auditcongress.com

This month has seen the public humiliation of a Congressman who has served into his 21st term in the House of Representatives.

The House voted 333-79 to censure Rangel for failing to pay all his taxes, filing misleading financial statements, improperly seeking money from corporate interests for a college center bearing his name and setting up a campaign office in a subsidized, New York apartment designated for residential use.

Rangel is a Korean War Veteran.  Sixty years ago his unit was trapped behind enemy lines as the Chinese army advanced.  Although only a private, and wounded, he lead 40 men back to safety, earning a Purple Heart and Bronze Star with Valor.

Yet all these years later, there seems to be an inability to operate under explicit rules of conduct.  One person said that Rangel is a very busy man, and that failure to follow rules might be expected from a very busy man.  It appears that ambition is considered an excuse for prudence by some.  When life becomes so disordered that paying taxes can't be done correctly, and shortcuts that bypass ethics seem the best course, then perhaps it is time to re-examine the lifestyle.  Living within one's means is not simply a matter of controlling spending, but extends to behavior of all kinds.

And in a twist of irony, this from Rangel's own website:

In 2007, Congressman Charles Rangel became the first African American to chair the oldest and argualbly the most powerful Commitee in the House of Representatives, the Ways and Means Commitee. As a senior member of the Commitee and as the vice chairman for the Joint Committee on Taxation, he continues to wield influence over tax revenue legislation and oversight authority over the major issues of the day – economic policy, international trade, welfare, Social Security, Medicare, and health care.

The Rangel story is a tragedy of sloppy behavior and a cautionary tale that "success" does not guarantee continued propriety.  Simply put, this mess might have been prevented had his tax returns been reviewed by the IRS.  The issue with his thousands of dollars of unreported or misreported income would have been addressed earlier, perhaps providing an encouragement to be more diligent about his other dealings. 

Now we will see how far privilege goes in reducing the sting of criminal penalties that would apply to any ordinary citizen who committed the same acts as Rangel.  Will there be justice?

Can compliance with the tax code encourage better behavior overall?  Perhaps it does not, as it is unclear that being held to one standard is an encouragement for any other proper action.  But perhaps it may.  Compulsory tax compliance may bring more consciousness to personal financial dealings and more awareness to the consequences of sloppy personal actions.  Some have said that Rangel's behavior does not sink to the level of "corruption" as they say there was no personal gain. How quickly we dispense decorum for politics.  Corruption is not just from "personal gain" but also comes from the corrosive effect of our leaders shattering the rules that society sets for proper conduct.

Pete Langlois

Recent coverage and reports in the Main Stream Media have shown that tax deadbeats in the Federal Government, including in Congress, are a real issue. While I expect that the MSM will soon drop the story, Audit Congress will continue to educate the public about this issue.

Professor Paul Caron, editor of the TaxProf Blog , details some of the findings contained in a report on Federal employee tax deadbeats issued by the IRS. He also documents the media coverage by The Atlantic, Fox News, The Hill, The L.A. Times, and the Washington Post.

Professor Caron’s post includes a link to the IRS data, and he provides a summary of delinquency rates by departments and agencies. Several things jump out at one when reviewing the summary.  First, the Treasury department has the lowest employee delinquency rate of any cabinet department, just shy of 1%. It is ironic that the Secretary of the Treasury, Timothy Geithner, inflates their score. Way to set an example there, Mr. Secretary!

More irony: The US Tax Court, the SEC, and the Federal Reserve Board all show up on this list with delinquency rates of 1.75%, 2.44% and 4.32% respectively. The Small Business Administration comes in at a whopping 6.34%. (The SBA employees are by no means the worst offenders; that honor goes to the “Committee for Purchase from People Who Are Blind or Severely Disabled”, at 14.29%) One would be forgiving for thinking that the employees of Federal departments and agencies having great financial responsibilities would be financialy responsible and properly calculate and pay their taxes.

At a Federal level, tax delinquency seems to be a universal issue. Over 280,000 Federal workers and retirees from almost every department and agency owe more than $3.3 billion in back taxes. The overall delinquency rate seems to be around a 3% for these workers and retirees. According to the web site Taxcut 2010, the IRS does not supply a compliance rate for individual taxpayer delinquencies in the US for comparison. In any case, some will argue that all Federal workers should be held to a higher standard than the general public. While we won’t make that argument here, we will argue that a subset of these workers-those who make our laws, high administration officials and those who run the Federal departments and agencies-should indeed be held to a higher standard.

