Initially, based on the information in the radio and print news media, like this WSJ article, my first reaction was: Let's get some more information. That consular/foreign job compensation issue really is complicated enough that tax professionals get confused. Odds are that this is an innocent error.
President Obama wants us to stop sweating the small stuff and focus on the big picture. Works for me!
Then I read the information in the Senate Finance Committee's Investigative information. It's a summary of information the Committee has learned about the tax problems in question. It includes copies of paystubs, documents that he signed, information that was provided to him explaining the requirement that he pay his own self-employment taxes and more. It's actually quite interesting. And the documents themselves are the most revealing.
This is what I learned about the recently amended returns for years 2001, 2002, 2004, 2005, 2006.
1) Geithner knew, without a shred of doubt, that he was responsible for paying self-employment taxes.
2) He was given a quarterly report to use for his ES payments.
3) He elected to have his IMF compensation grossed up to cover the additional taxes he had to pay due the SE tax requirement.
4) Even though he did get a letter, at some point, from a CPA saying that he wasn't responsible for the SE taxes, he was audited by IRS for 2003 and 2004 and was assessed the taxes. Which he did pay. No penalties were assessed.
My other question was, when did he amend these tax returns to come clean and why? Was it because of the audit?
It was because he was being appointed to this post and Obama required that he be above reproach.
Otherwise he wouldn't have bothered. After all, the years with the largest balances due - 2001 and 2002 were out of statute for IRS to assess. So, if IRS had not looked back to 2001 and 2002 when they performed the 2003 and 2004 audits, he was under no legal obligation to disclose the sizeable errors in those years. Right?
What would you tell a client in the same situation who was not under public scrutiny? Those are closed years.
The fact is, Geithner knowingly omitted the information from his tax returns. This doesn't seem to be the innocent error I first believed it was. That is a major ethical lapse. And the ethics are in an area governed by the cabinet post he is looking to head.
Despite the ethics involved, it wouldn't be nearly as crucial an ethical lapse if he were being appointed to some other cabinet post. But for Treasury? I would not have selected him.
Does he really have such special qualifications that only he can sort out our financial nation's financial woes and save us from financial collapse? After all as president of the New York Federal Reserve Bank, Geithner was one of the top chefs of the Treasury's Trouble Asset Relief Program (TARP), dealing with the $700 billion. Have you seen anything encouraging coming out of TARP? Have you seen more loan money in the system, or home mortgage foreclosures prevented? I haven't.
Frankly, since the Senate confirmation hearings are today, even if you protest today, it won't have any effect. Geithner will get confirmed as Secretary of the treasury.
The real question is - Will this experience and this exposure help him understand the issues and dilemmas of taxpayers better? Or knowing the extent of tax fraud in the system, will this cause Geithner to push IRS to close more gaps in the system without mercy.
I hope this has humbled him enough to be merciful.
And that he has sufficent energy, enthusiasm, and excellent ideas to take over Treasury and re-vitalize the economy.
Since this is a done deal, let's get behind him.
After all, when it comes to our livelihoods, he's going to have a lot of say!
For those who still want to protest...
Contact Sen Kent Conrad of the Senate Finance Committee
by phone: (202) 224-2043
by fax: (202) 224-7776