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Dasching away from taxes

February 02, 2009

Another Cabinet nominee is finding public service to be unexpectedly expensive. Tom Daschle had to write a $140,000 check to the IRS as his entry fee to the HHS Secretary job.

The Senate Finance Committee report says that the former South Dakota Senator paid up because of three, er, "mistakes" on his 1040s:

- He failed to pay tax on the value of chauffeur and car services provided by a private equity fund run by a big Democratic fund raiser.

- He also failed to pay tax on $80,000 cash he received from the same fund.

- He claimed a bunch of charitable contributions that weren't to actual charities.

People can be too hard on politicians when they run into tax problems. John Edwards' use of an S corporation to reduce his self-employment liability strikes me as routine tax planning. Al Franken's failure to file returns in all of the states where he did comedy shows highlights the expense and difficulty small businesses face every day with the states as they become more rapacious in going after non-residents. Sarah Palin came under a fire for her per-diems, but while it showed incompetence in Alaska's payroll processing, it was really just a pretext for feigned partisan outrage.

This is different. Small businesses get audited every day on personal use of cars. Most businesses are painfully aware that there are at least tax issues involved in personal use of vehicles; how can a Senator who writes the tax laws miss the boat? And failing to report $80,000 of cash? How do you miss that? You aren't surprised to hear the "no 1099, no taxes" excuse from somebody who takes cash on the side for odd jobs, but from a former Senator? Especially a former Senator who threw lots of stones from his glass house.

As bad as these tax problems are, they highlight a worse scandal: how Senators like Mr. Daschle and Iowa's Tom Harkin become millionaires on their $174,000 Senate salaries via their wives' "lobbying" jobs. When Rod Blagojovich pointed out that a Senate seat is "a ... valuable thing," he knew what he was talking about.

It does imply an explanation for an odd Washington phenomenon: millionaire Senators supporting higher taxes on millionaires. They just don't think they'll ever have to pay them. And unless they want a cabinet job, maybe they're right.

Additional coverage:

TaxProf, plus more TaxProf.
Kay Bell
Tax Grrrl
Peter Pappas

Instapundit is all over this, in too many places to link to.

Tags: Daschle.Edwards.Franken.Palin.