Why So Many Politicans With Tax Problems?

Hi All,

If you’ve been following the headlines, you’ve probably noticed that a LOT of political appointees have been failing to fully pay their taxes. Most famously Timothy Geitner experienced widespread criticism when he blamed Turbo Tax for making a 42,000 mistake on his income taxes (1). More recently apointees like Ron Kirk, Tom Daschle, Nancy Killefer and Hilda Solis also faced problems with their nominations due to tax issues (1). Now, to top it all off, its being reported today that 22 Georgia legislators have failed to pay their taxes (1).

Why is all this happening? Have politicians suddenly become mathematically illiterate?

Probably a more realistic interpretation is that the tax code is too complicated.

According to IRS estimates (1), it takes the average American family, including itemization, 28 hours to complete their income taxes. Assuming you work an 8 hour day that’s three and a half days of work, just to complete your returns. Think of all the wealth that Americans could retain if they did not have to spend billions a year paying tax preparers? Then think of how you could invest that wealth! But unfortunately we are stuck with this complex tax code. The increased complexity is reflected in the forms themselves, check out this 1040 from 1913 and compare it to the 2008 version.

Now compare it to the same form in 2008.

And that’s just the first page of the 2008 forms! If you’ve filed yourself, you know there are several more to fill out.

So just to wrap this up, the reason why many politicians are having tax issues block their appointments is the complexity of the IRS code. By and large, politicians tend to have more complicated income arrangements than the average person, and the complex rules of the tax system itself are making it increasing difficult to properly account for the money.

Best,

James