Tax Delinquency......With Lessons Learned!!


Posted on : 9/10/2010 10:22:00 PM | By : Dann | In : , , , , , , ,

I saw this item today over at Glenn Reynolds' Instapundit site:

It’s easy to see why these people don’t mind higher taxes. They don’t plan on paying ‘em anyway . . . .

One aspect of the current government criticisms currently on display is the differential...dare I say disproportionate in many cases...treatment that the IRS offers to those who theoretically owe federal incomes taxes. The two current poster boys are US Representative Charles Rangel who "forgot" to report well over US$1 million dollars in income over a number of years and Treasury Secretary Timothy Geithner who owed $14,847 in back taxes. Mr. Geithner apparently had no intention of paying until he was nominated for his current post.

Mr. Rangel has provided amended returns and paid the taxes that were owed. He has not paid any interest nor was he assessed any penalties. Mr. Geithner paid $15,000 in interest, but was assessed no penalties by the IRS.

No normal citizen could expect such lenient treatment from the IRS when they experience a legitimate tax debt. Trust me. I had one. We weren't in the same league as Mr. Rangel and Mr. Geithner. Yet when I asked to receive the same treatment that Messrs. Rangel an Geithner received, I was told that the IRS cannot guarantee equal treatment for all taxpayers.

Apparently, the 14th Amendment of the US Constitution is not applicable when it comes to matters related to US income taxes.

Glenn has been following the fiscal follies of both Messrs. Rangel and Geithner for quite some time. Additionally, Glenn has been following the huge disconnect between those that run our government. Part of that disconnect is the penalties that our government "masters" and the well connected never seem to pay for violating public laws and policies while us little folks bear the brunt of an overly officious, oafish, and offensive federal government.

Pitchforks were made for situations where public servants forget who they work for.

I believe that Glenn was attempting to demonstrate that people in the federal government were disproportionately above the (tax) law. Glenn's post linked to this LA Times blog which continued the theme of federal workers that were unduly delinquent in paying their taxes. The blog points out several federal departments who's employees have significant tax delinquency issues and who also employ several well connected individuals with tax delinquency issues.

That LA Times blog entry was based on this Washington Post story by T.W. Farnam. T.W.'s story is focused on Capital Hill employees with tax delinquency issues. The general thought again was that the people that are imposing laws on us are apparently unable or unwilling to abide by them as well. In his story, he pointed out that the employees of the Executive Office of the President owed about as much under Barack Obama in 2009 as they had under George W. Bush in 2008.

And that got me to thinking.

If you take the federal civilian employees, the US Postal service (which are not counted as federal employees), and those serving in uniform, the US federal government employs roughly 5.3 million people. The total labor force runs roughly 154.5 million people. That makes federal employees be roughly 3.4% of the total labor force.

Alternatively, if you count only taxpayers, there are 138 million people. That makes federal employees be roughly 3.8% of the total.

The story by T.W. Farnam had a link to a more complete listing of federal employee tax delinquency that was broken down by department/group. You can sort that list a couple of different ways. But the one way you cannot sort it is by the average tax debt per person within a given group. I had to do that myself. We will get there in a moment.

The total tax delinquency of federal employees was roughly US$3.3 billion. The total tax delinquency for the entire United States was roughly US$120 billion in 2003. That's the only number I could readily find. At that rate, federal employees are only 2.76% of the total delinquent tax bill. Given the state of the economy since 2003, I think it is safe to say that the total tax delinquency has gone up just a bit. Which makes federal employees responsible for less than 2.7% of the total bill owed.

So the big lesson learned here is always get to the data before you draw a conclusion. While I do think that the larger point of government policy makers creating laws and policies that they have no intention of obeying, but that they certainly expect us to obey holds true, this particular story doesn't necessarily justify Glenn's comment from above.

Sort of.

The more complete listing linked above had 85 categories of people. It took the data and calculated the average tax debt per person in each category. I then ranked the groups on that average data. The results were surprising.

The table below shows the top 20 categories, plus some others that I found interesting.

