Geithner should not be Secretary of the Treasury
The media rush to exonerate Timothy Geithner's failure to pay his self-employment tax as an "innocent mistake" (in Obama's words) ignores a crucial fact: even after he knew of his liability thanks to an IRS audit, he failed to pay taxes on years covered by the statute of limitations. Additionally, his failure to pay in the first place flies in the face of the fact that his employer, the IMF, notified him regularly of his obligation, and even paid him half of the tax liability, in lieu of the employer's share, money which he kept for himself.
The more serious questions surround the previously unpaid taxes. The bulk of them were detected in 2006 after an audit by the Internal Revenue Service for 2003 and 2004, and Mr. Geithner paid back taxes and interest then for those years.In November the Obama vetting team found other unpaid taxes for 2001 and 2002, and Mr. Geithner immediately paid those plus interest when the matter was brought to his attention, transition officials said. ...The I.M.F., as an international organization, does not withhold payroll taxes for Social Security and Medicare from its American employees' paychecks. Those workers are required to pay the roughly 15 percent tax themselves, as if they were self-employed.However, the I.M.F. does pay its American workers an amount equal to an employer's half of the payroll taxes, with the expectation that they will use that to pay the I.R.S. The organization also gives them quarterly wage statements that include United States tax liabilities.Mr. Geithner fully paid his state and federal income taxes. In failing to pay his payroll taxes, he in effect kept the money the I.M.F. had contributed toward his liability.
accountant told him he was exempt from self-employment taxes, according to Obama transition officials.
Byron York writes on NRO:
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."
Republican Sen. Lindsey Graham, who had briefed the president-elect, along with VP-elect Joe Biden, on their trip to the Middle East in the office earlier, was on hand to offer some Republican response."These are huge times. Now is not the time to think in small political terms," Graham told reporters, "I don't see any desire by the Republican Party to play gotcha on something like this. We need a new secretary of treasury who understands where this country is at financially and has a game plan to move forward. I think he's the right guy."
As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn't take on too much risk.But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history. ...oor risk management and weak capital levels were central to Citigroup's undoing. One enforcement agreement in place before Geithner took office in 2003 - an order requiring quarterly risk reports - was lifted during his watch. A ban on major acquisitions also was eliminated a year after it had been imposed in 2005.Afterward, in 2006 and 2007, Citigroup aggressively expanded into the subprime mortgage business and bought a hedge fund and Japanese brokerage, among other assets.A year later, as the global financial crisis took hold, Citigroup took losses and writedowns of more than $50 billion. The New York Fed brought no public enforcement case, although examiners privately sent a critical letter to the company in the first half of 2008.Compared with its peers, Citigroup had a thinner capital cushion and relied more heavily on less-desirable types of capital, records show. The New York Fed knew - in 2007 it allowed Citigroup to count as capital securities that some regulators and credit agencies frown upon or discount.
He has demonstrated he lacks both the judgment and integrity necessary for the awesome responsibilities of the Secretary of the Treasury.