Press Conference with Rep. John Carter (R-TX)
Press Conference
PRESS CONFERENCE WITH REP. JOHN CARTER (R-TX) AND OTHERS
SUBJECT: ELIMINATING PENALTIES LEVIED BY THE IRS ON BACK TAXES
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REP. CARTER: Good afternoon. Thank you. I want to thank all of you for coming out here today.
I have a little something -- I'm John Carter; I'm from Texas -- a little something that's a little unusual that I want to talk to you about today.
You know, we had Charlie Rangel get up on the floor of the House, as chairman of the Ways and Means Committee, and tell us that he had failed to pay his taxes on income from rental income for about 10 years -- just inadvertently forgot to pay those taxes, or didn't understand that he had to pay them. It sort of shocked me, but I understand that there's a rule that protects those kind of statements on the floor of the House. And being an old judge, it kind of -- I worried about his defense. But anyway, that's a sidebar.
I wanted to -- I listened to that. And then I've been keeping up on this, and I noticed that Mr. Rangel has paid the taxes, but he hasn't paid any penalty and interest on this. And just today I was -- the television on this morning, the early morning, there was one of these tax firms was advertising. And they said if you owe $10,000 or more in back taxes, you are facing severe penalties and interest, and it's so important, you need us to represent you with the IRS -- this tax firm was saying that.
So it seems that penalties and interest -- and it's been my experience as a lawyer and a as a judge that penalties and interest can be extremely onerous on unpaid taxes.
So with Rangel's situation -- and then all of a sudden, we start -- we hear about the new secretary of Treasury's issues. And it went from an incident to sort of a trend, because now we have a secretary of Treasury who's -- has paid his taxes, has paid his interest, but hasn't paid his penalties. And they haven't been assessed.
And then finally we've gone maybe from a trend to a movement, because now Ms. Kennedy doesn't run for the Senate and the same issue comes up, with the -- Caroline Kennedy.
I went back to some time back in Texas one time when we had a lieutenant governor who got stopped for DWI and thrown in jail. In the middle of the night his lawyer got him out with no bond. The next morning, the press wanted to know why the lieutenant governor got special treatment, when the rest of the people in the state would have stayed in jail for DWI overnight.
They said, "Oh, we've always had a rule that if your lawyer comes down, we'll let you out." That became the Hobby Rule. And to this day, the Hobby Rule is exercised -- an unwritten rule -- but exercised every time a lawyer goes down to the jail in Travis County and says "I want to get my client out on DWI. I'm exercising the Hobby Rule." They let him out.
So thinking back to that, I thought it would be very interesting -- I believe members of Congress are just like ordinary citizens, except that there are -- a majority of the voting public in a district of -- at least, mine's 750,000 people right now, but they started out at 590(,000) -- what, 565,000 -- those people sent you up here to represent them. But you have -- your citizens back home should have the same rights and benefits that come to you as a member of Congress. You shouldn't be treated any differently under the law than your citizens back home.
I have represented many clients that had to deal with the IRS on interest and penalties. And I know it's a very tough fight to get those things excused. It happens, but it has to be fought out. That should be, at least, assessed.
So I've introduced a bill where the average citizen, if they are caught in a situation where they haven't paid some taxes that they owe and they decide to pay the taxes, they can write down at the bottom of their form, "I'm exercising the Rangel Rule."
And they won't have to pay penalties and interest, so that they'll be treated with the same courtesy that, it seems, the IRS is treating the chairman of the Ways and Means Committee.
That's the purpose of this bill. That's the purpose of this press conference. You know, the speaker told us we were going to have the most ethical Congress in history while she was speaker.
This is an ethical issue. It's one we ought to address. (Audio break.)
MR. : Well, I want to thank you, Judge. I want to thank you for having this press conference and for doing this, because I think the American people are disappointed and disillusioned in the political system. And this is one reason why they are, because many of them, especially in economic times that we have right now, have been slow to pay their taxes.
They've been assessed the penalties and interest. They've had their wages garnished. They've had all different types of threats made by the IRS. And as you said, Speaker Pelosi promised that this would be the most open, honest, ethical Congress in the history.
She said that with the 110th Congress. And we're still waiting on that to come true in the 111th. But we also had a new president elected that talked about hope and change and what he was going to do. And so Judge, I think, this bill is right in line with some of the trends, as you've mentioned, happening in Washington.
