The nanny tax

Over at Marginal Revolution, Tyler writes about the tax trouble of appointees Geithner, Daschle, and Killifer (sounds a bit like Santa's reindeer as referred to in Munich or something):

I am more than willing to grant that not every nominee deserves to be appointed to rule over me. But I'm also worried about the incentives we are producing by applying tougher standards. Knocking out the caught cheaters won't make all the DC people honest or virtuous. The long run effect is to select for people who have known -- from the very beginning -- that they seek power and who are willing to pay money to the taxman to keep that option alive. We are selecting for people who are very good at covering up their misdeeds. We're selecting for honest people too. There's lots of posturing on this issue, but I'm not sure whether the net effect of the crackdown is positive, once you take all these selection effects into account. There's something to be said for selecting people who are relatively bad at cover-ups.

I think Daschle and Geithner's offenses are egregious. They can afford to hire a tax guy, and if they claim to have misinterpreted the tax code they're lying. The public already believes that their Congressmen operate under a separate set of standards when it comes to taxes, and this won't help.

But for Killifer, withdrawal may be excessive. I have never heard of any person who pays taxes on their nanny, politician or otherwise. In fact, if the government wants to increase its income, they should crack down on the illegal nanny trade. Half the parents we all know would be slapped with fines, which might force some of them to downgrade their strollers from designer all-wheel drive offroad models to something more pedestrian, like the plastic-wheeled polyester-hammocked contraptions that passed for strollers when I was in diapers.