CQ TODAY PRINT EDITION
– EXECUTIVE BRANCH
Jan. 15, 2009 – 3:25 p.m.
Economic Fears and Bipartisan Spirit Help Give Geithner a Pass on Taxes
By Jonathan Allen, CQ Staff
Diminished partisan blood lust and the depth of the nation’s financial crisis may bolster Treasury Secretary-designate Timothy F. Geithner against a pair of potentially perilous disclosures about his failure to pay $42,702 in self-employment taxes and interest and the lapse of a work permit for a former housekeeper.
In a closed-door meeting Jan. 13, Geithner told members of the Senate Finance Committee that he had paid back self-employment taxes and that the legal immigration status of a domestic employee had lapsed without his knowledge.
In the past, similar revelations might have sunk a nomination.
President Bill Clinton’s first two picks to head the Justice Department, Zoe Baird and Kimba Wood, were both forced to withdraw from the process because they had employed illegal immigrants at their homes. In Baird’s case, the problem was more severe and compounded by a failure to pay Social Security taxes.
Muted Reaction to Disclosures
With Geithner, the disclosures have drawn muted reaction from senators, including Republicans. Driving this is a pervasive fear that the economy could suffer if President-elect Barack Obama has to pick a new Treasury nominee, Geithner’s strong reputation among senators from both parties and the public appeal of Obama’s call for bipartisanship.
Significantly, the Obama transition team carefully choreographed its release of information about Geithner to ensure that the Finance Committee and its staff were not taken by surprise and were fully aware of the issues as early as Dec. 5. The team also made Geithner available to committee members before his hearing.
This was in stark contrast to the abrupt introduction of Leon E. Panetta as CIA director-designate, which resulted in even Democrats crying foul after not being told of the pick in advance.
“The times have tempered the division and the hostility,” said Sen. Olympia J. Snowe of Maine, a Finance Committee Republican. “There was a strong message sent in the last election.”
Snowe called Geithner “very competent and qualified” and indicated she is leaning toward supporting his nomination after he appears before the Finance Committee for a confirmation hearing Jan. 21.
While senators say Geithner should have paid the self-employment taxes for his work at the International Monetary Fund, few have even mentioned his housekeeper’s expired work permit, and his confirmation appears headed for Senate approval. The International Monetary Fund, which employs many foreigners, treats its employees as self-employed and requires them to handle payment of their taxes.
Concerns Addressed Quietly
The Republican defense of Geithner suggests that the partisan battles that permeated the Capitol in recent years have subsided.
“Normally some people would pounce on something like that,” said a Republican senator who asked not to be identified. “Part of it’s just the times we’re in.”
There are, of course, Republican senators who wonder about the wisdom of installing a Treasury secretary who had failed to pay his taxes. Following a 2006 IRS audit, Geithner paid $16,732 in back taxes and interest owed on income earned in 2003 and 2004. And, after vetting by the Obama team discovered a similar problem for income he earned in 2001 and 2002, Geithner paid another $25,970 in back taxes and interest.
“This man is seeking to be the head of the IRS,” said Sen. Jeff Sessions , R-Ala. “He needs to pay his taxes and explain why he should be entrusted with the leadership” of the agency that enforces tax law.
But even those who express concerns are not seeking out television cameras, grandstanding on the Senate floor or rushing to distribute blistering press releases in an effort to damage Geithner.
And the Senate Finance Committee’s meeting on Jan. 13 amounted to an extraordinary show of deference by the panel. Geithner was invited to answer questions behind closed doors, an approach that allowed senators to get answers without creating a public spectacle that could have endangered his nomination.
“A lot of people think he’s a pretty good nominee for a Democratic administration,” Sessions said.
South Dakota Sen. John Thune , the vice chairman of the Republican Conference, said Republicans understand that this is not the time to shoot for political points. “People don’t want to unnecessarily pick fights right now,” Thune said.
Former Sen. John E. Sununu, a new Hampshire Republican who is a member of the board overseeing the Troubled Asset Relief Program, said his former colleagues are “reluctant to sidetrack such a strong nominee at such a critical time.”




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How is it possible that a tax cheat can become the Secretary of the Treasury?
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