Grilled on the Hill
Before President Obama’s Treasury secretary nominee could use his confirmation hearings to lay out his plan to help steer the U.S. economy out of a recession, he first had to explain his own five-year tax problem — including his trouble operating tax preparation software.
Senators got tough on Timothy Geithner Wednesday, including the committee’s top Republican, Charles Grassley of Iowa, who got the New York Federal Reserve president to concede he prepared his own taxes for two of the years in question with the help of TurboTax.
Geithner said the program did not alert him to report income and pay self-employment taxes for the years he worked as director of the Policy Development and Review Department at the International Monetary Fund.
Geithner insisted that lawmakers not blame the software, though: “These are my responsibility, not the tax software’s responsibility.”
Of all President Obama’s Cabinet nominees, Geithner has faced the toughest questioning so far.
Grassley was highly critical of the 47-year-old nominee, who, if confirmed, would oversee the Internal Revenue Service. “It is deeply problematic if a U.S. citizen with your financial knowledge and expertise doesn’t consider whether he should be making a contribution to the Social Security Trust Fund, when his employer makes clear that it is the employee’s responsibility,” Grassley said.
According to the Senate Finance Committee documents, Geithner failed to pay Social Security or Medicaid taxes during his entire tenure at the IMF, which lasted from 2001 to 2003, even though the IMF advised him of the obligation. Geithner was also delinquent on self-employment and other taxes in several subsequent years and has repaid the IRS about $43,000 for taxes left unpaid from 2001 until 2006.
Geithner’s tax problems have been exacerbated by the revelation that even after he learned in a 2006 audit that he owed back taxes for 2003 and 2004, he did not pay the IRS for being short in the two previous years.
Geither said he did not repay the taxes for 2001 and 2002 because the IRS did not ask him to do so. Under the law, the statute of limitations had run out, though Geither would not confirm that he was aware of this fact, leading to a heated exchange with Sen. John Kyl, R-Ariz.
“It strains credulity that you didn’t realize that you had that liability for the entire time you were at the IMF,” Kyle said. “What I’m really asking you is whether you did think about it long enough to realize you had the liability for the prior two years at the IMF as well.”
Geither did not answer the question directly, instead telling Kyle, “I looked very carefully at what the IRS said I owed and I paid what they said I owed. When the IRS conducts an audit and they tell you that this settles your obligations, and I paid what they said I owed.”
But Geithner was quick to point out his own responsibility for his tax mistakes, and he did so repeatedly in the hearing. “When I look back on it now, I should have asked more questions.”