Staff members of the Senate and House of Representatives of the US Congress, including members of Congress themselves, are on the list. Of course, this list was compiled from just the known tax deadbeats.  The last several years’ reporting has shown that there seems to be many non-compliance issues in Congress that are only revealed under extraordinary circumstances.  How long has Charlie Rangel gotten away with ignoring the very laws he helped to craft?

I don’t think I’m the only American who suspects that the number of tax offenders in Congress is much higher than is shown by this report. After all, what IRS auditor would dare to audit a Congressman or a White House official? Congress and the Administration write their budget, and hire and fire their bosses.

The report says that 41 White House staff members owe over $800,000.  Is that a few or a lot?  Hard to say.  This TalkingPointsMemo article includes a report issued by the White House itself showing 487 staffers currently working in the White House. However comments on the article note that many career staffers and other employees were not included in the list for one reason or another.  I saw one reference elsewhere that the true number was well over 1000 employees and staff members. Personally, I don’t think it really matters if the rate shown by the IRS report is 10% or 2%. I think the true number of tax offenders in the White House is probably much higher than in this report for the same reasons I think the numbers in Congress are much higher: What Federal employee who valued their job and reputation would dare take on and investigate a member of this administration?

Timothy Geithner runs the Treasury Department, and he has admitted to having tax issues, but only after the heavy scrutiny of a Cabinet Post approval process. He blamed his problems on the tax software he was using, a claim that ordinary Americans cannot use.

All of this is just more data to support our call for “High Government Officials” to be included in the list of those who should be required to be audited by the IRS each year. What we propose is automatic, annual audits of all Congressmen, their staff members, and all high Government Officials.

Let’s audit Congress.  Every Year!

Dan Murphy

Let’s Catch Up!

In the past several months the Audit Congress blog has been quiet. Pete and I both lead full and rich lives which generally leave us very little free time. We haven’t stopped working on Audit Congress however.

We’ve been busy working on the structure of Audit Congress, and are pleased to officially announce that we have received approval of our 501(c)3 non-profit corporation status by the IRS. This approval allows us to collect donations that are tax deductable, and confers a tax exempt status on Audit Congress.

As a side note, the IRS approval process took only about 6 months or so. We’d been told that the process usually takes significantly longer than that, in some cases several years pass before the IRS makes a final determination regarding a request for non-profit status.  I credit the very thorough job done by Pete, as well as the great advice and support of our Attorney and Accountant.

Audit Congress has registered as a 501(c)3 corporation with the states of Virginia and Colorado, and can now accept donations from Virginia and Colorado residents and organizations. We are working on being able to solicit donations from other states as well.

We have also spent much time planning, and will soon start a campaign to actively seek volunteers. Volunteers will help inform and educate the public about our goal of establishing annual audits of our Senators and Representatives, help organize support with other individuals and organizations, as well as help funding needed to reach these goals.

If you share our belief that accountability and oversight must be restored at the federal level, and you want to restore trust in our government, consider volunteering to help Audit Congress. This is something real and tangible you can do, something that will make a difference. Details of a campaign to recruit volunteers will be offered shortly, but you don’t have to wait.  You can contact us at: Auditor@auditcongress.com now if you wish to contribute.

Dan Murphy

Audit Congress has been making some real progress, and we are a now a Virginia Non Stock corporation and have submitted to the IRS for 501(c)3 not-for-profit, charitable status.  We can accept donations in Virginia and Colorado, and are seeking support nationwide, but we're not asking for a donation, yet.  For those of you who haven't singed our petition yet, please do so today!

We would like to tell you about an important initiative from the White House.  The Obama Administration is seeking ideas to improve open government.  What timing:  We have an idea!  Here's the link to the White House site: http://www.whitehouse.gov/open/

The process involves collecting, evaluating, and discussing ideas.  We've submitted Auditing Congress (and other high officials) as a means to improve trust and confidence in our elected and appointed officials.  Here is the idea posted to the discussion site: http://opengov.ideascale.com/akira/dtd/3982-4049

This idea has been posted for only a few days, but is receiving a 95% positive response, and is already one of the highest rated ideas.  We need your help.

Please go here http://opengov.ideascale.com/akira/dtd/3982-4049 and vote for this idea.  Help the White House understand the simplicity, attractiveness, and openness of this concept.  Let them know that clear, specific steps in the right direction are the way to improve government.  Let your voice be heard today.

