Today, the story broke that Timothy Geithner, President-Elect Obama's nominee to head the Treasury Department, had failed to pay around $35,000 in taxes from 2001 to 2004. It seems that these unpaid taxes stemmed from his employment with the Interntional Monetary Fund (IMF) and Geithner's failure to pay the self-employment taxes associated with this position for those four years. Geithner claims this was an honest mistake, saying that he didn't realize that the self-employment taxes applied to his work for the IMF. There was also a revelation that Geithner apparently had a household employee, an immigrant, who had worked for him for three months after their work authorization had expired. Geithner claims these were honest mistakes--errors committed because he wasn't aware of the relevant tax law and, in the case of the expired work authorization, admittedly poor record-keeping on his part. The Vice-President of tax of the American Institute of Certified Public Accountants has said that Geithner's error on the self-employment tax issue would actually be a "difficult" one to commit, despite official statements from the White House claiming that it was a common mistake. In any case, this is unlikely to have much of an effect on Geithner's confirmation (Senate Majority Leader Harry Reid has called the issues "a few little hiccups" and says he is "not concerned at all"), particularly since Geithner has apparently paid his bill.
While I suppose I can buy the whole "honest mistake" bit, it's a little harder for me to turn a blind eye to the fact that Geithner only paid up on the majority of his IRS bill just few days before Obama announced him as the Treasury Secretary nominee. At least he paid though...and this led me to recall the numerous occasions where I have erupted at the television upon the airing of those "settle-your-IRS-tax-bill-for-pennies-on-the-dollar" commercials. While I do have significant issues with the monstrosity that that is the current U.S. tax code, I can't help but wonder how in the heck an average, "Main Street" citizen can get into $25,000, $50,000 or even hundreds of thousands of dollars back tax debt. In the end, it is what it is and if these people truly owe the money (for whatever reason) to the IRS, THEY OWE THE MONEY TO THE IRS! This wouldn't really be that much of an issue if it weren't for the fact that such a large number of people in this situation apparently turn to these so-called tax resolution agencies that claim to be able to settle your IRS debt for a significantly reduced amount than what is actually owed. If these agencies really are able to do what they say, there is a ton of money "owed" to the government that just gets written off, so-to-speak. The IRS forgives a large portion of the debt just to get at least some part of it.
But what does this mean? It's simply not plausible that this debt isn't somehow passed on to the rest of us law-abiding, tax-paying citizens in one way or another--maybe through tax increases somewhere else, etc. The same goes for those debt consolidation agencies who negotiate settlements with credit card companies to allow someone far behind on their bill to settle for an amount significantly less than what is actually owed. This is most certainly passed on to other credit card users in the form of increased interest rates. While I do, of course, feel sorry for people who are in such deep debt that they are in danger of going to jail or losing their homes, this really is unfair to the rest of us who "live by the rules." I could live with this, since there are many things in life that aren't fair, if it weren't for the infuriating nature of the advertisements these settlement negotiators produce (on TV, on the radio and on their websites). Every customer testimonial presented in these advertisements (I'm sure they are actors, but supposedly represent actual customers) features a couple or individual jubilantly announcing how, through the "magic" of whatever agency, they have managed to "erase" their debts and are now living happily ever after, free of that pesky notion of "responsibility" for your own behavior. The Debt-Relief Fairy has waved her magic wand and made everything better. Here are a few quotes from "satisfied" customers of one such agency, Freedom Tax Relief, that are quite illustrative--
"I didn't sleep for months due to my debt. Now I know you are dealing with them, and I no longer worry."
"I thought it was too good to be true, but now you've saved me over $14,000 in only one month!"
I'm sorry but if you have managed to get yourself into such a dire situation that the services of these agencies are your ONLY OPTION for recourse (apart from going to jail, I suppose), they should not be allowed to advertise with glowing, smiley testimonials of customers who are now carefree because their tens of thousands of dollars of debt are now gone. The blatantly flippant attitude towards personal responsibility that this puts forward is quite distressing; frankly, I think that they should be making you to feel quite embarrassed and ashamed that you are now forced into essentially shifting the consequences of your poor choices onto the rest of us, or else be imprisoned. Just one more example of the attitude of "entitlement" among U.S. citizens that I feel is increasing at an alarming rate...there's only so long this can go on before those of us who feel more compelled by the notion of personal responsibility simply refuse to keep paying for the mistakes of those who don't. I can only hope it's sooner than later.
3 comments:
I agree that the people who need to rely on these companies need a lesson in personal responsibility.
My guess is that their existence is partially so that credit card companies and other loaners can have a safeguard against fraud and non-payment. I know that in accounting class, they taught us to write off accounts receivable if they were deemed to be uncollectible, so I'm assuming that happens to a non-trivial amount of all credit card debt. Perhaps these agencies encourage people with astronomical amounts debt to pay a lesser amount, rather than resorting to some less legal tactics. So in that case, it doesn't have too much of a negative impact on honest, debt-free consumers...not sure if that is the case though.
I don't have much of a problem with debt negotiation in the private sector at all. This is a natural phenomenon and has a role in the economic structure.
The problem that I have is when this is used to negotiate debt settlement with the IRS. This places an additional tax burden on me and/or my baby girl. Yes. When private companies take the loss, the burden is passed on to other customers in higher rates, etc. But, I have the choice to do business with those companies.
I do not have the choice to do business with the IRS. They take my money no matter what I say.
That makes sense, I was only thinking about private debt before. The public should have a say in how the IRS resolves its debt, since they're part of the gov't and we're a democracy.
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