the Executive branch (and the judicial branch for that matter) faithfully pay what they owe.”
Audit them all, and you might be surprised.
A.W. - February 3, 2009 at 9:22 am
I say in general the tax code is too complex, and thus causes people to make needless errors.
But i am sick of people trotting out that excuse for Daschle and Geitner (sp?). Geitner didn’t pay any income tax. That isn’t a technicality: he paid none. And Daschle didn’t report obvious in kind payments. Again, that’s not a complicated issue. Did you get something? Yes. Was it of value? yes. did you report it? no. Sorry, how complicated is that?
So, yes, of course the tax code needs to be simplified and there is plenty of evidenc of that fact. But these idiots are not that evidence.
GB - February 3, 2009 at 9:38 am
“Overall, it is likely that most members of Congress and high-ranking members of the Executive branch (and the judicial branch for that matter) faithfully pay what they owe.”
On the contrary, the findings of the MN experiment apply to Congress as well. Add in the feeling of power these people have become used to and the incentive is strong for ignoring the details of the tax code. They make the law, therefore they feel above it. How many hundreds of laws have these people passed without even reading them? Could someone put up a petition we commoners could sign requesting the IRA to audit all members of Congress?
Stoutcat - February 3, 2009 at 9:48 am
At a guess, fewer than 10% of those in Congress do their own taxes. The likelihood is that the other 90% simply sign where their tax folks tell them to sign.
However, it is MORE than likely that the same 90% don’t report everything they should to the tax accountants. (See Geithner, Daschle, et al.)
To paraphrase GB above: “But Mom, everyone else is doing it!”
And Mom (conscience) says, “That doesn’t make it right.”
And the 90% say, “So what, shut up, la-lal-a I can’t hear you… where do I sign?” and hope they don’t get caught (or tapped for a cabinet position).
F - February 3, 2009 at 10:16 am
Congresspeople avoiding taxes is part of a bigger problem: Congress goes out of its way to exempt itself from the very laws it makes. I used to work in FOIA (that’s the Freedom of Information Act) compliance for the Department of State. State spends millions of dollars a year (or used to) answering FOIA requests, some serious, some frivolous, all of them requiring detailed review of department documents, many classified (that was my job). Congress wrote that law a couple decades ago and exempted itself from its reach. So too with laws like OSHA (Occupational Safety and Health) and many others. They are simply “above the law.” A very good illustration of this is the number of Congresspeople who angrily yell “do you know who I am?” when asked by a cop to show a driver’s license, or asked to step to the rear of the line, or to observe any of the customs that make civil society civil. They learn very quickly after arriving in Washington that they have special license plates, special parking, special privileges, special treatment. And they expect it. Expecting to be treated “specially” when it comes tax time goes with the territory. I suggested some time ago that all 535 Members should ASK to be audited, ASK to be subject to the laws they enact, ASK to be treated like the voters who elect them. Or else they are effectively asking to be sent back home and replaced by someone who doesn’t feel s/he is above the law. Now, how do we make this point to the Congresspeople? F
tkh - February 3, 2009 at 10:33 am
The resolution for the Congressional Aristocracy Syndrome (CRA):
Term Limits
eaglewingz08 - February 3, 2009 at 11:39 am
Daschle WAS AUDITED by the IRS in either 2006 or 2007, but he failed to disclose these ‘mistakes’ to the auditor. Funny how things slipped his memory.
Antimedia - February 3, 2009 at 12:29 pm
The fundamental problem with your idea is that it assumes ethics and honesty on the part of politicians – that they would willingly submit to an audit and that they would reveal all of their income. Daschle has already disproven that.
A.W. - February 3, 2009 at 1:01 pm
Btw, Daschle has just been thrown under the bus. heh.
Dantes - February 3, 2009 at 2:47 pm
Ronald Reagan once said of the United States: “We are a nation that has a government–not the other way around.”
Not any more.
Obama bans lobbyists, then issues 17 exemptions. We already know Charles Rangel is a tax cheat. Geithner gets to be treasury secretary. Bill Clinton rakes in millions from foreign contributors, and his wife is sec state…the list grows.
The good which may come out of this is that lots of people will start to decide they are tired of being treated as second class citizens by first class elected tax cheats, and clamor for tax reform.
Interesting that 50% citizens in the lower income brackets pay no income tax…and those Washington Insiders like Daschle apparently are trying to join that group.
Cris - February 3, 2009 at 3:39 pm
Make them pee in a cup, while you’re at it.
KO - February 4, 2009 at 12:50 pm
I don’t see why we should tolerate one more average American being audited and forced to pay for their mistakes until they clean up their own house. I think President Obama would go along way to achieving the bar he has set if he could oversee this action? Audit them all!
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