Thanks for your moral support, and for taking a few minutes to make a difference for our country.  Feel free to share this with your friends.  We can make a difference.

Peter Langlois
Dan Murphy

Kansas Governor Kathleen Sebelius is likely to soon be confirmed as the new Secretary of Health and Human Services despite revealing that she had underpaid her taxes by roughly $7,000.00  It is unfortunate that she is also another in a long line of public officials who seem to have trouble paying their appropriate taxes on time.

A major difference this time is that Kathleen Sebelius had her CPA review her tax returns for 2005, 2006, and 2007, and found that she hadn't properly paid her taxes.   In other words, she had herself voluntarily audited, which is precisely the idea what we are trying to put into place here at Audit Congress.   Audits can help ensure compliance.

She voluntarily submitted to the audit, caught the discrepancies, paid the difference (plus interest) to the IRS, and then revealed all this to the committee which subsequently approved her nomination to the post.   This action illustrates the real world viability of requiring tax audits for Congressmen and other high government officials: those who want to serve in government cleaning up their tax act, and keeping it clean.

We applaud, and encourage a broad positive recognition for the open and appropriate acts of Kathleen Sebelius!  This was the right thing to do, and we heartily support her audit as an example to be followed by others.

We doubt that anyone would have submitted to such an audit and paid up on their taxes were they not being put under a microscope at Congressional approval hearings.  If the CPA who prepared the previous years' tax returns was the same CPA who conducted the audit, we hope she got a rebate for earlier services.   Who knows, the article doesn't say.

We know the nature of some of the items which were "adjusted", including 3 out of 49 charitable and business deductions which were improperly documented and a mortgage interest deduction which was improperly applied.   These adjustments were disclosed in a news article and do not appear to be deliberate attempts to evade taxes.  Rather they illustrate how tough it can be to fully comply with the tax code regardless of intent.   Perhaps regular tax audits will bring home to Congress the unnecessary burden placed upon everyday Americans by the convoluted tax code they themselves have put into place.   In Secretary Sebelius’ home state of Kansas, Wayne Godsey, KMBC President And General Manager penned an editorial today on this subject.  Here is the heart of the editorial:

    "Kan. Gov. Kathleen Sebelius has become another in a long line of Cabinet nominees to admit underpaying income taxes. Assuming the errors were unintentional, as she claims, it raises the question of whether our tax code is just too complicated. Highly educated people have to hire accountants to prepare their returns.

The tax code was intended to raise money to finance the functions of government. But it has become a way for government to encourage or penalize actions of businesses and individuals. With thousands of provisions for every imaginable purpose, the code has become so complicated that even IRS experts get things wrong."

Simplifying the tax code is not the focus of Audit Congress. We intend to help Americans to implement audits at the highest levels of the Federal government. However it wouldn't hurt our feelings if congressional audits helped build a congressional consensus for simplifying the tax code.

We congratulate the Secretary nominee of HHS, Kathleen Sebelius, and applaud her for undergoing a voluntary audit. We would feel better, however, if in the future Secretary Sebelius was audited every year, as she will be responsible for one of the highest jobs in the government. And we would feel better still if all Congress and high officials were audited every year.

Pete Langlois and Dan Murphy

The US Congress’s moral authority to lead in times of crisis is undermined by the perception that many Congressmen are not paying their taxes. The fact that Congress is responsible for shaping our tax system just makes it worse. The Constitution of the United States gives Congress the power to tax.  From Section 8 of the Constitution: 

        "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises,........." 

The Constitution gives Congress many other powers in addition to the power to "lay and collect" taxes, but this power is one that is directly felt by almost every American virtually every day of their life. It is for many a heavy burden, made heavier by the realization that those who are requiring them to pay such taxes may not be paying their own tax obligations.  

Here in the U.S., we are not supposed to have different classes of citizens. Those who make our laws are supposed to be subject to them in the same way as any ordinary citizen. It is true that there are benefits and perks Congress has voted to themselves over the years, however not complying with the law is different. As far as we are aware, Congressmen are subject to the same tax filing and payment requirements as any other citizen.

The problem of course is that, as has been recently reported, some in Congress have been less diligent in paying their taxes than ordinary Americans expect. That is why we are calling for annual tax audits for Congressmen and other High Government officials.

