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The Tax Exempt Cabinet
Obama was fortunate to receive an early Presidential endorsement from former Senator and Leader of the Senate, Democrat Tom Daschle. Obama has stated that Daschle has been a long time advisor in his Presidential campaign. In June of 2008 Obama declares victory over Hillary Clinton in race to secure the Democratic Presidential nomination.
Also in June of 2008 Tom Daschle claims that “SOMETHING made him think that the limousine and driver he had been receiving from his employer (InterMedia Partners) since the beginning of 2005 might be taxable income since he used it 80% of the time for personal use.” The total tax due on the unreported income of over $250,000 was $128,000 (plus $12,000 in interest and penalties).
His Accountant said yes that would be the case it could pose a problem for him. Since Daschle had not included this income on his tax return for the years 2005, 2006 & 2007 he was delinquent in his taxes and he would be required to notify the IRS and pay the late taxes and penalties immediately.
Daschle claimed he was going to take care of the delinquent taxes (already 3 years delinquent) in April of 2009 when he files his 2008 return and expressed it in a way that might lead you to think it would appropriately be part of his 2008 filing. Sorry, that is not the case, it is totally a separate issue and would continue to accrue interest and penalties for an additional 9 months. But, Obama had not been elected in June and it was entirely possible that he might not be elected at all and even though I am sure Daschle knew he was on the list for a top appointment, he couldn’t be sure he would even have to confront the Vetting process at all, so why rush to pay a tax he may never have to deal with. Also, if he waited to file his amended returns till 4/15/2009 curiously that is the date that the earliest of his delinquent years (2005) is released from liability by the statue of limitations and 2005 was the year of largest liability because duration of interest and penalties.
If Obama does not get elected there would be no compelling reason for him to file an amended return. If he does get elected he could file delinquently for years 2006 & 2007 (omitting the 2005 return) in April, 2009 and pay the piper in order to get the terrific powerbase as Health and Human Services Secretary. In that light it might be a small price to pay.
But subsequent events, to Mr. Daschle’s disappointment, have put the spotlight on Cabinet appointments after Obama appointed Tim Geithner as the Secretary of the Treasury and it turns out he didn’t pay all his taxes and he was going to be head of the IRS. Mr. Geithner filed amended returns AFTER the Obama vetting team found the underpayment on his tax returns. I am not sure why he had to wait for Obama’s staff to find it since he had received multiple notices from the IRS to pay the amount he owed, which he regularly ignored. Mr. Geithner even signed documents yearly with the IMF (the International Monetary Fund) his employer acknowledging that he knew he was responsible for this tax and he even submitted reimbursement vouchers to the IMF for said tax which they paid him, yet he did not remit that money to the IRS. Does this sound like an “error” to you? Don’t be a fool.
Back to Daschle. It was also discovered by the Obama transition team that over the 2005-2007 period Daschle took $15,000 of Charitable Contribution deductions for donations he didn’t make to qualified tax exempt organizations (I’m guessing Political Donations), AND…… in 2007 he received a consulting salary of $1,000,000 from InterMedia Partners of which he didn’t include $83,333 of that income on his tax return in 2007.
Add this to the previous report that Charles Rangel, (D-New York), the Chairman of the powerful House Ways & Means Committee who writes the tax laws failed to report many years of rental income on real estate that he owned, claiming he wasn’t aware of his liability.
These are the guys that have been the prime movers behind the tax laws over the last 20 years and they have repeatedly claimed that certain Americans are not paying their “fair share” and continued to push for increased taxes regularly. This is the true “culture of corruption” in Washington. But it is time to reward them with cushy political jobs with overwhelming power.
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10 Responses to “The Tax Exempt Cabinet”
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Great summary, Steve. The timeline is even more damning to their cases than I had been led to believe.
I can’t believe the media is letting them get away with this. Oh, wait, I can believe it.
Geithner and Daschle should have been laughed off the stage. Obama hasn’t been in office two weeks and we’ve seen one thing like this after another, and his supporters don’t seem to care.
