Friday, January 16, 2015

Federal Memo: When It Comes To Paying Taxes, Do As I Say, Not As I Do

We were warned.

And by none other than Founding Father James Madison, who wrote: “You must first enable the government to control the governed; and in the next place, oblige it to control itself.”

Today three of four Americans distrust government.

Obviously the current White House renter, who claims to be a Constitutional scholar, is a big reason for this disturbing statistic. His churlish spate of executive orders shows the president must have been shooting jump shots in the Harvard gym when his law class was reading Madison’s Bill of Rights. That said, unmistakably mistrust of government stems from deeper regions of the American psyche than political personalities. The unfortunate truth is Americans are losing trust in democracy itself, the kind Lincoln spoke of eloquently at Gettysburg – “government of the people, by the people, for the people.” Especially younger ones who find the “American Dream” of their parents slipping through their fingers, Americans no longer believe government is “of,” “by” or “for” them. Rather, it’s for the benefit of a few.

I am not talking about the richly overused term, one-percenters. Okay, they’re rich and drive Teslas and vacation in the Hamptons. But, they hold no sway over you, really. I am talking about government employees. They’re the new privileged class. Worse yet, they stay on top because they write the rules you must play by. A handful of government paper-pushers at the IRS have a greater impact on your life and livelihood than a thousand one-percenters at Malibu beach.

I could go on all day about taxpayer-paid public pensions in California amounting to more than $100,000 a year, and about local government officials who retire at age 55 and get more in retirement money each year than they made for working. But, I’ll spare you. Let’s talk about federal employees, including officeholders, who owe back federal income taxes. And there’s a lot of them, boy.

The back-tax issue boiled over recently when the no-nothing commissioner of the Internal Revenue Service, Mr. John Koskinen, warned Congress that cutting the IRS budget by 3 percent will cause all kinds of troubles (for taxpayers of course) by delaying tax refund checks. It is January. Time of year employers send out W-2 wage withholding documents, and Americans begin to either calculate how much they will owe in federal income taxes or think about how to spend their tax refunds. My suggestion is Mr. Koskinen and his IRS horde take a look inward to solve their budget worries.

That is because employees of the IRS and other federal agencies owe $3.3 billion in back federal income taxes. In total, 318,462 federal employees owe an average of $10,391 each in delinquent taxes. Those involved make up a full cross-section of federal government, including Defense Department ($45 million); Justice Department ($21.9 million); Veterans Affairs ($146 million); Treasury, of which the IRS is part ($9.3 million); Air Force ($56.1 million); Navy ($69.1 million) and Social Security Administration ($22.1 million).

By no means has the White House been immune from the contagion of back-tax fever: 41 people in the Obama White House owed $831,055 in taxes, including the president’s former Treasury Secretary Timothy Geithner who owed $42,000 in taxes. The White House explained it was an “oversight” on Mr. Geithner’s part. (Had you misstated your taxes by $42,000 it would have been called a crime.)

And before Congress gets too smug, it has its own tax scofflaws. On the House side 420 people owed a total of $6.5 million in back taxes, while 217 people in the Senate owed $2.7 million. What’s more the rate of delinquent federal taxes among Congressional workers is even higher than the rate for IRS employees. It’s against the law for the IRS to name people who owe taxes so it’s hard to say how many of these deadbeats are elected representatives. It is known that one-time Senator Tom Daschle pulled out of heading the federal Health and Human Services Department after it was disclosed he owned $120,000 in taxes. Obviously he can’t be the only elected official on the delinquent tax rolls. And get this. Among bureaus with the highest rate of tax delinquency is court services – yes, the federal courts (8 percent), the guys who sentence us for cheating on our federal income taxes.

Of course the list of tax scofflaws only came to light after a news organization filed a formal request to release it under the Freedom of Information Act. In other words the IRS wasn’t about to rat out its own, willingly. Adding insult to injury, employees of the Government Accountability Office, which investigates how tax money is spent, owe $900,000 in taxes.

What does all this mean? Anybody who has ever owed taxes to the federal government knows exactly what it “should” mean. When the rest of us owe taxes we are fined and even threatened with prison food. So, you pay up, and fast, buddy. If you’re working in private business the IRS can step in and confiscate your wages. They don’t call it theft but a garnishment. Even if you crawl and beg for a monthly payment plan, the bullies at the IRS will still put a lien on your house. If you don’t watch it, buddy, you’ll find yourself and your three kids living in a tent under an overpass on Sepulveda Boulevard in Los Angeles.

But, does that happen to federal-worker-tax-deadbeats?

Well, no; they get bonuses instead.

Between 2010 and 2012 the IRS paid $2.8 million in bonuses to employees who were cited for using drugs, cheating on unemployment benefits, misusing government credit cards, and failing to pay taxes. In fact, about one thousand IRS employees who failed to pay taxes got $1 million in cash bonuses. (Is it too much to expect them to pay their back taxes with bonus cash?) Want a little more grief? Here goes: IRS officials even snubbed federal policy enacted in 2011 to limit bonuses to 2010 levels by giving bonuses bigger than the year before. Keep in mind some of these IRS employees “understated” their incomes, a raw violation of tax codes. Al Capone did the same thing and got whacked by the feds. If you understate income to avoid taxes it could mean the slammer.

“It’s no wonder the American people find it hard to believe the IRS needs more money when the agency fails to collect back taxes from their own employees and instead rewards them with bonuses,” said Senator Orrin G. Hatch, the Utah Republican. Efforts making it illegal to owe taxes to the government and work for the government have gone nowhere. It is time for Senator Hatch and his House and Senate Republican pals to put money-where-mouth is and pass legislation requiring federal employees to pay their delinquent taxes or hit the road. Current law says federal employees may be canned for owing taxes, but that’s too wishy-washy. Additionally, legislation should target IRS workers, making it a firing offense for any employee who cheats on his taxes. It’s akin to a department store employee stealing merchandise from the back room. He’d be terminated forthwith.

At minimum, what you might call a no-brainer, federal employees who owe taxes should be barred from receiving bonuses.

So what does this mess come down to?

It is no national secret that federal employment has transformed the Washington, D.C. region into the most affluent spot in the nation. Federal workers view themselves as a “special kind of person,” as one opinion writer put it, a person “above average working Americans.” Put another way: money goes from your wallet into their pocket. Letting them skate on obligations to pay federal income taxes is yet another example of a developing trend, a double standard, nationally: one set of rules for them and another for us. It is getting tough to stomach, without clenching your teeth. With each passing year evidence of this them-versus-us dynamic, like a disease, metastasizes. This cancer on government is why Americans who don’t rely on government handouts are fast losing trust in their democracy’s ability to govern evenhandedly. Theirs is becoming the government the wise Madison warned about, a government class unable to control itself. Indeed, ours is becoming a government to make the great-thinker Lincoln shiver in his tomb, a government of, by and for – themselves.
R.D. Byron-Smith's books are available at all online booksellers.

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