Accepting the Unacceptable
Democratic Senator: Geithner's Tax Offenses 'Completely Unacceptable.'


Byron York

A senior Democrat on the Senate Finance Committee said he believes Timothy Geithner’s failure to pay Social Security and Medicare taxes is “completely unacceptable” and would in any other time disqualify Geithner from heading the Treasury Department. But the senator, Kent Conrad of North Dakota, decided to vote for Geithner because it would take too long to find a replacement candidate for the key cabinet post.

“On the matter of Mr. Geithner’s failure to pay certain self-employment taxes, I find it completely unacceptable,” Conrad said before the committee’s 18-5 vote to approve Geithner yesterday. “I’m a former tax commissioner, I’ve dealt with hundreds of cases like this one, and in normal times that alone would lead me to oppose his confirmation. But these are not normal times, and I personally don’t think we can afford a further delay in the filling of this critically important position.”

Conrad was the only Democrat on the committee to be so openly critical of Geithner’s failure to pay self-employment taxes in 2001, 2002, 2003, and 2004. Other Democrats either ignored Geithner’s tax problems in their public remarks or quickly dismissed them as honest mistakes. In the end, all 13 Democrats on the committee, along with five Republicans, voted to send Geithner’s nomination to the full Senate.

Meanwhile, in written responses to questions from Republicans on the committee, Geithner said it never occurred to him that he had not paid Social Security and Medicare taxes in 2001 and 2002–even after Internal Revenue Service auditors discovered that he had failed to pay those taxes under the same circumstances in 2003 and 2004. It was his most definitive answer to the question of why, once it was discovered that he had not paid self-employment taxes in 2003 and 2004, he had not gone back to check his returns for 2001 and 2002.

At Geithner’s confirmation hearing Wednesday, he did not give clear, direct answers to questions about his knowledge of mistakes in his 2001 and 2002 returns. Republicans Jon Kyl and Jim Bunning, in particular, focused their questions on why, after a 2006 IRS audit revealed that Geithner had not paid Social Security and Medicare taxes during 2003 and 2004, and he paid $16,732 in back taxes and interest for those years, Geithner did not revisit his 2001 and 2002 returns to see if he had made the same mistake. After all, the senators said, Geithner worked for the International Monetary Fund during all of that time, and he signed for and accepted IMF reimbursement for paying self-employment taxes, even though he had not, in fact, paid them. As it turned out, Geithner had done the same thing in 2001 and 2002 that the IRS found he did in 2003 and 2004. He paid the IRS $25,970 in back taxes and interest for 2001 and 2002, but he only did so in November 2008, after he had been chosen to be treasury secretary and his finances had come under scrutiny from the Obama transition team.

At the hearing Wednesday, Geithner’s answers were so vague that a frustrated Kyl said, “Would you answer my question rather than dancing around it, please?” In his written responses, Geithner was more direct.

“It was only as a result of the transition team vetting process that the issue of the 2001 and 2002 returns came to my attention,” Geithner wrote. “If I had not been considered for this nomination, I might never have known this.” Geithner wrote that during the 2006 audit, “my state of mind at the time was focused on 2003 and 2004.” After settling the audit, Geithner continued, “I did not think about this again until late last year, when the subject came up as part of the transition team vetting process.”

Geithner was less definitive when senators asked whether IRS auditors ever brought up the subject of his 2001 and 2002 returns. “I do not recall any such inquiry,” he wrote. When asked whether Geithner told the IRS that he had been employed at the International Monetary Fund during 2001 and 2002, just as he had been in 2003 and 2004, Geithner answered, “I do not recall.” Geithner also told the committee he could not “recall any specific conversations” about the issue with his accountant.