Obama Calls Treasury Secretary’s Failure to Pay Taxes an ‘Innocent Mistake’
The revelations that Geithner had failed to pay $34,000 in taxes several years ago derailed Senate Democrats' plans to speed him to confirmation by Inauguration Day, but senators in both parties said the information was unlikely to torpedo his chances in the end.
Obama had hoped for approval by Tuesday, but senators now have scheduled Geithner's confirmation hearing for next Wednesday, with Senate debate and a vote sometime after that.
Two Republicans objected to scheduling a confirmation hearing this Friday at the Senate Finance Committee after the panel disclosed Geithner had failed to pay taxes he owed for several years. Democrats were working to clear away the obstacles, holding out hope that he could still be confirmed the day Obama is sworn in.
The president-elect, asked about the situation on Wednesday, said, "Look is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake. It is a mistake that is commonly made for people who are working internationally or for international institutions. It has been corrected. He paid the penalties."
"My expectation is that Tim Geithner will be confirmed," Obama said.
He spoke at his transition office after a meeting with Vice President-elect Joe Biden and Sen. Lindsey Graham, R-S.C., about their recent trip to Afghanistan, Pakistan, Iraq and Kuwait.
Democrats and Republicans on the Finance Committee voiced strong support for Geithner, who was phoning senators individually in an effort to persuade them his tax problems were the result of innocent errors, not deliberate attempts to avoid paying the Internal Revenue Service.
Senators' comments suggested that Geithner's tax troubles are being viewed on Capitol Hill more as embarrassing mistakes than as disqualifying misdeeds. That's despite the fact that tax problems have sunk other government nominees, including Zoe Baird, Bill Clinton's choice for attorney general, who stepped aside when word leaked that she had hired illegal immigrants as household workers and failed to pay their Social Security taxes.
"It's an honest mistake," said Sen. Max Baucus, the Montana Democrat who chairs the committee, adding that Geithner's confirmation was "a given."
Geithner is "very, very competent, and add to that the country needs to have an economic team in place immediately to address the dire economic problems," he said.
Sen. Jon S. Kyl of Arizona, the No. 2 Republican, is blocking the hearing by insisting on rules that require a full week's notice for scheduling such a session, according to an aide close to the confirmation process. Kyl's objection was disclosed on condition of anonymity because the aide was not authorized to announce it.
A second Finance Committee Republican, Sen. Jim Bunning of Kentucky, was also balking at expediting the hearing.
"Senator Bunning did not feel it was appropriate to rush forward with the hearing this week in light of the late-breaking information," said his spokesman, Mike Reynard. "He wanted more time to carefully consider" the disclosures.
Sen. Charles E. Grassley, the senior Finance Republican, said he was not inclined to oppose a quick hearing. He planned to meet individually with other GOP members of the panel to see whether they could agree on the Friday session.
"I'm not saying at this point it's disqualifying," Grassley told reporters in a conference call. "But it's a little more important about income tax for somebody that's overseeing the IRS than there is, maybe, for the secretary of agriculture, as an example."
Whenever he goes before the Finance panel, Geithner - whose responsibilities in his new post would include authority over the IRS - is likely to face a grilling about his tax errors.
He failed to pay self-employment taxes for money he earned from 2001 to 2004 while working for the International Monetary Fund, according to materials released by the committee Tuesday.
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.
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.
Associated Press Writers Ann Sanner, Charles Babington, Jim Kuhnhenn and Andrew Taylor contributed to this report.