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Obama nominee pulls out over tax trouble
Which one? I am more than willing to grant that not every nominee deserves to be appointed to rule over me. But I'm also worried about the incentives we are producing by applying tougher standards. Knocking out the caught cheaters won't make all the DC people honest or virtuous. The long run effect is to select for people who have known -- from the very beginning -- that they seek power and who are willing to pay money to the taxman to keep that option alive. We are selecting for people who are very good at covering up their misdeeds. We're selecting for honest people too. There's lots of posturing on this issue, but I'm not sure whether the net effect of the crackdown is positive, once you take all these selection effects into account. There's something to be said for selecting people who are relatively bad at cover-ups.
There's also something to be said for increasing the wages paid to top appointees, as they do in Singapore. That would encourage more tax compliance without just selecting for the power seekers.
Posted by Tyler Cowen on February 3, 2009 at 11:18 AM in Law | Permalink
Comments
Too funny! Of the three so far, her's was definitely the least objectionable case. Geithner's was deliberate tax evasion followed by serial perjury. Daschle's was probably deliberate, too.
Posted by: Yancey Ward at Feb 3, 2009 11:25:34 AM
In Geithner's case, it seems to me that, in overlooking and confirming, we have selected for just those kinds personal failings that have contributed to the collapse of the financial system -- namely: foolhardy risk taking, ethical 'casualness', and a sense of the elite being above the rules. How on earth can be those the characteristics we're looking for in a treasury secretary?
Posted by: Slocum at Feb 3, 2009 11:34:43 AM
Tyler, I hope that you are kidding.
Geithner and Daschle quite literally lied. Geithner squeezed by apparently because Summers was too politically tainted.
The former Majority Leader of the Senate should know the tax rules -- he voted on them for years, after all. Daschle should not get a pass on this one.
I'm pretty disgusted with the whole thing.
Posted by: TC at Feb 3, 2009 11:41:24 AM
There's also something to be said for increasing the wages paid to top appointees, as they do in Singapore. That would encourage more tax compliance without just selecting for the power seekers.
I doubt that you can provide any evidence to support that contention. Neither Daschle nor Geithner, for example, were being poorly compensated when they failed to comply with the law. Unlike those two tax cheats, Killifer's minor transgression was cleared up years before her appointment. She has been chosen as the sacrificial lamb.
Posted by: RW Rogers at Feb 3, 2009 11:41:47 AM
But I'm also worried about the incentives we are producing by applying tougher standards.
What are these standards "tougher" than? If I recall correctly, a couple of Clinton's nominees were knocked out of consideration for nanny and tax issues that, in retrospect, pale in comparison to Geithner and especially Daschle. I can't even recall whether nanny and tax issues were uncovered for Bush II nominees (I know one of them -- commerce? -- was knocked out for something, but I can't remember what; probably social security taxes for the nanny or hiring illegal immigrants for yardwork or something).
If anything, standards for Obama's cabinet officials are now considerably laxer than at any time in the past 20 years. I think part of that is that of Obama's original choices, we've already seen one get dinged because the transition team thought he was going to get indicted for corruption. And of course, Blagojevich has been in the news, reminding us all about Illinois politics. That has a way of reframing the debate, so that faults which would have crippled any other President's nominees seem minor. We can be thankful that at least these nominees aren't under indictment. Our expectations for the probity of the Obama cabinet have been duly lowered.
Posted by: Taeyoung at Feb 3, 2009 11:45:10 AM
There's also something to be said for increasing the wages paid to top appointees, as they do in Singapore. That would encourage more tax compliance without just selecting for the power seekers.
We can always (okay, often) rely on Tyler to fix ridiculous government abuse that belongs in a Dickens novel, by increasing government spending. :)
(For those who accuse Tyler of being a right-wing attack dog, please keep these types of posts in mind.)
Posted by: Bob Murphy at Feb 3, 2009 11:47:10 AM
I hate to ask the dumb question but, what is the "Chief White House Performance Officer". It appear to be a new position. Do we really need to pay one more person, "to scrutinize government spending." Maybe the new position should follow her out the door.
Posted by: rb at Feb 3, 2009 11:48:10 AM
The problem here, at least for somebody like Daschle, is rank hypocrisy. It brings to mind the Larry Craig incident. If you want to be a nutty homophobe, then you are probably a really bad guy, but if you want to do it while standing wide in airport bathrooms, you become vile hypocrite. Likewise, if you want to raise taxes on people making a certain amount of money, you better pay your own taxes when you are making a bundle yourself. It is pretty simple, and very hypocritical.
Posted by: Matt at Feb 3, 2009 11:48:45 AM
What about this signaling business economists are always going on about?
What signals are Obama, the Democrats, the senators who vote to confirm and the media who yawn sending?
Posted by: Kent Guida at Feb 3, 2009 11:54:10 AM
You act as if everyone cheats on their taxes. The 'tougher standards' you're worried about are something like the baseline of honest behavior that the majority of the little people in flyover country are expected to live up to year in and year out. And anyway, what tougher standards? Am I expected to regard the Geithner/Daschle contrition pony show as something more than pro forma ritual? Despite the posturing, I don't think either nomination was actually in any danger.
Posted by: bbartlog at Feb 3, 2009 11:56:03 AM
I would only punish Democrats for this. (Not that not getting a government job is a punishment.)
