THE PLANK JANUARY 14, 2009
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
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.
--Noam Scheiber
12 comments
I don't really care about his tax problems, but why did similar stuff derail Zoe Baird and Kimba Wood, and Geithner seemingly gets a pass? Seriously, I don't get it.
- butchie b
January 14, 2009 at 3:26pm
Two things:
1. Watch Republicans jump on him for this while burying their heads in the sand over Joe the Plumber's back taxes.
2. A spelling error: "and a longtime hedge fund manager or investment banker who's taxes"
"who's" should be "whose"
- kevincollins
January 14, 2009 at 3:56pm
"Look, Geithner certainly isn't poor. But .. he's not exactly rich either"
"Again, no one should cry for Geithner--he's done perfectly well for himself financially, certainly better than 90-plus percent of Americans"
----------
Do you see a problem here?
If he's done better, financially, than 90%+ of Americns, he's rich. Period.
A link to re-read whenever you're tempted to write things like the first sentence above - that is to say, the paragraph underneath the graphic and the last paragraph:
Ezra Klein: The Rich Man's Populism of the Political Class.
www.prospect.org/.../ezraklein_archive
- jobeek2
January 14, 2009 at 4:07pm
Since the source of Geithner's error seems to be the complexities of self-employed taxes, and given how many conservative-leaning working people in the trades have to deal with self-employed taxes, which are an absolute nightmare to calculate and pay, I don't see the GOP's grandstanding on Geithner as a good idea for them. Sort of sends the message, "Hey, plumbers and electricians! Stop bitching about how complicated your tax forms are, and by the way you're probably not paying enough. Remember to vote for us in 2010!"
- rhubarbs
January 14, 2009 at 4:10pm
butchie - Geithner is getting a pass because we're in a major economic crisis and people care more about getting the best person for the job than about honesty. The better the economy/foreign policy state is, the more trivial our political issues can get. See Bill Clinton and Monica Lewinsky.
Rhubarbs - I don't think this hurts the GOP message one bit. It is totally consistent to argue: 1) Self-employment taxes are too complicated and should be simplified; 2) Geithner's error is proof of that; 3) Still, the head of the Treasury Dept (incl. the IRS) and a trained economist should be held to a high standard of performance, and for him to not pay his taxes is unacceptable. In other words, if you think that the head of the Treasury Dept either cheating on his taxes or not being able to figure them out isn't a win for the GOP, you've got another thing coming.
- jgalun
January 14, 2009 at 4:23pm
I think Noam's right not to get worked up about Tim Geithner's tax problem. The Geithner problem
- Anonymous
January 14, 2009 at 4:39pm
"certainly better than 90-plus percent of Americans"
To be somewhat more precise: the $150,000-$175,000 he made in the late '90s would by itself make for a household income in the top 10% bracket (don't know what his wife was making on top of that, or if he had any). The $300,000-$400,000 he made at the New York Fed would by itself already vmake for a top 4% household income.
As Ezra wrote in another post (www.prospect.org/.../ezraklein_archive), "when everyone below the 95th percentile is .. effectively middle class, you’re in a bit of an odd discourse, distribution wise." Quite. When you're in or near that top 5%, you're not middle class - you're rich. Of course there's always going to be someone a lot richer than you still, when you've arrived in that bubble where everyone's in the top 5%. But in the eyes of any regular American, you're rich.
- jobeek2
January 14, 2009 at 5:40pm
Most of the people I know who make "a couple hundred thousand a year" do their own taxes. But they use TurboTax or something like that, which should catch these errors.
- gwolfjr
January 14, 2009 at 5:55pm
jgalun, I agree, good post.
- blackton
January 14, 2009 at 6:22pm
Like Jason , I think Geithner's track record as a bank regulator should be the central theme of his
- Anonymous
January 14, 2009 at 7:12pm
Oh, come on, jgalun, no one else in America can be Treasury Sec? He's it? Now today we learn he was given $$ and told to pay the tax, and he still didn't?
As I say, I don't get too jazzed about this either way, but I don't understand why everyone is sweeping it under the rug so quickly.
I do find it hilarious that the guy almost in charge of the IRS can''t figure out the tax code any better than I can.
- butchie b
January 15, 2009 at 4:50pm
butchie b said:
I don't really care about his tax problems, but why did similar stuff derail Zoe Baird and Kimba Wood, and Geithner seemingly gets a pass? Seriously, I don't get it.
George:
It's the difference between Bill Clinton being figuratively tarred and feathered for smoking [though not inhaling] pot in the 1992 campaign and Obama admitting not only that he inhaled but had also tried some "blow".
Nothing can be understood [especially in the world of politics] without a prevailing context.
Even something out of the blue that draws everyone's attention [like another 9/11 somewhere] can
factor in to how the media pushes one button instead of another. Fortuity works both ways.
And then there is the parallel universe that is America's "ruling class". It's always between the lines, of course, but what gets done or not done is ceaselessly communicated by and between Big Media, Big Business and Big Government.
Publications and pundits [from places like this] don't probe too deeply here for two reasons:
1] because they really don't believe a ruling class exists in America---it's just one of those conspiracies the loony lefties latch on to. And they all read each other stuff until the narratives take on a tautological life all their own.
2] if they were to acknowledge it, they would either expose their own [unwitting of course] part in it or [even worse] expose how ineffectual they own analysis is. They like to thing the stuff they write is read by those in governmnet....this allows them to imagine they play a part in how the the news unfolds
And because sometimes they do, there is no way in which to calibrate this with any degree of accuracy
george
- iambiguous
January 15, 2009 at 10:19pm