Yes, taxes are a pain and everyone hates the paperwork. And paying taxes is absurdly complicated for employees of the International Monetary Fund, where Geithner worked at the time of his tax problems, because the IMF does not withhold payroll taxes but its employees must still pay them. And the IMF pays them an additional allowance so they can make those payments. On which they also owe taxes. That's totally confusing, right? Anyone might screw it up.
But Geithener, who has now paid his past-due tax bill, is not just anyone. We would be completely sympathetic to Geithner's claim that this was a goof because of the IMF's Byzantine payroll-tax status. Except that Geithner, when he worked at the Treasury Department in 1998, testified before Congress to explain the IMF's Byzantine payroll-tax status:
Most countries in the world impose tax on the worldwide income of individuals on a residence, rather than citizenship, basis. Thus, non-U.S. nationals employed by the Fund outside of their home countries generally do not pay home country income tax on their Fund incomes. However, the United States taxes its citizens regardless of where they are resident; U.S. staff of the Fund are taxed by the United States on their Fund income regardless of where they are located. Arrangements have been made to reimburse employees for income taxes paid to their home countries to put them on an equal footing with staff who do not have to pay home country tax. Of IMF tax reimbursements, 99.5% go to U.S. staff. These reimbursements represent a transfer from the IMF to the U.S. Treasury. In the absence of tax reimbursement, the actual after-tax Fund income of U.S. staff would fall well below both the pay of other IMF staff (that is not taxed) and the after-tax pay of employees in the U.S. public and private sectors. In such circumstances, it would be very difficult, if not impossible, for the Fund to recruit or retain well qualified U.S. staff.
Got all that? The main possibilities this leaves:
- Geithner did not understand the testimony he was delivering to Congress, and thus was innocent but ignorant.
- Geithner understood it at the time, but suffered severe but temporary memory problems when he joined the IMF a few years later.
- Geithner knew exactly what he was doing when he cheated on his taxes, and lied about it.
Not that we have a problem with that! The main thing we need in a Treasury Secretary right now is the ability to completely snow Congress with long, complicated explanations. Ones that leave them incapable of screwing around with President Obama's attempt to rescue the economy. Go, Geithner, go!
(Photo by AP)