Neil, Thanks. The truth is not that he voluntarily paid the taxes just this week, but that he delayed it with the hopes that he might avoid all or part of the liability.. As you recognized, this will not be part of the mainstream media analysis because it is a Democrat……steve
Hi Steve,
It would seem that we have a new poster boy for limousine liberals. On the bright side, now that they’re in total charge they do seem to have Changed their attitude about admitting their crimes. Of course, this sort of thing may require Obama to Change his slogan from “Change you can believe in” to “Corruption you can believe in.”
the Grit
Hi Grit…………I remember when Gephardt (then Democratic Leader of the House of Representatives) also skipped out on Capital Gains tax on a beach house he owned and sold. He spun the issue by saying that he didn’t think he would owe taxes on his personal residence. Trouble is that if it was his residence (principal) and thus tax exempt he wouldn’t be a resident of Missouri where he was a Congressman from. I see why these Democrats continue to believe that some people aren’t paying their “fair share” of taxes, they just didn’t believe we’d find out it was them…………steve
Daschle is a clown! & he should bow out…
But now I am nervous. Do I owe taxes on my car expenses that my company paid for years? Should I have gotten a 1099 from them that I should have given to my tax accountant? How about all the other things on my expense account? What does one owe on loan of anything? I stayed at a friend’s house while on company business. Should I have paid taxes for the cost of not paying for a hotel? This sure should make everyone think about what they pay and do not pay taxes on. I was
“free lance” during some of this time. Was the taxes I paid into the state and Fed include my payroll taxes (per Tim Guitner)? I am only trusting my tax accountant to know these things and have taken it all on faith for years!
M2…..A lot of the questions you worry about have a yes answer and some have a no answer and most depend on which year it was and the status of the law at that time. It is Gephardt, Daschle, and Rangle (probably the 3 most influential congressmen on the matter) that led the instilling of the 1099 & W2’s to BE SURE that taxpayers didn’t evade taxes. Tax Avoidance is legal tax evasion is illegal. The Democrats consistently try and make tax avoidance seem like a crime in the “market place” of voters.
The legal presumption is that it is the TAXPAYERS responsibility to report all taxable income to the IRS. I have prepared at a minimum 4,000 and probably closer to 5,000 tax returns over my life (individual, corporate, partnership, Trust, etc. all pro bono) and I recall time when the “honor” system prevailed until during Gephardt and Daschle tenure when they led the change in reporting to force payers to “snitch” out the recipients of funds. If the payers failed to do so they encountered their own penalties, but it is still the responsibility of the taxpayer. Ignorance of the law is no excuse, but ignorance can change the matter from a criminal issue to a civil matter. There is no reasonable way to argue that Gephardt, Daschle and Rangle were ignorant of the law, notwithstanding their spin. Daschle even knew this as soon as Obama got the Nomination and that is why he said (as I Quoted) that “SOMETHING” caused him to think….. That same Something is the reason why he was responsible to file the amended returns
IMMEDIATELY
upon discovery. He said “we were going to clean it up with our filing of the 2008 return (i.e. 4/15/2009). You don’t use one year’s return to “clean up” a prior years return. He knows that and he admits he discussed with his accountant and you know his accountant knows that. He was trying to play out the clock and I’ll bet my house against yours it is true.
By the way the statute says that your employer is to provide you with a W-2 for the value of the vehicle you used not a 1099. Since Daschle was an employee and wasn’t “provided” the car for his personal use, but given the “service” of the car by another driver “for his personal use” it doesn’t fit under the regulation for the W-2 but was a gift from an employer. Gifts from employer are limited by statue to cover things like a turkey, but it is under $100. Anything over that is taxable income. Say you got a
$100,000 prize stud turkey for Thanksgiving from your employer. You’d owe taxes on most of it and you’d personally be responsible to report it on your tax return. NOTE: If the Limousine driver used the Limo for personal use (i.e. allowed to drive back and forth in it to home) then that would be deemed “personal use” reportable on HIS W-2.
It is you, Daschle and Gephart that have supported the blocking of all these “loopholes” for the fat cats. You just hadn’t realized that THEY are the fat cats………..
By the way, proceeds from loans (i.e. borrowings) are not taxable, but they can alter tax basis in certain entities……….steve
[…] Posted on February 3, 2009 by Neil The tax exempt cabinet– first Geithner, now Daschle. The timeline is even more damning to their cases than I had […]
the corruption is just beginning my friend!:)
Hi Angel, I’m afraid that you are correct. Couldn’t hapen to a better bunch of members of the “Culture of Corruption.” …..steve
Musta’ forgot about Sarah Palins due taxes huh?
Hi Tim, thanks for the visit………Nope, didn’t forget because Sarah is not in the Obama Cabinet, but since you asked I feel obliged to respond more to the spirit if not the letter of the question. If one studied the pages of the NSL Blog they will notice that upon occasion I am compelled to straighten out some common misconceptions by certain advocates, especially on economic and tax matters, so I suppose I’ll have to prepare another sort of “tax treatises” here to properly shed more light on this matter than your question might suggest. Let me first indicate that since I last saw you that as an accountant I have prepared nearly 4,000 tax returns of various varieties (individual, corporate, partnership, proprietorship, trust, estate on the Federal and many state, local, and county levels).
