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Tax problems derail fast Senate OK for Geithner
By JULIE HIRSCHFELD DAVIS
Associated Press
January 14, 2009

Page 2 of 2

He paid some of the taxes in 2006, after an IRS audit discovered the discrepancy for taxes paid in 2003 and 2004. But it wasn't until much later -- days before Obama tapped him to head Treasury late last year -- that Geithner paid back most of the taxes, incurred in 2001 and 2002. He did so after Obama's transition team found that Geithner had made the same tax mistake his first two years at the IMF as the one the IRS found he made during his last two years there.

Despite the disclosures, several committee Republicans appeared to be leaning toward backing Geithner. Sen. Orrin G. Hatch of Utah called the tax problems "a mistake that a human being can make."

"I'm confident in the man's ability. I think he's a very fine man. I'm not one that holds mistakes against people," Hatch said.

Sen. John Ensign, R-Nev., who said he spoke with Geithner for about a half-hour Wednesday morning, said he didn't foresee trouble for the nominee.

"I don't think I see enough in there to cause a problem," Ensign said. "It's very, very easy to make honest mistakes."

Sen. Pat Roberts, R-Kan., said he'd probably vote to confirm Geithner.

"I think he's a good man. I had a long visit with him," Roberts said. "I think he really knows his stuff."

Still, Roberts acknowledged that Geithner's tax troubles could cause a perception problem in the public and on Capitol Hill, likening it to the Big Three automobile CEOs who came to Washington on private jets to plead for government aid.

"It's a very bad thing for the guy that's running Treasury to be out there saying, 'I made a mistake. I forgot about it,'" said Sen. George V. Voinovich, R-Ohio. "The American public thinks that there's some people ... especially a lot of these guys on Wall Street, that have had it made in the shade."

Obama's team informed Baucus and Grassley of the problems in early December, and a subsequent investigation by their staffs unearthed another embarrassing detail about Geithner: that a housekeeper he employed in 2005 allowed her legal immigrant work status to lapse for three and a half months.

It was the unpaid taxes, though, that were proving more damaging. Obama's team says his mistake was a common one for people hired by international organizations and foreign embassies that don't pay the employer share of Social Security taxes. The IRS estimated in 2006 that as many as half those employees had made tax-filing mistakes, and offered a group settlement to let them correct the errors.

But the Finance Committee, in 30 pages of documents released on Tuesday, noted that the IMF issues several clear guidelines each year for its employees detailing their responsibility to pay all their self-employment taxes, and that Geithner had signed annual statements saying that he would do so. He also had experience dealing with such taxes, the panel noted.

"Obviously it's an embarrassment. One wishes it wasn't there, but I don't think it's going to stop his moving forward," Sen. John Kerry, D-Mass., a member of the Finance panel, told NBC's "Today."

------

Associated Press Writers Charles Babington, Jim Kuhnhenn, and Andrew Taylor contributed to this report.

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Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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