Not for political reasons, but because they are the ones who advocate taxation. Hypocrisy is the least acceptable trait of a ruler.
I don't think anyone should have to follow their dumb rules. They think only we should have to follow them.
Again, I come down opposite of Tyler based on my mirror image assumptions about the government. I have no problem if the best people don't enter government. He has "public choice concerns" and I believe that the institution is damn near irredeemable.
Posted by: Andrew at Feb 3, 2009 11:56:36 AM
As the Democrats were so fond of accusing the Republicans when the right tried to rationalize behavior the left didn't like: "It's okay when we do it."
Posted by: MM at Feb 3, 2009 12:01:59 PM
As has been pointed out Ms Killefer's tax issues were bad, but certainly not at the level of Geithner's and/or Daschle's issues. Plus, she hasn't had to perjure herself in a confirmation hearing.
I'm wondering if the White House isn't signaling to Mr. Daschle the right, honorable and classy thing to do is to withdraw your nomination now.
Also, I'm glad we're having these tax-nomination issues. It sheds light on just how impossible it is to equally and justly enforce our current tax system.
Want a real economic stimulus package? Scrap payroll/income tax.
Posted by: Common Cents at Feb 3, 2009 12:03:29 PM
In these times, people who are good at finding creative ways to save money are exactly the type of people we need in government.
Posted by: at Feb 3, 2009 12:03:44 PM
But I'm also worried about the incentives we are producing by applying tougher standards.
Is it that hard to find someone who hasn't cheated on their taxes? That's the new, tougher standard, that people who want to work for the government have to actually obey the law?
How I hate politicians.
Relatedly, the best political news I've heard recently is that Obama is taking Ron Sims away from us here in the NW corner. He may do more in DC, but surely whatever he does there will affect us less here in WA.
Posted by: Bob Montgomery at Feb 3, 2009 12:14:25 PM
But I'm also worried about the incentives we are producing by applying tougher standards.
I like producing an incentive to simplify the tax code.
Posted by: MikeDC at Feb 3, 2009 12:22:30 PM
Joe Biden said paying taxes is a patriotic duty and Rangel, Geithner, Daschle, Marc Rich & his patron Bill Clinton, Caroline Kennedy and this lady prove once again that democrats aren't patriotic.
BTW, last week, the Feds sent 20 agents to ransack and intimdate Greg Anderson's mother-in-law for alleged tax violations. At least they'll harrass tax cheats that aren't powerful.
I echo the comments that point out that low salaries have nothing to do with the Democratic party's tax cheating virus- Rangel cheated on rental income, Geitner on international wages, and Daschle on $100,000 year fringe benefits while "consulting" for lobbyists.
Posted by: guy in the veal calf office at Feb 3, 2009 12:43:52 PM
Instead of increasing the incentive to become a bureaucrat, we should decrease the importance and power of these positions. The stronger the centralized government becomes, the more power these positions have, and the greater chance scumbags have control over us.
Posted by: Jeff Yager at Feb 3, 2009 12:57:42 PM
And now Daschle is out! Hope and change. ;-)
Posted by: Speedmaster at Feb 3, 2009 1:09:14 PM
I don't get it. If we *don't* select on paying taxes, then even those who know ahead of time they want power won't bother to pay taxes.
Posted by: o at Feb 3, 2009 1:12:41 PM
Most of these comments suck - especially Andrew's (what else is new) - but I share outrage at the hypocrisy, especially re: Geithner.
Posted by: meter at Feb 3, 2009 1:13:06 PM
Tyler, you're wrong, very wrong about the economics (there is no incentive problem as shown by the huge rewards of holding a high government position--ask Bill Clinton, Alan Greenspan and all others) and the morality (why should anyone pay taxes when politicians can cheat) of tax cheaters. I hope you have the courage to address the cases of Chris Dodd, Charles Rangel and other corrupted US politicians--in the meantime please refrain from lecturing other countries about corruption.
Posted by: E. Barandiaran at Feb 3, 2009 1:20:17 PM
The problem is not that we pay public officials too little. It is that we pay private sector guys too much. But it is a market issue. There are 500 CEOs of Fortune 500 companies. And, maybe there are 10,000 people at the high executive level. With 300,000,000 people in this country, is the labor market so small that we can only hire one of the 10,000?
If so, then the market is working.
But I suspect not. Whether someone moves up the ranks is just as dependent on school or family ties as it is on performance (in my view).
I would encourage expanding the labor pool, so that wages are lower in the private sector (caused by market forces), rather than increasing federal government salaries.
Posted by: Allan at Feb 3, 2009 1:28:02 PM
One other thing. If tax laws are so complicated that our leaders cannot follow them, might that not be a clue that we need to change our tax laws? There has to be an economic theory on this out there...
Posted by: Allan at Feb 3, 2009 1:29:21 PM
Occasionally Tyler puts up a post whose main effect is to make me think, "Man, there are a lot of things about which economists have absolutely nothing to say, so why do they bother to try?" His post on closing Gitmo is one example; this post is another. The issues here are perfectly clear to the layman: many people behave poorly when they think no one is watching. This idea that we need to pay more money to public officials so that they will no longer have incentives to dodge over $100,000 in taxes for *having a driver* is pretty desperate barrel-scraping.
Posted by: Barbar at Feb 3, 2009 1:39:50 PM
