Timothy Geithner paid most of the past-due taxes days before Obama announced his nomination in November, an Obama transition official said. The unpaid taxes were discovered by Obama's transition team while investigating Geithner's background, the official said.
When the story first broke, it was presented as simply an oversight. After all, this is a mistake that happens to a lot of people every year who are self-employed, we were told by Team Obama and his media helpers. He paid it as soon as it was discovered, they said. It's no big deal, they assured us. [Move along...there is nothing to see here...] As is predictably and depressingly normal, though, that wasn't exactly the real story. Byron York illuminates the subject (emphasis mine):
Documents released by the Senate Finance Committee strongly suggest that Geithner knew, or should have known, what he was doing when he did not pay self-employment taxes in 2001, 2002, 2003, and 2004. After his failure to pay was discovered, first by the IRS and later during the vetting process, Geithner paid the federal government a total of $42,702 in taxes and interest.
The IMF did not withhold state and federal income taxes or self-employment taxes — Social Security and Medicare — from its employees' paychecks. But the IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.
The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a "gross-up," to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.
At the end of the tax allowance form were the words, "I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund." Geithner signed the form. He accepted the allowance payment. He didn't pay the tax. For several years in a row.
According to an analysis released by the Senate Finance Committee, Geithner "wrote contemporaneous checks to the IRS and the State of Maryland for estimated [income] tax payments" that jibed exactly with his IMF statements. But he didn't write checks for the self-employment tax allowance. Then, according to the committee analysis, "he filled out, signed and submitted an annual tax allowance request worksheet with the IMF that states, 'I wish to apply for tax allowance of U.S. Federal and State income taxes and the difference between the "self-employed" and "employed" obligation of the U.S. Social Security tax which I will pay on my Fund income."
In a conversation today with sources on Capitol Hill who are familiar with the situation, I asked, "Was Geithner made whole for tax payments that he didn't make?"
"Yes," one source answered. "He was getting the money. He was being paid a tax allowance to pay him for tax payments that he should have made but had not."
Geithner paid his 2003 and 2004 obligations after an IRS audit. He paid his 2001 and 2002 obligations after he was nominated to be treasury secretary. The Obama transition team argues that Geithner simply slipped up, saying Tuesday that Gieithner "mistakenly had not paid self-employment taxes" for the years in question. In a closed-door meeting with Senate Finance Committee members on Tuesday, Geithner explained his failure to pay the self-employment taxes as an oversight. In the days before his confirmation hearing, senators are going to want to know more about how that happened.
So, here's what happened. The guy knew he was supposed to pay taxes out of his own pocket. He didn't pay them. He then filled out paperwork to get reimbursed for the taxes he should have been paying (but wasn't). He took the reimbursement.
How is that an oversight, exactly?
In reality, this guy is a tax dodger. And, of course, this is the guy who Obama thinks is going to do a great job as head of the Treasury Department. This is the guy Obama picked to run the IRS. He should be investigated and prosecuted, but hey, what's the big deal about breaking a few tax laws? Do you think that you or I would be able to skip paying income taxes for a few years, and then get away with the lame excuse of, 'Oh, gee, sorry, I goofed'?? No, you or I would be perp-walked to prison like Al Capone.
To make things even more fun, Geithner had his fingers deep into the current economic meltdown since he was the head of the New York Fed while Citigroup tanked:
So, not only is Geithner a tax-dodger, but he is one of the very same fat cats that Obama pledged to clean out of Wall Street!Because the Fed conducts much of its work in secret, details about Geithner's role in the Citigroup debacle remain hidden. But a review of publicly available records shows that the New York Fed, in a key period, relaxed oversight as Citigroup went on a risky spree…
In 2006, Citigroup's issuances of collateralized debt obligations – securities in which mortgages and other debts are bundled and sold based on risk – grew to $40.9 billion, more than double the prior year. The number of subprime mortgages originated by Citigroup rose 85 percent that year, while other top originators had begun reducing subprime output, Fed data show…
These deals pumped up Citigroup's balance sheet. Assets went from $1.2 trillion at the end of 2003 to $2.3 trillion by September 2007. But the bank's defenses weakened during the same period. By the end of September of 2007, records show, Citigroup's once comfortable Tier 1 capital ratio had fallen to 7.32 percent, below the bank's target…
When it comes to valuing [a company's capital] base, regulators and credit rating agencies favor using common stock. But Citigroup, beginning in late 2007, relied increasingly on "hybrid" capital forms, such as trust-preferred securities, to prop up its Tier 1 ratio.
Even with these hybrids, its capital ratio dipped to 7.12, well below peers like JP Morgan Chase, at 8.44 percent, or Bank of New York Mellon, at 9.32 percent. In general, the NY Fed and the Federal Reserve allow the use of hybrid capital but apply limits and ask firms to obtain prior approval. In 2007, Citigroup exceeded the limit, the only bank among its peers to do so.
In fact, the Wall Street Journal suggested some time ago that Geithner's only job was going to be Secretary of Bailouts since most of his accomplishments have been done in backroom deals out of the public's eye.
How's that for change?
This one is so bad that even the New York Times is hammering on Geithner:
In a feat of investigative reporting seldom seen at the Grey Lady anymore, they go on to thoroughly blow away Team Obama's lame excuses. Of course, they still end up softening the blow by suggesting that Geithner is 'too big to fail', citing bipartisan skittishness at ditching the economic 'whiz-kid':As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithner's tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging...
Even in the best of economic times, it would be hard to accept a Treasury secretary — who, after all, is in charge of the Internal Revenue Service — with a cavalier attitude toward paying his taxes. Today, in a time of economic peril, the nation cannot afford a Treasury secretary with a tainted ability to command respect and instill confidence...
In response to this idiocy, Mary Katherine Ham wisely observes:
Good advice, there.
So, the NYT totally kills the argument for appointing Geithner to lead the Treasury, and then says that he should be appointed to lead the Treasury anyway because he's the Obamessiah's chosen one. Nice. Is it any wonder the NYT is facing bankruptcy?
Anyway, I predicted a couple days ago that Geithner may very well be thrown under the bus for this, and I stand by that prediction. This is a clear instance of corruption, and the American people won't put up with it. What it all depends on is whether or not Congressional Republicans have enough spine and guts to take a stand against this guy, and force the issue in the public discourse during the confirmation hearings. Oh, wait. In that case, never mind. He'll be approved.
Isn't America great?
There's my two cents.
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