Treasury Secretary Jack Lew: Politically inconvenient taxation

Republicans are using the nomination of Secretary Lew to hammer the point of taxation dysfunction. Photo: President Obama and Jack Lew

WASHINGTON, February 16, 2013 - President Obama’s nominee for Treasury Secretary, Jack Lew, is getting grilled at his Senate confirmation hearing. The issue of consequence that could derail his nomination, or at the very least cause angst, should be inconsequential, as it is above board, tactfully advantageous and was put into law by Congress itself.

Lew invested $56,000 in a CitiGroup venture capital fund, which happened to be based overseas in the now vilified Cayman Islands, the same islands that the Democrats were all too happy to bludgeon Mitt Romney over during the campaign.  Lew divested and disclosed his investment before being confirmed as budget director in 2010.

To compound matters, Lew paid taxes and reported all his income properly. He neither created, nor managed, nor even operated the CitiGroup fund. Indeed, Lew’s effort to take advantage of current tax law resulted in his investment taking a 2.8-percent loss, amounting to a $1,582 decrease in his investment principle.

Political reality dictates that Democrats need to be cognizant of tax favoritism as they continue to demand that tax loopholes, created by Congress, be closed to secure greater revenue sources.

Republicans have seized upon this issue and the nomination to highlight the fact that President Obama and the Democrats are tax hungry wolves in sheep’s clothing.  The underlying, convenient and apropos narrative is that Lew’s actions embody the ultimate hypocrisy.  As Sen. Chuck Grassley poignantly points out: President Obama once labeled the building that housed the CitiGroup venture as “either the biggest building or the biggest tax scam on record.”

Excluding the partisan context and putting the collegiate political optics aside, the issue essentially lifts the fog on the logical fallacy that both Democrats and Republicans, especially the Republicans, continue to argue.

Bluff and bluster create the appearance of virtue and engender a notion of underlying substance to the issue and soon-to-be manufactured point of contention, when nothing could be further from reality. At the same time, Republican’s stuck in the myopic tunnel vision of the Beltway fail to bridge the valuable message so desperately in need of bipartisan proof positive.

If Lew’s investment in a CitiGroup venture should be vilified, the very least Senators could do is condemn the system they created and disown the political machinations of a tax structure and just acknowledge its high time for a creative destructionist approach to reforming America’s tax policy.

The burden to bear for the complexity and various permutations of the tax code, which have served to drive investors to tax havens abroad, is not the fault of the enterprising individual who seeks to maximize returns whilst operating within the legitimate confines of a regulated free market. On the contrary, the onus of responsibility lies in the ivory towers that continue to shovel didactic notions that the tax system is ineffectual while not having the will to correct it.

America’s tax system is not only dysfunctional and inept; it’s reached the point of being a self-inflicted detriment to prosperity, growth and the bootstrapped ideals of the past. Our broken tax system, whether pilloried as being filled with outdated ‘loopholes,’ laden with disproportionate favoritism, or written to perpetuate a slovenly bureaucratic beast, should not be used as a mere tool of political expediency.  

Whether Lew is the right person for the job is for another discussion, but the fact remains that Republicans can leverage this to hammer home the point of taxation dysfunction. It would be more beneficial to do so in lieu of falling into the trap of class warfare and populist anger.

Lew’s investment in a fund that was housed abroad should not be a self-effacing exercise in political distraction.  In fact, it is an opportunity, a policy opportunity, to drive home the reality that both Democrats and Republicans agree on – not in theory or ideology – but in that American tax policy causes corporate and individual capital flight.

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Timothy W. Coleman

Timothy W. Coleman is a writer, analyst, and a technophile. He primarily focuses on international affairs, security, and technology matters, but Tim has a keen interest in history, politics and archeology, having visited more than 20 Mayan ruins in Central America alone.

Tim started off on Capitol Hill, worked on a successful US Senate campaign, and subsequently joined a full-­‐service, technology marketing communications firm. He has co-­‐founded two technology startup firms, is a contributing editor at and he is an intelligence analyst at the Langley Intelligence Group Network ( where he specializes in aerospace, naval, and cyber security analysis.

Coleman completed his BA from Georgetown University, an MBA in Finance from Barry University, a Graduate Studies Program at Singularity University at NASA Ames, and a Master’s of Public and International Affairs with a major in Security and Intelligence Studies at the University of Pittsburgh.

Coleman volunteers and serves as a member of the board of directors at the Lint Center for National Security Studies. 


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