"Rangel Rule" would give taxpayers a free pass on penalties

When ordinary American taxpayers don't pay their taxes on time, they face penalties owing to the IRS. Three prominent Democrats, Charles Rangel, Timothy Geithner, and now Tom Daschle have all been shown to have seriously underpaid their taxes until they were caught. All three of them did pay up when it was clear their political futures might be in jeopardy, but none of them was charged the penalties that the rest of us would have to pay. In each case, the politicians said the mistakes were "honest" or "careless" or they indicated they did not know the money and benefits received were taxable.

Not only did all three get free passes on the penalties, but Rangel gets to keep his job as chief tax writer for the United States, Geithner has been elevated to head the Treasury and the IRS, and Daschle, who has since withdrawn his nomination, was nominated to head Health and Human Services. That's why one Republican -- Congressman John Carter of Texas -- is trying to draw attention to this basic unfairness by proposing a law which he calls the Rangel Rule.

Carter's bill calls for the elimination of all IRS penalties and interest for paying taxes that are past due. The bill is named for Charles B. Rangel, and the official name is, the Rangel Rule Act of 2009, HR735. According to Carter's Web site, the rule would "prohibit the Internal Revenue Service from charging penalties and interest on back taxes against U.S. citizens." The proposal includes a provision whereby taxpayers could escape the assessment of penalties by writing on their tax forms "Rangel Rule."

Here's what Carter said in a
press release that was issued before the revelation of Tom Daschle's tax problems:

"All U.S. taxpayers would enjoy the same immunity from IRS penalties and interest as House Ways and Means Chairman Charles Rangel (D-NY) and Obama Administration Treasury Secretary Timothy Geithner, if a bill introduced today by Congressman John Carter (R-TX) becomes law.

"We must show the American people that Congress is following the same law, and the same legal process as we expect them to follow. That has not been done in the ongoing case against Chairman Rangel, nor in the instance of our new Treasury Secretary Timothy Geithner. If we don't hold our highest elected officials to the same standards as regular working folks, we owe it to our constituents to change those standards so everyone is abiding by the same law. Americans believe in blind justice, which shows no favoritism to the wealthy or powerful."

Carter also pointed out that the tax law change will provide good economic stimulus benefits, as it would free many taxpayers from massive debts to the IRS, restoring those funds to the free market to help create jobs.

According to a report from Fox News, on January 6th, Representative Carter sent Rangel a letter asking him to either pay the penalties that would have been charged to ordinary taxpayers, or join in the effort to pass the bill. "As Chairman of the House Ways and Means Committee, I believe you set an example for all American taxpayers in your dealings with the IRS, and that you must do so in a way that enforces blind justice without regard to wealth or status."

Rangel's spokesman had no comment on the Chairman's tax issues, which are currently before the House Ethics Committee, but had this to say about the Rangel rule.

"This legislation is unnecessary. All taxpayers currently receive equal treatment under the law."

Carter added, "I am raising this issue not so much to just push the issue but to open the discussion. I don't think it's wrong for us to start having a free discussion in congress and with a certain amount of humor in it about how should people be treated in congress."

To recap the now triple-play of tax woes of prominent Democrats:

Charles B. Rangel, (Democrat, NY) Chairman of House Ways and Means Committee, and chief tax-writer for Congress. Over a period of 20 years he's received rental income on his luxury condo in the Dominican Republic that he neither paid tax on, nor reported on his congressional disclosure forms. When his tax shortfall was exposed, he quickly paid the taxes and interest, but no penalties were charged. In addition, filing a false disclosure form can result in civil penalties and up to five-years in prison, but Rangel seems to have escaped this fate as well.

Rangel's embarrassing problems don't stop there. He is under investigation for:

  • using his Congressional stationery to solicit support for an education center that will bear his name.
  • a possible sweetheart loan from a political contributor to buy the luxury condo in the Dominican Republic.
  • leasing four rent-stabilized apartments in Harlem, one of which is used as a campaign office, violating the housing rules.
  • parking his unregistered vintage Mercedes Benz in the Congressional parking lot for several years, violating House rules.

Timothy Geithner, appointed on January 26th to be Barack Obama's Treasury Secretary and overseer of the IRS Hailed by the Obama Administration as a "financial wizard," yet he did not know that money paid to him by the International Monetary Fund over a period of four years was taxable income. This, in spite of the fact that:

  • He was told by the IMF that it was taxable and must be reported.
  • He signed a form certifying that he knew it was taxable.
  • Upon signing the form, he was given additional funds by the IMF to pay the taxes.
  • Although an IRS audit for two of the years in question turned up the omission and required him to file amended returns and pay the taxes and interest, it still did not prompt him to take care of the other two years, when the same omission occurred.

After Obama nominated him for Treasury Secretary, Geithner quickly paid the taxes and interest, though no penalties were charged.

Geithner also employed an undocumented alien for a period of time, though it seems this is being treated as a minor issue.

Tom Daschle, former Senator from South Dakota, Democrat, was nominated by President Obama to head the office of Health and Human Services and oversee the nation's health reform. After Daschle was nominated to head HHS, he quickly amended tax returns for several recent years and paid tax and interest amounting to over $140,000 that should have been paid earlier. Daschle's tax woes include:

  • The receipt of taxable benefits amounting to $250,000 in value, for the use of a car and driver.
  • Underreported income of over $88,000.
  • Claiming charitable tax deductions of $15,000 for organizations that did not qualify for the deduction.
  • Deductions of various examples of charitable contributions valued at over $250 without the proper substantiation.

Daschle has since withdrawn him nomination for the Cabinet post.

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