President Obama has now admitted that the “Buffett Rule,” formerly the centerpiece of his re-election campaign, is a silly gimmick that will raise hardly any money for the treasury. (Actually, it might cost the federal government money, as increases in the capital gains rate have been known to do.) So how about if, instead, we start talking about the Geithner Rule, which is: everyone pays what he owes under existing laws?
Start with the fact that as far as we know, Warren Buffett pays all the personal income taxes he owes, as do Mitt Romney and Barack Obama. Unlike these individuals, there are a great many Americans who don’t pay what they owe. The IRS estimates that year in and year out, around 15% of what Americans owe in taxes isn’t paid. This is mostly due to under-reporting of income. For FY 2011, the IRS collected around $2.3 trillion in tax revenue. Fifteen percent of that amount is $345 billion. Here, unlike the Buffett Rule, we are talking about real money.
Most tax evaders don’t wind up in prison. In fact, some wind up working for the government. Take Tim Geithner. Geithner, Obama’s Secretary of the Treasury, is a tax cheat. When he worked for the International Monetary Fund, the fund did not pay withholding taxes on his income, but rather paid Geithner a specifically-designated additional amount which Geithner was supposed to use to pay self-employment taxes. Geithner kept that money, but didn’t pay the taxes.