There is a new urgency to this matter, however. The current administration is proposing a record increase in existing and new taxes, and these new taxes will affect Americans at all income levels. Congress appears poised to approve the President's plans. We are also in the midst of the deepest economic downturn in 20 years.  (This comparison is debatable, but there is no question that it has been many years since we have experienced such a severe recession.)  In times such as these, it is crucial for the health of our Republic for the citizens to retain faith and confidence in the leadership of our great nation. Not only is there a need for the citizens to feel that our leadership has the talents, skills and willingness to lead us through tough times, citizens need to feel that their leadership has the moral authority to lead.

The US Congress’s moral authority to lead in this time of crisis is severely undermined by the perception that many Congressmen are not paying their taxes.

We believe that, at this crucial time, Congress should take steps to restore citizen's faith in their government. One immediate step they can take is to institute an annual tax audit for their membership, and for other high government officials.

Pete Langlois and Dan Murphy

While not called out explicitly in the Constitution, the "right to privacy" is a fairly well understood, and often debated construct.  And while not specifically delineated as a "right", the framers of the Constitution understood that their ability to enumerate every right was not only limited, but that attempting to enumerate all rights was inadvisable.  As such, and seeing they needed to get the job done of packaging together a set of assurances that the Federal government would not become another tyrant like the King of England, they concluded the Bill of Rights with two elegant and far reaching declarations.  The Ninth Amendment declares:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

And the tenth "piles on":

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Clearly we have rights and powers not enumerated. The question of privacy as a right to be explicitly protected in the context of the Tax Audits of High Officials, is explored in this essay.

There is a reasonable concern that requiring high government officials to undergo tax audits will discourage some good persons who are interested in public service (but who may jealously guard their privacy) from engaging in public service. They may decline to serve if it means the loss of their privacy and the disclosure of their personal business to the public. Restoring tax accountability should not also include the loss of talented individuals willing to serve their county.
 
This valid concern is precisely why the Audit Congress petition calls for a summary disclosure of the result of tax audits.  The idea of a complete 1040 form with all details being involuntarily disclosed to the public, puts into the public eye a great deal of information which does not advance the idea of increasing trust and transparency in government.  An individual's charitable contributions, or the specific dividends paid from their investments does not move forward the trust and transparency question.  It could however, support a number of distractions, a number of partisan or philosophically motivated attacks based upon how an individual chooses to invest or to whom they give charitable donations.  Those issues, while perhaps having merit in their own right, are not central to determining that a person has paid their taxes.

While privacy is a concern in terms of making holding an office more onerous than it is worth, it is not privacy per se that is of primary concern in the publication of the summary findings of annual tax audits.  It is the notion of achieving the desired effect, which is to restore a measure of trust in our government.  Ideally this can be done with a minimum of intrusion into other issues which are beyond the scope of this initiative.  There is no need, and no desired outcome to be served by probing into the "hows" and "whys" of the tax returns of our officials.  Compliance only is the issue to be served in the present discussion.

This brings to light the important issue of confidentiality and protection of records at the federal level. The various departments, agencies, committees, etc. of our federal government have an uneven track record in keeping confidential information confidential.  The problem can be broken into two pieces:  First, the volitional and intentional “leaking” by employees or contractors of the federal government. Second is unintended exposure or theft due to shortcomings in various forms of electronic or physical security.  The bottom line is that citizens who serve in high office do not sacrifice all of their privacy rights when they choose to serve their county.  Adequate protections must be constructed to ensure that privileged and confidential information disclosed in a government official’s tax audit does not later appear on the front page of a newspaper.
 
A directly related issue is record retention methods and policies related to tax audits. If the financial records of a Senator (for example) are pulled together for the purpose of completing a tax compliance audit, what parts of those records remain after the audit is completed as evidence that the audit was conducted to a sufficient standard of effect?  Should the record retention policies be any different than what are applied to any other citizen who must undergo a tax audit?  Who should those maintain those records, for what time period, and for which legal purposes should they be opened or disclosed?

This discussion does not address specifically what information should be disclosed in a "summary" finding of a tax audit.  Protecting the privacy of information not disclosed is a separate issue from deciding what information should be disclosed. What "summary" information should be disclosed after government officials undergo tax audits is the subject of a future essay.

These are serious and significant issues which need to be resolved as a policy to audit Congress and other officials for tax compliance is created.  Audit Congress is confident that they can be resolved, and while not advocating a specific law or policy, does advocate that laws and be enacted to serve the people in the arena of tax compliance.  Suffice to say, there are real issues regarding privacy, security, and disclosure associated with conducting tax audits, including the important issue of what should be disclosed as the result of the audit.  These are precisely the topics that must be probed in depth by those who will craft legislation addressing addressing tax trust and transparency.

