One Rangel Down, One Geithner to Go

-- Posted by Neil H. Buchanan

Rep. Charles Rangel (D-NY) has been forced to resign as chair of the tax-writing House Ways & Means Committee. (Although he initially described it as a temporary leave, apparently this is essentially irreversible under the facts as they stand -- and the facts could get much worse.) Even though the ethics committee ruling that apparently precipitated Rangel's resignation did not cover tax matters, there is a federal tax issue that is still pending against him (failure to pay taxes on rental income); and given his position as the head of the most important committee in Congress on tax issues, it is understandable that his ethical issues have a strong tax tint to them in public discussion.

Rangel's departure is good for the country, good for Congress, and good for the Democratic Party. Unfortunately, it appears that the process followed the usual pattern (for both parties) of stonewalling by a powerful politician until it becomes too politically costly for his partisans to continue to support him. It would be much better if this were to become an object lesson for Democrats in the importance of actually being beyond reproach on taxes.

Democrats, after all, face a much more difficult task than Republicans. As the party that generally believes in the (limited but essential) ability of government to do some good for the country, they harm themselves when they feed public cynicism by engaging in corrupt practices -- especially on tax matters. When Republicans do something wrong, it is merely further evidence that we should not trust politicians to do anything right, perversely reinforcing the Republicans' overall message. While the James Carville school of thought seems to be that politics is all a big cynical battle, and Democrats should fight as dirty as Republicans do, the reality is that Democrats cannot stay in power for long unless they actually accomplish things. In turn, they cannot accomplish things unless they have the support of the public at large. Feeding public cynicism is, therefore, suicidal for Democrats.

This point is not as obvious as it might seem. Consider one of the issues on which Republicans are most vulnerable in the hypocrisy sweepstakes: marital infidelity. The parade of clowns including (but certainly not limited to) Mark Sanford and John Ensign is not generally engaging in things that most Americans consider to be serious moral infractions. Yes, we all like to believe that people will be faithful to their spouses; but we know that many people stray, and there is little appetite for making a bigger deal out of infidelity than we do. What makes the Sanfords and Ensigns vulnerable is not that they are doing something that other people never do. It is that they are rank hypocrites, claiming to be committed to leading America to a more moral future, with devotion to traditional families at the center of their ideal world. They insisted upon a different, stricter moral standard. Then they failed (spectacularly) to live by it.

By contrast, the Democrats have not claimed to set a standard beyond that which should normally apply in society at large. People should not cheat on their taxes. People should not take money under the table. People should not break the law. When Democratic politicians fail those standards, they are not the victims of their own artificially high standards but are, quite dramatically, simply doing what no one should do in any case.

Again, however, what makes tax dodging by Democrats worse politically than tax dodging by Republicans is that Democrats need to show that government can work in a non-corrupt way. When the people see politicians cheating on their taxes, it can only lead to a very sad and predictable cynicism.

This is why Treasury Secretary Timothy Geithner remains such a political liability to the Obama administration and to Democrats more generally. He received special treatment when he was found to have failed to pay taxes (when anyone in his position should have known that taxes were due), and people are rightly angry about that. It is even worse, of course, because the IRS is part of the very department that he leads.

Similarly, there has been some recent discussion of the number of tax "deadbeats" who work for the federal government. A Republican Congressman has proposed that any Congressional employee who fails to pay their taxes should be fired. (This would extend the rule already in place for IRS workers, who are the most scrutinized and squeaky clean workers in the country.) As tempting as it is to view this proposal as mere political posturing, it is difficult not to agree with the basic idea. We are not, after all, asking people to do anything more than obey the law.

The legitimate concern, of course, is that this type of thing can become a witch hunt. Zero tolerance policies -- of which this proposal would be a very powerful example -- are notorious for being coupled with the denial of due process for accused wrongdoers. Putting in place a policy to fire tax "deadbeats," therefore, requires serious thought about what really makes a person a deadbeat.

Consider a personal anecdote. A few months ago, I received a notice from New York State indicating that I was in arrears on my state taxes, in an amount including penalties and interest of more than $15,000. This was for the year 2004. The problem was that I had neither lived nor worked in New York in 2004. In April 2005, I had moved to New York City, and I had entered my new address on my 2004 federal tax return, because that was my correct address when I signed the return.

It turns out that New York (and many other states, I suspect), in a completely sensible anti-fraud strategy, looks for federal returns each year with New York addresses for which there is no matching New York state return. Mine was such a return. The state then estimated my taxes due based on my federal return information, and it then added interest and penalties as appropriate under the law.

Happily, this was not a case where New York State's government lived down to my previous criticism of it as the "worst state government ever." I contacted the appropriate office, was given information on how to correct the record, sent in my New Jersey tax form for 2004, and received a letter clearing me of all NYS tax liability for the year. A minor annoyance, with no harm done.

The worry, of course, is that the lists of "deadbeats" that motivate the public outrage regarding public employees who do not pay taxes are littered with people who are not deadbeats in any meaningful sense of the word. Prior to mid-February of this year, I would have shown up on a list of people who had failed to pay state taxes -- and it would have looked even worse, because I had failed to pay for several years and had even been assessed penalties. Looks like a deadbeat to me!

The solution to this is not difficult, nor is it even particularly unusual. Any lawyer knows that you protect people from hasty convictions by providing adequate procedures to allow innocent employees to mount a defense. The serious danger is that federal employees, who are regularly (and unfairly) pilloried by politicians as lazy bureaucrats or worse, will not receive that fair shake.

All of which makes it clear that Democrats' ability to follow my advice above -- just follow the law, and you'll be fine -- will be limited by messy reality. Some cases can be made to look bad in the press, even if the employee is not actually cheating on his taxes. We will never be able to eliminate demagoguery surrounding taxes, but we can certainly eliminate the easiest cases. Rangel is gone. Geithner should be. Others who can be shown definitively to have violated the tax laws should not continue to serve. We will never get it exactly right, but Democrats need to think very carefully about just how much they (and we as a nation) lose by not trying harder.