THE PLANK JANUARY 14, 2009
No question that Geithner's failure to pay payroll taxes on his IMF income was a bone-headed move. But I think the headline of Maureen Dowd's column--"Tim Geithner! Why Are Rich People So Cheap?" gets it pretty wrong.
Look, Geithner certainly isn't poor. But he's spent his life as a civil servant and bureaucrat, so he's not exactly rich either. After about a decade at Treasury, he reached the rank of under secretary in the late '90s, meaning he probably never made more than $150,000-$175,000 per year there, and often much less. (He started more or less on the ground floor.) Thereafter, Geithner decamped to the IMF, where he probably did somewhat better, but not much if one can deduce from his back taxes. He went from the IMF to the New York Fed in 2003, where he seems to have made somewhere between $300,000 and $400,000 during each of his five 5 years there.
Again, no one should cry for Geithner--he's done perfectly well for himself financially, certainly better than 90-plus percent of Americans. On the other hand, had he come from Wall Street, he would probably have made millions per year.
Why is this relevant to his tax screw-up? Because people who make a couple hundred thousand dollars a year probably hire a single, middlebrow accountant to do their taxes, and these people are hardly fool-proof. On the other hand, people who make millions of dollars a year probably get the most exquisite accounting and tax-lawyering around. The end result is that the latter don't have obvious, embarrassing mistakes on their tax returns. But what many of them do have are extremely sophisticated tax shelters that undercut the spirit if not the letter of the law. (Come to think of it, they don't even need sophisticated tax shelters. This scam allows them to pay a 15 percent rate on income that you and me and Geithner would pay 35 percent on. And it's all perfectly legal!)
If the choice is between an upper middle-class career civil servant who makes the occasional goof on his taxes, and a longtime hedge fund manager or investment banker who's taxes are exquisitely lawyered and loopholed, I'll happily take the former. (Don't get me wrong: It's not that hedge fund managers can't make good public servants--though I prefer the ones who don't exploit shelters and loopholes so aggressively. It's just that, if you want to get worked up about taxes, that's what I'd get worked up about...)
P.S. If you're wondering why team Obama leaked word of the Geithner tax situation yesterday, just read the rest of Dowd's column--it's almost all about Hillary. That's pretty much how the rest of the news cycle went, too, I think. (MSNBC was pretty much all Hillary, all the time last night, with only the occasional aside about Geithner.) Not a bad tactical move, I'd say.