IndexOrganization/Type of worker to the IRSNumber of delinquent employees Balance owedAverage Owed
1Presidio Trust 10$680,682.00$68,068.20
2Office of Government Ethics 3$75,304.00$25,101.33
3Education 163$3,995,066.00$24,509.61
4Tennessee Valley Authority 292$6,766,333.00$23,172.37
5Executive Office of the President 41$831,055.00$20,269.63
6Federal Housing Finance Board 4$79,829.00$19,957.25
7National Endowment for the Humanities 4$79,279.00$19,819.75
8Nuclear Regulatory Commission 57$1,099,897.00$19,296.44
9Military retirees 84034$1,525,688,378.00$18,155.61
10Railroad Retirement Board 31$531,798.00$17,154.77
11Export-Import Bank of the United States 10$166,288.00$16,628.80
12Labor 463$7,481,463.00$16,158.67
13Administrative Office of the U.S. Courts 754$11,808,236.00$15,660.79
14Equal Employment Opportunity Commission 84$1,303,316.00$15,515.67
15U.S. House of Representatives 421$6,524,892.00$15,498.56
16Energy 331$4,899,649.00$14,802.56
17Federal Deposit Insurance Corporation 155$2,249,326.00$14,511.78
18Federal Election Commission 8$115,747.00$14,468.38
19Commerce 1556$22,246,314.00$14,297.12
20Office of Personnel Management 172$2,367,268.00$13,763.19
23Federal Reserve System - Board of Governors 81$1,076,733.00$13,293.00
28U.S. Senate 217$2,774,836.00$12,787.26
29U.S. Tax Court 4$51,111.00$12,777.75
39Civilian retirees 40000$454,938,448.00$11,373.46
43Navy 6841$72,432,604.00$10,588.01
53Defense 4454$38,495,128.00$8,642.82
56Air Force 5817$46,787,244.00$8,043.19
57Army 11330$89,966,859.00$7,940.59
67Treasury 1204$7,670,814.00$6,371.11
74Military active duty 28853$109,557,536.00$3,797.09

The first big surprise is how many government agencies that are directly responsible for either setting or enforcing tax policies have employees that cannot follow those policies. And we're not talking about chump change!

The Executive Office of the President comes in at number 5 on the list!

The Administrative Office of the Courts comes in at number 13.

The US House is 15th on the list.

Perhaps there is some validity to the idea that our government is staffed by people that are unwilling to live under the laws and policies that the rest of us have to observe and obey.

You would think that money men would know how to pay their taxes. Yet the US Federal Reserve - Board of Governors ranks 23rd on the list. The US Treasury department came in at number 67. I am not sure how comforting it is to know that 1200 Treasury department employees cannot satisfy their tax bill in a timely manner.

Due to my military service, I am naturally curious about the military related categories.

Active duty personnel came in at a very respectable 74 out of 85 categories. That may be the result of their lower than average pay simply limiting their ability to get into trouble with the IRS.

Yet the civilian component of the military services....the people responsible for maintaining civilian control....all fared much worse. The Navy at #43, the DoD at #53, the Air Force at #56, and the Army at #57. How can these civilians claim any authority over the active duty military when they cannot complete the simple task of paying their tax debt is beyond me.

Even worse, military retirees were 9th on the list with 84,000 tax scofflaws while civilian government retirees were 39th with only 40,000 tax reprobates! Unacceptable!

When we think about elected or appointed policy makers, I think the general theme of people that pass laws for us to obey, but not necessarily for them is sound. Mr. Rangel and Mr. Geithner are simply the last in a very long line of people that either do not understand or do not care how laws and policies affect the rest of us.

At the same time, I think we ought to be careful about using something as innocuous as tax debt data to slur all federal employees. That brush is more than a little too broad.

I didn't do a rigorous statistical regression, but a plot of the data is mostly linear. While there is a big difference in the dollars owed per person from 2nd to 85th on the list, each office is only incrementally more delinquent than the group below it. The exception at the top of the list is the Presidio Trust with a whopping $68,000 per tax debtor.

The other notable exceptions were at the bottom of the list where six agencies have 35 tax debtors with a cumulative tax debt that is less than the average delinquent from the Presidio Trust.

I would like to have population data for each category as well as some hard numbers of total taxpayers for comparison purposes. I think it is pretty easy to see where the Presidio Trust is a hotbed of tax delinquency, but it would be good to know what percentage of Presidio Trust employees are tax debtors. It would also be good to compare that percentage with the percentage of the general population.

There is no such thing as too much data.

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