Coincidentally, I have prepared taxes for some “touring” entertainers and I have had to evaluate the use of “actual expense” versus “per diem” expense in preparing the “optimal” travel expenses tax treatment for these particular clients. The area of “Per diem” expense reporting is probably one that only maybe 1 out of 15 or 20 professional tax preparers ever encounter. Certainly it would be much less frequent than that relative to the experience and education of preparers at H&R Block, which were the tax accountants for Sarah Palin and her husband.
In short it is possible that this is much adieu about not much, let me explain. First let me say that in the area of travel expense and reimbursement it is incumbent on the employer to provided guidance and accounting of this information to the taxpayer in the form of their W-2. (Which in the Palin’s case the state of Alaska didn’t indicate any taxable income in this area of travel expenses). So the obvious question is, “was the state of Alaska correct in not including the travel expenses in Sarah Palin’s W-2 as related to her travel, that of her husband and that of her children.”
I have often explained to my clients that in many (most) cases they are better off accepting the per diem deduction for meal expenses rather than embroil themselves in keeping the detailed listing of each meal, business purpose, cost, etc. Did you know that the IRS allows a Per Diem deduction for meals on the road for entertainers or business people (including governmental employees) even if they don’t incur any expense nor ingest any such meal? The whole idea is precipitated on the basis of “local averages” established by the Department of the Treasury with periodic COLA adjustments. Most of these expenses are triggered by the distance “away” from the “principal place of employment” (this obviously being Juneau not Wasalia).
The reason that I say that this might be much adieu about not much is because if the State recognizes the expenditures to be “appropriate” in the first place (without regard to their tax treatment - which they obviously did or they wouldn’t have reimbursed them) there would be largely in most cases a corresponding offsetting expense that they were being reimbursed for neutralizing much or all of the reportable income. In short, if you worked for an employer and you received A reimbursement for travel expenses (meals in this case) and that reimbursement was to be considered taxable, you wouldn’t have to remain entirely exposed for the tax on this income without the corresponding deduction for the cost of the meal or the per diem allowance for that day that you were being reimbursed for. So, if reported on W-2 and forced to take this a taxable income you would have to report his corresponding deduction on IRS form 2106 and then deducted on Schedule “A” (Itemized Deductions) . In this sense you have taxable income (in) and deductible expenses (out). This is not the full story since the IRS imposes a proration of the deduction for Meal Expense as opposed to travel and hotel type expenses. The net effect of this would most likely leave a “net taxable balance.” Most tax preparers would suggest that reimbursement for expenses that the taxpayer actually has or is entitled to (i.e. per diem) would constitute a non reportable net transaction. The employer if it was a taxable entity would itself be limited (i.e. the 50% proration) in its deduction for the “meal expenses” not the employee. So this is an area that could well support the tax reporting that H&R Block did, even though they probably didn’t or couldn’t think all these permutations through. This would leave an employee at a disadvantage and is why I suppose the State of Alaska determined that it is not appropriate to include such reimbursement in the W-2 since it is reimbursement for actual or allowable (i.e. per diem) expenses.
I think most tax prepares and IRS Auditors that I know would conclude that Palins Husbands expenses would be considered ordinary and necessary as well and would be ignored and to that extent the same with the kids. I know there have been anti Republican advocates that have argued to the contrary and have tried to make the novices believe this is an open and shut case, but it is not. But in any event the proper reflection and treatment of this would be established by the determination that the employer makes in issuing the W-2.
To the extent that I might lose this argument in the “minds” of some I’d add that if I am incorrect then the travel of Michelle Obama and their two kids on AirForce One would also constitute taxable income to the Obama’s.
great job Steve on such a volatile subject..Lord save us from THE ONE!!:)
That is entirely too long an answer for such a short observation about the Warsilla Hillbillies accounting. (Ad Hominen Attack du jour).
Hi Tim, your right. It is much better when the left can make the cheap and unsupportable charges and then drift into the shadows when the facts emerge. What do you think about those Chicago Hibilllies, should Michelle and the kids travel be included on Obama’s tax return in your opinion?…………..steve
Wanna see “Boner” drunk on the House Floor?
I’ve got it on my hard drive! It’s Classic!
