How Did Daschle Realize He Had a Limo Problem?
The question at the center of the HHS nominee's tax issue.


Byron York

One of the unanswered questions concerning Health and Human Services Secretary-designate Tom Daschle’s tax problem is why it suddenly occurred to Daschle, in June 2008, that the car and driver he had been provided by a wealthy Democratic donor in 2005, 2006, 2007, and 2008 might count as income and thus be subject to taxes — taxes which Daschle had not paid.

Skeptics have suggested that Daschle recognized the problem in June 2008 because it was in that month that Barack Obama claimed the Democratic nomination. At that point, Daschle, a big Obama supporter, knew it was at least possible that he might get a big job in an Obama administration; therefore, he knew he had to get his financial affairs in order. On the other hand, there’s been the suggestion from some sympathetic to Daschle that he might have come to the realization after a casual conversation with some unnamed person, perhaps at a party.

Now, members of the Senate Finance Committee have had a chance to pose the question to Daschle himself. And the answer is: He doesn’t know.

“He said, ‘I don’t know, something caused me to think about it, and I hadn’t until then,’” says a Senate source familiar with Daschle’s account. “He has no idea why it occurred to him.”

“He’s been asked why he thought of it in June,” says another Senate source who is also familiar with Daschle’s account. “He didn’t seem to have an answer to that.”

Daschle has told Senate questioners that once it occurred to him that the car service might be taxable, he sent an e-mail to his accountant raising the issue. The accountant reportedly said he would look into it. But by all accounts, nothing was done until the end of December 2008, after Daschle was nominated to head HHS. Daschle did not file amended tax returns for the years 2005, 2006, and 2007 until January 2, 2009. The Senate got word of the problem a short time later.

Why the delay? Critics say Daschle didn’t make things right with the Internal Revenue Service until his nomination forced him to. But Daschle has told the Senate he thinks his accountant, after that June 2008 e-mail, might have assumed that Daschle’s car problem was for 2008 only — therefore, it didn’t have to be dealt with quickly in June, but could wait until the beginning of 2009, when the accountant would normally prepare Daschle’s 2008 tax return. When the HHS nomination intervened, at the end of 2008, the process was speeded up.

But Daschle certainly knew that he had used the car and driver not just in 2008, but in 2005, 2006, and 2007 as well. According to a Finance Committee memo, the car service accounted for $73,031 in unreported income for 2005, $89,129 in unreported income for 2006, and $93,096 in unreported income for 2007. If Daschle knew that he had used the car, and he knew, or at least suspected, that he owed taxes on it, and he knew that, if he did owe taxes, he owed them going back three years — if he knew all that, why did he wait until the end of December 2008, when he was facing confirmation and the scrutiny that goes along with it, before dealing with the problem?

And there’s one more question. It has not been widely reported, but Daschle was audited by the IRS in 2006. There were no problems with the audit, but all sides concede that is because the IRS didn’t know that Daschle had been receiving the car service. If IRS investigators had known, they surely would have told Daschle that he owed the taxes. But Daschle didn’t tell the auditors about the car and driver; the audit occurred well before his June 2008 revelation that the car service was taxable.

A contrite-appearing Daschle met with members of the Finance Committee Monday afternoon. “My failure to recognize that the use of a car was income, and not a gift from a good friend, was a mistake,” he told reporters after the meeting. “When I realized the mistake, I notified officials and I paid the tax in full. It was inadvertent. But that’s no excuse, and I deeply apologize to President Obama, to my colleagues and to the American people.”

So far, no senator, Democrat or Republican, has stepped forward to oppose Daschle. On the other hand, no Republican senator, after Monday’s meeting, stepped forward to support him, either. At the moment, Republicans just want to know more. Why did Daschle wait? Did he really not know that the car and driver counted as income? Can the accountant’s version of events shed any more light on the story?

Democrats will undoubtedly want to move Daschle’s nomination forward as quickly as possible. But for the next few days at least, Republicans are in a question-asking mood.