We've already mentioned that the theoretical ideal definition of income is the Haig-Simon definition, which is the value of all comsumption in a given year plus the change in net worth.
For many reasons, both practical and political, the actual definition of income in the income tax code falls considerably short of that definition. A full Haig-Simons concept of income, for example, would include the value of ALL consumption and ALL changes in net worth. As we have seen and will continue to see, in actual practice the definition of income used on the 1040 is quite different. Many items of consumption (e.g., the value of employer paid health care, the value of home-grown produce in a backyard garden, the value of consumption paid for with government benefits such as food stamps or Supplemental Security Income or Section 8 housing subsidies, to take just a few examples) are excluded from income reported on the 1040. Many examples of increased net worth (most notably unrealized capital gains and employer contributions to retirement plans) are excluded from income reported on the 1040.
In general, most employee benefits could be considered either a form of consumption (employer-paid health care, free coffee, holiday fruit baskets and turkeys some employers give out, free flights for family members of airline employees, to take but a few examples) OR a form of increase in net worth (notably contributions to retirement plans.)
Many of these items are excluded from income that needs to be reported on a 1040, even though a strict Haig-Simon definition would require that they all be reported.
Some are excluded because they are considered de minimis (like the holiday fruit basket and free coffee) or because the cost to the employer of providing the benefits is minimal (free flights for family members in otherwise empty seats) but the cost of tracking and reporting those benefits would be substantial.
Other fringe benefits are excluded if they are "primarily for the benefit and convenience" of the employer. An example would be free housing provided by the employer to employees who are required to be available 24/7 (for example, a resident assistant in a dorm, a live-in superintendent in an apartment building, etc.) Their fringe benefit is actually a condition of employment, which makes it possible to do their job properly.
Still other fringe benefits are excluded because it was considered good public policy at the time (perhaps under the sway of strong lobbying forces.) For example, employer-paid health care was originally excluded from income during World War II, presumably because of lobbying by a coalition that included employers (looking for ways to attract scarce wartime employees during a time of wage and price controls and increasing tax rates) and hospitals (looking for ways to make sure their bills could get paid) and insurance companies (which were interested in generating more business.) The initial tax cost of exclusing that fringe benefit was relatively low, initially. Of course, the cost of those "fringe" benefits has soared as health care technology has greatly expanded the range of interventions health care providers can provide, but the tax exclusion remains in force.
But, in general, the imputed value of non-cash compensation paid by an employer or client IS reportable as taxable unless explicitly excluded.
The value of the car and driver provided to Mr. Daschle over the three-year period was certainly NOT de minimis, and since 80% of his use of the car and driver was personal, rather than business, it constituted consumption, and therfore should quite properly be included in a Haig-Simon definition of income.
The fact that the tax code does in fact require him to report the imputed consumption value as taxable income is an example of the actual tax code living up to the Haig-Simon ideal.