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Treasury Candidate Faces Tax Evasion Questions

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Treasury Candidate Faces Tax Evasion Questions

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Treasury Candidate Faces Tax Evasion Questions

Treasury Candidate Faces Tax Evasion Questions

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  • <iframe src="https://www.npr.org/player/embed/99654910/99654898" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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U.S. Treasury Secretary-designate Timothy Geithner appears before the U.S Senate Wednesday. He faces questions about his failure to pay social security and Medicare taxes while working for the International Monetary fund.

ALEX COHEN, host:

President Obama is also scheduled to meet this afternoon with his economic advisers to discuss his administration's response to the financial crisis. But as we mentioned, his most important economic appointee remains unconfirmed. Personal tax issues have slowed the Senate's approval of Timothy Geithner, Mr. Obama's choice for Treasury secretary.

We're joined now by NPR's economic correspondent John Ydstie. And, John, Timothy Geithner's confirmation hearing was supposed to be held last week. It was delayed until today by these revelations that he'd failed to pay $34,000 in taxes. Did this tax issue dominate today's hearings?

JOHN YDSTIE: Well, it certainly dominated the beginning of the hearing. Geithner raised it in his opening statement. Senate Finance Committee Chairman, Montana Democrat Max Baucus brought it up in his first round of questionings, I think trying to get it out of the way. But the ranking Republican, Charles Grassley, wouldn't be denied. He went through a series of questions outlining the tax failure, which involved Geithner not paying all of his Social Security taxes while he worked at the IMF.

It's somewhat complicated because the IMF doesn't withhold taxes for employees, including the employer's portion of the Social Security tax, which most U.S. employers pay on behalf of their workers. And despite multiple communications from the IMF to its employees telling them that they needed to pay this, Geithner didn't pay it.

That prompted a series of questions from Grassley, including whether Geithner had received those warnings, whether he'd prepared his own taxes, whether he'd used a computer tax program to do it, which Geithner said he did. Let's go to Senator Grassley.

(Soundbite of Senate Finance Committee confirmation hearing)

Senator CHARLES GRASSLEY (Republican, Iowa): Which brand did you use?

Mr. TIMOTHY GEITHNER (United States Secretary of the Treasury-Designate): I'll answer that question, sir, but I want to say these are my responsibility not the tax software responsibility.

Senator GRASSLEY: OK.

Mr. GEITHNER: But I used TurboTax to prepare my returns.

Senator GRASSLEY: Did the software prompt you to report income and pay self-employment taxes on your IMF income?

Mr. GEITHNER: Not to my recollection, Senator.

YDSTIE: You know, I actually thought that Grassley was maybe cutting Geithner a little slack, allowing him to blame this on TurboTax. We'll see if the senator finds himself a 2001 version of TurboTax to find out whether it would have warned Geithner.

COHEN: And Timothy Geithner said there, I am not going to blame TurboTax. So how did he explain his failure to pay these taxes?

YDSTIE: Well, he said he had three employers that year, so his taxes were a bit complicated. He said he really thought the IMF was responsible for paying the employer portion of the Social Security tax. In the end, this was his response.

(Soundbite of Senate Finance Committee confirmation hearing)

Mr. GEITHNER: These were careless mistakes. They were avoidable mistakes. But they were completely unintentional.

COHEN: Obviously, beyond the tax issue, this country faces some very serious economic troubles. Did Timothy Geithner talk at all about those?

YDSTIE: Yeah, he certainly did. He was asked about the use of the TARP, the Trouble Asset Relief Program, funds which have been used to bailout banks and auto companies, and Congress has been very unhappy with that. He responded that President Obama wants to reform the TARP and have it focus more on some areas like preventing home foreclosures.

He was also asked about the failure of Lehman Brothers, which a lot of people point to as a key mistake by the government in the crisis. Geithner was president of the New York Fed when that happened, and he was involved in the decision. He said the government didn't have the authority to - or the kind of money to put into Lehman that was needed. He said, in this response, that government needs to be ready to act more quickly.

(Soundbite of Senate Finance Committee confirmation hearing)

Mr. GEITHNER: The history of financial crises is a history of failures by governments to act with the speed and force commensurate with the severity of the crisis. If our policy response is tentative and incrementalist, then we risk greater damage to living standards, to the economy's productive potential, and to the fabric of our financial system.

YDSTIE: Geithner also said that within a few weeks President Obama will put together a plan to deal with the financial crisis and present it to the nation.

COHEN: NPR's economics correspondent John Ydstie. Thanks, John.

YDSTIE: You're welcome, Alex.

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