Peter Langlois

The business of Government may be actually more like a business than we commonly consider. Perhaps it should be more so.  The typical background and character checks that come with bringing a new senior executive to a major corporation are an excellent idea.  When a board of directors puts out an executive search, the skills and qualifications of the applicant are alone insufficient to instill confidence.  An exhaustive background check is part of what any board would do to ensure that the interest of stockholders is protected.  

We should expect no less of our leaders.  We are the "board of directors" for this thing we call a government, and we are responsible for managing our government so that the interests of our "stockholders" are protected.

The public servants who compete for the honor of doing the will of the people are our employees.  Their failure to discharge their personal tax obligations is the moral equivalent of an employee with financial responsibilities who fails to correctly balance the till at the end of the day.  At some point, as a manager, the question of whether the errors are a result of sloppy work or whether this is pilfering is simply not important.  They have to go.

In a July 2007 survey, 6FigureJobs.com  asked its 500,000+ executive and senior-level members if they thought taking a certified voluntary background check would make them a more marketable candidate. The survey revealed that eleven percent (11%) of respondents have already taken a voluntary background check. This is up four percent from the same survey conducted in June 2006, where only seven percent (7%) admitted to taking one. The survey results showed that the majority of respondents (49%) felt that a background check would make them more marketable and would consider taking one. This is a five percent increase compared to last year's results.

We’re not just talking about a good job here.  We’re talking about a public trust.

We have seen enough evidence of financial impropriety among members of our government to rightfully suspect that it is neither uncommon nor insignificant.  As stewards of our republic, we are well served to demand a bit more financial due diligence from those to whom we will entrust billions or even trillions of our dollars.

If we do not drive a harder bargain with our employees, we deserve to go on questioning both the performance of our employees and our own judgment.  Let’s get busy raising the bar, and measuring their performance.  They are not justified to take offense at our questioning their integrity.  It’s nothing personal, this is business.


Pete Langlois

Last week was the second full week the AuditCongress.com web site has been up, and what a week it was!  We have been very fortunate to have attracted interest in what we are trying to do, and are grateful for all the support we have received. We noticed a significant spike in traffic and in petition signatures after Professor Glenn Reynolds of Instapundit fame kindly mentioned us on Monday.  After that, traffic has been steadily higher, with other bloggers and sites linking to us either because of the Instapundit mention, or because they came here via another route.

To have attracted such interest in such a short amount of time tells us that many, many people are interested in finding some way to help restore trust in our government.

Thank you one and all!

The number one thing everyone can do to continue to help and support moving to our goal is to continue to spread the word about AuditCongress.com, and what we are trying to do. When people know about us and what we’d like to accomplish, they’re usually glad to sign the AuditCongess.com petition.

Also, as we move forward, we will need all of the help and support that we can get at a local level! In the coming weeks, we fully intend to broaden our campaign in several ways.  We are initiating a letter writing campaign to Public Officials, including Congressmen.  If you are interested in helping with this you can e-mail us here: Auditor@AuditCongress.com .

We will be taking the call for Congressional audits to the state grassroots level. For this, we will be looking for volunteers from across the country, to write and call their own state’s Congressmen, and ask them to support the AuditCongress.com petition. We will be asking political parties to ask their candidates and incumbents to take the pledge supporting tax transparency, and for their incumbent officials to promote the audit of high Government officials.  We will be looking for support for this effort as well.  In politics, when one person speaks, they are sometimes "hard to hear", but when a group speaks clearly and with one voice,  politicians will take notice!

We will also ask for volunteers to be local activists for congressional audits. We will look for them to organize locally, and work to generate local support for our goals.   We will be publishing pages for every Congressman, and look to local volunteers to help keep these up to date. We hope that this way it will be easy for anyone to see who has is supporting the AuditCongress.com intitiative. All volunteers will be asked to be strictly non-partisan on this issue, as this is not a partisan issue, and to understand that being non-partisan is key to further widespread support for our cause.

Again, if you are interested in becoming an AuditCongress volunteer and would like to further the cause of having high officials audited annually by the IRS, please contact us privately by emailing us at: Auditor@AuditCongress.com

Again, our sincere thanks to everyone for their support!

"The Auditor"

Pete Langlois and Dan Murphy