As I watch president Obama struggle with the tax problems of several of his appointees, I can't help but contrast their tax treatment with the way that the IRS handles the tax delinquencies of average Americans.  Senator Daschle failed to pay about $128,000 in taxes, and Secretary Geithner about $34,000, both pretty substantial sums.  When this was discovered, both paid the money back, with a bit of interest. 

I'm a psychologist, and I've treated two people thus far for major depression caused by being harassed to the ends of the earth by the IRS.  Both of these men (separate cases, they don't know each other) had very small businesses with a handful of employees, and were hard-working guys who took good care of their people, but were not as business-savvy as they should have been.  In both cases their businesses started doing poorly and they put all their money toward payroll, and therefore neglected to reserve the money that they were supposed to for business taxes.  When it came time to pay the quarterly taxes, they couldn't do it, and kept this up for a couple of years, instead of laying people off.  In both cases the amounts involved were not huge, less than $30,000. 

When the IRS discovered this, it assessed both of them penalties that were enormous, eventually growing, if you can believe this, to several hundred thousands of dollars, for each of these guys.  Both of them eventually paid off more than the original debt, but were still considered delinquent and constantly hounded.

Both, not surprisingly, developed major depression, at some point stopped responding to the IRS because of this, and therefore the IRS regarded them as recalcitrant and went after them even more energetically. One had most of his wages garnished, and has been unable to marry and start a family, and now is in his fifties, and is still paying.  The other had all his bank accounts seized, and was forced to live 'off the grid', working at menial, off-the-books jobs that paid very little, living with friends, and paying everything in cash.  He also developed drug problems, which he had never had previously.  Since he had no insurance, I also had to see him pro bono. 

Contrast this with Daschle and Geithner.  Senator Daschle failed to report tens of thousands of dollars in consulting income, for which 1099s are routinely provided and which absolutely everyone knows is income that must be reported.  Secretary Geithner failed to pay four years of certain taxes, and when the IRS caught the last two of those years, he paid those but not the first two.  In both cases, these prominent individuals simply asserted, very implausibly, that these omissions were totally unintentional, and the IRS accepted this and imposed no penalties.  

I have two reactions to this, one moral and the other intellectual.  My moral reaction is outrage.  This is just one more egregious example, among far too many, of the way that American society favors the well-off at the expense of all others.  The rules with the IRS about failure to pay taxes are that if you have no money then you have to pay a fortune in penalties, but if you already have a fortune then you pay no penalties.  I try not to let too much anger to creep into my posts, but sometimes that's very difficult.

My intellectual reaction is that this is obviously not an individual problem but a systemic one.  First, the IRS policy toward prominent tax delinquents clearly encourages such people to evade taxes.  Their response is that if you don't pay taxes and we catch you, then you have to pay what you would have anyway (the interest charged is about what the money could earn).  Therefore, evading taxes is a good idea.  You might get away with it, and if you don't, you really don't lose anything.  No wonder tax evasion is common with the elite, the IRS incentivizes it. 

 I'm glad that Obama has taken a stand against this kind of thing, I feel he was right to do that, but he's trying to impose rules of accountability on political and economic elites that are totally unaccustomed to that. The lack of accountability for these elites has gotten so bad that most have probably been corrupted to at least some degree by this environment.  In fact, Daschle and Geithner are good examples of this process because they're actually among the good guys.  If even the good guys routinely do this stuff, then Obama is going to have a tough time finding talent that's not tainted.