Mr. Geithner, who is the Treasury secretary, did not pay his self-employment tax. That is not like not paying your taxes. That is a trust. That is the Social Security. I've known people that have been threatened with jail sentences for that; their businesses shut down.
This is a different category. But yet Mr. Geithner only paid interest, no penalty. And then of course as we continue on with this new, this change that's going on, in Washington, the first thing that Mr. Geithner does when he's sworn in, as the Treasury secretary, is to hire a lobbyist for his chief of staff.
So I want to thank Judge Carter for doing this, bringing about this bill, the Rangel Rule. And I hope, Judge, that there will be many average American citizens, one day get to use the Rangel Rule and get the same treatment that so many people in Congress have gotten.
But I'll turn it back over to the judge.
REP. CARTER: I'll answer any questions.
Q Have you had any contact with the Internal Revenue Service about their failure -- (off mike)?
REP. CARTER: No, I have not. I did write to Mr. Rangel -- I think you've got a copy of the letter -- asking him in good faith to make a request of the IRS that they assess penalties and interest. I got no reply from Mr. Rangel whatsoever.
Q When you're talking about them being assessed, were you just talking about penalties or an audit?
REP. CARTER: Well, in most cases, if you have been over a period of time not paying your taxes, you're subject not only to the interest on that money -- and it's like credit card interest, okay? -- but they assess a punishment, which is a sanction against you which you've got to pay. Over a 10-year period of time, it can be a tremendous amount of money. I had a client that used to have a club in Round Rock back in the '70s. He just missed paying his taxes for two years, and I believe that his interest and penalties were more than the taxes.
REP. : And just to add to that, I think those are pretty much spelled out. I think those are pretty much spelled out in the law, what those penalty rates are and what the interest is. Now, that's not to say that they can't be negotiated out at some point in time, but I think to start off with, there is a certain penalty that has to be assessed.
REP. CARTER: And when you really get down to it, the Ways and Means chairman shouldn't be treated any differently than you should. The IRS should -- ought to treat him like any other citizen. Just because he happens to have control over the reins of their agency does not mean they shouldn't do their job and assess the punishment accordingly. And if they're not going to, then they ought to treat the rest of America the same way.
Q As you know, Mr. Carter, the ethics committee was investigating Mr. Rangel. Do you have any -- what's your view about the -- if they're doing their work? And why not just wait and see what the ethics committee does before you push this issue?
REP. CARTER: Well, I'm only -- I'm raising this issue not so much to push the issue as 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.
And the ethics committee, I'm very hopeful it will function properly. It hasn't had a good track record, in the last two years, of getting anything done, but they're moving along, it seems now, and we are all very prayerfully hoping that they will start to resolve some of these issues and resolve them properly.
I don't think I'm interfering in any way with the ethics process by raising this issue among my colleagues.
Q Do you have any faith that the ethics committee will do --
REP. CARTER: I hope so.
I always have hope. That's the theme of our new Congress, hope.
REP. : And let me add this: I don't think that the average American has an opportunity to go in front of an ethics committee to find out what they think about your tax liability. This is something that the judge is asking for in this piece of legislation that said all Americans will be treated equally. That is already an IRS rule. This is an IRS issue, not an ethics violation issue.
REP. CARTER: That's correct. You know, your neighbor down the street that has the same kind of problems that some of these folks we've talked about have mentioned, they don't have an ethics committee that they can throw it off into and just sit back and rock along.
Q (Off mike.)
REP. CARTER: Actually, it would help the taxpayers; it would help the economy. It will allow more -- if you want to get real imaginative about it, it's going to allow more funds to flow in commerce, because they're not going to be going for interest and penalties. There's a lot of ways you can use your imagination to see that it would help.
But most importantly, it's an equal -- we're an equal opportunity world. Remember that. We -- our Constitution says we treat everybody equally under the law. And that's the way we're supposed to treat everybody. Well, just because some neighbors of yours elected you to an office should not give you the position to be treated differently than the rest of the world. So if you are, then they ought to be able to claim that same right.
Yes, sir.
Q If you eliminate all these -- (off mike) -- what incentives do Americans have to pay their taxes at all?
REP. CARTER: Patriotism. Haven't you heard? It's patriotic to pay your taxes. We heard that from some of our senators on the other side of this building, that it's patriotic to pay your taxes. Do it for patriotism.
But seriously, I don't think -- I don't think the average American -- the good thing about Americans, we pay our taxes. The average American doesn't pay his taxes -- doesn't not pay his taxes because of penalties and interest. He does it because he believes in America and that's the way it should be.
