Yet another Obama nominee owes back taxes
Why do so many of President Obama's cabinet nominees owe taxes? It's mind-boggling, at least to this member of the liberal media elite who campaigned for the former senator from Illinois.
Kathleen Sebelius became the fifth Obama nominee to admit to owing money to Uncle Sam. The Kansas governor, who was picked to be Secretary of Health and Human Services, told the the Senate that she and her husband made "minor (and) unintentional" errors in their taxes. They amended their returns from 2005 to 2007 and paid $7,040 in back taxes plus $878 in interest.
"In July of 2006, my husband and I sold our home for an amount less than the outstanding balance on our mortgage," she wrote in a letter. "We continued paying off the loan, including interest we mistakenly believed continued to be deductible mortgage interest. Another loan for home improvements was treated similarly."
John W. Roth, senior tax analyst at tax information firm CCH Inc., said the issue with the home sale is very unusual. People in that situation try to sell their homes through a short sale which for a price lower than the amount of the mortgages. Many people are confused by the rules regarding home interest rules, he said.
The Sebeliuses also failed to provide sufficient documentation for business expenses and charitable deductions. It was not clear whether the Sebelius and her husband prepared their own tax returns or hired a CPA. Some wealthy people such as Treasury Secretary Tim Geithner used tax preparation software.
In an interview, Roth said he was "amazed" by how many Obama nominees have been tripped up by "pretty silly mistakes." He added that the Sebeliuses could still be hit with penalties though the IRS may cut them a break since they reported the errors themselves.
Predictably, Democrats are backing her and Senate Finance Committee Chair Max Baucus has expressed support for Sebelius. His Republican counterpart Sen. Chuck Grassley was non-committal. Spokespersons for Baucus and Grassley could not be reached for comment.
Though an administration official told The Wall Street Journal that the errors are minor and should not hold up her nomination, that misses the point. Most people pay their taxes on time and in full. Given the current economic environment, many people believe the rich get off easier from the IRS than us working stiffs. The cynicism has some justification.
Audits of taxpayers with $1 million or more in income fell by one-third last year despite the IRS' claims that it cracked down on wealthier taxpayers. The IRS disagrees with the conclusions of an independent researcher, according to USA Today.
There is no doubt that the tax code is overly complex.
A survey of more than 1,000 U.S. adults by CCH Inc. found that nearly 66 percent of taxpayers fear they may overlook tax breaks or make mistakes that could cost them in fines or penalties. "At the same time, most taxpayers also were unable to determine which tax breaks may be most beneficial, indicating their concerns about costly oversights or mistakes may be well founded," CCH said.
Still, we can't allow the rich to avoid paying taxes because they were confused. Everybody has to pay taxes whether they like to or not.
By the way, Sebelius replaces Obama's first choice for the job Tom Daschle who withdrew for -- what else -- tax problems.