President-elect Barack Obama’s team reacted predictably to the disclosure that Timothy Geithner, the nominee for Treasury secretary, failed to pay a chunk of his federal taxes over several recent years. The script gets played out, with slight variations, whenever a presidential nominee gets in that kind of trouble.
On Tuesday, when Mr. Geithner’s failures were first reported by The Wall Street Journal, the Obama transition office issued a statement calling his underpayment of taxes “honest mistakes.” On Wednesday, Mr. Obama himself said it was “innocent.” Those themes have been echoed by several of the senators who will conduct Mr. Geithner’s confirmation hearing, which is now scheduled for next Wednesday.
As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithner’s tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging.
Mr. Geithner must be questioned forcefully about these matters at the hearing next week, and his explanations must be credible. Even in the best of economic times, it would be hard to accept a Treasury secretary — who, after all, is in charge of the Internal Revenue Service — with a cavalier attitude toward paying his taxes. Today, in a time of economic peril, the nation cannot afford a Treasury secretary with a tainted ability to command respect and instill confidence.
According to the report, when Mr. Geithner’s tax returns for 2003 and 2004 were audited by the I.R.S. in 2006, the auditors found that he had failed to pay self-employment tax in those years. To make good, he paid the back taxes, plus interest — $16,732.
Obama officials say Mr. Geithner, who worked for the International Monetary Fund, had made a common error among international employees in Washington. But as The Journal reported on Wednesday, failing to pay the self-employment tax is not necessarily common among sophisticated I.M.F employees. Rather, one of the reasons such noncompliance is widespread is that it includes household embassy workers and other lower- level contractors. And regardless, the Finance Committee found that Mr. Geithner had signed paperwork at the I.M.F. that acknowledged his self-employment tax obligation.
The story does not stop there. Mr. Geithner also failed to pay the self-employment tax in 2001 and 2002. Those returns, which the report says Mr. Geithner prepared himself, were not audited and so the I.R.S. did not order him to pay up — which raises the question of why he did not voluntarily amend those returns and pay the taxes and interest at the time of the 2006 audit. Instead, he waited until after vetting by the Obama team late last year revealed the shortfall — $19,176 in taxes and $6,794 in interest.
A similar lapse occurred on another tax issue. On returns for 2001, 2004 and 2005, Mr. Geithner wrongly claimed expenses for sleep-away camps in calculating his dependent care tax credit. The accountant who prepared his 2006 return informed him that payments to overnight camps were not allowable expenses, but again, he did not file amended returns for the previous years at that time. The report does not break out the taxes and interest on that item alone, but along with other adjustments, Mr. Geithner owed an additional tax of $4,334 and interest of $1,232.
Many people find taxes baffling, but before his job at the I.M.F, Mr. Geithner was a senior official in the Treasury Department under President Clinton, and for the past five years he has been the president of the Federal Reserve Bank of New York. With that professional profile, tax transgressions are tough to excuse.
On Tuesday, when Mr. Geithner’s failures were first reported by The Wall Street Journal, the Obama transition office issued a statement calling his underpayment of taxes “honest mistakes.” On Wednesday, Mr. Obama himself said it was “innocent.” Those themes have been echoed by several of the senators who will conduct Mr. Geithner’s confirmation hearing, which is now scheduled for next Wednesday.
As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithner’s tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging.
Mr. Geithner must be questioned forcefully about these matters at the hearing next week, and his explanations must be credible. Even in the best of economic times, it would be hard to accept a Treasury secretary — who, after all, is in charge of the Internal Revenue Service — with a cavalier attitude toward paying his taxes. Today, in a time of economic peril, the nation cannot afford a Treasury secretary with a tainted ability to command respect and instill confidence.
According to the report, when Mr. Geithner’s tax returns for 2003 and 2004 were audited by the I.R.S. in 2006, the auditors found that he had failed to pay self-employment tax in those years. To make good, he paid the back taxes, plus interest — $16,732.
Obama officials say Mr. Geithner, who worked for the International Monetary Fund, had made a common error among international employees in Washington. But as The Journal reported on Wednesday, failing to pay the self-employment tax is not necessarily common among sophisticated I.M.F employees. Rather, one of the reasons such noncompliance is widespread is that it includes household embassy workers and other lower- level contractors. And regardless, the Finance Committee found that Mr. Geithner had signed paperwork at the I.M.F. that acknowledged his self-employment tax obligation.
The story does not stop there. Mr. Geithner also failed to pay the self-employment tax in 2001 and 2002. Those returns, which the report says Mr. Geithner prepared himself, were not audited and so the I.R.S. did not order him to pay up — which raises the question of why he did not voluntarily amend those returns and pay the taxes and interest at the time of the 2006 audit. Instead, he waited until after vetting by the Obama team late last year revealed the shortfall — $19,176 in taxes and $6,794 in interest.
A similar lapse occurred on another tax issue. On returns for 2001, 2004 and 2005, Mr. Geithner wrongly claimed expenses for sleep-away camps in calculating his dependent care tax credit. The accountant who prepared his 2006 return informed him that payments to overnight camps were not allowable expenses, but again, he did not file amended returns for the previous years at that time. The report does not break out the taxes and interest on that item alone, but along with other adjustments, Mr. Geithner owed an additional tax of $4,334 and interest of $1,232.
Many people find taxes baffling, but before his job at the I.M.F, Mr. Geithner was a senior official in the Treasury Department under President Clinton, and for the past five years he has been the president of the Federal Reserve Bank of New York. With that professional profile, tax transgressions are tough to excuse.
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