Why do 41% oppose Geithner?


From a Rasmussen poll:

Forty-one percent (41%) of U.S. voters say Geithner's failure to pay Social Security and Medicare taxes in 2001, 2002 and 2003 should prevent him from being Treasury secretary, while the identical number (41%) disagree. Eighteen percent (18%) are not sure in a new Rasmussen Reports national telephone survey.

That 41% opposed feels awfully high, in part because it seems like it should be the case that as scandals get more complicated, public outcries get smaller. In a thicket of details, having an informed opinion becomes more costly, not to mention less interesting ("reasonable people can disagree").

But in Geithner's case the opposite seems to be true. I wonder if the very same complicated details that created the scandal (i.e., the complicated nature of the payroll tax code) are keeping the public from getting over it. And in part that's because it's a tedious chore to gather the information that would exonerate Geithner. Here, for example, is Eric Toder of the Urban Institute describing what the Treasury nominee would have had to do to actually pay his taxes:

For most workers, paying payroll taxes is simple because employers withhold both the employee and employer portions. Self-employed people and those with income from partnerships or farms must report their incomes on Schedules C, E, or F.  Those forms have a line for payroll tax (called self-employment tax) and refer taxpayers to a Schedule SE to compute this tax.  Tax software performs these calculations, completes Schedule SE, and reports the tax owed automatically.


But employees of international organizations (and some others, including clergy) live in a tax never-never land.  Their employers aren't required to pay U.S. payroll tax, but they are. U.S. employees of international organizations owe payroll tax only on the portion of their earnings from work within the U.S.  The employer sends the employee a Form W-2, which shows wages that must be reported on Form 1040 and reports payroll taxes withheld. (For IMF employees the latter line is zero.)


Here's where the fun begins. There is no place to remit this payroll tax on Form 1040, where employees report their wages. Instead, the employee must complete Schedule SE even if he has no self-employment income or any other reason to complete a schedule (C, E, or F) that would direct him to Schedule SE. 


Ready for some more fun? Line 2 of Schedule SE lists the types of income that must be reported for SE tax and also specifies:  Ministers and members of religious orders, see instructions for amounts to report on this line.  Who would guess that these instructions also apply to U.S. employees of international organizations?  (Note: the instructions to Schedule SE do specify this, but who reads instructions?)

In other words, to have paid his payroll taxes (at least the first time around) Geithner would have had to (1) know that his employer was exempt from payroll taxes but he wasn't; (2) know that he needed to fill out a self-employment tax schedule even if he earned no self-employment income; (3) know that an apparently important line on the self-employment tax schedule referring to members of religious orders also, apparently, referred to the employees of international organizations.

These details aren't a breezey read, but I think they do clear some of the clouds hanging over Geithner. Some people (i.e., Jim Bunning) can argue over the meaning of negligence. But can they argue over whether or not the IMF counts as a religious order?

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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
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