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Law Humor

: Lowering the Bar

Tax Returns Are Hard, Says Federal Reserve Bank President

By Kevin Underhill

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According to a spokesman, the mistake Timothy Geithner made on his tax returns is a common one, and since he's corrected it and paid the $34,000 he owed, the matter should be considered closed. Our system is so complicated, said commentators, that we shouldn't be too hard on him personally for messing up an "arcane tax matter."

I think I'd agree with all that if Geithner wasn't currently in charge of the Federal Reserve Bank of New York. I'm no expert, but don't they do some relatively complex stuff there?

Geithner, in fact, has been nominated to be Secretary of the Treasury, which is the main reason so much scrutiny is being given to old tax returns. To be fair, the matter in question does seem kind of arcane. Geithner worked at the International Monetary Fund at the time he was getting this wrong, from 2001 to 2003. The IMF apparently does not withhold U.S. taxes, and its workers are considered "self-employed" for tax purposes. This means (if I understand correctly) they are required to pay their own Social Security and Medicare taxes and to pay both the employer and employee's share. Geithner got this wrong three years in a row (and as it happened, understated his taxes significantly).

That does seem pretty confusing to me and I'm sure I would screw it up. Again, however, I am not hoping to be Secretary of the Treasury, a position that puts one more or less in charge of the entire U.S. economy (as well as, ironically, the Internal Revenue Service). Nor do I have the sort of experience that Geithner seems to have with financial stuff, if this blurb from the Obama campaign site is accurate:

Timothy Geithner currently serves as president and CEO of the Federal Reserve Bank of New York, where he has played a key role in formulating the nation's monetary policy. He joined the Department of the Treasury in 1988 and has served three presidents. From 1999 to 2001, he served as Under Secretary of the Treasury for International Affairs. Following that post he served as director of the Policy Development and Review Department at the International Monetary Fund until 2003. Geithner is a graduate of Dartmouth College and the Johns Hopkins School of Advanced International Studies. Since 1988 he has been able to do his own taxes correctly about eighty-five percent of the time.

Okay, I added that last sentence.

Link: NPR (Jan. 15, 2009)

Link: Change.gov (press release re: Geithner's nomination)

Full post as published by Lowering the Bar on January 21, 2009 (boomark / email).