Geithner's Tax Flop

by John M. Curtis
(310) 204-8700

Copyright January 14, 2009
All Rights Reserved.                    

       Caught in the cookie jar, President Barck Obama’s  pick for treasury secretary, New York Federal Reserve Bank president Timothy F. Geithner, was forced to pay back-taxes, only days before his scheduled confirmation hearing.  Now postponed from Friday to next Wednesday, Gethner’s confirmation got a lot more interesting, with Democrats claiming his omissions were just “honest mistakes.”  For the man designated to serve as the titular head of the Internal Revenue Service, Geithner’s actions—no matter how innocent—send a twisted message to U.S. taxpayers.  Geithner, the 9th president of NY’s Federal Reserve Bank, claims he didn’t know that so-called 1099, consultant income earned from the International Monetary Fund between 2001-03 was taxable.  No basic accounting student would claim such ignorance of basic tax laws.  Nor would the IRS accept such a feeble excuse.

            Obama’s transition staff found last fall that Geithner had not paid self-employment taxes in 2001-03, prompting him to pay the IRS $25,970, only days before Obama named him his Treasury Secretary nominee Nov. 24.  If evading nearly $50,000 in taxes were not bad enough, Geithner paid a housekeeper without legal work status during 2004-05.  Other Cabinet nominees were derailed because of paying illegal aliens, including President Bill Clinton’s attorney general nominees Zoe Baird and Kimba Wood, and, more recently, President George W. Bush’s 2001 nominee for labor secretary, conservative columnist Linda Chavez.  While dismissed as inconsequential by Democrats, Republican Senators Jim Bunning (R-Ky.) and John Kyle (R-Ariz.) demanded more time on the Senate Finance Committee, pushing back Geithner’s confirmation hearing to Jan. 21.

            Obama heaped heavy praise on Geithner Nov. 24 at a press conference announcing his pick for treasury secretary.  Tim showed “unparalleled understanding of our current economic crisis in all its depth, complexity and urgency,” said Obama, praising the Dartmouth and Johns Hopkins graduate.   Some Senate Finance Committee members might wonder how it’s possible for a man of Geithner’s intellect and accomplishments to have overlooked paying nearly $50,000 in taxes?  “We have just learned about these allegations and the finance committee investigation,” said Don Stewart an, aid to Senate Minority Leader Mitch McConnel (R-Ky.).  “The committed is the appropriate place to review these allegations,” setting up a confrontation at next week’s hearing.  Geithner was considered among Barack’s best Cabinet picks, despite the red flags.

            Geithner’s tax problems go far beyond his qualifications for treasury secretary  Brilliance and the best credentials are no substitute for telling the truth and admitting mistakes.  Despite paying $25,970 days before his nomination, Geithner told senators he didn’t know he owed an additional $15,000 in back taxes for 2003-04. His claim he didn’t know 1099 income from the IMF was taxable lacks plausible deniability.  “We hope that the Senate will confirm him with strong bipartisan support so he can being the important work of the country,” said incoming White House Press Secretary Robert Gibbs, forgetting Obama’s No. 1 promise:  To reestablish honesty and integrity in government.  Partisan support and pushing through Geithner’s nomination does nothing to turn a new page.  Approving a treasury secretary professing ignorance of basic tax laws is mind-blowing.

            Whether or not Geither remedies his problems with the IRS doesn’t answer how a person of his knowledge and education could make this mistake.  His problem with his housekeeper, despite derailing other nominees, is far less problematic.  “I am disappointed in the errors found in Tim Geithner’s tax returns and other information,” said Senate Finance Committee Chairman Max Baucus (D-Mont.).  “But I am satisfied that Mr. Geithner has take the steps necessary to fix those problems,” not addressing the integrity issue.  Rectifying tax problems should not be part of the discussion for any of Obama’s nominees, especially the treasury secretary.  Geithner’s close association with current Treasury Secretary Henry M. Paulson is no longer an asset.  Paulson’s secretive handling of the first $350 billion installment of Toxic Asset Relief Fund money may warrant a Congressional investigation.

              President-elect Obama still backs Geithner, believing there’s enough GOP votes for confirmation.  “My expectation is that Tim Geighner will be confirmed,” said Barack, showing his support but not calculating the damage.  Whether other individuals make “common” or “innocent” tax mistakes doesn’t apply to the man expected to supervise the IRS.  “It’s an honest mistake,” said Baucus, urging committee members, especially Republicans, to overlook Geithner foibles.  When GOP committee members question Geithner next Wednesday, he’s going to express ignorance of tax law related to consultant income.  When he worked for the IMF, he signed a statement specifying his tax obligations, including paying self-employment tax.  It’s reasonable to question if Geithner made a mistake on his own taxes, what might he do when he’s in charge of the U.S. Treasury?

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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