So, no. But in turn, each expects to be treated the same way as some big shot who's been elected by his peers in Congress to a position. He expects to be treated the same way. So that's what we're trying to do.
REP. : And the fact that he is chairman of the Ways and Means Committee -- he is chairman of the committee that its responsibility is to write the tax codes. So if you have a chairman of that committee that does not understand the tax codes, then it goes to what we have been saying, the Republicans have been saying for quite some time.
Your citizens shouldn't be under something that can't be understood. And so certainly if the chairman of the committee doesn't even understand the provisions of the tax code, how can an everyday citizen expect to do that?
Q (Off mike.)
REP. CARTER: Well, I mean, I think, you -- I have asked Mr. Rangel, if he chooses to go down the path that he seems to want to go down, to join me in this. And let's give fairness to all Americans.
We could move this very rapidly through the Congress with the support of the majority. And we could even, by the time Mr. Geithner might get to the point where he thinks he might have to pay some penalties, because they haven't been assessed against him. But if he has a fear that they should, he could exercise the Rangel Rule.
(Cross talk.)
So there's a bipartisan element in this bill.
(Cross talk.)
You know what; any time I am trying to make a level playing field, so that all Americans are treated equal, I think it's the proper thing to do.
Q (Off mike.)
REP. CARTER: I'm saying that certainly the presumption can be made that the IRS, who basically falls under the purview of the Ways and Means Committee of the House, has not assessed penalties and interest, where I promise you, were you in the same situation, you would have already received a letter on penalties and interest and might even have had your business locked up by now.
Q (Off mike.)
REP. CARTER: I have communicated with two letters, which I gave you a copy. I haven't heard. We haven't heard any reply. I'd be glad to talk to him.
Q (Off mike.)
REP. CARTER: The easy solution to the problem that I first put forward was for him to ask the IRS to please assess the penalties and interest and pay the penalties and interest. And then nobody can argue that someone is getting special treatment for being the chairman of the Ways and Means Committee that other people wouldn't be.
I didn't try to ambush Mr. Rangel. I first wrote him a letter and asked him to just go ahead and call the IRS. And they know how to do it. They've assessed it against many of my clients, when I practiced law, and then many occasions where I had tried cases, in my court, especially family law cases.
We had lots of assessments and penalties and interest on various litigants, in family law cases, which caused a lot of headaches for a lot of judges that had to figure that stuff out.
So it's not that it's not done. It's done regularly by the IRS. It's the exception to see someone with 10 years of back taxes not pay, who stands up in front of the American public and says he didn't pay the taxes. It's the exception, not to assess some of penalties and interest.
Q Do think it's -- (off mike) -- Mr. Rangel, now chair of the Ways and Means Committee -- (off mike)?
REP. CARTER: No. I think that's an issue that's got to be determined by this House. And those are House issues in his caucus. That's not the -- I'm not after that situation. I'm after fairness for the American people. And if the IRS is willing to not assess these penalties and interest, then they ought to do it for everybody.
REP. : And one of the things I think, too, is most times you get a tax bill for the amount of tax that you owe. The penalty and interest is itemized on that statement that tells you the additional tax you owe. It will tell you the penalty you owe and it will tell you the interest that you owe as of that date. So it's highly unusual that somebody would just get a bill that only had the taxes that you owe. And I don't know if we know yet if this is just something that his accountant came up with, figuring that this was what he owed or if this was the national statement that he received from the IRS.
The other thing is it was a privileged resolution introduced by Leader Boehner that asked the speaker to relieve Chairman Rangel of his duties as to Ways and Means. And we wanted to record a vote on that, but the only recorded vote we got was on a motion to table by the Democrats.
REP. CARTER: And that's good history, but I want to make it clear: That's not the purpose of this. This is to start, I hope, a(n) open, free exchange between the members about whether or not someone by their position should be treated differently than the rest of the citizens of America. That's what this is about.
Q Thank you for -- (off mike). Is it retroactive? (Laughter.)
REP. CARTER: Well, talk to your congressman. He can make it -- he can -- I'd be willing to discuss an amendment.
Q We would like something in there that if you work in the press gallery, it is retroactive. I think that would work.
Q (Off mike.) (Laughter.)
Q My sister says, he could make it -- (off mike) -- she'd really stimulate the economy. (Laughter.)
REP. CARTER: Thank you. Thanks for coming.
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