Cutting Obama's Treasury Pick Slack on Taxes

No scandal for Obama nominee Tim Geithner, tax scofflaw: "Geithner's Mistake on Tax Is Common, Experts Say."

After a reasonably probing front-page story yesterday on the failure of Timothy Geithner, Obama's pick for Treasury Secretary, to pay $34,000 in payroll taxes over a four-year period, reporter Jackie Calmes followed up on Thursday with a story emphasizing the harmlessness of the offense and predicting smooth sailing to confirmation: "Geithner's Skill May Trump Tax Issue - Treasury Pick Is Seen as Best Able to Handle Troubled Economy."

Calmes cut the Obama nominee a lot of slack, painting Geithner as a perhaps flawed-but-necessary pick in these onerous economic times, and did not bring up the strangeness of Obama nominating someone who can't figure out his own tax liability to oversee the IRS.

If Timothy F. Geithner were a bank, he might well be considered "too big to fail."

In better economic times, Mr. Geithner's confirmation to be President-elect Barack Obama's Treasury secretary might be in danger after the disclosure this week that he had paid more than $48,000 in delinquent taxes and interest. But with the economy so fragile, many senators are loath to rattle financial markets by rejecting someone with Mr. Geithner's qualifications and international respect. By late Wednesday, Republicans as well as Democrats were predicting he would survive the controversy and be confirmed next week.

Mr. Geithner has broad experience in global economics, financial regulation, currency and monetary policy. And lately, as president of the Federal Reserve Bank of New York, he has been at the center of the government's efforts to manage the financial chaos, sharing some criticism for its mixed record but not blame.


The morning of the announcement, Mr. Geithner and Mr. Summers had breakfast together in the Chicago Hilton. Since the Treasury years, they have continued to consult each other, friends say, and play tennis at economic gatherings. Mr. Geithner told others that he regretted that the weeks of media speculation had focused so much on Mr. Summers' reputed arrogance. He joked at his own expense that the news media's story line amounted to, "Larry is arrogant and smart; Geithner's not so smart but he's very humble."

In truth, Mr. Geithner is known as exceptionally smart and unafraid to speak up - traits that drew Mr. Summers's attention at the Treasury Department 16 years ago.

Calmes gave Geithner credit for being "exceptionally smart," yet also gave him a pass for not paying taxes, even though the Wall StreetJournal reported on Thursday that he should have known that he was responsible for his share of Social Security and Medicare taxes:

Timothy Geithner, whose nomination as Treasury secretary has been delayed by his past failure to pay taxes, was repeatedly advised in writing by the International Monetary Fund that he would be responsible for any Social Security and Medicare taxes he owed on income he earned at the IMF between 2001 and 2004.

A Times Business section story by Tara Siegel Barnard also provided comfort to Obama's pick: "Geithner's Mistake on Tax Is Common, Experts Say."

Still, several tax experts said, it is an easy mistake for an employee of an international organization to make.

"This is not your normal situation between an employer and an employee," said Saul Brenner, a tax partner at Berdon, an accounting and advisory firm. "Did he make a mistake? Absolutely. But it appears that both he and his accountant made a mistake."

American companies and their employees typically split payroll taxes for Social Security and Medicare: each pays 6.2 percent of the employee's gross income to cover the Social Security piece, along with an additional 1.45 percent for Medicare.