(Original Post)
The Globe and Mail (Canada)
February 4, 2009 Wednesday
Death is Certain. Taxes, Maybe Not
by TU THANH HA
INTERNATIONAL NEWS; Pg. A15
The fiscal foibles of three of Barack Obama's cabinet nominees reflect a broader problem in a country where each year there is an estimated tax gap of $350-billion (U.S.) between what is owed and what is paid to the Internal Revenue Service.
"Are we a nation of tax cheats? Basically no. But the answer is nuanced," said Howard Chernick, a specialist on public-sector economics at Hunter College in New York.
While most Americans are wage earners whose income taxes are deducted at the source, small businesses and independent workers are turning into the biggest source of tax avoidance in the United States, Dr. Chernick said.
The widening income inequality in the United States makes non-wage income more prominent and contributes to tax evasion because non-wage transactions are less visible, a 2003 paper by IRS senior economist Kim Bloomquist says.
"The tax code makes it awfully easy for people who are in business to not pay their taxes as they should. Sometimes it's by confusion, sometimes they think they can get away with it," said Robert McIntyre, director of the Citizens for Tax Justice advocacy group.
The optics were particular bad for former Senate Democratic leader Tom Daschle, who dropped out of contention for the post of health and human services secretary over his failure to pay taxes on the use of a luxury car and driver while working as a consultant.
"We've gotten into a culture in the United States where the acceptance of aggressive tax evasion has grown and I fear that Daschle was subject to that culture," Dr. Chernick said. "It's infected everyone. ... Very few people are immune to the culture of tax avoidance."
Among red-meat Republicans bristling at Mr. Obama's honeymoon, the developments were a source of bons mots.
"One good thing about electing a Democrat as president is that, as he nominates fellow Democrats to senior positions in the executive branch, millions of dollars in unpaid tax liabilities come to light and are belatedly paid," wrote conservative blogger John Hinderaker.
"Liberals don't mind tax rates going up because they're not going to pay anyway," Republican Senator Jim DeMint said on a TV panel.
In fact, both Dr. Chernick and Mr. McIntyre said, IRS enforcement diminished under the Bush presidency and during past Republican-led Congresses.
During that time, U.S. media stories reported how IRS auditors spent less time scrutinizing corporations, investors in real-estate partnerships evaded billions of dollars in taxes each year and the ranks of IRS auditing lawyers were trimmed.
"Any time the government tried to crack down on cheating, the Republicans in particular stood up and said 'You're persecuting small businesses,' " Mr. McIntyre said.
Mr. Bloomquist's IRS paper noted that wealthier Americans had "greater antipathy towards taxation."
The paper even cited as the most notorious example the hotel tycoon Leona Helmsley who famously said that "only the little people pay taxes."