Thursday, February 5, 2009

Are Liberals Less Inclined to Pay Their Taxes?

That question occurred to me on reading the news that a fourth Obama Administration nominee, Labor Secretary nominee Rep. Hilda Solis, has unpaid tax issues (The Washington Post: "Solis Senate Session Postponed in Wake of Husband's Tax Lien Revelations"). This news, of course, comes after the revelations of unpaid taxes by Treasury Secretary Timothy Geithner1,2 (pictured above), former HHS Secretary nominee Tom Daschle, and former "Government Performance Czar" nominee Nancy Killefer. If coincidences don't come in threes, as the saying goes, then they don't come in fours either.

At first blush, it might seem counter-intuitive that affluent liberals would be less inclined to pay their taxes, since they tend to advocate for higher taxes on the affluent. Advocating for higher taxes on the affluent and being eager to pay them yourself are two different things though. Warren Buffett, for example, has famously lamented that he doesn't have a higher tax liability, and yet he deliberately avoids the capital gains tax on the shares of Berkshire Hathaway he donates to the Gates Foundation. I would be interested in any data that compared the level of tax compliance by conservatives and liberals, but I wonder if a similar dynamic is at work with taxes as with charitable donations.

Just as liberals tend to advocate for higher taxes on the affluent, they also tend to advocate for more government assistance to the less fortunate. While this might lead one to believe that liberals are more generous than conservatives, Arthur C. Brooks, professor of public administration at Syracuse, found that conservative households donate 30% more to charity than liberal households. Could it be that liberals feel less obligated to donate to charity or fully comply with tax laws because they feel that their advocacy for more progressive taxes and more generous welfare spending absolves them of some of their responsibility to contribute personally? Perhaps they feel they "gave" at the ballot box?

The photo above, of Treasury Secretary Timothy Geithner, is from the Affordable Housing Institute's website.

1I suspect Geithner's tax avoidance may have been motivated by what David Brooks has termed Status-Income Disequilibrium. As a high official at Treasury, the IMF, and then the New York Fed, Geithner earned a comfortable salary -- one higher than perhaps 99% of Americans -- but a pittance compared to some of the CEOs over whom he wielded authority. He probably thought he was sacrificing enough for the common good by renouncing more lucrative prospects in the private sector and working for the IMF instead, so why should he lower his take-home pay even more by paying his self-employment taxes?

2Atlantic blogger and journalist James Fallows, a former Carter Administration official and liberal in good standing, Had this to say about Timothy Geithner's non-payment of his taxes ("A Word about Timothy Geithner" -- scroll about a quarter of the way down for this):

I do not believe, and will never believe, that his failure to pay his own self-employment tax while at the IMF was an "oversight" or a "mistake." I have many many friends who have worked for this and similar organizations. I have myself over the years juggled the complexities of what is self-employment income and what is W-2 income and how to handle income from non-US sources -- and I have a lot less financial acumen than any Treasury Secretary aspirant should and must have. (Though I also use Turbo Tax!) Not a single person I have known from the IMF or similar bodies, not a one, believes that Geithner could have "overlooked" his need to pay US self-employment tax. When I have received similar income from international sources, the need was obvious even to me -- and I wasn't receiving and signing all the forms to the same effect Geithner would have gotten from the IMF. I could go on with details but I'll just say: if this were a situation more average Americans had experienced personally, he would not dare make his "mistake" excuse because everyone would say, "Are you kidding me???"


Bill & Hill Clinton said...


DaveinHackensack said...

I realize the title of this post sounds polemical, and that may have turned off some readers, but I think the questions I ask here are reasonable and worth asking. Feel free to disagree or critique what I wrote in the comment thread.

Bruce Hayden said...

I think that just as Republicans are vulnerable to sex scandals and Democrats are not, Democrats are vulnerable to tax and nanny scandals because of their advocacy of higher taxes on the "rich". It is the hypocrisy that causes the double standard.

A Republican is more vulnerable to a (esp. gay) sex scandal because of their "family values". Barney Frank may have had a male prostitution ring run out of his Congressional offices, and as a result is now in charge of banking in the House. Teddy Kennedy is now sainted, despite being a serial adulterer from at least from before he let his girlfriend die when he drove off that bridge. And so many thought Bill Clinton so manly for sexually exploiting women in the White House. And yet, Larry Craig is vilified for playing footsie in a bathroom.

So, the Democrats want to raise taxes on the "rich". But when they get money themselves, they don't want to pay it to the government in taxes. It is because of their insistence on raising taxes and manipulating the tax system that they open themselves up to hypocrisy.