Tax Problem Stalls Treasury Nominee Geithner

Timothy Geithner's failure to pay some of his taxes has hampered Democrats' efforts to install him quickly as President-elect Barack Obama's Treasury secretary. The Senate Finance Committee will consider his nomination next week. Sen. Chuck Grassley, the ranking Republican on that committee, talks with Renee Montagne about Geithner's chances for being confirmed.

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RENEE MONTAGNE, host:

This is Morning Edition from NPR News. I'm Renee Montagne. President-elect Barack Obama is defending his nominee for Treasury secretary. Timothy Geithner's confirmation hearing was postponed yesterday after it was revealed that he neglected to pay $34,000 in taxes. Yesterday speaking on CBS, Mr. Obama said he's confidant Geithner will be confirmed.

(Soundbite of TV show "CBS Evening News with Katie Couric," January 14, 2009)

President-elect BARACK OBAMA (Democratic Senator, Illinois): We knew about this before we nominated him. It was an innocent mistake, a common mistake that's made. But here's the bottom line: Nobody denies that he is uniquely qualified for this job.

MONTAGNE: The Senate Finance Committee will now consider Timothy Geithner's nomination next week. The ranking Republican on that committee is Senator Chuck Grassley of Iowa, and he joins us now. Good morning, senator.

Senator CHUCK GRASSLEY (Iowa, Republican; Ranking Republican, Senate Committee on Finance): Good morning. Glad to be with you, Renee.

MONTAGNE: Great to have you. Do you agree with the president-elect that Timothy Geithner made an innocent mistake on his taxes?

Sen. GRASSLEY: I don't know at this point that I want to characterize it one way or the other. But what I do want to say is that there's a one hand and then the other hand. I don't have any disagreement with the president-elect. On the one hand, there's no doubt in bipartisan agreement of the qualifications of Mr. Geithner and the need for somebody of Mr. Geithner's talents at a time when we have all this economic problems we have. And that's pretty much bipartisan agreement.

The distracting part is the tax issue. And it isn't so much because of the tax issue, per se, but it's because Senator - Secretary-designate Geithner is in a position, as secretary of Treasury, overseeing the IRS and the extent to which - when IRS employees have problems with their taxes, a lot of times they're given less leeway, because they're supposed to set an example. So, what sort of a situation does that create?

Now, I have not made a judgment yet, because there's a lot of other issues to go over with him that are policy issues, things like the economic crisis, how he's handled the bailout as the president of the Fed. And so, I'll be making a judgment on the total picture, not just on the income-tax issue, after the hearing. And that's characteristic of most nomination hearing that I go through in other committees.

MONTAGNE: Senator, just a little background for those who may not have been following so closely. Timothy Geithner worked for the International Monetary Fund at the time. This is back in the early 2000s.

Sen. GRASSLEY: Yeah.

MONTAGNE: Does not hold - withhold U.S. Social Security and Medicare taxes from paychecks. That's what he was supposed to have paid, needed to pay himself. Now that Geithner has paid most of those taxes, is that enough?

Sen. GRASSLEY: Well, it's - you've got to balance that against the fact that every year he worked for the International Monetary Fund he signed a statement in order to get the money that the IMF would normally pay as an employer - he signed a statement because they were going to give him and other employees the money to pay their Social Security tax. And he signed a statement to get that money, and part of that statement was...

MONTAGNE: Right.

Sen. GRASSLEY: An understanding that he was going to pay his Social Security tax. So, you wonder, if he signed a statement to get the money and that statement also said that he was going to take the responsibility for paying it, why wouldn't he have paid it when it was due?

MONTAGNE: So, you still have some concerns. But we just have a few seconds left here. How important is it that you confirm a Treasury secretary quickly? I mean, in a way, is Timothy Geithner, by virtue of the position he's been chosen for, too big to fail in this nomination?

Sen. GRASSLEY: Well, the hearing is the day after the nomination, and it could be approved very quickly.

MONTAGNE: Other senators on your committee have said his confirmation is a given. Do you think in the end that will happen after all this has aired?

Sen. GRASSLEY: I don't - from talking to my colleagues on the Republican side, and I haven't talked to all of them - and that's one of the reasons that I don't speak very openly about this, because it is my job as Republican leader to consult with them - but I have not found people that are going to vote against him based upon just the income-tax issue.

MONTAGNE: Thank you very much.

Sen. GRASSLEY: Thank you. Goodbye.

MONTAGNE: Iowa Senator Chuck Grassley is the ranking Republican on the Senate Finance Committee. And again, that committee considers Timothy Geithner's nomination for Treasury secretary next week.

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