Tax revelations of rich, powerful irk honest filers

From his office in Atlantic City, accountant Felix Taveras can only shake his head at the tax problems of the rich and nominated, the confirmed and the withdrawn.

With nearly eight of every 10 of his clients unemployed, recently laid off from the casino industry, counting on the arrival of another government stimulus check to get by, filing returns on meager incomes, Taveras is right up against the hypocrisy of unpaid taxes and the three Obama nominees.

"It's a shame," he said. "Where's the moral standard? If you owe the IRS and you're not famous or a senator, the rules are different for you."

As people contemplated the cut-corners and "misunderstandings" that derailed the nomination of former Sen. Tom Daschle as Health and Human Services secretary and Nancy Killefer as chief performance officer, but only slowed the confirmation of Treasury Secretary Timothy Geithner, there was a lot of head-shaking going around.

For instance, how is it that two moms and a search engine can figure out the rules on claiming sleep-away camp as part of your dependent-care account (not allowed) and the new treasury secretary could not - or didn't bother?

Kelly Phillips Erb, a Philadelphia tax lawyer who writes a tax blog at taxgirl.com, said people were "wildly disappointed" with Daschle and predicted a rising cynicism as their own tax deadlines approached.

"It does make people think there's a double standard and makes you not care so much," she said. "Is it just coincidence that these people had tax problems? I think people feel like they have been deep and forthright about doing it right, but other people haven't been."

She noted a case recently in which a prominent tax evader tried, ridiculously, to claim "late-filing syndrome."

"People feel like if you're wealthy enough or powerful enough, you can pretty much come up with any lame excuse that you want, and people will buy it," she said.

Peter Madden, 38, owner of Agile Cat, a marketing and public-relations agency in Center City, called the whole situation "disheartening."

"Especially for businesses, businesses in Center City, the most grossly overtaxed city in the country, it's just another punch in the stomach," he said. "People like me who play by the law, as much as it hurts - believe me every April, I cry on my accountant's shoulder. You do it, you do it the right way. You sleep at night. You wonder how these politicians sleep at night. What is making them make these kinds of decisions? Is it ego? What kind of character is on display?

"It doesn't make me say, 'He went for it, let me see what I can get away with,' " he added. "It leaves a bitter taste in your mouth. The people who create the laws are also trying to get away with things. Good for Obama for falling on his sword."

The wealthy taxpayers are just as resentful as the struggling, Erb says: High-earners believe that they already pay more than their share into the system and that they get shut out of benefits, like the stimulus check.

"High-wage-earners are not included in the stimulus," she said. "These people are very angry. They paid into the system. Why don't they get the break? I'm not saying every wealthy taxpayer wants to cheat. But the seeds get planted. There's a pattern: The more successful people get, you begin to say, why should it matter that somebody's driving me around in a car?"

She noted the outrage when Pat Burrell's real estate tax abatement for his Center City condo became public. "But he paid a lot of money in wage tax to the city," Erb said. "People might not think you're entitled. But

you

will always feel you're entitled."

On the other hand, she said, "how can you miss $300,000? That's more than people will make in 10 years. Or $80,000 in consultation fees? That makes people struggling really bitter. If I had an $80,000 check, I wouldn't forget it."

Brigid Kaye, 43, co-owner of Creative Characters, a business-to-business printing company at Ninth and Walnut, had her own explanation of Daschle's rarified tax problems: "It's the privileged keeping the privileges.

"I'm not out here driving around in a limo. We're just trying to survive," she said. "I have an accountant. I can't fathom someone doing their own taxes at that level with TurboTax," as Geithner said he had.

Center City lawyer Carol Fritz said she believed it could be reduced to a basic human tragic flaw. "Honestly, it comes down to the seven deadly sins. It comes down to greed. They don't want to pay.

"I think they don't understand that they work for us," she said. "Especially with Daschle. He left public service, then he avoided taxes, then he expects us to rehire him? Who in their right mind would rehire this person?"

She said the excuses were no help. "When people say the tax code is so complicated, it's so obtuse - it's not. These are very, very basic things, very basic concepts."

John Matthews, a CPA in Horsham and a Republican, quipped that maybe if Democrats in power paid all their taxes, they wouldn't be so quick to want to raise them.

"Most people, they have to do what they want to do to stay out of jail," he said. "It doesn't look right to have somebody who doesn't file in charge of the IRS."

All the representation-without-taxation issues from the Capitol may be causing anxiety among the rich, the not-yet-tax-scrutinized, and the rank-and-file cheaters.

Erb said she has received questions from people who claimed phantom dependents last year to increase their stimulus rebate check. "People are worried: 'If I lied about it last year, do I have to keep claiming them this year?' "

Taveras said he was advising clients to be extra careful this year. "I say, Listen, you can't do that; look at what happens to these guys. They will now try to look into most people."

Or, as comedian Paula Poundstone joked Tuesday on her Twitter page (or maybe she was not joking): "I don't know how to do my taxes. I pay 10 percent sales tax because I can't figure out 8.5 percent. A car and a driver? How do you calculate that?"

May be time to find out, Paula.