In the midst of the current economic crisis, I know that many in Congress were hoping for a smooth transition to a new administration. That may not happen. President Elect Barack Obama’s nomination to head the Treasury Department has hit a road block: revelations that Timothy Geithner had failed to timely pay $34,000 in taxes.
Republicans and Democrats have indicated that the information about back taxes (which were eventually paid) would not necessary block the nomination. Sen. Orrin Hatch (R-UT) has said he had “no problem” with Geithner while Sen. Charles Grassley (R-IA) called the information “serious, and whether or not it’s disqualifying is to be determined.” With all of the buzz, it looks like it will definitely not be smooth sailing for Geithner at his confirmation hearing.
The problem stems from Geithner’s 2001-2004 stint at the International Monetary Fund. Geithner failed to pay SE taxes (self-employment taxes, which are basically the FICA equivalent for an independent contractor or otherwise self-employed person). At IRS audit in 2006, Geithner repaid the obligation for 2003 and 2004 but did not pay the tax for 2001 and 2002 until 2008. Remarkably, that amount due wasn’t discovered by the IRS at audit but by Obama’s transition team.
Many in Congress believe that the filing omissions were not intentional and that the confirmation hearing will proceed without further problems. Intentional or not, it’s a sure bet that no matter what Congress is saying now, the hearing will not be an easy one for Geithner.
Geithner formerly worked with the International Affairs division of the U.S. Treasury Department. He went on to serve as an attache at the US Embassy in Tokyo before working under Treasury Secretaries Robert Rubin and Lawrence Summers. Geithner then served as the director of the Policy Development and Review Department at the International Monetary Fund for the tax years in question. He was later named president of the Federal Reserve Bank of New York.
An impressive resume, for sure. But what about the tax issues?
It’s not surprising to hear about someone failing to file SE taxes – or other taxes related to self-employment. I see it all of the time – just look at my “ask the taxgirl” questions. But most of the time, the folks who make those mistakes are web designers, authors, engineers and writers… They are not people whose entire careers have been focused on money management.
Timothy Geithner’s career has always been about money and he’s now on tap to lead the Treasury. He will set the tone for how our country reacts to economic news, as well as tax policy. He will follow in the footsteps as such esteemed Secretaries of the Treasury as Alexander Hamilton, William Gibbs McAdoo and James Baker (I’ll conveniently leave out Henry “I’ve pulled one over on the American people” Paulson).
Is this really the face that we want as representative of our economic policy? Especially in a time of crisis? What do you think?