I think our President is one of the best I’ve seen in my long life. I am proud of him, and enjoy watching the Republicans sink into the swamp they’ve worked so hard to end up in.
Although I no longer live in Ohio (now a BLUE STATE by the way), I still contribute to the Ohio Democratic Party.
Tim, About your infatuation with Obama. I always taught my children when they were growing up to live off the fruit of the vine and never to eat the vine itself. (I think you get my point). Obama is serving up the entire vine to his voting constituency so fast that we are doomed. He is fortunate that his supporters are predominately those riding the wagon instead of pulling the wagon and that they really don’t understand finance and economics any better than he does.
And of course since this is a post about the “tax exempt cabinet” I should add that I have now received and audited a copy of Obama’s 2008 tax return. Of course nothing was mentioned about this in the mainstream media, but I noticed that 2008 was a year that marked a strong upward jump in his income, exclusively related to his book sales. This is the first year he had the option of making a decision how to invest a large sum of “found” money. The vast vast majority of this money was invested in “tax exempt” domestic bonds and foreign dividend paying investments. None of the above are subject to US Income taxes and the foreign taxes create yet a additional credit against his wholly domestic income tax. So though this is not illegal such as Daschle, Geitner and Rangel, it does sort of make a lie out of his outrage that rich people aren’t paying their fair share of tax and that evil US Corporations are exporting jobs overseas, all while he was crafting his personal portfolio to avoid U.S. taxes and provide capital for foreign job not U.S. jobs. I’m sure that doesn’t bother you, but I sort of catch the hypocrisy. If you doubt me, I’ll send you a .pdf copy of his tax return that he made public. ….steve
Speaking of Tax Exempt Bonds. That’s a rub with me too. Being a railway man myself, I’ve always resented these tax exempt bonds that built airports (especially) while the RRs were paying real estate taxes on passenger terminals and right-of-way. It was, and in fact remains restraint of trade. Yeah, “unequal treatment under the law,” just like the progressive and confiscatory tax system that punishes the little guy because of its negative impact on economic growth and its effect on domestic jobs in the world economy.
Lets not talk about exporting jobs overseas or I will get into my Romney rant. Exactly, …..Romney and Obama.
With regard to you auditing a Tax Return:
Are you a CPA? Although I am not currently licensed by any state, for decades I was indeed licensed by the Ohio Accountancy Board as a public accountant with separate majors in Accounting & Finance and have been preparing tax returns (along with other accounting activities) for decades approaching about 4.000 returns now (including: individual, partnership, corporation (c)(s), LLC, trust, estate, and various payroll tax returns) at the Federal, State & Local levels, including Germany, also including representation of taxpayers before the IRS and Ohio Department of Taxation.
Are you trying to tell me he didn’t pay any taxes? That’s not what I understand. You got to pick up on the details, but here is an amplification of the point. He made $2,936 in “tax free” bond interest and $148,581 in “overseas” dividends that were tax exempt from US tax yet generated an additional $5,745 in credits that offset that much of his normal U.S. Tax liability in addition to the “tax exempt” income. This is almost all of his income from discretional investment decisions, not salary from the U.S. Senate or his book royalties. Are we clear here?
Rich people aren’t paying their fare share. These Bush tax cuts should be ended ASAP. Tomorrow wouldn’t be too soon. Just my point, Obama exercised his discretion in investments to avoid U.S. Taxes (his fair share). Incidentially, the so called rich are essentially paying
allmost all the income tax AND what about those foreign investments of Obama with the effect of exporting jobs overseas?This seems to be one of your obsessions. Not an obsession, just an area of my personal expertiese and it makes the political hypocrisy of the left cause me to smile.
It’s not one of mine. That’s why I said that you probably don’t care when Obama is guilty of what he (and now you) accuse others of. You also seem to be demonstrating in your above comments strong opinion on taxes regarding what you call Bush Tax Cuts.
I resent the Feudal notions of these Republicans. It doesn’t matter. They are going down the tubes and good riddance! What does this mean?
Wanna talk about Republican Draft Dodgers? I have my list at the ready! : - ) I don’t know where this came from but sure lets do it, and I’m sure that you have Bill Clinton on that list as well. He is quite the chicken hawk himself. (the unprovoked Kosovo war, no service, left the country for Europe to avoid draft). Yep, worse even than Bush…….(Iraq War, but at least service in the Naval Reserve as a fighter pilot). This one goes to Bush. Of course, Obama, no National Service, McCain war hero.